Barbara J. Doyle - Itron, Inc. Philip C. Mezey - Itron, Inc. Robert Farrow - Itron, Inc.

John Salvatore Quealy - Canaccord Genuity, Inc. David Katter - Robert W. Baird & Co., Inc. Noah Kaye - Oppenheimer & Co., Inc. Joseph Osha - JMP Securities LLC Thomas Boyes - Cowen and Company, LLC Sean K. F. Hannan - Needham & Company, LLC

Good day, everyone, and welcome to the Itron Incorporated Q1 2017 Earnings Conference Call. Today's call is being recorded. For opening remarks, I would like to turn the call over to Barbara Doyle. Please go ahead. Barbara J. Doyle - Itron, Inc.: Thank you, Camille, and good afternoon to everyone on the call. Welcome to Itron's first quarter 2017 earnings conference call. We issued a press release earlier today announcing our results. The press release includes replay information for today's call. We have also prepared presentation slides to accompany our remarks on this call, and 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 Rob Farrow, Itron's Vice President and Interim Chief Financial Officer. Following our prepared remarks, we will open up the call to take questions using the process 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 informations 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 Factors section of our Form 10-K, 10-Q 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 turn to page 4 in the presentation. And I'll turn the call over to our CEO, Philip Mezey. Philip C. Mezey - Itron, Inc.: Thank you, Barbara. Before we review the quarterly results, I'd like to take a minute to recognize Mark Schmitz. On March 28, we announced that Mark was stepping down as CFO, and that the company would be conducting a search for the position. Mark was instrumental in advancing Itron's business transformation to a more predictable, profitable and growing company during his tenure. His positive impact on the company's financial position and liquidity is visible in the strong results we will discuss today. The board and I thank Mark for the dedication and focus he brought to Itron. Rob Farrow was named Interim CFO until the search for a permanent replacement is complete. I'd also like to thank Rob for stepping seamlessly into the role. You'll hear from Rob shortly on today's call. This executive transition is another opportunity we are taking to accelerate the pace of change at Itron as we continue to build a culture of operational excellence, speed, collaboration and innovation. Now let's move on to the quarterly results. First quarter non-GAAP EPS was $0.57 per share and revenues were $478 million. This was a good start to 2017, reflecting improvements we're driving in our operating profitability. This first quarter was our seventh consecutive quarter of year-over-year increase in non-GAAP earnings per share, reinforcing our commitment to consistency and predictability. Adjusted EBITDA of 9.4% of revenues increased from 8% last year. We are seeing the benefits of our operational efficiencies and focus on higher-value solutions. Our percentage of smart solution business has consistently increased over the last several years and was nearly half of total shipments in the first quarter compared with 46% last year and 38% in the first quarter of 2015. Now let's turn to bookings and backlog on slide five. Our total company-wide backlog at the end of the first quarter was $1.6 billion and 12-month backlog was around $820 million, growing 7% and 4%, respectively, year-over-year. I would also note that this is the third consecutive quarter of growth in the 12-month backlog, providing better visibility into our near-term revenues. Bookings in the quarter totaled $424 million and reflect a number of diverse global contracts, including the remaining portion of a new contract with PT PLN in Indonesia, which is expanding deployment of Itron's smart prepayment solution by 500,000 units. A large SMETS deployment in the U.K. for Electric and Gas as part of their national 2020 smart initiative. In Water, we reported Empresas Clave (05:01) in Mexico, which is mentioned on our fourth quarter call is deploying Itron's smart water solution for their Pueblo project. And today, in the U.S., we announced that Roanoke Gas, which serves 70,000 natural gas customers in Western Virginia is deploying Itron's smart gas solution. We are adding high-value projects that meet rigorous margin objectives to our backlog each quarter. And looking ahead, pipeline activity continues to be sizable. This includes opportunities to potentially expand Itron's deployments with existing customers like Duke, National Grid, FirstEnergy and AVANGRID among others for potential business over and above the $325 million not reflected in our backlog. Customer interest in Itron's OpenWay Riva IoT solution continues to be strong. We've signed 10 OpenWay Riva customers and the list continues to grow. Another financial metric we're pleased to report this quarter is free cash flow, which increased substantially to $54 million compared with $25 million a year ago. Our operating performance and business discipline have put us in a strong financial position with flexibility to invest in growth areas. Because of the steps we've taken over the course of the last several years, we have ample liquidity to make acquisitions that accelerate our strategy and enhance our growth. As I've stated in previous quarters, M&A is an element of our overall growth strategy, focused on value-added services for utility customers and growing the contribution of outcome-based solutions as a part of our larger business. Now I'll turn the call over to Rob Farrow to review our financials in more detail. Robert