Barbara J. Doyle - Vice President of Investor Relations Philip C. Mezey - Chief Executive Officer, President and Director W. Mark Schmitz - Chief Financial Officer and Executive Vice President.

Patrick Jobin - Crédit Suisse AG, Research Division Noah Kaye - Northland Capital Markets, Research Division Benjamin J. Kallo - Robert W. Baird & Co. Incorporated, Research Division John Quealy - Canaccord Genuity, Research Division Andrew Hughes - BofA Merrill Lynch, Research Division.

Good day, everyone, and welcome to the Itron Incorporated Q3 2014 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. For opening remarks, I would turn the conference over to Ms. Barbara Doyle. Please go ahead..

Thank you, Keith, and good afternoon to everyone on the call. This is Itron's Third Quarter 2014 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 on this call.

The presentation is available to the webcast and to 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 marks, we will open up the call to take questions using the process that the operator described. 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 of 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 under 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 any forward-looking statements. Now please turn to Page 4 in the presentation and I will turn the call over to our CEO, Philip Mezey..

Good afternoon to everyone. And thank you for attending and joining us today, especially, those of you who are attending European Utility Week and calling in from Amsterdam. First I'm pleased to officially introduce Mark Schmitz, who joined Itron in September as Executive Vice President and CFO.

Mark has been diving in and getting actively engaged in Itron's business and he has already made a positive impact at Itron. So welcome, Mark, and thank you. I'll begin the call with some opening comments, focusing on revenues, bookings and backlog.

Mark will then review our financials and provide you with some insight into his initial priorities as Itron's CFO. I will review the restructuring plan we announced today and the benefits we will realize in our Electricity business. Then we'll take some questions. Our third quarter results reflect continuing improvement in our business execution.

We reported $496 million of revenue and $0.39 of non-GAAP EPS. A higher tax rate, increased professional fees and higher variable compensation impacted non-GAAP operating income and earnings per share compared to last year. However, we are executing well on a number of business initiatives.

Our underlying profitability is improving and we continue to build our backlog, increasing our visibility for revenue growth. Now let's turn to the revenue bridge for the quarter on Slide 4.

In constant currency, total revenues grew by $4 million in the third quarter with growth in Gas and Water revenues offsetting lower revenues in the Electricity segment. Water continues to perform well with growth from smart projects and new product. In Gas, we are seeing record revenues in North America, offsetting weakness in EMEA.

Electricity revenues were down year-over-year, driven primarily by a decline in EMEA. While Mark will review the segment financials in more detail, I will make a comment on our Electricity profitability. During the quarter, we recorded a net charge of $11 million for additional project cost in our OpenWay contract with BC Hydro.

We believe that we had recorded sufficient costs to complete the project in the third quarter last year. As we progressed through the implementation, we determined that adding Itron's cellular solution in certain areas will best address the most remote or hard to access meters.

Cellular is expected to be used on less than 2% of the 1.9 million meters in BC Hydro's territory and we've agreed to accept the costs for the combined solution.

Itron's comprehensive approach with integrated cellular technology is uniquely able to solve many types of complex topology challenges, and the solution meets the business requirements for BC Hydro's world-class smart grid project.

While this project has had technical challenges, this is a strong customer reference account for Itron and the project remains profitable. Factoring out these costs, the Electricity adjusted EBITDA margin would have been 5%. Now let's turn to the backlog and bookings slides on Slides 5 and 6. Total backlog of $1.35 billion grew by 27% year-over-year.

12-month backlog of $700 million grew by 21% year-over-year, and increased by 4% sequentially from Q2. As a reminder, a significant amount of business that Itron has been awarded is not yet booked into backlog, including 3.7 million smart meters with Gaz de France, nearly 2 million meters with Consumers Energy and almost 4 million with Duke.

So our revenue visibility is higher than depicted in the backlog. We had another solid quarter with $514 million worth of bookings, an increase of 12% year-over-year. Electricity segment bookings were up nearly 50% from last year.

This was on top of a diverse customer set of bookings and healthy frame contract business in Gas and Water, which is the more typical arrangement for these 2 segments. Notable bookings included $62 million with ERDF for Linky electric meters in France. As announced in September, Itron was awarded 1.6 million of the 3 million unit tender.

Itron will deliver the meters from September 2015 through the end of 2016. We booked the committed minimum of 1.2 million meters and we will record the additional allotment of 400,000 meters when the final allocation is received.

