Itron (ITRI)

Q1 2011 Earnings Call

April 27, 2011 5:00 pm ET


Ranny Dwiggins - Vice President of Investor Relations

Malcolm Unsworth - Chief Executive Officer, President and Director

Steven Helmbrecht - Chief Financial Officer and Senior Vice President


Steven Charest - Divine Capital

Michael Horwitz - Robert W. Baird & Co. Incorporated

Stephen Sanders - Stephens Inc.

Benjamin Schuman - Pacific Crest Securities, Inc.

Elaine Kwei - Jefferies & Company, Inc.

Craig Irwin - Wedbush Securities Inc.

Colin Rusch - ThinkEquity LLC

Sanjay Shrestha - Lazard Capital Markets LLC

Patrick Jobin

Paul Coster - JP Morgan Chase & Co

Andrew Weisel - Macquarie Research

John Quealy - Canaccord Genuity

Steven Milunovich - BofA Merrill Lynch

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Patrick Jobin - Crédit Suisse AG



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Good day, everyone, and welcome to the Itron Q1 2011 Earnings Conference Call. Today's call is being recorded. For opening remarks, I would like to turn the call over to Ranny Dwiggins. Please go ahead, sir.

Ranny Dwiggins

Thank you, and good afternoon, everyone. Thank you for joining us today. On the call, we have Malcolm Unsworth, our President and CEO; and Steve Helmbrecht, our Chief Financial Officer.

We issued a press release earlier announcing our results. The press release includes replay information about today's call. We have slides to accompany our remarks today. These slides are available through the webcast and through our corporate website under the Investor Relations tab.

Please turn to Slide 2 while I review today's agenda. After I complete the introduction, Malcolm will provide a business update. And next, we will review the financial results for the quarter, and then Malcolm will close our prepared remarks. After that, we'll take your questions.

Our earnings release and financial presentation include non-GAAP financial information that we believe enhances your overall understanding of our current and future performance. We have included reconciliations of differences between GAAP and non-GAAP financial measures in our earnings release and financial presentation.

Now please turn to Slide 3 regarding our Safe Harbor statement. 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 expectation 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, Form 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.

And with that, I will turn the call over to Malcolm Unsworth, Itron's President and CEO.

Malcolm Unsworth

Thank you, Ranny, and good afternoon, everyone. Itron's first quarter results provide continuing validation of the strategic direction we're setting for the company. Those of you who follow us on a regular basis, know that we are managing Itron to capitalize on the extraordinary energy on what the management opportunities' unfolding before us. As you move forward in the global marketplace, there are 3 watchwords at the forefront of our minds: Balance, which refers to our extensive product portfolio and solutions for electricity, gas and water; execution, which is how we manage every aspect of our company; and innovation, our ability to develop new solutions to meet the evolving needs of our customers. As you'll see in our discussion today, each of these continues to be reflected in Itron's first quarter performance.

Our first quarter success underlies our unique position. Itron is the global leader in technology solutions for electric, gas and water utilities, at a time when the utility industry has begun the most significant technology upgrade cycle in its history. The conversion to smart meters has progressed the fastest in North America, but it's spreading quickly to other parts of the world. Our North American leadership positions us well to extend our success globally, and we have the opportunity to expand our relationships with our customers to provide additional products and services. In short, we see the opportunity for dramatic growth and intend to aggressively pursue it.

On Slide 4 in our presentation, you'll see the areas I'm going to cover this afternoon. First, our improved profitability and other financial highlights for the quarter. Second, our recently announced $268 million BC Hydro booking, a validation of our alliance with Cisco and a number of other contract awards. And third, our reorganization to support growth.

Now please turn to Slide 5. We're off to a great start for the year. Revenue is up 13% over the first quarter of last year with very nice contributions from both North America, which was up over 14% and International, which was up approximately 12%. We also saw growth in all 3 business segments: Electricity, Gas and Water.

Now as I've said many times, our balanced product portfolio is one of our main strengths. The drivers for higher revenue in North America were higher sales from our OpenWay smart electricity meter and gas solutions and increases in professional services, as well as continued improvement from our Gas business, with high revenues from our Choice Connect advanced gas communication modules and gas meters.

The higher International revenue was driven by developing markets in Electricity, in particular, Indonesia and South Africa. For Gas, it was Italy, Azerbaijan and Latin America. And our International Water business has record quarterly revenues of $106 million, a 15% improvement over Q1 of last year, driven specifically by growth in Asia, the U.K. and France.

Now economic conditions are improving in our European factories are busy. In fact, 3 of our water and heat factories were a record production levels in Q1. We also had very strong bookings of $681 million, representing a book-to-bill ratio of 1.2:1, giving us a record backlog at the end of the first quarter of $1.75 billion.

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