Intevac Inc (IVAC) 2007 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Intevac's 2007 third quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS). Please note that this conference call is being recorded today, November 1, 2007. Kevin Fairburn, Intevac's President and Chief Executive Officer, is hosting the call today. I would now like to turn the conference over to Mr. Fairburn. Please go ahead, sir.

Thank you. Good afternoon, and thank you for joining us today. With me are Jeff Andreson, our Chief Financial Officer; Joe Pietras, our Vice President and General Manager of our Imaging Instrumentation Division; Luke Marusiak, our Chief Operating Officer, who is currently on business in Asia.

After Jeff reads the Safe Harbor statement, I will give a progress report on our third quarter activities and then Jeff will walk you through third results and talk about our expectations for the fourth quarter. We'll then open up the call for questions. Jeff?

Thanks. During the course of this conference call, we will comment upon future events and make projections about future financial performance of Intevac, including statements related to the projected orders, production rates, shipments of our products, revenue, gross margin, operating expense, other income, profitability, tax rate, earnings per share, cash flow, capital expenditures, depreciation and stock-based compensation expense.

We will discuss projected demand for hard drives, our 200 Lean system and upgrades. We will discuss the impact of upgrading legacy tools, the transition to perpendicular recording and product development plans. We will discuss our new Lean Etch semiconductor manufacturing product, the status of our product development program to customer qualification process, its competitive advantages, and why we believe Intevac can successfully enter this market. We will discuss our plans for military and commercial low-light imaging products, the expected market sizes for these products, projected applications and anticipated orders and shipments for these products.

These forward-looking statements are based upon our current expectations and actual results could differ materially as a result of various risks and uncertainties, including without limitation, the possibility that markets for our products may not be as large or develop as quickly as projected; that we may not be able to develop and deliver new products and technologies as planned; that orders and backlog may be canceled, delayed or rescheduled; that me way fail to achieve expected cost reductions, tax rates or financial results and other risk factors discussed in documents filed by us with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. The contents of this November 1 call include time-sensitive forward-looking statements that prevent our projections -- represent our projections as of the date of the call.

We will undertake no obligation to update the forward-looking statements made during the conference call. Any redistribution of this call without our express written consent is strictly prohibited. Kevin?

We are pleased to report our third quarter results, which were in line with our revenue guidance with gross margin and net income significantly exceeding guidance. Revenues totaled $51 million as we delivered 4 200 Leans and a record amount of technology upgrades. We achieved GAAP net income of $8.4 million or $0.38 per diluted share. Results included $1.8 million of stock options expense, equivalent to $0.07 per diluted share.

Q3 was a milestone as our imaging instrumentation business achieved its first operating profit. We expect further improvements in revenue and profitability going forward. We have been investing in the imaging instrumentation business and its technology for a while and we are pleased to see the results of our efforts beginning to have a favorable impact on Intevac's financial results and outlook.

Another key event for imaging was the recent announcement of the agreement to acquire Creative Display Systems. We believe the combination of this business with our existing imaging business will be a catalyst for future profitable revenue growth. Joe Pietras, will provide more detail on Creative when he updates you on imaging later in this call.

In our equipment business backlog includes two 200 Leans both the September order as well as an order just recently placed, which are scheduled for delivery in 2008. Our customers are still deciding what their capacity expansion plans will be for 2008, and as a result we do not yet have good visibility into 2008's 200 Lean shipments. Accordingly, we continue to aggressively manage our spending, while at the same time ensuring we get our new products finished and into the market.

Our operations team continues to do an excellent job driving improvements in gross margin. Our hard drive customers are extremely busy right now shipping products to meet the peak second half demand as it is the norm for the industry. This is not the time that you just need to install new equipment, rather they prefer to install new equipment in the relatively quieter first half of the year in preparation for the second half's peak production.

In prior years our customers allowed additional installation and qualification cycle time as they were in the process of transitioning to perpendicular. The record revenue in Q4 of last year was an example of customers allowing additional time for qualification for the perpendicular production. We expect our customers to wait until they complete 2007, before deciding on 2008 capital expansions.

Our customers continue to be cautious in adding capacity, especially our merchant media customers, given the change in the market as a result of Western Digital's acquisition of Komag. This acquisition, as I reported last quarter, has resulted in some order push outs pending choice of outsourced media suppliers by the large, mostly vertically integrated, hard drive companies.

