Guess? Inc (GES) 2003 Q3 法說會逐字稿

Good day and welcome to today's GUESS? conference call.

Today's call, including the question-and-answer portion, is being recorded and being made available to the public.

Statements made in this conference call including, but not limited to, the company's expected results of operations are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are only expectations and involve known and unknown risks and uncertainties which may cause actual results in future periods and other future events to differ materially from what is currently anticipated.

Factors which may cause actual results in future periods to differ from current expectations include, among other things, the continued availability of sufficient working capital, the successful integration of new stores into existing operations, the continued desirability and customer acceptance of existing and future product lines including licensed product lines, possible cancellations of wholesale orders, the success of competitive products, and the availability of (technical difficulty) capital.

In addition to these factors, the economic and other factors identified in the company's annual report on Form 10-K for fiscal year ended December 31, 2002, including but not limited to the risk factors discussed therein could affect the forward-looking statements contained herein and in the company's other public documents.

At this time for opening remarks and introductions I'd like to turn the conference call over to Mr. Carlos Alberini, President and Chief Operating Officer of the Company.

Please go ahead, sir.

Thank you.

Good afternoon and thank you for joining us today to discuss GUESS? 2003 third-quarter financial results.

Joining me is Fred Silny, Senior Vice President and Chief Financial Officer of the company.

I will begin with a review at the third quarter results and then update you on our outlook for the remainder of the year.

We will then open the call for your questions.

GUESS? performance in the third quarter is indicative of the positive trends underway at our company, which reflect the success of the initiatives we have undertaken on both the operational and product side of our business.

We have seen strong comparable store sales growth in our retail stores and good product sell throughs in all channels.

In particular, we are pleased that our bottom line has started to reflect the efforts that we have made to utilize our resources efficiently and ensure that our cost structure is as streamlined as possible.

This has included looking for every opportunity to eliminate unproductive activities which has resulted in improved expense management in our corporate offices as well as our retail stores.

At the same time, the efforts we have made to refine our product in both our women's and men's lines have been well received by our customers in our retail stores and at wholesale.

We are pleased to report that our sales in the third quarter reflect higher retail store sales as well as the early signs of a rebound in our wholesale business.

We are seeing improved margin performance in our business resulting in a strong earnings performance compared to last year.

In fact, all businesses including wholesale were profitable in the third quarter.

We are pleased with the progress we made and are confident that based on our current sales trends and our efficient business model, we'll be able to increase profitability in this 2003 fourth quarter and into 2004.

Now turning the statistics of our performance for the quarter.

We announced today that for the third quarter ended September 27, 2003, GUESS? reported net earnings of $6.7 million or diluted earnings of 15 cents per share.

This compares to net earnings of 3.4 million or diluted earnings of 8 cents per share for last year's third quarter which included proceeds from a litigation settlement of $4 million or $2.6 million net of tax.

Excluding the litigation settlement, net earnings for the 2002 third quarter were $0.8 million or diluted earnings of 2 cents per share.

Earnings from operations grew to $13.5 million for the third quarter from 9.1 million in the year ago period, which again included the $4 million of proceeds from a litigation settlement.

Total net revenue for the 2003 third quarter increased by 5.6 percent to $166.7 million from 157.8 million in last year's third quarter.

As I mentioned, this improved sales performance reflects the favorable trends we are seeing in our retail stores and the positive impact we have experienced from our product repositioning efforts.

Notably, during the quarter (technical difficulty) to see an improvement in our women's business as well as continued strong performance in men's.

While we are pleased with this performance, the retail environment remains difficult.

The wholesale segment in particular continues to be challenging across our industry and, as you know, we at GUESS? have been hard at work to turn our wholesale business around.

We are encouraged by the improved sell throughs of our recent product deliveries as well as better wholesale performance during the quarter.

We are continuing to collaborate very closely with our wholesale partners who, like us, are encouraged by the consumer acceptance of our new product lines.

But given the persistent challenging environment, we remain cautious in our outlook.

By segment our retail stores, including full price retail, kids, factory outlet, Canada and eCommerce, generated net sales of $114.2 million during the third quarter, an increase of 20.5 percent from 94.8 million in the prior year third quarter.

The increase was driven by a comparable store sales increase of 13.2 percent and a larger store base which represented an 8.4 percent increase in square footage as compared to the same period last year.