ERDF smart meter project is moving forward as a positive step in Europe and we are delighted to be a major supplier for this project. In Gas, we signed a $21 million contract with Peoples Gas in Chicago, which includes our fixed network and communications modules for 400,000 endpoints.

And in Water, we booked $25 million for contracts in Ireland, Germany, France, Spain and the city of Bismark in the U.S. The bookings this quarter reflect a book-to-bill ratio of 1.04 and our backlog stands at the highest level in 3 years.

Since the end of the quarter, Itron has been awarded other notable contracts, including an OpenWay solution for 35,000 smart meters in Brazil and a non-revenue smart water solution covering 120,000 endpoints in Jordan. Our bookings this year have been strong and our backlog has increased, driven by smart grid projects around the world.

Considering the large project awards not yet booked, our contracted revenue visibility increases upward to $2 billion. I'm also encouraged by record attendance at Itron's Utility Week Conference that we held in October, which is our largest customer event in the year.

We hosted more than 700 customers, 100 partners and 100 distributors for a week of presentations, discussions and knowledge exchange. There was high demand at Itron's 44 Itron Solution demo stations and in the 130 breakout session discussing Itron's Electricity, Gas and Water solutions.

We also conducted an inaugural Itron Executive Summit, including executives from gas, water and electric utilities from across the country. I came away from the event energized about the direction of our industry and confident about Itron's role in helping our customers build smart systems and smart cities around the world.

Now I'll turn the call over to Mark to cover our financial performance in more detail..

Thank you, Philip. Before I cover the quarter, I'd like say that I feel very pleased and fortunate to be part of the Itron team. We have a number of important and strategic initiatives underway, which are going to accelerate our path to profit improvement and in some ways, fundamentally change the ways we operate.

My priorities coming into the job are mostly about moving forward quickly and assertively with these initiatives and coupling them with some other moves that will move us to best-in-class in our support functions. Let's start with the restructuring program that we announced today in our 8-K.

A portion of this program will involve restructuring our back-office G&A functions to better align with business needs and at competitive cost levels. As part of this, we are moving to the central service functions for our controllership, transaction services and other G&A groups.

Our goal of business services center in Cork, Ireland now has 42 staff and has absorbed the back office functions of 10 of our business units. That is now moving forward at a faster pace. The streamlining of our back-office functions is made possible by the deployment of a common ERP system enterprise wide.

So far, we have 31 sites migrated to the new ERP system and we're on track to bring onboard our largest European businesses in early 2015. At that point, we'll have more than 80% of our worldwide revenue processed on the new system.

This is a foundational initiative for Itron in the future and has to be done right and with the necessary standardization and a solid controls framework.

It's also my highest priority to forge a collaborative relationship with Philip, John and the other business leaders in each of our segments so that finance and controllership are working to drive business growth and performance, partners in the business.

Finally, as should be the case with any finance leader, it's my job to ensure that we are always doing our best to provide a fair and hopefully superior return to our shareholders. And I should note also that our strong balance sheet provides ample financial flexibility to achieve our strategic objectives.

So in summary, my initial priorities also around accelerating progress on a few foundational initiatives that will improve Itron's efficiency and profitability and at the same time build a collaborative relationship to help drive continual business performance gains, all of which is aimed at higher shareholder return.

Now let's move to the third quarter results. Slide 7 summarizes consolidated company results for the third quarter of 2014 compared with our third quarter last year.

Total revenues of $496.5 million increased by $1 million compared to last year, driven by growth in Water and Gas revenues, offset by a decline in Electricity, which is driven by our strategy to focus on profitable growth in that segment.

Total gross margin of 30.4% improved by 10 basis points, driven primarily by improvements in the Water segment gross margin. Non-GAAP operating margin and EBITDA margin were down compared to last year, driven by higher operating expenses. Non-GAAP operating margin of 5.6% decreased 100 basis points.

Adjusted EBITDA margin of 8% declined by 140 basis points.

While margins are benefiting from the higher relative contribution from Water and Gas segments, lower manufacturing cost in our Electricity segment and lower headcount in our operating expense areas, we are achieving a higher rate of variable compensation and increased professional fees related to our restructuring projects.

On a GAAP basis, we have diluted earnings per share of $0.19 compared with a net loss of $0.19 per share in 2013. Higher gross profit and lower restructuring expenses more than offset a higher effective tax rate compared with last year.

Non-GAAP diluted earnings per share, which excludes the impact of goodwill impairment, restructuring charges, acquisition-related expenses and amortization of intangible assets, were $0.39 for the quarter compared with $0.65 in 2013.

