Good day, everyone, and welcome to the Itron Q2 2015 Earnings Conference Call. Today's call is being recorded. For opening remarks, I'd like to turn the call over to Barbara Doyle. Please go ahead, ma'am.

Thank you, Kevin, and good afternoon and welcome to Itron's second quarter 2015 earnings 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. The presentation is available through the webcast and through our corporate website under the Investor Relations tab. On the 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. Following our prepared remarks, we will open up the call to take questions using the process that the operator describes. 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 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 discussed in today's earnings release and the comments made during this conference call and in the Risk Factor section of our Form 10-Q, 10-K and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update our forward-looking statements. Now please turn to the presentation and I'll hand the call over to our CEO, Philip Mezey. Philip C. Mezey - President, Chief Executive Officer & Director: Thanks, Barbara. Good afternoon, everyone and thank you for joining us on the call today.…

And we'll take our first question from Ben Kallo with Robert Baird. Ben J. Kallo - Robert W. Baird & Co., Inc. (Broker): Hi. Thanks for taking my question. Hi, Phil, we saw the acquisitions of Elster by Honeywell and I think one of the questions we had was with their operating margins, EBITDA margins compared to where your business is at, specifically on the R&D spend that you have without any kind of top-line growth, we are trying to put all that together with some of the commentary about investing in the business but without seeing any outcomes there. So, could you just gives us a little bit of color on what we should expect there or why isn't there a greater cost reduction coming? Thanks. Philip C. Mezey - President, Chief Executive Officer & Director: Hey, it's Phil, Ben, first on the Elster acquisition, I mean, we're very pleased to see a strategic and disciplined buyer invest that much money in the sector and really reiterates the promise of what's seen in this area for growth. A significant part of Elster's business in the midstream and heat combustion business is outside of the metering space. Elster has been very disciplined in improving their operating model and reducing cost, no question about it. But we are mixing the Gas business line, the significant area of Gas business where we are not present and where we are present in the metering space. We have a different strategy in the metering space. We are moving beyond basic metering to meters communications, software, and services and ultimately to managed services. This is a somewhat different model than what we see in industrial companies that typically invest 3% to 4% of revenues into R&D. We see in companies in communications and networking space investments in the 8% to 12% of R&D category and in the software and services space in the 12% to 20% of R&D. So I get to an 8% to 9% target as we look at the selected investments that we are making in each one of these categories. And to the comment that we don't see the benefits of those, there is a 39% increase in our overall backlog last year, 17% increase in our 12-month backlog this year. We are seeing the benefits and competitive differentiation in market share wins, using with these investments. As to the comment about cost reduction, as you know, we've been talking for some quarters about this restructuring plan. This was an extensive negotiation through some structured labor markets, we are very pleased with the progress on restructuring and the ability to now start taking out 300 heads by the end of the year and a total of 500 as we consolidate a number of factories and we'll see the benefits of that cost reduction. Ben J. Kallo - Robert W. Baird & Co., Inc. (Broker): Thanks.

We'll go next to John Quealy with Canaccord Genuity.

Hey, good afternoon, folks. So just a couple of questions. I guess, I'll start with my bigger question. So warranty charges, this is a common theme and whether it's transistors that are audio control, whether it's BC Hydro one specs, whether there is other minor tweaks in warranty, this is a common theme. So, Phillip, talk to us about what the board is thinking about to change this. I assume you're going to have to go through this with your auditor at year-end in terms of warranty accruals and things like this. But, I guess, how do we fix this? Do we lower gross margins in accrual – make our accrual higher or do we go to our customer and get more value for our products. I know this is an comment but for you guys, it seems particularly acute. And then I have a couple of follow-ups. Philip C. Mezey - President, Chief Executive Officer & Director: Okay. John. So, I mean, there are two things that we're working on, performance and predictability. On the performance side, this is about continued growth in not only our revenue lines, but very importantly at the gross margin line by reducing variability by consolidating factories and running them more efficiently so an increased focus on operational performance at that level and with the bringing in of Bruce Douglas and somebody who is very, very focused on service delivery, the kinds of issues that we see in these complex product deliveries, we're managing much more closely. So performance is about overall EBITDA increase through revenue growth, through gross margin expansion by running our operations more effectively as we are managing and reducing cost, particularly in the operating expense category through this restructuring initiative. Predictability is about removing the level of variance that we see in these in the size and frequency of these special charges. This is a significant area that we're very focused on in terms of improving our overall quality program, our supplier management programs, making our overall quality program visible throughout the company with very, very strong leadership and emphasis and getting into stronger risk management and developing key performance indicators and really increasing the transparency of the organization so we can be more proactive in anticipating these issues. As to the comment about the auditors, we work extremely closely with them on an ongoing basis and reviewing these issues. This is not something where we get to the year-end review. So there is no issue with the auditors. And as to the comment about the board, we've recently met with and reviewed with the board all of our operating action plans and have a very clear path of alignment with them.

