Good day, everyone, and welcome to the Itron Incorporated Q1 2015 Earnings Conference Call. Today's call is being recorded. For opening remarks, it is my pleasure to turn the call over to Barbara Doyle. Please go ahead.

Thank you, Nicole, and welcome everyone to Itron's conference call. We issued a press release earlier today announcing our results. The press release includes replay information about today's call. We have also prepared presentation slides to accompany our remarks on this call. The presentation is available through the webcast and through our corporate website under the Investor Relations tab. On our call today, we have Philip Mezey, Itron's President and Chief Executive Officer; and Mark Schmitz, Itron's Executive Vice President and Chief Financial Officer; and John Holleran, Itron Executive Vice President and Chief Operating Officer. Following our prepared remarks, we will open up the call to take questions using the process that the operator will describe. Before I turn the call over to Philip, please let me remind you of our non-GAAP financial presentation and our Safe Harbor statement. 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 included 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 discussed in today's earnings release and the comments made during this conference call and in the Risk Factor section of our Form 10-K and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. Now please let me turn the call over to our CEO, Philip Mezey. Philip C. Mezey - President, Chief Executive Officer & Director: Thank you, Barbara, and good afternoon to everyone. Before we review…

Thank you. Our first question will come from Sean Hannan, Needham & Company. Sean K. Hannan - Needham & Company, LLC: Yes, thanks, folks for taking my question here and thanks for all to detail so far tonight. I just wanted to see if I could follow up on the new business environment that we have today. Clearly, your backlog through the course of a number of quarters stands in pretty decent shape but I wanted to drill in to the bookings specifically within the quarter. The numbers are down I think for each segment a bit year-over-year. There is a tough comparison there in electric but can you provide perhaps a little bit more color for us on how you're seeing the environment today, expectations perhaps for that to get some acceleration and any other color for us that might be helpful there? Thanks. Philip C. Mezey - President, Chief Executive Officer & Director: Sure, Sean. So there is some variability in our bookings. There was no single very large booking in the quarter, so we like the fact that it's almost one-to-one with a broad diversity across all of the business lines. We are up. While total backlog is not up this quarter, our 12 months backlog is up significantly which gives us this better near-term visibility and, as I said in my comments, we are very confident of our ability to grow that backlog in 2015 even beyond the very strong growth we saw in 2014. So that clearly indicates that we see in our developing contracts which we feel will continue this upward backlog trends through 2015 giving us the visibility that we need into 2016 and beyond. Sean K. Hannan - Needham & Company, LLC: Okay, thanks. And then on a different topic in on…

And we'll go next to John Quealy, Canaccord.

Hey, good afternoon, folks. First question is on the operational side. John, first of all best of luck hopefully we see you before you head out. On Duquesne Light, Philip, can you talk what exactly are you doing for them? Is it in that sort of $2 per meter bucket that we've seen in the industry a lot? Can you just flesh out Duquesne Light a little bit and then I have a follow-up? Philip C. Mezey - President, Chief Executive Officer & Director: Sure. So yes this is the kind of deal that we see developing more frequently in the marketplace in which we are in addition as we've said to deploying the smart meters in our case the meters, the communications, the services and software along with those that we're offering the added-value of actually operating that network as it's deployed over the next five to seven years. And yes, John, it's in that kind of range of revenues over time, a recurring revenue stream in this sort of basic couple of dollar range. This is a platform for us to extend with other added value software what we can do for these customers over time.

And so for this particular question, Duquesne Light, is it all Itron software technology or will there be third-party technology offered on the platform? Philip C. Mezey - President, Chief Executive Officer & Director: So far for Duquesne it is all Itron but we are very actively working on engaging with other partners as necessary to meet business, future business requirements. This initial phase is the actual operation of our technology, so it is all Itron.

