ITRI 10-K & 10-Q changes, risk factors and insider trading

Our market is characterized by increasing complexity driven by evolving technology including AI,artificial intelligence (AI), emerging laws and regulation, and the introduction of new competitive products, all of which impact the way our products and services are designed, developed, marketed, and delivered. The shift in, and increasing complexity of, our products and services mix involves judgment and entails risks. In order to successfully design and develop more complex offerings, we must anticipate the right products, solutions, and technologies to meet estimated market demands. These estimates may prove wrong. Additionally, our complex offerings may contain defects when they are first introduced; their release may be delayed due to unforeseen difficulties during product and service design and development; or they may have reliability, quality, or compatibility problems. We may not be able to successfully design workarounds. Any shift in, or increased complexity of, our products and services mix may not be easily understood or adopted by our current or future customers, who may be reluctant to buy, or may delay purchases of, our products and services.

Certain of our products, subassemblies, and system components, including most of our circuit boards, are procured from limited or sole sources. We could experience operational difficulties with these sources, including reductions in the availability of production capacity, errors in complying with product specifications, insufficient quality control, failures to meet production deadlines, increases in manufacturing costs, vendors' access to capital, and increased lead times. Additionally, our manufacturers may experience disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, natural disasters and pandemics, component or material shortages, cybersecurity events (such as ransomware or the deployment of AI to find and exploit vulnerabilities) that lead to extended downtime for the supplier or that lead to Itron intellectual property theft, rogue insiders impacting the quality or integrity of the products, cost increases, or other similar problems. Further, to minimize their inventory risk, our manufacturers may not order components from third-party suppliers with adequate lead time, thereby impacting our ability to meet our demand forecast. If we fail to manage our relationship with our manufacturers effectively, or if they experience operational difficulties, our ability to ship products to our customers and distributors could be impaired, and our competitive position and reputation could be harmed. If we receive shipments of products that fail to comply with our technical specifications, which have been compromised in some manner (specifically integrated circuit chips), or that fail to conform to our quality control standards, and if we are not able to obtain replacement products in a timely manner, we risk revenue losses from the inability to sell those products, increased administrative and shipping costs, and lower profitability. Additionally, if defects are not discovered until after consumers take delivery of our products, those customers could lose confidence in the technical attributes of our products, and our business could be harmed. Although arrangements with these partners may contain provisions for warranty expense reimbursement, we may remain responsible to the customer for warranty service in the event of product defects and could experience an unanticipated product defect or warranty liability. While we rely on partners to adhere to our supplier code of conduct, material violations of the supplier code of conduct could occur.

Adverse economic or market conditions, and perceptions or expectations about current or future conditions, such as inflation, rising interest rates, fluctuations in foreign currency exchange rates, recessions, economic sanctions, tariffs, natural disasters, epidemics or pandemics, political instability, wars, including the conflicts in Ukraine and Israel,wars are beyond our control and could unfavorably affect our business and financial condition. These economic conditions and global events have caused, and may in the future cause, disruptions and volatility in global financial markets, create disruption in customer demand and global supply chains, increase delinquency rates and write offs of customer accountingaccounts receivable and other unforeseen consequences. In recent years, our ability to obtain adequate supply of semiconductor components has impacted our ability to service customer demand in a timely manner. Temporary imbalance in supply and demand may create business uncertainties that include costs and availability. Efforts continue with suppliers to improve supply resiliency, including the approval of alternate sources. Additionally, inflation in our raw materials and component costs, freight charges, sanctions, tariffs, and labor costs may increase above historical levels due to, among other things, the continuing impacts of an uncertain economic environment. We may or may not be able to fully recover these increased costs through pricing actions with our customers. Currently, we have not identified any significant decrease in long-term customer demand for our products and services. Certain of our customer projects have in the past experienced, and may in the future experience, delays in deliveries, with revenues originally forecasted in prior periods shifting to future periods.

Our worldwide operations could be subject to hurricanes, tornadoes, earthquakes, floods, fires, extreme weather conditions, medical epidemics or pandemics, geopolitical instability, cybersecurity attacks, including ransomware, phishing, or the deployment of AI to find and exploit vulnerabilities, business email compromise, and distributed denial of service (DDoS), or other natural or man-made disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our business, financial condition, and results of operations.