Farrow - Itron, Inc.: Thank you, Philip. Before we get into a discussion of the quarter's results, I would just like to say that it's a privilege to be talking to you today. Mark Schmitz built a very experienced and dedicated finance team here, and I had the pleasure of representing them on the call. My priorities during my tenure in this role are as follows: maintaining the momentum and focus on delivering predictable results for the company; building and delivering more efficient finance processes; and partnering with our operations teams to profitably grow the business. Now I'll move on to discuss our first quarter financial results. Consolidated GAAP results, as shown on slide six and non-GAAP on slide seven. Itron delivered another set of solid operating results for the first quarter of 2017, improved margins and higher EPS on revenues of $478 million. The improvements were driven by strong revenue growth in the Electricity segment, strong margin performance in the Gas segment and lower corporate G&A expenses. Some other key points to note. Gross margin of almost 33% increased 10 basis points year-over-year. Both GAAP and non-GAAP operating margins increased by 160 basis points to 6% and 8%, respectively. GAAP net income and diluted EPS, each increased by more than 50% compared to last year. The GAAP net income of approximately $16 million from the quarter includes $3 million recognized for restructuring expense as part of the program we announced in the third quarter of last year. Our restructuring projects are proceeding as scheduled, and we continue to anticipate annualized savings of $40 million to be fully achieved by 2019. Supply chain and strategic sourcing initiatives are also underway as we work towards further operational efficiencies. Non-GAAP net income and diluted EPS each increased around 30%, and EBITDA as a percent of revenue, increased by 130 basis points compared with last year to over 9%. Now turning to the year-over-year revenue bridge on slide eight. Electricity's first quarter revenue growth in constant currency of 11% reflects continued strength in our North American business, as well as increased revenue upside from our Asia Pacific region. Reductions in Gas and Water revenues year-over-year are largely a factor of the first quarter of 2016, which included revenues from several large projects that are now concluded or nearing completion. Moving to slide nine, and a look at non-GAAP EPS bridge. Reduced operating expenses positively impacted EPS by $0.19; $0.13 of this reduction or $8 million relates to one-off legal and accounting expenses incurred in the first quarter 2016. The balance of the reduction, $0.06 or $4 million, is driven by lower product development costs and improvement in our G&A cost structure. This more than offset the pull through of lower revenues and volumes, which impacted EPS by $0.06. Our lower non-GAAP effective tax rate of approximately 33% compares with 38% last year, and offsets negative impacts from foreign currency translation and share count on EPS. Our estimated full year tax rate is still anticipated to be 35%. The additional two percentage point reduction in the first quarter is primarily a function of a discrete tax benefit related to a new stock-based compensation accounting standard, ASU 2016-09, which is effective this year. Itron generated free cash flow of $54 million in the quarter, double last year's amount, driven by strong focus on working capital management. This has led to cash and equivalents in the quarter increasing to $188 million. Our total debt remaining flat from December at just over $300 million and our leverage ratios continue to show improvement. Slides 10 through 12 in the presentation show results by business segment. Itron's Electricity business continued the trend of strong performance that we saw in 2016. Operating expenses were reduced to 20% of revenue, an over 300 basis point improvement from the first quarter of 2016, due to higher revenues and improved operating efficiencies, enhanced by our previously announced restructuring program. This resulted in non-GAAP operating margin of 8%, 140 basis-point improvement from a year ago, more than offsetting the not unexpected change in gross margin. The margin performance in the Gas business was a real standout in the quarter. As we mentioned earlier, revenue did decline from last year as major projects neared completion, and international projects are being intentionally selected based on their profitability. The overall mix of business was more favorable and we achieved a record gross margin of over 40% in the quarter. Non-GAAP operating margin rose to 19% on the strength of the product mix and further operational efficiencies in the business. Water had a difficult comparison. The first quarter of 2016 benefiting from major contracts that are now being completed. Lower volumes and product mix impacted margins, resulting in 35% gross margin and 9% non-GAAP operating margin. However, we retain a leadership position in Water Communications in North America, and we are encouraged by Water's order book. We have won several tenders in Latin America for residential project, as business levels in that region begin to stabilize. And overall, this is the third consecutive quarter that we have a book-to-bill ratio greater than 1 to 1 in Water. In summary, our first quarter results were consistent with our expectations for the full year. We see the favorable impact of product mix in the quarter being related to timing of product deliveries between the first and second quarters rather than an adjustment to trends for the year overall. Now