Got it. And then just lastly for Mark, the negative free cash flow I guess for this quarter, I don't see an 8-K or a Q yet, do you mind just giving us buckets of how much was what if you don't mind, just give us a range on the cash drags? William Mark Schmitz - Chief Financial Officer & Executive Vice President: Sure. So there were several pretty significant cash disbursements during the quarter. One is that we paid taxes, federal and state taxes totaling about $20 million this year; last year we had a small refund. We paid the settlement amount related to the legal item that was discussed and described in 8-K last quarter. We had our annual variable compensation planned payouts and some cash restructuring amounts. And I'll add to that to say that when you see the balance sheet, you probably already seen it there in the cash flow statement that inventories were up pretty significantly. They were offset by accounts payable – accounts payable were up by just about the same amount as inventories and but the inventory increases pretty well understood and we're actually not discouraged by that at all because it is a preparation for higher production levels and also reflect some transitions we're making in supply of electronic goods and other things. So overall, you sure it's not a good news story in cash flow but I do feel it's something we pretty well signaled with our guidance that cash flow would be weaker this year than last year, and it's largely a result, if you cancel everything else out, you look at the cash payments related to severance and our restructuring plan that is the major reason.

And severance, is it going to be all four quarters, Mark, or should it tail off or how should we think about the cadence of the cash for the four quarters? Thanks, guys. William Mark Schmitz - Chief Financial Officer & Executive Vice President: Yeah, most of the severance related expenses will actually occur in the second half of 2015.

John, are you still there? Philip C. Mezey - President, Chief Executive Officer & Director: No, he isn't.

Okay.

We'll go next to Ben Kallo, Robert W. Baird. Ben J. Kallo - Robert W. Baird & Co., Inc. (Broker): Hi. Thanks for taking my questions. Could you guys just talk about the warranty or supplier issues on the Water side? It seems like you had good business in the Electricity side, improvement on Gas and then we get hit with Water, so what's the confidence level that we'll get a clean quarter here going forward on all three segments? Philip C. Mezey - President, Chief Executive Officer & Director: Well, Ben, I want to differentiate, when you reference clean quarter, there are a variety of issues here, the one that we've discussed on the call most frequently of course is BC Hydro, a project related issue having to do with network design and project control. In this case, the supplier quality issue is something that of course we are working to manage through very quickly. I want to emphasize that one of the reasons that we resolved this so quickly and transparently is that we are working with customers to ensure the smooth growth of our business. There is a visible impact here. We have a rigorous quality program in place and supplier quality management program in place. We do not expect these types of things to occur but we react to them quickly and continuously improve. We are confident about our ability to manage these costs over time; as a part of one of the measures that we were using for CEO Executive comp this year is cost of non-quality. It's a metric that we monitor very, very closely that actually impacts our internal management system and has extremely high visibility. Ben J. Kallo - Robert W. Baird & Co., Inc. (Broker): Okay. And Philip, you're entering your…

We'll go next to Patrick Jobin, Credit Suisse. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Hi, good afternoon. Thanks for taking my question. The first question, just as I think about your comments about results exceeding expectations, I guess perhaps absent the warranty charge, were there any other gives and takes in the quarter as we think about kind of putting this in context to guidance for the full year and the strong second half ramp? Thanks. William Mark Schmitz - Chief Financial Officer & Executive Vice President: Yeah, Patrick actually what we've said is that our results in the first quarter exceeded our internal expectations even including the warranty charge. So we're little ahead of our internal expectations on which of course we based our guidance and we're positive about the outlook for the year. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Got it. That's helpful. Thanks. And then, just some simple follow-up items. Should we envision any warranty related charges for that water project in Q2, or is the charge fully reflected now? And then on the Eletrobras contract, can you size that initial phase, that initial award that's been granted and should we expect that to be a Q2 booking? Thanks. William Mark Schmitz - Chief Financial Officer & Executive Vice President: I'll take the question on the warranty charge first. That warranty charge on the water communication modules reflected our best estimates at this time. Of course, you can never say it couldn't get larger, couldn't get smaller – estimates may change – but it is a full best guesstimate at this time. And I think Philip wants to speak about the... Philip C. Mezey - President, Chief Executive Officer & Director: Yeah, Eletrobras, the comment that it's an initial tranche, Patrick. So we're in the $50ish million to $200ish million range. So this is not – it's absolutely a good progress and will be contained within our bookings but it's not in one huge outsized award we expect with success in the project to follow on the significantly more potential business. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Thank you very much.

We'll go next to Noah Kaye, Northland Capital Markets.

