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Nanometrics Inc  (NASDAQ:NANO)
Q4 2018 Earnings Conference Call
Feb. 05, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to Nanometrics Fourth Quarter Financial Results Conference Call. A Q&A session will be held at the end of the call, until that time all participants will be in a listen-only mode. Please note that this conference call is being recorded today, February 5, 2019.

At this time, I would like to turn the call over to your host Claire McAdams. Please go ahead.

Claire McAdams -- Managing Partner

Thank you, Tiffany and good afternoon, everyone. Welcome to the Nanometrics fourth quarter 2018 financial result conference call. Speaking on today's call are Dr. Pierre-Yves Lesaicherre, President and Chief Executive Officer; and Greg Swyt, VP of Finance and our Principal Financial Officer. Shortly, Pierre-Yves will provide a recap of the quarter and year and our perspective looking forward, then Greg will discuss our financial results in more detail, after which we will open up the call for Q&A.

The press release detailing our financial results was distributed over the wire services shortly after 1.00 PM Pacific, this afternoon. The press release and supplemental financial information are also available on our website at www.nanometrics.com.

Today's conference call contains certain forward-looking statements including, but not limited to, financial performance and results, including revenue, margins, operating expenses, profitability, earnings per share and the benefits that Nanometrics expects it will realize from its acquisition of 4D Technology Corporation. Such statements may be identified by the use of words like believe, expect, and similar expressions that look toward future events or performance.

Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially from the expectations due to a variety of factors, including general economic conditions, changes in timing and levels of industry spending, the adoption and competitiveness of our products, industry's adoption of new technology and manufacturing processes, customer demand, shifts in timing of orders or product shipments, changes in product mix, our ability to successfully realize operating efficiencies, and the additional risk factors and cautionary statements set forth in the Company's Form 10-K on file for fiscal year 2017. Nanometrics disclaims any obligation to update information contained in any forward-looking statement.

During today's call, we will also refer to financial measures not calculated according to Generally Accepted Accounting Principles. Please refer to today's press release for an explanation of our reasons for using such non-GAAP measures as well as tables reconciling these measures to our GAAP results.

I will now turn over the call to Pierre.

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Thank you, Claire and good afternoon everyone. Our fourth quarter results were at the upper end of our forecast due to a modest amount of customer pull-ins during the quarter. Incremental revenues from a partial quarter of 4D Technology's operations also added approximately $2 million in revenue. Total revenues of $77 million were similar to both the prior quarter and the same period last year.

Within this total, however, we saw a meaningful shift away from memory toward foundry, IDM and other devices. Memory declined to 69% of product revenues for the quarter, while all non-memory segments increased more than 50% quarter-over-quarter to comprise the remaining 31% of product revenues.

Our gross margin was within our guidance range, but at the lower end of our forecast for the quarter. OpEx was at the high end of the range, due to the partial quarter of 4D operations. Operating margin of 16.8% exceeded the midpoint of our guidance range for the quarter. Earnings also exceeded our guidance range due primarily to the impact of a true up in tax expense in Q4 in order to reflect a lower overall rate for the year of around 17%. This adjustment had a net benefit of approximately $0.11 per share versus Q4 guidance and 4D Technology was accretive ahead of schedule in its first partial quarter at around $0.01 per share for a total earnings of $0.53 per share in the fourth quarter.

For the full year, we reported $324.5 million in revenue, up 25% over 2017, the highest growth rate achieved in the process control market, well outpacing the growth of the overall wafer fab equipment industry. Our outperformance was driven by strong growth in memory spending, where we saw an increase in product sales of well over 60% year-over-year, reflecting our strong customer positions in 3D-NAND as well as incremental market share gains during the year. We achieved new annual revenue records for our automated, integrated, and optical critical dimension metrology sale as well as records in software, service, and new record levels for our materials characterization business.

For the full year, memory was 82% of product revenues, while foundry, IDM and all other devices contributed the remaining 18%. We increased gross margins approximately 400 basis points over 2017 to 57% for the year, which was above our target range of 55% to 56% at this revenue level. And despite significant increases in our R&D and sales investments to support future growth, we delivered record operating profit of $70 million. This was our fifth straight year of double-digit revenue growth and reported increases in gross margin, operating margin and earnings per share.

