Itron, Inc. (ITRI) Earnings Call Transcript & Summary

Welcome to Itron's 2024 Investor Day. We're thrilled you all could make it in person. As a reminder for the audience here, we're also webcasting, and welcome to everybody who's joining us over the web. We're really excited to have a really good program for you today, and hope everybody learns a lot and has a little bit of fun along the way. I'm Paul Vincent, I'm the Vice President of Investor Relations at Itron. And I'll kick it off by reminding everybody that we will actually be making some forward-looking statements today, and those should be taken as such, and we have appropriate disclosures here at the beginning of the presentation. Our agenda this morning, we're going to have Tom Deitrich, our President and CEO, kick off with a discussion about the company direction and kind of where we are in the world today. We're very fortunate to welcome Tim Cawley, Chairman, President and CEO of ConEd, who's been involved in a very fantastic project with Itron here in Manhattan. He'll talk a little bit about that experience and the relationship there. And then Tom will come back and really walk through some of the technology and give you an update on our operations, how the organizations plumbed for the future as well. We'll take a brief break, 10 to 15 minutes. And then we're honored to have our business unit leadership here to walk you through the platform, the technology, the approach that Itron is taking with the communities we operate in, the customers we have to help ensure their success. That will be followed by a financial update, some forecast for the next several years through 2027 from Joan Hooper, our Senior Vice President and CFO. We'll have one final break as we set up a technology demonstration. We'll invite you all to come visit Itopia, and we have some folks here who will lead you through an interactive visit to Itopia for the folks here in the audience. It should be a lot of fun. And to keep us on time, we ask that unless absolutely necessary, we just hold some Q&A until the end. We've got plenty of time for all the questions you could possibly ask and just to keep us on time, as you just hold that until the end. So with that, I'm going to play a quick video about where Itron has been and where we're going, and then we'll welcome Tom up to the stage. [Presentation]

Great. Well, it's an honor to welcome Tom Deitrich, CEO of Itron to the stage. Thank you.

So good morning, everybody. Thank you very much for joining us. Over the last several years we've been on a bit of a journey to redesign our supply chain, build a really strong management team and really reimagine what our product portfolio looks like. And what you saw in 2023 coming through in the financial results is the fruits of all of that hard work really starting to emerge. From where we are today, though, I think that there are convergence of things that are happening across the industry and across the globe today. Number 1 is an urgent and impressing need to really overhaul what we know as the grid, whether we're talking electricity or gas or water, even smart cities, that has got to change. We're on the path from a customer point of view, and you can see that from CapEx investments and technology investments to really invest to accomplish that mission overall, and there's government funding behind it that can even accelerate that transition that's out there. And from an Itron perspective, we're blessed to have a really, really innovative portfolio of solutions to address exact needs of our customers and really drive the industry forward. So if that's the backdrop, what I would say is welcome to the new neighborhood. That is the new world that we live in. And that phrase is really meant to capture the change that's coming to the industry and coming to the grid. But in some ways, it's tongue in cheek because for the next couple of minutes, I'm really going to invite you into that neighborhood. So maybe the picture on the screen is your neighborhood. You've got this beautiful house. You've got some solar panels on it. Maybe you've got a shiny new EV in the garage with a battery next to it to balance out power demand overall, really nice setup, thriving community, just a wonderful place. But before you kick back in the chaise lounge and break out the cocktails, I got one more thing to share with you. You're an executive at the local utility. So everybody put yourself in Tim's chair for the moment. And what I would say is being the executive at the local utility, you quickly realize it's perhaps maybe not all champagne and helicopters in terms of the future that's in front of you. There's real challenges. There's real things you've got to cope with to align with the mission of providing safe and reliable and effective services to your community. Your infrastructure maybe it's getting a little bit older. It's certainly under attacks from a cybersecurity standpoint or from a physical attack standpoint. You're upgrading the generation side of things to really align with the sustainability mission that is part of your company's promise. And that's terrific. But perhaps some days, the wind isn't blowing and the sun isn't shining. So some of those renewables aren't delivering the same base steady-load capacity that you were used to enjoying and now you've got some variability there. More and more distributed energy resources, things like EVs or rooftop solar or batteries behind the meter or microgrids, all of those things are starting to show up in the territory. And maybe by the end of 2025, there's 50% more distributed energy resources than there is in centralized generation. And that is an opportunity for you. But at the same time, it's a bit of a threat to grid stability. The environment around you is changing. It's more and more disruptive and whether we're talking floods or fires or hurricanes or tornadoes or severe drought, heat waves, no matter where in the world your territory may be, you're subject to some type of environmental trouble that's out there. And how do you provide reliable services during that kind of environmental pressure. If there happens to be an outage, how do you get things back online as quickly as possible. And the last piece of the puzzle, I would say, is societal changes. You as consumers, as well as your role as the executive at the local utility, your needs and your desires and how you interact with other service providers in your life are changing. You ordered your dinner last night from Uber Eats. And you knew in real time when the driver picked up the order and what the license plate number was and how much it was going to cost and what the previous reviews were on his or her services, and in real time, where they were on the way up to the house. Do you have that same kind of interaction with your utility company, with your customer as the utility executive. That service imbalance is an opportunity for you to get closer to the consumer, to help educate and really begin to help the consumers understand how they're using the product, but also to gain additional trust from that consumer. If you ever want to use that customers' EV to provide power back to the grid, they've got to know and have the level of trust needed to know when they go to the garage in the morning that the battery isn't going to be flat. So it's a 2-way street in terms of that trust, but getting closer to your consumer and providing more visibility and better real-time service is certainly a way to bridge that trust. So that's the backdrop of where you are. Let's go back to your neighborhood. My scenario that I'll run for you today really says it's a hot day in the neighborhood. EVs are charging and the sun is shining on the roof and everybody's lights are on and the world seems good. But do you really know as that executive, how close to the edge of your capacity are you? Are there hotspots? Are there things that are happening out in your distribution grid that you don't yet have visibility to that could be helping you prevent an outage. Are there distribution transformers that are almost overloaded or in a bad situation? You may not know given traditional levels of visibility out into your distribution grid. So if that's your situation, you as the forward-thinking executive has invested in grid edge intelligence. And what grid edge intelligence does is it gives you that visibility out at the edge. It gives you the ability to control and understand the capability of things that are out there and be able to optimize the solution. This is a different world and a different way of working with the assets that you have to balance out supply and demand. That is the capability that fortunately you were forward thinking to be able to invest in. And when you pop into the network operations center back at the ranch, this is the dashboard that you can see, and this is your neighborhood. What you see on the screen is the feeders down to the distribution transformers in the network that happens to service your neighborhood. And you've worked to integrate the ADMS system that you have for the distribution management with your edge intelligence solutions. So you get a pretty good picture of what's going on. And you can see that looking at the alerts by transformer, you've got 3 transformers that are a bit overloaded today. So you can find the distribution transformer that happens to service your house, and you see that's one of the places that it is overloaded. So if we click on that transformer, now you can see the transformer down to the end points that are on the houses that are in the neighborhood. So a pretty nice view of what's going on and understanding what is there. You've equipped those endpoints with the latest technology called distributed intelligence. You can download applications into those end points. And think of it as those endpoints are more like -- it's not a consumer device, but it's more like a smartphone rather than a flip phone. Yes, your iPhone still happens to make phone calls, but 9 out of 10 times when you're picking it up, you're doing more than making just a phone call. So the applications you've downloaded into your smartphone, your end points, in this case, are location awareness, transformer load monitoring, EV awareness and solar monitoring. So now you can start to understand what's out there in the grid. And you remember my grid edge paradigm be able to get visibility, understand the capability, be able to control it and eventually optimize it. So with these applications loaded on to the endpoints you now have got basic visibility to understand. So click on that transformer, and what do we see? What we see is that transformer happens to be loaded in this example, at about 140% of its named nameplate capacity. So okay, it's a little concerning, but probably not to the level that you're going to pop a fuse and create an outage on it. But certainly, you're probably wearing into the useful life of that asset running at a bit that hot. So let's take a look at the columns and all those silly numbers that are on the screen there. And what you see is that first column is the visibility part of my paradigm. Behind this distribution transformer, there are 8 different smart thermostats. There are 4 EVs. There are 5 sets of rooftop solar. There's a couple of load control switches working with things like pool pumps and a couple of batteries that are out there. And you can assess all of this by using those 4 applications that I talked about on the previous page. So now you know what's there. And fortunately, you've been working with your consumers to have the ability to be able to engage some of those assets to balance out your grid, and that's what that black number is really all about. You have the capability to control some subset of those things because you have a cooperative environment with the consumers that are at this distribution transformer and in your neighborhood overall. So that's the situation that you see in the dashboard without getting up off your chair, single pane of glass to understand what is there. So far the yellow, orange numbers there are 0. We're not actually controlling any of these things just yet. But okay, 140% load, maybe there's some action we would really like to take. So go one step further. And that annoying neighbor that lives on the edge of the call to stack over there. You can decide who that is, but he or she just bought that shiny new EV, they brought it home and they plugged it in. And oh, by the way, on this side of the cul-de-sac, cloud just happens to come over the sun. And now we've lost some of that PV, some of that solar capacity. What happens to the distribution transformer in real time when those 2 things happened behind the single distribution transformer? We now are loaded at close to 200%. And this really is a mission-critical situation. If something doesn't happen here, we are going to have an outage before too long. So what do you do? In a normal case, it would be a run to fail because of your forward thinking and the equipment that you put out in the fields, you now have the ability to exercise the third step in my paradigm, which is control. So let's exercise our grid edge capability in action, what choices do we have? Perhaps we could change the thermostats, raise the temperature from 72 to 74 degrees, shut off some of the air conditioning during this time period. Maybe we could change the rate of charging on some of those EVs or not having them charge at all right now, but do that later on in the day or maybe when the PV -- that rooftop solar is back online. Could turn off some pool pumps, but we have a lot of choices here of what we can do to solve the problem. Trigger your action. And now what we decided to do was control 4 out of 4 of those air conditioners, 3 out of 3 of the EVs that are out there and the pool pumps and pool charge out of 1 of the batteries. You've now exercised that control and you've optimized the situation and you brought the load on that distribution transformer down to an acceptable level. So I've run through a slightly contrived example here, but not anything far from a real-world case. The technology that is behind this, that capability, this isn't science fiction. This is science real. There's 9 million, 9.2 million actually of those endpoints that are out in the field today. We have customers that are using that EV detection capability already today, the ability to aggregate all of the endpoints from a transformer loading using location awareness that's out in the field today. So putting all of that together is what this example does, but you've seen how you can take a critical situation just in 1 cul-de-sac and use this capability to balance out supply and demand. Now imagine doing that across your entire territory and you have a much more complete system that can be much more nimble to deal with the world that we will live in and continue to advance the capability. Instead of building another set of generation capability, instead of trying to figure out how to solve a very difficult problem like interstate transmission to get renewables to an edge of a city or while that is happening, you can use this capability, this nonwireless alternative, investment in the distribution grid to actually solve the problem and really find a way through the maze that is out there by providing more safe, resilient and reliable services to your community. That's the power of what great intelligence really can do for the industry, and that's the capability that we work with our customers today to deploy. So what happens next? Clearly, we want to scale the deployment. I talked about what's in the field today but there's clearly much more in the backlog today with our customers, you can start to bring to bear much more sophisticated algorithms. You can rely on machine learning and artificial intelligence to balance these things out. This is where the technology goes. But what I wanted to show and just a few minutes that I had here this morning is the base capability that already exists today while we develop more capability with our customers in the future. What you'll hear throughout the day is more stories of how this technology works for not only the electricity space but what you can do with it in gas and water or in smart cities, how some of our largest customers are using it today. And of course, as we close out the morning, it will be about the financial results that are generated by deploying this technology that really does help the community and helps our customers. So I think with that, I really do want to welcome to the neighborhood as whether we call it NASDAQ, whether we call it the new grid and the new environment that we work in or Itron's view of the future, we're really delighted you're here. With that, I think I get the great pleasure of introducing a good friend and a great partner of ours at Itron. We're really pleased to have Tim here to chat with us this morning and really tell us a little bit about his territory, his company and how they are using the technology to service the community right outside your window. So Tim, please?