Thanks. Just a more specific question on – I heard you're thinking about acquisitions – you mentioned at the outset the challenges and opportunities faced by water scarcity. How are you thinking about a smart water technology like leak detection, water volume measurement, are you looking at those for potential acquisitions and if so how high in the priority list is that – you also mentioned software as a service, so? Thank you. Philip C. Mezey - President, Chief Executive Officer & Director: Yeah, no I mean, I clearly don't want to go into signaling, very – given your very specific signals here. But absolutely to your point water scarcity is very interesting and important to us. And we actually did make an acquisition in the leak detection technology space which we are using to embed that technology in more endpoints that we put out into the field. It is an example – we have partners that focus on things like pressure management. And so there are many aspects of water scarcity analytics that we are both exploring internally, making decisions about what it is that we develop partner, invest and require and do track range of technologies in that space. And just to connect the software as a service comment, we do find given the water space where there are tens of thousands of water utilities in North America and another set of tens of thousands in Europe, that these companies are not really of a scale that it is easy for them to set up free-standing implementations. And so the water market is ripe for a software as a service type offering just because of the scale of the customers.

Okay, great. And I think in the past you talked about your aspirations for the software as a service business. Can you benchmark a little bit for us where that is at today? What you had posted (41:08) in the quarter versus your growth aspiration? Philip C. Mezey - President, Chief Executive Officer & Director: So what we said is that of the existing revenues of the company that somewhere between $100 million to $200 million is already in this software and services area and the aspirational growth target that we've talked about in the past is on the order of $500 million. And so this is really for us a matter of building on a base of 8,000 utility customers and putting more focus in the space in which we feel that we can expand the current offerings across our customer base and actually broaden that offering in order to get to the overall target number.

And what do you feel as you talk to your customers you obviously have a good relationship with, are kind of the gating factors here in converting some of those networks with an upsell to more managed SaaS? And what if anything do you feel is going to accelerate the pace of your being able to grow that part of the business? Philip C. Mezey - President, Chief Executive Officer & Director: Well, certainly, the big accelerator is that the technology is becoming more complicated over time – operating sophisticated multi-tenant networks and running large scale data analytics platforms is – we have large sophisticated utility customers that have those kinds of capabilities internally but there certainly are significant number of utilities that may not have all of the internal skills or that may not consider that their core competency. So that's an accelerant. There are economic pressures on utilities as they're facing new challenges in markets where demand may not be increasing and the rate base is not growing, that represent some unique pressures for them. Aging workforce – so they have particular expertise retiring out of the workforce that may make it more advantageous for them to look outside for certain sorts of skill set. There are scarcities in titles like data scientific that have them look on the outside. On the other side of the ledger, we have to understand that many investor owned utilities invest with capital and earn a rate of return on capital converting those contracts over to operations and maintenance contracts that is ongoing and recurring expenses represents a challenge for any company that is bringing a recurring offering to utilities to re-categorize capital into operations and maintenance.

That's very helpful color. So given all of that, for our modeling, how would you think about a growth rate for this part of the business on an annual basis, ballpark? Philip C. Mezey - President, Chief Executive Officer & Director: When I say that we're – I announced on the last call the hiring of Bruce Douglas, the Senior Vice president in charge of software and services and is focused on developing the business plan that as we really have go through these steps, we'll get into more detail with you as these plans really solidify.

Okay. Thank you very much. I appreciate it. Philip C. Mezey - President, Chief Executive Officer & Director: Welcome.

And our next question will come from Jeff Osborne with Cowen & Company. Jeffrey Osborne - Cowen & Co. LLC: Good evening. Good afternoon, Philip. Just two quick questions, one I was wondering if you could just update us on the Riva platform, congratulations on the order in South America but seems like there would be a lot of opportunities for the PLC capability there in Europe. So what you're seeing there with the initial discussions? And then just broader on the electric side, if you can just update us on geographies where you're seeing RFP activity? Obviously Southeast Asia has been in the news for a couple of quarters here but any other thoughts would be helpful. Philip C. Mezey - President, Chief Executive Officer & Director: Sure, Jeff. So on Riva, of course there are opportunities in Europe, as you mentioned there is very strong use of PLC. That being said though, we're competing essentially with a – the G3 Alliance is an example where we have a good enough product. And so the challenge with Riva is demonstrating the additional value that can be created by having this hybrid product that has distributing computing close to the edge. We do have a couple of pilot programs underway in order to demonstrate that extended business case because we are not trying to compete simply as a low cost PLC provider. We are working on developing the unique value characteristics of the platform and there are a couple of places in Europe where that – where there is focus on added value and we certainly are focusing our sales efforts in those areas and that applies to many other markets around the world that there is a low cost good enough solution that's already available. We may not initially…

And our next question will come from Andrew Hughes, Bank of America.