The (indiscernible) store sales increase reflecting (indiscernible) results of both the men's and women's line.

In addition to strong same store sales growth, our retail stores also increased their margin and managed expenses effectively to deliver a substantial improvement in operating results.

In the women's retail business our young contemporary line, which is our principle line, generated continued improved performance in the third quarter.

Non-denim product performed particularly well with a solid comparable store sales increase for the quarter.

We also saw better trends in sales of denim, primarily in basics, which also delivered comparable store sales increases.

In men's, we continue to see improvement in men's retail with woven tops driving the business.

Non-denim bottoms also sold well during the period.

To build on this performance, we are continuing our realignment strategy to improve our top to bottom ratio through focusing on the best sellers in basic denim bottoms.

Our accessories business continued to perform well with same store sales increases in the quarter.

Watches in particular showed very strong sales growth, and we expect watches to continue to be a significant private in our accessories business during the holiday season.

In our wholesale operations, third quarter 2003 revenues declined 16.6 percent to $42.4 million from 50.7 million in the same period in 2002.

Domestic wholesale net revenue decreased in the third-quarter of 2003 by $5.6 million, or 17.7 percent, reflecting the reduction in the doors in which our product is offered.

Our product was sold in approximately 800 doors at the end of the third-quarter from approximately 1300 at the end and the 2002 third-quarter.

We believe that wholesale doors have stabilized, and right now we have about the same number of doors as we did at the end of the fourth quarter of 2002.

International wholesale revenue decreased by $2.7 million or 14.2 percent due to lower sales in the Middle East and Asia.

Our domestic wholesale backlog as of October 18, 2003 was $44.6 million compared to 49.9 million as of October 18, 2002 or down 10.6 percent.

As I will discuss in a few minutes, we expect wholesale revenues in the fourth quarter to increase over last year's volume.

Regarding spring 2004, our current backlog is lower than the comparable orders a year ago.

Consistent with our current strategy of immediate (indiscernible) of fashion product during the respective season, we have left a considerable amount of our wholesale customers-open-to-buy open, resulting in an inconsistent comparison year-over-year.

We still expect an increase in the number of stores our will be sold in spring and going forward.

That being said, our focus at this time remains on building our business and our most probable doors by working closely with our wholesale partners and assuring the best position of our products on the selling floor.

Over the long-term our objective is to reacquire lost dollars.

In terms of trends in our wholesale business, women's basics continued to sell well during the quarter.

We also saw solid performance from non-denim fashion bottoms.

In men's fashion wovens achieved good results.

As we mentioned, the department store business continues to be challenging, but we are pleased with the pockets of improvement we are seeing in our product line, and the improved sell throughs on the retail floor.

Now turning to our licensing business, this business continues to perform well and was on plan for the period, even though the third quarter revenues were $10.1 million compared to 12.3 million in the third quarter of 2002.

This 17.5 percent decrease is primarily attributable to a royalty adjustment made as a result of a licensee audit in the prior year period.

There were no such adjustments in 2003.

We expect the licensing business to be on plan for the full year.

Overall, gross profit for the 2003 third-quarter increased 8.5 percent to $61.6 million from 56.8 million in the third quarter of 2002.

Gross profit margin increased to 37 percent in the third quarter of 2003 from 36 percent in the same period of 2002.

The increase is attributable to improved margins at both retail and wholesale, partially offset by the lower licensing revenue.

The improvement in retail margins reflects the increase in comparable store sales which is allowing us to better leverage our store occupancy cost.

The improved margins in wholesale reflect stronger performance in our full price domestic wholesale business.

As we have discussed, expense control remains a key priority for GUESS?.

We reported that SG&A expenses for the third quarter were $48.1 million, a 6.9 percent decrease from last year's 51.7 million.

The SG&A rate this quarter was 28.9 percent of net revenues, almost 4 points better than our SG&A rate in the same quarter in 2002, which represented 32.8 percent of net revenues.

This improvement reflects the positive impact of the cost cutting actions that we have taken over the past year and expense leverage on sales growth in our retail business, partially offset by the additional expense of operating 16 net new stores in the third quarter of 2003 versus the same 2002 period.

Earnings from operations improved to $13.5 million in the third quarter of 2003 compared with 9.1 million in the 2002, which includes the previously discussed $4 million litigation settlement.

