INVESTOR PRESENTATION
February 2011
INVESTOR PRESENTATION
SAFE HARBOR Certain matters being discussed today that are not statements of historical fact constitute forward-looking statements relating to current or future financial performance, management's plans and objectives for future operations, product plans and performance, management's assessment of market factors, and statements regarding the strategy and plans of the Company. Such forward looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of Itron's future performance. Listeners are cautioned that all forward-looking statements are subject to a number of risks and uncertainties that could cause the Company's actual results in the future to differ materially from these forward-looking statements. These risks and uncertainties are detailed in the Company's filings with the Securities and Exchange Commission, including its 10-K filed on February 25, 2011, copies of which may be accessed through the SEC's website at http://www.sec.gov. Current data and other statistical information used throughout this presentation are based on independent industry publications, government publications, and reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, which are derived from our review of internal surveys, as well the independent sources listed above. We believe that these sources are reliable. February 2011 Investor Presentation / 2
TODAY’S PRESENTATION 1
Itron at a Glance
2
Industry Dynamics
3
Company Overview
4
Financial Overview
February 2011 Investor Presentation / 3
1
ITRON AT A GLANCE
February 2011 Investor Presentation / 4
ITRON AT A GLANCE »
Itron provides the knowledge, insight and technology that enable the responsible management, delivery and use of our precious energy and water resources
»
World’s leading end-to-end solution provider serving 8000 customers across 130 countries
»
Dedicated to supplying products and services for measuring, optimizing and analyzing utility information
February 2011 Investor Presentation / 5
ITRON AT A GLANCE CUSTOMERS 8000 in 130 countries EMPLOYEES 9500 LOCATIONS 80 worldwide SALES STAFF 900 2010 REVENUE $2.3 billion USD
SMART METERS AND COMMUNICATIONS » Over 85 million shipped in North America » ~ 46% market share LEADING GLOBAL METER SUPPLIER » #1 in combined market share for electricity, gas and water
LEADING SOFTWARE SUPPLIER » ~ 35% of Meter Data Management systems around the world » #1 in market share VALUE-ADDED PLATFORMS » Smart payment and prepayment metering » Forecasting software and services » Consulting and analysis professional services
February 2011 Investor Presentation / 6
GLOBAL LEADERSHIP
Malcolm Unsworth President and CEO Malcolm Unsworth was named president and chief executive officer of Itron in March 2009.
Philip Mezey Senior Vice President, COO Itron North America Philip Mezey became senior vice president and chief operating officer for Itron North America in April 2007.
Marcel Regnier Senior Vice President, COO Itron International
Steve Helmbrecht Senior Vice President, CFO
Marcel Regnier was named senior vice president and chief operating officer of Itron International in April 2008.
Steve Helmbrecht was named senior vice president and chief financial officer in January 2005.
February 2011 Investor Presentation / 7
2
INDUSTRY DYNAMICS February 2011 Investor Presentation / 8
THE WAY WE MANAGE ENERGY AND WATER WILL SHAPE OUR CENTURY. To allow the use of renewables and ultimately encourage energy efficiency, utilities need flexible solutions, rooted in reality.
February 2011 Investor Presentation / 9
BY 2030, ENERGY CONSUMPTION WILL INCREASE BY 40% 2009 World Energy Outlook - International Energy Agency
February 2011 Investor Presentation / 10
2+ MILLION MILES OF U.S. GAS PIPELINES 60% ARE OVER 40 YEARS OLD Source: AGA and PHMSA: Hazardous Liquid Pipelines
February 2011 Investor Presentation / 11
GLOBAL WATER DEMAND IS PROJECTED TO INCREASE 53% BY 2030 Source: Water Resources Group, Charting Our Water Future
February 2011 Investor Presentation / 12
3
COMPANY OVERVIEW
February 2011 Investor Presentation / 13
MOVING BEYOND OPERATIONAL EFFICIENCIES
February 2011 Investor Presentation / 14
A GLOBAL COMPANY, OPERATING LOCALLY
February 2011 Investor Presentation / 15
END-TO-END SOLUTIONS
Analytics
Network Communications
Active Smart Grid Analytics (ASA)
IEE Meter Data Management
Data Collection
Smart Payment Systems
Field Operations Meter Data Collection
Smart Metering Electricity
Gas
Water
February 2011 Investor Presentation / 16
THE CISCO / ITRON ALLIANCE Building the next-generation smart grid communications platform.
