Liberty Global Inc. (NASDAQ:LBTYA)
Q3 2008 Earnings Call
November 6, 2008 12:00 pm ET
Mike Fries – President and Chief Executive Officer
Gene Musselman – President and Chief Operating Officer, UPC Broadband
Mauricio Ramos – President, Liberty Global Latin America and CEO, VTR Global SA
Miranda Curtis – President, Liberty Global Japan
Bernie Dvorak – SVP and Co-Chief Financial Officer (Principal Accounting Officer)
[James Rackell] – Barclays Capital
Alan Gould – Natixis
David Joyce – Miller Tabak
Jason Bazinet – Citi
David Gober – Morgan Stanley
David Kestenbaum – Morgan Joseph
Steve Malcolm – Arete Research
(Operator Instructions). I would now like to turn the conference call over to Mr. Mike Fries, President and CEO of Liberty Global, please go ahead sir.
Let me just take a second to introduce who is on the call with us today. In addition to myself, we have Gene Musselman, Miranda Curtis and Mauricio Ramos who will each talk about their respective regions in Europe, Japan and Chile, Charlie Bracken and Bernie Dvorak our Co-CFO's, Rick Westurban who you all know, and various other senior management.
Before I get started I think we have a Safe Harbor statement.
And thank you, page two of the slides details the company's Safe Harbor statement regarding forward looking statements. Today's presentation may include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including with respect to Liberty Global's outlook and future growth prospects, this expectation regarding competitive and economic conditions and the liquidity and other statements that are not historical fact.
These forward looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed from time to time in Liberty Global's filings with the Securities and Exchange Commission. Including its most recently filed Forms 10-K and 10-Q.
Liberty Global disclaims any obligation to update any of these forward looking statements to reflect any change in its expectations or on the conditions on which any such statement is based.
I would now like to turn the call back over to Mr. Mike Fries.
So as usual we're speaking from some slides that I think are available on our web site. And on the agenda slide you'll see that there's three parts to the call as usual. I'll make some introductory remarks then Gene, Miranda and Mauricio will spend a couple of minutes on their respective operations. Charlie is going to hit the financial results and balance sheet and then we'll get to your questions.
So I'm on slide four, entitled Where Are We Today. And when we were thinking about how to start this call, we decided that it might be a good idea to step back and take a moment to put our business in the proper context here, given the current environment.
And as we did that, I think we quickly landed on four key points that represent both the foundation of our story and the factors that set us apart from any of our peers in the media and telecom sector.
I think the first perhaps the most important, despite all the concern around consuming spending and recession, our business continues to grow. That means we're adding digital TV, broadband and voice subscribers at a steady clip. We're increasing the amount of revenue we generate out of each home in every region.
We're delivering above average cash flow growth, both operating and free cash. And we're achieving record OCF margins. I think it bears repeating that we're not selling cars, high end clothing or organic food here. We provide utility light services that connect the most important devices in your daily life, your phone, your PC and your TV to the outside world. And at times like this that's a pretty good business to be in.
Second point that should jump out at you is that our geographic diversity is a strength in this environment. Let's take currencies for example. If you look at our platform of 15 countries and four continents, they represent a basket of 11 different currencies, including a healthy blend of first world countries like Japan and Switzerland which have actually appreciated or held their own against the dollar.
On a macro level the vast majority of our cable revenue, around 70% comes from Western Europe and Japan. Which are experiencing their own challenges but not necessarily the same type of consumer related issues resulting from the sub-prime housing crisis here in the U.S.
And where we expect to feel some pressure in the future, like in certain Central and Eastern European countries, Hungary and Romania, for example, I think it's important to note that we've already repositioned our products because of competition to be extremely cost effective for consumers in those markets.
So we actually think the situation could help us in the long run, by flushing out some of the weaker lower quality operators in Central and Eastern Europe who are clearly feeling financial pressure.
Third point should also resonate with investors given the dislocation in credit markets today, and I'm referring of course to the strength of our balance sheet. I mean there's three key things to stress here. First we have substantial liquidity, totally $3.2 billion in cash and undrawn facilities at quarter end. And we consider this to be a significant asset.
Second we're working, or have worked diligently and purposely over the last three years to de-risk our balance sheet by extending our maturity dates with around 90% of our debt due after 2011, so 2012 and beyond. And we also fixed our interest rates and hedged our currency exposure.
And lastly and perhaps most importantly each of our major operations generate positive free cash flow to support their own balance sheets. We currently sit around, at just under four times leverage. And we're certainly not going to do sub-optimal financing to stay within our target of four to five. We'll naturally delever over time if the markets remain as they are.
And then finally I'll just say a few words about our core value creation strategies, which remain largely intact, especially on the operating front, where we continue to launch and drive penetration of new products like DVRs HD and most recently DOCSIS 3.0. We now have 100 megabit plus broadband speeds available in two markets and expect to have the vast majority of our footprint launched next year.
On the M&A front the pipeline remains large, but as you might expect slow moving. We had done a couple of important deals in Belgium and Japan recently and perhaps more interesting though is the possibility that we might find ourselves well positioned to consolidate smaller or struggling operators again who are feeling the pressure. And of course we'll also look at asset sales where we think we can derive a private market premium.
And then lastly we will continue to buy our stock on an opportunistic basis. And at these levels that shouldn't surprise anyone. We've purchased 18 million shares at about 6% since August 1st, and nearly 40% since we started the program a few years back. And today I'm sure you all saw we announced another $250 million authorization.
So before I turn it over to Gene to kick off the regional updates, I just want to spend a minute providing a bit more color on the first plan made about growth. And to do that we've laid out four charts on slide five. Now all of them I think pretty good illustrations of the fact, and most of our co-operating metrics are stable.
The top left chart shows our quarterly growth in advanced services, so digital TV, broadband and voice. You can see that we added 630,000 advanced service subscriptions in Q3, typically our slowest quarter and just under 2 million year-to- date.
So as you see here today, or 16 million of our 25 million RGUs generally represent high ARPU value added products. Our biggest gainer continues to be digital TV which is now rolled our everywhere and increased by 363,000 in the quarter.
You'll hear from Gene in a minute but UPC has turned the gas on here with digital net adds up over 100% year-over-year, their biggest quarter ever and digital cable revenue up 45% year-to-date. New applications like DVRs and HD are driving demand; in fact, we're well ahead of expectations on our DVR penetration.