As you can see on Slide 8, improvements in gross margin were offset by higher operating expenses, tax and other expenses. The higher tax rate in 2014 is driven by the expiration of the U.S. R&D tax credit, which has not yet been reinstated this year and by valuation allowances placed on certain deferred tax assets.

The non-GAAP effective tax rate in quarter 3 of 34% increased from 14% in quarter 3 of last year. While these items are impacting our reported effective tax rate, cash taxes are expect to be about the same level this year as last year.

Cash flow reflects an improvement from 2013 levels, driven by higher operating profits and improvements in net working capital. Free cash flow in the quarter of $36.7 million increased from $31 million a year ago. For the 9-month period, free cash flow was $84.5 million, up significantly from $21.3 million in the last year.

We ended the quarter with $122 million in cash and equivalents. During the quarter, we repaid $17.5 million in debt, bringing our total debt down to $310 million. In addition, we utilized $8 million to repurchase 203,000 shares of stock.

Given the confidence we have in our forward plans, we are immediately increasing our rate of share repurchase under the current board authorization. The board authorized $50 million for share repurchases over a 12-month period. We have repurchased $15 million of shares through November 3.

Our goal now is to fully utilize the remaining $35 million prior to the expiration of the authorization in March 2015. Now let's move to the segment performance, beginning with the Water segment on Slide 9. The Water team continues to deliver strong results with revenues of $144 million in the quarter.

While the revenues grew by 6% compared with the third quarter of 2013, driven by strong book and ship orders and global smart water projects in EMEA as well as new business growth in the Asia-Pacific and Latin American regions. Gross margin increased to 35.7% driven by higher volumes and factory efficiencies.

Our water factories are running at high utilization rates in all regions. Non-GAAP operating margin decreased 140 basis points to 15%. This was primarily driven by higher sales expense and variable compensation in the quarter as well as higher product development expense.

Water continues to be a profitable growing business for Itron and we're very pleased with the performance in the quarter. Now turning to the Gas segment on Slide 10. Gas revenues of $149 million grew 4% compared with last year. Strong growth in North America offset downward pressure in EMEA.

In fact, we had a record level of gas revenue in North America in quarter 3. In EMEA, increased smart gas meter sales in Italy and the Netherlands were offset by a slowdown on some projects, particularly in Eastern Europe and the CIS countries.

We are optimistic about the long-term gas opportunity in EMEA, especially as GrDF and other smart gas projects advance. In the short-term, however, the potential exists for continued downward pressure in Russia, Ukraine, the CIS countries, given political instability in the region.

Gross margin was down 280 basis points as lower sales and volumes in EMEA offset strong volumes and sales in North America. Non-GAAP operating margin of 17.4% declined 320 basis points compared with last year. The decrease was driven by lower gross margin. In addition, we are in an R&D investment cycle for anticipated smart gas projects in EMEA.

Addressing the Electricity segment on Slide 11. Revenues decreased 6% year-over-year, primarily due to lower volumes in EMEA. In addition, our exit from the low-cost basic metering business in Brazil impacted revenues by approximately $7 million in the quarter. As we've discussed, this business decision improves profitability.

In both gross margin and non-GAAP operating margin, Electricity improved compared to last year. This is inclusive of the project cost on BC Hydro OpenWay project that Philip discussed.

The increased mix of higher values, smart grid project revenues in addition to other steps we have taken to date are driving improvements in margins and adjusted EBITDA. And we'll continue to take appropriate steps to drive profitability in this segment to our targeted level.

Lastly, let me provide an update on the status of the restructuring project we announced in 2013. In September 2013, we announced projects to reduce our workforce by 9%, delivering annualized savings of $30 million. We are now approximately 75% complete with the workforce reductions and are on track with the facility activities.

We estimate we will achieve approximately 80% of the expected annualized savings on a run rate basis by the end of 2014. Today, we announced a new restructuring plan targeted to further improve the profitability of the Electricity business, including related G&A reductions.

With this plan, we expect to incur restructuring charges in the fourth quarter of approximately $65 million to $75 million. Philip, I'll turn the call back over to you..

Backlog growth; long-term sustainable cost reductions and efficiencies; and rebalancing our existing electric business. We are making firm progress on each of these elements. Our Electricity backlog and frame orders have increased substantially with high-value smart grid business.