February 2011 Investor Presentation / 17
VISION »
Enable pervasive monitoring and control of energy distribution networks to enhance energy delivery and build a low carbon society.
STRATEGY »
Leverage Itron OpenWay solution with Cisco IP communications solutions to build a secure, scalable, and multi-service architecture.
February 2011 Investor Presentation / 18
CISCO / ITRON ALLIANCE SOLUTIONS BENEFITS »
Multi-layered end-to-end security based on NIST guidelines
»
Lower total cost of ownership by deploying common IP services over various communication technologies
»
Investment protection by enabling multiple applications
»
Zero-touch deployment, simplified/scalable network management
»
Self-healing capabilities for resilient communications
February 2011 Investor Presentation / 19
FIELD AREA NETWORKS TIERED COMMUNICATION ARCHITECTURE
February 2011 Investor Presentation / 20
AN EXCITING FUTURE 1600
HIGHLIGHTS
1400
» 2.7 billion meters worldwide » Currently ~ 9% automated » Business, regulatory and environmental drivers for automation • Europe moving to smart meters over next decade » Great opportunity » $1.6 billion backlog as of 12/31/10
1200 1000 800
1257
600 853
400 371
200 0
144
51
54
Electric
Gas
Water
10%
12%
6%
AUTOMATED
NON-AUTOMATED (in millions)
Sources: The Scott Report: International Deployments of Automated Metering Devices, 7th Edition; IMS Research, Worldwide Meter Market, 2010 Edition
February 2011 Investor Presentation / 21
4
FINANCIAL OVERVIEW
February 2011 Investor Presentation / 22
2010 FINANCIAL SUMMARY
2010
2009
Change
Revenue (in millions)
$2,259.3
$1,687.4
33.9%
Bookings (in millions)
$2,396.0
$1,849.0
29.6%
Gross margin
30.9%
31.9%
down 100 bps
GAAP diluted EPS
$2.56
-$0.06
$2.61
Non-GAAP operating margin
11.2%
8.5%
up 270 bps
Non-GAAP EPS
$3.89
$2.12
$1.77
Adjusted EBITDA (in millions)
$306.3
$188.7
62.3%
Total Debt (face value in millions)
$616.3
$797.2
($180.9)
February 2011 Investor Presentation / 23
2010 UNIT VOLUMES 40,000 35,000 5,960
30,000 3,830 710 3,110
25,000
4,460
3,980
20,000
An increase of 16 percentage points over the prior year
> INL: flat
15,000 10,000
> Advanced and smart technology represented ~ 42% of volume in 2010
> INA: 75% increase 21,210
20,010
5,000 0 2009
(in thousands)
2010
Basic meters
Advanced meters
Smart meters
Communication modules
February 2011 Investor Presentation / 24
REVENUE BY REGION Revenue by Region $2,500 $2,000 $1,500
$274
$335
> The smart meter projects in NA are primary driver behind revenue increase in the US and Canada
$756
> European revenue was down: Revenue down $30 million due to FX
$1,000
$807
Decline in export sales to Middle East $1,169
$500
Economic factors in parts of Europe
Delays in orders as customers evaluate advanced and smart metering systems and technology
$606 $ 2009 US and Canada (in millions)
2010 Europe
> Revenue in other parts of the world grew by 22% primarily as a result of projects in Azerbaijan, India and Indonesia
February 2011 Investor Presentation / 25
REVENUE BY SEGMENT > North America
$2,500 $2,000 $1,082
Smart metering contracts accounted for 49% of revenue vs. 17% in 2009
$1,500 $1,000
> International
$1,072
Volumes flat $1,177
$500 $616 $ 2009 INA Region
FX effect was $11 million reduction in revenue
2010 Intl Region
(in millions)
February 2011 Investor Presentation / 26
GAAP OPERATING INCOME - BY SEGMENT $280
> North America Driven by advanced and smart metering
$230 $26 $180
> International Significant increase in special charges
$130 $201
> Corporate
$80 $38 $30 ($20)
$37 ($44)
($30) 2009 INA Region
2010 Intl Region
Higher compensation expense due to the reinstatement of annual incentive compensation plans
Corporate
(in millions)
February 2011 Investor Presentation / 27
Non-GAAP Measures NON-GAAP MEASURES YTD-2010
$350
> Adjusted EBITDA Margin
$306 $300
Full Year 2009: 11.2%
$250 $192
$189
$200
$159 $150 $100
Full Year 2010: 13.6%
> Free Cash Flow $88
$82
Cash from operations: $254.6 million
$50 $ 2009 Non-GAAP Net Income