And we've still got a long way to go with only 32% digital cable penetration worldwide. Voice and data net have dropped off a bit in the quarter at 270,000 but with internet at 22% penetration and voice at 17% penetration we think there's plenty of demand ahead for us.
Then in the case of data it's just too early to draw conclusions, but 3.0 appears to be the game changer that we hoped it would be. And we expect it to have a meaningful impact over time in particular on our broadband ARPU trends.
We did lose a net 53,000 video RGUs in the quarter, again to mostly low priced, low end services. But that number was down 26% from the second quarter this year.
One of the benefits we derived from the penetration of digital voice and data is the related growth in customer ARPUs which is laid out on the bottom left of the slide. You can see that UPC Telenet and VTR all continue to grow household revenue in the 8% to 10% range.
At the top right box you'll see our financial performance, it's also stable with rebased revenue growth of approximately 6% and rebased OCF growth of approximately 13.5% for the quarter and year-to-date. So clearly we're dropping a lot of revenue to the bottom line and picking up margin as a result of continued cost efficiencies which will serve us well as we move forward into 2009.
And lastly at the bottom right of the chart shows our free cash flow performance. This is a good news story all the way around. Charlie will get into more detail but we more than doubled free cash flow year-to-date to $545 million. And our fourth quarter is one of our largest periods for free cash flow growth.
So I'll conclude by saying we feel good about our growth, even in the face of continued competition in a less certain economic environment. We feel good about our liquidity which is on everyone's mind these days. And we feel good about our strategic initiatives, in particular our desire to put a prudent amount of our excess cash back into the hands of shareholders through our stock buyback program.
Our chairman likes to say, and has said many times, if you live long enough you get to see everything twice. I think for most of us on this management team we know what that means. And this is a veteran group. Morale of the team is great and we're actually focused on coming out of this period stronger. In fact I think we'd be disappointed if we weren't able to find a prudent way to take advantage of the current environment and our relative position of strength.
So with that let me turn it over to Gene Muscleman who will give us a quick update on UPC.
Turning for a moment to UPC I'd like to draw your attention to our third quarter highlights. March by rebased OCF growth in the mid teens. The introduction of Euro DOCSIS 3.0 as Mike said another record digital quarter.
Firstly, I'd like to point out that in Q3 was our strongest OCF performance of the year with 31% year-on-year growth on a reported basis, and 15% growth when rebased for foreign exchange and acquisitions, which brings our OCF margins to a robust 49%. I think this is the highest number that we've reported.
Another key achievement this quarter was the September launch of Euro DOCSIS 3.0 in the Netherlands. As you can see from the upper right hand graph on the slide, it provides an example of how we're using cyber power to position our data products as the speed leader.
Using the 3.0 standard we are the first in the Netherlands, and by the way I think one of the first in the entire Europe to launch data speeds up to 220 megabits, and capitalizing on our considerable bandwidth advantage over ADSL we introduced UPC Fiber Power 60 megabits and 120 megabit products. These are offered at 60 and 80 Euros, respectively.
Just as importantly our bandwidths advantage allows us to significantly increase speeds across our entire data portfolio which we also began to implement in September. It's too early at this point to give any real subscriber details right now. But I can say at this point we plan to very aggressively roll this program out and by the end of '09 Euro DOCSIS 3.0 will be deployed in the majority of the UPC markets and will finish up early in 2010.
In addition our digital success continues as Q3 marked the full launch of DTV across all 10 of our markets, contributing to our second consecutive quarter with record organic digital cable adds of 187,000. That's an improvement of more than 100% over Q3 of last year and 6% higher than Q2.
Looking at value added services, high def, DVR and VOD continue to accelerate our growth as we ended with over one half million HD and DVR subscribers, representing a 20% increase in the last three months.
In terms of VOD, NL is currently the only market where we have full video on demand functionality based upon our current usage, but we see considerable future upside in VOD and we plan to roll out four new markets in '09 starting with the [inaudible] in January.
Overall the combination of growing digital base and the addition of key value added services helped us to achieve rebased digital cable revenue growth of over 45% year-on-year. Also during Q3 a total of 128,000 organic data and voice subs were added demonstrating the steady growth of our other advanced services in what is typically our slowest quarter.
And we continue to see competitive challenges particularly in Austria, Hungary and Romania where we're reacting aggressively to these markets. In Austria Q3 was our highest net at quarter '08, including 28,000 digital adds.
Also UPC's Austria's introduction of what we call the Fifth Bundle or the triple play bundle, helped reduce data [inaudible] to the lowest level of the year and has driven record voice growth. And in October we partnered with Orange to launch a combination of fixed and mobile data, whereby customers benefit from the speed advantage of UPC of course and the mobility of the Orange data card.
In Hungary we added 35,000 organic advanced service subscriptions in Q3, more than 45% higher year-on-year. Building on the early success of our DTV launch in April, 16,000 of these were digital additions.
Romania as Mike mentioned remains one of our most competitive markets particularly with regard to low end competition. Here we continue to fight the low end offers with our existing entry tiers and loyalty discounts. Most of those we've introduced in the last 12 to 18 months. We have also accelerated the roll out of DTV and introduced the market's first DVR in October, which better positions us to drive ARPU.
While recent macroeconomic events did not have a significant impact on our Q3 results, we do not rule out some future effects given the recent lower projections for the national economies, the volatile currency markets and the slowdown in real estate.
Although these are early days given the fast changing environment it is reasonable to draw a few conclusions. Number one consumers in the hardest hit economies, such as Hungary, may cut back on household spending. This may lead to more customers seeking out inexpensive options and downsizing existing services.
Yet I think experience shows us that video and telecom services are among the most resilient products in difficult economic times. I think Mike mentioned this earlier as well. Furthermore low end pressure is not a new phenomenon for UPC as we've experienced this in many of our markets over the past 12 to 18 months.
Fortunately we've taken the time to implement a mix of compelling products, along with promotional and retention strategies necessary to succeed in such environments. Conversely, there maybe some upside. Economic forces may force consolidation among industry players with weak balance sheets and we're already starting to see signs of this in a couple of our markets.
In addition this could lead to market rationalization as these weaker competitors may reduce their capital investments, operating expenses and/or increase their prices to remain financially stable. And again I think we're starting to see early signs in a couple of our markets of this kind of activity.