So good morning all. You can hear me in the back? Great. Tom, thanks for having me. Really thrilled and excited to be here. And Tom pointed out a big broad canvas of the challenges and, frankly, the opportunities in our space. I'm in the business for 37 years with Con Ed for 37 years right out of college. And there has never been a more exciting time in our industry and deploying technologies such as this is part of the excitement. The partnership and collaboration with Itron has been really great. You can imagine we're all busy. I'm pretty busy. But when the invitation came for me to address you, I thought it was really appropriate given the close collaboration. I think collectively, we help push the technology forward and we continue to push. We're a company of engineers and financial people. And if we have an opportunity to innovate, we can and do, and that's evidenced in this project. So I'll spend a couple of minutes with you. I'll talk a little bit about who we are at Con Edison, serving the folks outside the window. A little bit about the deployment of the system for us. Big logistical and IT tackle of a project and then cover some of the wide-ranging benefits, and Tom covered some of them or gave you some of the essence. And if you're following the company, you know what some of them are, but I'll sort of drill it down to some of the things we're seeing. And a big takeaway is, as we deployed, we were really focused on getting value throughout the deployment, not waiting for the last meter to go in. And the other is we continue to find use cases that creates a greater opportunity for us to run the grid on behalf of our customers. So who are we? Con Edison Inc., we deliver electric, gas and steam to New York City, Westchester County and through our Orange and Rockland utility, those suburbs across the Tappan Zee Bridge. We also have a business unit referred to as Con Ed Transmission, a small unit but growing, and they're really focused on moving renewables from where they're produced to where they're consumed. So think about offshore wind, off Long Island into our congested grid or solar and wind from Upstate New York into this service territory. We are 14,000 strong. We are hiring in light of the fact that the grid is growing as we embark on this clean energy transition. We greatly value and leverage the diversity and engagement of our team. I tell folks what keeps me going in this business is our mission. We get to sort of light up the most incredible dot on the globe. And the people I get to work with are just interesting and fun and humble, I would say, and just a blast to work with. And we're really focused on providing safe, reliable, resilient, customer-focused services to those we serve. We have been around for a while. We celebrated 200 years as a company last year. We started out as a small manufactured gas company in 1823 and switched over -- and that was at the time when lamps used to be lit with whale blubber lamp oil, and we start to manufacture gas. We've since consolidated and evolved from there and we'll continue to evolve. And in my 37 years, never a more exciting time than today to attack these issues. We are very steady financially. We have increased our dividend for 50 consecutive years. That was this year. And so we used to be dividend aristocrats and now we are dividend kings. And the same sort of financial stability that the people 50 years ago brought to us, we remain focused on -- our investors really like that incredible stability. And you think about 9/11 and COVID and recessions, the leaders of the company rose through all that, and we're continuing to not only issue a dividend but increase at 50 consecutive years. I give them lots of credit. Our focus today is a lot of what Tom covered -- transitioning the grid for this clean energy future. In New York City, if we're going to reduce carbon emissions to address climate change, we have to address power generation. We don't make the power, but we move it, and we're not vertically integrated anymore. So power generation, transportation, EVs, think about that. And then building heating, moving from oil and natural gas to heat pumps. And we are a natural gas company. We serve 1.1 million New Yorkers with natural gas. But we see the benefit in electrifying new buildings and starting to move in that direction. We think if we don't get going on that, we'll never get anywhere close to net zero by 2050. So a rare gas provider who would say we think we need to sell less gas to achieve the goals, and we're positioned to do that. We are the economic engine of New York City. In this clean energy transition, we play a central role. We've always played sort of a supporting role in New York City, health, safety, economy. We are in the middle of because if we're going to change the way buildings heat or what we're going to fuel cars with or how we're going to produce energy, we are smack dab in the middle of the plot, and we are up to the challenge and excited about it. We provide the most reliable electric service in the United States. And so in Manhattan and parts of the boroughs, we're about 75% underground, and that sort of protects our facilities. Our design criteria is built with contingency in it. We've got a lot of smart engineers and operators that run this complex grid. Our underground network system is 50x, 5-0, 50x more reliable than the national average. So -- and that is from a frequency of outage standpoint. Your lights are likely to go out 50x less if you are in our network system than across the nation. And I often say, my peers talk about reliability, you'll find it in the first 2 pages or annual report. We are talking about something different when we talk about delivering reliability. It is what New Yorkers expect. It's what they deserve. It's what people shop early and head home late about in our company, striving to continuously provide the highest level of service. And that thinking folded over into our deployment with Itron. Great to be here at the NASDAQ. Certainly, the NASDAQ appreciates or expects that high level of reliability. So a little bit about the project. Really great partnership. I've mentioned that already with Itron, a $1.4 billion project for us. We deployed it across both of our regulated utilities. So Con Ed at New York, 5 boroughs in Westchester and then Orange and Rockland Counties, a little bit of Bergen County, a little bit of Sullivan County, they're cleaning up after the wind last night in Sullivan County. They're in good stead. And really, the scaling across the utilities is really good for us as operators and delivers great value to our customers. When we pull 350,000 customers into the $3.5 million, you really can scale the enterprise and get incredible synergies for both sets of customers. That's at deployment, and it's also as we add value features moving forward. The 20-year project benefits to customers exceeded our original planning. And so when you pencil this and you go to your regulators and say, we think we should be doing this. This is back in 2016, 2017, you give them the business case. And frankly, when we moved through the business case, we found use cases that we didn't incorporate into the business plan, so we exceeded our pretty significant project benefits. The deployment was really big. So we started in 2017 and completed the last meters in 2023. Think about 5.5 million meters in the course of 5 years. We averaged about 6,000 meters a day. So this was a production shop in the field, swapping out the meters, peaked at around 9,500 meters in a day. And really very different terrains. I talked about Southern Sullivan County and Orange and Rockland territory way out there. And then you look at -- you can imagine the sets of meter banks and the residential building around here. So very different topography. Four years ago, almost to the day, COVID impacted operations. And we had to -- it wasn't the greatest idea as really -- COVID to hit a bunch of buildings. If 1 person was infected, they would have sort of hit a bunch of buildings. So we had to stand down and then adjust operations and first do outside work as things began to become safer and then sort of redeploy and reoriginate all those installers. We had a lot of significant outreach and communications on the front end and throughout the project. And I credit that and the operations team's diligence. Very few customer complaints. When you're sort of doing anything at a volume of $5.5 million, you expect some balances, but it was really, from that perspective, quite smooth. The communication network was really vital to the deployment. And I talked about our service reliability. That's the way we think about our systems. We are serving New York City. I think the greatest dot on the globe, and the expectations are super high. So we wanted to build in resiliency and reliability into the system. I talked about the different topographies. One customer every 1.5 miles in the far reaches of our service territory to 1,000 in a residential building, had to sort of adjust to that. I mentioned 75% of our system is underground. And that's the reliability that I talked about. And so for a lot of utilities, you take advantage of the pole infrastructure to put your communication network on and you sort of move around the neighborhood. We did a bunch of that for 25% of our customers, but we also had to find ways to communicate from the meters in deep basements out to a network, a gridded network that worked really well. In all, we installed 22,500 devices that are sort of overlaid and meshed and with contingency built in. And as a result, we're communicating at 99.9-plus percent. And we have diagnostics that tell us those few that aren't reporting and we've got tools to sort of address those deficiencies. Technology to support the project was a big deal. This was both a logistical, think about a bridge truck rolling up with meters in it, boxes of meters. So that's sort of the tactical end and where do you store and ship and test these things. And then on the IT end, we're consuming incredible amounts of data. We want to organize the data and then get on to bills and ingest the data in a way that we can deploy it for value-added cases. So a lot of IT work in this. We get our readings anywhere from every 5 to 15 minutes, which I think some others are beginning to push that envelope. We were the first to push. And again, we wanted to build a system for speed and that -- the amount of data is challenging to sort of consume and manage and organize but it gives us incredible insight and visibility into the grid. It makes a huge difference. So I'd be remiss not thanking the kind of team. We had a few project leads who got after it over these 5 years. Tom Magee and Madhu Reddy did an incredible job with this, and the teams they led, both Ops and IT and also the Itron team. I would say, collaborative, up to the challenge, very accessible up to Tom's level. Tom had a monthly with our project lead to talk about issues. And when you're moving through a project in this scale, it doesn't all hit like clockwork, and you've got to sort of come against barriers and overcome them. And we saw plenty of that, but we also had a ready partner in Itron to help work through it and push the technology. So I'll talk a little bit about the benefits, and this is not all inclusive. And I would also say that we continue. Right now, we're at [ four wing place ] down in Union Square. We've got engineers and operators who are thinking about additional use cases and how to sort of leverage the data that we're getting and the visibility we're getting. But operational awareness, public safety, billing performance, customer set, energy efficiency, it really runs the broad range. And the best part about it is these benefits are directly enjoyed by our customers. We're really here to serve the customer. We're focused on the customer. So it's not about us, it's about our ability to serve our customers, and it's done a really good job. At a very basic level, when we started to get into this, we had a couple of storms in the mid-teens. And one of the challenges is without an AMI system or smart meter system at the most basic level, we don't know with certainty or did not know with certainty whether or not at a granular level [ 2 amp street had ] power. And that was mystifying to customers. I've worked in overhead construction and our control centers. I've moved around a lot. And you talk to a customer and they'd be awed by the fact that in 2018 or 2017, we're running the grid, but we don't know whether or not with certainty you have power. It just sort of blows their mind. So at a very basic level, understanding and having basic visibility over the fact that the vital service we provide is being received by our customers was essential. And without it, you fall way behind. You talked about Uber and otherwise. I've got a daughter. She will order soccer cleats from Colorado and she could track them to Chicago to Newark right to the door to the second. And at that time, we couldn't tell to her whether or not they were getting our power. We were way out of sort of match. That is the basics, but it goes far beyond that. But at a very rudimentary level, it sort of brings us into the 2020s at the most basic level. I'll talk a little bit about operational awareness and efficiency outage management. During storms, we know with great granularity who's in and who's out. It used to be without this granularity, a thunderstorm would roll through at 10 at night. And because people didn't call us, we didn't really know how bad it was until around 8 or 9 in the morning when the call started to come in. Now we know instantaneously and granularly who's out. We take the no light data from the meters and feed it into our outage management system to prioritize. You get the most customers back with the least effort and a big game changer there. More efficient dispatch are sending folks to the right places, avoided truck rolls. At the end of every storm pre AMI, there used to be what we call singles. These are individual low lights. Often, they were part of a bigger outage, but we didn't have the clarity or the transparency to know that. So we'd be calling customers 2 days in and say, do you have your lights, and they say, you're operating the grid, you're asking me that? Yes, I had my light yesterday. Now we can ping meters and sort of clean up that list of 1,000 no lights in virtually no time. And that allows us to release mutual crews to the next utility who needs them. It's basic efficiencies that this helps drive. The other sort of bane of control center operator assistance is something we call a nested outage. Big neighborhood is out after a big storm. We made some big repairs. We closed the switch. Most of the neighborhood gets back on, but there's a pocket of customers nested that we're unaware of, and we pull off and they're stuck and their neighbors have their power. Now we can before we pull off, check in on the broad neighborhood and make sure that the restoration broadly covered all the customers. We use it for awareness of certain customer classes. We have a group of customers referred to as life-sustaining equipment customers, LSC. They are on medical equipment that is required for them to have electrically powered to preserve their life. And they register for it, we list it, we map it. We also have, within the system, a page that lists all the LSC customers. And if one of them goes out of light, we know instantaneously and can check into it. We've deployed that kind of thinking to the MTA as well, the subway system. And so for us, the electric supply to the subway system is lights, sometimes elevators, sometimes, but importantly, signals for the system without signals the subway stops and New York City stops. And the predominant way those signals are served is with a primary service sort of the go-to service. And if that fails, it swaps to an alternate, a pretty basic design. In the past, we didn't know whether or not the alternate was ready to do its thing, and we would find out when it was asked to do its thing. And if the alternate had failed, it would swap over to a dead circuit and the signals would be impacted. Now we know -- we sort of jumped ahead in the deployment, skipped order geographically and got into the subway systems to put the meters in there now to set the system up. And so now if we see an alternate go out, no harm, no foul, I'm riding the sixth to Grand Central, the way I do often, but we're going to address the alternate before it becomes a problem and gets called on. Very basic application, but keeps the city moving, frankly. And so I talked about getting value before the last meter goes in. We had to jump around locations. It was a bit of a pain. They had to manage it logistically, but well worth it in 2 or 3 years earlier, the MTA and New York City was benefiting from that change. We're also using -- you talked about visibility, Tom. We can look at the meters and see voltage perturbations, and our engineers run that through some screening and say, that signature of voltage looks like there's a loose connection on that block. And rather than let the loose connection fail, we'll proactively go out and address it before a small problem becomes a bigger one. And so we continue to find ways to develop cases. On safety, particularly proud of what we've done on the natural gas system with safety. And we worked with a firm called New Cosmos and Itron. New Cosmos is a gas detecting company. And they have gas detectors, they sort of look like the old easy passes, the white ones that were a little bigger than the ones we have now. That's what the gas detector looks like. We put those into the point of entry at all of our gas services. So we serve 1.1 million gas customers at CECONY. We have about 300 entries to buildings and then customers sort of spread out from there. But I'm sorry, 30,000 -- 300 I'd be able to quit the lunch -- 300,000. And so we put them in and what these natural gas detectors do is they detect methane well below the explosive limit. They will provide an audible alarm in the house. So if you're in the kitchen or somewhere, you're going to hear something that you sort of get out, there's methane leaking. Through the communication network, it transmits a signal directly to our control center in gas and produces a leak ticket that we respond to. And we respond super fast, very high percentage of leaks in less than 30 minutes, we're there. We'll call the fire department as needed, and it is a game changer in terms of public safety. My predecessor, John McAvoy was relentless. He was set high standards and was super supportive in general and on this initiative, in particular, he wouldn't sort of take a now. He knew the technology was capable and working with Itron and New Cosmos, we got it done. We're about 60% done with the deployment and the saves that we're seeing, I get a monthly report from gas, whether it's a pilot left on with nobody in the house. It's clear to me that some of these are saving structures and/or lives. And so a real game changer for us and incredibly proud of the team's effort there. So thanks for the support in making that happen. A lot of environmental benefits, much of what we are focused on at Con Edison is leading this clean energy transition, EVs, transmission for renewables, electrification of heating. And one of the ways we can do it is visibility at grid edge, and Tom talked about grid edge visibility. And we have a program called conservation voltage optimization, a bunch of engineers, yes, CVO, 3 initials, conservation, voltage, optimization. And effectively, the premise is that at our substations we maintain a certain level of voltage at the central substation. With the goal of making sure that the person at the end of the grid, at the grid edge is going to get sufficient voltage to run their appliances within the standard, I think, 120 - 240. Without knowing precisely what they're seeing, you tend to be more conservative at the substation so you're giving good service to your customers. With knowledge at the grid edge, you can say, wait a minute, we're a really great shape at the grid edge. I can lower the voltage at the substation or if there are certain pockets of the grid edge that aren't getting sufficient voltage and this allows you for lowing it, you can build the grid out a little bit, small investment. And by lowering the voltage at the substation, we're using less power. Power equals voltage times current. So if you lower the voltage, we're less power. Incredible savings for customers. So it reduces emissions because you need to produce less power. 1.5% cost savings, an $86 million cost savings thus far for customers. And really, this is all about leveraging the data of the visibility. Customers experience the same benefits as they always did. The environment benefits, the bills are smaller. It's an incredible win at scale for us. We're also really looking at data in general, finding all sorts of ways. The neighborhood that Tom showed, shows EVs and solar and maybe battery storage in some locations. And how do you manage all of that. The smart meter really provides the foundational element for us to see at that granular level what's happening. We can increase demand response. So we have programs that, say, on the hottest days of the year, we'll give you an incentive if you just take it easy and don't do your washer dryer. That's not possible unless we can see what your usage is, sort of an old mechanical meter, we're in the dark on that literally. It allows us to introduce new rate structures. We're going to have a lot of EVs in the service territory. And when -- if they all charge at once, if everybody goes home at 5:00 and plugs in, the grid is going to be challenged, and it's going to be an inefficient build-out. If however, we can create time of use pricing with the smarts in the meter to say, charge between midnight and 5:00 a.m., the grid's got all sorts of capacity and you'll get a break on your bill. That's made possible through smart meters. So different rate structures and tariffs as a result of data. The other place we're using it is giving customers access to their consumption information. And so a program could be -- if you're -- if you sign up for it and you're halfway through the month and you're way past your average, we give you a heads up. And it may or may not change behavior, but oftentimes, it can and you sort of tap the brakes and be more conscious in the second half of the month. So it sort of empowers customers in general. So I'll conclude here. Hopefully, this provided some insight into a customer's view of what we're up to with Itron. It's really about safety, reliability and resiliency, leveraging data, bringing us into the 2020s and beyond. And the grid is getting more and more complex. And with the complexity comes opportunity and challenge, and our rollout of the Itron system really positions us to avail ourselves to more and more of the opportunity on behalf of our customers. So with that, I'll invite Tom back up. Thanks.