The merchant media supplies have quite a few legacy systems, which were fine for the old longitudinal media technology, but are challenged to produce the best perpendicular media that is needed to compete in the media merchant market in the future. They are still looking at how best to deal with these legacy systems once longitudinal media production is no longer required. If used from perpendicular media these legacy systems are likely to reduce the industry's media capacity as they very likely will run at low productivity than for the old longitudinal media.

The good news is that the hard drive manufacturers are reporting robust business levels. If one considers the current level of hard drive shipments and the projected marketing features for hard drive usage next year, then the industry should need to add capacity in 2008. We are also encouraged by the dynamics in the market they indicate the market for hard drives continues to grow. Mobile is growing very rapidly as compared to desktops. This is good news in that there are usually two 2.5 inch disks in a mobile hard drive compared to just one 3.5 inch disk in a typical PC.

The 2.5 inch disks are also growing in usage for enterprise and now there are demands for 2.5 inch disks in digital video recorders. In both cases the need for smaller disks is driven by the desire for reduced power consumption. Since a 2.5 inch disk holds 50% less data than a 3.5 inch, we expect some net disk -- we expect net disk demand to increase, which is a direct driver for our systems business.

We have made significant progress on improving our systems and source modules to make sure we stay competitive and meet the upgrade needs for our customers' technology roadmaps. We expect to sell a lot of upgrades and new capabilities in 2008. In the last conference call I talked extensively about Lean Etch our new Etch product for the semiconductor manufacturing industry. Why we believe it's competitive and why we can succeed in the market. Our views have not changed.

We are focused initially, on four large customers. We are making good progress as we pursue their demand and specifications. These specifications have continued to shift as they refine their device structures and we've had to adjust our products schedules including first shipments to address these changes. We believe that for the customers, 45 nanometer specifications are now sufficiently stabilized, we have freeze the hardware and complete our internal mappings for our new product development process. We have also seen a shift in how customers want to deal with new systems such as the Lean Etch.

In the past customers would bring in a new system, develop the process recipe for their application, and then complete the electrical and devise testing. Now, they want a lot more work completed at the supplier's site that previously was done in the customer's fab. This is more cost-effective for the supplier and the customer. If changes are needed for the product to meet the customer's specifications so that it can be done more quickly and at lower cost at the supplier's side once full [weight] of specifications are met. It may enable faster qualification at the customer's site.

We continue to focus on delivering our first evaluation systems. However, we now see these pushing into the first half of 2008, and expect to turn some of these as well as follow-on systems to revenue later in 2008. Joe Pietras will now give you an update on the exciting things happening in our imaging instrumentation business. Joe?

Thank you, Kevin. I'm extremely pleased with our achievement of profitability in our imaging instrumentation business in Q3 and wish to thank and congratulate all members of our imaging team for reaching this important milestone. We continue to transition our business from a contract R&D-based business to a product-centric business. Through nine months of 2007, 26% of our revenue was generated through product sales compared to 16% during the first months -- first nine months of 2006. We are also on track of achieving our goal of profitability during the second half of 2007.

We continue to ramp deliveries of our exportable digital night vision camera module to Sagem power our NATO customer. During Q3, we delivered over 100 units, exceeding past delivery rates by twofold. We expect to further increase deliveries by 50% during Q4 to meet customer demand. Previously, we reported that we expect to deliver over 30,000 camera modules over seven years to Sagem. This may be less since in October, Sagem informed us that their current customer will not use digital vision -- night vision cameras in all their applications, at this point in time.

Production volumes for Sagem's current customer will still be significant. As we continue to work with Sagem to ensure digital solutions will be used in as many applications as possible. Also we expect additional NATO opportunities for exportable digital night vision cameras and goggles in high-volume production quantities.

Demand for our digital night vision camera is growing, as evidenced by an order we received in late Q3 for rapid deployment of our camera module in a U.S. military application. Delivery of prototypes is expected before year-end with a production order in excess of 1 million expected during the first half of 2008.