When we consider several large Electricity projects that have been awarded but not yet booked into backlog, our Electricity revenue visibility totals more than $1.5 billion. Many of the contracts are large projects with multiyear deployment schedules.

Based on planned project schedules, we forecast that backlog will generate more than $140 million of incremental high margin revenue growth by the end of 2016. Regarding cost reductions and efficiencies.

The plan we announced today includes projects that we expect will drive a run rate of approximately $40 million in net savings by the end of 2016, when the majority of the activities are completed.

The plan includes streamlining operations, consolidating facilities and rebalancing our global workforce to better align our resources with markets where Itron can serve its customers profitably. Given the legal and regulatory frameworks in different countries, the benefits will take 18 to 24 months to be fully achieved.

We're also rebalancing our electric business. During 2014, we have already begun phasing out our presence in certain low margin areas that are not strategic markets for us, which has impacted 2014 revenues by approximately $40 million compared with 2013. In 2015, further actions will impact revenues by an additional $40 million to $50 million.

While revenues are impacted in the short-term, these decisions improve operating leverage by allowing us to reduce support, sales, marketing and administration required to serve these markets.

In addition, we have clear visibility for these lower margin revenues to be more than offset over time as higher-margin revenue is generated from our backlog, with deployment schedules beginning late in 2015, ramping up in '16 and '17.

So how do our plans impact our outlook for the Electricity business? For 2015, we expect EBITDA will improve over 2014 on a full year basis. The improvement will be driven by the product mix shift to higher margins smart metering in the second half as our backlog converts to revenue.

We will also see positive effects of our prior restructuring actions, possibly offset by some short-term inefficiencies that may occur due to consolidations of factories and workforce changes as well as the continued rollout of our global ERP system.

In 2016 we can foresee double-digit growth in our Electricity business as projects like FirstEnergy, Duke, Consumers Energy, ERDF and others ramp up to their mass deployment schedules. At that time, the full benefit of our restructuring plans will also be in effect, driving segment EBITDA margins to high-single digits by the end of 2016.

In conclusion, business challenges and economic uncertainty and different geographic regions are likely still ahead of us, especially in the EMEA region. However, I'm confident of the steps that we are taking towards sustainably improved profitability.

Our customer win rates, backlog growth and new technologies, such as Riva adaptive communications with edge intelligence, demonstrates that Itron solutions and competitive position have never been stronger. We have a team of professionals with deep domain expertise and a passion for customer success.

And more customers and more geographies have begun to increase their investments in smart grid, smart systems and smart cities. Itron's leadership in our industry will help customers achieve their operational and strategic goals by providing innovation at the meter and to the edge of the network.

By doing so, we will drive long-term value creation for our customers and our shareholders. The decision to increase the rate of share repurchase and fully utilize the $50 million board authorization reflects our confidence in delivering this value. Thank you, and now let's take some questions..

[Operator Instructions] We'll take our first question from Patrick Jobin with Crédit Suisse..

Thanks for all the details on the electric segment, really appreciate that. First question just on the BC Hydro charge. Just want to understand that going forward since it's the second charge.

Was that contemplated when the mid-year guidance was formed of $1.50 to $1.80? Or how should we think about how you've looked at that project and getting it across the finish line?.

Thanks, Patrick. No, it was not. I would say, however, we've had strong electric results that have allowed us to substantially offset the -- that charge, certainly at the revenue line.

And in terms of -- you said in your comment about going forward, last year when we took the charge, we felt that we understood what was required in the process, again, of implementing the solution. There was more work that needed to be done. And -- so that we've worked very, very closely with BC Hydro in order to get this issue resolved.

And this charge that we have taken this quarter, we understand to encompass to the best of our knowledge all that's going to be required to complete the project..

Got it. Okay. And then over $2 billion or close to $2 billion in total revenue visibility, and I appreciate, a lot of that's not in backlog.

With that visibility, how are you thinking about 2015 at this stage? Or I guess, said another way, what is the project timing expectations for converting a lot of that to revenue?.

Yes, Patrick, we're not in a position to provide any guidance on 2015. We -- this is Mark Schmitz speaking. We do feel positive about the way the business is proceeding. Philip said it very well. Visibility and revenue is improving.

Some of this, of course, is backloaded and we'll be in a position to talk to you about 2015 in the February earnings call, but not yet..

We'll take our next question from Noah Kaye with Northland Capital Markets..

Looking at some of the growth opportunities that are out there globally, can you talk a little bit in particular about what you're seeing in Southeast Asia in terms of the opportunity for new large wins and newer countries you see moving forward in a relatively short time frame?.

