Good day, and thank you for standing by. Welcome to Itron's Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to speaker host, Paul Vincent, Vice President for Investor Relations. Please go ahead. Good morning and welcome to Itron's Fourth Quarter 2023 Earnings Conference call. Tom Deitrich, Itron's President and Chief Executive Officer, and Joan Hooper, Senior Vice President and Chief Financial Officer, will review Itron's Fourth Quarter results and provide a general business update and outlook. Earlier today, the company issued a press release announcing its results. This release also includes details related to the conference call and webcast replay information. Accompanying today's call is a presentation that is available through the webcast and on our corporate website under the Investor Relations tab. Following prepared remarks, the call will open for questions using the process the operator described. Before Tom begins, a reminder that our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance. Reconciliations of differences between GAAP and non-GAAP financial measures are available in our earnings release and on our Investor Relations website. We will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from these expectations because of factors that were presented in today's earnings release and comments made during this conference call, as well as those presented in the risk factors section of our Form 10-K and other reports and filings with the Securities and Exchange Commission. All company comments, estimates, or forward-looking statements are made in a good faith attempt to provide appropriate insight to our current and future operating and financial environment. Materials discussed today, February 26, 2024, may materially change, and we do not undertake any duty to update any of our forward-looking statements. Now, please turn to page four of our presentation as our CEO, Tom Deitrich, begins his remarks. Thank you, Paul. Good morning to everyone, and thank you for joining our call. During the fourth quarter, strong operational execution, improved supply chain balance, and robust customer demand supported financial results ahead of our expectations, including single quarter record revenue for our Network Solutions and Outcomes segments. The performance highlights for the fourth quarter were year-over-year revenue growth of 23% to $577 million, Adjusted EBITDA of $68 million, an increase of 99% year-over-year, Non-GAAP earnings per share of $1.23, an increase of 73%, and free cash flow of $39 million, which increased $57 million year-over-year. Turning to slide five, bookings for the fourth quarter of $839 million equated to a book-to-bill ratio of 1.45. This brought cumulative 2023 bookings to $2.16 billion, and our total backlog at year-end was $4.5 billion. Our customers faced pressure due to increased resource demand, climate and sustainability-related challenges, and the need to improve consumer experience. Itron's platform approach to provide Grid Edge Intelligence has a proven track record in addressing these customer concerns. The magnitude and diversity of bookings during the fourth quarter also reflects the breadth of unmet needs of utilities around the world. Our largest booking was an award from Eversource Energy, who contracted for an advanced endpoint and network rollout in their Massachusetts territory covering 1.3 million consumers. The program includes deployment services, 10 years of software and associated managed services, and Grid Edge Technology with Itron's Distributed Intelligence. This is another large, multi-application award for Itron, and we look forward to supporting Eversource to add value across their territory. Moving to the southeastern U.S., Tampa Electric, TECO, and Itron have agreed to work together to migrate TECO's existing DI-capable endpoint and network lighting controllers from a prior generation of Itron Networks to our latest, a multi-service canopy network platform, which will simplify and future-proof the solution for new Grid Edge Intelligence use cases. TECO continues to adopt Grid Edge Intelligence and is increasing the use and scale of Distributed Intelligence applications, most recently through the deployment of location awareness at scale. By leveraging the consolidated Itron network and embracing Distributed Intelligence, TECO will be able to introduce more value and service resilience to their consumers. Further, Itron will be working with Tulsa, Oklahoma-based ONE Gas, a provider of natural gas services to more than 2.3 million consumers. ONE Gas will enhance the intelligence of their network through the deployment of the next generation of communication modules. This project will help ONE Gas increase reliability, accuracy, and safety for their consumers. Our market demand outlook for 2024 remains constructive, and customer interest in new technology continues to accelerate. We anticipate 2024 bookings will result in a book-to-bill ratio of at least 1:1. We are observing customers actively exploring projects that could benefit from IIJA funding programs, and although too early to accurately quantify, we do anticipate 2024 bookings will include some contributions from various government infrastructure investment programs, including IIJA, with the benefits of these programs flowing through in subsequent years. Slide 6 provides insights on the operational environment. We continue to see a strong and stable pipeline of customer opportunities with accelerating interest in new technologies. Our customers are facing growing pressure to adapt to a rapidly changing world and digitize critical infrastructure. Requirements to become more efficient and more agile through visibility gathered by Itron's Grid Edge Intelligence solutions will improve asset management, enhance consumer