So I don't know if there's any [ sign field ] fans out there, but this is -- this episode sticks in my mind when George Costanza basically says, always leave them wanting more, just drop the mic and walk off the stage, that's kind of the moment. Now thank you, Tim. That's very, very humbling and you're super kind for doing that. So I've got a very tough act to follow. But I wanted to dig a little bit deeper into the technology and the operational side of this and really set the stage for what you will hear later on in the program today. So just some blocking and tackling, how we go to market, this concept of a device, a network and an outcome. We really want to design it once and use it multiple times. As Tim referenced, let's use the same network for metrology, gas safety, for electricity meter reading, maybe in some territories, you want to control street lights, maybe you want to do an air quality detection. But once you've built it, it's a canopy in the neighborhood and use it in many, many different ways. And that's really what drives our networking business. The prime objective for John Marcolini's Network Solutions business is application and margin expansion. Let's make sure that network can cover in a cost-effective, appropriate, robust way as many different applications as we possibly can. For Justin Patrick's devices organization, it really is about, let's build foundational building blocks that can feed every part of the organization, but let's optimize profitability. Justin and his team have made a lot of hard choices to improve the profitability over the last several years and you can start to see that flowing through. But his prime objective is really all about platform enablement and optimization of the business. Towards the thin edge of the wedge, if you will, Don Reeves' business is really all about rapid and profitable growth. Once you have your hands on all of this rich set of data, let's mine it and pull out all sorts of insights to run your business better. Tim went through several examples of how Con Ed is using it and what you can do with it. We've only really scratched the surface. From an Itron perspective, quite honestly, we do this because there's higher growth opportunities from a business point of view, up the pyramid and there's better margin potential because you are now leveraging an asset and every incremental use case you can put on top of it. There's incremental return for our customers and for our investors overall. But overall, that is the structure and why we are organized as we are. Of course, we serve vertical markets, electricity or gas or water or smart cities. And you can use this very flexible and capable platform in a lot of different ways. But our ambition very much is to be that tagline at the bottom of the page to be a trusted partner with real innovative solutions, with a team that's hungry to go and figure out how to do it better every day and make sure that we're giving a good return for our investors overall. That is our mission and how we think about our business holistically. Lots of smiling faces on the screen. This is the leadership team. Yes, I happen to stand in front of the room, and I mostly talk for a living, but everybody else in the organization are the people who do the real work, and I couldn't be more proud of the results that they generate for our customers. But the top row on this slide is who you'll hear from today. So the 3 leaders of our business segments who I just referenced in the prior slide, will be up here in a bit. And then Joan comes later in the program to really lay out financial targets for the years ahead. The market that we serve, a bit of a complicated slide that allow me to walk you through it. The pie that's all the way on the upper side, far side of the screen from where I stand today, the total market opportunity for the things that we do all around the globe is about a $36 billion market overall. And it's about split 1/3, 1/3, 1/3 between the -- what falls into the devices wedge or outcomes or networks. That's total worldwide opportunity for us. We look at the markets where we really can serve our customers well and serve our investors well. There are some places on the globe where we're not really present in a strategic sense, but more spot transactions, things of that sort. So there's about $20 billion that we're really focused heavily on making sure that we are heavily engaged in those marketplace and really doing a good job for our customers and investors there. You can see the split again between what is the outcomes opportunity, the networks opportunity and devices. You take that $20 billion and it goes to the table on the bottom of the slide there. So $9 billion, $7 billion, and $4 billion is the rough split in billions of dollars between the 3 segments. This is 2023 numbers. If you look at the growth rates by each one of those slices of the pie, outcomes is growing the fastest. So probably about a 12% plus CAGR, 5% and 2% for the business areas overall. Those numbers are based on the best estimates that we have by looking at third-party data, our view of the marketplace. And we really haven't done a particularly sophisticated job here of trying to figure out how government stimulus may affect these numbers. I certainly think there's an opportunity for that to pull things ahead and increase these growth rates as well as our own, but not built into the numbers at all given the pace at which that is moving through the process overall. For those who want the advanced course in how the market splits, the 2 pies on the far side of the screen from me now gives you a view of the regional splits between our 3 big regions between the Americas, Middle East, Africa, Europe and Asia Pacific. So a bit of a balance for us in a regional sense. Certainly, the U.S. and the Americas market is our largest, and an area that we're fiercely proud of our position and our customer relationships. But Asia being the smallest is certainly the fastest-growing area as we see a lot of uptake in countries like Australia and New Zealand, certainly, Singapore is an area. There's real grid stress in areas of that part of the world because of the things we've been talking about. Penetration of renewables in Western Australia, for example, in any sunny afternoon, 65% of the power that's consumed at any one moment is coming from private rooftop solar, which is terrific unless we use the example that I showed earlier where the sun goes behind the cloud and all that load wants to switch back on to the grid. How do you balance that kind of environment? How do they fully optimize that system? They've gone to tremendous measures, some not particularly sustainable in certain cases, by burning stadium lights during the day to create additional load and balance things out. They've gone to 5-minute settlement in the marketplace, but a lot of action on the grid that uses the kind of technology that we're talking about in our discussion today, and I think we can really help in that marketplace. From a vertical market perspective, electricity, gas, water, smart cities. You can see the size of the pie there. Electricity is the largest segment. Everything is being electrified. Tim talked about that just a moment ago from transportation, to heating, to cooking, to even data center loads are increasing pretty dramatically. And you see a lot of movement in that area and investment in the distribution grid is going to be required to cope with that electrification trend. So that 61% of the $20 billion, so $12 billion, $13 billion or so of the market opportunity for us is in electricity and our largest and strongest vertical. And the growth rate for electricity is above the average for the overall market. Second big opportunity is water. Water is above gas in terms of growth rate. Society doesn't exist without water. And that certainly is a big opportunity and a focus area, and you'll hear some use case examples from the segment leaders in just a moment. And finally, gas is sort of the small portion of the pie for us, an important one and one that we're absolutely not walking away from, but certainly, I think that market is flatter from a growth rate at the distribution edge, where a lot of locations, New York being one of them that you probably don't have a bunch of gas hookups inside of buildings any longer, maybe for -- still for generation, but inside of buildings, the trend is much more based on electricity. And finally, smart cities for us that is reusing that network asset to light up a city and be able to add a lot more intelligence into things like lighting perhaps air quality, perhaps understanding where assets are inside of the town or lighting up street furniture to understand what bus schedules look like, a lot of different applications that you can do once you have that vertical built out. So that is the market overall, but electricity and water, clearly, the focus areas and growing at or above the total market opportunity in terms of what we do. The things that I think are really important from an investor point of view for you to understand. 3 big technology trends, so you don't get lost in all of the details of the examples of how the technology works but our main areas of focus. Number one, add value through the platform itself. The more we can build out a platform the better it will be and you can use it in a lot of different ways. Once you've invested in the base capability, every incremental application accrues at a higher return on that investment for both your community and for Itron and its investors. The industry-wide adoption rate. One of the challenges that I didn't really talk about when I was going through my -- you're in the seat of the utility executive is the pace of technology change. There is a sacred obligation that Tim talked about, about making sure the lights stay on and the water runs when you open the tap, that you're providing safe and reliable service and you're being really effective with every dollar that you spend, but technology changes rapidly through innovation and there's lots of things that come at you every day. How can you increase the rate of that technology adoption from an Itron point of view, get more benefits into the field faster, get more benefits to our investors faster. We think the way to do that is integrate with more industry partners across the board. So in the last month, you saw us make announcements with Schneider Electric with GE Vernova with Microsoft, where we are doing pre-integration, we're prewiring the plumbing, if you will, if I mix my metaphors, to make sure that our systems and those systems are already pre-integrated. So as a utility, you don't have to figure out how to make that work. We've done that in advance to really pull things ahead and make technology adoption for our customers faster and easier. And finally, the sustainability benefits you get by deploying the technology. Tim talked about these things in his talk. Reduced truck rolls, better quality of service, better engagement with your consumers, the ability to equip consumers with understanding about how they are using the technology. So maybe they don't do laundry, the afternoon when it's really hot and the grid is under pressure. But that consumer behavior benefit comes when you really can engage your consumer as a utility. But the benefits from a sustainability point of view that come from that are enormous. The number on the screen is really a 2022 number. We don't have the 2023 numbers fully calculated just yet. But in the year 2022, we saved our customers or allowed our customers to save 180x more greenhouse gas emissions than our company produced. That number of 180 or that ratio of 180 is up from 100 in the year 2021. And I'm sure when we finish all the calculations for 2023, that ratio is going to go up again. So every time our customers deploy the technology, it has an overall sustainability benefit by reducing the amount of power, reducing the amount of loss, certainly improving the quality of service and helping consumers understand how they are using the product. So that ratio is very, very important from an overall sustainability perspective, but it is just another benefit that comes from the deployment of the technology. Those are really key benefits and things that I would encourage you to think about and take away from today's session. Resiliency and reliability in the world today is wildly, wildly important. And we've spent a lot of time thinking about this and working on it. So over the last several years, you've seen us go through a series of actions to rightsize our manufacturing footprint. So from close to 30 manufacturing plants several years ago by the end of this year, we'll be down to 6. And that number of manufacturing plants, each one is larger, each one has got some more economies of scale, and that factory footprint is now well aligned to our product portfolio. So with that portfolio, that's the number of factories that make sense for us with the global distribution that we have and we're finally at the point where we say, "Ah, now we have it with the portfolio that we're carrying forward". That allows us to switch our focus from a lot of product transfers and moving things around and plant consolidations, much more to productivity and the focus in the manufacturing point of view is certainly maintain the quality, which is sacred to both us and our customers, but really focus on bringing out more efficiency from the production facilities that we have as well as with our outsourced partners. We're about 50-50 today between outsourced manufacturing from a COGS point of view and in our own facilities and probably over the years ahead, the amount of outsourced tends to creep up more based on the product portfolio overall. But now in balance and we can really focus on driving efficiency and productivity through that channel. The last piece of this puzzle is very much global supply chain resiliency. I don't know what your magic 8 ball said or what was on your bingo card for the beginning of this year. I did not have Houthi rebels in the Red Sea on my card coming into the year. But nonetheless, here we are, where we do have a supply chain disruption that's out there. How do businesses, how do we make sure we provide resilient and reliable services through all sorts of tailwinds and cross wins and border disputes and tariffs and other things that are going on, spending time on supply chain resiliency is really, really key. And that strange wheel that's on the slide, if I'm not standing in front of it for those in the room, is really how we think about the resiliency. There's a part of this, which is the core capability. You've got to have visibility. You've got to be able to assess the situation in the world around you, but you also have to be able to absorb that punch when it comes and there's a lot of steps to being able to absorb a disruption and be able to manage it. And then clearly, there is the part of it which is recovery. You do your very best to make sure you've anticipated as much as possible. You're ready to absorb it without a real disruption. And when it comes, you can recover from it quickly. But it is things like having fewer factories and a supply base that's close to the factory, so you don't have long transit times. It is multisourcing. It is carrying more strategic inventory. It is thinking about your product portfolio so that you have fewer SKUs but you can cover a wider portion of the marketplace overall. But a lot of thinking and a lot of work on our side and some of the hard lessons that came out of the supply chain crunch that was in the post COVID years but building a much more resilient supply chain is the focus for our global operations team. My last slide then, before I think we either have a break or we go to the PBUs, is, why Itron? Certainly, it is a global platform that has a lot of capability. It is this notion of great edge intelligence, create visibility out of the edge, understand the capability of it, begin to control those things and then fully optimize the system for the benefit that you were looking for. Sustainability, reliability, cost reduction, all of the things that you will want as a utility customer is what we enable. Let's pre-integrate with leaders in the industry. Let's make sure we are taking advantage of systems that sit in the utilities back office or other parts of their system, pre-integrated to make sure that all these things are working out of the box to help customers absorb the technology with minimal disruption allow the customers to use them the way they want. And finally, the secret sauce very much is this notion of agility. Let's make sure we do have a way to adapt to what is happening. The utility model that used to exist where you could buy a fixed capability and you could put it in the ground and you could amortize it over whatever the length of your rate base is, 10 years, or something like that. That's very, very difficult to do in a volatile world. You don't know what happens next year, let alone next week. So how do you deploy assets that give you the flexibility to be able to move, use them as you need them, grow as you need them and adapt to the changing environment that is around you. That capability of flexibility and agility is something that is absolutely required in the world that we live in today. And then finally, at the end of the day is be able to do this with terrific partners like Con Ed here in New York and prove the results. So reading through an RF environment, in the environment that you see outside the door every 15 minutes at a 99.99% rate is something that as an engineer or at least recovering engineer from earlier in my career. It gives me chills to be able to figure out how that system works. And that's something that the team has accomplished with domain expertise to understand how to make sure that it works for the long run and for the good of the community. That's the value proposition that we provide and why I think we are very well positioned to take advantage of that convergence of things that I talked about first up this morning. The world needs to upgrade and overhaul the systems that are out there. Customers are ready to go and do this. They see the need as well. There's government funding that may accelerate that. And finally, we've got the portfolio to go make it happen. Thank you very much and I think I now in between you and a break. Thanks.

We'll be back at 10:15, 10 minutes, please. [Break]

All right. If I could have everybody's attention, we're going to get started here. If we could gather back at our seats, top off that coffee and we're going to get started. Get back on schedule here. Thank you so much for your attention.

All right. We'll stay in order going over there -- all right. I guess it's on -- good morning, everybody. I've just been up so early that it's -- I'm still thinking is the afternoon. My name is Justin Patrick, I lead our device solutions here at Itron. I'm responsible for our global device platforms, which includes our water, gas and electric endpoints. I've been here at Itron for 4 years during which my team has been transforming our portfolio, pruning old products, applying new technologies and then creating the ability to take more data out of our products and allowing us to grow our margin and our opportunities in the market. Prior to Itron, I was at Johnson Controls, had a couple of general management roles there. I also worked at Carrier and some sales and product marketing and management leadership positions and I was an officer of the Navy before that. So that's my background. Today, what we're going to talk to you guys about is how the 3 of us and our organizations are creating these solutions that solve the problems that you heard Tim and Tom talked about earlier today and how each of us reinforce that ecosystem that we have and that everything that we're doing is to try and create a better, more profitable and extra good result for our customers. Okay. This graphic here describes how we think about our businesses and how the Itron solution comes together. And it's really about end points and endpoints being able to collect as much data as possible, putting that across our networks or connected intelligence, right, and doing secure, safe and reliable transport of data to provide all the data we need to, to do all the great outcomes that Don and his team are doing from analytics and for the things we need to do to solve our customers' problems. I'm going to start from the devices perspective. And for me, it's all about how much data can we get out of the customers' infrastructure, right? It's the building block for the entire solution for Itron. We're applying new technologies to do that like solid state metrology, which allows us to get even more granular data to be able to provide that data that Don needs for additional and new and really cool outcomes. We're also applying new technology like solid state metrology allows us to get even more granular data, right? So again, getting -- it's about data right? That solid-state metrology though also has added benefits because it allows me to simplify my portfolio and to create scalable global platforms that we can use to serve our customers in a variety of markets and in a diversity of different solutions. There's an added benefit to that global platform and that it simplifies our offering in our portfolio. So we need less products, less components, which gives us a whole lot of opportunity for operational improvements in our manufacturing processes, better reliability and resiliency in supply chain. So getting parts for being able to deliver products to our customers and it also improves our customer fulfillment processes. So we're just a more reliable supplier. You heard Tom talk about that in his section about resiliency, right? And then this is all important because it allows us to have a very scalable, modifiable platform that allows us to go after more markets, more revenue and more margin across the organization. So with that, I'll hand it off to John.

Sure. Yes. Thank you. So John Marcolini, I'm the Senior Vice President of the Network Solutions business unit. I actually had come to Itron through the Silver Spring acquisition back in 2018. So -- and a lot of the reason why I'm here actually is because of what you heard from Tim. So back in 2015, I joined Silver Spring at the time that Con Edison was going to market. And it was an opportunity for me to dive into the utility space, where prior to that, I spent most of my life in semiconductors, which I think Tom would attest, has come in handy over the last few years as we've navigated some pretty treacherous waters. So my job or my team's job as network solutions to really build out our global platform. So when you think about how Tim talked about what they've done from back-office integrations and their business process definition to building out resilient canopies over some of the most challenging environments that you're going to run across the planet to ensuring that we can bring new and different types of use cases to market. That's really what my team does every day of the week, we have customers around the globe. We invest a lot of energy and making sure that we are keeping ahead of the standards, making sure that we're driving standards into the future. So as we think about today's mesh network, tomorrow's cellular network, how the 2 things work in conjunction with each other, it's front and center to what my business does every day of the week. So again, thank you for spending the time with us today. I'll hand it to Don.

Great. Thank you, John. So I'm Don Reeves. I've been with Itron also for 6 years, came in also through the Silver Spring acquisition, where I've been for about 13 years or so -- about 20 years in the industry. So outcomes is really all about turning the raw data into actionable insights. And you heard some great examples already this morning about how that can come to be. There's a breadth of offerings within outcomes. So this is everything from meter to cash. So we provide systems that serve as the cash register for our utilities, moving into demand response. So we provide systems that allow utilities to balance supply and demand through summer peaking and now winter peaking, and I'm sure soon spring and autumn picking to come. We provide forecasting to a lot of the independent system operators across the world. So Itron software is actually at the heart of forecasting about 15% of the world's electricity worldwide. We provide as well now grid edge intelligence and visibility as to what's actually happening at the edge of the grid. And obviously, that's going to be a large part of what we talk to today. I think a few other takeaways is not only do we provide software, but we also provide a set of personnel that really are experts in how these systems work and operate and are deployed. So I have a global managed services team that operates the software on behalf of one of our customers. So this is exactly what we do for Con Ed. We also have a delivery team, which includes a variety of subject matter experts that know how to deploy and implement and operate these systems. And certainly, as they get more and more complicated that level of expertise is very important to our utility customers. So with that, I think we'll dive more into the details.

