Q4 2013 Earnings Conference Call
March 20, 2014, 8:00 AM ET
Karen Howard - Investor Relations, Kei Advisors LLC
Kent Rockwell - Chairman and Chief Executive Officer
David Burns - President and Chief Operating Officer
Brian Smith - Chief Financial Officer
John Baliotti - Janney Capital Markets
Ajay Kejriwal - FBR
Sherri Scribner - Deutsche Bank
Jonathan Shaffer - Credit Suisse
Peter Misek - Jefferies
B.G. Dickey - Stephens
Cindy Shaw - DISCERN
Weston Twigg - Pacific Crest Securities
Greetings and welcome to The ExOne Company's Fourth Quarter and Year-End 2013 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Karen Howard, Investor Relations. Thank you, Ms. Howard, you may begin.
Thank you, Kevin, and good morning, everyone. We certainly appreciate your time today for our fourth quarter and full year 2013 conference call. On the call with me this morning are Kent Rockwell, Chairman and Chief Executive Officer; David Burns, President and Chief Operating Officer; and Brian Smith, Chief Financial Officer.
We will be reviewing the results of the quarter and year that were published in the press release distributed after yesterday's market close. If you don't have that release, it is available on our website at www.exone.com. The slides that will accompany our discussion today are posted there as well.
Referring to the slide deck on slide two is the Safe Harbor statement. As you may be aware, we may make some forward-looking statements during this discussion, as well as during the Q&A. These statements apply to future events and are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from what was stated here today. These risks and uncertainties and other factors are provided in earnings release, as well as other documents filed by the company with the Securities and Exchange Commission. These documents can be found at the company's website or at sec.gov.
We will have Kent first provide an overview of company's progress in 2013, including investments in our manufacturing capacity and people. David will review our revenue expansion activities and results as well as our research activities. And then Brian will provide a detailed review of the financial results. Then we'll turn it back to Kent to introduce our 2014 guidance and discuss our outlook.
With that, I turn it over to Kent. Kent?
Good morning, everybody, and welcome to our review of the 2013 year. We have with us also this morning, Tim Pierce, our new COO for the Americas, who is educating himself on how we run our public efforts here.
Our first slide is just a very positive statement. I want to make a couple of comments about it, if I could. ExOne is distinctively positioned as the industrial provider of 3D printing through its binder jetting technology. As we've said before, we are rather uniquely positioned with binder jetting. And I can say to you that the industrial markets are growing and very robust with regards to the activities that we're involved in, in the industrial markets with our current list of growing customers.
Secondly, just to give you an example of what I'm referring to, a year ago, we had zero contracts for development with third-party customers. Today, we have more than five contracts presently active for the development of materials, which will utilize our machines and we're very enthusiastic about the customer relationships, the customer collaborations that we're having. We are, I can say, working on some very large government opportunities in 2014 that should mature over the next 60 or 90 days. And those are sizeable funding opportunities, where the government is participating with other industry players to take this technology and apply it into the marketplace.
Moving to the next slide, very, very quickly, as you already know, our revenues approached $40 million and that's nearly a 40% growth rate. Certainly, the fourth quarter was a bit of a disappointment to us, because we had some international machines that shifted out of the quarter and dropped us just a hair below our 40% to 50% average. And in the scheme of things, I don't think it means anything. We didn't lose a single customer. We're enthusiastic that the year that we're now participating in is going to see a recovery and move forward to better levels of revenue performance.
And frankly, when you're selling a $1 million, $1.5 million machines and you run into some of the exogenous issues that we've been impacted by in this current period, it's not truly meaningful, even though the markets sometimes measure more dramatically.
Our technology is being affirmed by the market. I'd just refer to the five development contracts that we have right now and the other potentials, binder jetting is in a very positive and growing position in the additive processes. We think that the customers are realizing the economic effectivity of our equipment. And so we have some growing opportunities there. A lot of this has to do with our being able to bring in a new material set and we are still very focused on getting new materials, because that will drive substantially the future growth of machine sales, and in some cases of our PSC activities, as we start to deliver parts to the marketplace.
I think that we've demonstrated a good traction of the direct metal business. As you recall, there are two parts. We have indirect printing, which is really the going to the foundry applications and the casting applications markets, which is a bigger part where our larger machines are going right now, but the movement ultimately, we believe, will be much, much more as we move it to new metal sets that the metals business we'll take over. 2014 is a transition year for us as we do that. But we've had customers that have spoken to us about as we get some of these metals qualified, having a requirement (inaudible) 2013 machines in some instances, as these materials are proven out to satisfy the requirements. So we will be moving from the one or two type sales to very large recurrent sales to specific customers in the future. Again, 2014 is a transition year for that, because I really see the larger volume with better sales starting, but the real activity will come into '15, '16 period, as we move on.
But all in all, our metal business is good. The sea end of the business that we would refer to as that with the larger machines has been positive. We won a lot of new customers in that area as well. It has been somewhat slow to our machine sales and David and Brian will be addressing the specific performance issues that are related there.
The next slide, we did raise over $150 million in two capital raises in the last 12 months, as this young company got a start. That's a lot of capital and we have done a good job, I think, of applying that capital in a variety of instances such as I've mentioned here below. First and foremost, the manufacturing capacity expansions, and this is not just manufacturing, but also PSC expansions and we will highlight some of those spending shortly. But I think we've spent our money smartly. We have magnificent facility coming towards completion in Germany that will move us from seven different facilities into one facility and give us a lot more efficiency. And we have new machine designs that are coming in as we have that additional capacity that will satisfy different customer needs.
Most importantly, it's all about people when you're trying to do all this. Certainly we've increased the investment in people radically since we started off in 2013. The specific numbers will be given to you shortly. But anytime you increase people by 50% or 60%, you're going to go through a certain evolution that just causes you to have to implement new processes. And for us, evolving to new processes that make these people more effective, get them trained and become effective sales personnel is a very important part of what we're doing. And I think that we've done it really quite well in getting this going in the 2013 period.
