Somanetics Corporation Q4 2008 Earnings Call Transcript

Jan.21.09 | About: Somanetics Corp. (SMTS)

Somanetics Corporation (SMTS) Q4 2008 Earnings Call January 21, 2009 10:00 AM ET

Executives

Bruce J. Barrett - President, Chief Executive Officer

Mary Ann Victor - Vice President and Chief Administrative Officer

William Iacona – Chief Financial Officer

Analysts

Greg Hertz - Citigroup

Gregory Brash - Sidoti & Company LLC

Anthony Petrone - Maxim Group

Charley Jones - Barrington Research

Jonathan Block - SunTrust

Operator

Good day ladies and gentlemen and welcome to the Somanetics Corporations’ Fiscal 2008 Year-End Financial Results Conference Call. Today’s call is being recorded and webcast.

With us today from the company are Bruce Barrett the company’s President and Chief Executive Officer, Bill Iacona, Chief Financial Officer and Mary Ann Victor, Chief Administrative Officer.

At this time for opening remarks I would like to turn the conference over to Mary Ann Victor. Please go ahead.

Mary Ann Victor

Good morning everyone. Thank you for attending our fiscal 2008 investor conference call.

Statements in this call concerning our future business operating results, expected net revenues, anticipated investments, and other guidance are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based upon management’s expectations as of today, January 21, 2009. You are cautioned not to place undue reliance on these statements.

Information contained in these statements is inherently uncertain and actual performance and results may differ materially.

Factors that could cause actual results to differ materially from any forward-looking statements include economic conditions in general and in the healthcare market; market demand for our products; our dependence on the INVOS System and disposable sensors; and on distributors for a substantial portion of our sales; single-source suppliers; competition; the management of our growth; our ability to attract and retain key personnel; the potential for products liability claims; government regulations; changes in our deferred tax assets; equity compensation expenses; challenges associated with developing products and obtaining and maintaining regulatory approvals; research and development; the lengthy sales cycle for our products; employee turnover; changes in actual or estimated future taxable income; changes in accounting rules; enforceability and the costs of enforcement of patents; potential infringements of others' patents and the other factors set forth from time to time in our SEC filings.

The company undertakes on obligation to revise our publicly release the results of any revision of today’s forward-looking statements.

I will now turn the call over to our President and CEO Bruce Barrett.

Bruce Barrett

Thank you, Mary Ann. Good morning everyone. I will begin with a review of our fourth quarter and fiscal 2008 performance. Bill will follow with a detailed review of our financial results for these periods. Then I will discuss our plans and expectations for 2009.

The team produced a solid fourth quarter finish to fiscal 2008 with a 21% increase in net revenues to a record $13.7 million and diluted earnings per share of $0.25. For the year net revenues increased 23% to $47.5 million and diluted earnings per share were $0.76. We exited the year with approximately $70 million in cash and equivalents and no borrowings.

Entering 2008 our sales and marketing efforts remain focused on developing the cardiovascular surgery and pediatric ICU markets for our INVOS Cerebral and Somatic Oximeter System. We estimate each of these markets segments represent, in round numbers, about $200 million in annual disposal sensor potential worldwide or $400 million in total.

We estimate that we have achieved about 20% market penetration in the cardiovascular surgery market segment and less than 5% in the pediatric ICU including post-operative monitoring of congenital heart repair patients where we are more highly penetrated.

Early in 2008 we more than doubled our serve market potential with our entry into the neonatal ICU markets. We estimate the neonatal ICU market represents more than $400 million in annual disposable sensor potential worldwide and more than $1 billion in INVOS hardware. We are now pursuing serve market potential of more than $800 million in annual disposable sensors worldwide and in excess of $1 billion in INVOS hardware potential.

We made excellent progress developing our pediatric and neonatal market opportunities in 2008. Combined pediatric and neonatal sensor revenue increased 52% to $10.9 million in the year. In May we received FDA 510(k) clearance to expand our indications for use for the INVOS System. The new labeling states that the INVOS System is for use on any individual and to monitor changes in oxygen saturation in any tissue beneath the sensor. Previously our labeling was limited to skeletal muscle and cerebral tissues.

This expansion of our labeling is important for our efforts I the neonatal and pediatric ICU markets. The small size of these patients enables the INVOS system to monitor oxygen saturation in vital organs other than the brain, namely the kidneys and the bowels when these organs are beneath the sensors and our users are routinely applying our sensors over these organs in these patients.

Through out the year we pursued neonatal piglet and clinical research projects intended to develop the body of evidence needed to establish the value proposition for the INVOS System in the neonatal ICU. Early results from these activities are very positive and results from numerous studies will be presented and submitted for publication in the first half of 2009.

Research with neonates is addressing a wide range of topics. The neonatal piglet research has been focused on validating the accuracy, sensitivity, and specificity of the INVOS System, and monitoring the oxygen saturation of the brain, kidney and bowels. In addition, these studies have demonstrated the organ specific INVOS System response to various drugs that are routinely used in the neonatal ICU, as well as to certain clinical situations such as shock, reduced organ blood flow, cardiac arrest, and anemia.

The clinical research is focused on establishing typical value ranges in neonates of varying gestational age and weight in the initial weeks of life, as well as evaluating the potential usefulness of the INVOS System in a variety of clinical applications. Among these applications include the use of the INVOS System to monitor the brain, kidneys, and bowel to manage drug, ventilator, and blood transfusion therapies. There are also studies evaluating the potential benefit of the INVOS technology to warn of developing shock, bowel ischemia, and more.

In our adult cardiac surgery market, as mentioned previously, we are about 20% penetrated in this $200 million opportunity. Sensor revenue increased 13% in this market in 2008 despite a dilution of effort to enter the neonatal ICU.

In January 2008 the Society for Thoracic Surgeons, or STS, included cerebral oximetry as part of its adult cardiac surgery database. This database is the largest registry of its kind and the data collected is used to guide quality and safety improvement initiatives in cardiac surgery. The data is also used to develop practice standards.

Our goal is for cerebral oximetry data from the STS database to provide the impetus for establishing a practice standard that recommends its routine use in adult cardiac surgery.

If the data is consistent with previously presented and published data there is good reason to believe this can occur and if it does we would expect wide spread adoption of cerebral oximetry in cardiac surgery in the US market that would likely spread to international markets.

In November we completed the acquisition of a company called ICU Data Systems for approximately $2 million in cash. We believe this acquisition changes the playing field in the INVOS system market and provides us with a significant new revenue opportunity for the future.

In the promotion of our INVOS technology we have been bombarded with requests to combine INVOS data with other bedside data. Acquiring ICU Data Systems provides us with a solution to respond to these customer demands.

ICU Data Systems is a Gainesville, Florida based business that has developed a patented technology that integrates data from bedside machines such as physiological monitors, ventilators, and infusion devices into a single bedside display for comparison and data storage. The patent underlying the technology was licensed from the University of Florida and expires in 2023.

With the ICU Data Systems technology once data has been integrated into a single bedside system there are new capabilities available to the user and we have initiated the patenting process in an effort to secure protection for these capabilities.

First, the user has the ability to customize the display of any data integrated all in the same timeline for comparison in real time. Using a touch screen display a customer can easily add or subtract data or change the way it is presented. In addition, the patient history can be reviewed by zooming in on any period of time with the touch of a finger.

Second, the user hast the ability to customize derived parameters. Derived parameters are parameters generated from calculations based on two or more discrete measurements and these also can be displayed in real time and reviewed.

Third, the user can customize event marks and alerts. These event marks and alerts can be based on discrete or derived parameters or any combination of data that the customer selects.

Finally, the user can store all data for inclusion in the patient record, or for research purposes. IF desired, the ICU Data Systems unit can be linked to the hospital information system and in our due diligence researchers were especially positive about the technology due to its ability to reduce the labor and errors involved in manually gathering data from various devices for analysis.

In mid-2009 we plan to launch the ICU Data Systems technology in a stand-alone product. In this design the INVOS system will be interfaced with the ICU data systems platform just like any other device. We are also developing a next generation INVOS System platform that integrates the ICU data systems technology. We plan to launch this product in the second half of 2010.

The ability to integrate INVOS System and other bedside data should increase our value proposition for the INVOS System. We also believe that it will materially differentiate our INVOS technology offering.

While our focus has been to evaluate the ICU Data Systems technology in relation to our INVOS opportunity, we believe the capabilities embodied in the ICU Systems technology will appeal to all acute care areas of the hospital regardless of their use of the INVOS System. In this regard ICU Data Systems represents a significant new revenue opportunity.

The appeal of the ICU Data Systems capability is expected to help us productively enter new markets sooner with the INVOS system. For example, there is potential for the INVOS System in adult ICU markets for a variety of applications. With the opportunity for the ICU Data Systems technology in these same markets expansion into adult ICU markets could prove a more productive venture sooner with the combined potential of the two technologies.

Looking back at 2008 overall we are very pleased with our progress. We delivered solid financial progress in the face of a serious economic downturn and we made more dramatic progress positioning the business for the future.

Our entry into the neonatal ICU approximately doubled our serve market potential for the INVOS technology. Our early experience in the neonatal ICU market and initial research results are positive and very encouraging.

The advances to labeling better position us to capitalize on the opportunities to monitor organs in addition to the brain including kidneys and the bowel in the pediatric and neonatal patients.

The STS database initiative provides us a legitimate opportunity to secure a catalyst that can drive standard of care in the adult cardiac surgery market.

And, for a modest investment, the ICU Data Systems acquisition promises to improve patient care, substantively extend our technological leadership position in the INVOS business and offer us a significant new revenue opportunity in the years to come.

Now Bill will review our financial results for the fourth quarter and fiscal 2008.

William Iacona

Thank you, Bruce.

As we reported this morning, our net revenues were a record $13.7 million for our fourth quarter of fiscal 2008, a 21% increase over the same period of 2007.

For the fiscal year ended November 30 our net revenues were $47.5 million, a 23% increase over fiscal 2007.

US net revenues increased 16% in Q4 to $11 million and increased 21% for the year to $38 million.

For the fourth quarter and year-to-date US sales represented approximately 80% of our total sales.

For Q4 US disposable sensor revenues increased 21% to $8.2 million and our INVOS hardware revenues were $2.7 million, an increase of 3%.

For fiscal 2008 US sensor revenues increased 23% to $30.4 million and US hardware revenues increased 14% to $7.6 million.

Our International net revenues in Q4 were $2.7 million, an increase of 51% compared to Q4 of ‘07 and for the year International increased 34% to $9.4 million.

In the fourth quarter we placed 173 INVOS monitors in 85 hospital accounts in the United States. Internationally we sold 203 INVOS monitors.

For fiscal 2008 we placed 517 monitors in the United States and 621 monitors internationally representing our first year of monitor placements worldwide in excess of 10000 systems.

As of November 30, 2008 our installed base of INVOS monitors in the US grew to 2,523 monitors in 714 hospital accounts.

In Q4 our US sensor unit sales increased 14% to 76,551 and for the year increased 16% to 288,797.

Our combined pediatric and neonatal sensor sales continue to represent a strong contribution accounting for approximately 33% of total US sensor revenues for the fourth quarter and for the year.

Also, combined pediatric and neonatal units represented approximately 27% of total US sensor units for the quarter and for fiscal 2008.

Total company sensor unit sales increased to 111,321 in the fourth quarter and increased to 424,647 for the year ended November 30, compared to 96,155 and 371,050 in the fourth quarter and fiscal 2007 respectively.

In the US our average selling price for sensors increased 6% in Q4 and for the full fiscal year, primarily due to increased sales of our pediatric and neonatal sensors which sell for a higher price than the adult sensor.

For the fourth quarter and for fiscal 2008 we experiences ASP increases for both the adult sensor and also the combined pediatric and neonatal sensors.

Gross margin was 87% for the fourth quarter and the year ended November 30, consistent with what we had expected for the year based on the mix of sales between the US and OUS.

In the fourth quarter and for the full year our operating expense increased primarily as a result of continued investments in sales and marketing as well as research and development.

For the three months ended November 30 our operating expenses increased 10% compared to Q4 2007 and for fiscal 2008 operating expenses increased 20% compared with 2007.

