Good afternoon, and welcome to the Ross Stores Third Quarter 2021 Earnings Release Conference Call. The call will begin with prepared comments by management, followed by a question-and-answer session. [Operator Instructions].

Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings, COVID-related costs and other matters that are based on the company's current forecast of aspects of its future business.

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These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2020 Form 10-K and fiscal 2021 Form 10-Qs and 8-Ks on file with the SEC.

Now I'd like to turn the call over to Barbara Rentler, Chief Executive Officer. .

Good afternoon. Joining me on our call today are Michael Hartshorn, Group President, Chief Operating Officer; and Connie Kao, Group Vice President, Investor Relations. And I'd also like to welcome Adam Orvos, our recently appointed Executive Vice President and Chief Financial Officer.

We'll begin our call today with a review of our third quarter performance, followed by an update on our outlook for the fourth quarter and fiscal year. Afterwards, we'll be happy to respond to any questions you may have. .

As noted in today's press release, third quarter sales and profitability significantly exceeded our expectations as consumers continued to respond favorably to our broad assortment of great bargains. We achieved these results despite waning government stimulus and uncertainties related to the spread of COVID variants.

Earnings per share for the 13 weeks ended October 30, 2021, were $1.09 on net income of $385 million. This compares to $1.03 per share on net earnings of $371 million for the 13 weeks ended November 2, 2019. .

Total sales for the quarter rose 19% to $4.6 billion with strong comparable store sales increase of 14%. For the first 9 months, earnings per share were $3.82 on net earnings of $1.4 billion, up from $3.32 per share on net income of $1.2 billion for the same period in 2019.

Sales for the first 9 months of this year rose 20% to $13.9 billion with comparable store sales up 14%. .

For the third quarter at Ross, children and men's were the best-performing businesses while the Midwest and Southeast were the top-performing regions. dd's DISCOUNTS trends remained strong during the period as their sales performance also significantly exceeded our expectations.

However, like Ross, dd's profitability was negatively impacted by cost pressures related to freight, wages and COVID. .

At quarter end, total consolidated inventories were up 3%, while average selling store inventories were down 1% versus 2019. Packaway levels ended at 31% of the total compared to 39% for the same period in 2019 as we continued to use a substantial amount of packaway merchandise to support ahead of planned sales.

In addition, there were receipt delays due to supply chain congestion. .

Turning to store growth. We completed our expansion program for 2021 with the addition of 18 new Ross and 10 dd's DISCOUNTS in the third quarter. For the full year, we added 65 locations comprised of 44 Ross and 21 dd's DISCOUNTS. Additionally, we plan to close 1 store by year-end.

As previously mentioned, we expect to return to our normal annual opening program of approximately 100 stores in 2022. Now Adam Orvos will provide further details on our third quarter results, fourth quarter guidance and updated outlook for the year. .

Thank you, Barbara. As previously stated, comparable store sales were up 14% in the quarter. The increase was mainly driven by a larger average basket with traffic down slightly versus 2019. Operating margin of 11.4% was well above our guidance range.

As expected, the decline in overall profitability versus 2019 was mainly due to ongoing headwinds from higher freight, wage and COVID-related costs. .

Cost of goods sold grew by 85 basis points in the quarter. Domestic freight expenses increased 125 basis points, while higher ocean freight costs negatively impacted merchandise margin, which declined by 40 basis points. Buying also rose by 10 basis points.

These higher expenses were partially offset by occupancy and distribution leverage of 65 and 25 basis points, respectively. .

SG&A for the period grew 15 basis points as leverage from the strong sales gain was offset by COVID expenses and higher incentive costs given our better-than-expected third quarter results. Total net COVID-related costs for the period were approximately 35 basis points, the vast majority of which impacted SG&A. .

During the third quarter, we repurchased 2.1 million shares of common stock for an aggregate cost of $241 million. We remain on track to buy back a total of $650 million in stock for the year. .

Now let's discuss our fourth quarter guidance. As a reminder, our projections compare to the same period in 2019. Looking ahead, while we are encouraged by the ongoing strength of consumer demand, there remains significant uncertainty related to the worsening industry-wide supply chain congestion as we enter the important holiday season.