As of December 31, 2024,2025, our total outstanding indebtedness was $1.3 billion as described under Liquidity and Capital Resources. Our current credit facility, originally entered on JanuarySeptember 5,25, 20182025 (as amended, the 20182025 credit facility) allows us to draw on a $500.0$750.0 million revolving line of credit. This indebtedness could have important consequences to us, including:

If we were unable to protect our information technology infrastructure and network against data corruption, cyber-based attacksattacks, or network security incidents caused by unauthorized access, we could be exposed to an increased risk of customer liability and reputational damage.

As a company that processes confidential information relatedrelating to our clients, vendors, and employees, includingsuch as personal information and customer data and personally identifiable information,data, we are subject to compliance obligations under federal, statestate, and foreign privacy,privacy protection, breach notification, and data protection,security laws, regulations, and cybersecurity-related laws, including federal, state and foreign security breach notification laws applicable to such data.policies. These laws, which include the European Union (EU) General Data Protection Regulation (GDPR) and the California Privacy Rights Act of 2020 (CPRA),laws impact our data processing activities and obligations as both a data controller and data processor. We comply with the relevant laws in the multiple jurisdictions in which we do business.

TheAmounts 2018borrowed under the 2025 credit facility bears,bear, and other indebtedness we may incur in the future may bear, interest at a variable rate. As a result, at any given time interest rates on the 20182025 credit facility and any other variable rate debt could be higher or lower than current levels. If interest rates increase, our debt service obligations on our variable rate indebtedness may increase even though the amount borrowed remains the same, and therefore net income and associated cash flows, including cash available for servicing our indebtedness, may correspondingly decrease. While we continually monitor and assess our interest rate risk relative to the value of related debt and have previously entered into derivative instruments to manage such risk, these instruments could be ineffective at mitigating all or a part of our risk, including changes to the applicable margin under our 20182025 credit facility. At December 31, 2024,2025, there were no outstanding loan balances under the 20182025 credit facility.

The Organization for Economic Cooperation and Development (OECD) guidance under the Base Erosion and Profit Shifting (BEPS) initiative aims to minimize perceived tax abuses and modernize global tax policy, including the implementation of a global minimum effective tax rate of 15%. In December 2022, the Council of the European Union adopted OECD Pillar 2 for implementation by European Union member states by December 31, 2023. The resulting legislation in most countries where Itron has significant operations is takingtook effect for calendar year 2024. The OECD continuesreleased to release morefurther guidance on theseJanuary rules6, 2026, which included new and frameworkrevised safe harbor rules, including a new permanent safe harbor, and we are evaluating the impactframework for a "side-by-side" agreement that would exempt US-based multinational companies from all top-up taxes, other than qualified domestic top-up taxes imposed on subsidiaries in their countries of residence. Enactment through legislation will be required in order for this additional guidance to ourbe financialeffective position.and is expected to only be effective for years after 2025. These enactments or amendments could adversely affect our tax rate and ultimately result in a negative impact on our operating results and cash flows. BasedConsistent upon preliminarywith calculations for calendar year 2024, the Company anticipates it will meet the safe harbors in most jurisdictions,jurisdictions in 2025, and any remaining top-up tax should be immaterial.

There is focus from certain investors, customers, employees, other stakeholders and regulators concerning environmental, social and governance matters (ESG). We announce initiatives and goals related to ESG matters from time to time, including renewable energy and net zero emissions commitments. These statements reflect our current plans and aspirations and our ability to balance and achieve any ESG objective is subject to numerous risks, many of which are outside of our control, including the availability and cost of alternative energy sources; the evolving regulatory and reporting requirements affecting ESG practices and disclosures; the locations and usage of our products. OurFurthermore, actualfederal, state, and local regulatory authorities, private organizations, and individuals may challenge our approach to ESG issues, including allegations that we failed in our efforts, should not have undertaken such efforts or that we improperly engaged other entities in our approach to ESG issues. A failure or perceived failure to achievemeet our goals or otherwise meet evolving and diverse stakeholder expectations regarding our ESG-related initiatives, goals, or commitments or to accurately track and report on these initiatives, goals and commitments on a timely basisbasis, could unfavorably impact our reputation or otherwise materially harm our business.