All operating segments showed a profit in the quarter.

The retail segment earnings from operations increased $7.8 million to 9.5 million from 1.7 million in the 2002 period.

The wholesale segment earnings from operations were $2.4 million compared to 3.5 million in the third quarter of 2002.

While wholesale operating income decreased $1.1 million from the prior year, it represents a significant improvement over the results for the second quarter of this year and the other recent prior periods.

Licensing earnings from operations were $8.5 million versus 9.5 million in the prior year.

Corporate overhead increased to $6.9 million from 5.6 million in the 2002 third-quarter which was also profitably impacted by the $4 million litigation settlement.

Interest expense for the third quarter of 2003 was $1.7 million compared to 2.2 million for the 2002 third-quarter reflecting the lower interest rates on the secures notes that we issued at the end of April and lower borrowing levels in the period.

Our debt level decreased by $13.7 million or 15.9 percent to $72.3 million at the end of the 2003 third quarter from 86 million at the end of the 2002 third-quarter.

We are pleased with our more cost efficient and flexible capital structure to support the growth of our business.

We have also improved our inventory management which resulted in lower overall inventory levels and less excess or obsolete inventory, thereby reducing our off price sales and allowing us to improve margin.

Our inventory levels have declined 1.5 percent year-over-year in spite of a 7.6 percent increase in product sales during the quarter.

We adequate the third quarter with a total of 268 stores, including those in Canada of which 187 were full price retail and kid stores and 71 were factory outlet stores.

During the quarter we opened one retail store and three factory stores and we converted one retail store to a factory store.

For the nine months ended September 27, 2003, the company reported a net loss of $4.5 million or a diluted loss per share of 10 cents versus a net loss of 6.7 million or a diluted loss per share of 15 cents in the comparable 2002 period.

The 2003 results include restructuring, impairment and severance charges of $0.8 million or 0.5 million net of tax while the 2002 results include restructuring, impairment and severance charges of 0.7 million or 0.4 million net of tax.

The 2002 results also include the previously mentioned litigation proceeds of 4 million or 2.6 million net of tax.

Loss from operations for the nine months ended September 27, 2003 was $1.7 million, this compares to a loss from operations of 4.6 million in the year ago period which again included the litigation settlement.

Total revenues for the nine months increased by 5.2 percent to $437.3 million compared to 415.8 million in the same period last year.

Now I will provide a brief update on our outlook for the quarter.

The fourth quarter that is.

We expect comparable store sales in our retail stores for October to increase in the mid single digit range.

Consistent with this, we anticipate that retail comparable store sales will increase in the mid single digits range for the fourth quarter on target (ph).

We expect total retail sales to increase in the mid teen range, including the opening of approximately 20 new stores during the year and the annualization of the 24 stores that we opened in 2002.

On the wholesale side, we anticipate overall revenues to increase in the teens for the fourth quarter versus last year.

Overall gross margins are expected to improve in the fourth quarter.

We expect gross margin in both our wholesale and retail businesses to improve in the fourth quarter from last year's levels.

Due to the continued contribution from cost-cutting initiatives, we expect SG&A expenses for the fourth quarter to be down in dollars and as a percent of revenues from 200s levels in spite of the expenses necessary to support the 20 new stores.

Finally, we continue to expect inventory levels to increase percentagewise in the mid single digits by year end compared to year end 2002, and capital expenditures for 2003 are expected to be approximately $18 which includes the cost of opening the new stores.

Before we open the call up for questions I would like to say that while we expect business to remain challenging for the rest of 2003, our objective remains to improve sales and margins while carefully managing cost and inventory.

We are encouraged by the results of the actions that we have taken on the product side and we remain optimistic that our efforts will result in improved performance for the year and over the long-term.

With that, as always, we thank you for interest in GUESS? and we would now be happy to take your questions.

Operator.

(OPERATOR INSTRUCTIONS) Holly Guthrie from Morgan Keegan.

Good afternoon, Carlos and Fred, and good quarter, congratulations.

A couple questions on the wholesale business.

You had said something about the backlog and I was hoping you could clarify that.

I think you said something about the spring backlog, I was wondering if you could talk about the current backlog and what those expectations were for spring in the also business?

The comparison on the backlog is not a very easy comparison this time.