2010 EBITDA
Free Cash Flow
Capital expenditures: $ 62.8 million
(in millions)
February 2011 Investor Presentation / 28
TOTAL DEBT AND DEBT/EBITDA RATIO $1,400
$1,200
4.1 3.7
$1,000
4.3 4.1
$800
3.9
3.2
2.6
2.2
6/30/10
9/30/10
1.9
$600
$400
$200
$
12/31/08
3/31/09
6/30/09
9/30/09
12/31/09
3/31/10
12/31/10
($200)
Sub-Notes
Converts
USD Term Loan
EUR Term Loan
(in millions)
February 2011 Investor Presentation / 29
OpenWay Bookings
NEW ORDER BOOKINGS TREND
» Q4 2008 - $334 million » Q1 2009 - $260 million » Q2 2010 - $339 million
$900 $800 $700 $600 $500
$517
$422 $377
$400
$162 $176
$300
$142
$132
$272
$301
$200 $311
$100
$248
$251
$257
$264
Q1 09
Q2 09
Q3 09
Q4 09
$319
$289
$256
$280
Q1 10
Q2 10
Q3 10
Q4 10
$Q4 08
(in millions)
International
North America February 2011 Investor Presentation / 30
TWELVE MONTH AND TOTAL BACKLOG $1,800
$1,620
$1,488
$1,600
$1,309
$1,400 $1,200
$913
$1,000 $800 $600
$807
$659 $501
$418
$400 $200 $-
Q4 2007
Q4 2008
Q4 2009
Q4 2010
(in millions)
12 Month Backlog
Total Backlog
February 2011 Investor Presentation / 31
QUESTIONS?
February 2011 Investor Presentation / 32
THANK YOU CORPORATE HEADQUARTERS 2111 N Molter Road Liberty Lake, Washington 99019 United States
investors.itron.com February 2011 Investor Presentation / 33
INVESTOR PRESENTATION
SAFE HARBOR Certain matters being discussed today that are not statements of historical fact constitute forward-looking statements relating to current or future financial performance, management's plans and objectives for future operations, product plans and performance, management's assessment of market factors, and statements regarding the strategy and plans of the Company. Such forward looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of Itron's future performance. Listeners are cautioned that all forward-looking statements are subject to a number of risks and uncertainties that could cause the Company's actual results in the future to differ materially from these forward-looking statements. These risks and uncertainties are detailed in the Company's filings with the Securities and Exchange Commission, including its 10-K filed on February 25, 2011, copies of which may be accessed through the SEC's website at http://www.sec.gov. Current data and other statistical information used throughout this presentation are based on independent industry publications, government publications, and reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, which are derived from our review of internal surveys, as well the independent sources listed above. We believe that these sources are reliable. February 2011 Investor Presentation / 2
TODAY’S PRESENTATION 1
Itron at a Glance
2
Industry Dynamics
3
Company Overview
4
Financial Overview
February 2011 Investor Presentation / 3
1
ITRON AT A GLANCE
February 2011 Investor Presentation / 4
ITRON AT A GLANCE »
Itron provides the knowledge, insight and technology that enable the responsible management, delivery and use of our precious energy and water resources
»
World’s leading end-to-end solution provider serving 8000 customers across 130 countries
»
Dedicated to supplying products and services for measuring, optimizing and analyzing utility information
February 2011 Investor Presentation / 5
ITRON AT A GLANCE CUSTOMERS 8000 in 130 countries EMPLOYEES 9500 LOCATIONS 80 worldwide SALES STAFF 900 2010 REVENUE $2.3 billion USD
SMART METERS AND COMMUNICATIONS » Over 85 million shipped in North America » ~ 46% market share LEADING GLOBAL METER SUPPLIER » #1 in combined market share for electricity, gas and water
LEADING SOFTWARE SUPPLIER » ~ 35% of Meter Data Management systems around the world » #1 in market share VALUE-ADDED PLATFORMS » Smart payment and prepayment metering » Forecasting software and services » Consulting and analysis professional services
February 2011 Investor Presentation / 6
GLOBAL LEADERSHIP
Malcolm Unsworth President and CEO Malcolm Unsworth was named president and chief executive officer of Itron in March 2009.