I'd like to turn the call back over to Philip. Philip C. Mezey - Itron, Inc.: Thank you, Rob. Our first quarter results reinforce Itron's commitment to three core pillars of our continued success: predictability, profitability and growth. We are executing our plans, which include aggressively driving key operational and administrative efficiencies, implementing restructuring projects and realigning our supply chain. These actions enable us to increase earnings power in any revenue environment and build operating leverage for future revenue growth. And we continue to focus on expanding our portfolio of outcome based solutions aimed at higher growth opportunities utilizing the power of our OpenWay Riva platform. The successes we are seeing with our customers and our financial results reinforce that we are on the right path and we will continue to move with purpose and a high level of urgency. Now let's open the call for questions.

Thank you And our first question is from John Quealy with Canaccord Genuity. John Salvatore Quealy - Canaccord Genuity, Inc.: Hi, good afternoon. Can you hear me? Philip C. Mezey - Itron, Inc.: Yes, John. Thanks. John Salvatore Quealy - Canaccord Genuity, Inc.: Hey, Philip. So a couple of questions. First, on the mix. Just taking a step back, so gross margin is down a little bit as Electricity mix goes up, but our overall smart mix goes up too. So I know I'm going through three different variables here, but can we dive into gross margin a little bit more and talk about the change perhaps year-to-year? And I see the operating income improvement, but I'm more concerned about gross margin on this first question. Thanks. Philip C. Mezey - Itron, Inc.: Okay. So, John, the comment about a decline in gross margin, total company gross margin is up 10 basis points. So the reference to mix there, I mean, there is really the decline in Water, which is a volume-related issue, but the – I guess, and then this Electric – the Electric mix issue is not a structural issue. I agree that there are higher volumes, smart, of course, we see this very strongly on the Gas results and in Water that's really just – or sorry in Electricity, this really is just a comparative result in timing in the first quarter. I mean, we continue to see opportunity to improve overall gross margin on the Electric side. John Salvatore Quealy - Canaccord Genuity, Inc.: Okay. And that was – I'm going back, that was my inelegant question of the call. So I'll move on to a better question. A couple – two other things, free cash flow, can we talk about sustainability of that, the puts and takes as you go through the year? I know we do a mid-year guidance update, so this might be a quarter too soon, but can you just characterize for us, those are very strong free cash number? Can you characterize the puts and takes as the year progresses? Robert Farrow - Itron, Inc.: Yes. Hi, John, it's Rob here, I'll take your question. Yes, we had good free cash flow in the first quarter, for sure. And we've got a project business and the cash flow can be variable quarter-to-quarter as our working capital requirements change. But I think for the year, we're seeing it pretty strong and we're seeing it above last year. John Salvatore Quealy - Canaccord Genuity, Inc.: Okay, thanks. So I want to go back to my first question now that I'm more specific. So in the Electricity segment slide, slide 10, the gross margin down 160 bps, I wouldn't expect it to be down given some of the restructuring actions, given the movement towards smart. So again, remind me why that was down modestly, is that price or... Philip C. Mezey - Itron, Inc.: No, we would not characterize it that way. Part of this is mix between our global portfolio and the U.S. portfolio. We do have strong strength in the North American portfolio, which as we said is generally accretive to gross margin. However, we are shipping a substantial number of international meters at somewhat lower margin there. And then we'll have to look back at the Q1 2016 to see if there are any discrete charges that are in there that might have elevated that margin on a comparative basis. But again, no structural change there. Barbara J. Doyle - Itron, Inc.: Well, it's more the mix by geography, as Philip said. John Salvatore Quealy - Canaccord Genuity, Inc.: Yeah, yeah. Okay. Just two more for me. So Riva, can you talk about volumes in the field, at least round it or aggregate it? And what should we be thinking about that, the 10 wins, I think is similar to what you've been talking about this past quarter, but talk to us about volumes in the ground and what we should be thinking later on in the year. Philip C. Mezey - Itron, Inc.: Sure. Very modest in the first half of this year as we are involved in various field trials and initial deployments, ramping significantly starting in the second half of the year across Electricity, Gas and Water. John Salvatore Quealy - Canaccord Genuity, Inc.: Okay. Okay. And then the CFO search finalization timing, how do you expect that to play out? Philip C. Mezey - Itron, Inc.: Yeah. I mean, we've seen a strong list of candidates actually have some initial strong opportunities. John, our focus here is on getting – absolutely, getting the right candidate. We're very lucky that Rob has stepped in seamlessly into the role which has given us the time to really conduct a full and proper search. And our expectation here is to – it is a very high priority item for us, so we will get it done as quickly as practical. John Salvatore Quealy - Canaccord Genuity, Inc.: Great. Thank you. Nice job guys. Philip C. Mezey - Itron, Inc.: Thanks, John.