Sales network expansion, we've probably doubled our sales. Again, David will touch on those specific numbers. But clearly, we need to expand our sales capability. I think we're doing that. And then most importantly, accelerated research efforts. Our technology is a new and a disruptive technology and we need to be able to get out and explain to the customers the nature of how you apply this technology in your new workplace. And so there is a phenomenal requirement for educating the customers and for getting them to understand the process by which they can take this and improve their business and improve the qualitative aspects of what they're providing to their end customers. And I think we've made a lot progress again in that instance and we're going to see a lot more of that, because literally in 2013, we got the funds in late February. It's taken us a good bit of time to get the engineering personnel in place and get them really working effectively and collaborating with the customers to take us to a higher level. And I believe all that's happening, but it doesn't happen simply in a nine-month period. And we've gone through some of the aberrations that any small high-growth company will begin to face.
I'm going to let David go ahead and highlight some of the details of the '13 year and Brian will focus on the numbers. And I'll come back here with a couple of closing comments.
Thanks, Kent, and good morning, everyone. This is David Burns, President and COO of ExOne. First on the slide, let's dissect our revenues a bit region and product line for 2013. Then we'll talk more specifically about machines and then on to a variety of highlights in terms of accomplishments for the year.
So beginning on Slide 8, we try to show slides in the same format each time, so you have some expectations of what you're going to see, and this is our quarterly split by product line and by region. As you know, we've talked various times about having a business that was focused about 50% on PSC in recurring revenue side and about 50% on the machine side. But we've set all along the machines with lead for a while and eventually we expect that the recurring line to fill in behind it.
Quarterly split for Q4 was about two-thirds machines and one-third PSC or recurring revenue. And interesting for us, if you look at the revenue split by region on the right-hand side of Slide 8, you see that 50% of our output in Q4 went to Asia, about 41% in the Americas and 9% in Europe. This is reflective, I think, of our discussions all through 2014 that we were facing more difficult circumstances in Europe. We are well aware especially on the vehicle side that there has been some discussion about emission standards in Europe. And a lot of folks have been waiting for those standards to get settled before they launch in the next-generation designs. And we have healthy impact of that.
That said, I hope when you look at the positive side, which is that we globalized this company immediately when we founded it. And in fact, I think the outcome of that is that we have access to the Korean market, the Chinese market, the Japanese market. And you see the effect of that in Q4.
Moving to Slide 9, which is the full year, same splits, 53% machines, and again, Asia was the dominant region for us. We don't necessarily expect this regional split to fall this way in 2014, but we are grateful for the excess to the Asian market when we had this share to support the company.
Moving to Slide 10, a quick look at machine sales for the year, both dollars and volume, you'll see the annual growth rate of about 80%. We reached 29 machine units in 2013. That was gratifying in and of itself, simply that number, but at the same time, the units, as you know if you looked at the release, were spread across a variety of platforms. The introduction of the new M-Flex machine has been successful for us and we've now shipped six. And of the 29 customers that we shipped to in 2013, 20 of them were brand new customers for us around the world, another very significant fact.
I know you're going to take the machine numbers and try to say, well, where are we with average pricing. And what I'll say is we've talked about average pricing, the average pricing that we experienced, is holding up. So if you go across units and average pricing, you get to that $25 million in machine sales for the year for us.
Slide 11, a quick view of the non-machine revenue for both the quarter and the year. We're flat Q4 '12 to Q4 '13 in terms of revenues, and we're up for the year from $13 million to $14.6 million. We do note at the top that our Q4 was impacted by the fact that we are engaged in two large casting projects for two separate customers. A chunk of our capacity in Q4 in our PSCs was pre-printing for castings that we're going to be shipping in the first half of 2014. So I do want to note that as we shift to more of a full-blown ex-cast strategy, where we're taking castings (inaudible), it's going to make the recurring line a little bit more lumpy than it was and we don't see any reason for concern. We anticipate good strong growth in our recurring revenue stream in 2014 vis-à-vis 2013.
Slide 12, highlighting the facts of our manufacturing and PSC capacity expansion projects, as Kent mentioned, we broke ground on our new German facility. It's a $25 million investment that we anticipate opening in the latter half of 2014. It's a great facility. It gives us a lot of efficiency. It is very representative of the image that we want to present as ExOne. But I do want to recall that that facility services the world. There is a line of machines that are developed and shipped there all over. And that is our European hub.
In the US, we did reduce some refurbishment here outside of Pittsburg in our North Huntingdon facility, much of that related to R&D. We will be getting out about 25% employee base here later this year. We did open two new PSCs this year and will have a capacity expansion in Japan as well coming up in 2014.
On Slide 13, discussions about our investments in people, overall our headcount is up 45%. We have in a sense retooled our leadership level. We've added a Chief Legal Officer and in addition to that, we've noted before that we've hired a couple of new IP attorneys in-house and engaged IP resources outside of the company, because we're anticipating significant flow of patent applications and grants. We added this year a new Chief Accounting Officer. Our European head became our Chief Development Officer. We had a new CFO, and Tim Pierce, our new US COO, are all with us and came really this year.
So we've got a strong and emerging management team. And much of the rest of the investment in people is focused on sales, research and engineering, which we'll touch on subsequent slides.
Slide 14, discussion of the sales network, we have more than doubled our sales force since the beginning of 2013. We currently have 17 direct salespeople and the concentration of our direct people are in the US, where we're going to market with, as we'd indicate, more direct sales efforts. While we've hired a few less in relative terms in Europe in Asia, we're building out those channels to include distributors as well. You may have noted that we added distributors in Spain and the UK earlier this year. We've recently announced the Scandinavian representative. We opened sales offices in Shanghai and São Paulo. And we anticipate getting a couple of international sales offices here in 2014 as well.
Going to Slide 15, again to Kent's comments about accelerating our research efforts, we nearly doubled our R&D and engineering staffing during 2013. A piece of that is on our effort to advance new materials. And as Kent noted, we have in place several research contracts that we're co-developing material and application combinations with specific large industrial customers. Not only did we announce a couple of new materials this year, but also a couple of new binders for our indirect printing processes. And on the machine side, the M-Flex rolled out successfully. We would expect that that number of M-Flexes we will sell in 2014 will triple. And we do anticipate announcing a new indirect printing machine built off one of our other platforms, but adapted to use our new binder technology that we need for indirect printing. So our research efforts are robust and growing, and we're very, very confident in our ability to reach our goals for 2014.
Now I'd like to turn it over to Brian Smith. This will be your opportunity here from Brian, our new Chief Financial Officer, will give you a look at the numbers for 2014. And then Kent will wrap it up for us.