We operate under the Itron brand worldwide and manage and report under threefour operatingreportable segments: Device Solutions, Networked Solutions, Outcomes, and Outcomes.Resiliency Solutions. Resiliency Solutions is a new reportable segment starting in the fourth quarter of 2025. The product and operating definitions of the threefour segments are as follows:

Device Solutions – This segment primarily includes hardware products used for measurement, control, or sensing that can have communications capability embedded for use with our broader Itron systems, i.e., hardware-based products that may be part of a complete end-to-end solution.sensing. Examples from the Device Solutions portfolio include: standard endpoints that are shipped without Itron communications, such as our standard electricity, gas, and water meters for a variety of global markets and adhering to regulations and standards within those markets, as well as our heat and allocation products; communicating meters thatdesigned mayto beoperate sold as partoutside of an Itron end-to-end solutionsolutions and designed to meet market requirements; and the implementation and installation of communicating and non-communicatingassociated devices.

Networked Solutions – This segment primarily includes a combination of communicating devicesendpoints (e.g., smart meters, modules, endpoints, and sensors), network infrastructure, network design services, and associated head-endheadend management and application software designed and sold as a complete solution for acquiring and transporting robust application-specific data. Networked Solutions includes productsproducts, software and softwareservices for the implementation, installation, and management of communicating devicesendpoints and data networks. The Industrial Internet of Things (IIoT) solutions supported by this segment include automated meter reading (AMR); and advanced metering infrastructure (AMI) for electricity, water, and gas; distributed energy resource management (DERMs); grid edge devices; distribution automation communications; smart street lighting; and smart city sensors and applications; and leak detection and applications for both gas and water systems.applications. Our IIoT platform allows utility and smart city applications to be run and managed on a flexibleflexible, secure, and interoperable multi-purpose network.

Outcomes – This segment primarily includes our value-added, enhanced software and services in which we enableutilize griddistributed edgecompute intelligence andto manage, organize, analyze, and interpret raw, anonymized data using artificial intelligence, machine learning, statistical modeling, and other analytics. This allowsdelivers usnew tovalue helpfor utilitiesutilities, improvemunicipalities, and cities through improving decision making, maximizemaximizing operational profitability, engageengaging consumers, enhanceensuring safety, enhancing resource efficiency, improveand improving grid resiliency and reliability, and deliver value for utilities and smart cities.reliability. Outcomes supports high-value use cases, such as data management, grid planning and operations, distributed intelligence, AMI operations, gas distribution andsafety, safety,non-revenue water operations management,reduction, revenue assurance, DERMs,distributed energy resources (DER) management, energy forecasting, consumer engagement, and smart payment, and fleet energy resource management.payment. Utilities leverage these outcomes to unlock the capabilities of their networks and devices, improve the productivity of their workforce, increase the reliability of their operations, manage and optimize the proliferation of distributed energy resources (DERs),DERs, address grid complexity, and enhance the customer experience. Revenue from these offerings are primarily recurring in nature and would include any direct management of Device Solutions, Networked Solutions, and other third-parties' products on behalf of our end customers.

We haveuse threeadjusted measuresoperating income (margin) as the primary measure of segment performance:performance. revenues,In addition, we believe adjusted gross profit (margin), andprovides operatingfurther incomeunderstanding (margin).of our segments' performance. Intersegment revenues are minimal. Certain operating expenses are allocated to the operatingreportable segments based upon internally established allocation methodologies. Interest income, interest expense, other income (expense), the income tax provision (benefit), and certain corporate operating expenses are neither allocated to the segments nor included in the measures of segment performance.

To supplement our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States (GAAP), we use certain adjusted or non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share (EPS), adjusted EBITDA, free cash flow, adjusted gross profit, adjusted operating income, and constant currency. We provide these non-GAAP financial measures because we believe they provide greater transparency and represent supplemental information used by management in its financial and operational decision making. We exclude certain costs in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may be different from those reported by other companies.

•Operating expenses decreasedincreased $9.8$3.8 million, or 2%,1%, compared with 20232024

•Net income attributable to Itron, Inc. was $239.1$301.1 million compared with net income of $96.9$239.1 million in 20232024

Effective SeptemberNovember 19,10, 2024,2025, Itron's Board of Directors authorized a repurchase up to $100$250 million of our common stock over an 18-month period (the 20242025 Stock Repurchase Program). Repurchases will be made in the open market and pursuant to the terms of any Rule 10b5-1 plans that Itron may enter into, and in accordance with applicable securities laws. The repurchase program is intended to comply with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. We repurchased no shares under the 20242025 Stock Repurchase Program.