As a result and while we hope to do better, we are forecasting comparable store sales to be up 7% to 9% with earnings per share projected in the range of $0.83 to $0.93 for the 13 weeks ending January 29, 2022. .

total sales are projected to grow 10% to 13%. We expect operating margin to be 8.1% to 8.8%. This forecast primarily reflects ongoing pressure from the previously mentioned supply chain headwinds as well as holiday pay incentives in our stores and distribution centers.

In addition, COVID-related costs are projected to negatively impact EBIT margin by approximately 30 basis points in the period. .

Net interest expense is estimated to be about $18 million. Our tax rate is expected to be approximately 22% to 23%, and weighted average diluted shares outstanding are projected to be about 352 million.

Based on our year-to-date results and fourth quarter guidance, we are now forecasting full year comparable store sales gains of 12% to 13% and earnings per share in the range of $4.65 to $4.75 compared to $4.60 in 2019. Now I'll turn the call back to Barbara for closing comments. .

Thank you, Adam. We're encouraged by our above-plan sales year-to-date. As Adam noted, uncertainty remains on how industry-wide supply chain congestion may negatively affect our business in the fourth quarter.

That said, we believe we are well positioned as a value retailer and are confident customers will find broad assortments of great branded bargains in our stores for the holiday season. .

Moving forward, consumers' increasing focus on value and convenience, along with a large number of retail -- recent retail closures and bankruptcies, make us confident about our prospects for continued market share gains in the future. At this point, we'd like to open up the call and respond to any questions you may have. .

[Operator Instructions] We have our first question coming from the line of Matthew Boss with JPMorgan. .

Congrats on a nice quarter.

So Barbara, with 3 straight quarters, 13% to 15% 2-year comps, could you elaborate on market share gains tied to value and convenience that you're seeing? And then given the closures and bankruptcies that you cited, how would you best characterize product availability in the marketplace today?.

Matthew, it's Michael Hartshorn. On market share gains, longer term, we're very excited about the market share opportunity ahead of us. We're in a very healthy sector of retail with the consumer even more focused, as you mentioned, on value and convenience.

We've clearly gained market share during the pandemic and are confident about our future prospects for further gains, given the significant number of retail closures and bankruptcies. .

And Matthew, in terms of product availability, I have a [ good feeling ], it's a good time to be a buyer, maybe not in every category but some areas are very good. Others are inconsistent but overall, it's favorable.

Even with store closures, one would expect that over time, as -- after COVID as retail settles, that the market will get more bullish on creating more goods. But right now, we really feel good about market availability. .

We have our next question coming from the line of Mark Altschwager with Baird. .

Welcome, Adam.

I'm curious, just with the more inflationary backdrop, are you seeing more opportunities to raise ticket while still maintaining the strong value proposition? Or how are you thinking about this lever to offset some of the ongoing freight and expense pressures?.

Sure. Look, our pricing model is really built off of other mainstream retailers and then we provide a discount. So we're very aware of pricing at different levels of distribution and we watch it closely. With that, we've continued to experiment with higher retail in all areas in the new organization.

In some cases, it's been absolutely fine, and in some cases, not quite as fine. And I wouldn't elaborate more on that in this forum. But what I would say is we would adjust pricing over time once we understand it. We don't know where it's really all going at this point, but we are definitely experimenting with different retails. .

We have our next question coming from the line of Paul Lejuez with Citi. .

You referenced ongoing strength of consumer demand. I was curious if that was a comment on the fourth quarter to date, if you're seeing that continue. You also referenced worsening industry-wide supply chain congestion, and I'm curious if that's hurting you thus far in 4Q to a greater degree than what you saw in 3Q.

And big picture, I'm wondering if you think that congestion will ultimately be good for your business, either in fourth quarter or into '22. .

Paul, we are seeing a very healthy consumer. When we came into the quarter, we were worried about the Delta variant and also the receding government stimulus.

But we've continued to see a very healthy consumer with strong demand for us across geographies, merchandise areas, and you can see relatively across retail, one that is increasingly focused on price value. .

On the freight front, we've taken a number of actions to ready ourselves for the holiday selling period, including adjusting our ordering times. We chartered our own ocean vessel, and we've been purchasing at market rate capacity to make sure we have enough ocean freight to move goods. You can see that certainly in our margins for the quarter.