And then finally it's conceivable that encompassed within our market may become less aggressive. For example scaling back and or delaying five of the home construction projects until market conditions stabilize and improve.
In closing I'd like to stress again that we're only beginning to unlock the growth potential of our digital TV and our next generation data products. Furthermore, we remain confident in our ability to realize the potential of these new products throughout all of our markets.
And with that said I will introduce you to Miranda. Miranda would you like to take over please.
Let me now just give you an update on J:Com. J: Com continues to deliver consistent revenue and OCF growth. With rebased revenue growth of 7%, growth for the quarter and for the nine months ended in September. Rebased OCF growth was 12% in the third quarter and year-to-date OCF is up 11% to nearly $850 million.
With 75% digital penetration already achieved, J: Com is ready to start planning the final push to 100% digitization in a controlled and phased manner. We expect that process to take place over the next year or so which would still be well ahead of the analog switch off mandated by the Japanese government in 2011.
J:Com's DOCSIS 3.0 roll out in Japan is now nationwide with growing demand for the high end 160 megabit product. 28% of third quarter RGU additions took the 160 meg product compared to 19% in Q3 last year. So a gain in traction despite the 10% premium they charge.
At the same time the company is successfully trying different bundles and tiers to support new subscriber acquisitions. For example J:Com launched a telephone broadband bundle for NDUs prices around 5000 Yen. This has resulted in a 20% increase in sales productivity and also boosted TV sales; 40% of those taking this bundle also take TV.
J:Com have also re-tiered their HSD offering in certain areas to provide more competitive mid speed and low speed tiers. And again we're seeing a similar increase in sales productivity.
Meantime J:Com continues to monitor acquisition and consolidation opportunities both in distribution and in content. For example they completed the FCN acquisition in Q3 and announced the [Cyco] acquisition. On a combined basis, those two will add over 600,000 times fast and 200,000 RGUs to J:Com's consolidated footprint.
In terms of the economic environment, the average consumer in Japan has one of the highest levels of household savings in the world. She has very little personal debt and remains a loyal customer relatively unaffected by the global financial situation.
In recent surveys the Japanese government concluded that private consumption is flat. Consistent with the statistic that average monthly household spending on communications and broadcasting as a percent of total average monthly expenditure was 4.2% for the third quarter, similar to the 2007 annual average of 4%.
Overall we believe the Japanese economy is well positioned given the current global environment. It's worth pointing out that the Yen's recent strengthening against the U.S. dollar benefits LGI and balances to some extent the impact that other depreciating currencies to the U.S. dollar have had on the company.
So all in all J:Com is in good shape. It's producing steady growth in RDU's in revenue and in cash flow. With a strong balance sheet with leverage still less than two times and its growing free cash flow profile.
Let me now turn you over to Mauricio to discuss VTR.
Q3 was overall a good quarter for VTR. You will see on the slide that we added 63,000 advanced services, including 39,000 digital subscribers and this was our third best quarter ever for digital additions.
We also sustained rebased revenue growth of 12%, with 12% OCF growth for the quarter and on a year-to-date basis we have delivered 18% OCF rebased growth. So we're still growing at a very good rate.
You will note that Q3 OCF growth decreased to 12% while our growth has typically averaged around 20%. This is primarily due to the timing of our CPI increases which happen every six months, whereas our costs generally rise with inflation on a much more frequent basis, usually on a monthly basis.
Therefore, we just took a six-month inflation adjustment to all of our rates in late September which would, of course load through our results in Q4 and should enable us to post the stronger rebased OCF growth in Q4, stronger then we reported in Q3.
Having explained this and said this, it is important to know that we are feeling from the economic pressures in Chile. And, more importantly that we are working on a number of strategies to counter this and of course, to continue growing.
For example, we have strengthened our retention efforts over the last few months. We have strengthened our outbound marketing efforts. We've improved our collection protocols and we have beefed up our lower tier video and data products, including the speed increases on our data tiers that we just announced a few days ago.
The overall strategy, as you can imagine, is largely focused on retaining customers, and sustaining customer growth during this period. This will retain for us and prove for us the ability to cross sell and upgrade when times are better again.
So far, we have fared well in this strategy, as our net customer being of about 34,000 customers, year-to-date remains similar to our growth of last year. And with those comments, I will turn it over to Charlie for an update on our financials.
Thanks Mauricio. For those following along, on slide 10 now and this shows the year-to-dates financial highlights. Our revenue is up 22%, to $7.79 billion, our reported basis with FX movements driving most of the increase. The rebased growth was around 6%. Markets to highlight are Poland, Chile and Australia, which are all double digit rebased growth markets. OCF for the nine months increased 32% to $3.42 billion primarily from FX and organic growth and on a rebased basis this equates to 14 %. And I will give you some more segment detail in that in just a minute.
The OCF margin for the nine months was 43 % or 42.8 %, that's an increase of 300 basis points in the prior year and the key drivers of the margin expansion remain the same as the previous quarters. High contribution margins from our advanced service RDU add, together with operating leverage on our cost base, particularly in our OpEx and corporate cost.
CapEx for the nine months was $1.7 billion compared to $1.5 billion last year. Now the increase was mainly due to FX, as well as an increase in CPE, which is a good news story, because it's related to digital box demand. But as a percentage of sales, it's down to 21 %, year-to-date versus 22 % last year. And as always, in previous courses, over 50 % of our spend was variable and directly tied to volume growth.
Moving to slide 11, this is showing the revenue detail by the division for both the three and nine months. Now rebased revenue growth was consistent for both periods, up 6 % for each to $2.65 billion and $7.99 billion respectively.
The European operation UPC was also consistent over both periods. Western and Central Eastern Europe were both 3% to 4% rebased growth range with UPC generating $1.14 billion revenue for the three months, and $3.45 billion year-to-date.
But we have better top line performance in our other operations, which was led by VTR, with 12% rebased revenue growth in Q3, which got them $180 million, and 11 % revenue growth for the nine months year-to-date to $560 million. J:Com in Japan and Telenet in Belgium both posted rebased revenue growth of 7 % for the nine months.
Consistent with the prior courses, UPC's growth was negatively impacted by performance in Romania, Hungary and Austria and these three markets remain challenged as Gene discussed. But if you'd excluded those three, Romania, Hungary and Austria, our rebased revenue growth year-to-date would have been an excess of 7% for LGI overall. And as it relates to our revenue guidance, we would expect to come in around the 6% level for the year.
