Good day, everyone, and welcome to the Itron, Incorporated Q1 2013 Earnings Conference Call. Today's call is being recorded. For opening remarks, I would like to turn the conference over to Barbara Doyle. Please go ahead, ma'am.

Thank you, Cecilia, and good morning to everyone. Welcome to Itron's first quarter fiscal 2013 conference call. On the call today will be Philip Mezey, Itron President and Chief Executive Officer; Steve Helmbrecht, Itron Vice -- Executive Vice President and Chief Financial Officer; and John Holleran, Itron Executive Vice President and Chief Operating Officer. After our prepared remarks conclude, Philip, Steve and John will take some questions using the process that the operator described. We issued a press release earlier today announcing our results. The press release includes replay information for today's call. We have prepared slides to accompany our remarks in this call, and these slides are available through the webcast and through our corporate website under the Investor Relations tab. Our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance. We have reconciliations of differences between GAAP and non-GAAP financial measures in our earnings release and financial presentation. I would also like to cover 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 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 and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. Now I'll turn the call over to Philip Mezey.

Good morning, everyone, and thank you for joining today's call. I will begin the call with some comments on Q1 and current market dynamics and provide an update on key opportunities. Steve and John will cover the business results in more detail, then I will conclude the call with some remarks on the balance of 2014 before taking questions. Q1 was a tough start to the year. There is no doubt about it. As we discussed on our Q4 call, we expected a slow start. Revenues in the quarter were at the low end of our expectations. We did see volumes pick up in March but not enough to cover a shortfall in January and February. But I would not call the softness across the board. We had some orders in the quarter delayed, and we did see weakness in certain geographies. On the other hand, we also had some projects that ramped up and accelerated. So a combination of factors impacted our results, on which John and Steve will elaborate. What are we seeing in terms of market dynamics? First, I'd say our level of core business remained solid. When you normalize for the top 5 OpenWay projects in 2012, our electricity revenues performed well. Our water segment revenues increased modestly in Q1, and we continue to anticipate growth in water for the full year. The good activity in core electricity and our water business was offset by lower gas revenues in the quarter. We attribute the softness in the quarter primarily to project-specific issues, but I won't dismiss the effect of economic weakness in certain regions. Revenues held up fairly well in North America. In certain European countries, utilities are moving cautiously under current economic conditions. And we are seeing a slowdown in Latin America residential business overall.…

Thank you, Philip, and good morning. Today I will cover our consolidated financial results and capital activity, then turn the call over to John for a discussion of our segment business performance. I'll begin with Slide 4, which summarizes our revenue bridge for the quarter as compared with the prior year. Lower revenue from the top 5 OpenWay smart grid projects drove the decline as 4 of these projects were substantially completed in the third quarter of 2012. OpenWay revenues in the first quarter were $12 million compared with over $130 million in Q1 '12. The roll-off of these projects drove the majority of the year-over-year impact in revenue, gross margin and operating profit in Q1. We still have about $263 million in backlog for these top 5 contracts, which we expect will be recognized over the next few years as Detroit Edison continues its rollout. Currency fluctuations and a stronger U.S. dollar reduced revenue by $5 million. Excluding these items, we saw growth in our electric and water businesses and a decrease in our gas business. Slide 5 summarizes the year-over-year bridge for non-GAAP EPS. Gross profit dollars were down primarily due to the decrease in North American OpenWay contract revenues. Non-GAAP operating expenses declined 3% compared with last year with decreases in sales and marketing and G&A, reflecting our focus on reducing expenses in these areas. Decreased other costs and a lower tax rate resulted in benefits of $0.12 a share compared with last year. The tax benefit in Q1 was driven primarily by the recognition of 2012 R&D tax credits of about $4 million due to the U.S. federal legislation passed at the beginning of this year. Slide 6 provides a summary of the key financial metrics for the first quarter. Revenue in the quarter declined 22%…