Noah, sure. So Southeast Asia, obviously, a big region and what we've talked about on last several calls is it, that we are focusing on markets in which we have a sensible long-term product advantage. And what that means is that we are not necessarily focused on large commoditized markets.

In particular, we discussed tremendous customer and partner, China Light and Power, who's working with our most advanced new technology, this Riva product that we referenced.

And we see opportunities in Australia, New Zealand, Singapore and a number of other countries like Malaysia, Thailand, where there are opportunities for these types of smart grid solutions. So very, very interesting and promising area for us..

Okay. And you also mentioned, I think, new bookings for non-revenue water.

Can you tell us a little bit more about that and what traction you're seeing there, actually, in that leak detection product?.

That's correct. We have frequently commented on the fact that up to 30% of the water that's put into the distribution system is wasted and there were tremendous opportunity globally to use our technology and our analytics in order to discover where that non-revenue water occurs.

And so it's now a normal course of business for us, it's a part of selling our solution to either lead with or work with the customer to expand the scope to include a non-revenue water component of the project. So it's a very strong selling tool for us..

We'll take our next question from Ben Kallo with Robert W. Baird..

Welcome, Mark, for your first conference call. There are a lot of moving parts and mostly good things.

But when I add them all up, it sounds like it's -- and correct me if I'm wrong on this characterization, that 2015 is kind of still in this transition until we see the growth in 2016, where a lot of these projects kick in and your cost savings really come into effect..

I mean, Ben, yes. So you've added up these comments that have said that the announced restructuring is -- the full benefits will be felt in even the back half of '16, that a number of the projects that we've talked about that are in backlog are really only beginning initial deployments in '15 and that it's fairly back-end loaded there.

So we are -- have made a number of comments about the back half of '15 leading into, as we've said, a double-digit '16. That's -- those comments were specifically directed at the electric segment, our Gas and Water segment. [Audio Gap].

... that consumer and also with Duke and what needs to occur for you guys to be able to put that into backlog and start moving forward with the projects, I guess..

Yes. So consumers is -- well, we have been selected for the entire deployment, the form of the contract is such that we are not able to book the whole contract into backlog. There are annual authorizations that occur on that contract. So that's why it has not been booked.

We have begun the deployment and have a deployment schedule for continuing into 2015. And on Duke, we had commented on the fact that we had booked about $18 million or $20 million worth of the Duke contract last quarter for committed deployments that are going on through the third and fourth quarter of this year.

And that the next big milestone for us on Duke is the approval of the Indiana case, which has been filed with the commission in which we expect approval in the first half of 2015..

[Operator Instructions] We'll go next to John Quealy with Canaccord Genuity..

So the first question, just a clarification on some of the numbers and assumptions and the things you talked about, Philip. Electric EBITDA up in '15 versus '14. I assume that excludes the onetime charges when you make that comparison. And then, also, the sort of high-teens -- I don't know.

You said -- did you say high-teens EBITDA in '16 in that segment or how did you couch that? And I'll come back to you..

Sure. The comment was -- we are not expecting any onetime charges and not comparing to that. So we expect the underlying performance of the electric segment to grow.

So -- and I believe the confusion you're speaking about on the second area is that, we've said that the overall company target mid-30s gross margin, mid-teens EBITDA margin at the total company level will be achieved.

In order to achieve that target, where we need to focus is getting the electric segment to this high-single digit EBITDA by the end of 2016. So my comments today, I did not reiterate the total company target. It is absolutely still out there and we're actively focused on it.

It's just that this call, given the announcement of the restructuring, is very focused on electric segment performance. And therefore, we've really emphasized this high-single digit EBITDA target by the end of 2016..

Okay.

And that assumes no change in the R&D percentages from historical levels, give or take?.

Yes. I mean, the focus is, we are managing those R&D expenses down. As we've announced on the call, we have, as an example, opened an India development office.

And right now, one of the reasons that operating expenses, particularly, at the R&D line are not down as much as we feel it's achievable, is that we have a period of kind of double-up here as we have not shed some of the resources in our higher cost countries and added these lower cost resources and it is our intent in 2015 to manage through that process..

Okay. And then a second question. The sort of acceleration with the buyback and I'm sorry I dropped off when Mark was speaking about it.

But is this because you've seen the M&A environment and don't see anything you like, so you'd rather buy back stock for the next 12 months as we wait for '16 organics to kick back in? Or is M&A still a viable option, given the balance sheet?.