For the full year, earnings were $2.37 per share and we generated free cash flow of $96 million or 30% of revenues. The net increase in cash and investments was just under $35 million, reflecting the funds deployed to repurchase stock and acquire 4D Technology during the year.

Turning to our outlook for the forthcoming year. Since our last earnings call, we have witnessed a moderation of expectations for the first half of 2019, particularly in memory. Whereas our previous forecast was for the first half of 2019 to remain at similar levels to the second half of 2018, we now expect a decline in the mid-teens on a percentage basis.

There are several drivers for the change. First of all, we did have a modest amount of pull-ins from the first quarter into Q4 of 2018, which bolstered our 2018 results ,but makes the first-half comparison less favorable. Secondly, several planned customer projects have been further pushed out since our last earnings call. Some of these are expected to materialize in the second half and others now look more likely to be 2020 events.

The forecast has been volatile, to say the least. This is now the third straight quarter of delays in planned capital spending projects versus prior expectations both in NAND and DRAM. A weak environment for memory pricing, smartphone demand, and data center spending have dampened our customers' confidence in maintaining their prior capital expansion plans, along with a backdrop of escalating trade tariffs and export concerns.

On the bright side, our non-memory businesses are growing significantly entering the year and are expected to comprise close to half of our product revenue for the first part of 2019. So, as we look at the full year, our visibility for the first half is fairly solid at this point with an outlook somewhat lower than what we thought a quarter ago, even after including the contribution of 4D. This is primarily due to exacerbated weakness in the memory sector. During this time, we expect strong growth in foundry, IDM and other devices in support of 10-nanometer and below investments and broader demand from all other non-memory markets.

As for the second half with limited visibility, we expect that it will be stronger than the first half of 2019, the magnitude of the second half improvement is still to be determined at this point in time. If we break it down by end market, logic and foundry are growing significantly in the first half and we expect these segments will continue to gain momentum in the second half of the year.

We also expect a stronger second half for our other device markets for 4D and for service. So, memory is the question. Clearly, we just finished the year when memory drove 82% of our product sales and the majority of that was from NAND. This year every one of the six leading NAND companies are significantly curtail spending until memory pricing improves. This is also the segment in which we have the highest relative market share in OCD and in terms of metrology.

In DRAM, we have tool-of-record position at two of the three leading suppliers and while revenues are expected to hold up better in DRAM versus NAND, we're not benefiting from the first half spending by one of the three leading players. So, while we are clearly experiencing headwinds in our core memory market, there is optimism for rebound in the second half, although it is difficult to say with confidence how significant that rebound will be. We are monitoring market conditions closely and expect to have a clearer view of the second half rebound in memory by our next earnings call.

In the meantime growing sales to logic, foundry and other devices as well as the contribution of 4D Technology and a growing business in services and materials characterization products in 2019, will help offset the expected declines in memory spending this year.

During this time, we will continue to deliver solid performance in margins profitability and positive cash flows. For Q1, in particular, we are expecting a sequential decline in gross margin, primarily due to customer and product mix. We are also modeling service gross margin below our historical model for this business, given the relative under-utilization of our service and support personnel during the slowdown in overall spending. We expect to return to our target model ranges for gross margin in the second half of 2019.

Finally, as we look toward the end of the year, at which found -- at which point, the rebound in memory will be evident to us given the timing of the return to capacity expansion in preparation for 2020 demand, we will be prepared to return to growth and relative outperformance compared to our served markets. We have handily outperformed the process control and wafer fab equipment markets over the last five years and our objective is to do the same again for the next five years.

We have a robust pipeline of new products under development. During the last two years, we've been developing new platforms and technologies to address new applications for the next generation of devices. More recently, our customers have been eager to see more performance and productivity enhancement from our flagship products and therefore, for 2019, our next product introductions have been prioritized toward these new launches, which will demonstrate increased capabilities in our core products.