Our next question comes from Dave Katter with R.W. Baird. David Katter - Robert W. Baird & Co., Inc.: Afternoon guys. Thanking you for taking the question. Philip C. Mezey - Itron, Inc.: Yeah. David Katter - Robert W. Baird & Co., Inc.: I was hoping – I know that the update comes in the middle of the year, but about your revenue guide, I mean, you had a strong first quarter and backlog seems solid. How should we think about that? Philip C. Mezey - Itron, Inc.: Well, I mean, as we said, first of all, that Q1 has started off consistently with our expectations for the year as a whole. And that in Rob's comments, he did comment on the fact that there is a bit of a timing issue here that's somewhat difficult to forecast, but it's within our bounds, the predictability of the quarter, so we will stop there and provide you an update on our next call. David Katter - Robert W. Baird & Co., Inc.: Got it. And in terms of operational improvements, we're seeing some of the operating margins expand. There was, I think, a $0.06 effect in Q1. How can we think about that going forward, and how many more levers do you have to kind of improve operational efficiency? Philip C. Mezey - Itron, Inc.: Sure. Well, let me start maybe above the line, and I'll pass to Rob to talk about operating expenses. We feel the very positive results here in restructuring activities, but also a wider range of activities underway in terms of how we're managing our centralized planning, procurement process, mix of business done in-house and using contract manufacturing all the way down to how it is that we're delivering product and managing our working capital. So there are continued opportunities for improvement in that area. We actually, although we did improve gross margin by 10 basis points in the quarter in what was a challenging revenue quarter for us, we're able really to produce even more favorable profitability results. So we're very pleased with the level of flexibility in our management of cost above the line. And then Rob maybe, if you want to take the operating expense one? Robert Farrow - Itron, Inc.: Yeah. I'll do that, Philip. And certainly, the $8 million of audit and legal expense that didn't repeat year-over-year was beneficial. But again, going back to the $4 million or $0.06 of EPS benefit due to lower core G&A, our head count's down there by about 8% in G&A, and that will stay stable. David Katter - Robert W. Baird & Co., Inc.: Got it. Thank you guys very much. Philip C. Mezey - Itron, Inc.: Thanks, Dave.