Our merchant margin was impacted by ocean freight that we weren't able to offset, with merchant margin down about 40 basis points. I wouldn't comment on the impact in the third quarter. The congestion right now is squarely focused on the port and getting goods out of the port. .

And the merchandise margin, you said it was down 40 basis points. What -- you said that was impacted by ocean.

Can you separate the pure merch margin versus the ocean piece?.

We wouldn't break that out separately. Ocean freight is actually included in our merchant margin. Merchant margin ended up better than we expected for the quarter as we had more full-price selling and faster turns with the inventory ahead of plan -- our sales ahead of plan. .

And then I would say, as it pertains to the supply chain congestion, it should create more closeout opportunities for us in the future. .

We have our next question coming from the line of Lorraine Hutchinson with Bank of America. .

Barbara, I know you said it's a good time to be a buyer, but I just wanted to focus in on any risk around receipt timing ahead of holiday.

And then what are you hearing from your vendors going into the spring of next year vis-à-vis product availability and the categories you really want to focus on?.

On receipt timing ahead of holiday, I think we've taken all the appropriate actions as it pertains to receipt timing, whether Michael just said chartering the vessel, building in longer lead times, everything to get goods through the port. But with that, we have concerns, not a given but we have some concerns.

As we think about product for spring, I think vendors have gotten very aggressive in terms of pricing goods. I think there are some vendors that are really looking to gain some market share in this time frame and have taken bigger risk in terms of making commitments. So I think it's very much on who the vendor is and what their strategy is.

But in terms of -- again, in terms of timing for holiday, we've taken the assets we think we need to take. But again, we have some concerns but it's not a given. .

We have our next question coming from the line of Kimberly Greenberger with Morgan Stanley. .

Okay, great. I just wanted to follow up on Lorraine's question just about holiday, Barbara, and just want to make sure I understand you clearly.

So how are you feeling about your in-stock levels currently here, call it, middle of November? And how do you feel about your inventory position here for the next sort of 6 weeks of holiday selling? If you could just give us a little bit of color just on the short term. And then I wanted to ask a couple of other questions, if I could. .

Kimberly, on inventory position currently, we're in a good shape. We ended the quarter with average in-store inventories down about 1%, which is where we wanted them to be, and we continue to have a fresh flow of product. There are a lot of receipts between now and the next 6 weeks.

And there could be some risk in areas like home that, as Barbara mentioned, they're not a given but we reflected that risk in our guidance at 7% to 9%. .

Okay, got it.

And is it -- are the receipts risk concentrated in home because that's where you would have, call it, more of a direct import or more of the direct imports would be impacting that area and those would be the items that would be either stuck in ports or on ocean-going vessels?.

Correct, right. Mainly -- we have 6 weeks left mainly stuck in ports. .

Okay, mainly stuck in ports. Okay, perfect. That is great, okay. And then on the quarter, Michael or Adam, whoever wants to address this, you talked about larger basket size.

I'm wondering if you can talk about the average unit retail versus the units per transaction, what's driving that? And then just longer term, following up on the question with regard to pricing. I'm not sure if you have taken a look at where you're sitting competitively versus peers.

But is there -- I know there are some of your peers looking at some surgical price increases in some categories. I'm just wondering if you've taken a look at your pricing and re-benchmarked it recently, if you have any thoughts on that. .

Yes, this is Adam. Let me jump in on the first part of that question. So our strong comps were driven by size of basket, which was primarily driven by a number of units per transaction. We did have a slight increase in AUR, driven by the better full-price selling, given the above-plan sales.

And then as we mentioned, there was a slight decline in traffic in the quarter. .

And then as it pertains to the pricing issue, we are definitely experimenting with higher retails. And I said in some areas, it's working, it's fine. In some areas, it's not fine. I think we'll continue to do that, Kimberly, and fine-tune what the customer is willing to accept as we watch what goes on in mainstream retailers and where their AURs sit.

And after we get comfortable, over time, we would consider adjusting the pricing once we really understand it. .

But as we get ready to enter into Q4, we're not expecting mainstream retailers to promote but we don't really know that as you get into Q4, and there's really this compressed period of time. So with that, again, merchants are out there trying new things, trying retail, seeing what the customer is willing to accept.