This is Mark Schmitz, John. And I'd say that M&A is a viable option. We've got the financial flexibility to do that. We are not looking at this as one alternative necessarily versus another.

We just felt and our board felt that accelerating the buyback to their previous authorization, we're not going above what they had already authorized actually, but accelerating the pace until the end of the current authorization was the right thing to do, given the whole variety of factors, including our cash position and, of course, the price of our stock..

And we'll take our next question from Andrew Hughes, Bank of America Merrill Lynch..

Just on the additional allotment of 400,000 meters in the ERDF deal, I know you mentioned that those would be booked once they were allocated.

Can you just talk a little bit about what that allocation procedure is like? Are those meters essentially secured and that's just a matter of time? Or does -- what needs to happen to get those into backlog?.

Yes. Andrew, the structure of the contract is that the consumer very wisely signals their intention of their total commitment, but measures you and your performance on that first allotment prior to awarding the final amount.

So it's a mechanism for, really, ensuring that we are meeting their quality timeliness and their performance criteria before that additional allotment is allocated..

And that's the process they use for every provider in that contract, it's not just Itron..

Got you.

And then the gross margin trends in the Gas segment driven by product mix and decreased volumes in EMEA, is that something you expect to turn around pretty quickly in 2015 or even sooner than that? And can you just talk about some of the longer-term trends you're seeing in that business and when the sort of margin turnaround that Mark was talking about, when do you expect to see that?.

Yes. There are opportunities for us to improve the gross margin. As you point out, product mix is a strong contributor there. Although we did have a very attractive mix and as you heard, record revenues in North America. We do have some high-value prepayment meters, where we -- our volumes were somewhat depressed in the quarter.

And so based upon contract timing, it is absolutely possible for us to adjust mix. And as you point out, volume is the other contributor. We are -- in terms of how we think about the timing, that's something that we will update you on as we give guidance for 2015..

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

Mark, the FX, I think you guys talked about the assumptions last quarter. I think it was like $1.35 or something. Obviously, that's not dealt that with here.

What should we use for Q4 or how to think about FX for you guys?.

Here's a rule of thumb, John. As we look at our business, we say that every $0.05 decline in the euro rate probably takes $5 million a quarter off of the top line for us, off of the revenue line. The impact on the bottom line, though, is pretty neutral, not a real material impact. So....

And then just a follow-up, Philip, on Europe. It seems like a lost year for Europe in a lot of different ways from utility CapEx pressures to cannibalization ahead of smart. I know we're not talking '15 numbers here.

But at this stage, in November, is that a fair way to think about Europe for the industry and Itron? Or is it potentially grinding out share gains as you do some work under the wireline on expenses in Europe?.

I mean, John, I don't think it's that far off on 2014. The story for us really has to do with actively pursuing opportunities, clearly ERDF being a big win for us there as we pursue these foundation opportunities in the U.K. and the other strength in the Water business that we've had in Europe. So I'd point out that we've got some strong success there.

But we are really focused on GrDF, ERDF moving forward as we've talked about the possibilities and Italy on the gas side, U.K. business and really building that. But your characterization of '14 has, across Electricity and Gas it has not been the strongest year. Water has had a really -- an outstanding year..

Are there any other questions, Keith?.

We do have 1 question in the queue..

Okay..

It looks like we have no question in the queue at this point. My apologies..

Okay. That's all right. So....

Okay, thank you, everyone. A couple of quarters ago, we talked about this -- the significant challenge that we're facing in our Electricity segment. I am -- and we've really committed to developing a clear plan for addressing that challenge for getting to the targets that we stated.

On today's call, we've really provided you with this view about improved revenue visibility, cost control and the steps that we're making and rebalancing the portfolio, which is already underway.

We feel that aside -- with the project charge aside, that the health of the Electricity business is returning and it's going to continue to improve throughout 2015 and '16.

The emphasis on these businesses -- on the Electricity business on this call is not intended to detract from the strong performance of our overall Gas and Water business and the same kinds of scrutiny that John Holleran and his team are giving those business lines as well, whereas we say there is opportunity for continued improvement as well.

We're very confident about the plan that we've announced today. Also, very, very thankful to have Mark Schmitz on board. And with that, I look forward to catching up with all of you soon. Thank you..

Thanks, operator. That concludes our call..

Thank you. Ladies and gentlemen, 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 8690717 or go to the company's website at www.itron.com. This concludes today's discussion. We appreciate your participation..