Thanks, Steve, and good morning. I'm going to review the results for each of our business lines. I'll close with some comments about continuing priorities for the balance of the year, and then I'll turn the call back to Philip. I'll start with water on Slide 7. Revenue was up 1% year-over-year, and one of the main drivers was an increase in professional services. However, gross margins dropped from 36% to 33% because the margins on those same professional services related to our Cleveland project were lower than projected due to some unexpectedly high installation costs. We're pursuing several alternatives so that we can fix this problem as soon as possible. Non-GAAP operating expenses were flat year-over-year, but the non-GAAP operating margin was down 250 basis points due to the lower gross profit. Regionally, North America water posted a pretty good quarter with revenue up 17% year-over-year. However, gross margins fell as a result of the professional services component that I just mentioned a moment ago. EMEA and Asia Pacific revenues were basically flat year-over-year, and gross margins in each of these regions were down slightly due to product mix. Latin America revenue and gross margins were down year-over-year, a result of some orders in Brazil that we expected in January but didn't receive and start to ship until late March. We expect to catch up on these revenues in the second quarter and see an improvement in their gross margins. Now let's move to energy on Slide 8. I'll cover the segment information first, and then I'll discuss both gas and electricity separately. Energy revenues were $313 million in the first quarter of 2013 compared with $438 million in the first quarter of 2012, reflecting the run-out of our top 5 OpenWay projects. Excluding the revenue from our top…

Thanks, John. I want to comment on the balance of the year. While we'll update our guidance on our Q2 call, consistent with our policy, I will provide some color on what we anticipate for the remainder of 2013 and where we are focused. We said last quarter that we see 2013 as a transition year ahead of an expected increase in global Smart Meter projects. We said that we expected our financial results would be slower in the first half of the year, strengthening in the second half. We continue to forecast that revenues and volumes will increase through the year. We will also continue our focus on cost and expenses. As such, we are confident that margins and earnings will improve from the Q1 level. Business is Q1 -- in Q1 was, as expected, slow. We saw some orders moving to the right and ongoing economic headwinds. We also saw some positives: our non-OpenWay electricity revenues grew 10%, we reduced our operating expenses year-over-year, we had some forward motion in Europe with the Iberdrola AMI meter tender. We are already working on a list of actions to help mitigate the impact of the slow start in Q1 on the full year's results. We are going to preserve critical projects and review actions we can take to improve profitability in the near term. We will factor these items into our guidance update on the Q2 call. As I said earlier in my remarks, the challenges we are facing in 2013 are largely issues of timing. I remain confident about Itron's long-term growth prospects. Our core business is stable, our backlog is sound and the list of customers who have selected Itron provides good visibility for additional business that is not yet in our backlog. My confidence also comes from long-standing, satisfied Itron customers that are achieving and often exceeding their business case for their projects with Itron. My confidence comes from Itron's technical innovation and strong partnerships. We deliver new products and innovation to our customers with high performance and high reliability. This gives Itron the strongest customer reference base in the industry. With that, let's open up the call to the question-and-answer session.

[Operator Instructions] We'll go first to Sean Hannan of Needham & Company. Sean K.F. Hannan - Needham & Company, LLC, Research Division: So a question on the water side. So you had a pretty sizable decrease in the margins due to mix in the quarter. So from a hardware perspective, that was obviously down a little bit. I'm trying to get a sense of how you see mix changing in '13. It sounds like there's a little bit more optimism as you're moving into second and third quarter. So just any perspective there would be helpful.

Yes, Sean, this is John. I think the margin challenges we had on the water side were not so much due to the hardware side of the business but more to the professional services side. That's where we saw the challenge in the gross margins. And in terms of the confidence level and seeing things pick up the rest of the year, we're seeing things pick up in March. We had some orders, particularly in Brazil, that slid from January to very late March, and we've already seen the shipment level pick up pretty well down there. So I'm feeling pretty good about water. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Okay. And in terms of your quarterly bookings, those were down about 8% year-over-year, 4% on the quarter. Is there any more perspective you can provide around that? And it sounds like that also, from your standpoint, has some expectations to start ticking up a little bit as we proceed into the -- a little further into the June quarter.