I'm now on page 12, with the OCF, and this is really the same detail as the previous page, except it's our OCF breakdown. Rebased OCF grew 13% in Q3 to $1.17 billion and stands at 14 % year-to-date to $3.42 billion. Our top performing operations in Q3 were UPC and J:COM, which generated rebased OCF growth rates of 15 % and 12 % respectively, both reporting their strongest quarters of 2008. Western Europe delivered a 15 % rebased OCF growth, while central and Eastern Europe posted 7% growth. And that was dragged down by Romania, which was down actually over 25% in the quarter.
Telenet was up only 8% in Q3, but rebased OCF for the nine months, was up 10% to $550 million. And as Mauricio discussed VTR's growth was 12% in Q3 was impacted by timing difference between inflation-based cost increases, and a September rate increase across all product lines and year-to-date VTR is actually up 18 %. So excluding our three challenging markets, of Hungary, Romania and Austria, our OTF growth for nine months year-to-date was over 16%. And as it relates to OCF guidance, we're confirming the 13% to 15% rebased range for 2008.
Now slide 13 we have our free cash flow progression to the first nine months of the year. Q3 free cash flow was down $25 million compared to the prior year due to the high capital spend in this year's Q3 versus last year.
But the LGI overall free cash flow in Q3 came in ahead of our internal estimates. And more importantly, free cash flow on a year-to-date basis was still up 143% to $545 million. And that's an increase of $320 million.
That's driven by an increase in cash and operating activities of around $550 million, and partly offset by an increase in CapEx of $225 million. As we look to Q4, 2008, we're going to expect to report a very strong quarter in comparison with Q3, due largely to the timing of both our cash interest and tax payments as well as favorable working capital swings in Q4 because many customers in certain European markets pre-pay for a full year of service, particularly in Switzerland.
Now I'm going to talk a bit about the balance sheet, which obviously everyone's very focused on, and we feel very good about our balance sheet. Page 14 is the first slide here. Total debt in Q3 decreased around $525 million from Q2 of '08 to around $19.3 billion. The reduction in debt is attributable to the FX translation impact, particularly as the dollar has strengthened to the Euro.
But the decrease was partly offset by incremental borrowings in the quarter, mainly as we drew down the revolvers that we have in the UPC credit group. Remember that our weighted average cost of debt is very low in our opinion. At Q3 it's still around 6%.
Now our cash position was $2.1 billion. Excluding restricted cash, it was around $1.6 billion and our cash increased by $370 million from Q2 of '08. And the increase is largely attributable to the cash we took down from the incremental borrowings, partly offset by the cash we used for stock repurchases.
And in terms of where our cash resides, at quarter end it's $780 million in cash at LGI, and then on non-operating stocks and $800 million in our operating stocks. At September 30th, we were levered on a gross basis of 4.1 times and on a net basis of 3.7.
And these ratios have steadily declined in 2008 due largely to our underlying OCF growth. And as you can see in the far column, on an adjusted basis, excluding the impact of the debt related to our shares in [News Corp] and Sumitomo, both of which we effectively repaid with the underlying shares, our gross leverage actually would fall to under four times in the last quarter-annualized basis.
On page 15, what we tried to do is give you an update on where we are on our capital structure. Clearly the markets are in terrible shape from a credit point of view. But we want to reassure you that we think we've got a good capital structure for this part of the cycle. As part of our capital structure philosophy, we've strive to maintain distinct, separate credit pools, which can stand-alone and support their own borrowing.
So, first of all, we don't cross guarantee or cross collateralize our credit pools, so this limits the risk that any one credit pool can impact the others. From an LGI perspective, in addition to our $1.6 billion of cash, we also have around $1.6 billion of undrawn borrowing capacity through our subsidiaries of September 30th .
And this breaks down as follows, UPC $550 million, J:COM $530 million, Telenet $440 million, and North Star $50 million. And on a consolidated basis as of September 30th we could borrow $1.4 billion of the $1.6 billion.
Now we are committed to the levered equity strategy. But as Mike said up front, to the extent that the financing markets remain challenged for an extended period, we could see our leverage fall below the four times level because we're not going to pursue incremental debt financings on sub-optimal terms just to keep it at the four times.
Now as most of you are aware, we're focused on hedging balance sheet risk, both with respect to variable interest rates and currencies. In terms of the interest rates, we've hedged over 90% of our exposure to floating rates. And on the currencies where all our debt is not in the local currency of the operation, which is primarily in the UPC credit group, where we have mostly Euro-denominated debts, but we have a number of non-Euro countries like Switzerland, and Central and Eastern Europe, and Chile, we've swabbed the exposure to match the underlying cash flow of the operations. And we've done that to maturity so we're not in any way impacted by the issues that are going on in Hungary for example.
Many of these contracts roll their hedges out to 2014 and most of the hedges are generally set in the three to five times range of trading OCF. In general the counterparty risk reflects a lot on this and we've got a very diverse group of lenders and counterparties and we're just not seeing any issues in terms of funding our revolver commitments.
And as most of you know we strive through free cash flow positive at each of the credit pools, and we're certainly positive free cash flows year-to-date in all of them. But perhaps most importantly, we have an extended maturity profile. I'm going to illustrate that on the following slide 16.
And on slide 16 you can see the bulk of our debt, including the capital leases, matures in 2014 or later. Over the next couple of years, two and a quarter years, about 4% of our debt matures but that's primarily related to J:COM, which is around one times levered and so there's no issues there. And that's in very cheap and stable capital lease structure. Approximately 90% of our debt matures beyond 2011, and over 50% beyond 2013 so there's really no near term amortizations of any significance.
Now we're very happy with our maturity profile and certainly as we look out over the next several years, we'll opportunistically look for windows while we continue to push this schedule out. And we have a structure in place in our borrowing pools to do this, should the markets return.
So let me just go over the conclusions page 17 before we go to questions. We're generating strong growth in advanced services RGUs, and with increasing availability of DVRs, high def, and VOD, as well as our rapidly expanding 3.0 roll-outs. We feel really good about our growth prospects. And we're looking forward to a healthy Q4 and carrying that momentum into '09.
The OCF growth and margins were a clear highlight through the quarter, and we still believe that we can be more efficient in how we operate our business and that OCF margins can continue to climb albeit at a slower pace, as we drive global scale.