But we kind of need to see both of those things to take, I would say, a larger step. .

Perfect. Makes perfect sense. .

We have our next question coming from the line of Chuck Grom with Gordon Haskett. .

I was wondering if you guys could speak to the trend of your comp there in the quarter. And if you think weather had any impact, adverse impact, particularly in September and October? And any early thoughts on the first couple of weeks of November? It sounds like the trend has stayed strong but just wanted to confirm that. .

This is Adam, I can take that. So comps were strong throughout the quarter and really no -- weather impact was very immaterial in the quarter. .

And we wouldn't comment on intra-quarter trends. .

We have our next question coming from the line of Michael Binetti with Credit Suisse. .

I'm just curious, as you look at the guidance, what you guys are seeing in the business that helped you build to a 7% to 9% guidance for fourth quarter. I think the last prior 2 quarters, it was 5% to 7%. Just any change on how you built up with it.

But then, I guess Michael, when you -- can you help -- I know you won't give us a number to Paul's question earlier, but when you think about what you baked into freight in the fourth quarter, maybe just some directional idea of how that looks relative to third quarter. .

And then as you look out, maybe just -- thinking about when your contracts roll, how much visibility you have into the first half of next year and help us understand if it's -- if we should think that, that's still going to be an incremental headwind into the first half based on what you guys know today. .

Sure, Michael. Let me generally talk about the fourth quarter guidance. Obviously, in these uncertain times, we believe it's prudent to be conservative, as we always have with our guidance, and hope to exceed these estimates.

Obviously, the large difference between Q3 is a cautious comp estimate, given the potential impact of unpredictable supply chain congestion. .

The guidance also includes ongoing freight pressure related to the congestion. I would say it's not significantly worse than it was in Q3. It also includes elevated wage-related costs due to holiday incentives in both our stores and distribution centers to acknowledge our associates' extraordinary dedication throughout the pandemic.

What we'd expect on that is above -- sales above the estimates, we'd expect 15 to 20 basis points of leverage. .

On freight congestion, I think our view at this point is we would not expect freight to subside probably through the first half of next year. And then we'll have to see how it trends after that. In terms of what impact that could have, we'll have more to say in our year-end call as we finish up wrapping up our budget cycle. .

Okay. If I could follow that.

Just as you look at some of the AUR initiatives that you are seeing success with, Barb, do you feel like you have enough at this point to combat that freight pressure in the first half as needed?.

No. I think where we are now is that we will continue to test the AUR and then make probably slower moves so we really understand what that looks like in mainstream retailers. .

We have our next question coming from the line of Jay Sole with UBS. .

Great. I just want to know if you can share with us, high level, I'm not looking for any specific guidance, but going into first quarter next year, lapping the stimulus.

How much of a benefit do you think you got from the stimulus in the first quarter of this year? And how do you think it might play out next year as you lap that, what kind of impact would it have on sales?.

Yes. At this point, we wouldn't comment on next year. As I said, we'll have more to say after we wrap up the fourth quarter and provide guidance in our year-end call in early March. .

Okay. And maybe if I can just ask one more then. There's a lot of talk about how the pandemic has changed shopping and consumers may be adopting more of an omni-channel method. If you look at the operating income growth for your department store competitors over the last 3 quarters, it's up over 100%. Versus off-price, it's up more like 10%.

Do you feel at all like something has changed where maybe the department stores are catching up a little bit? And if not, why not?.

Catching up in what regard?.

Just catching up in a way that like you've outgrown them in terms of sales.

You mentioned the market share gains that you've taken, outgrown them in terms of profit, but maybe they're getting closer to competing and being able, maybe not necessarily maintain the same level of sales, but maybe getting more profitable, which ultimately could be an advantage they could use to sort of catch up in other ways as well. .

Yes. I think overall, we'll have to see how it plays out. I mean, we're still in this burst of economic activity where demand is exceeding supply. I think we have to understand what happens when it's a more -- a greater balance between supply and demand, which we'll see if that's first quarter or second quarter of next year.

So it's hard to say at this point. .

We have our next question coming from the line of Marni Shapiro with Retail Tracker. .

Congratulations.

