Isilon Systems, Inc. Q3 2008 Earnings Call Transcript

Isilon Systems, Inc. (ISLN)

Q3 2008 Earnings Call Transcript

October 30, 2008, 5:00 pm ET

Executives

Rosemary Moothart – Director of IR

Sujal Patel – President and CEO; Founder

Bill Richter – VP of Finance & Interim CFO

Analysts

Aaron Schwartz – JP Morgan

Katy Huberty – Morgan Stanley

Glenn Hanus – Needham

Tom Curlin – RBC

Sid Parakh – McAdams Wright Ragen

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Isilon Systems 2008 third quarter financial results conference call. My name is Kim, and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator instructions) I would now like to turn the presentation over to your host for today’s conference, Ms. Rosemary Moothart, Director of Investor Relations. Please proceed, ma’am.

Rosemary Moothart

Thanks, Kim. Good afternoon, everyone, and thanks for joining us. The speakers on our call today will be CEO, Sujal Patel, and VP, Finance and Interim CFO, Bill Richter. Before I turn the call over to Sujal, there is important information I need to review with you.

On this call, we will be referencing both GAAP and non-GAAP financial measures. When we review gross margin, operating expenses, operating loss and net loss, we may be speaking in non-GAAP terms, which excludes stock-based compensation. We believe that excluding these expenses gives our management and investors a better indication of our operating results.

We provide GAAP and non-GAAP reconciliation information in the press release we issued today announcing Q3 results. The press release is available on the homepage of the Investor Relations section of our website at www.isilon.com/company. The webcast of this call will be archived in the same section. In addition, a recording of the conference call will be available later this evening through midnight Eastern Time on November 13. Details on the playback are in the Q3 press release.

During this conference call, we will make forward-looking statements about our business and expectations for the future. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our actual results may differ materially from those expressed or implied by our forward-looking statements.

For detailed descriptions of these risks, uncertainties and assumptions, please read our quarterly report on Form 10-Q for the third quarter ended September 30, 2008 also filed today, and our annual report on Form 10-K for the fiscal year ended December 30, 2007, and other filings with the Securities and Exchange Commission. Isilon assumes no obligation and does not intend to update these forward-looking statements.

And now, I’ll turn the call over to Sujal.

Sujal Patel

Thank you, Rosemary. Good afternoon, everyone, and thank you for joining us today. Overall, I’m pleased with Isilon’s third quarter performance. We are steadily driving topline growth and converging towards profitability. Our results clearly demonstrate forward execution against our plan.

I’m now going to turn the call over to Bill to review our financial results and then I’ll provide my perspective on our achievements in the quarter. Bill?

Bill Richter

Thanks, Sujal. And let me also welcome everyone to today’s call. Let me start with the income statement. Total revenue in the third quarter was $30.3 million, up 40% from $21.6 million in the third quarter of last year. Sequentially, total revenue increased 8% from $28.2 million in Q2.

Let me give you some detail on our Q3 revenue. Geographically, the breakdown was 67% domestic and 33% international. This is a record for international revenue contribution, led by our particularly strong quarter in Japan. The channel drove 55% of revenue in Q3, roughly flat with last quarter. Software applications contributed 10% of our total revenue, or about $3.1 million compared with 8% last quarter. In Q3, we acquired 56 new customers.

Now I’d like to review our gross margin, which was 57.3%, a sequential increase of 30 basis points. Our core product margins were 62.4% compared with 59.6% last quarter. Several factors contributed to this progress. First, our customers increasingly value the differentiation that our OneFS operating system software provides. This enabled us to hold firm on discounting levels in Q3. Second, we saw continued progress in our add-on software sales. And third, improvements in inventory turns and supply chain efficiency reduced our product COGS. These factors taken together yielded product margins at an al-time high in Isilon’s history.

Service margins were 36.4% compared with 46.2% in Q2. As a reminder, last quarter service margins included a one-time pickup of 6 percentage points generated by a few large service contracts. After backing up a one-time pickup from last quarter, service margins decreased about 4% sequentially, as we invest in our global support organization. From a business model perspective, we continue to expect service margins to hover around 40% in the near to medium term.

