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Nuance Communications, Inc. (NASDAQ:NUAN)
Q4 2017 Earnings Conference Call
Nov. 28, 2017, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Nuance's fourth-quarter and full-year fiscal 2017 conference call. As a reminder, this conference is being recorded. With us today from Nuance are Chairman and CEO, Paul Ricci; CFO, Dan Tempesta; and head of Investor Relations, Christine Marchuska. At this time, I would like to turn the call over to Ms. Marchuska. Please, go ahead.

Christine Marchuska -- Investor Relations

Thank you. Before we begin, I remind everyone our discussion this afternoon includes predictions, estimates, expectations, and other forward-looking statements. These statements are subject to risks and uncertainties that could cause material differences in our actual results. Please refer to our recent SEC filings for a discussion of these risks.

All references to income statement results are non-GAAP unless otherwise stated. And, as noted in our press release, we issued a set of prepared remarks in advance of this call, which are available on our website. Those remarks are intended to serve in place of extended formal comments, and we will not repeat them here.

I will now turn the call over to Paul.

Paul Ricci -- Chairman and Chief Executive Officer

Thank you, Christine. Good afternoon, everyone. Before taking your questions, I'd like to highlight a few key points regard our FY17 results, outline our expectations for FY18, and provide preliminary thoughts on FY19. I want to begin by noting that I am pleased with how Nuance completed its Fiscal 2017. As you know, in June, we were the victims of a cyber attack which had a significant impact on our performance in Q4. Absent the incident, we completed an excellent year operationally, strategically, and financially. Notwithstanding the malware incident, we performed well against several key metrics. We delivered net new bookings at the high end of our guidance range at 10% for Fiscal '17. Additionally, our healthcare business delivered its best net new bookings quarter in history in Q4, despite the challenges this segment faced as it recovered from the malware.

We outperformed our post-incident expectations. Notably, we had favorable outcomes for our Q4 and FY17 revenue and EPS incident impacts as compared to the malware impact guidance we provided in Q3, and we met our recurring revenue target of 73%, as we saw continued momentum across our growth businesses.

Our Fiscal Year '17 performance provides further evidence that our strategic focus on evolving our business to conversational AI and predictive analytics-based solutions is generating demand in our key vertical markets. Worth noting is that our total pipeline metric grew by $900 million, or an increase of about 30% during Fiscal Year '17. Throughout the year, we accelerated important product initiatives in each of our segments. For example, in healthcare, we continued our shift to the cloud with Dragon Medical; launched new virtual assistant capabilities; enhanced our offering in analytics, critical result management, and workflow optimization and diagnostics; and just yesterday, introduced with Nvidia, the world's first open marketplace for AI algorithms in radiology.

In enterprise, we continued the rapid expansion to omnichannel engagement powered by AI and analytics and added new facial and behavioral capabilities to our voice biometrics portfolio. In mobile, we accelerated our automotive 2020 product initiative and delivered outstanding customer deployments to make the connected car a reality for leading automakers. Again, making automotive an excellent growth business for Nuance.

We expect to build on our momentum, capitalize on the new AI-based solutions, and benefit from favorable market trends as we enter our new fiscal year. As you saw in our earnings material, we reiterated our growth expectation for 2018 of organic revenue growth between 2 and 4%. We have confidence in our revenue projection based on the growing volume of our pipeline, our bookings performance of 2017, the compounding effect of our recurring revenue streams, and importantly, a turning point whereby our growing revenue streams are now outpacing our declining streams.

For several years, we've managed a shift in our revenue streams and address several declining businesses while investing in longer-term growth opportunities. For example, we've managed the erosion of our HIM solutions in healthcare, as we concurrently build our Dragon Medical, clinical documentation improvement, and diagnostics business lines. By the end of 2018, Dragon Medical will eclipse transcription as the largest revenue contributor in healthcare, where its growth will more than offset the erosion expected in HIM.

Similarly, in mobile, automotive now comprises the lion's share of the segment's revenue, approximately 63%, with a double-digit growth rate. In addition to these effects, we anticipate revenue growth from our CDI offerings, our mobile services business, and new releases for our imaging solutions. Our imaging business it's worth noting has slated for Fiscal '18, the most robust set of new product offerings in the division's history. Along with our strong revenue projections, we expect continued favorable trends in our booking performance and forecast net new bookings growth between 5 to 7% in FY18, which you will note is somewhat above the initial guidance range for our FY17 net bookings growth, which we provided at this time last year.