Good afternoon, folks. Thanks for taking the question. Philip, you sort of answered one of them, whether or not – or the opportunity for software and services revenues across segments. I'm wondering if you can elaborate a bit on where that sort of breakdown exist today in that $100 million to $200 million range across the three segments and then as you go towards that $500 million goal, how you see that – if that breakdown changes becomes more Electricity focused or in some of the other segments? Philip C. Mezey - President, Chief Executive Officer & Director: I'm tempted to theorize a bit there but I really think that given where we are in the planning process that there is more information I'd like to bring you there. To give you a breakdown now on the current profile of business of course we implement and install a fair amount of our product. There is a basic amount of work that we do there. We do post implementation support. We provide platforms on a subscription basis. We forecast 80% of the energy that flows through the North American electric system with a system that largely has an annual renewal model. We are the largest global provider of electric and gas pre-payment systems. We then operate the back office for that in the UK and in parts of Africa. There are attractive opportunities for us there. And we provide managed services for our customers to do – support really the billing cycle and we see that now being a more standard part of the bidding process and have made a number of announcements in places where we have secured that managed service business as a platform for future growth.

Thanks. And then just on the Water segment, realizing that the bulk of the margin impact was related to the supplier issue, there is also a mention of some product mix impact. Just curious what – I think I heard heat meters was one factor but maybe just a little bit more color there and your confidence going forward that that mix will improve to be more margin accretive? Thanks. William Mark Schmitz - Chief Financial Officer & Executive Vice President: Yeah, Andrew, what we can say about Water, yeah, there was a modest deterioration in mix versus the prior year, principally due to the heat meter volumes that were predominant a year ago. But if we look at the special items, and warranty was of course the biggest of the special items affecting Water, we can say to you that special items really account for all of the deterioration in gross margin on Water on a year-to-year basis. And of course those are real and we don't discount them. The fact they're special doesn't mean that they didn't hurt us, but as we look forward, we just see that business as having no longer-term negative impact occurring in its profitability or its growth.

Great, thanks.

We'll go next to Andrew Weisel, Macquarie. Andrew M. Weisel - Macquarie Capital (USA), Inc.: Hey, good afternoon, everyone. Just to elaborate on that last question from Andrew. When you look at what's in the backlog what does that indicate for the future product mixes for the segments in the next 12 months or even beyond? The trend for the last several quarters has been pretty consistent, where a product mix helped in electric and hurt the other two businesses. What are you expecting based on what's already in the backlog? Philip C. Mezey - President, Chief Executive Officer & Director: So Andrew, the comment we've made is that the backlog generally speaking is predominantly North American and that the margin profile of the North American business is generally accretive to the overall reported margins for the segment. So as we see backlog growth, both total backlog and year-on-year backlog, that we see accretive margin opportunity as we see more of those smart projects coming out of the backlog. You mentioned Water somewhere in there. In the beginning, Water typically has not have (53:07) as large a backlog component to it just because of the contracting style, historically, of the Water segment, but those comments absolutely apply to the electric and Gas business. Did that answer your question? Andrew M. Weisel - Macquarie Capital (USA), Inc.: Yeah, that's helpful. My other question is you mentioned a couple of times you're very optimistic about growing the backlog further as we go through the year and I know Jeff asked about the outlook for the Electric segment when you sort of gave your tour of the world answer. What are you seeing in the Gas and Water business? And again, I guess you just addressed Water's not being so backlog driven but…

. At this time, we have no further questions in queue. So I would like to turn the call back over to our speakers for any additional or closing remarks.

This is Barbara. And we'd like to thank everyone for joining the call today and look forward to speaking with you over the coming weeks. Thank you.