We expect to complement these future revenue growth drivers, with continued strong operational execution, with continued solid gross margin, performance and positive cash flows and we're firmly committed to creating shareholder value as we drive toward our revenue growth and profitably targets in 2020 and beyond.

Turning to our guidance for the first quarter, we expect the growing mix of foundry, logic and other device revenues will continue for more evenly weighted contribution compared to our memory business.

Our Q1 guidance is for revenues of $62 million to $68 million, gross margin of approximately 53.5% plus or minus 1%, operating expenses of $28 million to $29 million and earnings per share of $0.16 to $0.27. I'll now turn the call over to Greg to discuss our financial results and guidance in more detail. Greg?

Greg Swyt -- Vice President, Finance

Thanks, Pierre. Before I begin my prepared remarks, I'd like to remind you that a schedule which summarizes GAAP and non-GAAP financial results discussed on this conference call as well as supplemental revenue segment information by end market and geographic region is available in the Investors section of our website. The P&L metrics discussed our non-GAAP measures unless I identify the measure as GAAP-based, these measures exclude the impact of amortization of acquired intangible assets, costs related to acquisitions, severance and executive search and transition costs as well as certain discreet tax and other items.

Starting with a summary of our fourth quarter results; fourth quarter revenues were $77 million, a decrease of 2% from the fourth quarter of 2017 and an increase of 1% from the prior quarter. Product revenues were $63.8 million, flat from the third quarter and a decrease of 6% year-over-year. Service revenues achieved another record at $13.2 million, an increase of 4% from the third quarter and up 24% from the year ago period. Included in the fourth quarter revenue was $2.1 million for 4D Technology.

By end market, product sales to the NAND segment continue to be the largest contributor at 44% of product revenues. DRAM sales were 25% of product revenues and foundry, IDM and other markets, comprised 31% of product revenues. Our 10% customers in the fourth quarter included SK Hynix, Toshiba and Intel. Our Q4 gross margin of 55.7%, decreased 130 basis points from the third quarter and was at the low end of our gross margin range.

Product gross margins decreased 180 basis points from the third quarter to 58.1%, the decrease in product margins is associated with product and customer mix as well as one-time charges related to our year-end physical inventory and slighter higher -- and slightly higher transportation and packaging costs. Service gross margins of 44.3%, increased 160 basis points from the prior quarter, but we're still below our forecast and target model for this business level.

In Q4, operating expenses of $29.9 million, were up 3% from the third quarter and included $600,000 related to 4D Technology. Because of updated tax reform regulations in the fourth quarter, we recorded a tax benefit of $100,000, reflecting a year-to-date favorable tax adjustments. Net income for the fourth quarter was $13 million or $0.53 per share. As highlighted in Pierre-Yves' remarks, the tax adjustment contributed $0.11 per share to earnings for the quarter and 4D contributed $0.01 per share.

Turning to the full-year results, total sales were $324.5 million, up 25% from 2017. Product revenues increased 28%, while service revenues increased 30% from 2017. By end-market product sales to the NAND segment grew by 32%, as compared to 2017 and comprised 52% of product revenues for the year. DRAM revenue increased 175% from 2017 to comprise 30% of product revenues in 2018 and foundry, IDM and other markets comprised 80% of product sales and decreased by 36% from the prior year.

Our 10% customers for the full year included Samsung, Toshiba, SK Hynix and Intel, with 25% revenue growth, gross margin increased 390 basis points to 57%. Operating expenses were $115.1 million, up 23% from the prior year and our operating margin for the year was 21.5%, up 420 basis points from 2017.

For the full year 2018, our non-GAAP tax expense was $11.9 million or 16.9% of pre-tax income, lower than expectations of 19% to 20%. Our lower effective tax rate relates to the closing of Staff Accounting Bulletin, SAB 118 as well as adjustments related to the current interpretation of the Tax Reform Act, based on proposed guidance that was issued in Q4 2018.