Now running a levered balance sheet like we do, we feel we've made some smart decisions in how we manage the risk. And through a combination of cash on hand, borrowing availability, and our free cash flow profile, we've got the necessary liquidity to weather the extension of the current credit environment.
And additionally we're not backing away from our levered equity strategy. We may not buy back stock at the same pace as recent quarters in light of the current environment, but we are committed to allocating our capital what we see as the single best investment we can make, and that certainly is our stock at these levels.
With that I'd like to turn it back to the operator perhaps for questions.
(Operator instructions). And we'll take our first question from Mr. Vijay Jayant – Barclays Capital
[James Rackell] – Barclays Capital
Hi it's [James Rackell] for Vijay. A couple questions, you mentioned counterparties on the debt side, can you talk about how reliable you believe your derivative and currency hedge counterparties are?
And second, you talked about repurchasing equity, given to where some of your debt's trading, is that, A, something you can do given your covenance, and B, something you'd consider to repurchase some of the debt at a discount?
And third, looking at Eastern Europe as a whole can you talk about what if anything about the Eastern European markets that haven't been significantly affected? So essentially outside of Hungary and Romania, what makes those either from a macro point of view or competitively different and more or less likely to experience the same sort of effects?
Hang on Charlie, this – let's dole these out, so Charlie why don't you start preparing for the counterparty risk question; I don't think it's that complicated or going to take that long. On the issue of our debt versus our stock, I mean I think we believe as we said, on a prudent basis there's nothing better out there to buy than our stock. So we will certainly continue to do that first and foremost and while we haven't changed our debt profile or objectives in the four to five range, certainly reducing our debt is not a bad thing to do in this environment as well.
But I think given the choice between the two, it's our view at this point since we don't have any balance sheet challenges, as I think we spent a fair amount of time discussing this morning, and our stock is probably a better value for shareholders. You want to talk about the counter party risk issue Charlie real quickly?
Charles H.R. Bracken
Yes I mean we're learning a lot about and I'm sure you are about CDS and clearly where all the banks trade. We don't have a big derivative portfolio, because of these currencies and interest rates. The first one, it's heavily diversified so we're not reliant on one single counterparty. As it turns out we're generally in a situation where we owe the counterparties rather than they owe us.
Which is not necessarily a good thing, but it means if there was any default we would actually be in the money if you like.
And the third thing is as I look at our key counter parties, I mean our top three would be Paribas, HSBC, Socgen, which I think we'd all agree are probably some of the most credit worthy banks, certainly if the CDSs are to be believed.
I don't want to pick on any individual bank by name, but we're not in any of the banks which are trading with CDSs naught for 300 if that gives you any clues in terms of swaps or derivatives. And I think in terms of just to kind of give a perspective view if you extend the CDS to some of the countries, obviously the countries look pretty strong in Eastern Europe. Certainly the Czech Republic is trading extremely well from a macroeconomic point of view.
And so whilst you do have issues around Hungary and Romania, we still – we're not looking too bad in all our Central and Eastern European portfolios. Slovenia, Slovakia and the Czechs aren't looking too bad.
Well I would also add that if you look at expected growth in GDP in say Poland, Czech Republic, Hungary, Slovakia, Romania, with the exception of Hungary, they're all in the 5% to 7% range roughly. And if you look at estimates – even estimates as recently as last week for 2009, these countries, including Romania, are expected to grow anywhere from 3% to 6%.
So these are still growing economies, the unique situation in Hungary and Romania – Hungary in particular, relate to the fact a lot of housing loans were taken down in foreign currency. So volatility in the foreign currency could impact consumer confidence in disposable income.
But you're all following I'm sure the structural macro developments in those markets as well. But they're still growing economies and I think that makes it a lot easier to manage these sort of challenges. Next question operator.
Certainly and our next question goes to Mr. Alan Gould – Natixis. (Operator Instructions).
And hearing no response we'll move on to Mr. [Matthew Harrigan].
When you look at your local currency costs and you back into them, it looks like there are a number of markets, including the Netherlands where you're actually having sequential and year-over-year absolute declines in your cost base. And I'm curious as to whether there's some anomalies there as Mauricio talked about when the VTR in [Chile]. And I would think going forward your costs would probably move it at least the rate of inflation.
And then secondly on the Dutch digital ARPU, you said it was up about 70% year-over-year, and it looks like you've got very nice critical mass now north of 40% penetration. What's fading on the revenue side that isn't giving you a better local currency number in the Netherlands? Are you seeing a lot more price compression on the voice and data products in that particular market?
Well on the Dutch point I'll let Gene add some comments here, but if you look at the – I don't think we've reported this specifically – but ARPU per household in Holland is up pretty meaningfully; over 15% year-over-year, and that's driven mostly by digital. Naturally Matt, as you know, the number we're focused on most closely is what can we generate out of each home, and that is up over 15% year-over-year, and digital is a big driver of that.
The issue around the other ARPU for other products, principally it's been data that has affected us most significantly in the past. Our data ARPUs in that market are around 20 Euro plus. And our goal moving forward is to try to not only to maintain that ARPU but try to grow that ARPU through a combination of this 3.0 roll-out at higher ARPUs and driving people to more advanced products.
So the name of the game in Holland is clearly digital TV, which is as you noted having significant success in the ARPU equation and trying to put a floor under data ARPU and perhaps over the medium-term drive up that data ARPU through the launch of these game changing technologies. If we achieve those two things you'll see a nice spiral I think, a nice pop in the overall revenue in that market.
And on the cost base in a couple of markets like Chile where currency will have a small impact on our operating numbers because we do have some dollar-based costs and programming, for example the most part of our costs are in the local currency of the operation and what you'll see is simply a reported variance.
The vast majority of the cost efficiencies realized in a market like Holland or Europe in particular, have been real cost efficiencies, real headcount maintenance, real synergies from mergers that are still being finalized or implemented. For example in Switzerland, IT costs savings associated with the roll-out of [Darby], so we're realizing real cost efficiencies and to me, that's a terrific position to be in as we move into 2009 and 2010.
I would rather be very, very efficient and at a high margin point at this stage of the game, than trying to achieve those numbers in the next couple three years. So I think it's been effort well delivered. Operator?
We're going to go ahead and go back to Mr. Alan Gould – Natixis.