Philip Mezey Senior Vice President, COO Itron North America Philip Mezey became senior vice president and chief operating officer for Itron North America in April 2007.
Marcel Regnier Senior Vice President, COO Itron International
Steve Helmbrecht Senior Vice President, CFO
Marcel Regnier was named senior vice president and chief operating officer of Itron International in April 2008.
Steve Helmbrecht was named senior vice president and chief financial officer in January 2005.
February 2011 Investor Presentation / 7
2
INDUSTRY DYNAMICS February 2011 Investor Presentation / 8
THE WAY WE MANAGE ENERGY AND WATER WILL SHAPE OUR CENTURY. To allow the use of renewables and ultimately encourage energy efficiency, utilities need flexible solutions, rooted in reality.
February 2011 Investor Presentation / 9
BY 2030, ENERGY CONSUMPTION WILL INCREASE BY 40% 2009 World Energy Outlook - International Energy Agency
February 2011 Investor Presentation / 10
2+ MILLION MILES OF U.S. GAS PIPELINES 60% ARE OVER 40 YEARS OLD Source: AGA and PHMSA: Hazardous Liquid Pipelines
February 2011 Investor Presentation / 11
GLOBAL WATER DEMAND IS PROJECTED TO INCREASE 53% BY 2030 Source: Water Resources Group, Charting Our Water Future
February 2011 Investor Presentation / 12
3
COMPANY OVERVIEW
February 2011 Investor Presentation / 13
MOVING BEYOND OPERATIONAL EFFICIENCIES
February 2011 Investor Presentation / 14
A GLOBAL COMPANY, OPERATING LOCALLY
February 2011 Investor Presentation / 15
END-TO-END SOLUTIONS
Analytics
Network Communications
Active Smart Grid Analytics (ASA)
IEE Meter Data Management
Data Collection
Smart Payment Systems
Field Operations Meter Data Collection
Smart Metering Electricity
Gas
Water
February 2011 Investor Presentation / 16
THE CISCO / ITRON ALLIANCE Building the next-generation smart grid communications platform.
February 2011 Investor Presentation / 17
VISION »
Enable pervasive monitoring and control of energy distribution networks to enhance energy delivery and build a low carbon society.
STRATEGY »
Leverage Itron OpenWay solution with Cisco IP communications solutions to build a secure, scalable, and multi-service architecture.
February 2011 Investor Presentation / 18
CISCO / ITRON ALLIANCE SOLUTIONS BENEFITS »
Multi-layered end-to-end security based on NIST guidelines
»
Lower total cost of ownership by deploying common IP services over various communication technologies
»
Investment protection by enabling multiple applications
»
Zero-touch deployment, simplified/scalable network management
»
Self-healing capabilities for resilient communications
February 2011 Investor Presentation / 19
FIELD AREA NETWORKS TIERED COMMUNICATION ARCHITECTURE
February 2011 Investor Presentation / 20
AN EXCITING FUTURE 1600
HIGHLIGHTS
1400
» 2.7 billion meters worldwide » Currently ~ 9% automated » Business, regulatory and environmental drivers for automation • Europe moving to smart meters over next decade » Great opportunity » $1.6 billion backlog as of 12/31/10
1200 1000 800
1257
600 853
400 371
200 0
144
51
54
Electric
Gas
Water
10%
12%
6%
AUTOMATED
NON-AUTOMATED (in millions)
Sources: The Scott Report: International Deployments of Automated Metering Devices, 7th Edition; IMS Research, Worldwide Meter Market, 2010 Edition
February 2011 Investor Presentation / 21
4
FINANCIAL OVERVIEW
February 2011 Investor Presentation / 22
2010 FINANCIAL SUMMARY
2010
2009
Change
Revenue (in millions)
$2,259.3
$1,687.4
33.9%
Bookings (in millions)
$2,396.0
$1,849.0
29.6%
Gross margin
30.9%
31.9%
down 100 bps
GAAP diluted EPS
