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ITRON, INC. (ITRI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue of $582M (-5% YoY) came in slightly above consensus, while record gross margin (37.7%), non‑GAAP operating income and adjusted EBITDA ($97M) drove profitability and cash generation (FCF $113M). Management highlighted “record margin, profitability, and cash flow” .
  • Non‑GAAP EPS of $1.54 modestly beat consensus $1.48*, and revenue of $581.6M beat consensus $578.5M*. Adjusted EBITDA also exceeded consensus ($97.2M vs $92.0M*) .
  • Q4 guide: revenue $555–$565M and non‑GAAP EPS $2.15–$2.25, aided by a discrete tax benefit (~$39M; ~$0.84/sh), with full‑year 2025 EPS raised to $6.84–$6.94 and revenue narrowed to $2.35–$2.36B .
  • Operational backdrop: bookings slowed (Q3 $380M; below 1:1 book‑to‑bill likely for FY) and deployments are pushing right, but backlog rose to $4.3B and DI adoption remains strong (16M endpoints deployed; DI app licenses +119% YoY to 20M) .
  • Strategic catalysts: definitive agreement to acquire Urbint for $325M (all cash; expected Q4 close) and launch of Gen6 network platform with UtilityIQ upgrades supporting cross‑vendor DI interoperability .

What Went Well and What Went Wrong

What Went Well

  • Record margins and cash generation: gross margin 37.7% (+360 bps YoY), adjusted EBITDA $97M (+10% YoY), free cash flow $113M (+$55M YoY). CEO: “record margin, profitability, and cash flow” .
  • Outcomes segment momentum: Outcomes revenue +11% YoY; recurring revenue growth; DI endpoints reached 16M with >10M in backlog; licensed DI apps +119% YoY to 20M .
  • Backlog/portfolio optimization: total backlog $4.3B (+$0.3B YoY) reflecting durable demand; higher‑margin mix improvements across segments drove record non‑GAAP operating income .

What Went Wrong

  • Top‑line decline: revenue down 5% YoY to $582M, driven by portfolio optimization (legacy electric) and timing of deployments; Device Solutions revenue -16% YoY; Networked Solutions -6% .
  • Bookings softness and deployment delays: Q3 bookings $380M and expectation for FY bookings below 1:1 due to regulators’ cost sensitivity and customers extending project schedules; no cancellations, but pace slowed .
  • Q4 revenue guide implies ~9% YoY decline, with EPS uplift largely tax‑driven rather than operating leverage; Networks cited as the biggest area of near‑term weakness .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$615.5 $607.0 $581.6
GAAP Diluted EPS ($)$1.70 $1.47 $1.41
Non-GAAP Diluted EPS ($)$1.84 $1.62 $1.54
Gross Margin %34.1% 36.9% 37.7%
Adjusted EBITDA ($USD Millions)$88.6 $90.0 $97.2
Free Cash Flow ($USD Millions)$58.7 $91.0 $113.4

Actual vs Consensus and Guidance

MetricQ3 2025 ConsensusQ3 2025 ActualDeltaQ4 2025 Guidance
Revenue ($USD Millions)$578.5*$581.6 +$3.1$555–$565
Non-GAAP EPS ($)$1.48*$1.54 +$0.06$2.15–$2.25
Adjusted EBITDA ($USD Millions)$92.0*$97.2 +$5.2N/A

Values marked with * retrieved from S&P Global.

Segment Revenue

Segment Revenue ($USD Millions)Q3 2024Q2 2025Q3 2025
Device Solutions$122.7 $113.0 $103.6
Networked Solutions$416.7 $409.0 $393.7
Outcomes$76.0 $85.0 $84.3
Total$615.5 $607.0 $581.6

Segment Margins (Q3 2025)

SegmentGross Margin %Operating Margin %
Device Solutions30.9% 24.0%
Networked Solutions39.3% 31.0%
Outcomes38.9% 19.9%

KPIs

KPIQ3 2025
Bookings ($USD Millions)$380
Backlog ($USD Billions)$4.3
DI Endpoints Deployed (Cumulative)16M
DI App Licenses (Cumulative)20M (+119% YoY)
Operating Cash Flow ($USD Millions, Q3)$117.8
Free Cash Flow ($USD Millions, Q3)$113.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$2.35–$2.40B $2.35–$2.36B Narrowed/Lowered midpoint vs prior
Non-GAAP EPSFY 2025$6.00–$6.20 $6.84–$6.94 Raised (tax discrete benefit)
RevenueQ3 2025$570–$585M Actual $581.6M In range (near top end)
Non-GAAP EPSQ3 2025$1.45–$1.55 Actual $1.54 In range (near top end)
RevenueQ4 2025N/A$555–$565M New
Non-GAAP EPSQ4 2025N/A$2.15–$2.25 New