Alan Gould – Natixis
Mike, a couple big picture questions. First is with respect to your management incentive plan, and I like the fact that management's aligned with shareholders, but I never thought – I'm sure you never thought – that the stock would be trading around 15.
When we're getting close to paying that out, it looks like you're going to be hitting the high end of the bogie in terms of EBITDA growth. But $400 million divided by 15 is a lot more dilutive than we anticipated. Can you give us some help as to what's going to occur there do you think? And are you close to that 17% growth on an apples-to-apples basis?
Well on that point we haven't run the exact math for the benefit of the board or the comp committee and it's pretty well described in the plan itself how that is calculated. I don't think we're going to be at the top end of that Alan, I think we're going to be shy of that, but not hugely shy of that.
I think the number you cite in terms of the overall comp amount is actually less than that, and if you back that off by the amount we'll be short of the goal, it'll be even less. And I'm not here – I'm not prepared to give you a figure because I don't have one in my head, but it would be less than the amount you disclosed.
Alan Gould – Natixis
I was combining the two plans.
Yes, even by combining the two plans. If you – the plan is very specific. It says that it's at the comp committee's and the board's discretion as to whether to pay out in cash or stock. The intention has been and it has been stated that they will pay out in stock, but they reserve the right to at any point adjust that position. And honestly we haven't had that conversation. Certainly I think it's prudent that they'll look at dilution and the impact of dilution.
And again the point I'd make Alan is they don't have to make a decision necessarily at one point. They can make that decision every six months. So it's a – technically the payments could be spread out over a six month period, and they can determine at every six month period if they choose what the best thing to do for the company is.
So I think there's a lot of flexibility there. And I think the board and the company will be extremely prudent and thoughtful about how they approach that.
Alan Gould – Natixis
My second question is with respect to EBITDA margins. I mean 44% or so in the quarter is way higher than anyone I've seen. Is there a tradeoff between the EBITDA margin and your revenue in sub-growth?
Well we get that question every quarter. I think that – and we ask ourselves that question every month when we look at our numbers. I think the fact is that if I were to give you the answer yes, then I would have to say that marketing and sales expenditures were down. But really we're spending a lot of money – both from the point of view of promotions and discounts as well as marketing and sales, pushing our products.
And we don't generally have a sales problem. I mean Gene will tell you that our sales results year-over-year and year-to-date, to budget are pretty much on target.
So if I we're sitting, we're sitting here today having achieved 70% of sales or 50% of sales then I would say to you boy, let's go back and we would be looking at our marketing spend and marketing and sales costs and is that having some kind of impact.
But the fact is we're selling. Our issues if we have them are more related to shares and retention and you know that's really the place where we're focusing our attention and time. And the savings we're realizing are coming out of a number of areas, marketing and sales is principally not the main area.
It's coming out of headcount in overall operations and as I said before IT and things of that nature, so, I don't think so and I really don't believe that we could simply spend our way to greater RGU sales or greater RGU net adds. That's generally not the way it's worked in these markets and you know the money we are putting in, we're putting largely into retention.
I don't know, Gene, do you want to add something from the European perspective to that?
I guess the only thing I might add to that is this question came up at our board meeting about a week ago and in preparation for the board I had gone back and looked at this very issue. And essentially what we found was that in eight out of the 10 countries our offers were actually stronger than what we had put into the market the year before, only in two instances were they about equal
I think another thing that you have to take a look at when you're looking at our marketing spans particularly if you compare it on a metric of revenue against revenue, as a percentage of revenue. We don't include in our reporting for that purpose or looking at the metric, the discount.
And, when you add the discount that we use to drive sales and as part of our retention program, I think we're spending about the right amount of money. From time to time I ask our managing directors if you add 10% more, 20% more, would that make a huge difference? And the answer always comes back no, of course it would make a difference probably, but then you have to look at the marginal return on that sale.
Alan Gould – Natixis
And my last question, Mike I know you started the call differentiating yourself from the U.S. operators. From Time Warner Cable's call yesterday they said they saw a meaningful changing, decline in new subs beginning in October. Can I confirm that you have not seen the same results?
That's another question we're always asking ourselves more weekly and daily than monthly. And the fact is yes I think we've identified the areas where we think there might be some weakness moving forward and or where we perhaps have felt a bit of weakness.
Chile is one and I think Mauricio addressed that and potentially Hungary where both the interest rate environment as well as what's happening there on a macro level could impact broader sales. But I think the fact is we have not as of this point seen a meaningful change but to be prudent Alan you know what I think we've been seeing here all along we might and so we're prepared for that.
And I think we're well positioned for that. But at this stage I would not say, I can't remember the words you used, but I would not use the word meaningful in this context if that's the word.
Maybe I can phrase that a different way because we just looked at that as well. And I haven't seen or we haven't seen any noticeable change in the level or volume of sales. If you look at the month of October sales were slightly below budget but they had not fallen in volume.
Your next question is from David Joyce – Miller Tabak.
David Joyce – Miller Tabak
Excuse me, thank you, was wondering in Belgium if there's further consolidation that you would be allowed, that Telenet would be allowed after the recent deal early in October? And, secondly, on the European front was there any new development in Netherlands related to opening up the analog system?
Well in Belgium the deal they just completed with [InterCobul] is a pretty significant transaction and as you say helps consolidate the Flemish market, which is where Telenet's strength and core operations reside.
I mean there is, they have looked at historically opportunities to move into [Volunia], other areas in the south and I don't believe at this point there is anything actionable there. But it's certainly a possibility that they might look at those areas down the road but I wouldn't put it necessarily number one on their list.
And they're in a pretty strong position where they sit today in the planners. And on the OPTA question I think we discussed that on our last call, in August, sometime in August, the issue to draft decision to try to impose a resale on us and other operators in Holland around our television product.
We obviously went immediately to the EU and expressed to them in very simple terms that this seems to us to be absurd given the increased level of competition in this marketplace, in particular increased level of digital competition in this market place.
Since then I think OPTA has retrenched. They have gone back to prepare their own more formal response and submission to the EU which we expect to have some – they might deliver some time yet this year. It's unclear if they will or when they will and how long the EU will take to determine that.
So I think it's very cloudy, it's not the first time we've had to deal with these cloudy approaches from regulatory point of view locally and we expect to fight them diligently as we have done. I think this is the third attempt in this market place and again just looking at the trend here in terms of relative competitive dynamics now versus the prior two attempts we think it's sort of laughable. But we deal with it seriously and we will keep you updated if we get any more information.