The tax reform guidance around foreign derived intangible income and global intangible low taxed income, has not been finalized by the IRS as of fiscal year end 2018 and is subject to change once final guidance is issued. Any change resulting from any new guidance would be accounted for in the period of change.

Net income for the full year was $58.3 million and $2.37 per share.

Now turning to the balance sheet, the net increase in cash and investments in 2018 was $34.8 million, reflecting free cash flow of $95.9 million, $23 million used for stock repurchases and $38 million used for the acquisition of 4D Technology.

Days sales outstanding for the fourth quarter was 59 days and DSOs for the full year represented a significant improvement from the prior year. Inventory increased $1.4 million to $62.1 million at the end of the fourth quarter and $7.7 million from the prior year. Included in the ending inventory of $3.8 million associated with the purchase of 4D Technology.

Finally, looking forward to Q1 '19, our first quarter revenue guidance of $62 million to $68 million includes approximately $4 million from 4D Technology. Today, we are providing 4Ds contribution for their first partial quarter and our expectations for their first full quarter, but going forward, we will not be segmenting their results. As Pierre-Yves mentioned in his remarks, for the first quarter of 2019, we are guiding gross margin to 53.5% plus or minus 1 percentage point. Although we will be off our gross margin model in the first half of the year, we expect to return to our target margin ranges in the second half of the year.

For the first quarter of 2019, we expect operating expenses to be $28 million to $29 million. For the forthcoming quarters, operating expenses are expected to continue to be in this range, which includes the impact of 4D Technology. Although this is the current outlook, the Company will continue to evaluate the overall market conditions and take actions as necessary. We are forecasting our non-GAAP tax rate in 2019 to be between 19% and 20%.

And with that, I'll turn the call over to questions. Operator?

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from Tom Diffely with D.A. Davidson. Please proceed.

Tom Diffely -- D.A. Davidson -- Analyst

Yes, good afternoon. First question is on the memory side. You talked about last year, the memory market for year grew 60%, so I wonder if you could parse that out between what do you think there is share gains versus just the market growth?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Well, there were -- both contributions were there. We have the two wins that we mentioned, the win in China with the 3D-NAND manufacturer and then the DRAM win that we had in Korea. But even if we take these two wins out of our numbers and we run that exercise, we would still have outperformed WFE in 2018. So we -- the contribution was from our normal business and the addition of these two wins.

Tom Diffely -- D.A. Davidson -- Analyst

Okay, and then when you look at all the cross trends that has happened over the last few months in the industry, what has happened to the utilization rates to tools in the films (ph) and what impact, if any, might have had on services over the next few quarters?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

So, we have seen only one customer doing some idling of tools. All of the other tools are being utilized today. And we have the expected revenue from the service except maybe for that one customer.

Tom Diffely -- D.A. Davidson -- Analyst

Okay, great. And then on the margin side...

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Yes, go ahead.

Tom Diffely -- D.A. Davidson -- Analyst

Just to say, when you look at the margin then come down, is that strictly just because of the lower revenue or is there something in the mix, that impacts the margins as well?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

It's primarily due to customer and product mix. And there is a small element of under utilization, but the biggest impact is really customer and product mix. And those are mixed in our products -- as our customer and product mix evolve over the year, we expect the gross margins to go back, modeled in the second half.

Tom Diffely -- D.A. Davidson -- Analyst

Okay. Sounds great. And finally, when you look at EUV financial roll out into production this year, what is the impact on the OCD over time from EUV?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

So, we are not directly related to EUV, most of the metrology that is associated with lithography is served by ASML or KLA. So, we don't have a strong correlation with EUV. So, this is relatively neutral to us.

Tom Diffely -- D.A. Davidson -- Analyst

Okay. I thought maybe an increase in extra features that you can measure with new tools. Okay, thank you very much. I appreciate the time today.

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Yeah, thanks.

Operator

Thank you. And our next question comes from Patrick Ho with Stifel. Please proceed.