Our next question comes from Noah Kaye with Oppenheimer & Co. Noah Kaye - Oppenheimer & Co., Inc.: Thank you very much. Good afternoon. Hi, Philip and Rob. Thank you for taking the call and the questions. Looking at the mix of smart versus traditional, we typically thought about this business being maybe about 50% replacement. And I don't know if that's the exact figure you're at now. Maybe you can update us there. But I guess now that smart is about 50% of total shipments, I think the question is begged, are you starting to see either in sales or in the pipeline replacement business for some earlier generation of smart meters? If so, where is that happening? And do you see that as potential tailwind to margins? Philip C. Mezey - Itron, Inc.: Yeah, thanks, Noah. So I want to distinguish between what – when we say the replacement business, we're typically talking about purchase order related business to replace equipment that has literally worn out in the field. And those purchase orders have historically typically been for basic metering, although now that we're getting such high penetrations of smart metering, we do see purchase over replacements for them as well, but on a sort of routine quarter-to-quarter basis. And then you asked a related question which is, are we starting to see a refarming opportunity now for the resale of Riva, as an example, into territories where we have already installed some kind of smart product, and the answer to that is absolutely, yes. This has been going on for some time in the Gas and the Water space in which we've had a healthy degree of refarming, particularly in North America. And in Electricity, we're seeing that opportunity not only to refarm electric AMR that was sold by Itron to customers where we installed 45 million electric end points in North America that are now coming up for review. In addition, the initial smart meter deployments that began in places like Canada and even parts of the U.S., there is opportunity for us to fill in on that work as well. And so yes, there is an opportunity for growth in what is seen as the already installed base. Noah Kaye - Oppenheimer & Co., Inc.: Okay. Great. Thank you. And then on a related, somewhat related note around higher software IT content, I think last fall's NARUC Resolution expressing the sense that utilities could increase productivity by moving to cloud and managed services versus on-premise and should get rate recovery on that. I guess with that backdrop, can you maybe talk about the current activity and pipeline of managed services customers? And in general, how you're assessing right now your trajectory on software and services? Philip C. Mezey - Itron, Inc.: Sure. So in terms of managed services, we've talked about this, that it is now a part of our standard offer in many places to offer managed services with the core hardware offering. We had a strong uptick in North America last year and have over 500 customers worldwide now that are purchasing managed services from Itron. So it's a significant number of customers and we expect that to increase. And that as you pointed out the NARUC Resolution, which was really looking for more favorable financial treatment for a Software-as-a-Service purchase we see as a tailwind for additional managed services sales. So it's an increasing part of our offering and from a trajectory point of view, we've talked about $100 million to $200 million of – in this sort of area of outcomes in managed services with an inspirational goal of $500 million and are very focused on how it is that we can increase that contribution that we're currently receiving from not only managed services but outcome-based offerings, where we're offering high-value analytics of the data we're collecting through these systems. Noah Kaye - Oppenheimer & Co., Inc.: Okay. Great. And then maybe one more from me and it does get back at the kind of the outlook. I think in last quarter, you noted that that timing on several contracts had led you to anticipate a more back half-weighted year for revenue. And I guess now that it's at least a few months later, I mean, has that visibility firmed up somewhat just in terms of your level of visibility into – sensibility into some of these back half-weighted deals? Philip C. Mezey - Itron, Inc.: Yeah. No, it has. The comment we made about this three-quarter sequential increase in the 12-month backlog again is a strong indicator to us of that improved visibility for that – for the next 12 months. Noah Kaye - Oppenheimer & Co., Inc.: Okay. Fantastic. Thank you very much. Philip C. Mezey - Itron, Inc.: You're welcome.