Thanks, David, and good morning, everyone. I'm happy to be here in my first call.
Turning to Slide 17, Q4 '13, the gross profit was impacted by our investments in our customer programs, as well as the under-absorption we had with lower volumes. If you look at Q4 2012, there is also a $1.1 million non-recurring benefit in that 2012 quarter. These factors also impacted the annual gross margin. And obviously, the gross profit was impacted by the higher volume of revenue.
I want to stop one second here. I do want to remind everyone that we did say in other calls before that we would have some lumpiness with these machines. And I think David and Kent have alluded to that already. Also, gross profit will slow with some of that lumpiness as we invest in resources and new PSCs.
So I'll go to Slide 18 now. SG&A for Q4, we had about $400,000 in M&A activities in Q4 to support some of our acquisition efforts. We also were impacted with personnel and our public company infrastructure class, which also impacted the year. If you look at the year, there was about $7.7 million equity comp charge in 2012. And the year show that 2012 was higher than 2013. 2013 had $400,000 of equity comp in it in the year.
If we'll turn to the next slide and talk about R&D, as Kent and David both mentioned, our R&D expenses are up substantially related to enhancing our machines as well as the development for new materials.
Turning to Slide 20, our cap table, again Kent had mentioned our two offerings this year. At year-end, we had $98 million of cash and $146 million of equity and virtually no debt. You'll remember a substantial portion of our debt was paid off right after the first offering.
On Slide 21 is our CapEx for 2013. We spent $19.3 million in 2013 to support our activities, mainly the Germany and North Huntingdon expansion, the Germany new building and the North Huntingdon expansion that we had talked about, as well as new PSCs. 2014, we'll continue to expand our facilities. We'll spend somewhere in the neighborhood of $31 million to $34 million. We'll finish the Germany plant. We'll also purchase and expand our Japanese facility and expand the space back in our North Huntingdon facility here.
To support the revenue growth, we'll have new PSCs and machines and to put in those facilities of somewhere between $7.5 million and $8.5 million. In addition, we've embarked on a process to implement our new ERP system. We'll spend $2 million to $3 million in capitalized costs, including hardware and software and facilities. And finally, we'll spend probably in the neighborhood of $500,000 to $700,000 in costs that will be expenses related to our ERP system.
With that, I'll turn it back to Kent.
The next slide you're looking at is the 2014 guidance, and our guidance is reflective of our long-term goals that we had given to you previously, that being a 40% to 50% organic growth rate. And in the case of the $55 million to $60 million, for those of you with calculators, you can see that that pretty much stays in line with our expectation that the 40% to 50% gets you between $55 million and $60 million. That does include the smaller acquisitions we've made in this first quarter, because some of the revenue will be transfer revenue from subcontracted activities. There will be some new revenue that comes out of the sale of third-party microwave ovens out of the German facility and that acquisition.
Our gross margins we're holding to as last year of 43% to 46%. I know if you look at the fourth quarter, you say what the hell happens, how can we explain all that, all I can tell you is that we have the ability to explain it in detail. I'm not going to try and do it here. But if we rationalize the one-time cost of getting some of the startups and then an inventory issue in Germany, we fundamentally were running at 43% to 46%. I believe that that will continue to be a valid position for us as we continue to develop in the '14 year.
SG&A is going to be between $19 million and $21 million. And I think that that's pretty much in mind of what everybody anticipated. R&D is between $6 million and $7 million. That's a pretty big spend rate, but we do feel that that doesn't even include the spend rate that we would have if we pick up some of the government funding that we're looking at and some of the other contract incomes that we may receive from third-party customers as we move along.
Taxes, I can't even begin to communicate on, except to say that we've paid taxes in Germany and we don't pay taxes in the US. So we got a tax bill that kind of screws up how our normal numbers look. We do believe that we have the ability to get to a positive APS if all this matures correctly in here.
And so I'm pleased with that. This is excluding any concepts of acquisition. And we did say that we have some acquisition strategies that we're contemplating associated with our shift in some of the PSC strategies, and I'll talk about that in just a minute.
Moving to the next slide, our 2014 priorities, we simply think that we're continuing on a steady pace with our operational sales and development efforts. I think that they're often incorrectly defined. It just takes a long time, it takes six months to get a salesperson in 3D educated and trying to educate a customer who is not educated. And so the whole thing takes a bit of time, but we're doing well there. I'm very pleased with our research efforts for developing new materials, as I've already said.
We did do two small acquisitions that were helping us in our post-printing applications, and we will be looking at some of the related activities this year. We have a focused acquisition pipeline. And that's because we are re-strategizing our PSC strategy as it relates to ExCast. And I think this is a very important comment for those of you that are truly focused on what is it that makes ExOne tick. What we're finding is that in the PSCs, we originally had thought that our technology would be extremely well received by the foundry industry. And in fact, we've found a little headwind with the foundry industry, because it is so innovative that they're very reluctant to adopt it, because it's moving control of the pattern-making from their historic control back to their customers, which are the OEMs. And we have had OEMs come to us, say that your technology is absolutely what we want. We have to have it. And so we are asking you to please work with us to give us control of this process and to implement your ExCast strategy.
To do that means that we are going to have to reexamine our PSC investment where originally we would have said that putting a couple of machines in each PSC would generate maybe a $6 million, $7 million revenue. Now we're looking at increasing the intensity of our investment to be able to meet the OEMs' needs. And in the process of being able to meet their needs, we have customers that are talking about single customers, about $20 million, $30 million a year in revenues, if we can effect the ExCast strategy that we've been working on for a period of time. So I think that we're on the right track with what we're finding.
As I've said earlier, you have to be pretty fluid in what you do and go back and keep rechecking that you're doing the right things when you're trying to put a disruptive technology in place. We're finding a pretty good redirection of our business on the sand side, the big machine side that is very, very much in demand by some of the larger aerospace and energy companies. And doing this is going to be very beneficial for us. We believe it's going to shift our business model much more to the higher service side and lower the balance, whereas traditionally we had thought 50-50 might be the balance between machine sales and recurrent revenues, we're now seeing transactional sales probably slow as a percentage and the big increase is going to come through our PSC strategies as ExCast evolves.