Total Company GAAPGAAP, Non-GAAP Highlights, and Non-GAAPAnnual HighlightsRecurring and Endpoints Under ManagementRevenue:

Definition of anAnnual EndpointRecurring Under ManagementRevenue

Revenues increaseddecreased $267.2$73.6 million in 20242025 compared with 2023.2024. Product revenues increaseddecreased $267.9$122.4 million in 2024,2025, and service revenues decreasedincreased $0.7$48.8 million. Device Solutions increaseddecreased by $20.9$29.5 million; Networked Solutions increaseddecreased by $199.8$92.8 million; and Outcomes increased by $46.6$45.6 million when compared with the same period last year. Resiliency Solutions revenues were $3.0 million in 2025.

Gross margin was 34.4%37.7% for 2024,2025, compared with 32.8%34.4% in 2023.2024. We were favorably impacted by product and solution mix and manufacturing efficiencies from increased volumes.efficiencies. Product sales gross margin increased to 35.7% in 2025 from 32.9% in 2024 from 30.7% in 2023.2024. Gross margin on service revenues decreasedincreased to 44.6%49.0% from 46.0%.44.6%.

Refer to OperatingReportable Segment Results section below for further detail on total company revenues and gross margin.

Operating expenses decreasedincreased $9.8$3.8 million for the year ended December 31, 20242025 as compared with the same period in 2023.2024. This was primarily the result of a $41.3 million decrease in restructuring costs, as well as a $1.1 million decrease in amortization of intangible assets. The decrease was partially offset by $26.3$13.9 million increase in sales, general and administrative expenses anddriven by increased labor costs. The increase was partially offset by a $6.3$8.0 million increasedecrease in research and development expenses. The increases in sales, general and administrative and research and development expenses were primarily driven by increasedreduced laborprofessional costs.service expenses as compared with 2024, as well as a $1.7 million decrease in restructuring costs and a $0.6 million loss on sale of business recognized in 2024. Refer to Item 8: Financial Statements and Supplementary Data, Note 4: Intangible Assets and Liabilities, and Note 13: Restructuring for more details.

Total other income (expense) for the year ended December 31, 20242025 was net other income of $29.2 million compared with net other income of $20.4 million compared with net expense of $1.5 million in 2023.2024. The net increase was driven by a $25.3$13.8 million increase in interest income primarily due to interest earned from the cash proceeds of the 2024 Notes, as well as increased other income due to a $3.1$2.1 million foreignpension currencyexpense losscredit recognized in 2023 compared with a gain of $1.1 million in 2024.2025. This increase was offset by an$5.2 increasemillion in otheradditional interest expense drivenrelated by a $5.8 million interest accrual forto the 2024 NotesNotes, recognizedwhich inwere 2024outstanding throughout 2025 compared with June 21 through December 31 of 2024, and a $1.8$1.6 million increase in amortization of prepaid debt fees.

Our income tax expense was $43.4$38.9 million and $29.1$43.4 million for the years ended December 31, 20242025 and 2023.2024. Our tax rate for the year ended December 31, 20242025 differed from the U.S. federal statutory tax rate of 21% due to changes in valuation allowances, the level of profit or losses in domestic and international jurisdictions, stock-based compensation, tax credits, settlementexpiration of taxstatute audits,of limitations, and uncertain tax positions.

OperatingReportable Segment Results

For a description of our operatingreportable segments, refer to Part I, Item 1: Business, Our OperatingReportable Segments included in this Annual Report on Form 10-K and the Overview section above. The following tables and discussion highlight significant changes in trends or components of each operatingreportable segment:

Revenues increaseddecreased by $20.9$29.5 million in 2024,2025, or 5%,6%, compared with 2023. The 2024 increase in revenues was driven primarily by increased smart water product sales.2024. Changes in foreign currency exchange rates favorably impacted revenues by $0.6$8.8 million. Revenues were lower due to the planned decrease in electric residential sales in Europe, Middle East, and Africa (EMEA) and water meter sales, partially offset by higher smart water shipments.

GrossAdjusted gross margin was 25.9%31.2% in 20242025 compared with 23.2%25.9% in 2023.2024. The 270530 basis point increase over the prior year was primarily due to an improved customer and product mix andas manufacturinga efficiencies.result of the end-of-life of certain lower margin products.

OperatingAdjusted expensesoperating decreasedincome $10.3increased $15.2 million, or 26%,16%, in 20242025 compared with 2023.2024. The decreaseincrease was primarilya dueresult toof lowerincreased adjusted gross profit, slightly offset by increased product development costs.