Q4 operating income increased 36% to $4.7 million and fiscal 2008 operating income increased 26% to $13.8 million.

Income before income taxes for the fourth quarter was a record $5.1 million compared to $4.5 million in the prior year and for the full year income before income taxes was also a record $16.4 million compared to with $14.9 million a year ago.

Net income for the fourth quarter was approximately $3.3 million or $0.25 per diluted share and for the fiscal year was a record $10.4 million or 40.76 per diluted share.

For fiscal 2008 we have recognized income tax expense at an estimated effective tax rate of 36% on our statement of operations.

In April 2008 we initiated a stock repurchase program that was then expanded in May and again in July. The current authorized repurchase program amount is $45 million. To date we have purchased 1,805,129 shares under the program utilizing $31.4 million of the $45 million authorized.

As of November 30 our balance sheet was strong with cash, marketable securities, and long-term investments totaling $70 million and the company had no borrowings. In addition, fiscal 2008 saw our operations provide positive cash flow of approximately $15 million.

I will now turn the call back over the Bruce who will talk about our business for 2009.

Bruce Barrett

Thank you, Bill.

As stated previously our entry into the neonatal ICU and acquisition of ICU Data Systems we now estimate our annual serve market potential for disposable INVOS sensors exceeds $800 million worldwide. In these market segments we estimate the potential for INVOS hardware exceeds $1 billion. The market potential for the ICU Data Systems technology could also exceed $1 billion worldwide and there are clearly other markets to pursue in the future with both technologies.

For planning purposes, despite increasing customer interest in the INVOS technology we assume the economic circumstances faced by our hospital customers will continue to deteriorate in 2009 and further slow the pace of adoption of new technology and limit capital spending. For this reason we are forecasting that net revenue will increase approximately 15% in 2009 to $54.6 million. Yet, we have a strong balance sheet with $70 million in cash, positive cash flow, and more than 95% of our business potential in front of us. Given these circumstances, despite the economy, we are accelerating our investments in 2009 primarily to capitalize on our new opportunities in the neonatal ICU and with the ICU Data Systems technology.

As a result of our investments operating margin is forecast to be approximately 20% and income before income taxes are forecasted at approximately $12 million in 2009.

The investments we are making will be focused in research and development, medical education, and sales. In our R&D our largest investments will be to develop the stand-alone ICU Data Systems product for launch in mid-2009 and to develop an integrated ICU Data Systems and INVOS technology platform for launch in the second half of 2010. These investments will amount to approximately $2 million in 2009.

We believe the combination of these technologies will extend our technological lead in the INVOS System market, increase the value proposition for the INVOS System, and offer a significant new revenue opportunity.

In medical education we are expanding our resources to develop the neonatal ICU opportunity. We are expanding our US field education team from 22 to 37 members and our US field sales team from 31 to 33 members. We also plan to increase investment in medical education and marketing by about $1 million focusing on the neonatal ICU and the launch of the ICU Data Systems technology.

These investments are being made with knowledge of neonatal piglet and clinical research that will be presented in the first half of 2009 at several medical conferences. At one such conference positive clinical results with the use of the INVOS System in neonates will be presented to several hundred directors of neonatal ICU’s. This exposure is expected to increase awareness and interest in the INVOS system and our investments in medical education headcount and programs are intended to capitalize on this interest.

In the International markets we are in the process of hiring several sales personnel. For example, we are in the process of recruiting our first sales personnel in Germany, France, and Spain to compliment our person in Italy. These personnel are being hired to support Covidien, our exclusive distribution partner in Europe, and to lead the launch of the ICU Data Systems technology in Europe.

With regards to our relationship to Covidien our exclusive distribution agreement in Europe, the Middle East, and Africa is due to expire in February 2010. Our guidance assumes we will extend our relationship; however, given no such agreement is in hand at the moment, we are taking the necessary steps to develop a direct organization in Europe. If we continue down the path of establishing a direct organization in Europe the incremental cost in 2009 is estimated in the range of $3 to $4 million.

In 2009 we expect to get our first look at the cerebral oximetry data in the STS Adult Cardiac Surgery Database. This initial review of the data will give us insight into the current level of enrollment and whether the data is beginning to show any trends with regards to use of cerebral oximetry.

In the neonatal ICU we are entering 2009 focusing on several applications for the INVOS technology that our early adopters are excited about based on their clinical use. Just one such example is the use of the INVOS System to help guide management of neonates on ventilators. There are 135,000 ventilated neonates in the US each year and these patients can experience rapid changes in carbon dioxide that affect cerebral blood flow and oxygenation. The only way to check the carbon dioxide level is to take a blood sample. The small blood volume of these patients limit the number of blood samples that can be taken, so the potential exists that neonates go for very long periods of time with elevated carbon dioxide levels and inadequate cerebral blood flow and oxygenation. In this application the INVOS technology provides a non-invasive and continuous means of assessing the adequacy of cerebral blood flow by monitoring changes in oxygenation. This is simply one example of many with regards to the INVOS system in this fragile patient population.

In summary, we have materially increased the size of our serve market opportunity with entry into the neonatal ICU and acquisition of the ICU Data Systems technology. Despite the near term economic outlook, we are fortunate to have a strong cash position in technologies with great market potential and we are investing to develop these opportunities as well as to extend our technological leadership position.

With that I will be glad, along with Bill, to answer any questions you might have.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Matt Dodds from Citigroup.

Greg Hertz – Citigroup

Good morning gentlemen, it is actually Greg Hertz calling in for Matt Dodds.

Just staring off actually, Bruce maybe one question for you as you mentioned towards the end about the potential for incremental sales spending as it results to the current Covidien relationship. As we kind of get closer to the termination of that agreement, at least as it is currently written, can you kind of give us a little view as to thinking about the timing of it and when you make the decision to go forward with the potential for, I guess, that incremental $3 to $4 million in spending?

Bruce Barrett

Yes, I think it is going to unfold here over the next few months. Obviously it takes some time to establish a direct presence in Europe and we have actually started doing the things that we need to do with regards to setting up legal entities and recruiters and that sort of thing so take that path, if we have to, because that is the one path we control. Obviously to extend an agreement it takes both parties agree upon how we are going to do that.