In the third quarter, total operating expense was $21 million, flat compared with Q2. Within OpEx, R&D increased 3% sequentially, but was down as a percentage of revenue. Sales and marketing decreased about $1 million in Q2, reflecting several factors, including seasonally less tradeshow activity, the reset of our half-year commission plan, and some favorable benefit from foreign exchange. Finally, G&A increased about $790,000 compared with Q2. The increase was driven by legal fees and expenses related to shareholder litigation and our ongoing cooperation with the SEC related to our prior year restatement.

Given the uncertainty in the current macroeconomic environment, Isilon's management is taking appropriate caution in managing our cost structure. While we do anticipate continued investment in strategic areas of our business in the fourth quarter, particularly in sales and R&D, we remain acutely focused on our path to sustain profitability. In Q3, the non-GAAP net loss per share was $0.05, down sequentially from $0.07 in Q2 and half the net loss per share from the same period a year ago.

Now I would like to review some highlights on the balance sheet and our cash flows. We ended Q3 with over $76.7 million in cash, cash equivalents and marketable securities, up $1.7 million from the end of Q2. Deferred revenue was $23.7 million, up slightly from $23.3 million in Q2. DSOs improved to 45 days from 60 days in the previous quarter. Inventory at $10.5 million was down about $1 million from the previous quarter, driving inventory turns up to 5. And in Q3, we generated $3.3 million of positive operating cash flows.

Overall, these results demonstrate solid execution of our business plan, driving revenue growth, generating increased leverage in the business and advancing towards profitability. While we are continuing our practice of not providing quantitative revenue or EPS guidance, I would like to summarize the targets of our business model.

Over time, we expect gross margins in the low 60s; OpEx at 40% to 45% of revenue, including R&D in the low-teens, sales and marketing in the mid-20s, and G&A in the mid-to-high single digits, which generates operating margins at 15% to 20%.

With this, I will now turn the call back over to Sujal.

Sujal Patel

Thanks, Bill. Let me comment on our financial results for the third quarter. We achieved record revenue and gross margin, increased the operating leverage in our business, and made significant progress towards profitability cutting the non-GAAP loss per share in half year-over-year. These results reflect fundamental strength in our business that I would like to highlight for you.

Reorder revenue from our installed base grew 132% year-over-year to an all-time record of $26.2 million. This growth rate was driven not only by customers adding note to their existing Isilon IQ storage systems, but more importantly, it was driven by a broadened product portfolio introduced in 2008, including the Isilon IQ X-Series, OneFS 5.0, and the Accelerator-x. These new products and the continued maturation of our technology had enabled us to extend our footprint beyond our traditional media roots into a broadening range of enterprise applications and workflows. This reorder rate not only underscores the inherent value of Isilon’s modular pay-as-you-grow clustered storage systems, but it also clearly demonstrates our deepening penetration into large enterprise accounts.

As excited as I am about the growth in reorders from our installed base, I'm disappointed in the number of new customers we acquired in the quarter. New customer acquisition was impacted by both typical Q3 seasonality and the limited traction from our North American channel. Creating a business that drives new customer acquisition through increased channel leverage is one of our top priorities in Q4.

Today, we announced a significant step towards achieving that goal by hiring Leonard Iventosch as our VP of Global Channels and OEM. Leonard was most recently NetApp's VP of Global Channel Sales, building their channel business from its intensity to more than $2 billion during his eight-year tenure. We are thrilled to welcome Leonard to the Isilon management team.

Let me shift gears and share my perspective on the current dynamics in the enterprise storage market. Faced with rapid and boundless growth in file-based data, IT organizations are feeling increased pressure to reduce costs and improve their agility of their storage infrastructure. This combined with the continued adoption of clustered computing and server virtualization has placed significant strength on traditional monolithic scale-up storage architectures.

As the data center continues to evolve, a transformation is necessary to facilitate the consolidation and automation of file-based data storage. Enterprises have turned to clustered storage as the answer to these challenges. While other incumbent storage vendors are in the early stages of development of clustered storage products, Isilon recently announced its fifth generation clustered storage systems, delivering unmatched levels of performance, scalability and value to power the widest range of file-based applications and workflows in the enterprise.