We continue to work with our partner DRS Technologies in securing funding to continue the development of our digital enhanced night vision goggle known as DENVG. Recent U.S. Army funding has been committed that will allow Intevac and DRS to advance the design of our DENVG product. Building on the success of the initial prototypes we delivered to the U.S. Army in early 2007. Prototypes of the advanced design will be delivered in the second half of 2008.

We still expect the U.S. Army to initiate DENVG preproduction in 2009, followed by an initial three years of production beginning in 2011. This would be valued at over $100 million of business. In our commercial business, orders continue to be strong as we achieved the twofold increase in DeltaNu Raman instrument orders compared to Q2. 50% of our DeltaNu product orders came from international sales, resulting from our efforts in establishing eight international distributors of our products in Europe and Asia.

We expect to continue our growth by adding additional international distribution, and by doubling the size of our domestic sales staff over the next few months.

In Q3, we also began delivering our new Advantage 1064 Raman instrument, which uses our proprietary near infrared sensor technology to provide new capabilities in materials identification to various scientific and industrial markets.

The agreement to acquire creative display systems, which we recently announced, is an important step in our strategy to become a global leader in providing, enabling digital optical system products to both government and commercial markets.

Creative Display Systems' expertise in high performance micro display products for near-eye and portable applications is an excellent compliment to our current capabilities in night vision system products and miniature Raman instruments. This provides our imaging instrumentation business with enhanced system capabilities as well as critical technology in optimizing displays for near-eye viewing.

This will continue -- this will contribute to the growth of existing business areas such as our Sagem and U.S. Army night-vision products, as well as facilitate expansion into new government and commercial system products. I will now turn it over to Jeff, to discuss our financial results for the third quarter.

Thank you, Joe. Consolidated Q3 revenues totaled $50.6 million and included four 200 Lean systems. Imaging sales of $5.7 million consisted of $4.5 million of contract, research, and development, and $1.2 million of product shipments. The record level of contract research and development was primarily the result of accelerating development of the next generation night-vision sensor.

Third quarter consolidated gross margin of 49% was well above beginning of the quarter guidance. Equipment gross margins increased to 49% from 42.5% in the year-ago period reflecting the high level of technology upgrades and spares delivered during the quarter relative to system shipments as well as our continued focus on cost reduction programs.

In imaging, gross margins grew to 44.5% from 41% in the year-ago period. Imaging gross margins benefited from higher margins on the R&D contracts.

Operating -- third quarter operating expense of $16.5 million met the lower end of our guidance and was 6% less from the prior quarter as we manage our expenses down in response to the current business environment. We expect to make further progress reducing operating expenses in the fourth quarter.

We reduced our 2007 estimated tax rate to 24% from our initial estimate of 26.9%. The reduction from our prior estimate is due to approximately $1 million of previously un-forecasted savings on the filing of our 2006 tax return resulting in a 3% improvement in our 2007 tax rate.

Net income for the third quarter totaled $8.4 million or $0.38 per diluted share and included $1.8 million of stock-based compensation expense equivalent to $0.07 per share.

Our backlog totaled $31.2 million at the quarter end and includes one 200 Lean system. We received an order for one additional 200 Lean (inaudible) end of the quarter which brings our 200 Lean backlog as of today to two system. We experienced strong orders in the quarter for spares and technology upgrades and equipment as our customers continue to upgrade their installed base for perpendicular production.

Consistent with our guidance in the last call, we do not expect any 200 Lean shipments during Q4. Additionally, systems, shipments of upgrades are expected to decline relative to the third quarter. However, we expect imaging to achieve record revenues driven primarily by increased product revenues compared to Q3.

Accordingly, we are projecting consolidated Q4 revenues of $13 to $16 million. We expect third quarter gross margin of 37% to 42%, operating expense of $15.5 to $16.5 million and other income of approximately $1.8 million.

For Q4 we are projecting a loss of $0.26 to $0.32 per diluted share, which includes an estimated $1.6 million of stock-based compensation expense equivalent to $0.05 a share.

For the full year, we are projecting revenues of $212 to $215 million, which includes the shipments of 29 200 Leans. Imaging revenues of $19 to $21 million are included in the above projection. We expect gross margins to average 43% to 44% for the full year. We expect operating expenses of $69 to $70 million. We expect other income, primarily interest income, from our cash of approximately $6.5 million.