Could we just talk a little bit about 2 things? As the consumer's back out and about, working events, parties, have you seen a shift in what she's buying or are you continuing to see strength across the board? And then if you can also just touch on, with all of the late deliveries in the market, have you been able to still get in the very holiday-rich type of items, Christmas-themed items? Or were you able to tap into packaways from last year's holiday to make sure that, that was on the floor in time?.

Sure, Marni. We have seen a shift with the customers. Look, we've always had a big casual business, let me tell you that. That's always been a big business for us. And certainly during the pandemic, that business got even bigger and stronger for us.

But what we have seen is we have seen the customer make a shift back into what you're looking for as holiday, glitz, dress-up, specials [ ongoing there ]. We have seen the customer make that shift into holiday product and also just more into more mainstream sports brands. So a little bit of both.

So casual is still very good, still a business that we believe and it will expand and get greater, but she is making a shift, whether it's back to work or she's going out for easing, whatever she's doing, we have seen that, yes. .

What about like in the home and like bags, like those kinds of bags to go back to work or the home area, if she's going back to work and not thinking about her home as much? I don't know. .

You're saying like in handbags?.

Yes.

Has she shifted into handbags as she's going out again or out of home and into apparel more? Those kinds of bigger shifts as well?.

I think anything where she is leaving her house in -- on the apparel side has taken a shift, whether it's in footwear, whether it's in handbags. She hasn't replenished, replaced a lot of those products in a long time. So yes, we are seeing a shift back into some of those businesses as she goes out. She wants new stuff.

So whether it's home or apparel though, Marni, I would say both businesses have been relatively similar in sales gain. So she's kind of traveling between both worlds now. I think the surge in apparel is because she just doesn't own it. .

Yes, that makes sense.

And then just on the packaway?.

And then on packaway, we -- and how it's just -- just do me a favor, just remind me that piece again on packaway because I think I might have interpreted it as the holiday piece. Hit me back with that question again.

Marni?.

We have our next question coming from the line of Laura Champine with Loop Capital. .

Should we hold up and try to get Marni back or would you prefer I fire ahead?.

Fire ahead. We'll call Marni later. .

Go ahead. We'll find Marni later. .

Okay, here goes. I thought the SG&A expense level was really impressive, given that I think you're saying that COVID is still an incremental hit.

Are we -- is this kind of a base level that we can look at as we start to model for next year? What are kind of some of the puts and takes that are keeping, despite really strong top line, that SG&A expense is staying fairly flat?.

Yes -- go ahead. .

Yes. No, I was just going to jump in and say, COVID's been a pretty consistent impact throughout the year and will be in fourth quarter. We talked about the actions we've taken from a wage standpoint and from an incentive standpoint in our DCs and our stores. Those are clearly kind of the biggest movers within SG&A. .

And then obviously, I would say the 14% comp helps us leverage the SG&A significantly. .

[Operator Instructions] We have our next question coming from the line of Bob Drbul with Guggenheim. .

Just wondering if you could maybe spend a little bit more time on the labor component and just sort of the wage pressures that you're seeing in labor availability. Maybe just give us some insights on that. That would be helpful. .

Sure, Bob. It's a very competitive market for talent, and we've seen the most competition in our distribution centers. We made some permanent wage increases early this year. We also have some retention and incentives to get us through the peak. We're in really good shape. We've been able to staff up the peak.

The distribution centers are where they need to be in the stores. Obviously, we have holiday selling ahead of us. We also have incentive -- hiring incentives there to make sure we can staff up for peak, and we're confident that we're in a good place there as well.

Given the competition, we'll remain competitive to make sure that we can -- we'll remain competitive with our pay to make sure we can attract talent, and we feel really good about the workforce right now. .

We have our next question coming from the line of Adrienne Yih with Barclays. .

Congratulations on the progress on the top line in the quarter. Barbara, you made a comment during the prepared remarks. You said you should see improvement in kind of closeout buying.

And I'm wondering, are you seeing any incrementality in that, in increased supply flow from either canceled orders or stranded inventory that could be used for short-stay buys and redeploy it earlier next year? And then just a clarification question on the, Adam, on the freight.

The 160 basis points of freight pressure this quarter, fourth quarter is similar and then carrying that same level through the first half of '22? Is that the implication that you were intending?.

I'll start with the freight. I was making no commentary on what the freight cost level will be next year. I was really answering that in terms of what congestion could look like. Obviously, we'll have some other different options first quarter versus the fourth. .