Patrick Ho -- Stifel, Nicolaus & Co. -- Analyst

Thank you very much. Pierre, maybe first off on the foundry logic spending that you're seeing in the first half of the year. You talked about advanced nodes, such as 10-nanometers or below. Two-part question. First, can you discuss right now, the sustainability of those spending trends that you'll see in the first half of the year, whether they can remain strong through all of 2019? And secondly, given I think what you said in the past about capital intensity trends for OCD metrology, particularly at these smaller, smaller nodes with new features more FinFET, how do you look at capital intensity transfer OCD metrology in that marketplace, I guess today as well as when the industry goes to gain new features such as NANO wires?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Okay. So for the first question, we are benefiting in the first half strongly from the increased spending in foundry and logic. And when we look at the whole year, we're actually -- in foundry and logic, we are second-half weighted. So, we expect that contribution from foundry and logic to grow from first half to the second half.

And then on the -- the other question, we see an increasing OCD intensity at each node and that is particularly true for DRAM and for logic. In NAND, the situation is a little bit different because the main evolution as you know from generation to generation is the addition of layer in the capacitor structure and there what we see is an increasing challenge to measure critical dimensions in a very high aspect ratio channel (ph) and for that, we believe there is going to be an increasing need for advanced metrology to be able to measure these increasingly complex high aspect ratio structures.

Patrick Ho -- Stifel, Nicolaus & Co. -- Analyst

Great, that's helpful. And as my follow-up question, you talked about the growth in your services business in 2019, which isn't a surprise given the growth of your installed base over the last few years. Does this segment potentially create incremental investment opportunities or the necessary growth that requires in services that are not factored into your outlook for 2019? Basically -- they going to be pressures on the cost of goods and OpEx side as you grow the services business?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Maybe, I'll ask Greg to answer that.

Greg Swyt -- Vice President, Finance

So Patrick. This is Greg. So the answer to that is, as we mentioned, the service margins are reflecting in our current outlook or run rates. There will be improvements in utilization as we move through the second half of the year. It isn't requiring us to do any incremental investments in OpEx and -- although there may be new product offerings, there is very limited investment that we need to do to bring those to market in the service business.

Patrick Ho -- Stifel, Nicolaus & Co. -- Analyst

Great. And maybe my -- go ahead.

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Yes, I just wanted to add one thing around service. Today, obviously with the revenue coming a little bit down, we have a lot of service personnel around the world and our choice has been, at this point in time, waiting to see how the later quarters develop, not to reduce our headcount and service because it takes quite some time to hire these people and train them and we want to be ready for when the business comes back. So, as Greg mentioned, slight under-utilization in Q1, but we're holding out to the headcount because training and having the headcount is really important for us as we expect the business to go back up.

Patrick Ho -- Stifel, Nicolaus & Co. -- Analyst

Great. And a final question from me, just as a follow-up to that. A lot of your customers, obviously as you mentioned, are under-utilized a bit right now. But one of the things they've relied upon over the years from many equipment vendor is upgrade and enhanced capabilities to their existing tool base. How do you see that type of business, especially in this kind of market environment as part of your 2019 growth strategy?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

So, it is an important part of our strategy. We want to increase the upgrades business. It's also a business that it typically has a higher margin than the normal service business. So we want to increase that. We have seen over the years, conversion from our Atlas II to our Atlas II+ or some other upgrades that we've done in terms of the lamp brightness or the stage or the computer or the operating system. So, we have seen these upgrades. They have been coming on and off, and what we're trying to do now is, develop a more consistent business that keeps growing our service integrates business. So, it's definitely an opportunity for 2019 and beyond.

Patrick Ho -- Stifel, Nicolaus & Co. -- Analyst

Great, thank you very much.

Operator

Thank you. And our next question comes from Weston Twigg with KeyBanc. Please proceed.