In 2007, we expect between $1.2 and $1.8 of GAAP earnings per share which includes an estimated $6.2 million of stock-based compensation expense equivalent to $0.21 per share. Cash in hand investments increased to $147 million or $6.64 per share from $117 million at the beginning of the quarter as a result of Q3 profits and a reduction in inventory and receivables.

Our operations team has done an excellent job managing inventory and our receivables are in current and in good shape from a collections perspective. Year-to-date capital spending totaled $4.4 million. Year-to-date depreciation and amortization including DeltaNu purchase account and amortization totaled $3.2 million.

For 2007, we have reduced our projected capital spending from $10 million to approximately $8 million. We expect full-year depreciation and amortization of approximately $4.5 million.

Our headcount at the end of the quarter totaled 443 employees, down 5% from 466 employees at the beginning of the quarter. 30% of our employees are based in Asia. 7% of our employees are contractors who primarily work in operations.

We expect to close the announced purchase of Creative Display Systems within the month. We will make a single cash payment for substantially all of their assets and assume certain liabilities. The financial impact of the acquisition has not been included in our guidance as we will be completing the acquisition accounting during Q4.

We expect that Creative Display Systems' revenues for the last two months of 2007 will not be material to our 2007 results.

This completes the formal part of our presentation. Operator we are ready for questions.

(OPERATOR INSTRUCTIONS) We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Bill Ong with American Tech Research.

Yes. The memory chip makers are obviously facing lot of pressure, given the recent price decline so their capital spending is very tight, so your discussions with the chip customers as an aggregate, I see them slowing down their technology buys, or you think they're getting little bit more aggressive in using technology to gain a cost advantage?

This is Kevin here Bill. We don't see them slowing down on their technology roadmaps. As you know memory always gets its biggest bang for its buck in terms of cost reduction through shrinks, and that's why we think that we've been driven into providing some technology solutions for 45 nanometers because they want to make that happen.

Okay. And then as a follow up, what are some of the additional specifications or requirements that your memory customers are asking now, given that the actual potential bookings is being pushed up by a few months. So what additional expectations are they unfolding on you?

When we started the original qualification work it was targeted at 65 nanometers and then around the May time customers asked us to focus on 45 nanometers. And as the year evolved they were evolving their specifications in terms of aspect ratios and profiles for some of these Etch results.

So that -- I'd say much of the change, I think, has come to a halt, so it has enabled us to focus on finishing this development, process development and so we can now get ready to do our internal mappings. The other thing we've seen them do is push for higher Etch rates and that's required some additional development from our part as well. And, we are happy to report that we have been able to achieve the desired Etch rates.

Okay. It sounds like you'll be able to get these bookings done in the early part of -- first half of '08. You should be able to get it shipped and recognize this revenue at least before the end of next year.

That's what we're working towards.

Okay. And then my last question is with Jeff. What kind of tax rate should we expect for 2008, what type of breakeven should we look at from an operational point of view?

Tax rate, I think -- tax rate you can use for the next maybe few years would be 27% and our breakeven is between $35 and $40 million.

Okay, thank you very much.

Your next question comes from the line of Rich Kugele with Needham & Co.

Good afternoon guys. Just a few questions. So just to make sure I understand what you're saying on the Etch tool, the customers remain interested, they remain engaged with you, but you expect to ship for [qual] some time in the first half of '08, but you think that the -- that the qualification time maybe shrunk because of the changes that they are making and you might be able to get some orders for revenue in the second half of '08.

Hi, Rich, this is Kevin. Yes, you summed it up pretty well. So (inaudible) your comments.

Okay, and then back to the drive side. The slowness -- or the slowdown in upgrades business for the December quarter, can you just comment on what you are seeing there. Why are they slowing that given the continued increase of perpendicular as a percentage of the shipments?

Hi, Rich, hi, it's Jeff. In Q3 we had record shipments for our upgrades. I would say that just quarter over quarter they are less. I don't know that we are implying that they are slowing up. It's just that we have a very large quantity of going and being installed and shipped in the third quarter.

Yes, Rich, some of these upgrades were some legacy systems, which won't actually be installed until first half of 2008, but the customer wanted the upgrades done now prior to shipping the systems.

Okay, and then the additional Lean that you received, your backlog is typically for revenue in the next 12 months, right. But can you give us a sense on when you think both of those Leans may be recognized for revenue or shipped anyway.