Bookings will be led by an expansion of our enterprise, omnichannel, and voice biometric solutions, the continued growth of our automotive business, and the adoption of our Dragon Medical cloud solution. We expect that margins will increase from FY17 levels, but we note that in FY18, they will be flat or slightly down from our pre-incident levels as we accommodate additional investments in our enhanced security posture and infrastructure following the incident.

As you saw in our prepared remarks, we've embarked upon a multi-year organizational and productivity initiative focused on increasing investments in our growth businesses, building on our previously successful efficiency programs. We will use these efficiencies to fund our increasing investments in AI and our expansion of our go-to-market resources in our key vertical markets and to deliver steady, year-over-year margin improvements. This initiative, along with our enhanced pipeline, our booking trajectory, the relative strength of our growth businesses, and the diminishing effect of our declining businesses, has encouraged us to provide initial thoughts about Fiscal Year '19. In particular, we expect our growth businesses to further outpace our declining businesses, which would improve organic growth rates to between 3 and 5% in Fiscal Year '19, with each segment contributing to overall growth.

We expect similar performance to FY18 to net new bookings, with strong contributions from automotive, Dragon Medical cloud and enterprise omnichannel solutions. As we put the incident farther behind us, we expect operating margin expansion of approximately 50 basis points, while gross margins will remain at similar levels of FY18. Overall, our efforts to set us on the path for steadily increasing growth while balancing the use of productivity gains between funding growth and enabling operating margin expansion.

Finally, I wish to comment briefly on the topic of CEO succession. As I had mentioned previously, the Board and the Search Committee have, in recent quarters, initiated a process to evaluate both internal and external candidates. The Committee has made progress in that process and expects to complete its work prior to the end of March. You can expect a further update after the first of the year.

In closing, I'd like to reiterate that Fiscal 2017 was a remarkable year for Nuance, one that bore witness to numerous milestones amid our recovery from a devastating malware attack. I'm confident we exited Fiscal '17 a stronger organization, owing both to our success and the challenge we endured. Now as we begin the new year, the combination of our investment in new solutions, our position in key vertical markets, the strength of our growth businesses, and our deep customer relationships will allow us to recognize our potential for Fiscal '18 and the years ahead. We're now pleased to take your questions.

Questions and Answers:

Operator

Ladies and gentlemen, if you wish to ask a question, please press *1. You will hear a tone indicating you've been placed in the queue. To remove yourself from the queue, please press the # key. If using a speakerphone, pick up the handset before pressing those numbers. Once again, if you have a question at this time, please press *1.

The first question comes from Saket Kalia from Barclays Capital. Your line is open. Please go ahead.

Saket Kalia -- Barclays Capital -- Analyst

Hi, guys. Thanks for taking my questions here. Dan, maybe just to start with you. It looks like the impact of the malware incident this quarter was much better than expected and luckily, that's carrying forward to next year. Just to level set, can you talk about what sort of dollar impact you're assuming from the malware incident in FY18?

Dan Tempesta -- Chief Financial Officer

Sure. Hi, Saket. Thanks. Yes, first of all, the incident impact in Q4 was better than expected. In '18, we originally expected an impact on revenue of around $70 million. I would say because of the better performance, we would expect an estimated impact of around $60 to $65 million in 2018.

Saket Kalia -- Barclays Capital -- Analyst

That's great. Maybe for my follow-up for you, Paul, more of a segment question on the healthcare business. It felt like the clinical data improvement or CDI solutions had a particularly good bookings quarter. Can you talk about if that's something that's coming from continued optimization at hospitals are constantly doing? Or is there maybe something industrywide or regulatory-driven that's perhaps driving strength in CDI?

Paul Ricci -- Chairman and Chief Executive Officer

Yes, we did have a good year in CDI. Bookings were particularly strong. It is driven, in fact, by both of those trends within hospitals. There is regulatory pressure on hospitals to improve the quality of documentation and to reduce errors. Those errors affect patient outcomes. As you know, that's a central focus in healthcare right now. There's also, of course, enormous pressure on hospitals' business models to further optimize. CDI improves the efficiency of the entire clinical documentation chain and so benefits in that way as well.

Saket Kalia -- Barclays Capital -- Analyst

Got it. That's it for me. Thanks very much, guys. A nice quarter.

Operator

Thank you. The next question comes from Sanjit Singh from Morgan Stanley. Your line is open. Please go ahead.

Sanjit Singh -- Morgan Stanley -- Analyst

Thank you for taking the questions. Dan, a quick question on margins. I think relative to the Q3 update, margins are a little bit down. I think it was in that originally 27 to 27.5 range and now it's down by 50 basis points. Can you give us some insight on whether incremental investments are going or what drove the slight downtick in margins?

Dan Tempesta -- Chief Financial Officer

Sure. You are right. We're guiding for the year 26.5 to 27% operating margins. I would say from the trajectory that we were on in 2017 to that landing point, you can think about it as about 100 basis points are impacted by malware and updating the security environment. Another 100 basis points are for a number of investment areas, particularly in auto R&D, as well as in enterprise. Those are the two main drivers of the adjustment.

Sanjit Singh -- Morgan Stanley -- Analyst

Got it. I do appreciate your initial commentary on Fiscal Year '19 and also breaking out the automotive contribution for Fiscal Year '17. When we think about durable growth, obviously automotive is going to be one of the major components of that. In terms of thinking about the durability of your automotive businesses and you think about 2020 and 2021 design wins, what gives you the confidence you're going to be able to continue to secure those wins? You see Alexa making some inroads within some OEMs. What's the stickiness or the value proposition that you guys are working on to secure those wins going forward? Thanks.

Paul Ricci -- Chairman and Chief Executive Officer

I should note that 2020 and 2021 design wins are the wins that we have been doing of late. So, it is a business where one signs contracts well in advance of the shipment of the cars. We're already having success with design wins in that time period. But more generally to your question, our business model in automotive has been driven by our close alignment with the automotive manufacturers and helping them present the digital experience that they seek inside the car consistent with the overall design parameters and experience that they're trying to evoke with their brand.

We've said in the past and continue to believe that the automotive manufacturers will accommodate the digital lives that drivers bring into the car from other platforms, but that doesn't mean that they're going to abandon their own investments and their own initiatives in building a complete solution. That seems to be the strong message we get from the automotive manufacturers that seems to be consistent with the success rate we're having in winning designs.

Sanjit Singh -- Morgan Stanley -- Analyst

Got it. Very helpful. Thank you, Paul.

Operator

Thank you. The next question comes from Jeff Van Rhee from Craig-Hallum. Your line is open. Please go ahead.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Great, thank you. Paul, with respect to AI and machine learning, just take that a few steps further, would you? I know you're deploying it and it's central to a lot of themes within a lot of product sets, but in terms of its ability to drive the revenue line, sort of narrow our focus a little bit here. What are the solutions and the actual use cases of AI that you think are going to be most impactful in the next 12 to 24 months?

Paul Ricci -- Chairman and Chief Executive Officer

Well, I want to start by noting that machine learning has been a central focal point at the frontier of the evolution of speech technology itself. We've been using deep learning in improving the capabilities of our speech technology for some number of years, equally important in the expansion to natural language processing, which of course has been the extension of that technology that we've been focused on for the last several years. As we move to a more conversational AI that includes interactions and dialogue, that will continue to be the case. But there are other use cases, such as CDI, the radiology use cases we talked about, the application of machine learning to the virtual assistant solutions in enterprise, customer management, customer service, and of course, in automotive as well.

Our solutions, as my comments in recent quarters and this quarter have suggested, are increasingly focused on specializing for the vertical markets we're solving and taking advantage of the rich datasets that are in those markets and providing analytics and more complete solutions around that data.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Okay. I guess just shifting gears, the new EVP Business Transformation with Tom Beaudoin's return. Can you take that a few steps further? You talk about rationalization of business portfolio and a few of the other kind of core things you're going to be focusing on. Why now and why those particular areas of focus?

Paul Ricci -- Chairman and Chief Executive Officer

Well, this initiative is really an attempt to build upon the initiatives that we undertook a couple of years ago and had considerable success with. That initiative was designed to improve margins and to free investments in product growth. As you've seen in our forecast today, we've had some success in that. We are seeking to redouble our efforts in that regard to free more funds from existing expenditures that we can use to drive further investments in the conversational AI agenda that I just mentioned, as well as further investments in the vertical markets, such as the financial services market, where we've done so well in our enterprise business, the telecommunications market that spans initiatives in both our enterprise and mobile business, and the automotive and healthcare markets, of course.

So, we want to fund investments in those two areas because we believe that will drive further growth. And we want to create the opportunity for margin expansion. To do that, there's a lot of optimization that has to go on. Not just cost-cutting, but realignment to take advantage of synergies within the company, and to bring accentuation to certain areas, such as, for example, our automotive business which we think has such durability that we want to pursue greater growth there.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

I guess just last then for me, it looks like you're pointing to roughly $400 million-ish in free cash flow. Just thoughts if there are any shifts in terms of how that free cash flow is likely to be deployed as you go through Fiscal '18?

Dan Tempesta -- Chief Financial Officer

I think the previous plan around capital allocation in a balanced manner is still the plan. Between attractive stock repurchase prices, repurchasing the debt, and then some cash for M&A.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Got it. Great. Thanks for taking my questions.

Paul Ricci -- Chairman and Chief Executive Officer

Thanks, Jeff.

Operator

Thank you. The next question comes from the line of Nandan Amladi with Deutsche Bank. Your line is open. Please go ahead.

Nandan Amladi -- Deutsche Bank -- Analyst

Hi, good afternoon. Thanks for taking my question. Paul, building a little bit on the previous question around the transformation, would it be fair to say that the previous $125 million OpEx program was really more cost focused and now you're also focusing a little bit more on growth opportunities?

Paul Ricci -- Chairman and Chief Executive Officer

It's a good question. When we started that initiative, it was primarily cost focused. As we migrated through it about a year into it, we began to talk about channeling some of that into growth opportunities. We pointed to our bookings growth and some of the expansions that we funded last year that we've outlined previously. It is the case in this instance that we want to try to accelerate the growth potential for the business while defending and expanding our margins gradually and steadily over the next couple of years.

Nandan Amladi -- Deutsche Bank -- Analyst

Then on the AI marketplace that you announced yesterday, how many developers are there in these specialized fields like healthcare? Clearly, your announcement yesterday was on the healthcare front. I would imagine that it's a broader initiative. Historically, you've built most of these applications yourselves. What was the impetus to open it up?

Paul Ricci -- Chairman and Chief Executive Officer

Well, this initiative that we announced yesterday is exclusively focused on healthcare today. And in particular, it is focused on the diagnostics and radiology market within healthcare. The advent of machine learning has, as many people pointed out and as we pointed out yesterday, democratized the ability to create new solutions from datasets. There are a lot of deep learning resources available. Using, in this case, the Nvidia platform and the reach that Nuance has in its radiology reporting platform and PowerScribe and its image sharing platform and PowerShare, we can enable a broad set of radiologists who want to innovate algorithms based on deep learning technologies and their datasets and provide an infrastructure where they can get visibility for those algorithms, get validations for those algorithms, and establish a marketplace for those algorithms.

We think that there's going to be a lot of work within the radiology industry to develop those algorithms based on insights that individual and groups of radiologists have based on their data.

Nandan Amladi -- Deutsche Bank -- Analyst

Thank you.

Operator

The next question comes from the line of Tom Roderick of Stifel. Your line is open. Please go ahead.

Tom Roderick -- Stifel, Nicolaus & Company -- Analyst

Hi, guys. Thanks for the question. Paul, can you just take a few minutes here to talk a little bit more about the mechanics of how the malware outage actually impacted the revenue stream and how it's impacting the way you guys think about it? So, certainly there was the period of time where you couldn't offer services. I think we all get that. But as it relates to certain customers, perhaps moving transactional volumes to other systems or reputational risk and some share loss. Can you just kind of talk through the impact of the different ways that the revenue streams have been impacted and how you're thinking about any customer churn that's come out of this? Thanks.

Paul Ricci -- Chairman and Chief Executive Officer

Yes, well we reported I think an expectation through Q3 and Q4 of about $85 million -- I'm looking to Dan for confirmation -- of revenue loss in those quarters due to the outage itself, due to customer credits --

Dan Tempesta -- Chief Financial Officer

The final number, that was originally what we were guiding to, but the final number was $68 million.

Paul Ricci -- Chairman and Chief Executive Officer

We forecasted $85 million and the final number was just below $70 million. That was due to customer credits and the outage, and some volume loss both to early migration to Dragon Medical and to competitive offerings. I think what Dan said earlier was that the effect we had expected in '18 was about $70 million, but now looked closer to $60 to $65 million.

Tom Roderick -- Stifel, Nicolaus & Company -- Analyst

Okay. That's helpful. Dan, following up on that as it impacts the gross margins and the way we should see that play out, you guys have laid out an expectation for gross margins of I think about 120 basis points for the year. If I look at the EPS guide for Q1, it would seem to suggest that there is either a drop in gross margins in Q1 or some OpEx that we ought to be aware of. Can you take us through the progression of gross margins and OpEx as we go through the year and how you're thinking about layering those in?

Dan Tempesta -- Chief Financial Officer

I think the first thing I would say is gross margins we're projecting for the year to be around 63%, which is consistent. Of course, last year we had the effects of malware pulling that margin down. But we think we get back to 63%. When you think about gross margins, we're still seeing a shift away from licensing and toward hosting and professional services. But we're able to maintain that 63% because we're gaining leverage in those hosted offerings and the margins are improving there. So, that trend continues. As far as operating margins in general, they will ramp through the year. Q1 has historically, and in this quarter, in particular, has a lower operating margin, but that will get back to the higher levels as we progress through the year.

Tom Roderick -- Stifel, Nicolaus & Company -- Analyst

Okay, thank you.

Operator

Thank you. The next question comes from the line of DJ Hynes with Canaccord. Your line is open. Please go ahead.

DJ Hynes -- Canaccord Genuity -- Analyst

Hey, thanks, guys. Maybe one more follow-up on the malware incident. Dan, any more color you can give that helps us reconcile the difference between the cash flow impact and the revenue impact? The gap was a little wider than I was expecting.

Dan Tempesta -- Chief Financial Officer

I think when you think about cash flows, we certainly saw significant shortfalls in collections. No. 1, that was due to the lost production that we saw in June, July, and early August. That level of cash would have otherwise been collected. Two, as Paul alluded to, we gave credits and we had to work through credits with our customers. Some of those credits happened in the quarter, of course. The majority happened in the quarter. But that caused our customers to defer payments until the credit process was resolved. So, I think the combination of those three had a significant impact on our collections. In addition, as we noted last quarter, there were significant one-time costs we had to incur in the quarter to remediate and restore. We paid a fair amount of those expenses in the quarter as well. The combination of all those items makes up the predominance of the shortfall.

DJ Hynes -- Canaccord Genuity -- Analyst

So, should we expect any different linearity in terms of the way cash comes in Fiscal '18?

Dan Tempesta -- Chief Financial Officer

The answer is yes. We're going to have a little bit of a shortfall carryover in Q1. But then in Q2, 3, and 4, we would expect it to be more aligned with the percentage averages that we provided in the call remarks. But Q1 we still have some expenses to pay that happened in Q4.

DJ Hynes -- Canaccord Genuity -- Analyst

Got it. Paul, the 30% pipeline metric growth, I don't recall you sharing that in the past. That's helpful. Can you maybe help frame that growth across your segments? Where does it feel like the most incremental opportunity has been created?

Paul Ricci -- Chairman and Chief Executive Officer

Well, without quantifying it, I can say that the major contributors included notably automotive, voice biometrics, Dragon Medical cloud, our CDI, and generally our enterprise pipeline was very strong.

DJ Hynes -- Canaccord Genuity -- Analyst

Yeah, OK. So, spread across the growth businesses. Then last, maybe the M*Modal litigation that was announced recently. Can you speak to the claims there? And then maybe more broadly, as the strategy on patent enforcement going forward, is this an area where we should expect Nuance to be more aggressive? Or how are you thinking about it?