experience, and reduce inefficiencies. Component supply has improved and has become more predictable. This has allowed Itron to fulfill a meaningful portion of previously constrained revenue and build inventory of certain critical components in light of a more uncertain and potentially volatile global landscape. During 2023, efforts to improve our price-cost ratio gained traction, and we were pleased with the results. Moving forward, we will continue to align our business needs for increased pricing flexibility with the predictability needs of our regulated customers. Exiting 2023, approximately 70% of our $4.5 billion backlog has been repriced or indexed to help address margin compression in the event of continued inflationary cost volatility. Much of the remaining 30% of backlog is expected to be fulfilled during 2024, which does gate margins primarily in the Network Solutions segment. I will now ask Joan to provide details about our fourth quarter and full-year results, as well as our outlook for 2024. Thank you, Tom. I'll review Itron's fourth quarter and full-year 2023 results before discussing our financial guidance for the full year 2024 and our outlook for the first quarter. Please turn to slide seven for a summary of consolidated GAAP results. Fourth quarter revenue of $577 million increased 23% versus last year. Revenue growth was supported by strong operational execution and increased component availability, which allowed us to continue to catch up on previously supply-constrained revenue. Gross margin of 34% was 390 basis points higher than last year, primarily due to favorable product mix and operational efficiencies related to increased volumes. This was Itron's highest gross margin since 2017. GAAP net income of $44.96 per diluted share compares to $22.49 per diluted share in the prior year. The improvement was driven by higher operating income, partially offset by higher tax expense. Regarding non-GAAP metrics on slide 8, non-GAAP operating income of $61 million increased $36 million year-over-year. Adjusted EBITDA of $68 million nearly doubled from the prior year. Non-GAAP net income for the quarter was $57 million or $1.23 per diluted share versus $0.71 a year ago. This quarter was an all-time high for non-GAAP EPS. Free cash flow was $39 million in Q4 versus -$18 million a year ago. The improvement reflects significant year-over-year earnings growth. Year-over-year revenue comparisons by business segment are on slide 9. Device Solutions revenue of $114 million increased $9 million or 9% on a constant currency basis, driven by growth in water, meter, and communication module sales in our EMEA region. Network Solutions revenue of $391 million increased 30% year-over-year. Growth was enabled by improved supply chain conditions, which allowed us to continue to catch up on previously constrained revenue. Outcomes revenue of $73 million increased $6 million or 9% in constant currency, primarily due to an increase in recurring and one-time services. Moving to the non-GAAP year-over-year EPS spreads on slide 10, our Q4 non-GAAP EPS increased $0.52 year-over-year to $1.23 per diluted share. Pre-tax operating performance contributed a $0.78 per share increase driven by the flow-through of higher gross profit, partially offset by higher operating expenses. Higher tax expense had a negative year-over-year impact of $0.27 per share. Turning to slides 11 through 13, I'll review Q4 segment results compared with the prior year. Device Solutions revenue was $114 million. Gross margin was 26.9%, and operating margin was 17.5%. Gross margin was up over 15 points year-over-year, and operating margin was up nearly 15 points, reflecting a higher value product mix and operational efficiencies. This was the Device segment's highest quarterly gross margin since Q3 of 2016. Network Solutions revenue of $391 million established a new quarterly record, and gross margin was 35%. Gross margin increased 220 basis points year-over-year, and operating margin was up 290 basis points due to favorable product mix and improved operational efficiencies. Outcomes revenue of $73 million was also a quarterly record, and gross margin was 39.8%. Gross margin decreased 670 basis points year-over-year, and operating margin was down 650 basis points due to a lower mix of software licensing activity. As we have previously discussed, the relative size of software licensing activity in a quarter can create variability from period to period. For a recap of full-year 2023 results, please turn to slide 14. Revenue of $2.17 billion grew 21% versus 2022, supported by a substantial conversion of previously constrained revenue, and supply availability improved faster than expected. We estimate approximately $275 million of revenue that had been constrained by supply limitations at the end of 2022 was converted to revenue during 2023. In addition, we were pleased with increased customer adoption of our Grid Edge Intelligence technology. Our Networks and outcome segments both delivered record revenue in 2023. Gross margin of 32.8% increased by 370 basis points year-over-year due to favorable product mix and operational efficiencies. Adjusted EBITDA was $226 million or 10.4% of revenue, compared with $95 million or 5.3% in 2022. Non-GAAP earnings per diluted share was $3.36 versus $1.13 in 2022. Free Cash Flow of $98 million compares to $5 million in the prior year. The year-over-year increase was due to higher earnings, partially offset by growth in working capital and increased cash taxes paid. Turning to slide 15, I'll review liquidity and debt at the end of the fourth quarter. Total debt was $460 million, and net debt was $158 million. Net leverage was 0.7 times at the end of Q4, and cash and equivalents were $302 million. Please turn to slide 16 for our full-year 2024 financial