Revenues increaseddecreased by $199.8$92.8 million, or 14%,6%, in 20242025 compared with 2023.2024. The increasedecline was primarily from product revenues due to the ramptiming of newcustomer projectsdeployments and ongoingan deployments,unusually slightlylarge offsetfirst byhalf $1.12024 millionvolume, inwhich unfavorableincluded foreigna currencysignificant exchangeamount rateof changes.catch-up of previously supply chain constrained revenue.

GrossAdjusted gross margin was 36.2%39.1% in 20242025 compared with 34.5%36.2% in 2023.2024. The 170290 basis point increase was primarily related to favorable productcustomer and solutions volumes and mix as well as improved operational efficiencies.mix.

Highlights and significant developments for the three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025

•Revenues were $587.0$562.9 million compared with $607.2$606.8 million in 2025, a decrease of $20.2 million, or 3%7%

•Operating expenses increased $27.7$7.4 millionmillion, or 5%, compared with 2025

•Total backlog was $4.4 billion,billion and twelve-month backlog was $1.6$1.7 billion at MarchJune 31,30, 2026, compared with $4.7$4.5 billion and $1.6$1.5 billion at MarchJune 31,30, 2025

EffectiveOn NovemberMay 10,6, 2025,2026, Itron'sthe Company's Board of Directors authorized a new share repurchase program of up to $250$200 million of ourItron's common stock over an 18-month periodperiod, effective May 8, 2026 (the 20252026 Stock Repurchase Program). Repurchases will be made in the open market and pursuant to the terms of any Rule 10b5-1 plans that Itron may enter into, and in accordance with applicable securities laws. The repurchase program is intended to comply with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. In February 2026, we repurchased 1,050,309 shares under the 2025 Stock Repurchase Program at an average price of $95.21 (excluding commissions) for a total of $100 million. This repurchase was completed in conjunction with the sale of the 2026 Notes.

On January 5, 2026, we completed the acquisition of 100% of the outstanding equity of Locusview, Ltd. and subsidiaries (collectively, Locusview) a privately held utility-focused software and services company that is based in the United States and Israel. The acquisition provides value to Itron through the leverage of Locusview's digital construction management solutions to enhance Itron's Resiliency Solutions offerings to its customers. The preliminary purchase price allocated to acquired assets and liabilities was $546.6$546.4 million, which was funded through cash on hand. The purchase price iswas subject to further adjustment based on final working capital and other closing considerations to be determined following the transaction's close.considerations.

Total revenues decreased $20.2$43.9 millionmillion, or 7%, in the current 2026 quarter, compared with the same period in 2025. Product revenues decreased by $45.3$63.7 million, and service revenues increased by $25.2$19.9 million. Device Solutions decreased by $1.5$1.3 million; Networked Solutions decreased by $52.1$69.7 million; and Outcomes increased by $17.4$11.3 million when compared with the same period last year. Resiliency Solutions provided revenues of $16.0$15.8 million duringfor the quarter.period. Changes in exchange rates favorably impacted total revenues by $13.7$3.2 million, of which $10.1$2.0 million favorably impacted Device Solutions and $2.4 million favorably impacted Networked Solutions.

Gross Margin - Three months ended MarchJune 31,30, 2026 vs. Three months ended MarchJune 31,30, 2025

Gross margin in the 2026 period was 40.3%,41.0%, compared with 35.8%36.9% in 2025. Product sales gross margin increased to 37.2%,38.1% for the quarter in 2026, compared with 33.8%34.8% in 2025,2025. and grossGross margin on service revenues increased to 53.8%,52.9% in 2026, compared with 48.2%48.9% in 2025.

Operating expenses increased $27.7$35.1 million for the threesix months ended MarchJune 31,30, 2026 as compared with the same period in 2025. This was primarily the result of a $18.4$20.6 million increase in sales, general and administrative expenses primarily driven by increased labor costs, IT expenses, and acquisition-related costs, a $4.9$7.6 million increase in amortization of intangible assets driven by the two recent acquisitions, and a $7.2 million increase in research and development expenses primarily driven by increased labor costs,costs and aIT $3.7 million increase in amortization of intangible assets.expenses. Refer to Item 1: Financial Statements (Unaudited), Note 4: Intangible Assets included in this Quarterly Report on Form 10-Q for additional information.

Total other income (expense) for the three and six months ended MarchJune 31,30, 2026 was expenseincome of $0.4$4.1 million and $3.8 million, compared with income of $6.1$7.1 million and $13.1 million in the same period in 2025.