That said, we have had a very positive relationship and we still have a very positive relationship with Covidien. They have done an excellent job growing the market in Europe in recent history; they are doing so as we speak. We just had a national sales meeting, for example, for the US and Covidien invested in sending in six people from Europe and the Middle East to attend our program to get up to speed. They are continuing to invest quite nicely in the promotion of our product.

As far as timing we would like to have it done sooner rather than later so we know where we stand. I think it is hard to get both parties motivated to sit down. If the economics are going to change as they are going to probably have to, obviously, for us to extend. So, I would expect that if not by the next conference call, certainly by the June conference call we either have to have something done, preferably before that, or we will be on embarking on the recruiting and so forth to establish a direct organization at which time it might be difficult to turn back.

Just overall, we view distribution a make versus buy decision. Strategically it always makes more sense to be direct. I mean it is the only way that you control that you get a dedicated, consistent effort to your product year after year. Any company for whom it is not their technology could choose to change their focus either because of an acquisition or just because they want to focus their resources more on internally developed products.

So, there is always a risk associated with distribution that you don’t have being direct, but in our case Covidien has done such a great job for us and it seems to be so important to what they are doing with their business in Europe that I think there is a great opportunity for us to extend and I would expect we will.

Greg Hertz – Citigroup

Understood and then perhaps this is a question for Bill, as it relates to the expectations for the ICU acquisition. What are the assumptions from kind of a top line standpoint as you enter into fiscal 2010 with respect to your outlook for the opening in accretive in that year?

William Iacona

I can tell you, at least from what we have looked at here internally, there is modest revenue in our plan for 2009 in the back half of the year related to the ICU Data Systems technology. As Bruce mentioned, for 2009 we expect we are going to have some direct spend related to the R&D side of about $2 million plus some sales and marketing, so not accretive for 2009, but when we look at our numbers and where we think we’re at in 2010 we think that the ICU Data Systems technology is accretive to our financials in 2010.

Greg Hertz – Citigroup

Can you provide any more specifics there on a revenue range maybe?

William Iacona

Yes, I can give you some, but I also probably need to tell you where they come from. There are two opportunities, really, to generate revenue here that we looked at in evaluating the acquisition because we really evaluated the acquisition on the basis of what it would do for our INVOS business.

It is our INVOS customers who, of course, are the ones we are interfacing with day in and day out who are saying we could really use something that puts all this data together; it would help us understand how your number is changing and what it means if we saw it on the same screen with our blood pressure and our heart rate and everything else and on the same timeline, which they are not currently either, so we would understand the information more quickly. Also, we are doing calculations on our scrubs as to what some of these derived parameters are that we would like.

Some of them are simple like just looking at the differences between arterial and venous oxygen saturation that you could easily calculate in display for them, but the data is just not all in one place to do it right now.

We really focused on that and when we focused on that we said okay what are the benefits? Well the benefits are several. We could sell the stand-alone device. We could also place the stand-alone device in exchange for an up charge on the sensor, or could sell the stand-alone device in combination with the INVOS to sell more INVOS as opposed to giving them away.

When you add all of those up it is not necessarily going to be reflected in just an ICU Data System sale, but when you add them all up we are still looking at several million dollars in revenue that we think this will contribute to us in 2010, but will allow it to be accretive especially as our R&D wanes as we get into the later part of 2010.

Greg Hertz – Citigroup

Just with respect now to fiscal 2009, if I could, obviously it is expected to be a bit dilutive here. You mentioned $2 million specifically in R&D in addition to a modest amount of amortization. Is there any additional expense that you are expecting that we should kind of build in as we try to calculate perhaps the dilutive impact in the current year?

Bruce Barrett

Well we certainly will have an expense associated with launching it, but basically I would do your dilution impact to be your R&D amortization expense. The cost of actually launching this through the same sales organization will not be high and the modest revenue or margin that we make off of it in 2009 should cover the launch expense. I think your true dilutive cost is really the R&A and the amortization.

Greg Hertz – Citigroup

Then just one more, quick question, before I jump back in the queue. I missed it, Bill could you provide me the US INVOS hardware and SomaSensor revenues for the quarter?

William Iacona

For the fourth quarter US INVOS hardware came right in at about $2.7 million and $8.2 million in sensors.

Operator

Your next question comes from Gregory Brash at Sidoti & Company LLC.

Gregory Brash - Sidoti & Company LLC

I just wanted to get a little more insight into your though process into hiring sales and clinical reps this year. I mean obviously your operating margin is going to go down considerably in ’09. Is that because you are seeing maybe some of the larger device companies cutting back and you just have an abundance of talent and you feel like now is the right time to do it? Is that part of your thought process here?

Bruce Barrett

No, not really. I think if you look at our history there is a reason why at our stage of our business, despite our potential, we always increased revenue and increased earnings to the extent that this year we had, what, operating margin of 29%.

We have always been very measured in investing. We are very disciplined in investing. We don’t just invest because we are small and we have a big opportunity and we think it sounds like it is a good thing to do. So, hopefully we are correct here in making the right judgment that now is the time for us to invest. While when you do invest in a period like this where the economy is tough and you can expect it is going to impact your near-term revenue you are going to see the hit hit the earnings.

Our view is this, that the neonatal ICU opportunity a tremendous opportunity for us. We have had about eight months of experience in that market to date with our sensors. The product is working well. We have been collecting both neonatal as well as there are numerous clinical research studies going on. We know what the results of some of those studies are. We know when they are going to be presented in the first half of the year and by what type of institutions and we know what audiences that we are going to get in front of with those results.

We believe that not investing right now to support the activity that is going to be generated by the clinical research and the people who are going to get presented with clinical research would really just be letting the market not get developed like it should.

We are very excited about what the neonatal opportunity can bring us. Now how much can you sell in the early part of the development of the market after peoples initial introduction of the technology even with compelling clinical research by thought leaders in their field? We will see how much we can get done this year from an economic standpoint, but it is definitely the right investment for us to make and there is no doubt in my mind it is going to pay off.

