ITRI
#Yes.
I mean, I'll make a comment on your question around, is there some sort of catch-up period, the answer would be no.
So we obviously implemented the new revenue standard this quarter, and are reporting a backlog for the Networks segment that's embedded in our total numbers, is totally consistent from a methodology standpoint.
So we did have to think up the methodologies to ensure that we didn't have any contracts in here that didn't have regulatory approval.
But from an accounting standpoint, there's no difference in the $337 million that we brought in for the 12 months, and the $1.4 billion was essentially what they brought with them.
And <UNK>, I would say that, that's also ---+ yes.
I mean, sorry, strong bookings performance in the Q3, Q4 and even Q1 time frame.
I mean ---+ so the bookings performance in the Networks segment is coming along well.
Generally ---+ so book and ship, a very modest amount.
The business is really primarily project-driven and has a low component of book and ship.
Yes.
We didn't really break that out.
What you saw in the financial performance was a combination of factors.
Certainly, we had a little bit of our own supply chain transition.
We had some acquisition-related factors, some inventory step-up.
But the normal things that you would see in the first quarter after an acquisition as well as the component pricing and the effect on utilization of factories stopping and starting.
So all of those factors are built into the financial results that you saw in Q1.
As we work to establish long-term supply arrangements so that we've got the components coming in on a regular basis, we end up seeing the benefits of our restructuring from the 2016 plan and so forth.
We definitely believe we can even that out, but it was clearly something that affected us in Q1.
And I would point out that in terms of commodity pricing, <UNK>.
I mean, the largest impact is in our Water business.
Although we do have a fair number of composites in our Water business, and there is some steel and aluminum in the gas business.
But that really is primarily an issue within an element of our Water business, the straight out commodity fluctuation.
Well, our normal practice would be to update the guidance on the Q2 call, and we do intend to do that as well.
We gave a little bit of color around the impact of Q2 versus the rest of the year, essentially just a little bit more pronounced than what we had said on last quarter's call.
So we had already provided quite a bit of color that the second half of the year profitably would be quite a bit higher than the second ---+ than the first half.
And so, again, we gave a little color on that, no intent to really update guidance until the middle of the year.
Yes.
Good question, Joe.
Tom here.
The 2016 restructuring plan really had 3 factories ---+ or 3 pieces of business that we were looping around.
We really are completing the ---+ all 3 of those during the first half of this year, and you start to see the benefits into the second half of the year.
So a lot of the things that we had talked about last time, those tend to be timing-related, transients, and they kind of go away for us through the first half of the year.
And this is what we said.
Yes.
I wish I had the crystal ball as to exactly some of the ---+ when some of the supply allocation situations we see in the electronics, world will even out.
You could read the blogosphere as well as I can to try to guess what it would look like.
It usually takes several quarters for these things to work their way through the electronics' industry, but obviously, that's historical data rather than anything that's specific for this time.
That's something we'll have to watch and see.
Yes.
I don't know specifically what you're referring to in terms of ---+ we had a loan ---+ we had a term loan structure or a bond structure, and we talked about that on the last call.
And we're still essentially with that same structure.
There's different pay-down timing of the term loan versus the bonds, but essentially, we're still on the same plan.
Yes.
That should just be a Q1 item.
And that was 70 basis points on consolidated gross margin and 500 basis points on the Networks gross margin, that's all.
Well, again, we did try to provide a little bit of color, Q1 versus Q2 for Networks, because it was an exceptionally high quarter.
They had some projects that had been expected to be recognized in Q4, and some that we expected in the second half of this year actually happened in Q1.
So we try to provide a little color.
We would not expect the same level of revenue and gross margin performance in Q2.
Yes.
<UNK>, it's actually kind of a mixed bag.
I mean, a number of states have already ---+ and regulatory commissions have already intervened, demanding that the utilities return any benefits that they received from the tax legislation directly to the ratepayers.
And there are a number of other jurisdictions in which there is some discussion about the possibility, as you're indicating, of using that benefit for infrastructure investment to make capital investments.
So that ---+ how that is going to sort out is really still in development.
But I would say that it applies only to a portion of U.<UNK> jurisdictions, again, that have not already asked for a pay ---+ almost a complete pass-through of the benefits to the ratepayers.
Sure, <UNK>.
I don't think you need to go very far here and talk about flying cars or trash collection because nearer to home, we are further along in our plans in order to certify Itron metering and end points underneath the Silver Spring Networks in order to create cross-selling opportunities there.
We are very pleased with what we discovered in terms of the opportunities for distribution automation and street lighting and our ability to both cross-sell those back into the sort of legacy Itron environment.
And then looking internationally at how we can use Itron's large ---+ legacy Itron's large geographic footprint in order to target the Silver Spring, the Gen5 network appropriately on a global basis, we have the solid makings here of how it is that we can drive the next level of business out of this acquisition.
All of that being said, we are focusing on a standards-based compliant network with a large partner base in order to create an ecosystem of opportunities for many other partners and speaking at IoT World on Wednesday and we're going to be demonstrating other types of sensors and modules that are connected onto the network.
And we see a longer-term developing opportunity there as well.
But it's going to start out looking at meters and modules and cross-selling of DA and streetlights are the ---+ and software opportunities for the near-term benefits.
Yes.
The biggest commodity movement that we've seen that ---+ it really has a material effect on our purchasing is brass.
And so that's one.
Steel and aluminum is much further down the list.
It's not as big a factor.
But trumping any commodity has been the things that are going on in the electronics industry, really the ---+ what's going on with allocation of supply in the ---+ the passive part of the electronics was probably the biggest cost factor, outweighing the others.
That ---+ again, it's really, really difficult to understand exactly what will happen.
The news of the day tends to be difficult to predict exactly when those things could happen and what the tariffs would look like, but I would expect it to be pretty muted in terms of our impact on steel and aluminum.
So <UNK>, it's ---+ the targeted customer base are largely investor-owned electric utilities.
There are some municipal and locally-owned entities there.
The exposure is predominantly in North America.
Although there are a number of global opportunities.
But this is a space that we're very focused on and familiar with, so almost entirely utility-oriented.
At least, municipalities.
Yes ---+ businesses.
Did I answer your question.
We ---+ I mean, there are opportunities.
I think we're early there.
I would say that legacy Itron customers did have reading and management requirements before, there are some select opportunities where we really see some exciting opportunities within the area of distribution automation and street lighting, as I said, to get back to the ---+ that legacy Itron side.
But as you point out, there were also software opportunities.
And I'd say that even on the legacy Itron side, the acquisition of Comverge and having a demand response is something ---+ capability is something that we're looking at as well.
No, we are not providing that breakout at this time.
Sure.
<UNK>, thank you.
I would say that we are really on plan in terms of that planning process.
Just to refresh everybody on the call both Networks provided by Itron and Silver Spring were radio frequency-meshing networks, using very similar types of technologies, even chipsets.
So there is an announced support for a common standard so there is a real opportunity for the harmonization of these networks.
Our teams have been working since the transaction closed on developing a plan.
We expected that, that would take the first half of this year so that we would be in a better position to discuss the details in the second half.
We also, when we reported the target of $50 million of cost synergies, talked about the fact that we expected that the R&D teams were the most heavily committed in terms of their existing road maps and contractual commitments, and so that we expected that it would take some time in order to be able to free up these teams to both ---+ to get to the synergy numbers but also to really drive ---+ execute on the convergence plans.
So we expect that it's going to take some time to realize that convergence.
Now that being said, what we've in the interim done is sorted out a very detailed go-to-market plan in which there is no ambiguity about what product is going to be used and what context and have discussed this with our customers and prospects, and so have a very targeted plan.
And have also worked with our customers that we will not be in ---+ of course, in any way stranding any assets that are put out in the field, and that we provide a path to upgrade so that we are able to continue very effectively to sell both of these platforms.
Thank you, everyone.
I just want to close with ---+ it was a very busy and productive quarter, and we're very pleased with the results of the ---+ of preliminary integration work we've done.
Somebody made a comment about the ---+ that we have this under our belt or something like that.
No, actually, this is an ongoing task that's going to take many quarters and a lot of vigilance to ensure that we do this properly.
But the initial results are very, very positive.
We're very pleased with the overall market response and our customers' response, which we think the backlog really reflects the opportunity, and the level of activity that we have in the market reflects a tremendous forward opportunity for us.
The very aggressive plans that we have in order to continue to operationally improve and optimize the business give us the tools that we need to weather the kinds of pressures that have been discussed today here on the supply chain.
So while we are recognizing the headwinds of ---+ and particularly component supply, we have very active plans under way in order to offset absolutely as much of that as we possibly can, so see a strong opportunity here for the remainder of 2018.
Thank you all, and look forward to our call next quarter.