The decrease in net other income for the three months ended MarchJune 31,30, 2026, as compared with the same period in 2025, was primarily driven by the $6.1$6.0 million decrease in interest income primarily due to decreased interest-earning cash.cash, partially offset by the $3.2 million increase in other income (expense), resulting primarily from the gain on the sale of an equity method investment.

For the three and six months ended MarchJune 31,30, 2026, our income tax expense was $13.6$26.7 million and $40.3 million, compared with income tax expense of $16.9$14.7 million and $31.7 million for the same periodperiods in 2025. Our tax rate for the three and six months ended MarchJune 31,30, 2026 of 20%33% and 27% differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, an intra-entity asset transfer, the effect of cross-border tax laws, nondeductible executive compensation, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions. Our tax rate for the three and six months ended MarchJune 31,30, 2025 of 21%18% wasand in19% linediffered withfrom the federal statutory rate of 21% and overall was impacted by the effect of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, the effect of cross-border tax laws, nondeductible executive compensation, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions.

A sweeping legislative package formally titled "An act to provide for reconciliation pursuant to title II of H. Con. Res. 14" (the "Act"), and commonly referred to as the One Big Beautiful Bill Act, was signed into law on July 4, 2025. The legislationAct included numerous changes to existing tax law that took effect in 2026. There were also changes that were retroactive to the beginning of 2025, including the deductibility of current and previously capitalized domestic research and development costs. These changes did not have a significant impact on our consolidated financial statements.

The Organization for Economic Cooperation and Development (OECD) guidance under the Base Erosion and Profit Shifting (BEPS) initiative aims to minimize perceived tax abuses and modernize global tax policy, including the implementation of a global minimum effective tax rate of 15%. In December 2022, the Council of the European Union adopted OECD Pillar 2 for implementation by European Union member states by December 31, 2023. The resulting legislation in most countries where Itron has significant operations took effect for calendar year 2024. We filed our Global Information Return relating to tax year 2024, which resulted in no material top-up taxes. The OECD released further guidance on January 6, 2026, which included new and revised safe harbor rules, including a new permanent safe harbor, and the framework for a "side-by-side" agreement that would exempt US-based multinational companies from all top-up taxes, other than qualified domestic top-up taxes imposed on subsidiaries in their countries of residence. Enactment through legislation will be required in order for this additional guidance to be effective and is expected to only be effective for years after 2025. These enactments or amendments could adversely affect our tax rate and ultimately result in a negative impact on our operating results and cash flows. Consistent with calculations for calendar year 2024 and 2025, the Company anticipates it will meet the safe harbors in most jurisdictions in 2026, and any remaining top-up tax should be immaterial.

(1) Refer to the Non-GAAP Measures section below on pages 42-4546-50 for additional information on adjusted gross profit and marginmargin.

Revenues decreased $1.5$1.3 million, or 1%. Changes in foreign currency exchange rates favorably impacted revenues by $10.1$2.0 million. Revenues were lower due to the planned decreasedecreases in electric residential sales in Europe, Middle East, and Africa (EMEA) and lower North American project deployments.sales.

For the three months ended MarchJune 31,30, 2026, adjusted gross margin was 35.4%,34.8%, compared with 30.0%29.8% for the same period in 2025. The 540500 basis point increase over the prior year was primarily drivendue byto an improved customerproduct mix and productoperational mix.efficiencies.

Adjusted operating income increased $6.4$6.1 million, or 21%, for the first three months of 2026,24%, compared with the same period in 2025. The increase was aprimarily the result of increasedhigher adjusted gross profit.

Revenues decreased $52.1$69.7 million, or 13%,17%, forin the first three months of 2026,2026 compared with the same period in 2025. The declinedecrease was primarily due to the timing of customer deployments. Changes in foreign currency exchange rates favorably impacted revenues by $2.4$0.7 million.

Adjusted operating incomeRevenues decreased $6.0$121.8 million, or 5%,15%, for the first threesix months of 2026, compared with the same period in 2025. The decreasedecline was aprimarily resultdue to the timing of lowercustomer adjusteddeployments. grossChanges profit.in foreign currency exchange rates favorably impacted revenues by $3.1 million.

Adjusted operating income forFor the first2026 threeperiod, months of 2026revenues increased $8.0$11.3 million, or 56%,13%, compared with the same2025 period last year.period. This increase was adriven resultby ofhigher increasedservices adjustedand grosshardware profit,sales, partially offset by increasedlower laborsoftware costs.license sales.