But let me try to explain it further.

What we said is that for the fourth quarter we expect revenues for wholesale to be up over last year's revenue.

That is part of the backlog.

Obviously the numbers that we gave you (indiscernible) and change percent is (indiscernible) very recently, in October 18th I think was the day.

So obviously there are still two months and 10 days or so that are included in those backlog numbers for the fourth quarter.

So that takes care of the fourth quarter.

Then with respect to spring of '04, which is also part of our backlog, we have left open a lot from purchases.

We work with our partners in wholesale, and because we are intjecting a lot of fashion during the season, and during the spring season we expect to bring a lot of new styles and new product that's going to be injected during that time.

We ask the retailers, our partners, to leave open-to-buy open so then they can buy those products when they are available.

And that's what they have done to a greater degree than they have in the past.

Therefore, because they are leaving so much open, obviously that is going to impact our backlog.

But it's going to give us an opportunity to get better product on time and having enough in the open-to-buy to be able to buy.

And why is this occurring this year?

Is it just (multiple speakers) changing in fashion or what?

No.

We believe that the faster you are and the closer that you design the product to the need, to the delivery, the more trend right the product is going to be.

So we are doing this by design, we are doing it in our stores as well.

And trying to leave a lot open so then we can design much closer to the need or to the delivery, and therefore the fashion is going to be much more on trend.

Great.

And the 800 doors that you were in the third quarter versus the 1300 last year, do you have comps for the 800 doors so we can get a feeling for how the apples-to-apples comparison was for the wholesale business?

No, Holly, we don't.

We don't have comps for those numbers.

The important thing is that if you look at the revenue expectations that we have given you for wholesale, and you anticipate that we're going to be in about the same number of doors that we were at the end of the fourth year, that would imply that there is a comp growth, at least from our standpoint in terms of sales.

Definitely.

And the gross margin was just outstanding.

Could you talk a little bit about -- from my model it was about 200 basis points above what I was looking for.

Could you talk a little bit about what drove that sequentially in year-over-year?

The number one issue, we have been relentless in managing inventories.

And we are not afraid to make decisions to move inventory when we see that excess is being created.

And we are making a big effort to plan inventory levels more effectively, and really move the inventory as we see that it needs to be moved.

That is probably the number one reason why our margins were very solid, but of course that is always a function of how the products sell.

We had very good sell throughs in our wholesale business as well.

And lastly, the leveraging of our occupancy cost, because of the same-store sales growth that we experienced during the quarter, helped in our margin as well.

So it was all the different pieces working.

We had lower sales to the off price channel which has been a major issue for us in the past.

But again, that is a function of having less excess and being more careful with the buying and the planning.

Thank you.

Margaret Whitfield from Brean Murray.

Good afternoon and congratulations.

Carlos, you said you expected an increase in doors in the spring, could you comment as to whether that's men's, women's and what kind of an increase might be likely?

The increase is -- it's tentative right now, we have very solid plans from the retailers so we know that we should anticipate an increase now the number of doors is in the works.

I think that the growth is more prominent in the women's side than in the men's side.

That's encouraging.

And then, if you could quantify the level of off price sales both in this third quarter and what it was last year.

I know it was a drain last year in the fourth quarter so we know what we're up against.

We do not disclose that kind of numbers, Margaret, but I can say that this past quarter they were less than a year ago.

And am I right that last year's fourth quarter was affected by the off- price selling?

Yes, it was affected very significantly, but it wasn't just the off-price selling but also impact on margins from excess inventory as well.

So when you see the margins for last year, they were abnormally reduced by those two factors.

Given the comps you've been reporting, what is the outlook for store expansion?

Would you possibly accelerate the store expansion from this year's levels?

No, that is something that we discuss very often, of course, as to what kind of expansion we should pursue.

The great thing is that the company has a very strong capital structure, and we have been delivering the balance sheet which we all had set as a target.

We have several stores that have already been signed for next year, of course, and we're looking at every deal that we think makes sense for us.

Now, that being said, long-term we may consider the acceleration of the expansion, but that is not something that I'm in a position to talk about right now.

We're going through these discussions right now.

And we are planning to give you some outlook and a good idea of expansion by the time that we wrap the fourth quarter.

Regarding October, I know you have a few days left to go.