Our next question comes from Joe Osha with JMP Securities. Joseph Osha - JMP Securities LLC: Hello, are you there? Philip C. Mezey - Itron, Inc.: Hello. Joseph Osha - JMP Securities LLC: Hi. Yeah, just a couple. For starters, returning to this gross margin question and I'm sorry, I may have misunderstood earlier, looks like one underpinning factor there was that big improvement in Gas, which looks like it went from 35% to 41% sequentially. Can you speak a little bit more to why that was and how sustainable that is? Philip C. Mezey - Itron, Inc.: Sure. It's, I mean, a product mix, we've talked in the past about the fact that the North American Gas portfolio in particular has a desirable margin profile. So when we're – when the mixes shift towards North America, it tends to help that overall margin. And then the other comment we had made was about increasing selectivity on our global Gas business in which very much like the discussion we've had over the last couple of years of being very critical on the Electric side. In our Gas business, we're clearly taking a look at when we talk about the second of these tenant's profitability of looking at tenders and if they don't need our increasingly stringent profitability targets that we're willing to forego a certain level of volume in order to achieve those profitability target. So the margin is going to move around depending upon mix during the course of the year, but the strength of these high-margin contributors along with this critical selectivity that's going on gives us a very strong tool to keep it in a certain banded range, but I would say that this was a record in this quarter and has been the high end of what we've seen as the historical gross margin range in this business line. Joseph Osha - JMP Securities LLC: And sure. So without pinning you down, I mean, if you're thinking that you've got this business to sort of a better place than it was, say a year ago? Philip C. Mezey - Itron, Inc.: Well, yes, I would. Joseph Osha - JMP Securities LLC: Yeah. Philip C. Mezey - Itron, Inc.: I mean, again based on the selectivity comment, again, it's this mix and this earlier comment I made about the Electricity mix, which there was a nice large volume of international business that was slightly diluted to the prior year's quarter. I mean, we're going to see movement based upon the global portfolio here. But we have strengthened the business with a focus on higher value offerings and being more selective in our deal selection. Joseph Osha - JMP Securities LLC: Well, that's good management done. The second question, can you – you mentioned the number in connection with this Roanoke Gas deal. Can you confirm that? And also give us some sense as to where is that the icing that's all outside of 12 months in terms of the backlog? Yeah. Barbara J. Doyle - Itron, Inc.: We didn't announce a contract value for that, Joe. Joseph Osha - JMP Securities LLC: I thought I heard a $300 million in the prepared comments. Philip C. Mezey - Itron, Inc.: No, no, no. Barbara J. Doyle - Itron, Inc.: No, no sorry. Yeah, let... Philip C. Mezey - Itron, Inc.: Yes. No, Roanoke was an announcement of 70,000 units. Would that it were a number that large Joseph Osha - JMP Securities LLC: Okay. Barbara J. Doyle - Itron, Inc.: No, and it's not booked yet. Philip C. Mezey - Itron, Inc.: And not booked, it's an awarded deal. The $300 million number is that we have visibility to deals as an example, Public Service in New Mexico that's publicly announced that they've selected Itron, but is still awaiting regulatory approval. So the deal is awarded to Itron, but not yet in backlog because it has not obtained regulatory approval. So that $325 million referenced above the formal backlog are deals in which Itron has been selected and typically, has been selected and is awaiting regulatory approval prior to actually putting that amount into the formal backlog. Joseph Osha - JMP Securities LLC: Okay. And then that Roanoke deal would be additive to that as well? Barbara J. Doyle - Itron, Inc.: Sure. Yeah, right. Sure. Philip C. Mezey - Itron, Inc.: It would, yes. Joseph Osha - JMP Securities LLC: Yeah. Okay, thanks. And then final question and I'll go away. Just thinking about kind of the run rate of your OpEx here as you've continued to optimize it over the course that you're obviously there's – moves up and down the revenue a bit. Can I still say if we think of it as kind of between $125 million and $130 million all-in on a GAAP basis? Sorry, on a quarterly basis, sorry. Barbara J. Doyle - Itron, Inc.: Yeah. Restructuring and amortization can certainly vary during the quarter. But... Robert Farrow - Itron, Inc.: It's in that ballpark. Barbara J. Doyle - Itron, Inc.: Yeah. Joseph Osha - JMP Securities LLC: Okay. Robert Farrow - Itron, Inc.: So... Joseph Osha - JMP Securities LLC: I'm sorry. Robert Farrow - Itron, Inc.: Yeah, I was just going to add that here, Joe, that the OpEx for the full year, if we're thinking of that in relation to last year, then obviously, we've got the $18 million that were one-offs in 2016, which won't repeat. And if you're thinking about the full year, you won't quite see the full amount of that $18 million reduction because we do have some increased G&A cost, largely from increased stock-based competition accruals, which has gone up in line with our stock price and some other activities and on projects that we're preparing for the future. So you won't see that full $18 million. Barbara J. Doyle - Itron, Inc.: But it will be... Robert Farrow - Itron, Inc.: And we'll see that's largely for the year. Joseph Osha - JMP Securities LLC: Okay, thank you very much.

Our next question comes from Thomas Boyes with Cowen and Company. Thomas Boyes - Cowen and Company, LLC: Good afternoon. Philip C. Mezey - Itron, Inc.: Hello, there. Thomas Boyes - Cowen and Company, LLC: Just a couple of quick ones for me. One on Riva, just how is the development going with third parties that are looking to utilize the platform. And then if you haven't already started, when do you expect to kind of start shipments to companies like Avista and things like that? Philip C. Mezey - Itron, Inc.: Okay, let's take those in order. In terms of a third-party uptick, we have certified our first electric meter provider on the platform and have a number of additional providers in the pipeline and have actively shift the module to other kinds of devices such as streetlights and charging stations in which we have the module up and working, and have provided it to a wide range of other partner providers. It's actually available online, and you can download one and order it yourself if you are so inclined. And so we have active engagement on that front. In terms of when shippings will begin, we actually have shipped meters in North America and have a number of initial pilots and proof-of-concept underway, have supplied equipment to Avista, but the volume shipments of those products, again, begin in the back half of this year. Thomas Boyes - Cowen and Company, LLC: Okay. Back half. Great. And then just a last – you kind of broadly touched upon it, but could you give us just any insight into the current RFP landscape, just maybe regionally, I mean where you see the strength particularly as it relates to the Electricity segment. Philip C. Mezey - Itron, Inc.: Sure. Yeah, so I mean, beginning closest to where we're sitting now, the North American backlog remains, or level of activity remains very strong and that's varied from as we talked about in our comments, not only our continued work with our existing customers to expand the level of penetration inside of their multiple territories, as well as, of course, getting approval on these deals that have been announced and are not yet shipping in addition to new RFP related activity. We are seeing some recovery as we mentioned in Latin America, in particular in the Water business, which is a significant business for us. So we're starting to see, I guess – so Water, you asked me to focus on Electricity there, but an improvement in Water. Some of the strength of our Electricity results are actually from Asia Pacific, in which we've seen a nice level of activity. Typically though, those deals are somewhat smaller in terms of a percentage of revenue for the company. And then in Europe, this discussion we had about a large SMETS related contract, Electricity and Gas in the U.K. is in addition to the significant number of shipments and opportunity that we see continuing in France, that we have seen an uptick of activity in the U.K. with Germany on the close horizon here emerging that we kind of see in the 2018, 2019-ish sort of timeframe. Thomas Boyes - Cowen and Company, LLC: Great. Thank you very much. Philip C. Mezey - Itron, Inc.: Welcome.

Our next question comes from Sean Hannan with Needham & Company. Barbara J. Doyle - Itron, Inc.: Hello, Sean. Sean K. F. Hannan - Needham & Company, LLC: Yeah, good evening. Can you hear me? Philip C. Mezey - Itron, Inc.: Yes. Thanks. Robert Farrow - Itron, Inc.: Yeah. Sean K. F. Hannan - Needham & Company, LLC: Okay, thanks. Yeah. A number of my questions actually have been asked or addressed here. One thing I want to do is see if I could circle back though, to that number that you frame for business that's been won, but perhaps not in backlog if we don't yet have commission approval, et cetera. As you think about those projects, do you have a sense of timing between those state commissions or regulatory bodies with utility in going through the approval process? Any color you can provide around that as well as however it is that you might handicap due to any risk that could be there that would otherwise bring back that number. Philip C. Mezey - Itron, Inc.: I'll do my best, Sean. As you know, because I know that you do this as well, that you spent time kind of thinking about what the commissions are going to do possibly and when. So the largest two participants that we've talked about in that category are National Grid Massachusetts and Public Service in New Mexico, both of whom publicly announced that they've selected us. Cases have been submitted to the commission and there has been back and forth discussion about those regulatory cases. They're both significant deals. When we talk about the strength of the 12-month backlog and better visibility for the second half, I think it is safe to infer from that, that we're not depending upon regulatory approval on these deals not yet in backlog as a predictable source of revenue in the 2017 timeframe. So our expectation is that these are 2018-ish deals in order to get to any kind of scale there. The other two that have been announced AVANGRID and Central Hudson, both of which we have press releases out, are smaller deals initially, although there is larger opportunity there for expansion and those are moving through the regulatory approval process. And so we're – and on all four of those deals, we're comfortable talking about them because we are confident of approval, but as you point out, somewhat less confident about the exact timing of that approval. Sean K. F. Hannan - Needham & Company, LLC: Fair enough. All right. Thanks so much for addressing the question, Philip. Philip C. Mezey - Itron, Inc.: Thanks, Sean.