Okay. Thanks for that. Secondly, on the enterprise selling efforts or the software efforts I know you've reinvigorated that effort with a new gentlemen, I guess, launching right around DistribuTECH. Can you comment qualitatively how you feel, I know it's early, but how do you feel about those efforts and I know you talked about solar briefly, but more broadly on software, how do you feel? Philip C. Mezey - President, Chief Executive Officer & Director: Yeah. I think that the opportunity is really terrific for us. What we've done in the intervening time since the announcement of launch is a full audit and survey of the services that are out there, a survey of the marketplace focused areas where we think that there is margin improvement opportunity for us with the current services that we're delivering and new opportunities for us to expand both in managed services and analytics. And as you heard from the deals that we've discussed in the release today, we're moving towards much more frequent scenario where we're winning new installation business but also managing that business after it has been installed, which gives us the opportunity then to transition to providing new insights about the data. The gentleman you mentioned, Bruce Douglas, has developed a business plan to drive highly profitable growth in this area and that plan has been reviewed as a part of an annual strategy process and we are beginning to make the initial investments and really propelling that business forward even more rapidly.

Okay. Thanks. And my last question maybe for Mark. $32 million, I believe, it's SG&A. Is that a good run rate for the rest of the year? I know we've got some head count reductions coming, I assume, and a one-time charge. But can you just comment on that level going forward? Thank you, guys. William Mark Schmitz - Chief Financial Officer & Executive Vice President: Yeah. In general, we think our offering expenses are going to pretty similar in the second half to the first half. I would say that, keep in mind, our G&A in particular is still burdened by little bit of duplicate costs as we continue to rollout the implementation of Oracle and our Global Business Services, our shared services operation in Ireland and those costs will come down next year.

We'll next to Our next is Jeff Osborne with Cowen & Company. Jeffrey Osborne - Cowen & Co. LLC: Hey, great. Good afternoon. I just had two questions. Most of the topics have been addressed already. But one, Philip, I was just wondering if you can touch on the pace of RFP activity that you are seeing in particular on the Electric side, regionally, it would be helpful. And then I was wondering just in terms of Tom Dietrich, looking at the companies that he has worked at before, I mean, how would you characterize his core competency as a COO? Is he a turnaround guy, a quality guru, what kind of in a nutshell, how would you characterize him as he comes onboard? Philip C. Mezey - President, Chief Executive Officer & Director: Super, Jeff, thank you to great question. So RFP activity, you said particularly in Electric, regional breakdown, very strong in North America. Of course, we talked about this increasing regulatory support for smart grid investments in Pennsylvania, New York, New Jersey, Ohio, Massachusetts. So there are very, very sizable opportunities. Obliviously a lot talk about New York REV and the opportunities that there are there. With the Clean Power Plan, we see an opportunity for long-term acceleration of business in North America. So, very healthy outlook in North American smart metering side on Electricity. In Europe, again, targeted approach for us in focusing on markets where we have high-value differentiated offerings in which we're expanding the number of pilots in order to demonstrate value and increase that electric metering over time. We are getting to now the shipment window on ERDF and beginning the shipment of those Generation I meters and we have a very significant bid on – we have a so-called G-III qualified product…