I -- yes, Sean, I agree with the observation about bookings. We've really looked at that closely. We feel the bookings are strong. They vary just on timing issues on large contracts. As we've said many times, a significant part of our base business does not appear in that bookings numbers, and we have contracts that are coming online in the second half of this year, some of which do not appear in our bookings and backlog yet that give us confidence about the second half of the year. So we actually think that the bookings performance in Q1 did not indicate some broader economic slowdown, and -- which is why we're maintaining our confidence level in the second half of the year. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Okay. And then last question for the moment. It sounds like although you're not updating your guidance, and I understand the policy there, it seems that incrementally, the news, the communications, what you're observing in some of the general markets, particularly those abroad, that there may be a little bit of reduced expectations for what we could see in the back half of the year. Do you -- would you agree with that viewpoint? Is there perhaps a perspective that we should take -- there's a little bit more caution around how that second half materializes for you?

Great, thanks. So what I'd like everybody on the call to notice is, is that we are really making a concerted effort to provide much broader color about geographies and our individual markets with these more detailed comments from John. So I want to make sure that we place context around some of the specific comments that John has made. Overall, with our geographic diversity and business line diversity, while there are certainly some challenges in specific markets, we have an excellent mix of business to mitigate some of the factors. But Sean, you're absolutely right that the reason that we are pointing out some difficulties is we are really examining those tough markets, looking how we can offset them in other places and taking the time prior to this guidance update to understand what we can do to offset some of the economic pressure that we've commented on.

[Indiscernible]...

Your next question comes from Sanjay Shrestha of Lazard Capital Markets.

And I'm sorry, Cecilia. I just wanted to make a comment.

[Indiscernible].

Yes, Sanjay, I'm sorry. I just want to make a comment to please remind everyone just if you can just hold your questions to really just 2 at the most. We do have a long queue and we want to get everybody in there.

Got it. So, well, first question, right. Well, I'm sort of trying to understand where you guys are coming from based on this full year thing. Well, was there a surprise element versus how you guys are looking at the world at the end of 2012 versus at the end of Q1 here. And there's obviously going to be a lot of puts and takes, but I -- you guys were pretty vocal that Q1 was going to be soft, there was going to be a rebound in the second half on the last call. Did anything change here at the end of Q1 that makes you feel increasingly more cautious, like I think, which you're maybe trying to imply?

Yes. And Sanjay, the word -- yes, I mean, we were surprised by the slowness of January and February. As we've commented, March has picked up, and we do see -- John has made some comments, and I'll pass to him in a moment, about some continued pickup in April. There were a couple of project-related delays that were unexpected and these economic factors that we cited to you. You're absolutely right that we had planned and talked to you about an expected softness in the first half the year, but we just had not expected quite as slow a start in the first 2 months. John, anything to add there?

The only thing I'd add is I think our customers at the end of the year, they have budgets, they accelerated some purchases. And then I think they went into a bit of a wait-and-see conservative mode on purchases, and that just slowed things down a little bit more than we expected. But we are seeing things pick up in a number of our regions, not all of them but in quite a few of them. So that's why we continue to think the back half of the year will be better than what we've seen so far.

Okay, great. Well, one more follow-up for me, guys. So there was a talk about one of your competitors sort of potentially looking at a U.K. opportunity moving forward, and that's something you guys haven't talked about in some time. Can you share any insight into what are you seeing in that market? Because obviously, you guys have highlighted Iberdrola, ERDS, well, and, obviously, you've got a bunch of things here in the U.S. that you won in the last 12 months. But is there an opportunity you get something real that can move forward sooner? And are you guys participating in that? Anything you can share with that?