$2.56
-$0.06
$2.61
Non-GAAP operating margin
11.2%
8.5%
up 270 bps
Non-GAAP EPS
$3.89
$2.12
$1.77
Adjusted EBITDA (in millions)
$306.3
$188.7
62.3%
Total Debt (face value in millions)
$616.3
$797.2
($180.9)
February 2011 Investor Presentation / 23
2010 UNIT VOLUMES 40,000 35,000 5,960
30,000 3,830 710 3,110
25,000
4,460
3,980
20,000
An increase of 16 percentage points over the prior year
> INL: flat
15,000 10,000
> Advanced and smart technology represented ~ 42% of volume in 2010
> INA: 75% increase 21,210
20,010
5,000 0 2009
(in thousands)
2010
Basic meters
Advanced meters
Smart meters
Communication modules
February 2011 Investor Presentation / 24
REVENUE BY REGION Revenue by Region $2,500 $2,000 $1,500
$274
$335
> The smart meter projects in NA are primary driver behind revenue increase in the US and Canada
$756
> European revenue was down: Revenue down $30 million due to FX
$1,000
$807
Decline in export sales to Middle East $1,169
$500
Economic factors in parts of Europe
Delays in orders as customers evaluate advanced and smart metering systems and technology
$606 $ 2009 US and Canada (in millions)
2010 Europe
> Revenue in other parts of the world grew by 22% primarily as a result of projects in Azerbaijan, India and Indonesia
February 2011 Investor Presentation / 25
REVENUE BY SEGMENT > North America
$2,500 $2,000 $1,082
Smart metering contracts accounted for 49% of revenue vs. 17% in 2009
$1,500 $1,000
> International
$1,072
Volumes flat $1,177
$500 $616 $ 2009 INA Region
FX effect was $11 million reduction in revenue
2010 Intl Region
(in millions)
February 2011 Investor Presentation / 26
GAAP OPERATING INCOME - BY SEGMENT $280
> North America Driven by advanced and smart metering
$230 $26 $180
> International Significant increase in special charges
$130 $201
> Corporate
$80 $38 $30 ($20)
$37 ($44)
($30) 2009 INA Region
2010 Intl Region
Higher compensation expense due to the reinstatement of annual incentive compensation plans
Corporate
(in millions)
February 2011 Investor Presentation / 27
Non-GAAP Measures NON-GAAP MEASURES YTD-2010
$350
> Adjusted EBITDA Margin
$306 $300
Full Year 2009: 11.2%
$250 $192
$189
$200
$159 $150 $100
Full Year 2010: 13.6%
> Free Cash Flow $88
$82
Cash from operations: $254.6 million
$50 $ 2009 Non-GAAP Net Income
2010 EBITDA
Free Cash Flow
Capital expenditures: $ 62.8 million
(in millions)
February 2011 Investor Presentation / 28
TOTAL DEBT AND DEBT/EBITDA RATIO $1,400
$1,200
4.1 3.7
$1,000
4.3 4.1
$800
3.9
3.2
2.6
2.2
6/30/10
9/30/10
1.9
$600
$400
$200
$
12/31/08
3/31/09
6/30/09
9/30/09
12/31/09
3/31/10
12/31/10
($200)
Sub-Notes
Converts
USD Term Loan
EUR Term Loan
(in millions)
February 2011 Investor Presentation / 29
OpenWay Bookings
NEW ORDER BOOKINGS TREND
» Q4 2008 - $334 million » Q1 2009 - $260 million » Q2 2010 - $339 million
$900 $800 $700 $600 $500
$517
$422 $377
$400
$162 $176
$300
$142
$132
$272
$301
$200 $311
$100
$248
$251
$257
$264
Q1 09
Q2 09
Q3 09
Q4 09
$319
$289
$256
$280
Q1 10
Q2 10
Q3 10
Q4 10
$Q4 08
(in millions)
International
North America February 2011 Investor Presentation / 30
TWELVE MONTH AND TOTAL BACKLOG $1,800
$1,620
$1,488
$1,600
$1,309
$1,400 $1,200
$913
$1,000 $800 $600
$807
$659 $501
$418
$400 $200 $-
Q4 2007
Q4 2008
Q4 2009
Q4 2010
(in millions)
12 Month Backlog
Total Backlog
February 2011 Investor Presentation / 31
QUESTIONS?
February 2011 Investor Presentation / 32
THANK YOU CORPORATE HEADQUARTERS 2111 N Molter Road Liberty Lake, Washington 99019 United States
investors.itron.com February 2011 Investor Presentation / 33
