Itron Inc Oppenheimer 29th Annual Technology, Internet & Communications Conference
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All right. Well, thanks everyone for bearing with us here at Oppenheimer's Annual Technology Conference. We're very pleased to welcome back the management team of Itron. I think this might be our 10th straight year, although my memory is a little hazy, hosting the company. We've got CFO Joan Hooper on the line, and VP of Tax and Treasury, Joel Vach. Thank you both for being here. Really glad to have you here for the discussion.
Yeah, thanks, Noah, and apologies. I couldn't get on the webinar for some reason, but I'm here to help.
Well, the unpredictable is part of life.
I look forward to talking a little bit about Itron's growth trajectory here, and some of the key questions that have been coming up post-quarter. I would just like to start with a high-level question, which is Itron has historically been viewed by investors primarily as a metering company. Today it's clear you're really more of a platform company. How should investors think about that evolution, what it enables, and what advantages it creates compared with point solutions providers?
Yeah, thanks. That's a great question. To your very point, people often mischaracterize Itron as just a continuation of what we used to call AMI 1.0. Way back when Itron started and got in this business, we helped utilities kind of mechanize the billing process and the meters in AMI 1.0 played a very key role, and that was really all the way up to, call it, 2010, 2011. As we think about what we are now, it isn't really just a metering company. As you indicated, it's a platform company. In addition to meters, we obviously have a grid edge intelligence. We've got networks offering software analytics, really services. Really designed to help address the complexity of what the utility customers are facing. Their environment is so much more complex than it was 15 years ago.
Certainly there is potential for a quote-unquote, "refresh cycle" of depreciated meters need to be replaced with new meters, but it isn't really about the meter anymore. It's about the solutions that we can bring to the customer for the problems that they're dealing with.
Maybe benchmark for us, Joan, where are we at in the cycle for grid edge intelligence adoption? I think maybe even help us definitionally understand the difference between that and AMI 1.0.
Sure. I'd say we're in the early innings. We have definitely been a leader in this area. As of the end of the second quarter, we had about 18 million DI-enabled endpoint ships. Think about that as a meter, but with a computer on the side of it. If you look at the growth year over year, that's like 20% growth year over year from second quarter over a year ago, but that's still a small number. If you look at thousands of meters deployed, it's a small percentage. Again, AMI 1.0 really didn't have this capability. For years, we started probably selling it in 2018, 2019, and it was really just a couple of customers that would start down this journey. In many cases, we learned with them as to what capability and what applications we could come up with.
But we're very excited. The number of licensed apps for the DI-enabled endpoints is up to close to 28 million, and it's like 50% growth year-over-year. But I would still say we're in the early innings, in terms of how many are actually in use. So more and more when we sign a new contract, it has a component of Networked Solutions, it has a component of Outcomes, and typically it has the ability for the utility to purchase a certain number of apps as well.
How does that change the procurement conversation? And what drives that interest in managed services and platform as a service?
Well, certainly a lot more complex with the utility in terms of the procurement process. But again, it's not a discussion anymore of, hey, we need to understand the cycle time of how we bill our customers and get the cash flow. It's really around how do we use grid edge intelligence to help us manage load growth? How does it become more resilient? How do we deal with distributed energy resources and coordinating things like EV charging? If you think about the utility customer, what they have to deal with is much more complex just even in the last five years than they had to deal with 10, 15 years ago.
It's a great point. When you look at that customer pipeline and the regulatory activity that's underway today, just how does the volume and scope of opportunities compare with what you saw? You talked about difference between three, five years ago. How does it compare now? And what's changed in the utility investment landscape?
Certainly, load growth is part of it. We have never seen the pipeline, so again, not into our backlog yet, but the pipeline of opportunities, have never seen it so big. It's primarily electric in the U.S., but gas is now a significant portion as well. They're really trying to deal with, whether it's data centers or just the proliferation of different DERMS activities. There's just a huge increase for load growth, and obviously they're dealing with the pressure with the regulators for affordability. How do they become resilience? Climate and weather disasters have become more frequent than they used to be. How do they ensure that there's reliability? They're trying to balance all these things. I think they have, as we have for a while, concluded you can't do it without some new technology that allows you to utilize your assets more efficiently.
Yeah, I think with this customer kind of conversion over to grid edge intelligence, maybe just talk a little bit about. We know where we are in terms of hard adoption. We're in mid-single digit penetration based off of what you just said. But where are we in the education cycle, both for the customers understanding what the platform can do now, and then really helping the regulators in their different states and jurisdictions understand the benefits? Is that still a process that has a lot more runway to go in terms of education and tools, or do we feel like there's a broader understanding now in the utility marketplace that these solutions are really key to the future?
I would say there is definitely a better appreciation both at the customer level and at the regulatory level, but I would still say we're in our early innings. They have become much more sophisticated. I mean, the beauty of this industry is our customers don't compete with each other, so they're happy to share things that work. For those people that were early adopters for grid edge intelligence, they're able to demonstrate the benefits they got, and so other utilities are obviously interested in that. The regulators are becoming more sophisticated as well. It's not just about what's the cost of what you want to spend, it's what's the benefit and how do you get benefits to customers, not just in terms of the rates, but also, again, reliability, resiliency. How do you satisfy the end customer?
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