Our innovations in 2008 have doubled the performance of our products reaching 20 gigabytes per second and 2.3 petabytes of capacity in a single file system and a single volume. With OneFS 5.0, Isilon’s clustered storage systems set the standard for scale-out file storage and create disruptive, competitive differentiation from incumbents such as NetApp and EMC. There's no better way to underscore Isilon’s role in leading this transformation in the enterprise storage market than to highlight customer deployment. The life sciences industry is one our fastest growing markets. As science moves out of the Petri dish and into the data center, the role of technology only grows in importance and magnitude.

Let me share some direct feedback from the Broad Institute that underscores Isilon's value proposition. Before Isilon was deployed, Broad had to manage more than 1,000 file systems on 54 Sun trumpers [ph] and eight NetApps. This significantly overtaxed their three full-time storage administrators. Since Isilon was deployed, the Broad has scaled their cluster capacity five-fold in less than a year to now more than one petabyte in a single file system, requiring only a fraction of one administrator's time.

Another key life sciences customer of ours is Complete Genomics. By mid 2009, Complete Genomics plans to deliver a $5,000 genome, dramatically lowering the cost of DNA sequencing. Complete Genomics has already deployed more than 700 terabytes of Isilon products to unify its vast stores of mission-critical genetic data while eliminating the requirement for a full-time storage administrator. These customer examples underscore the need for a new storage architecture that effectively handles the rapid growth of file-based data and the increasing performance requirements of the next generation enterprise data center. Isilon’s traction in large enterprise accounts demonstrates our technology lead and value proposition relative to incumbent vendors.

In summary, I’m pleased with Isilon’s solid performance in the third quarter and believe we are well positioned to drive growth and success. With this, Bill and I are happy to take your questions. Operator?

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Aaron Schwartz of JP Morgan. Please proceed.

Aaron Schwartz – JP Morgan

Good afternoon and congratulations on the results. Sujal, if you look back at this year, you outlined a number of major initiatives that you had, including putting a lot of focus on the services organization, having more enterprise grade products and bringing in them or strengthening your management team, all of which you’ve had a lot of success with. If you look out into ’09, what are the some of the major things that we should look for you and this company to achieve?

Sujal Patel

So – Appreciate the thanks earlier – the congratulations earlier, excuse me. So, you are absolutely right that I’ve made a tremendous amount of progress on the plan that I set forth in the call that I did right after we completed our 2007 restatement in terms of building out a management team, focusing on our products and our technologies, as well as getting the company on track with respect to growth. From the prepared remark comments what you realize is that we are putting a significant effort behind our channel organization and we are continuing to invest in our sales and marketing organization to move our business growth rate upward and to capitalize on what we think is a tremendous opportunity going forward. I view 2008 for me as a year to get the business in position to capitalize on what I think will be a great 2009. And so I think what you should look for in ’09 from us is execution on that.

Aaron Schwartz – JP Morgan

Okay, terrific. And other question I have is, with the X-Series, I believe that if you sell it back in the installed base, it would require a software upgrade, and correct me if I'm wrong there. But I’m just wondering if you go back into the installed base with the X-Series what you are seeing in terms of software attach rates and new module additions for some of your customers?

Sujal Patel

Yes. So let me try to just segment the different products that we have and what they are. So the Isilon IQ X-Series, which was introduced in January, is the third major refresh of our hardware platforms. And the X-Series provides our customers with 30% to 40% better power efficiency, double the performance of our previous generation and a lot of other improvements. That hardware platform and the nodes that comprise that platform are seamlessly integratable into all of the clusters that we've been shipping for many years. And the so X-Series nodes can be added non-disruptively to a cluster one node at a time. The other thing that we introduced, which we introduced recently, was the OneFS 5.0 operating system. And that operating system is the fifth major generation of our software. And that is something that when our customers deploy, they deploy it in a more careful fashion. Today, the majority of our customer base is still running our OneFS 4.7 releases, but we’ve seen a great uptick in customers that are running OneFS 5.0 and it’s around 100 of our customers today.

Aaron Schwartz – JP Morgan

Terrific. That color is very helpful. Thank you very much and congratulations again.

Sujal Patel

Thank you.

Bill Richter

Thanks, Aaron.