Sounds good. Yes. Thanks, Don. So I will try to move around a little bit so that you can see the screen, I am not blocking it. So there'll be 2 real key themes that you hear from us collectively today. The first is around delivering industrial IoT platforms, really -- over the last few years, we've pivoted the business away from that onetime device sale where you recognize that revenue, you grab that margin, but then you sort of lose that customer relationship because it's a onetime transaction. We've really focused our energy over the last few years on pivoting from device-based sales, as you heard Tom talk about, to solution-based sales. And why is that important? It's important for, again, all the reasons and I keep pointing to the empty chair, but that was where Tim was sitting. He's not there anymore. So what's important is that we recognize the need and the velocity at which this market moves, right? So we recognize the need to continue to add new value and create new value for our customers over time because these business cases can last 15 years, 20 years, right? If you go back to the first infusion of dollars from the ARA back in 2008, 2009, the business case then that was used to justify the investments that our partners made looks much, much different today. And if they knew then what they know now about what they needed out of this platform, they may have made different decisions back then. So our goal as a company is to deliver an industrial IoT platform that is future-proofed, right? We can bring new solutions like the natural gas detector that we spoke about earlier, like smart streetlights, like distribution automation. All of these different capabilities that work on a platform that's both backward and forward compatible. Again, industry knowledge and understanding the velocity, I came from the semiconductor industry and my world was driven by Moore's Law. Every 18 months, we were building new chips and we were pushing them into the market. I had to recalibrate myself a little bit to make sure I understood the dynamics of this market. So keeping that flowing, keeping the ability to create new value is what is absolutely critical for us. The second piece of this -- that second part of the story is around intelligent connectivity. So again, walking around the streets of Manhattan. You don't see poles, you don't see wires. Everything is underground. I think the stat was 75% of the grid is underground here. So as you think about what it takes to deploy a resilient network in this type of environment, it really pushes you to the limits of what's possible. So in the partnership with Con Ed and understanding that whole value proposition where they wanted to push the envelope and deliver 15-minute data to their customers, right, for consumption by their customers every 15 minutes. It pushed us to get creative in how we would build a network in this type of environment. And now we've been able to take that capability and take that globally. So be able to provide a highly resilient network, providing all of the data insights in a real-time fashion because as you heard Tom talk about, the insights at the edge are really going to define the way our utilities manage this extreme amount of new demand that's coming their way. So intelligent connectivity from my perspective is how do we use the best tool for the job, right? We don't necessarily tell our customers, well, you need to be mesh or you need to be cellular or you need to use a combination of both. What our goal is, as a company, is to make sure that we can provide that vertical value that we've been delivering for decades to our customers regardless of the transport because at the end of the day, what they care about the most is making sure that they can keep the lights on. They can ring the cash register every month when they generate bills and make sure that their service delivery is of the highest of resiliency that it can possibly be. So when you tie all this together, it really defines the IoT platform and intelligent connectivity and why the 2 of those things come together to really define the future for Itron and the value that we bring. Again, not only to our customers but to you, our investors. So intelligent connectivity, right? I talked a little bit about the project. And when I started here back in 2015, 2016, and we thought about what it would take to build the network out. There was a couple of key points that we needed to focus on. Number one, was the performance expectations of the network. And the second thing, which actually became more apparent after the fact was the different types of use cases that may come into the future. At that time, we talked about high-level concepts of what sensors we might want to put on the network. But when it came right down to it, we always thought that they would be constantly powered devices, things like street lights or distribution, automation type equipment. All of a sudden, they ask us, well, we need a battery-powered device that can sit somewhere inside of a building and communicate on the same network that you can communicate all of your electricity meters are communicating on. So we had to think about the dynamics of how to build that resilient network in an environment like this. And honestly, we learned a ton, great partnership with Con Edison, just fantastic collaboration between the teams. And as you heard Tim say, over 5 million electricity and gas end points reading here every day. So when you have this resilient canopy, the question then becomes, what do you do with it next. So we've got great examples around the globe of customers who have embraced our technology, who accomplished their initial goal, right? So maybe the goal was to build out an advanced metering infrastructure. But then they took that highly capable grid and decided, well, let's see what we can do to generate new value. So over the last few years, we've had a couple of customers who have leveraged this Canopy for new use cases and new services. So Commonwealth Edison in Chicago have decided we have the capacity and we have the relationships. Why don't we open up our canopy for the utilities and cities that sit underneath us. So they established a partnership with people's gas, and they decided that it's more effective for us to read your gas endpoints than for you to build an entirely new network. So they established a network as a service relationship, which again generates new value for an asset that back in 2009 or '10, I'm sure that this didn't cross their mind. So for us, again, as the technology provider, we need to make sure we're future-proofed. We need to make sure we're continuing to evolve the capabilities of the platform to bring new value. So there's over 1 million gas endpoints that will be read underneath Commonwealth Edison Canopy in Chicago, again, as a new value, new use case and it provides societal benefits also. Rinse and repeat that same exact story for CPS Energy in San Antonio and SAW, as are known as the San Antonio water system, 0.5 million water endpoints being read underneath the CPS Canopy. Again, from that perspective, CPS Energy is now generating a new revenue stream, we're selling additional services, as Don pointed out, with the global managed services team. And now we're able to collaborate amongst the 3 of us and generate new value for all 3 parties. So at the end of the day -- and I touched on this a little bit when I mentioned cellular, what's super important for us is that we are staying ahead of the curve. We are embracing this technology in ways that provides value to our customers and not forcing them down any one path, right? It's about total cost of ownership, right? Make sure that we can build a solution that drives value for each individual customer sometimes their dynamics are slightly different. So taking this one step further, and Tom touched on this on the smart city and smart lighting segment of his discussion. We are a market leader in this space. Some folks don't typically look at Itron as a smart cities company. We have over 4 million connected streetlights awarded globally. We're 60% market share for U.S. AMI awards. So we have a very strong position in the markets, both in the United States and globally. But what was really critical about the way we introduced the streetlight technology was, number one, it actually came through our partner ecosystem. So we created an ecosystem of over 250 partners that bring different value to the table. Some of them on hardware devices, some like new Cosmos, again, mentioned by Tim, some that Don will touch on later as it relates to the application partners that we announced at DistribuTECH 2 weeks ago. But what was important was that, again, as we embrace this new use case, we needed to make sure that this value could be realized on the platform that our customers have deployed. So backward and forward compatibility, leveraging a large canopy, Florida Power & Light is a perfect example of this. They deployed over 5 million end points to -- in their initial program back in 2008, 2009. Since then, we've added tens of thousands of distribution automation equipment devices. We've also added now 0.5 million street lights, which was at the time, probably the largest streetlight deployment in the United States. So we know that things are changing in this world and actually the velocity of change is starting to increase. So as we think about our job as a technology provider, we need to be ready for all those new consumers and producers of energy that are going to be sitting at the edge of the grid. And I know Don will go into this in a bit more detail. So with that, I'm going to go ahead and hand it over to Justin.

So John was talking about connected intelligence or connected -- intelligent connectivity, right? And we want to make sure that we're bringing that to not just our electric customers, but to all of our customers. And so the next 2 examples I'm going to give are in gas and in water. And you heard Tim talk about this a little bit earlier in terms of connectivity, right? And what he's using it for? Our end-to-end solution gives our gas customers the ability to have that same insight around connectivity, monitoring, endpoint, data collection that our electric utilities do, and it gives them that same ability to react to anything that's taking place inside their distribution network. We have a great solution that goes with our solid-state gas endpoint, our fantastic networks communication and then our outcomes, which is a gas safety distribution application. And it gives our customers a lot of insight into what's going on inside their network. Tim talked about this a little bit from methane detection and how he's using that to make sure that they're keeping on top of any issues that may be there. And safety is important, right? Utilities want to make sure that they're measuring and managing the resource, whether it's gas, water, electricity, and they also want to make sure that they're collecting revenue. But as Tim and others have said that safety is their #1 priority in terms of keeping their customers and their employees safe. And this application allows them to get that insight and to see it and to do it. This particular graph here shows what all of that data coming into displays. The operator back at the utility operations center, can see exactly what's happening with each and every one of the endpoints and the meters. You can see when there's maybe an action that needs to take place. One example of that is that they see that there's a leak, they can actually take action against one of the gas assets or even a group of gas assets and shut off the integrated isolation valve and stop that leak. They can also notify and dispatch first responders a whole lot faster to get them exactly to where the leak may be so they can be there in advance and give them that opportunity to make sure that nothing goes wrong. And so that's why Tim and Con Ed really love this. We also have another partner, Spire Energy, which is a utility in St. Louis. They're doing it for the same reasons, safety of their people, safety of their customers but they're also doing around engaging with their customers. And you heard Tim talk about that as well, engaging customers about their consumption, making sure that they're using their resources the right way is a very common theme. So that's what we're doing in the gas space around intelligent connectivity. Water. Water is our most precious resource. And it's one that a lot of organizations around the world are trying to work on how do we conserve it better. Over 1/3 of all treated water gets lost either through leaks in pipes or through lack of measurement at a super high cost to utilities and communities. And so we like to propose our end-to-end solution for our customers to help them go solve that water conservation challenge. With our solid-state meters, we can give the utilities a whole lot more granularity and visibility into the leaks and to where the water is going. But we can also do it on mechanical assets as well because there's a lot of mechanical assets that are set out there today. And we can do that by taking a communications module, smart communications module, putting it on top of those mechanical assets and still providing a very similar amount of outcomes and insight into their infrastructure. So again, they can go and make sure they know where their leaks are, where the issues are and go ahead and conserve that water. I've got 2 great examples on this slide that talk about it. So Provo water, which is in the Turks And Caicos. It's a utility that serves about 6500 customers. In 2014, they realized that they were losing about 20% of their water and their water is created by desalination. So it's a very, very, very expensive type of water. Putting that -- putting our end-to-end solution and allowed them to reduce their losses whole lot. I don't remember the exact number, but it was a massive reduction. But the other great benefit that came out of it was right after Hurricane Irma, Provo Water lost about 3 million gallons or about half of their water reserve and we're unable to provide water to the entire community. Using our system, finding where all the leaks were, they were able to get the system, pressurized, back up and running in 2.5 weeks, normally would have taken them about 2 to 3 months. So getting a very, very important resource back up to their customers in a fantastic time period. Abbanoa, it's another island in Italy, Sardinia, about 1.6 million customers there. They're also having water scarcity because of the weather changes that are taking place and they have high water losses as well. So they're deploying our solid-state meter -- asset to be able to better manage their water loss. The 180,000 meters over the next 2 years, they've already put half of those in. And again, they're using this for not just water leaks and for detection, but also for consumer engagement to get them to be better about managing the water and where they're using it. I mean my utility does that same thing. My kids came home at Christmas. And 2 days later, I got an e-mail from the utility saying, we think you have a water leak, I said, no, it's just a bunch of teenagers home for the holidays. But that's the kind of insight that this connected intelligence gives to our customers. So with that, I'm going to hand it over to Don or no, John, you've got more work. Yes.

Got these transitions are down. All right. So charting a path to grid intelligence, I spoke a lot about backward and forward compatibility and I spoke a lot about the use cases and the use case evolution and what our customers need to protect themselves for the future. It's our job and I look at it as my team's job specifically to make sure that we can offer this new value that we're creating and this grid edge intelligence movement, we need to chart a course for every customer that we have. They're all going to face the same challenges. And maybe they're slightly off in timing. If I look at our customers in Australia and solar penetration and what's happening to their grid, as Tom touched on earlier, they may be a little bit ahead there. And then there's other areas of the world and Don's hometown in California where EV penetration is through the roof. So everybody is at a different place of adoption of this technology or I'd say, of this demand curve. But it's our job to find ways to bring every customer forward because, again, that asset that they invested in a long time ago, we want to make sure that we can continue to add new value. We want to raise the barrier for our competition, right? Make sure we keep them out of there because all those high-value IT integrations and all of those high-value assets that have been deployed in the field can work in harmony with every piece of new technology that we introduce. So it's our job as a company to make sure every single one of our customers and all those new customers that maybe had made a bad choice in the past by not going with Itron. We have a path for them also to embrace new technology and to really get ready for that grid edge future. I touched on this a little bit, but the business case, again, today versus the business case 15 years ago is going to be much, much different, right? It was all about decommissioning meter readers in the past and operational expense savings. Now what we're looking at is a demand curve that I don't really think our industry is ready for. So -- and you can't deploy transmission fast enough to solve the problem. So what are the non-wire alternatives that we can collectively create for our customers to give them a little bit more runway, to handle some of those large bigger Itron programs that are going to be coming their way. And Don is going to go into a lot more detail on this on the Grid Edge Intelligence side, but it's really ensuring that we understand the customer's challenge. We know where they are in their journey and the technology that we introduced for them is compatible with what they've already invested in. This really defines how we are thinking about the future and the future growth of Itron and how we can then generate new value for our customers. Maybe the last point I'll make on this topic is just the stickiness that gets created when you have the type of engagements like we just spoke about with Tim, right? Having all of their operational processes, being able to get a sensor that communicates directly to their gas operations center. That creates a level of stickiness with our customers that's really, really hard to replace. So the more types of solutions that we can introduce to -- that create that stickiness, the longer term this relationship is going to be and the more value we'll be able to generate, again, not only for Itron but for our investment community and for the customers who sit underneath their canopies. So all in all, we think about the different producers and consumers of energy that are now going to exist at the edge of the grid. It's my job in network solutions. I get to be the guy in the middle in that nice diagram. It's our job to make sure we can connect everything that exists out there at the edge of the grid, whether it's leveraging WiFi and our latest endpoints to connect to smart inverters, whether it is using power line carrier to bus through, in some cases, hard-to-reach locations or using power line carrier to determine what endpoints sit on the same distribution transformer in the example that Tom used. So it's our job to make sure that we're embracing all of these different types of technologies, making sure that we're simplifying it for our customers so that they don't have to worry about the complexity of what's happening underneath the covers. Don's team will manage the networks, we'll manage the back office systems. We want them to focus their energy on realizing the value of the platform, not on doing firmware upgrades or software upgrades. That's what they pay us to do. And that's -- that recurring value and that stickiness that we generate with our customers. So it's a really exciting time for us right now. And again, Tim touched on this, is just -- we're seeing the excitement in this industry. And there -- it's maybe an excitement that's coming out of fear because of the demand that's coming their way. But it's a great time for us as a company to take advantage of that and offer new solutions specifically in the grid edge space where I know my colleague, Don is going to spend quite a bit of time talking through.