If you look at the ICU Data Systems thing it is really the same thing. I mean, we are really just changing the playing field completely for the INVOS. Everyone we have talked to in the neonatal ICU, bar none that I know of, has said that is a great addition to what you guys are doing; it will provide us some tremendous benefit. If someone else were to enter the neonatal ICU market, only offering a cerebral and oximeter or a cerebral and somatic oximeter without these additional capabilities, they are not offering what the customer is going to be looking for.

We just think strategically it makes all the sense in the world and we do think financially it will end up being an upper for us once we get through the development phase.

Gregory Brash - Sidoti & Company LLC

Fair enough. Then, just help me understand this data system. Is it a monitor that other say patient monitors in your INVOS would then plug into? Is that how it works?

Bruce Barrett

Yes. Essentially the way it works today is that it has data aggregation ports that you can hook other medical devices into. It could be infusion devices. We are focused predominantly on ventilators and other physiological monitors like pulse oximeters and your multi-modality monitors from the larger companies, but it basically just aggregates all of that data into one location and then once you have it there you can customize how you present it. You can customize what you do with the data in terms of calculating parameters that you would like to see, now that you have all the data in place, and you can present that data in any way you want. If the customer believes that based on their experience, or based on data that comes out in the literature. There is increasingly more data coming out looking at algorhythms for management, so it may be three different variables that if they are all moving in certain directions at a certain magnitude you want to be alerted to that, because it foretells say impending shock. You can’t really get an alert on that right now because the parameters aren’t all in one spot and able to be used for calculation purposes.

Here we could alert someone to those kinds of scenarios so they could say, you know what, when this happens I want to be notified, because it foretells something bad is about to occur. That is sort of basically how the system is set up.

All we are going to do with our integrated platform is we will end up having a system where INVOS is integrated, so you don’t need our separate INVOS device as part of it. We will have basically an integrated box and then we will still link the other devices through the data aggregation ports.

Gregory Brash - Sidoti & Company LLC

Okay. Do you think you can get back to, sort of, operating margins in the high 20’s by 2010? Especially with this acquisition being accretive in 2010, maybe if you are not hiring as many sales reps and clinical reps in 2010 can we get back to sort of where we were this year on the operating margin basis?

Bruce Barrett

Yes, you know it is really difficult to say at what level we will be in 2010. There are kind of three things you have to watch out for I would say. First is what happens in Europe. If we go direct, obviously until the agreement were to expire in February 2010 there will probably be a rocky road there those last few months from a financial standpoint just as you would expect. Any distributor would bleed off any inventory they may have while we would still be having expenses not recognized in the margin until after the agreement expires; so you have got that sort of to deal with.

The other question is really what happens with the neonatal ICU. Many, many people tell us that this neonatal ICU for his technology is not going to be as difficult to develop as say the adult cardiac surgery market where everybody wants to know, you know, where is your prospect of randomized multi-center trial. That the type of evidence that is going to be needed to drive adoption in this market is going to be somewhat lower, partly because of the just wide variability of types of issues that are faced in the neonatal ICU, so it is very difficult to do any kind of a multi-center prospect of randomized trials, because there is so much variability in the patient population.

If that is true, and if this market because of our investments this year develops more rapidly than we have currently forecasted we might choose to invest more again in 2010. We have to see how that plays out.

The third thins is the whole adult cardiac surgery marketplace. We really do believe that this STS initiative that we are working with in terms of the database has great potential. We are going to see initial data in 2009 and actually there is a change to look at the data, I think now, every quarter. Now we won’t be looking at the data, so we don’t control this. This will be thought leaders in the fields who are going to be looking at the data and seeing if it provides a compelling result.

If we get compelling results from that sooner rather than later and we know those results are going to be presented and lead the standard of care, I mean, we are going to have to be prepared with the market coverage to make sure that we are the ones capitalizing on that opportunity. So, I really can’t tell you what 2010 would bring based on those key assumptions. But, at the moment, as we said here, we would expect that given that we say we are going to do about 20% operating margin this year that if we make accelerated progress next year, that we would have some improvement in those operating margins.

Gregory Brash - Sidoti & Company LLC

Okay. It seems like you sold a decent percent of the monitors that were place. I am just curious what you are seeing from hospital spending, how that has progressed over the last several months. What sort of delays are you seeing?

Bruce Barrett

Well certainly I think I was asked the question at the end of the third quarter, which would have been what September, when we had our call. Are you seeing the economic environment impacting the face of adoption of your hardware revenue and I said, you know we can’t really necessarily see that because it is always difficult to sell a new, non-reimbursed technology concept into the market place. We have always found that it is not an easy sales process.

That said, I will say that over the past couple of months we are having much more frequent reports from the field that hospitals are just saying, and you know, the word crisis comes up a lot, but because of the crisis we have the money, but the hospital is not releasing any monies right now. We certainly are hearing that more frequently and we expect we will continue to hear that more frequently through out the year.

That said our hardware revenue, at least so far in the quarter, is ahead of what we expected. Now we can’t know if we will finish that way, because a lot of our hardware is usually weighted towards the end of the quarter. We are expecting some impact from the economy obviously.

Operator

Your next question comes from Anthony Petrone with Maxim Group.

Anthony Petrone - Maxim Group

I would like to begin with the sales force investments $3 to $4 million. I am just wondering if in fact you had to go direct there would $3 to $4 million get in the way of direct sales or your specialists and what would be the go to strategy here if there is a game plan thus far?

Bruce Barrett

Obviously the $3 to $4 million is not a full year number, because it would be heavily weighted towards the back part of the year when the hiring would be completed. Some of that is recruiting, in fact more than $0.5 million in that number is just recruiting. There is training that needs to be done and so forth. There are up front costs associated with establishing the necessary legal entities that we would be doing and so forth. Then the rest of it is largely the headcount.

Besides the organization we think we need, you have got a business over there that by the end of this year ought to be something in the high teens of millions, something in the $17, $18 million range. So, we think a sales team of approximately 25 people would be adequate to support that size of a business and continue to grow it as we move forward.

Then you are going to have to have some local presence. You can either basically hire outside services to do a lot of the services that you need from a customer service and so forth standpoint, accounting and all that, or you can man it yourself. Then you are going to have to provide technical service and so forth, so there are other things such as that that would require some small local warehouse office shipping and receiving location, which we have already determined we would put in the Netherlands.