Q1 in terms of shipment for those two systems.

Rich Kugele Okay, the [below] shipments for Q1. Okay. And then lastly, in terms of your expectations for 2008, I know, you don't have a tremendous amount of visibility from the customers. But do you expect it to be broad-based in terms of order flow or do you think it will be narrowed among the three customers you have?

That is a good question, now as I mentioned in my talk we are still waiting to see what happens relative to who gets the outsource business from Seagate, Hitachi and Western Digital and certainly that his having an impact on some orders from some of the merchant media suppliers. And if what we can see our other customers' business is doing well. I think it could be broad-based but we will have to wait and see what plans they announce early next year.

And given your headcount reductions and just streamlining of your operating expenses, has your lead time extended for how long it would take to ship new tools?

No, it hasn't changed. It's still four months.

Okay. Thank you very much.

Your next question comes from the line of Kevin Hunt with Thomas Wiesel.

Hi, thank you. Couple of questions. Can you give us a little more color on this Creative Display acquisition and any sense of size or how much you paid for that?

Hi, Kevin it's Jeff. We haven't closed the deal yet. So we're not disclosing the actual acquisition value. But like we said we didn't think their revenues in the last two months would be material to our earnings.

Okay. And then to follow up on the equipment -?

We brought a -- I think Joe should perhaps comment about --

Joe * I think -- if I were to say a few words about the acquisition of Creative Display and its important to the imaging business. They provide some very critical technology and displays. And they be -- the ability to be able to optimize displays for near-eye viewing. And they are a systems design company with products and with manufacturing capabilities that are very important to the imaging business in terms of its strategy to become a systems supplier in particular of digital night vision goggles to the U.S. military and to NATO countries. So we're very excited by this acquisition and feel it is extremely strategic as well will be beneficial financially.

And one last comment Kevin is that it won't be material to our cash position either. Just to give you --

Okay. And then -- well then a couple of thoughts. So on -- say on the imaging business, I guess first. Mix was much more heavily skewed towards R&D than I thought was going to be so what -- I mean how should we think about that in terms of you are still targeting that $20, $21 million on imaging but what's sort of a break down of product versus R&D on that?

It is converting, I mean it's -- I would say before the share is out it will be about 30%, and next year it will be over 50% and it's on a very high trajectory towards a product conversion.

Okay. And just to follow-up on the equipment business. Doing the math here you are kind of implying it is below $10 million for the December quarter, which you have to go back about three years or so since it was that low on equipment upgrades. So what's -- I mean how should we think about that run rate of that business going forward?

Well, I think Kev, the activity there -- there are no systems in Q4 which is kind of driving that business level down. The second thing is customers are just cranking out products right now and don't want to take any upgrades. So we would expect the business to improve as we move forward -- obviously we do have some systems in backlog and we have opportunities to build bigger backlogs as we go into Q1.

Okay, should we think about that, this is like a low watermark for that upgrade business then it will kind of ramp right back up from here.

Yes, I --

That is correct. That is our expectation. We are not in a position to give guidance for 2008.

Okay.

But certainly hope and expect that was the low watermark.

Okay.

Kevin if you look at our backlog of $31 million. It has one Lean in it so there is $27 million [of other] backlog.

Yes, now you expect those two Leans both to be in Q1 shipments?

Correct.

Okay. All right, thank you.

Your next question comes from the line of [Brett Pereira with Carson Company].

Hi guys thanks for taking my call, it's Brett Pearson in for [Ben Tang]. You guys have done a great job of slashing your Opex, I was just seeing if going forward with your -- if you think that what it is going to settle at as a percentage of sales, or do you have any figures internally for that?

Well I wouldn't give you a percentage of sales other than to say that what we achieved in Q3, we think we have given guidance where it will drop down into Q4 and we hope we can hold it somewhere in that range.

Okay, thanks a lot.

Thank you. Your next question comes from the line of Jesse Pichel with Piper Jaffrey.

Hi, this is [Palovi] filling in Jesse Pichel. I just want a quick question. When do you think you will start I mean actually including revenue generated by your recent acquisition of CDS, would it be as early as first half of '08?

CDS acquisition, if we can close that, as we said, in the next month or so we will see revenue in this year. We just have not included it in the guidance.