Thank you, John. So hopefully, you've heard from a customer example and from my peers, the reasons why we are the market leader today in the AMI space, right? Our systems are collecting billions of data points each and every day. We've got nearly 100 million endpoints under management for all the reasons that John and Justin just cited. But fundamentally, AMI alone for some of the reasons, you've already heard, is not going to solve the challenges of the energy transition, right? We're fundamentally facing a giant challenge as we look to decarbonize, as distributed energy resources, which, again, are solar and batteries and electric vehicle charging come into play. And as energy demand, electricity demand sources. We have customers, who are predicting a 3x load increase over the next 15 years within their grid. And not every single jurisdiction is going to look like that, but everyone is predicting their energy demand is going to be going up. So the way that we're attacking this problem is we are bringing new technology to bear and a new set of solutions to bear to allow the customers to go after that. And it really is all about providing visibility and ultimately control at the edge of the grid. And for us, the edge of the grid is everything from the substation down. But we also recognize that just providing the data is not enough, but it's really about how do we tie that data and our software in with other solutions. So today, utilities require and rely upon operations software to manage their overall grid, their transmission part of the grid as well as the distribution part of the grid. And so we've partnered with companies we made 2 announcements, one with GE Vernova, one with Schneider, around how we are going to pre-integrate and deliver solutions where both data and process flows are ready to go for the utility. And what this will translate to is really speeding up of the availability of that value to the utility and to the end consumer. So ultimately, what our grid edge intelligence focus is all about is giving utilities the opportunity to convert OpEx into CapEx. That if they can go ahead and they can do preventative maintenance and they can see problems before they're happening, if they can avoid truck rolls, if they can actually target their investment more wisely, we can actually allow them to save that money. They can deploy their CapEx dollars more wisely. Ultimately, that's really important to the utility industry. That's really important to the consumer, and it is hugely differentiating because this is a problem that exists right now for which there is no scalable solution. So let's dive into a little bit of the details as to why this is. So this picture here depicts the typical way a utility is managed, which is you've got a distribution system and software that manages that. And we're typically talking about thousands to maybe a few tens of thousands of devices or data points that are being managed. And then over on what we're talking about in terms of endpoints, typically, we're for a large utility and you heard the numbers from Tim, 5 million endpoints, but now we're also talking about multiple devices sitting behind each of those endpoints, right? There may be a couple of EV chargers. You've got a couple of batteries. I actually have 2 solar systems on my house because I deployed one in the early days when I was getting a really good discount and then the efficiency went way up. And I got another round of discounts from the government, and so I've got a second system in another part of the roof. So it's not just the number of endpoints is going to be a multiplier on top of that. So the scale problem is fundamentally different. Next, it comes down to visibility. So being able to identify where those DERs are and then how they're actually being used, right? I can tell you with certainty when I bought my EV and brought it home, the first call I made was not to my utility to let them know that I just bought an EV. I just assumed I can plug it in and it was going to work. Not everyone is going to charge their car at the same time. Not everyone is going to be using their battery in the same way. So providing that visibility back to the utility as to what are the assets that are out there is going to be absolutely critical. And so here's an example of that. We're running a program for Duke, targeting the electric vehicle owners. And their whole goal is to first off, identify who are -- who owns the EVs, who's actually charging those EVs at home? This then allows them to target their marketing programs towards those specific consumers and then encourage them to go ahead, and as you heard from Tim, to charge those vehicles during friendly times for the grid. And then unlike other sort of incentive programs for consumers in the past, we can now actually track the behavior of the consumer because we can go measure based upon the data that's there, is that charging actually happening at the right time and then properly incentivize the consumer if they're actually following the rules of the game. And with our grid edge intelligence, we can do this to an even finer degree, then we can go ahead and do that today with some of the existing AMI systems. And then finally, we get into control. So the challenge of the future -- and I'll compare and contrast this with current demand response systems, which I mentioned earlier. So a demand response system is really trying to balance aggregate supply and demand. And you don't really care where you get the electrons from, you just need to see a certain kilowatt -- set of kilowatt hours introduced. Well, in the future, it's not a homogeneous grid. The problems are hyper localized. You're going to have neighborhoods. We're going to have strong EV penetration. You have neighborhoods. We're going to have strong solar penetration. You've got different ages of equipment that's out there connecting all this together, different ages of those wires, wires of different gauges. So in order to really manage the distribution grid efficiently, you need to understand exactly where the problems are, which goes back to that visibility. But then you need to have grid level control where I can say, all right, I need to go solve the problem below that transformer, I need to go solve the problem off of that feeder, I need to solve the problem within this specific area. And so that's the sort of capability that we're going to enable. So a second example here, and we have utilities currently piloting these systems on both coasts is related to transformer monitoring. So here, we're able to, because of our latest technology, very accurately identify not just the meter to transform or mapping, which you would assume most utilities have this down. They know how everything is electrically connected, but it turns out this is a giant problem, especially when you think about what happens during storm recovery, right? You're bringing in crews from all over to help you out recover things, kind of records get lost in that process. So just that information alone is tough. But we can also determine meter to phase. So we can understand exactly how that transformer is loaded. Well, now we can with our data and the technology within the networking stack, we can actually, in real time, understand exactly how that transformer is loaded. And then with the integration we're doing with the folks like GE Vernova and Schneider, we can deliver that information to the grid operator. And then combining with our forecasting technology, we can actually predict, what's going to happen in each and every home. And therefore, what's going to happen to that transformer and so we can identify problems ahead of when they actually become a problem. So going back to Tom's example that you showed earlier, where we anticipated the problem with EV charging and then we're able to go ahead and take action. So that's really where all this is heading, and that's what we're working to make possible. And again, this is a brand-new capability for the industry. This is fundamentally white space in terms of solving these problems at scale and making them fully operable. So let's look a little bit more broadly on what we're trying to do. And again, you've heard from Justin around the devices that we're building and how we are leading the charge there. You've heard from John around connectivity and mesh and cellular and combining the 2. So we provide really unparalleled ubiquitous coverage to devices, which is fundamentally incredibly important. Then we look at the data stack, the data platform. And this is critically important as well because not only do we have to handle the bulk of all those volume of data I've just been talking about, but now we need to handle a brand-new type of data, which is the real-time streaming data with very low latency and that needs to be processed, digested and then passed on to upstream systems that can consume it. So fundamentally, I would submit to you that data is the fuel that will enable the utility to flexibly, efficiently, scalably and resiliently operate the grid. And so we are positioning ourselves to be able to deliver that at full capability. And then across the top, we provide now a broad set of applications. And when we came to you, I think, 4 years ago, a lot of this was still vision. Well, this is now actually here today. We have these applications. We have these deployed out there. And they're all built upon both our existing AMI system, but then the most leading capabilities are built on top of our DI platform. And so again, what that DI platform provides are a few key facets. First off, we have the ability to get access to far more granular data. And with more granular data, you get better insight. So we can go ahead and see problems, see issues that just aren't possible when you're talking about a 60-minute or 15-minute view of the data. We can get to 1 second or below 1 second. Second, we have solved the whole life cycle problem for how do you actually deliver applications to the edge. It's a nontrivial problem. So think of this as the marriage of your smartphone with your meter in terms of the utility being able to go ahead and download those applications selectively. Third, we've opened up this platform. So this is not just about Itron providing the applications, this is about third parties being able to develop, but we have a very active developer program. We've got applications that have been developed by third parties that are actually deployed out today to our customers. And finally, this is proven. So Tom mentioned the number of endpoints we've got out in the field. We now have millions of applications running and active today on that. So taken together, we now have a broad set of applications across the top, leveraging existing infrastructure as well as our new grid edge infrastructure and really providing a level of visibility that has not existed before. I'll call out at the top, the third icon from the left, labeled grid planning. So this is actually referencing our Elpis Squared acquisition, which was announced last Tuesday. And this represents a further execution of our vision around what it means to be engaging with utility within the distribution grid. So Elpis Squared is a 10-year-old company that focuses on distribution planning, operations and engineering, and they provide software as well as outsourcing capability to utilities within North America. And their whole focus was really on taking the AMI data that we've talked about and turning that into valuable operational insights for the grid distribution planners and operators. Well, now what we're going to do is, we're going to go ahead and take this grid edge visibility, combine that with their software and deliver a level of capability -- additional capability that really, I think, will fundamentally unlock for the grid planner and operator the value of non-wires alternatives. They'll really be able to see what's happening within their distribution grid to a level of detail not previously available. So net, what does this mean? It's ultimately not about technology. It's really about the benefits. So it's about reducing OpEx and again, making that trade-off of OpEx for CapEx, which, as you know, for any utility is a trade-off, they very willingly make, right? They'd rather go ahead and spend CapEx dollars and cut their operating costs. And you heard examples already this morning of different ways those operating costs can be reduced. It's about that consumer engagement because, again, those DERs that I mentioned, those are owned by the consumer. So if the utility is not engaging with that consumer early and gaining their trust, then they're not going to have access later when they need to be able to ask that consumer to take action, whether that be through a message to the consumer or some sort of automated control to say, limit the rate of EV charging. They're going to need to build that trust. So we provide that capability, and that's all done through the data platform and a number of our software partners. And then finally, this is really all about driving that resiliency and reliability throughout the system, and again, offering the ability to make that CapEx versus -- OpEx versus CapEx trade-off. So with that, I will turn it back over to Justin.

That's actually -- I think it's all of us. But -- so we just have a couple of final thoughts that we want to leave you with but why we believe in our full end-end solution and the future of Itron and it comes down to the 4 icons that you see up here. I'm going to talk about Global Endpoint platforms. First, for me, it's about name brand recognition and the trust that our customers have with us. We've been doing this for a really long time. We've got leading market share in a lot of verticals and a lot of geographies and our support to our customers is what they really love the most. We're using new technology to gather more data, to help support our end case uses with outcomes. But that technology is also allowing us to simplify our portfolio, improve our operational efficiencies and of course, increase our profitability on our products and our solutions. But I think the one that's the biggest for me is domain expertise. We've been doing this for decades, right? We've been doing metrology and data acquisition for decades, and we're still doing it today. And we're using newer technologies to allow us to do that, and we're using technologies that have higher sampling rates and give us more granular data to make sure that we stay ahead of the market and our competition and provide the best solutions we can for our customers.

Yes. And you heard it from me already a couple of times today, 2 super key points. Number 1 is the industrial IoT platform that we are deploying globally, and intelligent connectivity, right? So I view, again, the Network Solutions business unit is really the land -- part of our land and expand strategy. We are out accumulating as many endpoints as possible underneath these highly resilient canopies and setting up the stage for Don and the outcomes team to really drive value from a recurring sense across that footprint of high-value endpoints. And as I also mentioned, we're not doing this alone, right? We recognized early on that Itron within our 4 walls will generate a lot of value, but having a partner ecosystem to actually grow and expand that value is super critical. So that is, again, in the form of devices, some of our network lighting controlling partners, all the way to the software application partners that Don mentioned. It's really about how do we expand value for our customers? How do we expand value for you, our shareholders? And how do we continue to get in front of that wave that's coming, which is around this clean energy transition.

And the ecosystem, as you've heard, is key for us, not just from the software developer perspective and building on top of our platform, taking advantage of the data we make available. But then the integration that we are doing with key other industry leaders to tie together the solutions and really reduce the time to value because ultimately, we think the biggest challenge here is one of time, right? The clock is ticking. There's -- we have customers who have objectives to be carbon neutral by 2030. So they need to be taking action now in order to go ahead and achieve those. And then finally, Distributed Intelligence really does fundamentally change the game in terms of giving us access to new insights, new ability to control. And then through the platform, we've put together, we make this available not just to customers who are redeploying all their meters for whatever reason that may be, but we can actually surgically drop in this technology to allow our existing customers augment and evolve and grow over time. So ultimately, this is about us really unlocking the ability for the utility to be much smarter in how they spend their CapEx dollars, target those investments wisely while also reducing OpEx. So we think a very, very compelling picture. And with that, I'll turn it over to Joan, who will actually take you through the numbers. Thank you, everybody.

Well, thank you for coming. For many of you, who were here, I guess it was 2019 when we did our last face-to-face. So we're glad to have everybody back and for some of you, you're new to the Itron story. So I'm going to go through the financials. I'm going to tell you upfront and then going to be a very short break. I want to encourage you not to leave because you want to come back and see the interactive demo, it's really kind of neat. And then we're going to open it up to Q&A for all of us. So any questions that you have, please wait to the end. So the first slide really reiterates what Tom and the PBU leaders have already said. Well, this is a unique value proposition. We are leading the industry in what is a growing industry need, our customers, you heard Tim talk about it. There is a need to have grid edge intelligence and the ability to solve real problems, and we are in the forefront of that. We have leading technology. We have spent a lot over the last 5 years restructuring the company and getting it to be more efficient. Tom mentioned, closing factories, but we're at a point where the operating leverage is at a pivot point. You saw us go from 5% EBITDA of revenue in 2022 to 10% in 2023. I'm going to show you some targets here going forward. But we really think we are in the cusp of really getting out of the supply chain problems and having operating leverage really scale. You'll also see that we're really starting to generate a lot more cash and more than we expected the last time we set targets. On the right-hand side of the slide is the 2023 actual, so $2.2 billion of revenue. Clearly, Network Solutions at about 2/3 of the revenue is the biggest piece. I'll talk in a second about outcomes. It's 12% here, you'll see that become a much bigger piece going forward. And from a regional perspective, primarily in Americas region. At the end of the year, we had $4.5 billion in backlog. Over 90% of that backlog is networks and outcomes. So that's typically how our business works. So very rich backlog to help fuel the future growth. So these are the new targets. Let me start by explaining what is not in here. It does not have any M&A, even the M&A we announced last week. More importantly, we did not try to explicitly build in tailwinds from IIJA and IRA. So to the extent, as we do our planning, we know of a deployment or a large RFP coming out that's going to happen irrespective of government stimulus. That's in our targets. So my expectation is these are somewhat conservative to the extent that there really starts to flow money. Why did we do it that way? Because as Tom mentioned, it's going a lot slower than we anticipated, and it's really hard to predict how much money will be available? When will it first appear in bookings? When will affect revenue. So just level set what's in there. First set of columns is 2023 actuals and then the 2027 estimate. So from a revenue perspective, $2.6 billion to $2.8 billion, that's 5% to 7% CAGR. I'll peel these down by segment on the next slide. Gross margin, we have increased that from previous targets to 36% to 38%. The OpEx target is similar to what it has been in the past. But the flow through of the higher gross margin means the EBITDA target has improved to 15% to 17%. And the free cash flow target has greatly improved as a percentage of revenue. We are about 4.5% in 2023, the targets 10% to 12% by 2027. So as I drill it down by segment, let me first start with the revenue line, and I want to remind you what Tom talked to you about in terms of industry growth. So first, for devices, we're projecting 0% to 2% growth. Tom had 2% plus for the global device segment, CAGR for the same time period. But as we said before, the mission of the devices business is to improve profitability, which they've done a great job doing. We had 23% gross margin in 2023, which was the low end of our initial target. So you'll see in a second we have increased it to 24% to 26%. So really, really great performance for devices. And again, roughly flat with the market. For Networks, 4% to 6%. Tom showed a kind of a 5% growth -- industry growth for Networks. So basically, think about it as holding share, and the same gross margin target we've had for a while. We've certainly had a lot of headwinds, which I'll talk about. But 38% to 40%, we think, is the right short-term, midterm '27 target for Networks. And then for Outcomes, 12% to 15%. So Tom showed an industry growth rate of 12% plus. So we believe with this kind of target, we'll be gaining share in our Outcomes segment. And we have increased the target gross margins for Outcomes by about 300 basis points from the last time when we set targets, so 43% to 45%. So let me talk a little bit about what has changed from the last time we did an Investor Day, which was in '21. First of all, progress. So we continued through COVID to really invest in R&D. So we spend about today, 9% of our revenue on R&D that is call it, 85%, in Networks and Outcomes. So we're really investing R&D to create the solutions that the guys just took you through. We have accelerated this restructuring in the pruning of devices. So we sold a piece of the mechanical gas business to Dresser a couple of years ago. There was about $150 million of revenue. So if you were to compare what we said about devices a few years ago, it's a smaller business. But as we said, that was the goal. Prune it down to the right size, make it more profitable, and Justin and the team have really done that. So we're ahead of where we thought we would be. We also have a much stronger balance sheet, obviously, and I'll take you through that. And since the time we were together in '21, we announced a new plan in early '23, and we're closing 2 new more factories. As Tom said, we'll be down to 6 by end of '24, early '25. But during this year, we're closing predominantly Networks factory in the U.S. and a predominantly Devices factory in France. The savings from those closure of factories will start to accrue in '25. And so you'll see that's part of how you get to higher margins. So as I mentioned, the refresh model, a little bit higher CAGR revenue growth than we talked about previously. Gross margin is up 200 bps. EBITDA margins up 100 bps, cash flow up about 200 bps in terms of the target margins from the prior. In the deck that we put online today in the appendix, you'll actually see the last set of targets we provided and what they look like today. So obviously, we did have some headwinds. And if you think about what happened, COVID was one thing, but the supply chain turned out to be a lot more severe for us. So we had this semiconductor shortage, which lasted a lot more than we expected a lot longer than we expected. It definitely created supply constraints. As you know, we had about $400 million of revenue we could not deliver because of supply component constraints. We delivered about $275 million of that in '23. We'll deliver the remaining $125 million primarily in the first half of '24. So that definitely put pressure as well as inflation. So one of the big learnings for us is pricing, and you'll see that as a pricing lever. We get caught, the fact is we did. We were in long-term fixed price contracts with our customers, which they like because it's predictable and the regulators like it. And all of a sudden, when inflation went from virtually nothing to higher inflation, we were stuck with some fixed price contracts, which put pressure on our margins. And there's still a little bit left. So we quoted on our last call, about 70% of our backlog has some sort of indexing or price protection. So that remaining 30% will come through the P&L primarily in 2024. So it does create some pressure to near-term margins. That's primarily in the Networked Solutions segment. And then the outcomes ramp. We are very proud of what we've built in the Outcomes business. In some respects, we're probably a little bit ahead of what the customers were understanding how to deliver. And we think the more and more proof points in the customer testimonials that you've seen, I think, give us good cause for -- this is really poised to take off. So if you think about the overall contribution by segment, on the right -- left-hand side of the chart is the revenue. So kind of 6% CAGR at the midpoint of the ranges I provided and gross profit dollars increasing by about 9%. In 2023, outcomes was about 12% of the company's revenue. In these targets for 2027, it's 17%. So it's grown in terms of a bigger piece of the business. If I think about gross profit dollars in 2023, outcomes was 15% of the gross profit dollars and the 2027 estimates is about 20%. So you're seeing that natural as you have your highest margin business growing the fastest, really helping the overall company numbers. So again, a little bit more detail, and I mentioned this -- the first one, Devices, to be able to hit 23% gross margins, congratulations to Justin and the team. It was certainly ahead of our expectations in terms of timing, not that we knew he couldn't do it, but he certainly did a little faster than we expected. So for his targets for '27, you'll see, again, roughly flattish revenue, so $450 million to $500 million, but we are looking for a couple of point uplift in gross margin. For John's business, 4% to 6% growth, still growing, to about [indiscernible] at the midpoint and increasing the gross margin. John's got the biggest lift from where we are today to where we need to get to. And then for Don's business, again, very strong revenue growth, 12% to 15% and margins going from 40% to 43% to 45%. So how do we get there? We tried to lay out for you what are the levers we're working on. So if you peel back to our operational plans, there's goals for all the different parts of the organization to enable us to hit these targets. The first one on revenue mix, some of it is structural. As your higher-margin businesses grow faster, you're going to improve the margins. But it's taking advantage of that network footprint. It's the land and expand that John addressed. You have more and more endpoints out there, Don can go then sell more and more applications on top of that. It's also a new product introduction. So we have a goal internally around how much revenue we get every year from new product introductions. That's one of the ways we measure our R&D efficiency. So that will continue to drive new products that are higher margin products. Second one, I just alluded to pricing and cost optimization. So now we have a muscle and a discipline in the business that when we sign a contract, there's some level of indexation. Does it precisely equal an inflation rate? Not always, but it's certainly much better than it has been. In those difficult discussions back in '21 with customers around, well, you're going to have to pay more versus the contract you signed a couple of years ago, those aren't as difficult discussions anymore because the whole world has started to adjust to an inflationary environment. Component and commodity. We talked a little bit about this platforms. Platforms allow you to have less components, fewer suppliers, but still be able to dual source. We have a goal internally around SKU reductions. We made tremendous progress around this. And if you think about having less SKUs, that's less things for the procurement organization to go buy, to go manage, to make sure we don't have obsolete inventory. You got purchasing power when you buy more things in a smaller amount. So that's been a tremendous part. We continue to work on that. Supply chain optimization, we alluded to the 2 factories. So those will be closed by the end of '24, early '25. We're also really focused on that, what Tom talked about supply chain resiliency. How do you get suppliers that are close to your key factories so that you're not worried about freight issues across the globe and those kinds of things? So we've really -- done a really great job, I think, over the last 3 years improving the overall productivity and the efficiency of our supply chain. From an OpEx perspective, we're going to grow into these targets, but believe me, we have disciplined approaches to how people get OpEx and these guys kind of test. Nobody gets the OpEx they originally asked for. And so this gives you a little bit of a bridge, how do you get from 32.8% gross margin in 2023 to a midpoint of 37% and likewise, on the EBITDA side from 10.4% to a midpoint of 16%. So the balance sheet. So when COVID hit, our primary focus from a capital allocation was preserved cash. We really weren't sure how this is going to play out. And so we drew down just about like every bank did the revolver and made sure we had plenty of cash to weather the storm and then eventually, we're in a position to pay that back. In '21, we recapitalized the balance sheet. We were able to pay off the debt that we had taken on when we acquired Silver Spring, and we paid that off and we issued 0 coupon convertible, which comes due in '26. So yes, '26 is only 2 years away. And so we're starting to think about what do we do with that. We recently extended the duration of our $500 million bank revolver, and we don't have any money drawn off that. So we have a lot of liquidity available to us, and ended the year with $300 million in cash. So obviously, next question is, what are you going do with all that cash? So I would say we still got a little bit of cash payments to pay for the restructuring we've done. And so no new plans, that's a good thing. We've had a lot of plans, but there is some cash that's going to linger '24, '25, even a little into '26. We'll continue to invest in R&D. We are very pleased with the return we're getting on an R&D investment. We'll continue to spend money there. But by far, the biggest priority for us is M&A. We've been talking about it for a while, but we're in a much better position now from a balance sheet perspective. So what is the M&A? It's going to be to help Don grow the Outcomes business. So it's got to have a solution that is scalable across our platform. So it's a solution that sells to utilities. We're not really interested in creating a new vertical for us. It's got to be able to prove that it's commercial. So we're not really interested in pre-revenue companies. Ideally, we would find something that's got decent scale that can helped Don get to these -- beyond the targets that I showed you. But that is the focus. We've been very busy. Elpis was obviously a pretty small acquisition that we announced last week, but we continue to look for things that help build out that platform that Don talked about. And then obviously, we're going to keep the balance sheet flexible from a strategic standpoint. So we do have a stock repurchase plan that's authorized. We did not execute anything on it last year, but we'll continue to evaluate what's the best use of our funds for shareholder return. So in summary, the left-hand side of this chart is what you just heard. I mean, to me, I sum it by saying we're in a great industry, at a very good time to be in this industry. So everything is getting electrified, and that is providing all kinds of opportunity for us. And the adoption of distributed energy resources, we're just in a really good industry that is going to continue to grow. And the right-hand side, why Itron? We're proven. We have technology that's in the field. We're not just a vision. There's a lot of people now -- if you go to -- if you want to distribute tech, they talk a lot like Itron, and I guess that's a compliment. They've taken the vision we have, and they're now talking about it, but we have -- over 9 million endpoints -- distributed endpoints in the field. There's over 10 million in backlog. So we are already executing on the vision. This is not vaporware. This is real things with real customers. And so from that standpoint and the fact that we're in a position with operating leverage improving, we believe we're going to yield significantly high, both earnings and cash flow over the next several years. So with that, I think I'm done, but we are going to, again, take a 10-minute -- guys, is that a long enough for you to set up? 10-minute break, please don't leave. They've spent a lot of time. This is going to be an interactive demo so that you can see how our technology works. And then we will answer any questions that you have, and then we will serve you lunch. So 10 minutes if you don't need it, just stay there, but the guys are going to come up and set up their demo. Thank you. [Break]