Operator

Your next question comes from the line of Katy Huberty of Morgan Stanley. Please proceed.

Katy Huberty – Morgan Stanley

Hi, guys. Congrats on the revenue performance this quarter. How many deals made up the upside from Japan in the quarter? Was that one large deal or were there a number of deals in that region?

Sujal Patel

With respect to large deals, what I would say is that if I look at it first worldwide, the average deal size as well as the number of large deals, sort of 500,000 and bigger, were roughly the same as they were in Q2. And so we are very pleased with that. With respect to Japan and APAC in general, our performance was pretty diversified. It wasn’t caught up with any large concentration. We didn’t have any 10% customers for the quarter.

Katy Huberty – Morgan Stanley

Okay. And it sounds like the positive influences on product gross margins this quarter are items that are sustainable. Is that fair? And do you feel that software revenues can remain in the double digits as a percentage of revenue?

Bill Richter

Katy, there were no one-time items in our product gross margins to speak of. And so if you're asking me about sustainability, I think that we would agree that they are sustainable. And actually Sujal and I are focused on driving them higher. And that’s going to come over time with greater supply chain efficiency and, as you pointed out, greater adoption of our add-on software applications. And so, this quarter they came up to 10%, last quarter they were 8%. We're not giving forward-looking guidance, but we want to see those software add-ons to be in the low-double digits. So we are driving towards it absolutely.

Katy Huberty – Morgan Stanley

Okay. And then what trends did you see late in the quarter? Did you see any customers back off deals in the second half of September? And DSOs have moved in the right direction but looks low. Does that point to anything as it relates to linearity?

Sujal Patel

What I would say is, is that we are – we did some deal slippage and sales cycle elongation at the tail of Q3, but it wasn't material overall, nor would I say it was all that different from what you typically see in a Q3 since it’s seasonally slow through the summer months. With respect to linearity, I think it was probably pretty similar to what we typically see in that summer quarter.

Katy Huberty – Morgan Stanley

Great. Thanks so much.

Operator

Your next question comes from the line of Glenn Hanus of Needham. Please proceed, sir.

Glenn Hanus – Needham

Good afternoon and congrats. Just following up on that last question, I think last quarter you said that the macro factors don’t play that much into your markets. So, to what extent do you feel like macro factors play into your vertical markets? And following up on Katy’s question, how was the beginning of October?

Sujal Patel

We certainly believe that the vertical markets that we target are impacted to a lesser degree by the current economic downturns and others such as the financial services vertical, which we have almost no exposure. The other thing I would say is that we have a very unique pay-as-you-grow architecture, which allows our customers to add one node at a time to their clusters, managing their CapEx in a way they can’t do with traditional architectures. And I think that really makes us much more valuable during these tougher economic times. That being said, no one is immune from this macroeconomic environment that we're in. And so we’re being cautious with our operating plan for 2009, but we think we’ve got a tremendous opportunity in front of us.

Glenn Hanus – Needham

Could you maybe just touch on competition and pricing – pricing tactics and competition and NetApp, is that still basically the same as last quarter, or are there any changes this quarter?

Sujal Patel

Yes. We didn’t see any material change in the competitive environment. The majority of our sales engagements remain against Network Appliance and EMC. We continue to do very well. Our fifth generation clustered storage systems are being received very well out there and we believe that our technology is highly disruptive relative to NetApp and EMC. One of the things that we are looking at out there in the marketplace is that there are a number of incumbent vendors who are beginning to talk about clustered storage, and we are really happy about that validation. We haven’t seen any real engagements with any other new entrants into this space and we haven’t seen any pricing pressures to speak of, which I think you could see in our gross margins.

Glenn Hanus – Needham

Could you talk about the significance of your announcement of the certification with VMware and Xen server and the extent you are deployed in virtual environments at all?

Sujal Patel

Sure. I’d be happy to. We believe that as the data center adopts clustered computing and server virtualization that what you are going to have is that you are going to have greater strength placed on traditional storage architectures by the compute layer, the server layer. And what we are finding with customers that are using VMware and Xen is that they have two problems. One problem is that they need a place to store their server images and the VMware and Xen source images that are actually representing the virtual servers that they have. The second thing that we’re seeing is that the applications that run in those virtual servers need a large, scalable, high-performance storage system. And what the two certifications give us is a way for our storage to play in both of those areas. And in the prepared remarks I made some comments about our broadening applicability across the wider range of enterprise applications and workflows. And we view this as one of those very important applications and workflows.

Glenn Hanus – Needham

And to the extent you are deployed in those environments today is that quite small and growing?

Sujal Patel

I would say it’s a – I would say it’s handful, but growing.

Glenn Hanus – Needham

Thank you.

Operator

Your next question comes from the line of Tom Curlin of RBC. Please proceed.

Tom Curlin – RBC

Hi. Can you elaborate on your thoughts for your channel initiatives? And do you feel like you are not growing the number of partners that you would like to have as fast as target, or is it about revenue per partner? Are there specific geographies where you think you need to make more progress than you have?

Sujal Patel

I think that internationally we have done very well with the channel. We have a number of partners and a number of distributors and resellers throughout the non-North American regions that are doing quite well. Within North America, I think that – I wouldn’t say that we have to necessarily grow the number of partners that we have. What I say is that we need more focus on it. If you think back to the beginning of this year, Steve Fitz who is in charge of our sales organization worldwide didn’t have someone who is specifically focused on our domestic channel nor did he have someone really focused on the international channel. The international channel roughly for us is pretty self sufficient and run out of the regions to some degree. Having somebody focus day-in and day-out like Leonard on our North American channel and in a broader sense, our global channel, I think is really what we need to ensure that, one, the partners are trained appropriately that they have our story and they know how to sell our product that we have joint marketing programs, engagements and events with them. I think that this is really a matter of focus. There might be some partners that shift around. We might add some and remove some, but it isn’t a numbers game for us here.

Tom Curlin – RBC

And can you remind us how are you coordinating the efforts of your more direct sales oriented personnel relative to the channel registration and so forth? Has there been any conflict in that regard that would hinder the channel growth, or are there other issues related to that?

Sujal Patel

Yes. This is an area where we have a particularly good model. Our field reps, which we don’t really call them direct reps, we call them regional territory managers, RTMs. We call them that because they manage a portfolio of routes to market within the geography that they service. And so their compensation is neutral whether it’s sold directly, sold indirectly through a partner, distributor or even an OEM, their compensation is neutral. And so it encourages our regional territory managers to engage and work with the channel to the degree that we can get leverage in a sales cycle. And we have within our channel program things like deal registration that allow partners to get a greater degree of discount as well to protect their investment that they make in a sales cycle with Isilon’s technology and our team.

Tom Curlin – RBC

Okay. Thank you very much.

Operator

(Operator instructions) Your next question comes from the line of Sid Parakh of McAdams Wright Ragen. Please proceed.

Sid Parakh – McAdams Wright Ragen

Hey, good afternoon. Good quarter, guys. Just a quick question, I’m trying to understand the new customer adds or dynamics surrounding new customer adds. Can you maybe help us understand if there was – I mean, I know you talked about some slippage in the quarter. But can you maybe give us a better understanding of where these customers are, why there are delays, and what they are looking for? I mean, just kind of general commentary around that.

Sujal Patel

Sure. As we mentioned in the prepared remarks, certainly we are disappointed with the number of new customers that we acquired in Q3. And I think that definitely, as we mentioned in the prepared remarks, there was some impact due to the typical Q3 seasonality, which is sometimes threat, sometimes just slowness with respect to getting in touch with customers through the summer months. And we also limited traction from our North American channel with respect to getting into new customers. The other thing that I think I would note is that it’s worth talking about the fact that a lot of our reorder business actually represents new competitive wins with new divisions or new applications or new workflows within our existing customer base. And in many of those sort of environments, it’s still a competitive sales cycle. But our sales force’s focus and attention is really drawn to those opportunities that our customers are bringing those opportunities to the sales force. And so I think it is matter of little bit of focus as well. And it’s our top priority as a company in Q4 we believe that increasing our channel leverage is going to address this opportunity, and we think adding Leonard Iventosch is going to be huge for us as well with respect to our channels and its effect on our customer acquisitions.