David Joyce – Miller Tabak
All right. On the M&A pipeline front we normally think about the distribution opportunities, your core competency there, but I was wondering if there was anything in the M&A opportunities that might be along the content front especially as you want to be adding some more VOD contenting in the event that you might be sort of a JV partner or something?
Is there anything happening along those lines?
Well I think [Shane O'Neil] is on the line. [Shane] do you want to maybe talk for a minute about what we've been doing in Europe and the content area? I think he's on the line. [Shane]? Not on the line.
Well, I think the, to answer the first question, we have been relatively active in the M&A environment from a content point of view historically. So it's certainly something we've – we closed for example in September a relatively large transaction, about a $95 million deal in Central Eastern Europe on a documentary channel that is one of the higher rated services we carry in Hungary and Czech and Slovak.
We continue to look at expanding our presence in the kid's area and some other smaller transactions so I think we've been looking at content. We don't always disclose every content deal we do but we certainly are active in the content space. And have today a pretty large and substantial platform of channels and subscribers right out of Europe.
Probably something we need to do a better job of highlighting for folks. Generating a pretty substantial EBITDA today and growing at one of our faster growth rates. Terms of VOD I mean we're – the areas of the content side we're most focused on would be high def content first and foremost and in VOD content secondly. The reason for that is we do have high def launch just about everywhere, but we're still ramping up the VOD platforms.
We're rolled out in Japan of course, we're rolled out in Holland, and we are seeing some pretty good take in both markets and in Belgium I should add in both, in all three markets, from the point of view of both free and transactional VOD services.
But the European market in particular hasn't reached a tipping point either for VOD or for HD. And I think when it does reach that tipping point we're well positioned to exploit our advantages both in terms of scale and our ability to negotiate with content providers. And be in a position to push the products.
So there's nothing immediate that jumps to us that says hey this is one of the things we can do in this environment to take advantage of. I would say no.
All right and we have another question from Jason Bazinet with Citi.
Jason Bazinet – Citi
On the CapEx front if you had an opportunity to either tweak the holding the dollar amount of CapEx flat, because that's not really my question. But either reallocate the CapEx by country or reallocate the CapEx into certain specific areas of your business. Where do you think you would get the biggest return for that sort of marginal dollar of investment?
Well I think we're putting it, I mean, well let me make you feel better about the question. We asked ourselves that every year when we put our budget together and then regularly throughout the year. So we approached the capital budget from the point of view of what we'll generate the highest return to the company.
Both in terms of cash on cash and in any other way you want to look at it so we already filter every project through that prism if you will. And then land on the ones we're going to develop for example we look all new builds and all rebuilds which are still very relatively substantial in our business on a market by market, project by project basis and we set relatively high return expectation before we'll approach those projects.
We look at every product whether it's digital TV or broadband with 3.0 or any content investments. We look at each of those on a standalone basis. So I am not trying to be facetious but I think we already have at this point allocated our capital we believe in the areas that generate the highest return and the most appropriate return for that capital.
If you want to ask about a specific product or area we can certainly look at that. The pieces of the CapEx that we are focused intently on reducing over time are the areas of CapEx that are largely maintenance, or more fixed in nature.
So we are hopeful that our IT costs as we finish up the process of converting for example most of the appropriate markets in Europe to Darby. That those one off expenses will go away and we think that's coming this direction.
So I mean there are some areas where we have maintenance costs and more fixed costs where we are focused certainly will be focused this upcoming budget year I can assure you. On looking at every single project there that may or may not have a revenue component with it to ensure that it's a valuable spend from the point of view of shareholders and ourselves.
Your next question is from David Gober – Morgan Stanley.
David Gober – Morgan Stanley
I had two that are pretty unrelated but back on the topic of CapEx. I was just wondering what percentage of your CapEx is not in local currencies? For instance maybe some of the Eastern European CapEx that might be in Euros and whether or not you guys have had that exposure?
And also I think we're a little over a year away from when the Super Media relationship expires in Japan. I am just curious how you guys are thinking about that right now and especially given the strength of that balance sheet and the dynamics of that market?
Charlie, do you want to take the CapEx question and go –
Sure I mean I think we've already focused on matching functional currency to underlying operations in terms of CapEx. I mean I think to be, across the group our OpEx is sub $50 million and the way we hedge it but we usually do 12-month runs forward.
It's about $50 million in Chile sorry and it's just under $50 in Europe, so this is in relation to the European business particularly. We hedge about 12 months forward or we hold dollars in our balance sheets. So we hedge it there, but clearly 12 months out we have to kind of roll again.
On the CapEx side these are contracts that are obviously looked at every year. In Europe it's sub $100 million is spent in dollars on CapEx albeit some of the contracts are North Eastern into Europe but linked to dollar pricing. And certainly because we're very focused on making sure that we don't get hit here by the movement in the currencies. And we do have a few alternative suppliers which are, a lot of them are Euro denominated.
So it's not quite as bad a story but you can take a hole in the round and it's a de minimis impact to be honest in relation. We've run some stress tests and we really are relatively unexposed to any kind of movements.
Miranda, you want to address Super Media?
Sure as you know we have a very long-standing relationship with Sumitomo it's been a very successful partnership and we remain extremely committed to the market. So as you'd imagine we're looking at a whole range of options.
But for the primary focus on how we strengthen the company going forward. There, as you can imagine, there's a whole range of topics that we talk about but we're looking at them in a very constructive way and we have good engagement with Sumitomo.
And our next question goes to David Kestenbaum – Morgan Joseph.
David Kestenbaum – Morgan Joseph
Thanks. I guess the first one's for Miranda. Just wanted to know what the acquisition environment is like in Japan. I see you completed a pretty big one this quarter and how many more are like that size? And then how is your relationship with Sumitomo affecting your ability to complete acquisitions?
Oh, I think the Sumitomo share our interest in seeing J:Com continue to grow and in certain potential transactions are very helpful in deploying some of the existing corporate relationships in talking to major share holders involved in other companies.
There are probably two or three mid size acquisitions that might come up over the next couple of years. There's nothing immediately on the horizon that we're actively engaged in. We continue, J:Com of course, continues to look at conversations with [Mediactive] but Sumitomo remains positive and supportive of acquisitions.