Yes, Sanjay, great question. We haven't talked about that. Of course, the opportunity in the U.K., $45 million combined electric and gas meters potentially up for replacement with -- in a market in which Itron has traditionally been very strong, there have been competitive announcements for initial pilots and rollouts, and Itron has not been visible in some of those earliest announcements. However, we do have products certified for the U.K. We have demonstrated a dual-fuel solution that is an electricity and gas meter coordinating through a hub and are working very closely with a number of the 6 retailers as well as taking a look at the central market solution. The story in the U.K. is an evolving one with the standards just in the process of being finalized, and we are very, very actively focused on qualifying product and on selling to each level of the market and participating in the regulatory and standards process there. It's a very important market to us.

And our next question comes from Craig Irwin with Wedbush.

In your prepared comments, you talked a little bit about some of the utilities that are seeing elevated maintenance costs, sort of shopping for a migration strategy and looking for how they want to implement AMI technology. Can you maybe give us a little bit of color? Are you seeing these utilities indicating that they're leaning towards the very large, wide-scale rollout of new technology? Or are they leaning more in the direction of what Connecticut Power and Light (sic) [Connecticut Light & Power] was proposing to its commission where they were basically saying that they would put up the towers and then fill in with AMI units ratably? And I guess as a part of this question, do you have any legacy customers that might be considering a migration strategy that are actually taking the AMI units already given their backwards compatibility to the older AMR networks that they have installed?

Sure, Craig. Let me take that question in a couple of pieces because the comments that John had made had to do specifically with meter repairs. It was made in the context of the gas market in Europe. And in Europe where there are market mandates, those mandates are for total replacement. And what we're talking about is the phenomenon that we saw in the U.S. somewhat in 2009 in which prior to very large rollouts, customers are really delaying purchase of new meters, old-style meters, because they -- they're getting ready for a complete meter change-out. So that was a comment made in a specific context, and we do not see incremental deployment strategies really being planned in Europe in as much as there is a mandate for total replacement there. You did comment, though, on a phenomenon that we absolutely are seeing in North America, and -- which is more targeted rollout plans. Yes, we do have customers that are taking our so-called Bridge Meter. That is a meter that reads in an AMR -- existing AMR environment, which we have 45 million installed electric end points with AMR solutions. And those customers are starting to take the bridging technology that prepares them for a Smart Meter environment. We are -- and those are customers in the Northeast that are starting to take those products, as well as customers taking more selective rollout approaches with our Itron Cellular Solutions in which they're able to very specifically target customers and build incremental rollouts. So we see that phenomenon more strongly in North America. It could emerge in some other parts of the world, but in Europe, we do see a lot -- complete rollout plans.

Great. And then my second question is, you've shared with us in the past on many occasions that both replacement and wide-scale implementations and smaller implementations are a large part of your business, but new housing construction is also a driver. Can you maybe give us a little bit of color as far as the lag between neighborhoods initiating construction and when they would need the meters? And how much of this business you actually saw contribute to your overall mix in the prior housing construction cycle?

So the technical question of what the lag is, is very little in as much as electric meters are placed in new construction at the time of construction, and so that demand occurs simultaneously. New housing starts affect us, and it's difficult to isolate it exactly. I'd go back to our comments, though, that our core business, which is made up of things like equipment that is at the end of its useful life being repaired as well as new housing starts and expansion of both AMR and AMI programs, that, that business has remained very solid and that we saw growth in our North American electric business outside of these very large projects, both of which indicate that we are seeing signs of the recovering economy in North America.

We'll go next to John Quealy of Canaccord.

So my 2 questions. First, Japan. Can you talk about how you're sensitizing yourself to the likelihood of winning or not winning any of that business? Clearly, I would say, consensus is Japanese conglomerates win most of it and perhaps their in-house suppliers win most of it. So can you comment on sensitizing the model for that? And then secondly, Steve, on the buyback, I'm sorry, did you say 2.5 million deployed since April but 50 million in total?