But is your sense that the cold weather in September perhaps borrowed a little bit from October as some retails are stating?

I'm not sure that that is the case.

We are looking into every area.

We have certainly seen some deceleration of sales, but nothing to be concerned about.

In our case, we are running with lower inventories at the store level and that may be impacting our sales.

But again, we have been very careful with promotional activities and trying to just keep the sales going on healthy business.

I think that the month of October, which for us has five weeks, has been impacted by weather as it usually does.

We just released new deliveries not too long ago, and we have reordered a lot of a product that had been very successful in the previous months.

So we think that we have a good plan going into the fourth quarter but, of course, the most significant weeks are coming now.

So it's kind of early.

Thank you.

Eric Deter (ph) from Northeast Securities.

When you look at your inventory levels, they've been going down.

On a (indiscernible) level, they went down even more.

What should be -- where is your goal in terms of reducing inventories going forward here?

We believe when we benchmark ourselves against the industry, we believe that there is still significant opportunity to improve turns.

Of course, that's always a delicate balance that you have to play, because we don't want to miss any sales.

But we think that there is still opportunity to become even more efficient with the use of our inventory.

We continue to work on allocation methodologies and trying to get better at it; it's always a challenge.

We think we are getting better at it.

But, you know, how high can it be in terms of how high the turns -- we think that we have plenty of room.

In terms of stores, how many stores are you going to have opened before the holiday season?

How many did you do in October and do you plan to do in November?

Let us look for that number.

Do have another question?

In terms of -- the headcount now in terms of the streamlining, you said that SG&A has pretty much remained the same year-over-year.

Is that something that -- what is the level now, where can you take the topline before you really need to significantly increase the SG&A levels in terms of -- not the store operations, but your internal operations?

We have been very driven to reduce our SG&A levels.

And I think it's pretty remarkable that the company will be able to absorb the growth without increasing -- actually decreasing SG&A expenses overall.

But I think that at some point all those efficiencies will be somewhat taken advantage of.

And I think that if you look at significant growth in the future, you will have to count on some expense increases to be able to fund that growth.

We continue to work on efficiencies, don't get me wrong, but I think that we have taken a lot out of the business and I think that we are getting to a point where the efficiencies in terms of corporate and even the stores are reaching a level that's going to be more difficult to get big dollars out of them.

Especially if we grow very fast.

And one more quick question.

On the GUESS? collection, I know that's only in about two or three key department stores.

Is there any thought of taking that -- making it not as exclusive as you have it now or are your wholesalers kind of asking for that product?

No.

We think that our direction and how we treat GUESS? collection is the right place.

As you know, we have it in our stores, it's only a few doors (indiscernible) at a time.

But that's the strategy that the Company has selected.

And I think it's the right one.

Well, when you guys get the amount of doors please tell me, and then I will talk to you later.

Eric, I have that number for you.

By the end of the year we'll have 266 stores open.

So that's an additional eight stores.

Those will all be open before the big Thanksgiving season?

Yes.

Most of the stores are opening either this month or into the beginning of November.

Thank you.

Dorothy Lakner from CIBC World Markets.

Thanks and congratulations, guys, much improved quarter.

Going back to the wholesale business for a minute.

You're looking for increased -- an increase in the number of doors next year.

What about the space within existing doors, is that going to be increasing as well?

And then secondly, again in regard to the wholesale business, Carlos, could you give us a figure as to what typically you used to run in terms of backlog versus in season orders?

I know you've said that you're trying to get retailers to hold more of their open-to-buy so that you can inject more fashion in -- closer to the time of the season.

But what was that running historically and do you expect a proportion to continue to shift towards more in season or out once type of purchases?

And then lastly, I've noticed there seem to be more GUESS? advertisements in more prominent placement than in the past.

Is marketing spend increasing, I would imagine for the second half of the year, and what's the outlook there for going into 2004?

Thanks.

Thank you, Dorothy.

First, with respect to the space, we are always -- you know Nancy very well.

She is always working with her partners to really get better space and more space if it is warranted concerning the productivity of the space.

But I don't think that there are significant changes on the micro point.

With respect to wholesale business and how much to leave open, yes, this is a changing strategy in a way.

I think that the strategy has always been to be right with the product.

But in this case we know that, again, being closer to the need is going to be more successful.