guidance. We anticipate 2024 revenue to fall within a range of $2.275-$2.375 billion. At the midpoint, this represents approximately 7% year-over-year growth. An important factor to consider when looking at the projected revenue growth rate is the timing impact of the catch-up of previously supply-constrained revenue. You may recall that we entered 2023 with approximately $400 million of revenue we were unable to deliver due to component supply constraints. We knew the revenue was not lost, and we would be able to convert it as supply availability improved. As I just mentioned, we estimate approximately $275 million of that catch-up occurred in 2023, and we anticipate the remaining $125 million will occur primarily in the first half of 2024. If you normalize for the impact of 2023 and expected 2024 catch-up of constrained revenue, the 7% year-over-year growth rate would be approximately 16%. We anticipate full-year 2024 Non-GAAP earnings per share to fall within a range of $3.40-$3.80 per diluted share. The EPS guidance assumes an effective tax rate of 25% for the full year. Quarterly rates could fluctuate based on the jurisdictional mix and the timing and amount of tax settlements. At the midpoint of this EPS range and normalizing the tax rate to 25% for both years, we expect 2024 year-over-year earnings growth of approximately 14%. Now, please turn to slide 17 for our first quarter outlook. We anticipate Q1 revenue to be within a range of $575 million-$585 million, a 17% year-over-year increase at the midpoint. We anticipate first quarter non-GAAP earnings per share to be within a range of $0.80-$0.90 per diluted share, which at the midpoint is approximately 68% year-over-year growth after normalizing for the tax rate. Our 2023 financial results reflected strong operational execution. We reacted quickly to better-than-expected component supply, ramped manufacturing output and shipments to customers, enabling us to convert a greater-than-expected amount of supply-constrained demand. Our teams pivoted to growth and improved profitability. We're very pleased with our 2023 performance, and we begin 2024 with considerable momentum and strategic flexibility. Now, I'll turn the call back to Tom. Thank you, Joan. The modern grid is undoubtedly the largest machine on the planet and possibly the most complex, with the least readily available visibility into its operational conditions. Not only does it need to be modernized, but this needs to happen in years, not decades, as demand and complexity continues to rapidly increase. Itron's robust connectivity and Grid Edge Intelligence at scale is providing critical solutions to our customers in timeframes that match these needs. To accelerate and broaden the adoption of new technology, we recently announced co-innovation work with three industry-leading partners that have cutting-edge technology. Itron will integrate our Grid Edge Intelligence solutions with Schneider Electric's EcoStruxure platform. The combined solution will give utilities greater visibility and control over energy distribution and resource management, which in turn enables an increase in grid capacity while optimizing capital investments in physical equipment. The collaboration is designed to simplify management against an increasingly challenging landscape. This initial step will digitize both the supply and demand sides of the energy value chain for distributed energy resource management. With the support of Microsoft, Itron is integrating Microsoft Azure OpenAI into our portfolio of outcome solutions. This enables secure natural language processing of utility data to speed access to business intelligence needed in a rapidly changing world. No longer is data science or automation of business intelligence limited to IT and engineering specialists. With this collaboration, actionable information will be more quickly available to all business managers for critical decisions. Additionally, we recently announced plans to integrate our Grid Edge Intelligence solutions with GE Vernova's GridOS orchestration software to collaborate and build a unified data model to ease the integration and utilization of data from the Grid Edge to the utility control room by connecting the two for real-time data insights for grid operators. Combining Grid Edge data with operations data will close visibility gaps that previously prevented utilities from identifying and resolving grid issues quickly and efficiently. Grid Edge Intelligence unlocks visibility as well as the ability to control and operationalize Distributed Energy Resources inside and outside the home. Fully optimizing the distribution grid requires cooperation from the ADMS system to the edge and the ability to securely access cloud-based data for processing with the latest machine learning and AI capabilities. Itron believes collaboration between industry leaders is required to accelerate grid modernization essential to economic and social prosperity. We will discuss these arrangements and more in our upcoming Investor Day on the 12th of March at NASDAQ MarketSite in New York City. We expect our program will be helpful for investors seeking to understand our business and why we believe we are positioned at the intersection of a multi-year market trend of wide-scale customer demand for technology with an innovative portfolio of solutions that supports our growth expectations. We look forward to visiting with everyone attending in person, and we'll also be broadcasting the event via webcast through Itron.com. For those interested in participating, please contact our IR team for registration details. To recap today's call, Itron had a strong fourth quarter and full year 2023. Our teams executed at a high level across the organization and delivered significantly improved results. Our Network Solutions and Outcomes segments set annual revenue records. We drove margin expansion through the year while continuing to earn high-quality customer rewards that maintain our backlog at near-record levels. While there may be continued volatility in the world ahead, we have assembled a strong and capable team that has proven itself is poised to continue to perform in 2024. Thank you for joining today. Operator, please open the line for some questions. Certainly. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To retry your question, simply press star 11 again. Please stand by while we compile the Q&A roster. Our first question coming from the line of Noah Kaye with Oppenheimer. Your line is open. Good morning. Thanks for taking the questions. Great quarter. Maybe we can start with the guide, actually. I think the first question would be how to think about the growth across the segments that's embedded in the guide. Is it sort of flat-ish devices and high single-digit and Outcomes or Networks?? Is that kind of the right way to think about it, or how would you nuance that? Yeah. Yeah. This is Joan. I would say the devices is relatively flat. And from a standpoint of year-over-year growth, you would expect a little bit again in devices, but it's kind of low double-digit growth in Networks, and Outcomes would be more like high single-digit. So if you think about Networks, that's where the continuation of the catch-up of the constrained revenue primarily affects the network segment. Right. I think if most of that catch-up is happening in the first half, that implies that we're kind of back to underlying growth in the back half of the year from a sort of revenue run-rate perspective? Correct. So again, you're correct that most of the remaining catch-up of the $125 million should be in the first half. So that plays into how to unpack margin trends a little bit because you mentioned there's a couple of things going on. You've got some of the old backlog that still is maybe mix disadvantaged, right, rolling through revenue this year. But then you have kind of the catch-up on Networks backlog, and so that should be mix accretive. So just kind of help us understand how to think about the trajectory of margins over the course of the year and what kind of a cleaner margin trajectory might look like once we get past some of these different items? Yeah. I would say the first comment would be about Q1. I would expect Q1 to be sequentially lower than Q4. Q4 was a very, very strong margin quarter. If I think about the overall guidance for the year, it implies slightly higher than 2023 in aggregate. To your point, I would expect kind of first-half margins to be a little bit below second-half margins. Okay. Tom, you mentioned in the prepared remarks, but just to help us understand, where are we in the cycle for fund flow from IIJA and IRA? It looks like the DOE only just opened applications for the GRIP program in November. So are you starting to see quoting activity related to specific programs? Good question. You are correct that a lot of the proposals to obtain grants from the government are going in now. The first round of awardees happened in the fourth quarter. That's an award. That doesn't mean the cash is flowing just yet. So I would expect that we will see a lot of activities for proposals and for projects that we are working with our customers on during 2024. What that means in terms of flowing it through to our P&L is that there will be bookings in 2024, but I don't expect a material amount of revenue in 2024. The revenue probably comes in 2025 and beyond in terms of the timing itself. Terrific. I'll turn it over. Thank you. Our next question coming from the line of Martin Malloy with Johnson Rice & Company. Your line is open. Good morning. Congratulations on the strong quarter. My first question revolved around the pickup that you saw beginning last year in terms of network solutions, revenues, and deploying more endpoints. How should we think about that impacting the timing of related increase in Outcomes, revenues, and solutions? I can start, and then Tom, feel free to catch up. So typically, you'll see anywhere from a 12-18-month lag in terms of Outcomes kind of applications after the endpoints are deployed. So you're correct. We started to see a lot of this constrained revenue really was Networks, and that has started to come through. So think about 12-18 months beyond that. The other thing I would just caution though is Outcomes is a mix of different types of businesses. We have managed services in there. We have license revenue. And then, of course, we have the applications on distributed endpoints. So it's really all three of those. So I don't think you're going to see a complete correlation in terms of the ability to model it that way. But we would expect that that would pick up anywhere from 12-18 months after endpoints are deployed. I don't know, Tom, if you've got anything else. No. Well-stated, Joan. Okay. My second question, you've announced several partnerships here that look like they're in collaborations that look like they're important. Could you maybe give us a little more color in terms of the timing of when we might see these partnerships impact your results? Sure. Happy to do so. So let me take a step back and try to put the collaborations in context and then come to the meat of your question. We think fundamentally, it is extremely important to connect up and create full visibility across the distribution grid from the ADMS system, meaning things that are happening higher up in the grid from where we normally play all the way down to the last mile to the endpoint itself. You can't solve the full grid problem without that notion of connecting those two parts of it. So the work that we announced with both Schneider Electric and with GE Vernova is really around that fundamental collaboration. Additionally, the Microsoft collaboration has to do with bringing the power of generative AI to utility data. Today, only about a third of utilities are really doing something with AI, and there's a substantial productivity gain that can be possible when you do use that capability in a responsible way. So how do we enable that in a secure and responsible way is what the collaboration with Microsoft is really all about. Those collaborations themselves, we're working with the first customers in each of those right now. You'll hear some things. And I think we, even with the GE Vernova, mentioned Florida Power and Light in the press release that went out in the past couple of days. But those collaborations, initial customer activities are going on now, and I would expect product releases to be happening during the year and flowing through the results in 2025 and beyond. Thank you. I'll turn it back. Thank you. And our next question coming from the line of Jeff Osborne with TD Cowen. Your line is open. Yeah. Thank you. Good morning. Just a couple of questions on my side, Tom. I was wondering, I think Joan mentioned a 16% normalized growth rate without the catch-up on the semiconductor side. I was just wondering, is there anything one-time as it relates to 2024, and would you have a similar growth rate given the robust backlog as we look out into 2025? Why wouldn't that be a growth rate? Excuse me, Pete. Yeah. Let me just clarify what that 16% represents. So what we did to get the 16% is we took the 2023 booked revenue, reduced it by the $275 million of catch-up, and then compared that to the 2024 midpoint guidance I just provided and reduced that by $125 million of catch-up. So there's catch-up in both years. So we normalized both years, and that's how we got the 16%. Got it. I apologize. I'm losing my voice here. And then on the TECO, how do you think about the migration from 2.0 to or 1.0- 2.0 solutions? Hypothetically, if you had spent $100 million on a 1.0 solution a decade ago, are you getting 60 cents on the dollar with the upgrades? And how do we think about the legacy customers, FPL, CenterPoint, etc.? Right. Right. Well, I'll give you a moment to clear your throat. I think I got the question, Jeff. The TECO upgrade, just to set the record there, is not really a 1.0- 2.0. Think of it as a 1.0, sorry, think of it as a 2.0 to a 2.0, but there were 2 different underlying technologies that were part of 2.0. And really, what's going on is migrating everything to the latest and greatest version to allow that capability to scale much more efficiently across different applications. So it's not a 1- 2. It's really a 2- 2 in terms of the headline capability, but the underlying protocols are a little bit cleaner in terms of where they're going. That said, to your question, in a 1.0 AMI, just to make it really simple, application, the return you were getting on that as an operator was probably 6%, 4%, 5%, somewhere in that range typically. Mileage varies a bit, so you could have some a little bit higher than that, but that was more typical. In a 2.0, the return that you get is much, much bigger. The more applications you pile onto a common set of infrastructure, the more the benefits accrue. So it's far, in a way, a better investment to go to a 2.0 generation. And the cash register really accrues the benefits as you add more applications. We find incremental applications are substantially higher than the single-digit percentages that we saw in an initial just automation of the meter-to-cash cycle. Great. Thank you. That's all I had. Thank you. Our next question coming from the line of Kashy Harrison with Piper Sandler. Your line is open. Good morning, everyone. Thanks for taking my questions. My first one, I just wanted to go back to the backlog. I think you flagged 70% being repriced index and then obviously implying that there's 30% on the other side. Can you give us a sense of what proportion of 4Q results were tied to the lower-priced backlog? And then maybe just generally, how should we think about the margin drag from the lower-priced backlog on 2024 guidance? Yeah. I don't know that I could give a perfect answer for Q4. I would say that there was a mix of pre-pandemic pricing as well as the more recent stuff in Q4. Certainly, it was less than the 70/30 split, meaning we had more of the older stuff flowing through in Q4. The overall margins that we have in there, clearly, we've had a substantial run-up in costs on components. Those component costs have not started to materially ease back to the pre-pandemic levels to this point just yet. So, difficult to give you an off-the-cuff answer on the precise numbers. But I do think that margins in the network segment are probably most affected. The other segments are a little bit more free in terms of that margin compression dynamic from pre-pandemic backlog. Got it. Okay. Fair enough. And then my follow-up question, you highlighted the integration of generative AI to your portfolio of outcome solutions. So clearly, the Outcomes business will, the services will improve due to the use of AI. But can you maybe speak to the financial impacts? Specifically, are you expecting margin expansion in the Outcomes segment? Do you expect to win more business or higher revenues? And then when do you expect OpenAI to be fully integrated across the board to all your customers within the Outcomes segment? Right. Well, three different parts of the equation there. Certainly, I think that the inclusion of more and better refined machine learning capabilities as well as AI capabilities into the data suite that we provide will help both revenue as well as margin. We definitely believe the collaboration with Microsoft, where you can do it in a secure way, really thinking about it as a Copilot, is the right way to do it in the utility space. So I think it is accelerating business, which results in revenue and margin accretion. Timing-wise, it's going to depend on customer adoption in terms of how it flows through the P&L. We're going to enable it for anything that is hosted in Azure. As a first-off example, the faster we migrate customers to a cloud-based environment, I think the faster they will be able to consume it. There's a lot of power in being able to do this. Instead of running down the office hallway to the IT or the engineering department to say, "Write me a report for something," why not speak in natural language and have the computer do the work to pull data out so you can get better insights and make decisions much faster? That's really what the power would be. But I think it's a 2025 story in terms of revenue is where you'll start to see the initial results. Appreciate the caller there. Then maybe my final question. Your bookings, you saw a nice recovery in Q4, and then you're highlighting 1-to-1, at least 1-to-1 bookings guidance for 2024. Can you help us think through what that 1-to-1 bookings guidance would imply for the year-end 12-month backlog? Yeah. I think that one is probably going to depend on customer deployment more so than the booking itself. Recall, when we do a booking, we require a signed customer contract and award, of course, but also regulatory approval to be able to put it into backlog. Once it's there, then the deployment schedule gets defined. That 12-month backlog number is oftentimes based on deployment schedules more so than booking schedule. So I expect that demand is likely to remain stable and strong, which is a very good thing throughout 2024. And we would expect that 12-month backlog to reflect that strong and stable demand environment. Got it. Appreciate the commentary. I'll pass it on. Thanks. Thank you. And our next question coming from the line of Chip Moore with Roth MKM. Your line is open. Good morning. Hey, everybody. I wanted to ask about recurring software and service attach rates. We've heard numbers as high as, I think, 30% for some contracts out there. Is there a way to think about how those attach rates have been trending and how those are in backlog? I think our software and services revenue is somewhere right around 17%-20% of our total revenue today. Attach rates continue to drive that up over time. So the vast majority of new bookings include not only some hardware but software and services associated with it. The exact portion that is software and services varies a lot deal to deal, and probably it's not a good bellwether to think about a single number there. It's very dependent on the individual deal itself. What we do know is once we have a network deployed, the amount of follow-on business that we get in the software and services area is a substantially higher portion of the attach than it is in the initial deal itself. And that just is good for the customer as they're exercising the assets that they've bought in multiple ways to help their communities. But it's also good for us as it adds to that software and services activity for the company itself. Got it. That's helpful color, Tom. Appreciate it. And as a follow-up, maybe on the component side, I think, Joan, you mentioned that you've been able to stockpile some critical components. I guess just your confidence, if we do get some volatility, have you been able to engineer out some of the more challenging stuff, or do you think you have enough on hand that you have good comfort if we get some volatility? Thanks. Yeah. I'll start, and then, Tom, please chime in. So yeah, we have made a decision to strategically invest in inventory. If you look over the past year, our inventory has gone up quite a bit, and that is to really make sure we've built some supply chain resiliency. We feel good about the projections we're providing for 2024. Obviously, we continue to work on initiatives to make the supply chain more robust, including dual sourcings and things like that, but at this point, not overly concerned with supply chain shortages on components. Great. Thank you. Thank you. Our next question coming from the line of Tommy Moll with Stephens Inc. is open. Morning, and thank you for taking my questions. Hey, Tommy. I wanted to start with a follow-up on the point you made about having repriced or indexed about 70% of that year-end backlog. Really, my question is to try to understand the philosophy that underlies those negotiations with your customers. Is the idea to hold the gross margin percentage constant in a changing environment, gross profit dollars, hold those constant, or what is the underlying mutually beneficial arrangement you're trying to get to there? Thank you. Well, certainly, when we have a discussion with customers, we're trying to make sure we are selling the value of the solution that we provide. That's fundamentally how we have the discussion. It's good for the customer, and it's good for us and good for our shareholders when we do that. We've got a better mousetrap than competition in our minds. Because our customers are largely regulated utilities, they're looking for price certainty so they can put it into a rate case, and they can go to their commission to develop the right rate structure for their communities. That's the world that they live in. If we live in a world with a lot of volatility on the cost side, how can we make those two worlds coincide? Indexing is largely the way we tend to work with customers most often, where if we do have a certain inflation rate, we can take the benefit of it. It tends to go up. In cases where we had done fixed-price contracts where we were not able to renegotiate, that's the remaining 30%-ish that we referenced in our