Okay, I'll start on Japan. John, we, I mean, we absolutely share the concern that the historical buying pattern in Japan is internally focused. I think I commented on the last call that I had been over in Japan and received very senior-level assurances that they were going to try to break that cycle and welcome foreign technology, experienced companies and really take a broader look. We've tried to mitigate the internal buying pattern, as you know, by partnering with Panasonic to have a very strong partner who -- present in the Japanese market. We are -- you can't balance your risk in terms of your technology plans. We are going full bore ahead at building the best technical solution that we can for the Japanese market and doing everything we can in order to win that communications business. On the metering side, we expect that there will be tenders similar to the style that we see in Europe in which portions of the metering bid will be available to us, even in the -- a case that an internal -- internally developed communications solution wins out there. We -- so we remained focused and engaged, but we also, on the other hand, have not built in assumptions into our performance plan that we have won that business. And I would point out that the opportunity is not just with TEPCO. There are 7 other utilities and it is our intent to continue to compete for all of the business in Japan. With that, I'll pass to Steve.

The authorization of the stock purchase plan was in March, and it's a 1-year plan. Total authorization is $50 million. And from our remarks, we've repurchased about $2.5 million or so. So just for some rounding, we'd say that we have $47 million in remaining authorization through next March under the current authorized plan.

Our next question comes from Vishal Shah of Deutsche Bank.

This is Susie Min on behalf of Vishal Shah. So you had mentioned that Q1 seems to have been weaker than you expected, and I was wondering, as it relates to your year guidance, how are you thinking about the revenue growth trajectory? Is Q2 kind of trending in line with your expectations? Or how should we think about it over the next few quarters?

So Susie, the color that we've provided is that -- is really, January and February were the slow start with a pickup in March, and I'll pass to John on his thoughts on what we're seeing in April. We -- the -- we have some pressure, clearly, which we've - -we really have characterized the first half as tough. And there were a couple of project delays, which we're working to resolve. From a margin perspective, John has talked about a number of actions that we're going to take in the short term. So we feel that Q1 is below point, and we see signs of the business really improving in the second quarter and the second -- onward into the second half. John?

Yes. So I think you covered that well, and I don't have much to add.

Okay.

Great. And so my second question was related to margins, and you had mentioned that some of the European tenders seem very competitive. How can we think about some of the other levers? And I know you mentioned some good progress on the cost front. Can you talk more about that and then the dynamics between the margins on the energy business versus the water?

Yes, I think we're going to continue to see some pressure on the electric margins. They're -- particularly on these larger projects. They're big, there's a lot of competitors playing in that. We had -- however, in North America, our margins were pretty good on the OpenWay meters. So it remains to be seen how that plays out. We've got to get those tenders issued, first and foremost. And I think in terms of the gas business and what we see there, I think that's been a good business for us historically. We had, as we've mentioned, a bit of a slow start and some issues in the first quarter, but gas rocks and I think we're going to do just fine with that business going forward.

And Susie, I'll just make one comment. We've had pricing pressure and have planned on pricing pressure all along. And our business volume is extremely critical for giving us a gross margin benefit. So as these projects ramp up, we have more volume. We have continuous price reduction programs, as John has mentioned, with a very strong operations team that progressively works on reducing total manufacturing costs. And so to your question about the levers that we pull, our buildups and volumes, the proper sizing of our capacity and continued cost improvement plans even in a -- even in our highly competitive deals really help us over time to improve margins on those large deals.

And our next question comes from Ben Schuman of Pacific Crest Securities.

I guess my first question is around the professional services drag on the water margins. When can we expect that to subside maybe just in terms of that contract being completed? And how does that look from an incremental operating margin standpoint?

One of our largest contracts...