Our phenoler machines are just now being accepted. And so that's a benefit for us. We've got another new machine coming online. At the end of the year, these are all focused on improving our abilities to go to mass production and truly take this technology into the world production marketplaces. Our customers that we're working with in that regard are enthusiastic that we're still on track and we feel that again we're still in probably still a transition year. But what we're looking at as we move and get some of these machines, we'll start to go in place at the end of '14 and certainly into '15 that you'll be looking at repetitive orders of maybe five or 10 machines of some of these users as opposed to the ones or twos in the trials and all the modeling that everybody is doing. That is the industrial process. It takes longer. So it's much critical for us as it's for our customers. And so we're very focused on re-strategizing to optimize the conditions for the future and with regards to how we're looking into PSCs going forward.
It is a change for us, but it's something that we can over time do well, and I think we're on a good move right now.
Lastly, near-term and long-term outlooks for most of your who are truly aware of investment in the 3D space, there was a BEWARE 3D Printing article written by Barron's in March 10th of this year. And in that article, it spent most of the time, I think, talking about beware as an investor about the 3D stocks and the value of the 3D stocks because of the future opportunities that lie there. And it's not our job to talk about the investment valuations in the marketplace. But I want to highlight that article did specify that the industrial markets are different and are where the game will be played. And I want to remind you that that's exactly where ExOne is and what ExOne is doing.
So they didn't much reference to ExOne, which does not disturb me. But I would like to point out that I thought if you really read it through correctly, it reinforced that we're in the right markets doing the right things. Whether or not it's a year late or not, I mean I think that the article has spent more time talking about some of the other companies than it did referring to binder jetting, but I would say to you what this article said, beware of 3D printing. And I say it, because 3D printing is coming, I think, very effectively and perhaps a little more rapidly than as yet demonstrated, but we're seeing it with our customers. We understand the time and the effort that it takes to transplant a process in the industrial world. We're very focused on doing what's right for our customer. And it's impacted us negatively from time to time as it certainly did in the fourth quarter.
So the answer is to adjust and respond, so that you are the leader in what you're doing. Our binder jetting technology, I think, is gaining much, much more receptivity as we move into these markets. And the proof of the pudding is the customers that we're working with and their satisfaction. So I'm pleased with the prospects and opportunities. I'm sorry that we haven't been as competent in perhaps addressing quarterly, we don't address quarterly anyway, but just the guidance aspects of this thing. We're guiding down a little bit as a result of this, and I think we should. But I don't think that that's demonstrating any lack of enthusiasm or effort on the part of this management. This management team here is very, very focused with its customers. The new team that we've developed here is capable to go out and address the global marketplace more effectively. And we're ready to go do that in '14. And I think you're going to see some positive things evolve as we go through the year.
With that, I will be pleased to entertain questions from our audience and thank you for your time.
(Operator Instructions) Our first question today is coming from John Baliotti from Janney Capital Markets.
John Baliotti - Janney Capital Markets
Kent, unfortunately the article as you're reading through, it also implied that Ford was actually parts that were made out of sand as opposed to using your sand machines to make their parts, which is a distinction a lot of us, I think, understand. But unfortunately, might have been missed on the reader. You're speaking very optimistically about [ph] a lot of existing customers increasing their use of your services and your equipment, but also new customers entering. And some of the positive articles that have been written about with Ford and so forth in terms of what they're getting out of your equipment, are you seeing that not only an increasing use by companies like that, but also competitors in those industries recognizing the need to make sure that they're involved in the same technology?
Ford, they did not mention that it was an ExOne machine. I would also mentioned that they're very old machines and we continually are trying to get Ford to update it. And Ford is constantly talking to us now about replacing their five machines. And so they understand the value of this technology. And I think that Ford has been using it fairly well. In the same article, you saw reference to Shapeways, where they said this is what Shapeways is doing. And of course, we produce, I believe, 100% of Shapeways parts, which wasn't mentioned. And Shapeways is growing and I think doing a very nice job of building their business. But we're their metal supplier and I don't think there is any likelihood that that should change soon. I think they're satisfied with our working relationship.
So ExOne didn't get some of the good dos that we might have, but we're little guys still prodding our way up and we understand that some of that stuff is going to happen. So, David, do you want to address some of John's questions.
The breadth of companies we're working with today across a spectrum of industrial producers is much broader than it was a year ago. And those are seeds that are planted and we expect to see a lot of results here in the next 12 to 24 months from that.
John Baliotti - Janney Capital Markets
Yeah, I mean it just seems natural that if Ford is talking about in these articles that they're getting a dramatic reduced cycle time on new engines and Deere is getting some similar improvements that how as a competitor there as you couldn't at least try to level the playing field and make sure that you're involved in the same technology.
Our next question is from Ajay Kejriwal from FBR.
Ajay Kejriwal - FBR
Maybe, David, if you can address the two casting projects that impacted PSC revenues in the quarter, maybe a little more color with regards to the size? And then in the hypothetical scenario that they would have been delivered in the quarter, how much would revenues have been up?
Well, first off, they weren't scheduled to be delivered in the quarter. So it's not a question of whether or not we missed. It is that we have over $3 million in backlog in casting projects from two customers. And we literally printed for weeks and weeks and weeks in Troy on all of our machines to get the moles ready to do the castings, which ultimately have to be then cast, x-rayed, post-process heat-treated and qualified before they ship. And that's very often 20, 24, 28 weeks to get all that work done. So the only point we want to note here is that Troy's capacity in the fourth quarter was largely utilized to print moles that ultimately are going to yield castings, which will ship throughout 2014.
Ajay Kejriwal - FBR
And then while we're on the topic of backlog, maybe just color on what the backlog was end of the year and then any update on the quarter 10 days from the close year, what the trends have been and then what's the visibility into the rest of the year?
The year is exactly as Kent indicated, and that is that we expect our revenues to be $55 million to $60 million for the year. We're probably 35% first half, 65% second half, not unlike patterns we've seen before. Classically the first quarter is the weakest quarter of the year for companies like ours, but we don't anticipate that to be any different this year. We do expect to see a significant uptick in non-machine revenue in Q1, because some of the casting programs are going to begin to roll out, not all of them, but some of them. And relative to machines, Ajay, one machine movement can change our numbers by, as you well know, 10% to 20%. And so we anticipate revenues Q1 to Q1 being up. We hope that they're going to approximate the growth rate that we think for the year. But there is a machine that may or may not be in the quarter, and that could easily take our growth rate for the quarter from 40% to 20% or even less.