pre-prepared remarks. Now, when it comes to how do you have that negotiation with customers to rework those existing deals? Again, we look for ways that we can try to provide incremental value so that we can help the customer solve new and interesting problems. Is there a way to do that but still live within the construct that they have for their business? So we try to make it as much as possible a win-win for both sides. That's helpful. Thank you. As a follow-up, I wanted to ask a question on the EPS outlook you've provided. If we just take the first quarter midpoint and the full-year midpoint for 2024, it's just shy of 25% earnings contribution from the first quarter. While it's difficult to know what a "normal" contribution looks like, I think if we look historically, that skews a little bit rich, which might imply some conservatism embedded in the 2Q, 3Q, 4Q outlook. So any comments you could provide there would be helpful. Yeah. The only thing I would comment is what I said earlier, which is a normal progression of what a first-half, second-half would look like is going to be a little bit skewed in 2024 as a result of that catch-up of $125 million of revenue occurring primarily in the first half. So if you think about that, you're going to have kind of more normal revenue without the catch-up in the second half. And as a result, you end up with something that looks more flatish than it would normally look from first-half to second-half. That makes sense. Thank you, Joan, and I'll turn it back. Thank you. Our next question coming from the line of Ben Kallo with Baird. Your line is open. Hey. Good morning, guys. Congrats, Tom and Joan and team. Just quickly, I guess, Tom, on Outcomes, and congrats on the partnerships. Does the partnerships change your strategy around build at home, acquire, or partner? I guess what I'm asking is you've talked about acquisitions in the past, and how do you think about that for Outcomes or any of the other parts of the business? Thanks, Ben. No, I don't see that these partnerships change our strategy for the technology we would look to add into our portfolio at all. We weren't looking to get into the high-end ADMS market. That's better served by others, and it's appropriate to partner there. The same with large language models. It's better to partner with a firm there to be able to do that. Let's make sure that we can extract value for our customers. When we do that, that's how we think about those partnerships overall. When it comes to acquisitions itself, we're very focused on edge intelligence capability, adding technology that we can scale across multiple customers. Primarily, Outcomes-related solutions is where you should look for us to continue to scour the market overall. When we think about just the booking, the very good bookings in Q4, and I assume you, or I think you, have visibility for what you think you can book for the year, how does that mix play out between networking and Outcomes this quarter than the past Q4 and then looking at it? Yeah. Two ways to look at it. The $839 million of bookings we had in Q4, the vast majority of that is Networks and Outcomes. That will be true again in 2024. The actual split between Networks and Outcomes inside of the number varies a bit quarter to quarter. Q4 happened to be a little bit heavier on the Outcomes side. We'll see what 2024 looks like. The exact split comes down to how we work with customers for the contracts themselves. I know you guys have been on a long journey of right-sizing costs and getting your manufacturing footprint to the right size. Could you just update us where you are there? Then if there's any benefit in 2025 from anything that won't happen until then, I guess, like a year-over-year benefit from 2024 from just cost savings or right-sizing manufacturing? Thank you. Yeah. I was going to say, so in the plan we announced about a year ago, we have two factories closing, and they won't close till the tail end of 2024, early 2025. So the answer is yes, there will be some benefit in 2025 versus 2024 once those two factories close. And it's just, as you mentioned, a continuation of the strategy we've been on to right-size the manufacturing footprint. So that is why, as we had mentioned a couple of times, 2024 margins are a little bit muted from a standpoint of the unpriced backlog as well as the fact that the factories aren't closed yet. So we'll be in a position when we do Investor Day in a couple of weeks to talk about our view of 2027, actually. Great. Thank you very much, Joan. Thank you. Our next question coming from the line of Pavel Molchanov with Raymond James. Your line is open. Thanks for taking the question. Can you talk about the geographic sales mix of 2023, what you're thinking of this year, and particularly what you're seeing in the European market? Yeah. I can start in that, Tom, if you want to add in. I would say, given that our networks business is and Outcomes, for that matter, is heavily North America, the vast majority of our revenue continues to be from North America. We do have primarily our devices business that has a good amount of revenue in Europe, and devices was much stronger than we expected in 2023 on the backs of really strengthening the water meter and water communication modules business. So we're seeing a lot of good water strength in Europe right now. If I just fast-forward and add one more comment there, agree fully with Joan's commentary, that there is push on the part of local governments, specifically in Western Europe, around the water market that's certainly helping the market overall. We've seen pretty robust signals. That business tends to be a little bit shorter cycle. Almost a good portion of it is turns business, meaning book and ship within the quarter. That's one that we will continue to watch