I also think there, again could be some quite interesting opportunities on the content side where we're beginning to see some consolidation opportunities. And the JTV management team is looking at whether some mergers or some channel acquisitions as well as possible expansion into the BS platform. So, there's not a flood gate but there's a steady stream of acquisitions that we review with management and inter-business.
David Kestenbaum – Morgan Joseph
In then in Chile, obviously we've had recently very high inflation. Just wondering what happened last time inflation reached these type of levels and how the company reacted to it at that point?
Mauricio are you on still?
Yes I'm on thank you. It was a long time ago. Inflation in Chile has been held at around a 3% level, 3% to 4% level; pretty much ever since I could remember; certainly throughout the latter part of the 90's and the 2000's.
What is important, I guess to characterize here is that this is an inflation based economy and by that I mean there is legacy from prior years to rebased everything according to CPI. So we have in place a policy that just does exactly that.
We rebased our revenues on inflation hikes regularly on a six month basis. The difference this time around is that the spike has occurred as a result of, basically high electricity bills and gas prices and it has happened within this last six month period. And that's what causes this lag that we're catching up with the CPI, 100% CPI rate hike that we just took in late December.
David Kestenbaum – Morgan Joseph
So are you saying that you have flexibility to change your customer's bills every six months? Is that so you can adjust to inflation?
Yes, we have the ability to adjust to inflation. We pass on 100% of CPI to the costumer.
We will take our final question Steve Malcolm – Arete Research.
Steve Malcolm – Arete Research
Three questions please. First of all on Cablecom in Switzerland, I believe you've had some pretty big well publicized customer service problems, which I think are at least a partially reflected from the KPI at the quarter. Can you talk us through what's going on there? What you've done to fix it and what we should expect the next couple of quarters as a result of that?
Secondly Gene's comments seeing distressed operators in the first signs of consolidation in a couple of the markets. Can you maybe elaborate on that, where you see that mostly likely to happen and how you may benefit?
And finally, just on advertising revenues within Chellomedia, can you just give us an idea of exposure is advertising revenues and how that might play through Chello's financial performance over the next 12 months. Thank you.
Yes, well I'll take the Swiss one and Gene, why don't you talk about the consolidations and stress points. And Charlie, I don't know a change there but you can deal with advertising.
I'll deal with the advertising, yes.
Yes, I was just in Switzerland, guess it was ten days ago, and what I'll tell you is if you compare the performance of that asset, first of all to our other European businesses, it is performing extremely well. They have had year-to-date OCF growth in the 13%, 13.5% which for a large mature western European market is terrific and their revenue growth has also been pretty steady.
So I think the business first and foremost is a very high performing business from our perspective. The issues around costumer service relate principally to our recent conversion, our continued conversion of the IT system to the standard centralized platform we used in five other countries. And inevitably you are going to have those types of challenges when you convert a large system over. So I think we believe those are largely behind us. We have all the issues and bugs fixed and are working aggressively and actively every single day to work down the backlog of change orders and issues.
So the team there is extremely focused, extremely energetic. It's a challenging market because it's a very demanding consumer and a very small market in that respect. But I think the business there is performing well. Their digital product is performing actually better than we anticipated, 3.0 is around the corner, VOD's around the corner.
I think we're doing all the right things in that market place and it's really one of the most stable marketplaces we operate in both a competitive and regulatory point of view and I think you can see that in our results. So, I think that the biggest issue is IT related and I think it's largely behind them.
Before I would leave in Cablecom, I would just echo what Mike said. I mean we went through a major change out of a billing system. But it's a lot more than just a billing system it's a whole end to end platform that handles the customer from point if sale right through to the billing and provisioning.
And those are fairly complicated and sophisticated systems that we put into place. One of the things I would like to mention is it's not the IT system per se that you put in place that creates some of those kinds of problems; it's the fact that the organization has to adjust so much to the new system and what we're going through now is really what I would call process reengineering. And I've been in communications regularly with management almost on a daily basis in some cases. We've got a task force of some 50 odd people supporting them out of this office and we're shooting by the end of year to have this fixed and get off to a good start in '09.
On that consolidation point, Gene, you want to talk about any operators we feel are experiencing the stress of that we've –
It's the markets not the operators because a lot of it's innuendo and rumors but it's the kind of feedback we get on a day to day basis as we monitor what going on in the markets. And in Romania and Hungary and Czech I think we're seeing signs of one particular operator maybe who's experiencing perhaps financial distress.
That may be a strong word but we're not seeing the same level of competition nor quite the same type of aggressive offers that we've seen in prior years.
There's another operator in the Romanian market that has cut back substantially in their operations in terms of expanding and headcount. Whether at the end of the day it will prove that these are consolidation opportunities or more important even if they were consolidation opportunities, if it's an opportunity to rationalize the market would these low income competitors start behaving more rationally start moving rates up then we would benefit from that as well.
So I say two things. There's a possibility of the rationalization happening as a result of what's going on in these markets and in some cases there's even an opportunity maybe to consolidate the markets further. But I wouldn't want to go into operator names.
Well I think on the Chello advertising side, Chello's base actually is largely subscription although obviously over time that will change. So today it's broadly speaking about 20%, 25% is ad revenues. And we have been hit by in the UK. There's a bit of an [inaudible] zone media and certainly been struggling a little over in the UK advertising cycle. Although, surprisingly, held up pretty well elsewhere. They do show that they have a bit more advertising revenue rate to resale our business that has very, very low margins. So I would say the right number is about 20, 25% of our revenues.
And then, just to echo what Mike said, these guys have done a very good job of consolidating some assets, depending on your view on the exchange rates. They're closing in on the $75 + million over DA, building quite a lot of value here.
And the business is still a 10% grower, even despite what's going on in the ad cycle. Certainly a lot of hidden value here and something which I think there's still opportunities to consolidate and get smaller assets followed in.
Well I think that concludes the call. Thanks for sticking with us if you still are on. Certainly appreciate you making the time. We believe that, and I think I can speak for all the management here as they said, our morale is good. We think the business is on a great footing here and we're hopeful to come out of this actually not just stronger but perhaps taking advantage of some of these opportunities. And we will speak to you all soon on our fourth quarter results. So thanks very much.
Ladies and gentlemen this concludes Liberty Global's investor call and the call will be available in the Investor Relations section of Liberty Global's website at www.lgi.com. There you can also find a copy of today's presentation material. Thank you can have a nice day.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!