Ajay Kejriwal - FBR
And then the backlog end of the year?
The backlog is in our 10-K will be $10.9 million. It was $5.1 million last year.
Ajay Kejriwal - FBR
In the CapEx plans for this year, how many new PSCs are you expecting? I thought I heard, I think, in the prepared remarks that for the PSCs you're looking to intensify the investments each location. So just maybe a little more color there.
We will open in the first half of 2014 two new sites, which will be a blend between PSC related activities, sales and service centers. Both are intended to be in Europe and one is likely in Southern Europe. I think Kent's point about PSC expansion is that we had said 15 PSCs by 2015. And I think at this point, with our view of what ExCast could mean, that it's likelier that we are going to have larger full-blown manufacturing facilities and less of them by the end of 2015. And those facilities will be capable of taking a casting from concept through deliver with a much broader range of equipment and capabilities than we originally anticipated with our first discussions of PSCs.
And as Kent pointed out, I think this is absolutely appropriate, and I think investors should applaud the fact that we're really light on our feet relative to strategy and we're reacting to what customers are asking of us.
Our next question is coming from Sherri Scribner from Deutsche Bank.
Sherri Scribner - Deutsche Bank
I just wanted to get a little bit of detail on the 1Q commentary and thinking about the five machines that you commented earlier in the year that has been pushed out. I think you said 1Q will be down. Does that include any benefit from some of those machines that were pushed out from the fourth quarter, and when you do you expect those five machines to ship? Would those be later in the year, or would they possibly ship in 2Q?
We anticipate Q1 '13 to Q1 '14 to show an increase in revenue. The question is how much. And the answer will depend on where machines specifically fall. The machine programs that we saw in Q4 that we anticipated developing are all going to ship in the first half. And all those programs are still alive. We expect some benefit in Q1, but there isn't going to be case that machines from Q4 into Q1 on top of other programs that were there. So don't anticipate that.
Sherri Scribner - Deutsche Bank
But you still expect on a sequential basis that March would be down, or could it possibly be flat?
We expect growth Q1 to Q1 to be there.
Sherri Scribner - Deutsche Bank
No sequentially from the December quarter to the March quarter, do you expect it to be down? You mentioned that seasonally it's typically down.
Classically, our first quarter is our lightest volume quarter and we would anticipate that for this year as well.
Sherri Scribner - Deutsche Bank
Even with the benefit of a couple of more machines?
Sherri Scribner - Deutsche Bank
And then just thinking about the guidance for the full year and the numbers that you've outlined, it suggests that we are still losing money in fiscal '14. I know you suggested that this is a transition year. I just want to make sure that based on the guidance, I'm understanding that correctly. So I think this has you earning about $0.25 in 2014.
If we achieve our performance, I believe that we will have a positive EPS in the year. Again, Sherri, it's a simple question. Could we be positive? Absolutely. But we have got very, very SG&A and R&D expenses. I want to curtain those. That could get us to $0.25. The question is, is that what the investor wants, or does the investor want us to become a $300 million, $400 million company in the next couple of years, because we really aggressively pursue the long-term opportunities. And I'm of the opinion that that's what the investment community was looking for. And so I'm not as worried about whether or not I spent an extra million of dollars in R&D. If some customer comes in and says, hey, we have the opportunity to order 10, 15 machines next year if you could get this qualified and up for us. And any incubative high-growth company like ours, you have to be able to make those decisions. And right now, I think that in the interest of what is the real investor is really looking for here was just to create a true leader in this technology that I'm not going to be terribly focused, although I do think we have an obligation to show people we can make money. So we're focused on getting to a profit level. How significant it is in '14 is not relevant, because what's going to happen in '15 is much, much different.
Our next question is coming from Jonathan Shaffer from Credit Suisse.
Jonathan Shaffer - Credit Suisse
I was just wondering on the two recent acquisitions, whether you guys had had any kind of pre-existing relationship with them, meaning that they were kind of already using your machines and so it was easy to integrate them within your process? And then just as a second part of that, what are you continuing to look for in any kind of new acquisitions?
First off, the pre-existing relationship; A, with the microwave producer, they were our primary supplier of industrial microwaves that we use to catalyze parts coming out of our indirect printing technologies with new binders. So we were consuming a significant portion of their production anyways. They do have a little bit of outside sales, but that wasn't the primary driver. Machin-A-Mation is a fundamental machine in-house that we can use both for parts manufacturing for our own machines here in the States, as well as potentially using them in the stream of casting manufacturing and delivery that we envisioned with ExCast. So while they weren't pre-existing, now that they are part of us, we immediately have an interchange of a variety of parts and processes.
Just to add to your longer question, first of all, with MAM, some of our work is being subcontracted out to the third-party machine shops and we can transfer that into our own machine shops. So it's a transfer of who we do the work with that we would incur very profit to that process. Longer term, one of the acquisitions we're looking at, we are staying focused in binder jetting technologies and in looking at the pre and post-processes of binder jetting. There is some software opportunities that we're looking at and there're some other processes that we're looking at that, we believe, will strengthen our overall technological lead in binder jet.
Having said that, secondly, the execution of ExCast is a capital-intensive investment that involves looking at '16 and prior steps in the process of taking a casting from conceptual design to finish machining in a short period of time in a cost-effective manner. And we are looking at those steps and some of them involve inspection type activities for inspecting castings and for the software for solidification analysis that's specific to the requirements of these new castings. We are also with our new technology able to do better thinner valve castings that have been delivered by anybody heretofore. And that's been affirmed by major customers such as Boeing and Sikorsky.
And so we're looking at how do we take a bigger bite of that process and get to 12 of that process, because the OEM wants to buy it from one source. And right now where they get them from a foundry, the foundry still owns their patents and a foundry pretty much controls the process and the time in that process. And we have the ability to provide that capability to a foundry if they were to choose to employ it or provide it ourselves to an OEM, because a foundry won't employ it effectively to meet their needs. And that's become one of the issues that we've run into the evolution of the ExCast process.
Our next question is coming from Peter Misek from Jefferies.
Peter Misek - Jefferies
Really two questions. One is can you help us understand the catch movement now that you're transitioning more to a service model and there's going to be an increased investment here in capital equipment. But I would imagine there is also an increase in working capital, inventories, et cetera. Basically what I'm trying to understand is what do you see the cash balance looking like throughout the year. And then just the last question is, I would like to understand, it seems that some of the work that you've been doing with the larger industrials, German automotive companies, et cetera, that we would have expected do more keen on the sand casting for their higher-end prototyping and higher-end engines seems to be cooling a bit, or maybe I'm misunderstanding that based on your commentary.
It's not cooling. It's very much in line. But what we have said from the beginning is that BMW rather was always a 2016 project.
I guess I'll just echo Kent's comments. I don't think it's a question of the precursor preparatory work being done within especially European automakers. We are still connected and doing what I would view as very preliminary fun and stuff. The question is have we seen the conversion to higher volumes and more production related. And we haven't in Europe. And again, we've been monitoring this all year, and I'm pretty comfortable that we're positioned where we need to be with this customer base. It's a question of timing more than it is anything else.
The intensity of capital investment in the ExCast process, which will be applied to one or more of our PSCs this year, is substantial. Whereas originally we would have talked about $3 million to $5 million for basically what was our equipment to provide the quality of castings and molds that a foundry would have used, now we are looking at investing in sims and various kinds of inspection equipment, which might be a $1 million a piece to expedite that process and give it to the control of the OEM rather than leaving it with the foundry suppliers, which are more resistant to have to make the capital investment themselves to adapt the capabilities that their customers are requesting.
If you go to a mini-foundry, you can put in a mini-aluminum, magnesium foundry for a $2 million, $3 million. And some of those places, we may consider employing that activity. In addition to that, there is machining. There is heat-treating. And some of those are activities that we may continue to outsource, because our customers will accept that. And in some cases such as in Machin-A-Mation, we would bring it in-house, as we have decided to do in the case of the Sikorsky effort.
Peter Misek - Jefferies
I guess the one specific item I was hoping to get is what do you view as your minimum cash balance throughout the year, or is that something that we need to worry about or concern or is there a need for additional capital? I guess that's one of the comments that I was just hoping to get answered.
Right now, we have more than sufficient capital to meet all of the needs of growth that we've described for 2014 year and leave us with sufficient cash to acquire the capital equipment or by acquisition certain processes which would expedite the overall implementation of the ExCast process. We have almost no debt. And we certainly have the facility to generate if we needed it. We have north of $50 million in cash at the end of this plan without an acquisition. And we certainly have the ability to immediately raise $25 million to $30 million in debt if we needed it.
So there will be more capital if the ExCast deployment is effective and customer justified. I mean we believe that in '15, we would see at least $50 million, $60 million of revenue from that. And those are pretty heavy margins that we're pleased with. So we think that it's a justifiable effort.
Our next question is coming from B.G. Dickey from Stephens.
B.G. Dickey - Stephens
My first question is just really around Asia. Can you talk about the competitive landscape there? Has it changed or how do you see it changing should, for instance, Chinese OEMs begin to flood the market with cheaper machines that maybe they're not there in terms of quality now, but over time as they start to perfect the FDM process, for instance, how is it going to impact your machine sales business not only in Asia, but across the globe as well? Maybe that's more of a long-term question, but would certainly appreciate your thoughts on that topic.
Well, specifically, the China, as you may know, in the manufacturing technology world, while the Chinese have capabilities that they deploy domestically, they've been fairly unsuccessful in selling manufacturing technology outside of China, because generally speaking, the level of technology they deploy is a step behind what you can get from Japan or Germany or the United States. I would say in the 3D printing world, we've got good visibility on what's going on in China with 3D printing. We respect their efforts and we think that there is some nation that emerging stuff going on. But it's not on our radar screen simply because we don't have a particular concern at this moment about the Chinese coming to market.
That said, we are getting inundated with requests to do business in China. So I don't see the Chinese as a particular competitive threat. To be honest with you, there really isn't any 3D printing technology emerging from Asia at the moment. The people that in a sense are in the same space we are, are European for the most part.
At the same time, I'd say we do have a lot of interest from the Chinese markets in buying our technology. And I have to say, first of all, we've had [ph] ITAR issues with regards to some of them. And secondly, we know that some of the customers who are buying are very interested in trying to replicate our technology, and we've been reluctant to allow that to occur. Having said that, the technology that we see coming out of China were all there making statements that they can do this and do that. Their technology is not nearly a robust enough to meet any of the ASTM industrial standards that would apply for US markets of industrial production. And I think that they're a long, long way from that. Could they be there in three years? Yes, but in three years, I think we'll be a little bit further ahead again.
Secondly, I believe that the Chinese interests right now are to bring the 3D additive activities into their own market as opposed to take it and turn around and exploit it in international market sales of additive manufacturing equipment. They're a tough competitor. They got a lot of brilliant people. They work very, very hard. You've got be very wise about how you deal with them. We have made sales of sand equipment and we have orders online for more equipment. And so we're very monitoring and David has worked to develop the Chinese market. Tim Pierce has joined us and has extensive experience in China and the Asia. And I'm sure over time, he will help David in that deployment.
So the Chinese threat is not that real for us in our global marketplace. It's really within China as we see it today, because they don't have the technology level. And that's one of the reasons, they'd love to own, for instance, our M-Flex. But you've got to be careful you don't shoot yourself in the foot with those folks.
B.G. Dickey - Stephens
Kent, you were talking about earlier kind of investor focus and I think rightly so that the people are not necessarily interested so much in EPS, given this stage where your company is at in terms of growing. But certainly the topline is important in market share. And so given that for '13, you came in slightly below that 40% to 50% organic topline growth range you talked about previously. So looking out to '14, just in terms of confidence and visibility to hit that bogey, can you talk about that? And really to the extent that there is conservatism baked in there, because I think that probably some of the Street numbers were a bit high, because for instance they may have been calculating that those four or five machines that you talked about in the fourth quarter getting pushed out into the first half, so we were maybe thinking that you had a nice tailwind on the topline there. I know you've talked a little bit about the topline, but just some additional color around that would be appreciated.
If one of the five machines had occurred, we would have been over 40%. And so the magnitude of large numbers against a small company developing like ours is very, very real. I think that the expectation for retaining 40% to 50% was quite real and it was a sad point for us that all five of things didn't occur. And yet when we look at them and say, okay, did we do anything wrong, what was it that anything wrong things we did, was our expectation of the completion of the process in international markets simply by the fact that there are so many exogenous factors like the Indian machine, the guy signed the order January 2nd and it's in the process now to get shipped, but they had a bunch of changing requirements in India, that's not an unusual circumstance. They change it about every 48 hours it seems.