Okay. Thank you for your attention and patience so far. We're going to get ready to head off to Itopia. I can't do it until everyone seated with hands, feet, bags inside their vehicle. So if we could make our way back to our seats, we'd appreciate it. Thank you.

Tom, you got a front row seat. Only you. I did see Gallagher back in the day. You did not want to sit in the front row for that. Okay? We good to go? All right. Well, greetings, everyone. Thank you for sitting through our presentation here. My name is Tom Erceg. This is Kevin Ferree. We're going to be your presenters today. In the back, Kirk [indiscernible], right here, Kirk is kind of our Wizard of Oz. He is the man behind the curtain that makes all the magic happen, and James Papp. James is our fearless leader and the guy that sets the vision for what it is we do and the 4 of us put all of this together for you folks. Just a quick show of hands, how many people here have seen an Itron experience at either DTECH or -- awesome. Joe, I know you've seen one before. We're doing something a little different this time. We've kind of reinvented what it is we're doing here, and we're going to take you all on an interactive grid adventure. So you'll notice tablets kind of passed around. Unfortunately, we only have 18 tablets. So we're going to ask if you don't have one, if you can look over one of your neighbors shoulders, that would be a good thing. And if there's just no way we're kind of mirroring one of the tablets appear once we get started. So why don't we go ahead and activate the tablets. And we're going to ask you to do 3 things for us. The first is to pick out an avatar. That's how you'll know, who you are up on the screen, enter your name, and then finally, we'd like to know where everyone was from originally. We figured you all from around here now, but where do you come from originally? We've done that -- we did that at DISTRIBUTECH, and it was interesting. We have people from all over the world who actually came to see the presentation. So once we've got all of that, we'll go ahead and kick things off.

That's right. I'll just do a quick line check. Can everyone hear me as well? Because I haven't spoken yet. There we are. Yes, all right. It's fun to see a full audience.

It is -- all 18, that's a good thing. Chip and I apparently have the same barber.

All right. Tom, you've got to count 18 -- there you go. So even still the New York here pretty strong...

So by the way, if you have any issues with your tablets, just raise your hand and either Kirk or James can help you there.

All right. Two more folks to finish up. And we can complete boarding process. I never want to be the last guy. They're running to the game. All right. Do we know who are waiting on, James, or not to embarrass anybody, but? Only Paul will do that to us. All right. Well, we'll just get started then. Take what we've got. All right. So boarding has completed, so we're closing the gates and it's time to take off to Itopia. All right. So Itopia is our fictional land where Itron technology makes life for our citizens better than ever. So we're going to show you a lot of the use cases, technology and services that you've seen already this morning. And we're just going to put it to a little bit of life that you wouldn't get otherwise through presentation such as this. So we're going to go ahead and zoom on into Itopia, land this plane and the first order of business, when you arrive to a new place, is find some transportation for yourself. So we're going to push a question to your tablets, and this isn't our interactive experience. You get to make decisions. There are consequences to every decision you make, but feel free to make up what you would do, not even do what you do in real life. So you're going to choose what kind of car you'd like, a gas car or an electric car. And then depending upon what you choose, there may be additional questions that you have to go through. So go ahead and work through all that until you see that you finished, and we'll see how it shakes out here in a moment. All right. Are we just going to always have 17 of 18? Okay. All right. All right. It's an important decision as we'll soon find out. All right. So there you go. We've got a lot of people who've gone gas, but there are a few there that have bought EVs. And within that category, we have -- we had additional questions. And so a few people went all in on those, and that's like, did they want to enroll with their utilities energy management program and also whether they'd like to upgrade their charger from -- to charge the car faster. Some of them though have room to improve, and we're going to dive in on that in a moment. All right. So we're zooming in here into the Old Town District of Itopia. This is where you call home, and we're going to parade those new vehicles in and my goodness, Tom, they just are in a rush, aren't they?

No traffic laws in Itopia.

[indiscernible] somewhere. All right. Well, so we've got you guys all moved in, but there's a few other residents of Itopia. Those are our SIMs. And so we need to call on them from time to time to help round out some story elements, if we need them. But for now, we're going to fix on this street where we have 6 of you living. And so Tom, why don't you take it away?

All right. Well, congratulations on your new car purchases. I noticed some of you bought EVs. The utility would really like to know where those EVs are, right, because they put a big load on the grid. Well, fortunately for you, everyone in Itopia has a Riva electricity meter at their house. . And the Riva meter is not just a meter. It's also a Linux computer. And much like with your smartphone, the utility can choose to download apps to that meter to solve different kinds of problems. We're going to talk about a few of them as we go along. But the first is EV Awareness. So the EV Awareness app is continuously running, and it's looking for the presence of electric vehicles. These are all brand news and none of them have been plugged into their charger yet here, but a moment -- there we go, we just found our first EV. Now not only will it detect the presence of an EV charger, it can also determine the type of charger, whether it's a level 1 or level 2 charger. Well, level 2 chargers are terrific, right? They charge a car much more quickly, but they also draw tremendous amount of power. A level 2 charger can pull as much as 10 kilowatts of energy, and that's roughly equivalent to the maximum load on a typical home. So when you plug that car in, you basically added another house to that transformer.

That's right. That's a serious thing. We're going to take another look at as we get into grid management. But for now, we're going to pull up a graphic that looks at, again, how you guys chose from the initial polling. And so we can see a lot of gas owners there. It's more than I expected, to be honest. But then we've got a lot of EVs as well. Now within the EV group, we have that broken down into 2 categories: consumer and prosumer. And what we view the prosumer as is, someone who has partnered with the utility. So they've been enlisted in or enrolled in their energy management programs and allowed loads to be used to manage the grid, in this case, an EV. And this is a very important demographic for utilities to consider because if you don't have manageable loads, you really are stuck not with anything to manage and you can't do grid management. So [ 101]; kind of thing. So one value to take it further than what Tom has already stated, is EV Awareness has now given the utility precise knowledge of where these cars are, what homes have them? And then we can actually market and mail and chase after our customers to see if we can't get them to convert. So we have some holdouts. We have 3 people who decided to opt out originally. So we're going to send some more questions to your tablet. Depending upon what you chose originally, you may just be learning that gas is very expensive in Itopia so sorry about that. But for those 3 people who are consumers who opted out before, maybe the utility can sweeten the pot a little bit, maybe incentivize adoption. And so we're going to see if that was the case here in a moment and the prosumers being you just -- you're all stars. All right. Drumroll, please. We will see if peer pressure has won the day, 1 convert, all right. Not bad.

Congratulations. That's good.

You're a tough crowd. You're digging your way I see that. All right. But that's good. And again, this is something that really leverages. Now we start talking more about the grid management, right?

That's right. So the next application we're going to talk about is Location Awareness. And this has been a challenge for the utility industry, basically forever. You really want to know exactly which meters are connected to which transformers. Itron has spent years in research and development, perfecting this. And now really for the first time in the history of the utility industry, we can tell with very high precision, exactly which meters are connected to which transformers. And this is really a foundational capability because once you know that model and you can trust it, it enables all sorts of future applications. One of which we're going to talk about next, which is transformer load monitoring. We see that represented up here. So because these meters all know they're connected to the same transformer, they can pick a spokes meter and they can share their usage information in real time. So what we're seeing here is the aggregate load on that transformer. And a very important point, we're doing this with no hardware on the transformer whatsoever. It's just the apps on the Riva meter that are figuring this out.

Sorry, we've got something coming in on the wire here, some breaking news that's coming in...

This looks important.

Oh, wow, let's see what this is about. Well, Itron stock has through the roof. This is fantastic news. I guess the market's finally realized the value of all this technology.

Who's that handsome gentleman?

He's a handsome guy. I don't know who that is. All right. The good news for you guys is you bought in on the ground floor. So you're all rich. What are you going to do with all that money?

Well, I'd buy a new house.

Let's do it. Let's buy some house. The reason of that is the Southwest is New Itopia, the newest development in the city is the gem of living here. Everybody wants to get in. You're in on the ground floor with all that money you now have. So it's some new, in fact, we're going to pay the roads right as we pull in, build the houses before you get in the driveway. That's just how efficient things are here in Itopia.

That's fair. Real-time construction here.

That's right. Now the reason we're having this fun is because, again, Tom just glossed over some incredibly important detail when it comes to the foundations of doing grid management. And we don't want that to be lost on you. So we're going to rewind the tape, build something new and show you how it all builds up to the value that we were talking about. So we've stripped away that data, right? Now we just know what the physical elements are, where the wires are on the ground, where the transformers are in the neighborhood, where the meters are on the houses. We don't have that coveted intelligence data yet. And so we're going to now focus on location awareness and walk through how that's accomplished. So the big thing is that the app is always running and always looking at changes of voltage and waveform anomalies in the service to the meter. And so it's always building a picture of affinity. It shows that information to nearby neighbors. And as those meters compare notes, they figure out who's connected to what transformer as well as phase and feeder relationships. And so that's a real-time update, and the model is always being figured out. Now we want you to play a quick game because it's all about fun here, and you're going to help your meter determine the transformer to meet our model. So we're going to show you what that looks like here as a little demonstration. We've got these loads that are going to be gray. When they are gray, tap them. As they cool down and graying their color, they will become gray again, tap them again. Whoever can do this most efficiently will help their meter fill up the confidence level here as fast as possible and you'll be our winner, which everybody loves to be a winner, especially you guys, you look very competitive. All right. Now the reason this works is because changing loads causes changes in voltages, and so, you'll be helping your app determine that model. So I want to do another click. You look at your tablets. Here, 3,2,1 countdown, and we're off. Tap those gray boxes as fast as you can and efficiently as you can. And it doesn't take long, just keep tapping away. Oh my goodness.

Bang, bang, bang.

As you're watching that, like that was literally...

Real-time.

Really called that in the stakes there. That was close. Thomas, you are -- photo finish, you are our winner.

Where is Thomas?

This is all we have for you, Thomas. Where are you? In the back. A golf clap for Thomas. Very nice.

And unfortunately, that's all you win.

Yes, yes. All right. So what we've done, though, is we've figured out that transformer-to-meter model as well as phase and feeder, and now, we've set that value to the back office, and Tom will build on that.

That's right. Okay. So now that -- once again, now that we fully trust this model that enables our transformer load monitoring app. So we can see we have 4 different transformers. Each of the transformers has picked a spokesmeter. All of the meters on that transformer are talking to each other, sharing that load information in real-time. And so for each of these spokesmeters, they ship their information to the back office. Now we see that represented here. This is grid edge manager. Grid edge manager consumes that data, and it knows the ratings on all of the transformers. Now with that information, what we can see is that all 4 of these transformers are running at pretty close to the rated capacity.

That's right. And as well as it's been stated already by many, a lot of utilities don't have the visibility. They don't know how their transformers are performing. So we're giving 2 critical abilities here, visibility into performance, and then, secondly, control because if you can't do anything about the problem, you just get ulcers, and there's not much value to that. So we're going to now get into how we can do some control. But before that, I need to make the situation a little worse because 100% load in the transformer is kind of normal, it's not unfortunately. And so we're going to roll the clock over, and it's now tomorrow. And you see on the tablets that you've got to work assignment from your boss, going into the office or working from home. So trade-offs for both, right, to go into office, that's traffic, how is that going to pan out. And then working from home is you got to eat leftovers, last night's dinner. Tom, I'm not a fan. I really hate leftovers.

He made that very clear.

I'd rather drive into the work. All right. So we're going to send our commuters off and waving goodbye. Hopefully, traffic is not too bad. In the meantime, leftovers just happens to be grandma's secret chili recipe. And Tom, it always gets me a little hot. You're going to turn your AC thermostats down. That's going to cause HVACs to kick in, and boom, we're loading our transformers now at 130%. And this is an area where we can experience loss of life from our transformers if it persists for multiple hours. So this is something that would be concerning over a period of time to utilities. But we're going to make matters worse because at the end of the day, our commuters come home, and now, there's a few EVs that need to get charged, right? And so as those get plugged in, our transformers are now in the red, 160% load, certainly loss of life, certainly a dangerous situation. And Tom, I think at this point, I'd say, holy, overload factor. No, that was unexpected. Will our transformers survive the terrifying demands of this community? The answers to this and other concerns, I can't even talk without knowing questions coming next.