CFO clarified the Q4 EPS uplift is from a discrete tax benefit (~$39M; ~$0.84/sh), with normalized EPS growth ~7% YoY at midpoint .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
AI/Tech & DIEmphasis on Grid Edge Intelligence; DI endpoints 14.4M; Outcomes +14% YoY DI endpoints shipped 15.3M; strong adoption; Outcomes growth DI endpoints 16M; DI app licenses 20M (+119% YoY); Outcomes +11% YoY Accelerating DI adoption; expanding Outcomes
Supply Chain/PortfolioFactory footprint optimization; regional supply resilience Margin expansion via mix; device portfolio pruning Margin records; portfolio optimization cited for lower Device revenue Structural margin improvement sustained
Tariffs/MacroTariff impact estimated ~$15M net in 2025; mitigation measures underway Macro/trade policy uncertainty; regulators’ cost sensitivity impacting pacing No cancellations; deployments slowed; pipeline +25% YTD; bookings below 1:1 likely Near‑term pacing slower; long‑term pipeline stronger
Product PerformanceDevice: record margins; Outcomes mix improvement Device GM 29.8%; Outcomes GM 38.5%; Networks GM 38.5% Device GM 30.9%; Networks GM 39.3%; Outcomes GM 38.9% Margin trajectory up across segments
Regulatory/Legal & TaxConstructive environment for Outcomes; performance‑based rates expansion PUC pushback due to ratepayer costs; sequencing causing delays Q4 discrete tax benefit (~$39M); statute expiry Oct 15 Ongoing regulatory scrutiny; tax tailwind in Q4
R&D/Product LaunchN/AN/ALaunch of Gen6 network platform and UtilityIQ upgrades for cross‑vendor DI interoperability Platform modernization; innovation catalyst
Regional TrendsN/AEarly traction for edge intelligence in Europe; water strong Device decline tied to EMEA legacy electric; NA water volume softness EMEA legacy exit; Europe DI opportunity

Management Commentary

  • CEO framing: “Itron delivered third quarter results with record margin, profitability, and cash flow.” Customers are “actively deploying advanced technology” to address complexity; Grid Edge Intelligence “designed to solve dynamic problems” .
  • CFO on quality of earnings: Non‑GAAP operating income and adjusted EBITDA at all‑time records; Q3 FCF “a new company record,” driven by working capital, lower tax payments, higher operational earnings .
  • Bookings/backlog dynamics: Pipeline expanded >25% YTD; Outcomes backlog up 36% YoY and “well over 20%” of total backlog; “no project cancellations,” but large hardware projects are spread out (e.g., 3 years to 4 years) .
  • Tax & Q4: “Negative effective tax rate of 19%” in Q4 from a discrete item ($39M; worth ~$0.84/sh), with normalized EPS up ~7% YoY at midpoint .
  • Strategy & targets: 2027 targets remain intact; revenue may be at lower end with margin/FCF potentially at high end; long‑term trajectory unchanged despite lumpiness .

Q&A Highlights

  • Networks pacing: Weakness concentrated in Networks due to deployments “pushing to the right”; Q4 GM expected “pretty close” to Q3 .
  • Project phasing: Customers are extending rollouts (e.g., 3‑year to 4‑year) to manage annual CapEx and regulatory constraints; no stoppages; visibility suggests normalization over coming quarters .
  • Bookings outlook: Achieving 1:1 book‑to‑bill remains possible but less likely; FY bookings below target more plausible given Q3 softness .
  • Backlog & Outcomes: Outcomes “well over 20%” of $4.3B backlog; duration typically ~3–4 years; recurring contracts often evergreen via extensions .
  • Urbint rationale: SaaS platform for emergency preparedness, damage prevention, and worker safety; strong customer overlap and analytics synergies with Itron data streams .

Estimates Context

  • Q3 beat: Revenue $581.6M vs $578.5M*; non‑GAAP EPS $1.54 vs $1.48*; adjusted EBITDA $97.2M vs $92.0M*. Modest beats reflect favorable mix and margin resilience .
  • Q4 setup: Guidance revenue $555–$565M vs consensus $566.0M*; EPS $2.15–$2.25 vs consensus $2.19*. EPS uplift is tax‑driven; operating margins expected similar to Q3 .
  • FY 2025: EPS guidance raised ($6.84–$6.94) due to tax benefit; revenue narrowed ($2.35–$2.36B) amid slower deployments. Consensus likely to adjust EPS higher and revenue growth lower to reflect phasing and tax item .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Mix‑led margin story outweighing near‑term top‑line softness: record GM and EBITDA with FCF strength suggest resilient earnings power even as deployments pace moderates .
  • Results were modest beats vs consensus; watch for estimate revisions: FY EPS likely moves up on tax tailwind; revenue trajectories may be trimmed on bookings softness .
  • Q4 is tax‑boosted; normalize EPS for ~7% YoY growth to assess core performance; Networks remains the area to monitor for deployment pacing .
  • Strategic catalysts: Urbint deal close (Q4) and Gen6 platform availability (Q4) expand software/Outcomes and DI ecosystem, supporting recurring revenue growth and margin durability .
  • DI adoption is accelerating (16M endpoints; 20M licenses), reinforcing long‑term Outcomes thesis and backlog quality; no cancellations despite regulatory scrutiny .
  • Bookings/book‑to‑bill likely below 1:1 for 2025, but pipeline up >25% YTD and backlog up YoY underpin 2026–2027 trajectory; expect lumpiness but not structural weakness .
  • Near‑term trading lens: focus on Q4 tax item sizing, Networks deployment signals, and any backlog conversion commentary; medium‑term thesis: margin‑accretive mix, Outcomes expansion, and platform upgrades driving compounding FCF .