throughout the year. But Joan is right. The water market in 2023 was stronger than we had expected coming into the year, and we'll continue to watch that through 2024. Got it. And since my M&A question was already answered, I thought I would kind of frame slightly different around the free cash flow. You are building cash, and the only debt on the balance sheet is a convert that you have two years on. So what's the kind of priority ranking on how you're thinking about that increase in cash balance? M&A. That is the priority. We've been very active. We continue to be active, and we feel very good about our position now given our cash balance and our ability, if need be, for the right acquisition to actually take on more debt given where our leverage is. So that is by far the number one priority, is to find something that enhances our Outcomes segment. All right. Very clear. Thanks very much. Thank you. Our next question coming from the line of Scott Graham with Seaport Research Partners. Your line is open. Yes, hi. Good morning. Thanks for taking my questions and congratulations on your quarter. I hope you can answer this question, and I hope I'm not overly complicating it. Probably will be. When you reprice, does that get you because you threw around the word indexing, Tom? Does that get you to price cost, however you want to call that, price inflation neutrality? Or are you still price cost negative even after that indexing? Well, it depends on the timeframe that you're talking about. So an index, just to really put a fine point on it, could be something like a PPI or a CPI for the specific market that you're dealing with. That's what you could use to index pricing on a go-forward basis. And then it will depend very much on your internal productivity compared to that overall very visible, very trackable metric between you and the customer to make it clear. So whether you win on price cost depends on your productivity against that particular metric. And generally, it's in a go-forward sense is how that indexing tends to work. So if you started behind or you started ahead, then you know where you are relative to that index on a time evolution basis. I hope that helps put clarity behind it. I'll probably have to read the transcript again on that one for your answer, but it does help a little bit. So I guess my follow-up question would be kind of the same question asked a little bit differently just for number's sake. The big jump in gross margin the fourth quarter, was that—let's assume that we get to or closer to price cost parity. So was that like enriched mix? Was that volume? Was it productivity? And you can say yes to all three, but then maybe rank them. I would say yes to all three, and I would say mix was probably the biggest. Right on. Okay. And then how does that look for 2024 gross margin? Well, I think I commented earlier. In the full-year guidance that we provided, the assumption is the gross margin is a little bit better than full-year 2023. And so part of that is this headwind of the 30% non-indexed backlog coming in, and that primarily affects networks. But in aggregate, we think the overall gross margin will be slightly higher than it was in 2023, annual 2023, not Q4. Yes. Yes. And Joan, does that headwind, I assume, that headwind reduces significantly in 2025? Yes. Correct. Plus, you have the benefit of the two factories going offline, which will help margin as well. But yeah, in the 30% or so of the backlog that is not price protected, we would expect the majority of that to come into 2024. Thank you. Thank you. Our next question coming from the line of Austin Moeller with Canaccord. Your line is open. Hi. Good morning. Nice quarter. So I have a two-part question here. Where do you view yourself in the sales cycle with the utilities right now? And do you expect further demand recovery as interest rates decline, just given the sensitivity of utilities to interest rates? So I can take that one. I think that we generally see utilities looking to solve the real problems that are on their hands today. They've got to figure out how to balance supply and demand with more renewables on the generation side and more Distributed Energy Resources at the edge of the network. How do they do that? They do it with Grid Edge Intelligence. They've got more environmental pressures with floods and fires and storms or ice storms or droughts, what have you, depending on where in the country you may be. And they've got to make their infrastructure more resilient. And they've got rising consumer demands. Consumers want to understand how they are buying the service in much finer detail than the traditional utility model allowed. Those are the pressures that drive our customers towards new technology. We see customers actively looking at new technology to address those questions. We haven't seen shifts in buying behavior from our customers with interest rates rising over the last couple of years. Indeed, the demand picture has been pretty steady and strong looking at these new technologies. Rate cases are being approved. They're working through the regulatory process, and the return that they're getting on those rate cases is also pretty steady. As interest rates come down, perhaps rate cases change a little bit or maybe demand goes up. Time will tell as to how that plays out. But independent of interest rates, we do expect the demand environment to continue to be stable and strong. Excellent. Thanks, Tom. Thank you. And I'll now turn the call back over to Mr. Tom Deitrich for any closing remarks. I thank everyone for joining today. We look forward to updating everyone at our March investor event. Until next time, thank you for joining. Please. And now, this concludes the conference for today. Thank you for your participation. You may now disconnect.