We'll go next to Patrick Jobin with Credit Suisse. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Hi. Thanks for taking the question. First one, just thinking about 2016, is this a high-growth year as some of these contracts kick in? Is this a more normal growth year or is this a transition year, just given what you are seeing from a timing perspective? And I have a few follow ups. Thanks. Philip C. Mezey - President, Chief Executive Officer & Director: So, yeah, Patrick, I mean we're not in a position to give full guidance on 2016, but we have commented on the fact that we do see stronger than average growth in 2016, really as a result of the already booked contracts and the other contractual commitments not yet in our formal backlog. So this was the discussion about not only did we see a significant build-up of our total company backlog, but that we have visibility to shipments in North America in places like Consumers and Duke not yet fully in backlog, to other European shipments with companies like ERDF and GrDF in which there is visibility beyond the backlog, which we see deploying and committed in 2016. So we would definitely characterize 2016 as an above normal growth year. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Thank you.

And we'll also start to see some real benefit from the restructuring in 2016. Philip C. Mezey - President, Chief Executive Officer & Director: Yeah. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Got it. So just a housekeeping item on tax rate, what should we expect there? And then really my second question is, how much of your mid-teen EBITDA target by end of 2016, I guess, into 2017 is predicated on costs out versus, I guess, revenue growth or a mix shift occurring to kind of higher value products? This would be helpful to understand what you need to achieve to get to that mid-teens EBITDA target. Thanks. Philip C. Mezey - President, Chief Executive Officer & Director: Okay. I'll let Mark comment on the tax rate and then I'll come back with that mix question. William Mark Schmitz - Chief Financial Officer & Executive Vice President: On the tax rate – and I believe what I just said in the discussion part of the call – was that we expect to see some modest upward pressure from the 37% that we had forecast or we had guided to earlier as a full-year effective tax rate. Now what that means is that we will see a lower rate in the second half of the year than we've experienced thus far. And without being too precise on it, let me say the second half of the year, the way we look at it, should be somewhere below 30%. Why is that? It's because of the dynamics of improving profitability particularly in Germany and France where we have deferred tax assets that are fully impaired. So if you understand that where we have losses in Germany and France today we get no credit for that because the deferred…

We'll go next to Andrew Hughes with Bank of America Merrill Lynch.

Good afternoon, guys. Thanks for taking the question. On the managed services and software and services revenue, Philip in the past you've talked about sort of $200 million annualized run rate with a target of $500 million longer term. I'm wondering, if there is an update on timing around that $500 million and whether or not some of these impressive signings with Duquesne in Germany and in Tonga on the managed services front if there is upside to that sort of $200 million run rate we're seeing now and maybe the $500 million longer term target? Philip C. Mezey - President, Chief Executive Officer & Director: Yeah. Andrew, it's very fair, our intent here, as we get this business really established in the way that we see it internally, that we would provide more visibility about the separate financial metrics of the software and services business. It's both something that we are intend to manage aggressively and that we need to present to you more transparently in terms of how it affects our overall business. To the question of the – do we see growth against that sort of $200 million baseline, it is, yes, it is growing as we are focusing more on providing the solutions up to and including managed services and even data services beyond that. So, we see the growth opportunity at being faster than overall total company revenue growth. In terms of an update for that total targeted plan in the 2017, 2018 timeframe, we really see the opportunity to realize that growth target.

Great. That's very helpful. And on the Water segment you had the gross margin up, the operating margin down. Just curious with some of the investments you're making in that sector when we can expect to see some leverage there? Is it in the second half with margin recovery or is it a little bit more long dated? Thanks. Philip C. Mezey - President, Chief Executive Officer & Director: I'd say that's a bit more long dated that to get that straightened out. So those are, yes, slightly higher costs to go after some very desirable business. By the way, we talked about this that that, Jordan Water and a number of these opportunities we're going after our solid-state water meters, I mean, communicating meters, where we've made investments in advanced technology that are really going to drive the business forward and revenues are as we've said are down slightly. So, as we return to revenue growth in 2016 that operating leverage we think will straighten itself out.

And ladies and gentlemen, that does conclude our question-and-answer session. And I'd like to turn the call back over to Barbara Doyle for any additional or closing remarks.

I think we have provided all the answers to the questions everyone on the queue. So, we thank you for your participation today and we look forward to seeing you and speaking with you in the upcoming weeks. Thanks very much.