In Russia, you had the issue that the currency is a little volatile and that the money has to be approved and released through a very, very antiquated process. The central government has to fund the leasing company. The leasing company has to buy the equipment for the customer. And the paperwork is huge and the process to work that paperwork in Russia is very intense. And their bureaucracy nears Obamacare. So we struggle a lot. And that's just one of things that you run into.
Having said that, Russia has been an excellent customer for us. They use the machines very effectively. They have a requirement for more. And we think that they're a good market for the future. So we're trying to expedite the processes that we use, so that we can manage Russia in a more proper sense. Now we're having to deal with the issues. We're getting paid in rubles and having to manage the euros, and that represents a whole new crisis of management that we've got employ within our company.
We have machines that we know is going to the French and they're all of a sudden, the government was providing money and then the government postponed providing the money from '13 into '14. So there is a cycle for all of this stuff in the international market.
In a little company like ours, it's just extremely burdensome. And our optimism brought on by our success in the past probably made us a little more confident than we should. We do not have a hockey stick in our fourth quarter, the way we have had in the past to get to where we wanted to go. We have an internal goal that is higher. They're in our guidance as we should. And my focus is much toward that internal goal. And that doesn't mean that any of you who are doing analytical computations should take that in any way as a reason to reach beyond what we've given you as guidance, that's what we're trying to do is get it more in realization with the magnitude of opportunities that we're seeing.
So I think that we're taking a little bit of a step down in our guidance. I don't want you to think that the enthusiasm in the marketplace isn't strong and that we don't have the opportunity. Again, for us, '14 is a transitional year. We will complete the facility that Dave mentioned, the 175,000 square feet facility in Germany, and this is desperately important to our strategy for success. It's a magnificent powerhouse that we've already seen here a couple of times to get from five or six different buildings into one building, just the amount of indirect expense that we will be able to improve on and the overall productivity of our staff there will be magnificent. And it's coming at a very time that we're coming online with a new production-ready machine by the end of the year. It's going to get a lot of visibility with a lot of customers. And they're enthusiastic about it.
They're already working with us on a regular basis. Multiple customers are for the deliver of that machine. So I think that we're well positioned to make our way through '14 in line with this guidance. And what's really going to be exciting is if we get a couple of effective acquisitions done, what '15 and '16 are really going to look like. And that's what the investors had to be thinking about when they bought this equity at the beginning.
B.G. Dickey - Stephens
Just one little follow-up on your comments there on the new machine to be able to early feed a comment on this and you did provide a little bit of color in prepared remarks, I believe. But have any customers actually placed orders for those or can you about ASP on that or any additional color around that?
No, it's too early. We've got two new machine models in the works. One is specifically designed to allow us to use the new binder technology that we've got for indirect printing. And then beyond that, there is a production machine with much higher productivity and more suited for high volume production. But in both cases, these are designs that are on the boards. So when we get a little bit closer, we'll talk about it.
Our next question is coming from Cindy Shaw from DISCERN.
Cindy Shaw - DISCERN
One of the things that I wanted to ask about is my recollection from the last year's discussions were that you're production constrained potentially at the end of the year. So as we think about this year, we have some machines going into the first half. I'm guessing you've got a lot of production capacity scheduled to come online. Is there anything we should be thinking about in terms of production capacity limitations as we go through the year, any constraints such that if something slips in say the second quarter that you just won't have capacity to make up for later in the year?
The answer is no, we don't have any production constraints. We've anticipated the transition in Germany for a year-and-a-half. And in some sense, our working capital at the moment is probably higher than we might otherwise have required, because we're pre-building out some level of volume to be sure that during the transition time we're able to keep selling what we've got. So our inventory levels are higher than perhaps we normally would have expected for the volumes we're running. But that's very anticipatory of the big move in Germany, which as Kent mentioned, is a big event for us. So it's a big deal. And what we've been planning for, for a while and we're very comfortable that we've got the capacity we need to execute the year.
Cindy Shaw - DISCERN
On the tax rate, there was a comment during the prepared remarks that sounded like that's still really up in the year and there has been some discussion previously of really trying to narrow that down this year and make it less of an open question. I was hoping you could update us on how that's going, what's sort of the range for calendar '14 might be, and if it's still kind of an open wide range if you expect further improvement as we go on to calendar '15?
You could use something in the neighborhood of $300,000 to $600,000. It will be in that range.
Cindy Shaw - DISCERN
As we look at this ExCast process and really bypassing the foundries, it seems there is a lot of dynamics to that and there could be some unintended consequences. So as we think about it, are you no longer selling to the foundries, are you looking for the OEMs to force this on to the foundries? And there was a comment about taking out the PSCs and bigger machine sales. So I was a little unclear on does this mean initially the PSCs and then you get these five and 20 machines for customers? If you could give us some more color on how you expect it to play out and what sort of headwinds you think you might run into?
I want to be clear that of the opportunity sets for ExOne are fairly specifically delineated. We see three major market opportunities going forward that are very expansive in terms of the opportunity. One is within the arena of delivering castings from conception to finish stuff and along the way, especially in the US, there's been an evolution that the foundry has become the focal point for technology development and control of how castings are created. And therefore, in some sense, OEMs have relinquished some of their authority over the supply chain to foundries where a lot of black magic happens.
The push-back we're getting from OEMs is we don't want to black magic anymore. We want control of this process and 3D printing gives them that. In that scenario, foundries become more of a tooling agent that simply contributes the stuff in the process as opposed to controlling design and technology. And of course, there is going to be resistance and unintended consequences and it's going to be ugly at times and there is going to be struggle that is going to be disruptive and it's going to be unpredictable. And that's all okay, because that's what disruptive technologies do.
A secondary thrust for us is moving into high production machines that allow us to go into existing facilities and displace traditional machining for a variety of industrial production. That in and of itself is its own initiative and of course it (inaudible) ExCast, but it's its own field of opportunity of us.