Paul Ricci -- Chairman and Chief Executive Officer

I don't want to talk in any detail about the specific litigation with M*Modal. I'll say generally that it is our interest and our intent to enforce respect for our intellectual property. We've talked about that previously. There's been a lot of investor questions about that. You should see this in that broader light.

DJ Hynes -- Canaccord Genuity -- Analyst

Okay. I'll pass it along. Thanks, guys.

Operator

The next question comes from the line of Tavis McCourt with Raymond James. Your line is open. Please go ahead.

Tavis McCourt -- Raymond James -- Analyst

Thanks for taking my questions. I've got a few of them. First, on the enterprise business, growth has been pretty good all year, but the margins are down to 30% or so. I think in the prepared remarks you talk about the transition to the cloud there. Is there a margin run rate that you think that bottoms at or do you think that segment is in kind of a growth phase where we should expect margins to continue to trend down as long as it's growing?

Paul Ricci -- Chairman and Chief Executive Officer

Well, it's still a business delivering attractive margins in comparison to benchmarks in that market. The margins have declined for two reasons. One has been the transition to digital cloud revenues, which do have a lower gross margin. Secondly, the increased investments to fund the growth that we've been talking about this afternoon. It's possible that there is some additional modest margin decline, but it's probably in the realm of where it should be.

Tavis McCourt -- Raymond James -- Analyst

Okay, cool. Then back on the commentary around 30% pipeline growth. You get a lot of businesses where you're bidding reasonably complex professional services-laden contracts. It appears demand is reasonably high across a lot of segments. How do you incentivize your business-level managers to have the right economics on these deals? Is there any sign of customers getting less price sensitive as demand some of these AI applications increases?

Paul Ricci -- Chairman and Chief Executive Officer

Well, with respect to the first question, we have plenty of focus inside the company on incentives and discipline around professional services margins. We aren't perfect there and there are areas of the business for which the performance is better than other areas, but the trend has generally been quite good and I think we have a lot of experience that allow us to remediate the areas where it's not as good. With respect to the pricing question, it really depends on the market. There are some segments in which there is more pricing freedom and some in which there is less. It's difficult given the breadth of markets we're in to generalize about that.

Tavis McCourt -- Raymond James -- Analyst

Fair enough. Then a housekeeping one for Dan. Dan, I think you're implementing 606 revenue back in 2019? Any update on the likely impact of that given the broad nature of your business?

Dan Tempesta -- Chief Financial Officer

I think the answer continues to be the same. We certainly are going to be impacted quite significantly. The revenue stream that's going to be most impacted is going to be the term licenses. We have a number of different offerings that have term licenses. That will, if you're familiar with 606, that will accelerate. So, that'll be the largest area. There will be smaller areas across the rest of the portfolio, but that's the largest.

Tavis McCourt -- Raymond James -- Analyst

Fair enough. The guidance for a recurring revenue of about 73% for next year, pretty similar to this year. Should we read into that about this transition nearing its end or is that just a rounding error?

Paul Ricci -- Chairman and Chief Executive Officer

Well, there's a number of things contributing to that being somewhat flat this year. One, of course, is the loss of recurring revenues in the HIM segment. So, that's a significant offset. The second is the growth in our on-premise voice biometrics business, which of course is a very attractive business to us but is not recurring in revenues. The final is the growth and professional services related to your earlier question.

Tavis McCourt -- Raymond James -- Analyst

Great. Thanks a lot.

Operator

There are no further questions in queue at this time. Please continue.

Paul Ricci -- Chairman and Chief Executive Officer

We thank you for joining us this quarter. We look forward to speaking with you again next quarter. Take care.

Operator

Ladies and gentlemen, that does conclude our conference. We thank you for your participation today and for using AT&T Executive Teleconference. You may now disconnect.

Duration: 36 minutes

Call participants:

Christine Marchuska -- Investor Relations

Paul Ricci -- Chairman and Chief Executive Officer

Dan Tempesta -- Chief Financial Officer

Saket Kalia -- Barclays Capital -- Analyst

Sanjit Singh -- Morgan Stanley -- Analyst

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Nandan Amladi -- Deutsche Bank -- Analyst

Tom Roderick -- Stifel, Nicolaus & Company -- Analyst

DJ Hynes -- Canaccord Genuity -- Analyst

Tavis McCourt -- Raymond James -- Analyst

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