Those are the types of investments that we would make and they would be heavily weighted toward the back part of the year.

Over the first part of the year we are funding a few headcount, but we intended to do that even with an extension with Covidien, so over the next few months. We are not doing anything different, largely, in terms of investments in Europe that we wouldn’t do anyway if we already had an extension under our belts.

Anthony Petrone - Maxim Group

Just taking a look at the 20% operating margin, and I know you mentioned that very little is reflected there right now, but you did mention on the other hand that you have made some investments in the way of legal and what not. So, now much is reflected there in the 20% if at all?

Bruce Barrett

You mean what we are investing even if we do have the assumed extension with Covidien?

Anthony Petrone - Maxim Group

I guess both. That is correct. If you assume an extension will also, on the other hand, if you had to go at direct you have already spent some money here early on and it seems that you have plans to make investments even if you do go.

Bruce Barrett

Yes, we are not making any investments in the first part of the year here that we wouldn’t make regardless. I mean, we want to hire employees in the major markets in Europe, so we have one in Italy that happens to be a contract employee, but we want to make them an employee of the company. We want to do the same thing in Spain, Germany, and France, so we will be hiring those three employees and we are recruiting and doing interviewing as we speak.

To make them employees we have to establish a legal entity in Europe as a management company and we have to establish a branch in each of those four countries in order to be able to take care of all the tax and benefits issues related. Those are activities that we are just in the midst of doing.

If you look at it in its entirety, I mean our head counts in Europe, with the exchange rate and everything, for the type of body we are looking for is probably $250,000.00 a year and you have got three new ones and then maybe we have another couple hundred thousand dollars in spend related to administrative and recruiting and that sort of thing that is going to be done. Those expenses are all happening here in the first part of the year and they are all going to happen even if we had an extension in hand, because we just have too big of a business to rely 100% on any third party in Europe at this point.

Anthony Petrone - Maxim Group

Sure and just sticking with overseas for a minute here. Covidien has the current relationship as minimum purchase commitments for the year, so I am just wondering, there is the one year on this, has Covidien updated that purchase commitment for the current fiscal year?

Bruce Barrett

Yes we agreed upon what their purchase commitments were for this year. We are happy with what they are. They have committed to making them quarterly on our fiscal quarters and hopefully they will, because that helps us at least not have big swings. Obviously we have big swings in our quarterly results historically. We are up against a relatively light comparison for the first quarter, we are going to be up against a fairly heavy comparison in the second quarter, so it would be nice if we could at least level out our International comparisons. I hope that it will happen that way. But, we have a very good relationship; I have every reason to believe we will come to terms on an extension and if we don’t then there are certain advantages to be direct as well.

Anthony Petrone - Maxim Group

Moving on here for a moment on oxy alert, last quarter you mentioned that 55 hospitals had already adopted oxy alert. I am just wondering if you can give us an update on that number.

Bruce Barrett

We have not expanded that number dramatically, which is another reason to add the educational resources. We have a certain amount of educational resource right now which is constraining how many evaluations we are doing, but you could probably increase that number by another 15. We are not trying to dramatically increase the number of evaluations we have right now, we are trying to get more in usage within the accounts that we have already started.

Now that is probably going to get a little bit out of our control here after all of this data starts getting presented here in the first half of the year, which is why we are also adding resources and trying to develop tools to educate people that are not so labor intensive, tools that don’t require us to have a person on site all the time.

Anthony Petrone - Maxim Group

Sure, moving on to sensor usage. Has somatic labeling resulted in any dramatic increase in usage per patient here? I know that the objective there is to use the sensors beyond cerebrals, so have you noticed any impact here in the short term?

Bruce Barrett

From the standpoint of it opens the door for us to talk about these other uses, where as before, with the labeling the way it was, doctors’ would still put it over the bowel and the kidney thinking that that is what they were monitoring, but we couldn’t say anything about it. They did it because they talked to their peers and that is the way their peers were using it. So, with the labeling now the way it is we are able to talk about you can monitor whatever tissue is under the sensor. Obviously if you are over the bowel and you have a very thin wall, because you are looking at a very small patient, between the sensors and the bowels you are looking predominantly at bowel tissue and we have the animal research, that we have provided the FDA as well, that we are able to talk about that actually demonstrates the response to oxygenation changes in the bowels as well as the kidneys.

It really just puts us on this positive footing where we can go out and talk about our technology in terms of the way it really is being used and demonstrated to have value, and we don’t have to have it be off label use and kind of skirt around the issue.

Anthony Petrone - Maxim Group

Finally, jumping to the guidance and some of the head winds here in the hospital market, one specifically in terms of order sizes and other companies had some success in driving multi-hardware unit contracts per contract. Is there any change in the outlook for that? I would imagine so. In other words if the hospital was looking to add ten maybe they are looking at five.

Then secondly, you are still adding you are still adding into the NICU market here, so has there been any substantial increase in pipeline and/or backlog over the past 90 days?

Bruce Barrett

There has been an increase in the activity in the pipeline. At the same time there has been an increase in customers saying, the hospitals, we are just not releasing any funds right now. I think if you look at the numbers, from things that I have read my understanding is the American Hospital Association, I think, has reported that hospital margins went from a +1% or so in Q3 ’07 to -6 point something percent in Q308 and they are getting worse. Hospitals are scared right now, so I think actually the reaction to releasing dollars may be worse than the economy in the hospitals at the moment, just because people don’t know what is going to happen.

I think it is just a storm we have to weather, but we definitely have data that will help that, help encourage and push that process along. But, we just have to live with the realities of our economic circumstances right now and it makes the forecast seem very difficult. I mean, we are basically assuming hardware remains relatively flat in terms of purchases despite our greater opportunity with the neonatal ICU due to the economy. It is very difficult to know exactly what that hardware revenue is going to turn out to be, given we don’t know exactly what the economy is going to turn out to be as we go through 2009.

Operator

Your next question comes from Charley Jones from Barrington Research.

Charley Jones - Barrington Research

It looks like a really solid quarter as far as unit growth. I am just kind of curious when you are adding the reps? Then the second part of that question is, I think you said everything with your actions; I guess my question is how easy of a decision was it to go with the extra 15 reps now. Was it a topic of major discussion with the board or was it relatively obvious given the markets main team in the neonatal markets. I am just kind of curious how obvious that decision was.