I think the contract's going to extend for a while, and we're doing a couple of things, talking with the customer to try and fix some of the challenges we've run into, some of which were unexpected. But I'm reasonably confident we'll get those margins fixed here in the second quarter and see a return to what I would consider to be a much healthier margin on those services.

Okay, great. And then in terms of the incremental weakness since the Q4 report, I mean, you guys reported in the middle of February. Can you help me understand just how January and February could have turned out to be such a dud with the mid-February report? I mean, were you expecting maybe a stronger snapback? Or just help me sort of reconcile what's going on there.

Ben, that's an absolutely fair question. By the middle of February, we don't have visibility. We don't have results reported for our February month. And with a can-do team, we've got a lot of very motivated people. We saw a slow January and said, "You know what? It's a 1-month phenomenon. We're going to get it back in February." And so by the time you got to mid-February, you've got a lot of people pedaling as hard as they can. You don't have your February results, and so it's a little bit difficult to see that you've got another slow month in there. The good news is that by March, they really had made a substantial pickup in terms of their momentums and volumes. So it's just a timing issue, but you're absolutely right about when we spoke to you.

And we'll go next to Paul Coster of JPMorgan. Paul Coster - JP Morgan Chase & Co, Research Division: I understand that you're working feverishly hard on bringing down your cost structure. At the same time, you seem to be still running into international projects, which have maybe lower pricing and, I imagine, some pressure on gross margins. Can you talk to us about the longer-term gross margin outlook for the company and what can materially sort of shift it up a gear?

So Paul, volume, again, is the huge magic in the manufacturing business. So as we see these large projects come online, we have better absorption of our costs, better purchasing leverage, which allow us -- and also give us the time in order to continue our cost reduction plans on the manufacturing side. Though -- the longer-term plan, as you know, is to move beyond just being a bidder in meter auctions to providing measurement, communications software and services solutions that give us better differentiation and margin opportunity to concentrate on markets with higher average selling prices and profit opportunities. As to what the long-term prospects are in the gross margin side, we have strong plans under place to continue the growth in gross margin that we saw in 2012 and have projected in 2013. There are certainly opportunities for us to continue along in that improvement plan through 2014 and '15. Paul Coster - JP Morgan Chase & Co, Research Division: Okay. Maybe to just revisit the U.K. question for a second. I think I understood from your question that you're not part of the -- one of the consortia that's bidding on the infrastructure side. You're really trying to qualify your products for any of the winning teams. Is that a correct statement?

It's not. It's -- as you point out, it is a kind of a 2-tier business in which the current -- incumbent players do have independent plans in advance of a complete market solution to make procurements and to begin to deploy units out in the field with the intent that there is also a central market offering, and we are present and competing at both levels of the procurement process in the U.K.

And our next question comes from Ryan Connors of Janney Montgomery Scott.

I had a question with regard to the tax line actually. The R&D tax credit, obviously, had a reasonably material impact on the profitability in the quarter. So just in terms of modeling that tax line going forward, any kind of color you can give us about whether that reverts to a more normal historical pattern or whether there are more positive realizations there on the R&D credit?

Well, Ryan, this is Steve. It reverts back through the year closer to 24%, 25% rate over the course of the year. It can always be subject to some discrete items going forward, legislative changes. And also, I was going to qualify that, but on a general basis as we look at mix and so forth across the world, it blends to about that level.

Okay, great. And then the other question had to do with the water market and specifically the type of products that communications and water utilities are purchasing. Can you give us any color on whether you're seeing a shift towards AMI and fixed networks away from the traditional drive-by solutions and whether or not you're seeing that? And if so, how you're faring competitively in that next generation?