Same electrifying times.

Same electrifying channels.

But of course, the most important question, what's going to become of our dynamic duo?

Old-school steakhouse. How about that?

I like it. That's good.

In New York City. I like it.

Well, so we're having some fun here. But this is an example of real-world problems. These are issues utilities are facing, right? You've got large variable loads, like electric vehicles. You've intermittent or bidirectional power flow. You've got aging infrastructure, and you don't have the tools to deal with it. So what we're going to do is we're going to walk you through a different scenario, one that's actually much more difficult than the one we showed you. And we can show you how Itron's technology can help. All right. Well, it's a summer vacation time. So all of our residents here are headed off to the beach. And it looks like even Bender needs a vacation now and then. So while you are all of having fun, the solar installation crew has finally decided to show up. And because this is Itopia, every home in Itopia is equipped with solar panels on the roof. And not only do you get solar panels, everybody gets a free power wall. All right. Well, they finished their installation, and now, we can see with the added generating capacity from those solar panels, all of our transformers are now back well within their rated capacity.

That's right. Solar can be quite the blessing, but you may think, oh, job done, let's call it success here. But the problem is solar is a curse as well because it's completely dependent on factors outside of the utility's control. They have no control on whether weather is clear and skies are good. For now though, skies are good, so we're getting that generation. The only bad news is that vacation is over, and everybody's got to come home, get back to the grind, get ready for tomorrow. And so as those cars pull in, we're going to focus on 1 transformer because we're going to bring some additional detail up here in a minute. All right. So let's take a look here. And again, we've got that solar working on our behalf there. But man, everyone's come home from vacation. That's going to cause some additional load to kick in because people are going to get comfortable. They're going to turn loads on. They're going to wash their clothes, and of course, EVs charging, common theme today, right? So as that happens, the load on the transformer increases to 147%. We've already talked about that danger zone as far as loss of life over a period of time, and that's with solar helping. And now, in the summer, Tom, I don't know about where you live, but we have afternoon storms, and they rolled in earlier than forecasted, and we've lost all of that solar that we were getting. We're 1 unexpected load away from blowing our fuse. We can't let this stand, Tom.

No, we cannot. All right. Well, what we're going to talk about next is Distributed Energy Resource Optimizer. Now it's a bit of a mouthful, so we call it DER Optimizer for short. DER Optimizer knows about every controllable load in the home. And not only does it know about them, it knows how to control them, and it knows all of the rules and regulations about when those kinds of loads can be shed. So we're seeing an example of that here. So DER optimizer has made some choices. Over on the far side over there in the purple, we can see we've installed load control switches on the kind of compressors on a couple of the air conditioners for different houses. In the blue, we've throttled charging on one of the electric vehicles. So the car will still charge, it's just going to take a little longer. And then finally, in the green, that free power wall we gave you, we sent a 20, 30.5 WiFi command through the Riva meter to the power wall asking it to discharge back onto the grid. So now with all of that assist, we've seen that our transformer is now under 150% load, and we're no longer in danger of blowing a fuse and causing a blackout.

That's right. It's not just about managing 1 transformer in a neighborhood, but it's actually about maintaining grid balance across all of Itopia. And so as all of this distributed intelligence data from the Riva meters is being brought back to the back office, DER Optimizer is making system-wide decisions, finding loads that are available to it to manage the grid and bring distressed transformers back into a safer place. All right, Tom. You've been pretty good with helping solve a lot of issues. Let's see if we can up the ante a little bit. We will see. Sounds cold.

It does. Well, unfortunately, summer is over. The first winter storm of the season has blown in. And what we're going to do now is we're going to change gears, and we're going to talk about some of our smart city solutions. And these are ways we're making life better for the residents here in Itopia. Everything you see here is running on the exact same network we're using to read the Riva meters. So these are a couple of many solutions. The first is traffic monitoring. So we would hope with the bad weather that people would be driving less, and it looks like we're actually monitoring on 42nd Street here, which isn't pretty convenient. The next one is digital signage. So we see that the parking garage is closed because of the bad weather, bus service has been curtailed. And basically, we're asking people to shelter in place. And then finally, we have noise sensors scattered throughout Itopia. And apparently, a couple of cars didn't get the memo. They've had an accident. And now, if we choose to, we can dispatch emergency services and maybe send notifications to people, letting them know they should avoid driving in that area until things get cleared up. So these are 3 of many of the smart city solutions we have available here in Itopia today. Well, unfortunately, our winter weather is getting worse. And as you can see here, the lake has actually frozen. So now what we're going to do is talk about how our water solutions can help out. So the Diehl water meter, one of our partner companies is sensing the water temperature, and that information is being reported back with our 500 W water [ herd ]. And so we can see right now, it's cold, but things are okay. As the storm intensifies, now things are getting to the point where it's a little dangerous. So your water utility has decided to send you folks a message. You'll see that on your tablet, and it will be up to you to figure out how you choose to respond. Okay. There we go. All right. Well, let's see what choices you made. Boy, well, water conservation is a good thing, but maybe not so much this time. It looks like a few of you are living in igloos now. But the good news is you've got plenty of ice when you make your nightly cocktail.

That's right. So with the storm still in effect, we're going to talk about how gas can be impacted, and specifically, gas distribution. So we're going to zoom back out and look at the wide view again of Itopia. But this time, we're going to show you the 6 districts of Itopia, which will become important in a moment. And we're going to model a story for you that was based off of Winter Storm Elliott, December 2022. Anybody livid? I'm in New York. So it was a storm that hit the Northeast United States. It was disastrous to gas distribution. It was so cold that they had distribution equipment that malfunctioned. They had supply chain issues with wellheads freezing. And between the freezing and the malfunctioning, it caused an incredible problem for gas services. On top of that, electric generation in emergency situations often uses like natural gas as fuel. And so those just compounded together. So let's look at a timeline here. We've got to walk through the story. And so as Tom left it, we were cold, but the system integrity was still being maintained. But then 12 hours in, our polar vortex has swept in, and now, we're at 5 degrees. And what's happened is demand has surged, and the reason that's happened is because with the low temperatures, it's taking more energy to maintain the heating of the homes, so it's -- people are needing more gas. We walked forward another 24 hours, and now, supply has taken a hit while maintaining that high demand. And the reason of that is because of exactly what I just said before, equipment failures and freezing. And so as the supply chain has been impacted, we're losing even what we have as supply, and outages are starting to sprinkle in based on this imbalance. And now we're going to go 56 hours in. And this is the point where the utility is like, has to do something to maintain the system integrity. And so unfortunately, the only tools in their tool belt are their city gate stations. These are basically like substations in electrical distribution networks, but for gas, they are called city gate stations. So they've got pressure monitoring systems there. They've got valves that they can leverage. And unfortunately, they're hammers when they need scalpels. And in fact, as they shut off valves in these city gate stations, they cut off more demand than they actually needed to because they had 70% of supply, they overcut, and they've caused a huge amount of outage within the city. And unfortunately, it's spread around uncontrolled, and we have no idea where these problems are, who lost service. It's just been an uncontrolled descent. So we want to have a little fun, as always, and we're going to have a book for you. It's a Choose Your Own Adventure book. We've written called the distress of Itopia. It's now on your tablets. We'll give that 2 minutes to walk through the story and decide in what order the various districts should get service restoration. So you get to make morality choices, you get to make just interesting little story about -- well, Tom, have you -- what would you say the story is about?

It's who do I want to irritate the most. While you figure that out, we're going to enjoy a little Dave Brubeck.

But every decision you make has a time cost. And so we're going to have -- see how well you performed at the very end.

All right. 60 seconds left.

Halfway there.

All right. 30 seconds left. Yes, 10 seconds.

All right. Get those last pages read. Go ahead and click, click, click. 3 seconds. All right. So the window is closed. So we're going to see now who made the most efficient restoration choices, which my goodness, what did you have to go off of? But let's take a look. All right. So 3 of you found the 9 days to restore path. No one found the most optimal 8 days to restore. But honestly, all of these are terrible choices or options because this represents days that our residents were out of heating in their homes. And so we're going to have to change this a little bit. Let's do better, right, Tom.

I suspect we can do a little better. All right. Well, what we're going to do now is we're going to walk through this scenario again. But this time, we're going to leverage the power of the Itron Intelis gas meter. So the Intelis is a pretty incredible little product. It's about 1/3 of the size of a traditional gas meter. It has ultrasonic measuring technology, so there are no moving parts. It has integrated remote shutoff switch and communications, and it can sense pressure. So with all of those capabilities, we're going to see if maybe we can improve things a little bit. All right. So we start off in the same situation, 30 degrees outside, supply and demand are still in balance. 12 hours later, it's dropped to a bone-chilling 5 degrees. And as we would expect, demand has skyrocketed, but we know that. And as a result of that, we can now choose to sample the pressure at every Intelis meter throughout the entire gas distribution system. And so what that's doing is it's giving us a near real-time visibility into exactly how the system is holding up. Okay. 56 hours in, we have supply constraints, so we still have to make some difficult choices. But because we know exactly how the pressure is performing everywhere, we can be very targeted in where we choose to curtail service. And as a result of that, we're able to keep supply and demand in balance, and we've drastically reduced the extent of the outage. Now eventually, the service will come back on, the weather will improve. And now we have another benefit because when it comes time to restore service, we know exactly where we curtailed it. So we can roll trucks in the optimum -- most optimum manner possible and get service restored to everybody as quickly as possible.

That's right. Let's bring that leaderboard up because we've got a 2-day option that wasn't seen before because Itron has done it better than all of you. And that's only because of this intelligence that we are providing. But -- so we hope you've -- this brings us to the end. I'm sure we had some fun, learned something. We just wanted to really showcase, again, how all of these things build upon themselves to make life more efficient, more resourceful for everyone involved. So thank you for your time.

Yes. I'll walk around and grab everybody in the room's questions. We've got the whole team available. So don't be shy. We've got plenty of time. And we'll start with Kashy here in the back, if I can get over there. For those on the webcast, I think there's an opportunity to submit questions as well.

So I have 2. The first one is on just market and macro. Tom, I think you outlined several different CAGRs over the next several years for each of the individual segments. And really what I'm curious about is what is the most important overarching theme that needs to happen for these growth expectations to come to fruition. So is that electrification? Is that load growth? Is that complexity? Just what are some of the big market factors that we need to be thinking about that could either accelerate those growth rates or cause those growth rates to come in beneath your expectations? And then I have a follow-up.

Yes. I think that number one thesis behind it is electrification of more things. That would be one area to really think your way through. Whether we're talking about heating, whether we are talking about transportation, whether we're talking about data center loads, it doesn't truly matter to us. We're not trying to pick winners and losers and growth rates on any of those. But if more things are being electrified, you really have a situation where you're going to have to do something. That same thought process is true, whether you're talking about you are changing something on the generation side or whether you are seeing more distributed energy resources out in the marketplace. So all it takes to break the system, the fragile grid that exists today is to upset the balance, the perfect harmony between supply and demand and how that supply and demand gets changed. More renewables here, more distributed energy resources there, more things being electrified, any one of those things upsets the balance, and therefore, you need to do something as a utility to maintain service, maintain grid stability and make sure that you're doing it in a cost-effective way. So it's really the thesis is, if anything changes, you've got to be able to balance supply and demand.

That's helpful. And then my follow-up is for Joan. Joan, you had the margin slide that shows the bridge from gross margins from '23 to '27, and I think the first one is pretty self-explanatory. It's like revenues mix shift. And then there were 2 below those that I think each added about 100 bps of margin to help you get to that midpoint. Can you help us think through the timing of those, of Box #2 and 3? Do you add 200 bps in 2025? Is it gradual over the course? I'm just trying to understand how quickly you could -- how quickly we can get from 33% to 37%.

Yes. Well, the first thing I would say is the guidance that we provided for '24 was relatively flat gross margin at the company level, so call it, 33%. So that gives you an anchor of '24. And then we purposely did go out to '27. So I don't really have a path to share that says '25, '26, '27. We'll see some uplift in '25 because the 2 factories will be closed. I think you'll see progression every year from '24 to '27.

Thanks so much. Noah Kaye with Oppenheimer. I'm going to start with outcomes. Don, it's great to see you again and great seeing all the simulations today. I think the question is really about the visibility to get to, call it, roughly $450 million of segment revenues in '27. Maybe we can first understand how much of that is actually in backlog, what is this inflection predicated on? How much is under the company's control at this point?

Yes. I don't think I've got the exact number on what's in backlog, although we talked in general that our -- the majority of our backlog is between networks and outcomes. I think the key is that we've got a pretty balanced portfolio within outcomes. So we've got revenue that derives directly as we go ahead and sell more water, gas and electricity meters. We've got other revenue that's tied to electric vehicles and DER proliferation and such. So I've got really multiple paths for how to go get there. Certainly, the expectation is that with every new Riva meter sold, we will see an attach rate to that of multiple DI applications over time. We're seeing that prove out with our early adopters. And I don't think we've yet seen at all the ceiling of how that will -- of how high that can grow.

Yes, 2 additional points that I would fill in on top of -- spot on with what Don said, the first one is Don's business is 75% plus or minus any particular quarter recurring revenue. So every new deal that gets signed, think of it more as a shale chart. The old one didn't go away, and the new ones just continued to build on top of it. So it is this boil, if you will, where the water level keeps rising up because of the nature of the recurring revenue, point one. And point two, while we do not break out the ratios of the backlog, that $4.5 billion, we say 90% plus networks and outcomes, all true. Don's business came into 2024 with the highest backlog that he's ever had building on top of the highest revenue he's ever had. So we're on the right path for sure and have the appetite to continue to grow. And hopefully, we've made a decent case and you heard it from the horse's mouth that the customer as to the value that they get out of the system. So it's a self-reinforcing prophecy in terms of how these things lay through.

It makes sense. I just want to respectfully push on it a little bit more because I think that if we look at the historical growth rates for the segment, they're not at that sort of double digit you talked about. I think the guidance for '24 was, if I can remember correctly, high single digits. And so everything that we've heard today makes sense in terms of the value proposition. And I think you talked about basically having more tools to offer now, and I think you mentioned 10 million DI endpoints in backlog. Just help us close this gap here to understand why this business maybe inflects a little bit more in '25, '26?

Yes. I'll add something, and then, certainly welcome Don to comment on it. First one that I would give you is that growth rate did come in 2023. So the number was, I think, 13% or something like that, so right on target for where we were. And obviously, we guided a little bit below that. We'll see how the year shapes up for us in the year ahead. That would be clearly one way to think about it. Every time we deploy something, again, it's more greenfield that's out there. In general, outcomes revenue tends to lag network deployments. Customers very much want to do the right thing for their investors to make sure that the cash register works. So they're very interested in the meter to cash first and then they can start working up the pyramid for the more advanced courses. We're working really hard to make sure we can shorten that window as much as possible so that pre-integration we do with other industry partners is take that time lag and try to compress it. Our customers are risk averse, and if I was going to be slightly cruel about it, I would say almost herd animals, no one wants to be first, but when they've seen it done, then you can start to do it. And the power of having customers that really want to stand up and say, we did it, and it works, as you saw this morning, is extremely powerful with other customers to have them move along the path. So again, the right things are moving forward in terms of what you need to see. We obviously are going to continue to push it, and your desire to push us is well received.

Thanks very much. Great presentation today. Appreciate it.

Tommy Moll from Stephens. So John, no pressure on the gross margin bogey here, 400 to 800 basis points of improvement. Can you walk us through the bridge there? Just given your -- so your starting point, 2023, then we look out to 2027, it's up 400 to 800 basis points. Just walk us through that figure, John.

Yes. Let me start because I don't think it's much different than what I presented because most of the gross margin improvement has to come from John's business. And so I showed company numbers, it's the same bridge. So first of all, he's got the headwinds from the 30% of the backlog that has not been repriced. So think about him not making a lot of progress from '23 to '24, although '23 was pretty nice gross margin. So it's the new product introduction, it's the making sure that when the factory closes at the end of '24, he's going to get an uplift in margin just from overhead reduction in the factory via supply chain reducing the number of SKUs, making sure we're leveraging platforms. All of that, that same bridge that I have is the same bridge for John. Basically, I had to show something like a 4-point improvement, and he's most of it.