Then I am wondering how obvious the decision to invest, what you have already started to invest in Europe, whether that was considered to be something that you are considering delaying because you are feeling pretty good about Covidien or whether or not that was a pretty obvious decision as well.

Bruce Barrett

I will take the second one first, which is the European situation. It is an obvious decision if you don’t have an agreement in hand even if everyone seems to be looking like they are moving in that direction. It is a very obvious decision to do the one thing that you control to benefit your business and your shareholders and that is to go direct. Now we would prefer an extension. I think we have made that very clear and we are of the opinion that Covidien would like one too and that we will negotiate one here over the coming weeks and months. But, if we don’t we can’t be sitting her flat footed, so the one thing we control is going direct.

Now we are also talking with potentially other partners, but there is still that strategic benefit of being direct. If we are not going to be with a partner that we know and trust and how has done an excellent job for us like Covidien, I think starting a new partnership and all the risk associated with that is not a very likely scenario.

As it relates to hiring the people there was a lot of discussion about both making the ICU Data Systems acquisition and the impact it would have on earnings as well as hiring people. We have been a very measured group in terms of trying to produce increased revenue and increased earnings every year. We have done that in a strong way each of the last five years, so there was a lot of discussion. At the same time it was very obvious that the investments made tremendous sense for us based on what we were looking at.

This neonatal opportunity is just too big not to fund and we are the leaders in it and we should make sure we establish ourselves as the clear leaders in it.

The ICU Systems Data technology will help to even further extend our leadership position from a technology standpoint, as well as in the other markets we serve, and create a new revenue opportunity. So, with our balance sheet it just makes tremendous sense for us to be doing this, recognizing that it is a hit to earnings and shareholders who like increases in earnings every single year aren’t going to like it initially, but the reality is we are a growth company at a very early stage with more than 96% of our potential in front of us and we can’t starve that potential just because the economy has taken a little bit of a hit for a while.

Operator

Your next question comes from Jonathan Block from SunTrust.

Jonathan Block - SunTrust

I think my first question, Bill maybe this is for you. Just within that guidance can you maybe drill down a little bit more the growth rates between US and OUS? Then maybe what you are assuming on sensor growth versus capital, because of the difficult times we are seeing here with capital.

Bruce Barrett

Jonathon this is Bruce. I think maybe I will take that. As it relates to US versus International, we are, if you assume a 15% growth rate, assuming the growth is higher in the US market than in the OUS market and that is simply because we are in the final year of our agreement with Covidien. Also, I think Edwards had a very strong year in 2008 as a result of it being their first full year with the new INVOS model 5100 four channel device, so they were pretty aggressive last year acquiring technology to try to upgrade those with older generation devices in 2008, which won’t repeat in 2009.

Covidien, also, was very aggressive in terms of acquiring both monitors and sensors in 2008 related to their launch into the neonatal ICUs’ so all of those factors combined we are expecting very modest single-digit growth in the US and the OUS market in terms of purchases in 2009. We are also expecting something in the 17% range or something like that in the larger US market.

Jonathan Block - SunTrust

Okay and I’m sorry, within the US the assumption behind sensor versus equipment, the 17% US does that assume flat equipment in growth from the sensors, is that what that is Bruce?

Bruce Barrett

Yes, essentially that is exactly true.

Jonathan Block – SunTrust

Okay great. Then Bruce maybe just to take a step with what you feel comfortable telling us, what, if anything, has changed with Covidien? I think you guys have been very careful to say that it is a deal that expires in February 2010, but maybe just reading into it a little bit, three or four quarters ago it seemed to be a little bit more of a certainty that it gets done and possibly with more favorable terms. Has anything changed? Are they still committed to cerebral oximetry or are they looking at other players? Is price the hang up? Anything that you can share with us would be very helpful there.

Bruce Barrett

I can’t really give you any insights to speak on their behalf. I guess from our standpoint what we see is what is in their actions which is they are very aggressively promoting this in Europe as we speak. They are not behaving as if they are a group that this is their last year and they are just milking it for what it is because they are not expecting to be involved with it in 2011. I mean, that is all I have to work with.

Other than that, I guess, all I could say is that the economics will have to change. It certainly makes more sense for us to go direct than to continue to have a relationship where transfer of prices are what they are today. I am sure there is no great motivation on the part of Covidien to sit down and negotiate what those new economics are going to be, but I think there are economics there that we should all be able to agree on and hopefully we will over the coming weeks and months.

Jonathan Block – SunTrust

Okay perfect and then maybe just one or two more. When you look at the STS database in the past how have they handled things? In other words is it sort of one big press release that they do and it has the data there? How do you expect that to unfold in 2009 in terms of A, the data and B, do we get it in different trounces and if so what piece will have the most impact?

Bruce Barrett

It is difficult to say, because to my knowledge there is not another monitor actually in the STS database and I think we may be the first that was ever included. So, there is not a lot of historical activity in this regard to predict.

We do have people who are leaders within the society who are going to be involved with analyzing the data and those who create practice standards are aware that that activity is going on and that if it is compelling they may be in a position that they are reviewing whether or not to establish such a standard. It really depends on how fast data is found that is compelling; if in fact it is going to be that outcome.

We are going to get a look at it here this year. I wouldn’t be surprised if it takes more patients and it is later this year or early next year before patients for any kind of a statement to be made. I am sure data will be presented at conferences before it is published. They have meetings basically once a year to create standards, so you are probably hoping that you have something that by 2010 or 2011 you have got data to compel people that a standard ought to be established.

Anything could happen. You could get data that says you know what the data is very compelling and it should be used in a segment of the adult cardiac surgery population, but not all of them, or a standard could come out, the data could compel that you should use it on everyone because it is a tremendous safety tool. We think it will be the later, but that would assume the data is consistent with other data that has been presented and published over the years.

Jonathan Block – SunTrust

Okay perfect, then one last question with maybe two parts. On the stock buy back is that static from last time in terms of the number of shares bought? Then my last question is just, maybe to help us out if you could. How do you weight the year? What should we be aware of? In other words you have got the $2 million in R&D. You are bringing on a bunch of reps. Should we just be cognizant of the fact that that is likely to be a lot more weighted in the first six months versus the back?