The third is that the outcome materials that we're developing are allowing us to begin talking about direct part delivery into amazing markets with amazing design stuff that we are just beginning to conceive. And any one of these three things, and they really are distinctive in some ways and yet of course they cross over. Each has its own opportunity set. If one of them happens, ExOne is going to be very successful. We're looking really successful. So we're confident that one of these three arenas, we're going to have major breakthroughs this year. And that's where we're apart.
I will tell you this management team is more enthusiastic now than we were six or nine months ago. We wish that the outcome, the derivative numbers were a little bit better. But I don't think that the future is dimmed at all in our view. In fact, it's brightened in a lot of ways in the last six months.
When we were doing high tech, innovative investments and we were analyzing all of our investments for successes and failures, one of the things that we found the most predominant reason for failure was that we invented a great technology, for which no market existed. And the second reason for failure was that we invented a Cadillac when the market wanted a Chevy. And I've always kept that in my mind when I look at what were we doing here at ExOne in terms of the evolution of our product and our market opportunities. And I am actually convinced that we've had a little bump in realizing that the customers that we thought would grasp and really appreciate the value of the technology that we were presenting in the foundry industry, we came to realize that hey, this is something that these guys aren't really receptive to for the simple reason that it's giving control to their customer and taking away the control and they're going to only become a tolling agent if they don't adapt to this technological evolution, because it's absolutely something that's going to happen.
So when we've looked at it, we simply realize that the OEM customers, the foundry customers are the ones that came to us and said, please don't stop, you've got to do this and you've got to do this for us, Sikorsky being a foremost example of that for us at this point in time. All of this is evolutionary for us. We've had margin impingements, because we've had to learn how to do things right. And so all of that is just part of the process of getting it right. But I think that we've really gotten it right and have the right proposition. And I think what's going to happen is as we move to this process that the foundry industry is going to have to say, gees, please don't do this, we're not going to exist. That's not going to happen universally over a short period of time, as some of the great doctoral guys that are doing simple stuff, but certainly with the guys that don't want to be doing a higher value component, they're going to have to adapt this or face the consequences of a diminished customer set.
And so we're pretty enthusiastic with where this is going to take us. We're pretty enthusiastic this technology is going to be recognized for the value it represents to the end user.
Cindy Shaw - DISCERN
With that additional value, do you think the ExCast margins could exceed what you might expect elsewhere? And would you wind up selling to the foundries if they get onboard?
I think we have a requirement to be able to address both markets. I mean when a foundry comes along and say, God, I now understand what you were saying and that if I don't this, my customers are going to be distracted. And so I think that it may evolve that we'll see a mix of the two. But we're convinced that certainly in the aerospace markets we're working in right now, there's a huge upside for us and we're looking at a very sizeable government funding for the continuation of these projects, because the government has a crisis, they came up with one casting that they’ve been trying to get them, but have been able to make one since last August. And they know that our process will be able to do this. And so they're really anxious to see this employed as well.
And the result will be, I think, is that we will see very, very appropriate margins for the kinds of businesses that we will be in. I think this will benefit our overall margin mix over the next couple of years as it becomes employed .
Our next question today is coming from Weston Twigg from Pacific Crest Securities.
Weston Twigg - Pacific Crest Securities
The ExCast opportunity sounds large. It sounds like you're very optimistic about it. I'm just wondering if so, why not increase your long-term organic growth rate beyond the 40% to 50% or maybe rather, could you give us some color on whether that spikes a bit in 2015 and 2016 and then comes down to that long-term rate?
In all honesty, we're getting beaten up already for having put it where it was and then you have little aberrations. And so I think that comes with a growing sense of confidence. And right now, one of things that we've experienced, even though I think we've experienced good growth and we really are moving in the right direction for the long-term value of our investors, I think we need to get credibility for being able to achieve the quarterly performance with all of the coverage that we have. And I think we've got nine analysts talking to us right now. And I'd rather get comfortable with everybody saying, okay, these guys are along the line with expectations, they're worrying about telling somebody that the growth could exceed that.
Having said that, it's very obvious that if you just take something like a Sikorsky that has the potential to be a $40 million PSC customer next year, it doesn't take too many Sikorskys before you're well on your way to that multimillion dollar environment that we're trying to achieve.
Our final question today will be a follow-up from John Baliotti from Janney Capital Markets.
John Baliotti - Janney Capital Markets
I just had a quick question maybe for Brian or Dave. In terms of the R&D and you gave us a nice breakdown of split in revenue and how it has been traditionally. Can you just give a sense of how you field R&D, SG&A that's like a follow-on from continuing sequentially from where you were in the fourth quarter, kind of how do you see that mix sort of being for the year just generally?
I mean if you do four times fourth quarter R&D, it puts us right in the range that we're talking about for next year. And I think we're going to run at that rate. It's not that we're not going to flush out with a few more people, but we would expect also sometimes you buy big chunk of material and that hits your R&D numbers. So run rate wise, we're put near where we expect to be for the year.
John Baliotti - Janney Capital Markets
Obviously if you have projects, you're not really baking it off of revenue as a percent of revenue, it's the project itself and the cost. So I just wanted to tread on that.
We have reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.
I think of as one thing we would try to have accomplished in this last 45 minutes or so is for those of you that are with us to come away with some sense of appreciation of the progress that we're actually making and the opportunities that we see in binder jetting for a variety of industrial applications. We have a very strong enthusiasm. We recognize that the fourth quarter was a bust and that's just a bump in the road. It's not about there is some fundamental flaw that we've incurred and quite in the process is evaluating what was going on with ExCast and the need to move. I think we've made some strategic corrections, which were essential to the long-term profitability and growth of this company.
We are in a very dynamic and exciting marketplace with a lot of customers that are very, very enthusiastic about what we're doing. It can't move fast enough for us. I wish we could get more materials out sooner, because these new materials are what are really going to give customers the ability to then move to the ability to create new products and enjoy the new opportunities of the 3D printing.
We're a much different business from 3D and Stratasys and what they do. And we respect their place in the marketplace and the values that they bring. But we think that we're measured in many, many different ways because of our focus. And the fact that we're coming off of an industrial base, which is going to be exponential growth rather than some of the hyperbolic growth that was experienced in those companies.
So we thank you for taking the time and listen all this. We believe that we're moving in the right direction. And so with that, we're going to close. And thank you for your time and we'll see you when the first quarter shows up.
Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
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: firstname.lastname@example.org. Thank you!