Okay. And a follow-up just on the free cash flow conversion for Joan. I think versus the 2021 conversion rate, it's up a couple of hundred basis points. Can you bridge us there how much of that comes from interest, tax, working capital? And if you can't quantify, just which of those are you expecting to improve is really the nature of the question?

Yes. I would say it's not from interest versus '21 because we had already recapitalized the balance sheet, and so interest was already quite low. I would say it is from just leverage of the EBITDA percent getting better in the flow-through from EBITDA to free cash flow is the biggest piece. So certainly, over the last 18 months, we have spent a lot of money on working capital. We've strategically built inventory. I think we're kind of where we need to be, and we'll continue to monitor that. But I would say it's primarily the fall through of higher earnings. Yes.

And no restructuring.

Well, in the -- yes, when you get to '27, we're about done with restructuring, too. Yes, that's true. So a little bit, but not much.

I wanted to ask about visibility that you have with your customers into their plan -- in their capital spending and beyond maybe what's showing up in your backlog. And as you work with your customers and helping them plan out their expenditures going out further. Could you maybe talk about that process and how much visibility you have there?

Sure. So I'll give you 2 parts to the answer I think are both really relevant. We don't put something in backlog until we have the award, we have the contract signed, and we have the regulatory approval required to be able to do it or the customer has the regulatory approval. So that's when we put it into backlog. So I'll use last year as an example. So we had relatively meager bookings in the first 3 quarters of the year, and every conference call, you heard me say, don't worry, it's coming, wait for it, wait for it, wait for it. Why would I say things like that? And then, okay, fourth quarter is this monster booking number. It is the visibility that you get from an award and the ongoing contract negotiation or contract is done and dusted and you're waiting for the appropriate regulatory authority to give us the confidence in putting it into backlog. So that's one 1 piece of it. There's more that we know about that appears in backlog because of that natural progression, number one. Longer term, which comes to the second part of your question, the systems that we are working with in our customers today are not transactional conversations any longer. I think John referenced it in some of his prepared remarks. It's not the nature of you walk up to the meter shop inside of the customer and say, okay, how many do you want, let's haggle over price and go get the deal done. That's what the business had looked like many, many, many years ago. Where it is today, that the conversation and the decision to make a decision to go with an enterprise-wide system and the full platform happens generally at the C level in the department itself or at least the opco presidents need to buy into this because it is their future for a decade or 2. So you're having those ongoing conversations. The sell-in cycles on a very new kind of environment is 18 to 24 months. So you're having the conversation for a good period of time. Once you have the base platform in place that those incremental things you can do with it, the extra value you add you have, clearly that can happen on a much shorter time span, but you have a good understanding of what the pain points are for the customer, what their ideas are, and they are publishing 5-year capital plans. You could read any of the earnings announcement from many of our customers, and they're saying, hey, we're going to spend $20 billion in capital over the next 5 years and here's the CAGR that we would expect from an ROE perspective -- ROI perspective associated with that. So those long-term capital deployment plans that our customers are out talking about are based on conversations about those longer-term platform-level investments and the pain points they have to deal with generation variability or distributed energy resources or safety issues or resiliency requirements, what have you, depending on what pain point they have. Our customers are in a lot of different geographies and a lot of different challenges, but all roads lead to the distribution grid, and you can't solve the problem with that visibility and the exact technology that we have. So I can't figure out who's next, but Paul has obviously got it sorted.

Chip Moore from ROTH MKM. Maybe a follow-up there, Tom, on your comments just now sort of longer term as you roll out DI capabilities much more broadly. How do you think about replacement cycles? Do those change less lumpy, the pace of technology adoption accelerating? How does that impact your customers?

Right. So I really don't think about the traditional model of this forklift upgrade of, okay, a fixed capability, buy it, amortize it, and then 10 years later you come back and you do it all again. There's a little bit of that out there from things that were sold in '08, '09, '10 kind of range. But for purchases that are made, I don't know, let's call it, from '17 on kind of timeframe, it is this much more forward-backward compatibility, a lot more ability to carry those assets forward. So it isn't a forklift upgrade. It's replacing the parts and bits that you need on the overall backbone of the solution itself. So there's a little bit of that replacement cycle that's left. Those early adopters from the '08, '09 timeframe are thinking about what they want to do and that business probably gets awarded in maybe '25 or '26 from some of those early adopters out there, but a lot more of the market is now these other things in terms of how the business goes. So from a bookings' lumpiness, there'll still be some of that, but I expect the amplitude of the lumps, if you will, starts to be damped down in the years ahead.

Josh from Guggenheim. 2 questions. First, a quick one for you, Joan. With that 30% in fixed cost -- fixed price backlog that you're working through this year, I'm wondering going forward, is that the end of that? Are your customers all basically agreeing to index pricing at this point?

Yes, in general, there might be a few that aren't that way. But in general, there's some sort of index tied to an external index like PPI or CPI. So that doesn't necessarily give you dollar for dollar, but it certainly gives you some protection against...

But going forward, this kind of hard fixed cost?

Once we get through '24. Yes.

All right. And then a question on the M&A. It's interesting. I heard you say you're not going to buy pre-revenue companies. But at the same time, I would think that M&A is more about capabilities and building out the platform than it is about just adding EBITDA. So I'm just wondering if you can put a few more -- a little more meat on the bones there. Are you trying to buy EBITDA, and it's going to be accretive at day 1? Or are you willing to buy capabilities?

Well, I would say the first priority we beat it by revenue so some commercial traction. So yes, there might be situations where you're buying technology, but then to me, it's a build versus buy and a time to market. So I think our preference is to get a solution that has already proved to be somewhat successful in the utility space that we can leverage our sales force to let it scale. And so it can have a little bit of revenue, not a lot of revenue. But if we could find the right company that actually brought a decent amount of revenue and helped Don really grow his business faster. There's a lot of leverage in the model that we can get his revenue up.

So does that mean you've got a 12 months or 18 months EBITDA accretive hurdle or something like that?

No. I mean we'd like it to be within a couple of years, 2 to 3 years, but yes.

Justin Bergner with Gabelli Funds. With respect to network solutions, the target for gross margins, I guess, is the same in 2027 versus what it was in 2021. I mean what's holding it back if I compare that 6-year timeframe? That's my first question. The second question is not necessarily a big fan of dividends, but you've had a lot of volatility in the stock. Have you thought about instituting a modest dividend to maybe attract some new investors to help with some of that volatility and maybe why have you decided against it for now?

Right. So on the gross margin question first, I would say that -- why didn't we up the targets? It was the nature of -- I forget who it was, Tommy's question, just 5 minutes ago, is let's work through the activities that are underway now, let's get the factory closed, let's get some of the pre-pandemic pricing behind us, let's get the product rotation that we know is coming in place, and then we can up the target. But let's be prudent about the timeframe that it would take to work through that. I'm not at all suggesting that there isn't more to come beyond it, but let's set a way point on the way to the long-term future of what we have. So it's a timing question.

And just to clarify, the '21 number was for '24, so it's not a 6-year shift, it's a 3-year shift.

And that is a direct relationship to the COVID and the supply chain crunch that's after that. But it really is why didn't we up it like we did with the others. It's we've got some things that were still in the flight of working through as referenced. On the dividend side of things, at this point, that certainly capital allocation, priority #1, is growing the Outcomes business. We think that's the right return on the investment that we can make with the capital that we have, and we've been very active in that space. That certainly is where we start. We have a share buyback authorization, which is another way we could potentially use capital, but that's still #2 on the list. And dividend is further down the priority from there. So I'm very focused on let's work through the things that we can do to grow the company and create a much more sustainable, long-term thriving enterprise, and I think that is up our game in the Outcomes space.

Pavel Molchanov at Raymond James. Going back to outcomes, so 6% historical growth rate, 12% to 15% going forward. Can you talk about the role of regulatory kind of software within the rate base dynamic as one of the drivers of doubling the growth rate?

Yes. I'll start, and then I'd welcome Don to fill in as well. Don referenced in some of his comments earlier this notion of OpEx to CapEx in terms of the overall model and the value that he and his team provide. But the key, and why that's important, obviously, is the OpEx dollar is harder to come by than the CapEx dollar in the utility world because of the regulatory environment. What is the regulatory environment like today that there's a couple of different ways to look at it. There's a lot more performance-based rates that exist today than there were 5 years ago. So 38, 39 states around the U.S. today have some kind of performance-based rate structure, and that allows utilities to get a greater rate of return when they perform better. And these things, as you saw earlier today, allow them to perform better. So it allows you to fit into the model a little bit better. We work really hard during that contracting phase to make sure that we can get the language right. We get the security in terms of what will happen and the margin that comes along with that, really does happen, but it also -- it allows the customer to get the treatment that they want to work through that. Careful articulation of how that all works in front of the regulator is the key to having it pass all the way through. The regulatory environment remains constructive today. And in general, rate cases are being approved. There's always some exception here and there. Rate cases are being approved at 9.5%, 9.6%. So higher cost of capital with higher interest rates hasn't slowed down the rate of return that utilities are getting. Capital plans are being updated. So this is flowing through and continues to look constructive in terms of what it can mean for our business. The magic of how you move things from OpEx dollars to CapEx dollars, maybe, Don, you want to comment on that, as you mentioned earlier.

Yes. I think what I would just add there on top of you, Tom, is we do see occasions where regulatory decisions can either slow down or speed up buying decisions. And I think we've seen it both ways. So that's probably the other factor. But I'd say right now that has in that kind of balanced out. And I don't think we're aware of any major trend there that's going to make us believe it's going to operate in differently going forward.

Let me follow up on -- this is probably applicable to all 3 of the segments. 80% North America revenue last year, historically, it was a little more kind of international, do you have a foothold in all of the geographies where you want to be in? And if not, where do you need to kind of make those investments?

Let me -- before they decide who's going to talk, let me just say in the 27 numbers that I provided, the percent outside the U.S. goes from 20% in 2023 to 30% in 2027. So there is growth, mostly in APAC, a little bit in Europe. So I'll let you guys.

So again, through the product pruning, through the market pruning, through the view that we've taken around where do we sell the complete solution as opposed to be commodity meter sellers, we're absolutely in the markets where we want to be. There's still a little more growth in little bit markets that we're developing products for, particularly in Australia and APAC, are the big ones. We're still doing a lot of good work in Europe, and we're going to continue to do the work in Europe, and that's a lot of my business, but we're also driving Outcomes work with the electrical utilities over there and some of the other water utilities. So we're absolutely in where I think we need to be. There's still a bit more growth to go.

Yes. I think we took a very comprehensive view to entering into any new market or expanding in any market where we don't already have a significant presence, and we look at that from a very balanced set of perspectives.

Right. Maybe just to close, the technology that we're developing is we're ensuring that it's applicable internationally, right? We've got a very strong footprint of customers in Australia. As we talked about with solar penetration, they're facing the same challenges that we see here domestically, maybe even in an accelerated fashion. So when we talk about grid edge intelligence and the capabilities that we're building into the platform, not just the endpoints, but the end-to-end solution, we're ensuring that those markets can consume that technology, and we're right there with them talking about all of the platform capabilities I just walked through, the backward and forward compatibility, how they can ingest this technology. So I think it's -- as my colleague said, I think we're in the right places. I think now we're starting to see a bit more interest given all the dynamics that are happening around the world with EV and solar growth.

Yes. Traditionally, I would say the problem was the opposite. We were in too many places and we weren't in places where we were getting the right rate of return associated with it. The work that has been done over the last couple of years and the heavy lift from the team, to my left, they get all the credit for it of really making those hard choices. We now are where we want to be. So I think that we still have ways to go to sell higher-value solutions in some of the markets that we are in, and that is absolutely part of the plan that takes us from the 20% to 30-plus percent international, but with the right rate of return. We're not looking to compete for the bottom. We're looking to make sure that the value we talked about today is something we can realize on a global level.

Scott Graham from Seaport. I would like to understand a little bit more about the value proposition of DI. It seems like there are other ways to do this, possibly less efficient use of sensors, doing data analytics at the facility itself as opposed to at the grid edge. Could you talk about how you're selling? What's the elevator pitch for DI and perhaps some of the factors that might be slowing its growth?

Yes, I'll take that one. So you're right. There are other options that are out there. So you can deploy special purpose sensors. But then the trick there is you have to know in advance where your problems are and what problems you're looking for. And as we've seen from utilities that have tried that approach, their knowledge is at best incomplete and often at times is highly inaccurate that what they discover in the field completely does not match what they expected to go find. So that's one approach. A second approach is to -- we see some of our competitors out saying, "Well, take all the data and go collect it all and do all the processing in the cloud". We think that's a fundamentally more expensive architecture and one that will face great difficulty in scaling as we progress through the leverage of what the grid is going to require to operate, right, getting into the control and optimize pieces. I think the final piece is really saying, well, what can you do with the data that exists today with existing meters and why does one need to go to the grid sensor approach. And I think what I can say there is while we had a thesis going in as to the set of use cases that will be available, our own customers have come back with a much larger library of use cases, measuring in the dozens of use cases as to what they can go ahead and accomplish for the system that can't be done with their current AMI-type systems or other SCADA systems. And frankly, I think that's just the tip of the iceberg. Kind of every time we look, every time we have this conversation with the customers, it is actually rare for any use case not to emerge from those conversations. So now, maybe the question of what's holding it back, I think it's the typical utility inertia, what Tom talked to, right, is the -- change is difficult. And fundamentally, what we're talking about to really get the operational benefits requires business process change. And I think that's where we've seen kind of my group change our focus from being one that was very hyper focused on technology to now being very focused on, all right, how do we get the technology there, but also how do we make it fully operable, how do we train the customer on its capabilities, how do we enable the customer to run more quickly with it. So that's been a real area of focus for us for the last, I'll call it, 12 months, whereas before that, I'd say we were far more focused on just getting the fundamentals of the technology working.

My follow-up question is nothing new, but it seems like one of your competitors who has a -- licensed some spectrum, does -- is going to market perhaps a little bit more loudly with this -- with their customers and perhaps trying to grab new customers? Because -- and their argument is our control around local area networks is better, our meters don't have to talk as loud as yours and other competitors. I know the big part of your model is you offer cell, you offer WiFi, you offer mesh. That is a selling point in and of itself, I get that. But can you talk about this competitor's claims, and again, it's not new, but they seem to be getting a little bit louder on this in the market that their licensed spectrum is a competitive advantage?

Yes. I would say that different horses for different courses, right? So if you have a situation where you have a village with a hill in the middle of the village, and you want to plant a tower, you clearly could cover the village. If you want to deploy different types of systems and look out the window, how do you do it in various kinds of environments, you wouldn't be able to deploy that same type of point-to-point technology in terms of how it actually works. So the beauty of the flexible transport technology that John talked about is you get to use the right horse for the right course. So you want a tunnel out of a meter room that's 20 meters below ground in concrete. Okay, let's use power line carrier to get the information out of there. You want to use mesh in a downtown, tightly-packed territory, we got you. You want to use cellular point-to-point technology, hey, we could do that, too. So the key, in my mind, is flexibility in the transport so that you really can use the right horse for the right course gives you a way to cover more territory. And even as Tim talked about this morning, he's got Bergen County to Manhattan, and those are different things. But if you can't look at all your data from behind 1 single pane of glass, you're missing an opportunity. And unifying that transport over that range of use cases is something we're going to continue to work on. John's business is about more application coverage, which means more physical territory, but more transport mechanisms and be able to unify that so that you can have the right coverage overall, different RF technologies, different wired technologies work in different ways and handle different use cases. One size does not fit all.

So simply, do you think that you're saying that the collectors that they're using are faster than yours?

Yes. I don't know that I could comment on individual use cases. That's probably a better conversation in a different way. I'm just saying that flexibility wins because one size doesn't fit all.

We've got time for 1 more. Austin, you win.

What does he win?

A free question.

Yes, I was going to say a free answer, I don't know, but...

Austin Moeller, Canaccord. So if we think about the Outcomes business and the growth expectations over the next several years, what percentage or share do you see coming from selling data solutions to the utilities relative to the solutions that you're developing in smart cities around traffic management, emergency detection, et cetera?

Yes. So we see the bulk of the growth in Outcomes tied to core utility use cases. Smart cities is certainly interesting, but the vast part of our business is coming from the core utility space.

Very good. As promised, I believe that was the last one, Paul. Am I correct? So he's giving me the thumbs up. Thank you all for spending the morning with us. I hope it was helpful for you. We've thoroughly enjoyed the time. So thank you for showing up.