So Ryan, the -- of course, the -- I've got to give you a geographic answer there. In North America, we are absolutely seeing a shift towards more focus on networks. We've done extremely well competitively with announcements in San Diego and Las Vegas, which have been the 2 large metropolitan announcements here in the last several quarters, and have an extremely competitive product that is both a drive-by and fixed network solution, which is what our customers are frequently looking for because they start out in one mode and migrate to the next. But the trend is clearly towards -- and that -- by the way, that same end point is a 2-way advanced end point with embedded security and full AMI capability. So -- but we see a strong trend in the North American market in that direction. In global markets, we're not quite that far along. We haven't seen a strong emphasis on network water solutions. We're really moving from an environment in which in large parts of the world, water meters are read semiannually or annually to getting to a handheld and then eventually to a -- and many of these markets now are moving to drive-by solutions. And so there, somewhat, we've seen this development in the North American market in the past decade or 2, and we consider the rest of the world kind of going through that process again at this point. And again, have -- we have qualified solutions to compete in those markets as well.

And our next question comes from Patrick Jobin of Crédit Suisse. Patrick Jobin - Crédit Suisse AG, Research Division: Just want to follow up on some of the pricing pressures you're facing with the multi-vendor contracts. So I guess -- so what are you doing to position Itron to move up the value chain? Maybe more software? And I guess in that same topic, and I promise it's one question, but where are you focusing R&D? And are there any acquisitions out there that are on the table?

Patrick, nice constructive single question. The... Patrick Jobin - Crédit Suisse AG, Research Division: It's only one.

Oh, no, no, no. No problem at all. It's good -- great question. So on the tenders that we've commented on, by the time that a tender like Iberdrola is structured, the -- our opportunity to compete within that tender, once it's been structured as essentially a meter auction, is to compete on quality and customer responsiveness, so -- which -- and, by the way, in some cases, the fact that the product is manufactured in the European Union. So the -- I mean, those are really the levers that you've got to pull because feature differentiation is not encouraged in a bid -- in a fully specified bid like that. So there are a couple of specific markets, we've talked about this before, the French market and the Spanish market that have been structured in this way. We don't necessarily see that model being used in many other markets. But there will always be a blend of those. As to the -- where are we placing our investments? Of course, we have to have qualified meters, and we've talked about before there are challenges in having that basic measurement device qualified in each one of the jurisdictions. But our investments are absolutely in differentiating on communications and collection systems, software analysis and essentially manage -- helping to manage our customers' risk and implementing new solutions. We see real opportunities there. As to M&A opportunities, yes, there are absolutely growth opportunities for us on getting more value out of the data, out of extending the number of end points that are on the communications networks into these other adjacent areas, and there are things that we are actively examining.

And at this time, we have no further questions in the queue. I'd like to turn the conference back over to Philip Mezey for any additional or closing remarks.

Well, I thank you for the interest. There -- look, Q1 was a tough quarter. And as we've said, there were some disappointments for us in terms of the slow start in the quarter. We are heartened by the pickup we saw at the end of the quarter. We are -- have gone through a bottoms-up forecasting process. John is working on a list, and Steve on a list of activities. We are absolutely focused on improving cash flow and managing working capital, as Steve has talked about, and we'll have an update for you here in Q2. That said, we did anticipate a slow first half of the year. We have strong confidence in the second half of the year because of signed contracts already under way, qualified products that are coming to market that give us a strong grounding for an improvement. We think of the first quarter as a low point in the year. However, we also see great developments that indicate a buildup in Smart Metering for 2014 and beyond. I'd again cite Iberdrola and other things, the other tenders that are coming to market here. So I want to absolutely acknowledge that there are things that we've got to do here in the short term in order to improve our financial metrics, and we are working on that very, very diligently. But we are not going to react to a short-term disruption that we think is going to work itself out here. That being said, we are aware of economic pressure and are really factoring that into our thinking, and we'll provide an update. So thank you for the questions and the interest and look forward to further discussions with you.

All right, thanks, everyone. We'll end the call now.

This does conclude today's conference. 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 (179) 457-0820 with a passcode of 4066711, or go to the company's website, www.itron.com. Again, thank you for your participation.