Sid Parakh – McAdams Wright Ragen

Okay. And then you touched on seasonality, Q4 is typically a seasonally high quarter. In the current environment, I mean, how should we think about that? Any color there?

Sujal Patel

So – definitely Q4 has historically been a stronger quarter than Q3. Having said that, we're cautious given the macroeconomic environment. And as we mentioned in our prepared remarks, we are not giving any quantitative revenue guidance with respect to Q4.

Sid Parakh – McAdams Wright Ragen

Sure. Maybe you can just help understand what you are hearing from customers at this point in a sense when you are walk into customers, are they delaying purchases? Are they not buying at all? Are they buying just as they were buying last quarter? I mean, can you help us get a sense of that?

Sujal Patel

When we look at the deals that we are trying to get done for Q4, and I look at them in general, I wouldn’t say that we are seeing our customers say that they are not spending or they are not going to spend. I don’t think that there is any material impact relative to what they are saying today. The reason we are cautious, of course is that you never know what it really will look like as you get into the last weeks and days of the quarter. And so we remain cautious but – cautiously optimistic.

Sid Parakh – McAdams Wright Ragen

Okay. And then just another question on the gross margin. On the product side, you’ve seen a benefit from lower inventories during the quarter, how much more do you think you have there?

Bill Richter

Sid, overall what we’re trying to do is drive gross margins to 60% and maybe slightly above. We brought down inventory levels by about $1 million, and as turns increase, we do see a correlating increase in gross margin. What I’ll tell you is that Mary Godwin, our new VP of Operations, has been on the job for three months. In the short period of time, she has made tremendous progress and we expect her to continue on that on that path.

Sid Parakh – McAdams Wright Ragen

Okay. Great. Thanks, guys.

Operator

And your next question comes from the line of Glenn Hanus of Needham. Please proceed, sir.

Glenn Hanus – Needham

Hi. You mentioned last quarter new pricing plan on software on a terabyte space is rather than nodes. Just wondering how that’s playing out, how that’s benefiting you, and how to think about going forward?

Sujal Patel

Sure, Glenn. You’re right. We did mention that last call. And just to clarify it, it went into effect I think on August 1. And so it was kind of a mid-quarter saying and it certainly did have a positive impact. And you see that in the software revenue percentage going from 8% to 10% in the quarter. And to some extent, we felt like in the past we are leaving money on the table because customers do view some of these add-on software packages and price per terabyte terms, and so essentially [ph] that changed. It's not exact price per terabyte, but it’s more of a sliding scale on that direction. And it makes us more consistent with what the industry does.

Glenn Hanus – Needham

How do you feel you are doing with your rollout and verticals beyond media and entertainment? And you talked a little bit about life sciences. How about some of the other verticals? Are they sort of flattish? Are they accelerating? Could you give some color there?

Sujal Patel

Sure. I mean, Glenn, what I’ll tell you is that media and entertainment, which is our traditional stronghold was actually the lowest level that it has been in the last couple years. And so we view that as a positive that demonstrates that we’re broadening out. Our life sciences is certainly a callout. Online service providers, Web 2.0 companies made a good show and so did manufacturing as a matter of fact.

Glenn Hanus – Needham

And media and entertainment lowest do you mean on a percentage basis?

Sujal Patel

Exactly, exactly. So media and entertainment in the past has been as high as 50% and in this quarter it was less than 40%.

Bill Richter

The other thing I’d mention, Glenn, is we have an increasing percentage of deal that we categorize as other, which means that they're good enterprise opportunities, they show the same of characteristics in terms of workflows and challenges with scalability of file-based data but don’t fall into the seven strategic vertical markets that we’ve outlined.

Sujal Patel

And just to add on that, the two biggest showers in the other category were actually financial services and education, particularly the university space.

Glenn Hanus – Needham

And maybe lastly, you had a good result, how did it sort of match up against what you were expecting as you went into the quarter?

Bill Richter

We are largely on plan for Q3, Glenn.

Glenn Hanus – Needham

Thank you very much.

Bill Richter

Sure.

Operator

I would now like to turn the call back over to Mr. Sujal Patel for closing remarks.

Sujal Patel

I’d like to thank everyone for being on the call. And we look forward to updating you on our progress in early 2009.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect.

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: [e-mail]. Thank you!