Weston Twigg -- KeyBanc Capital Markets -- Analyst

Hi, thanks for taking my question. I have two of them. First, from the demand side, it sounds like you're painting the picture that this is the trough whether it's Q1 or Q2. But I'm just wondering, given that you did see a bigger visibility. Is there any other risk that maybe you could highlight or you would highlight related to either another down-tick for memory customers or potentially a little softer ramp in logic or foundry on lower demand? Just curious, your thoughts on this?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Well. We've had a good relationship with our customers and what our history in the last fewer has been is once the orders are placed, the customers tend to abide by their order and take delivery of the equipment. And typically, we have a visibility of, I would say, of three to six months. So, we are pretty confident about our Q1 and Q2 orders and the fact that they will turn into sales and the proof point was last year, even I think, started softening a little bit in terms of demand in the NAND and DRAM market, our customers still took delivery of the tools that they had ordered. So, while there still a possibility that there is some push-outs from one quarter to another, we expect this will have a relatively low impact to our overall sales, and we're relatively confident with our Q1 to Q2 forecast.

Weston Twigg -- KeyBanc Capital Markets -- Analyst

Okay, that's very helpful. And the other question I have is, around new products, you said you're going to launch the new products this year, but I'm not sure I exactly understood, are these evolutionary products related to OCD or other existing products? Are these some of the brand new products you've been talking about for a while, and what would be the potential impact at 2019 revenue?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

So what I said is that, we've had a lot of interest from customers to further advance the current set of products. As you know, the flagship in automated metrology is the Atlas and then the flagship and the integrated metrology IMPULSE and we've been asked by customers to prioritize enhancement of these products ahead of some of the new products we were working on. And we decided to do that also because we can get faster returns on the R&D investments by doing that. So, these are the product launches that we're going to have this year that I talked about.

Weston Twigg -- KeyBanc Capital Markets -- Analyst

Very helpful. So that's embedded in the full 2019 outlook then?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Yes.

Weston Twigg -- KeyBanc Capital Markets -- Analyst

All right. Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from Mark Miller with The Benchmark Company. Please proceed.

Mark Miller -- The Benchmark Company -- Analyst

Thank you for the question. I'm just was wondering, you're expecting to see significant contributions from Chinese domestic NAND manufacturers or is that also going to slower in the first half of the year?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

So, we are seeing somewhat of a slowdown in China and I'll talk about China in general, but if we look at the specifics between China domestic and China foreign companies, we see a slowdown in both, I think, the slowdown in DRAM and NAND is well documented. So that would be the impact that we see at Intel, Dalian or Hynix in Wuxi or Samsung in Xi An, but we also see a lower demand from the domestic China customers. And our 3D-NAND customer, the most of the demand is weighted toward the second half of the year. But overall, we see China domestic being lower this year than it was last year.

Mark Miller -- The Benchmark Company -- Analyst

Are you still expecting to add third DRAM customer this year?

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

We are still working on it and hopefully we have some good news at a later stage, but we are working on it.

Mark Miller -- The Benchmark Company -- Analyst

Inventories were up slightly in the December quarter. Is that just 4D's contribution, do you expect those to trend down in the current quarter?

Greg Swyt -- Vice President, Finance

Yes, Mark this is Greg. That -- the majority of the increase is related to the 4D. As I said, we had a little less than $4 million of inventory that we brought on related to 4D, net of that we did see some improvements, quarter-over-quarter.

Mark Miller -- The Benchmark Company -- Analyst

Thank you.

Operator

Thank you. And at this time, I'm showing no further questions in queue, I'd like to turn the call back over to Dr. Lesaicherre for closing remarks.

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Thank you. So thank you for joining our call today. Together with the leadership team and all our employees, we remain steadfast in addressing the challenges and opportunities in front of us and profitably growing our business to create incremental shareholder value. I would also like to take this opportunity to thank our employees for their amazing efforts growing the Company by 25% this past year. I look forward to updating you on our next earnings call scheduled for late April. And that concludes our call today.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.

Duration: 36 minutes

Call participants:

Claire McAdams -- Managing Partner

Pierre-Yves Lesaicherre -- President and Chief Executive Officer

Greg Swyt -- Vice President, Finance

Tom Diffely -- D.A. Davidson -- Analyst

Patrick Ho -- Stifel, Nicolaus & Co. -- Analyst

Weston Twigg -- KeyBanc Capital Markets -- Analyst

Mark Miller -- The Benchmark Company -- Analyst

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