Bruce Barrett

Well on the later question regarding to weighting, certainly the weighting of adding what essentially, let’s say, is 20 headcount between the US and International, since we are just now in the recruiting process the weighting would be towards the back, because it will take a few months to get all those people hired and in their roles.

As far as the R&D I would say the weighting is probably weighted toward the three quarters, maybe a little less in the first quarter, but certainly the next three quarters. All that is, is because the weighting related to the stand-alone ICU Data Systems technology that won’t change too much. We will get it out the first part of this year, but then we will have to support it near the mid year. We are just defining the specifications of the integrated system, so that investment will increase as the year goes on.

As it relates to the share buy back you are correct. We haven’t done anything since we last reported.

William Iacona

The shares and the amount spent are the same.

Jonathan Block – SunTrust

Your assumptions on 2009, again with the sensors, that is just maybe flat to modestly up ASP’s as you continue to get a favorable mix shift with neonatal and pediatric?

William Iacona

Yes.

Jonathan Block - SunTrust

Okay, thank you.

Operator

Your final question comes from Greg Hertz from Citigroup.

Greg Hertz - Citigroup

Just to revisit and Bruce kind of touched on that in our initial kind of back and forth. Could you flush out a little bit more about how you are thinking about the economics of the deal for an ICU system stand-alone and also if you are going to displace that and how that would relate as far as increased pricing on the sensors? And you talked just generally about the profitability of the deal versus the current economics that you got with the info in some of the sensors? Thanks.

Bruce Barrett

I think what we expect is that the gross margin associated with any sort of deal regardless of what format it takes with the ICU Data Systems will ultimately be not too dissimilar from the kind of margins we enjoy today, so something in the 80% sort of gross margin range. Whether that is because we are getting more out of the sensors or we are getting the sale of the device itself.

As far as how we view it as we go through 2009 obviously this is a new approach. It is a piece of capital equipment, although in some places we could place it in exchange for existing sensors, just an up charge on the sensors; so, it will take a little time to develop from a capital budgeting standpoint. But, the stand alone unit is something that we can get to quickly. Get out there and get the features established in our marketplace and start getting the process of adoption underway. Then obviously the concept of an integrated system is to avoid the need to have two devices at the bedside, for people who want to use both technologies.

The stand-alone also give us the opportunity, clearly, to sell the device to customers who aren’t using the INVOS and not be only tied into that. So, I would expect we will maintain a stand-alone device even after we have an integrated system, as it relates to the ICU Data Systems technology.

Greg Hertz - Citigroup

And as it relates to the I think it is roughly the $20,000 sticker price, at least, that you are getting for the NICU equipment sale, what do you expect pricing to be for the ICU Data System product if you were to sell it on a stand alone basis?

Bruce Barrett

We have not actually totally set it. We did modeling for the acquisition from anywhere between $15,000 and $25,000 per system, and their list prices on it, as they were just getting started to sell it, which they were frankly trying to sell it for a little different purpose, their list price was $27,500.

But, the system was really designed and has the capability to be an electronic patient chart at the bedside in the neonatal ICU to eliminate all of the time consuming efforts associated with maintaining a manual, handwritten chart at the bedside and all the errors associated with that. That was really the focus of their development.

We have been talking with them since early 2007, because we felt like well that’s potentially interest in a capability that perhaps we could sell as well in the future. Our real interest was the fact that they had to integrate all of this data to do that. We were really looking at it as a monitoring company. They were really looking at it more as a provider of an automated electronic charting system.

We have kind of moved it into the realm that we like, but we still think the pricing sort of point is probably going to be somewhere in the mid 20’s, at least as far as the list price, and then how much we actually can command on an average selling price basis we are going to have to get a little bit more experienced.

Greg Hertz - Citigroup

I understand and then just one final question. If I am looking at a run rate at the end of fiscal ’09, again as it relates to the ins and outs of what potentially happens with Covidien, just to kind of drive some kind of sensitivity for fiscal 2010, is it fair to assume that based on you have got at least in the upper 30’s to $40 million SG&A run rate heading out of fiscal ’09 and you know if you were to include kind of an incremental $3 to $4 million in annual spend? Does that make sense?

Bruce Barrett

You know I think maybe it would be best if you give us a chance to think about that one. I don’t have those specific numbers in front of me to answer that question; so I wouldn’t want to mislead you.

Greg Hertz - Citigroup

But at the end of the day, I mean are you expecting that with our without a Covidien relationship in Europe fiscal 2010 are you expecting to show some operating leverage such that your EPS growth will outpace your revenue growth, or is that still kind of up in the air?

Bruce Barrett

Well I think it sort of depends, because you can expect a pretty – if we do go direct, I guess I would say, you can expect a pretty weak first quarter that would be unlike the rest of the year. So if you put the whole year together I don’t know exactly what it would shape up like, because you would assume that we will have all of the expenses in place by the first quarter of being direct and we wouldn’t be recognizing any of the benefit of the margin that is currently being maintained by Covidien. So, the direct model looks better than distributed at our current transfer prices, but not until after we are able to collect the margin starting in March of 2010.

If we stick with Covidien I think they are going to benefit from the same things that we are, which is going to be the leverage associated with all the activity and investments that they are making related to the neonatal ICU and the question will be whether or not they will participate, as we move forward with an ICU Data Systems technology, or if we would do that separately. It is not a part of the agreement because it is not an INVOS product. But, it would make sense. It would seem to me that this would be an additional technology that they would distribute as well as INVOS, so it would be an incremental opportunity for them as well.

Greg Hertz - Citigroup

I understand. Okay, thank you for your time this morning gentlemen.

Operator

That will conclude today’s question- and-answer session. Bruce I would like to turn the call back over to you for any additional closing remarks.

Bruce Barrett

Thank you and I would like to continue to thank our shareholders for your interest in our technology and our company and we look forward to reporting to you in just not too many weeks from now with our first quarter results.

Thank you.

Operator

This does conclude today’s conference call. We thank every one for their participation.

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: transcripts@seekingalpha.com. Thank you!