And I think maybe last year that number was 10 percent, maybe this year it's 25 percent, just to give you some general idea.

I don't know that those numbers are exact or accurate.

But that's kind of like the trend.

With respect to advertising, you will be surprised.

I think that Paul and his team really do a remarkable job on advertising spend, and they get a lot done with very reasonable dollars because they do a lot internally.

And you know our advertising in fact is down from a year ago levels.

Yes, I think we are doing a very good job.

But, going into 2004, we are planning to increase advertising spending, and we think it's the right thing, again, once we benchmark ourselves and looking at the problems that the brand has today we want to keep it that way.

One last thing and that is what's the portion of -- if you could divide up your sales just by gender or men's, women's, kids, how is that proportioned right now?

And what's the relative strength of the increases you're seeing in men's versus women's?

I know your men's business has been really improving.

The businesses are in different points of the curve.

Men's last year had a very strong second half of the year so we're up against those numbers.

Women's is -- we have had a very strong run and we will continue to see probably further growth from women's.

As you know, the women's business is a much more significant business for us than men's is.

I'm not in a position to give you percentages of what represents what, but I can tell you that the trends for the third quarter, men's composite (indiscernible) in spite of the very strong numbers that we experienced last year it was driven by woven tops primarily.

And women's had a very, very strong third quarter.

Even stronger than men's in terms of comps.

So you're not in a position where in terms of the retail stores, for example, where there's so much more space devoted to women's, you're not in a place where you want to increase the space in the stores that you devote to men's?

No, and actually the productivity of the space can still be improved in men's as well.

So it's not that we are reaching that maturity level at all.

We think that overall we can improve sales productivity in the stores, and then more specifically when you talk about men's, that opportunity is even more remarkable.

Thank you.

(OPERATOR INSTRUCTIONS) John (indiscernible) from Principle Global Investments.

What's your outlook for licensing revenues in the fourth quarter?

Are you expecting those to be flat to up slightly?

Last year you did about 10.2 million it looks like or thereabouts.

It could be -- we're still -- I think at the beginning of the year we said that we expected licensing to be flat to the year before.

And the year has been impacted a year ago by some of those adjustments that I mentioned during my prepared remarks.

I think that the fourth quarter is going to be about flat to last year.

Maybe down a little bit but not significantly.

But, I think that the good point about this is that we still expect the overall business for the year to be on plan.

I realize you haven't finalized your plans for the next year for capital spending, but would you expect it to be up a little bit at least compared to this year?

Yes.

We're planning to spend about $18 million this year and I think that would be up slightly maybe.

Again, we are still finalizing numbers but maybe a number north of $20 million or so.

What is your anticipated level of depreciation and amortization for this year, 2003?

35, that's down from last year.

Last year I think that the number was more in the $38 million range.

And then maybe flat to up slightly next year?

Maybe, I don't know.

Actually I don't know.

But if you participate in the fourth quarter call we'll definitely share that with you.

Dorothy Lakner from CIBC World Markets.

The denim business, could you just give a little bit more color as to what's going on there?

You talked about basic denim doing better versus the nonbasic, just if you could elaborate a little bit on that.

Thanks.

I think that Maurice has -- coming into this year he predicted that denim was going to slow down and he was absolutely right.

We plan our business accordingly, I think it was the right thing.

That being said, some pockets of denim business are still performing and they did for us.

Nancy's business has been very strong on the basic side.

She injected or brought a lot of styles that did very well for her in the third quarter.

And we did have some success with the fashion denim and our stores as well.

I think that the good move was to really go after some other fabrications that really I think was a great correction because we were very successful with those changes.

And I think that this is still a denim company and we still believe in denim as a fabrication of course.

So we will always have very strong presentations on denim.

But I think that there is always an opportunity to increase the business with other fabrications and, again, I think Maurice does an amazing job on that.

Great, thanks.

That concludes our question and answer session.

At this time I'd like to turn the call back over to Mr. Alberini for closing remarks.

Again, thank you for your interest in GUESS?.

Let me reiterate that we remain optimistic about GUESS? prospects for improved performance over 2003 and into 2004, and we are committed to capitalizing on the strength of our company and our brand to generate longer-term growth.

Thank you, and have a good day.

That concludes today's conference call.

Thank you for your participation.

You may now disconnect.