Could you also clarify timelines for your DENVG prototype?

Yes, our next advanced version will go for field testing towards the latter part of next year and then there will be a preproduction contract in 2008 followed by the Army letting a production contract in 2011, which will run for three years. That is $150 million for those three years and that is the current projections from the U.S. Army.

Okay could you also again sum up your full fourth quarter guidance?

Fourth quarter guidance?

Yes.

Revenues of $13 to $16 million. Gross margin of 37 to 42. Opex of $15.5 to $16.5 million. $1.8 million in interest income. 24% tax rate, a loss of $0.26 to $0.32.

All right, thank you very much.

Your next question comes from the line of Mark Miller with Brean Murray.

Mark?

Mr. Miller, your line is open.

We have kind of seen, over the last two years, a very hot market for Lean tools, and a very cold market at least this year for orders. And it seems like to me that somewhere in between is the reality for actually the future. And I'm just wondering any aspect to it -- it seems like you were too hot '06 and too cold in '07. What is the real -- the normal rates you would see going forward for Lean tools or arrange a Lean tool ships.

Okay, Miles a good question this is Kevin here. With hindsight I think a lot of those systems that we shipped in 'Q4 of last year really weren't needed until the first half of this year. And so that really kind of inflated our numbers in '06 at hindsight. Even so, I still wouldn't have prevented this soft Q4 that we're in right now. So as we look forward I think -- and the future is going to depend on really what happens to some of the legacy tools, in particular the legacy tools that some of the merchant media supply us. Some of them are sitting idle right now. They clearly would like to use them for perpendicular. But they have to produce the best perpendicular media as you understand this. So they have to make -- they're competing amongst themselves for the best media and everyone knows that you can make the best perpendicular media if you have more than 12 process steps. So I think until they sort themselves out on what they are doing there it's going to be unclear as to what they are going to be doing. If you kind of stand back and look at the industry as a whole various people have made top-down estimates that would suggest there will an ongoing need for a significant number of tools per year. But the problem we have and other people have is kind of dealing with the lumpiness in terms of the ordering cycle.

Veeco had similar experience you're having with -- or at least I assume you're having with Hitachi. And that Veeco recently reported that business is really slowed there. They are under a lot of profit pressure I know but they have been a large buyer of your tools in the past -- Lean tools. Any -- have they given you any insight when they might turn things back up or what might be going on there. There is lot of rumor, lot of speculation about various changes coming there.

We don't normally go into the details of our customers. All I will say that we continue to see good business levels from them and that -- I believe that they found it very advantageous to use 200 Lean for actually improving the competitiveness of their products and actually lowering their costs.

And finally, you might have -- I don't know if this was (inaudible). But you kind of gave us the impression. I know you've backed off once. But you thought that the sales levels of the Etch tools in the second half of the year could be significant and -- again I'm not pinning it, saying $50 million, but that was kind of the ballpark figure, I guess, some of us had. Are you (inaudible) optimistic of that, or is that still doable?

We are being a little bit more cautious now and until we get a clearer understanding the shipment of these first tools. We're kind of backing off and giving any specific guidance for '08 for revenue relative to Etch. We're still working towards getting revenue in the second half. But at the next quarter's call we expect to have better visibility there.

Thank you.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q&A roster. Your next question comes from the line of [Philip Vera] with [Algorithm Capital].

Yes, Jeff, could you go over the tax rate again for this quarter? How did you achieve that?

The tax rate, essentially the 3% that we were able to adjust, our year-to-date tax rate was driven by some un-forecasted tax savings related to 2006. So as we filed our final tax return and trued-up our estimates to the final tax return we were able to lower our taxes for 2006 by about $1 million.

Thanks. And my other question. Do you have a target for '08, gross margins for imaging?

We're not providing '08 guidance yet --

Well, do you have a long-term target, or any targets for gross margins?

Our long-time target is to be over 50%, and we would see year-over-year progress against that.

Great, thanks.

You're welcome.

(OPERATOR INSTRUCTIONS) At this time there are no further questions. Gentleman, do you have any closing remarks?

Thank you for joining us today. We certainly look forward to updating you with our Q4 results and the outlook for 2008 in our next conference call. Thank you.

This concludes today's conference call, you may now disconnect.