Our next question comes from John Quealy with Canaccord Genuity. John Salvatore Quealy - Canaccord Genuity, Inc.: Hi, thanks for the follow-up. In Water, Philip, can you talk about Europe? I know obviously they've got the election I guess next week. Is that impacting results at all? I know historically with the manufacturing footprint in France, Water has been a bigger part of the business there. So can you talk about the sort of base metrology business for Water in Europe? Philip C. Mezey - Itron, Inc.: Yeah. I mean, John, we do have a timing related issue on a significant order over there. I would not correlate it to the election per se. And we are confident that the issue is going to work itself out. So we do have some timing related issue there, but have a good outlook and expect recovery of the Water business in the second half of this year. John Salvatore Quealy - Canaccord Genuity, Inc.: Okay. And... Barbara J. Doyle - Itron, Inc.: And I think Rob also pointed out that the book-to-bill in Water has been greater than 1 to 1 for the last three quarters. So that helps with visibility for the second half. John Salvatore Quealy - Canaccord Genuity, Inc.: Okay. So this particular contract is booked funded and just sitting. Is that how to characterize it? Philip C. Mezey - Itron, Inc.: No. Barbara J. Doyle - Itron, Inc.: No. Philip C. Mezey - Itron, Inc.: I would not. No. Barbara J. Doyle - Itron, Inc.: No. John Salvatore Quealy - Canaccord Genuity, Inc.: So it's... Philip C. Mezey - Itron, Inc.: And by the way that characterization of our business generally applies to North American business and that style. European business tends to be tendered and therefore, does not – they are not awarded in advance... Barbara J. Doyle - Itron, Inc.: Right. Philip C. Mezey - Itron, Inc.: ...prior to regulatory approval, the tenders are issued and typically move forward after that. So... John Salvatore Quealy - Canaccord Genuity, Inc.: Okay. So this is not in the book-to-bill backlog, right now? Barbara J. Doyle - Itron, Inc.: Correct. Philip C. Mezey - Itron, Inc.: Yes. That is correct. Barbara J. Doyle - Itron, Inc.: Yeah. John Salvatore Quealy - Canaccord Genuity, Inc.: Okay. Thank you. And then Philip, characterize the M&A pipeline for us, can you give us any idea on how many opportunities you've looked at? How many you're current vetting? Any sort of metric or quantification around the dispersal of any funds? Thanks. Philip C. Mezey - Itron, Inc.: Yeah. John, I mean – we of course, don't comment on specific opportunities there, but as I've consistently said, we do see an opportunity to expand into this outcomes area, the higher value area of getting more leverage out of the data that's collected through our systems. And so it's typically concentrated in that area. I've commented before though that we are highly committed to focusing on this mid-teens EBITDA target by the end of 2018-ish timeframe and that, that puts a – I think a good level of discipline in the acquisition pipeline that we're looking at, that there were a number of opportunities to look at companies that don't make money and have uncertain timing as to when it is that we're going to see profitability. And in order to work consistently towards the kind of your profitability goal and maintain the trajectory we've had over the last seven quarters that we have to be selective. But that outcome-based area is our area of primary focus. There are other transactions in the device category that are out there, but on our strategic fit, we're really looking for higher growth, higher-margin opportunity pipeline out there and we do have a number of options. John Salvatore Quealy - Canaccord Genuity, Inc.: Great. Thank you folks. Philip C. Mezey - Itron, Inc.: You're welcome. Barbara J. Doyle - Itron, Inc.: Yeah.

That does conclude today's question-and-answer session. I would like to turn the call back to Philip Mezey for closing comments. Philip C. Mezey - Itron, Inc.: Thanks, everyone. I appreciate the time on the call. Our goal here is to make clear to you that we saw a very strong operational quarter. The benefits of the changes that we're making are, I think, very clear in terms of improving profitability metrics. We expect that to continue. And as revenues build throughout the year, the opportunity for increased leverage is very, very strong. So we're pleased with the overall results and are off to a good start for the year. Thanks very much, and look forward to talking to you all soon.

There will be an audio replay of today's conference available this afternoon. You can access the audio replay by dialing 1-888-203-1112 or 1-719-457-0820 with the passcode of 9719829 or go to the company's website, www.itron.com. That does conclude today's call. We appreciate your participation.