And then in terms of the content of the closeout buying, certainly, our expectation is that there will be full product as retailers have canceled goods because they're late and they can't get to the selling floor. So that would be real packaway for fall for Q3, Q4 of next year.

But we do see opportunities on, I would guess what you're thinking of as kind of seasonless apparel that we could flow now through Q1. I believe it's a combination of both. .

Okay, fantastic. Last question, if you would. Where is the average hourly rate? I seem to recall a few years ago, maybe 2018 or '19, you had sort of committed to this $12 number, and that was typically almost $1 higher than the average across the nation. I know you're at the better end of pay.

I'm just wondering where that number sits today maybe relative to where Walmart, Target and some others are in that mid-teen range. .

Yes. We don't disclose the specific wage. We do have a base level at $11, but a significant portion of the chain is under minimum wage. California, for instance, is at $15, so the average wage is well above that baseline. .

Fair enough. Thank you very much and best of luck for holiday. .

We have our next question coming from the line of Simeon Siegel with BMO Capital Markets. .

Sorry if I missed it, did you say where you expect inventory to end 4Q and then over the next few quarters? And then to the earlier point about outperforming despite waning stimulus, have you guys quantified what you think the benefit was from stimulus? And just how you're thinking about the potential impacts as we cycle through that early next year.

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On next year, we wouldn't comment. We'll comment again at year-end. On inventory, we typically don't guide ahead on inventory levels. .

So I guess for the stimulus, have you quantified what it was this year, how you think about the benefit this year?.

It's really hard because there's a lot of moving parts because it's not only stimulus, it's customer pent-up demand. We'll end up developing plans around it as we move into next year but we haven't quantified that. .

We have our next question coming from the line of Ike Boruchow with Wells Fargo. .

Hi, everyone. This is Jesse Sobelson on for Ike.

And I was just wondering, as we look forward and begin to model next year, would you guys be able to quantify timing of when COVID costs might be able to revert? Or are you expecting that to sustain and these costs to just kind of be a part of the business going forward?.

We wouldn't comment specifically on next year, but we would expect -- I would say generally, we would expect COVID costs to come down. They are not wholly permanently part of the cost. .

We have our next question coming from the line of John Kernan with Cowen. .

Just curious on the margin picture. You obviously outperformed your comp guidance, and the EBIT margin was down roughly 100 basis points from the pre-COVID base in '19. You're guiding it much lower than that, albeit on lower comp guidance for the fourth quarter.

Just curious, what do you think the biggest levers are to recapture that low teens operating margin that you generated in 2019? There's a lot of inflation across retail, the factories, your vendors, supply chain.

Just curious how you think you're going to recapture that pre-COVID level of profitability? Is it really just through more comp store sales gains? How do we quantify that?.

Sure, John. As I said, obviously, we're in a very healthy sector of retail and are confident in our prospects for further market share gains. As we sit here today, it's difficult to predict how much of the inflationary cost headwinds we're experiencing from the burst of economic activity are transitory versus permanent.

So margin recovery will be dependent on where and when those costs stabilize. .

And of course, our sales volume, where we once again, we believe we have a long-range, large market share opportunity ahead of us. Over time, we would expect to return to double-digit EPS growth on the 3% to 4% comp.

We do have initiatives in the company to try to increase efficiencies in our big areas of expense, including our stores and distribution centers, but it's going to be largely dependent on the transitory nature of the inflation that we're seeing today. .

We have our last question coming from the line of Tim Vierengel with Northcoast Research. .

Can you guys remind us of how you're thinking about store footprint and unit growth? And then maybe highlight for us if that environment or setup is getting easier or more difficult as you look forward?.

Sure. On the real estate front, as we said in our comments, we ended up -- we wrapped up our program for this year. We opened 65 stores. We also said that we expect to return to historical annual program in 2022 of opening 100 stores annually. Overall, the real estate market is good.

And we would expect there to be increased supply of available sites, given the level of store closures. .

Good. Sorry I missed that. .

There are no further questions on queue. I would now like to turn the call back over to Barbara Rentler for any closing remarks. .

Thank you for joining us today and for your interest in Ross Stores. Happy holidays. .

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect..