Victor Herrero - CEO Sandeep Reddy - CFO.

Eric Beder - Wunderlich Securities Randy Konik - Jefferies Krista Zuber - Cowen and Company Betty Chen - Mizuho Securities Jeff Van Sinderen - B. Riley.

Good day, everyone, and welcome to the Guess? Fourth Quarter Fiscal 2017 Earnings Conference Call. On the call are Victor Herrero, Chief Executive Officer; and Sandeep Reddy, Chief Financial Officer.

During today’s call, the Company will be making forward-looking statements including comments regarding future plans, strategic initiatives, capital allocation and short and long-term financial outlook.

The Company’s actual results may differ materially from current expectations based on risk factors included in today’s press release and the Company’s quarterly and annual reports filed with the SEC. Now, I would like to turn the call over to Victor Herrero..

We are executing our supply chain initiative to drive IMU by the way of product cost improvement, and the estimated cost savings from this initiative is expected to be $8 million in the coming year.

Specifically, we are developing our sourcing network in new territories like Bangladesh, Pakistan and Cambodia that can offer better cost without compromising quality. We are consolidating and building a strategic partnership with high-quality suppliers to gain scale efficiency.

And we are implementing a fabric platforming process utilizing common fabric across the multiple styles. Our supply chain initiative is a goal initiative with cost savings in Europe and in Asia expected to be an additional $16 million this year. Moving to Europe, during the quarter, revenues grew 11% in U.S. dollar and 14% in constant currency.

This growth was driven by new store opening, mid single digit constant currency positive store comps with a strong traffic and conversion and a rapid ecommerce growth. As we predicted on our last call, as a result of this rapid growth, the penetration of ecommerce in Europe is now similar to the Americas as a percentage of retail sales.

During the quarter, we opened 15 directly operated stores in Europe, bringing the total net openings for the year to 56. We added new stores to our fleet in Spain, Portugal, Denmark, Sweden, Turkey, Russia and Poland, and we plan to open another 60 stores in Europe this year.

While we are happy with the stabilization of our wholesale business, our retail channel in Europe continues to grow faster than wholesale, and retail now accounts for 55% of our sales in the region.

Very importantly, the adjusted operating margins in the European segment expanded 80 basis points in the quarter, continuing the improvement in profitability that we have seen for three consecutive quarters. Moving to Asia. Fourth quarter revenues were up 27% in U.S. dollar and up 28% in constant currency.

Revenue growth was driven by store openings, ecommerce growth, double-digit constant currency positive store comps in Greater China, and the timing benefit of an earlier Chinese New Year this year. During the quarter, we opened 13 stores on a net basis across Asia, bringing the total for the year to 54.

Specifically in China, we opened stores in Shanghai and Beijing, and in addition, opened stores in Kunming in the southwest, Changsha and Chongqing in the west, Shiyan in the northwest, Harbin in the north and Nanjing, Suzhou and Wuxi in the east. And we plan to open another 35 stores in Asia this year.

I was delighted with the improvement in profitability in Asia as we saw a significant sequential improvement versus the prior quarter. Our adjusted operating margins for the segment expanded 30 basis points as we started to benefit from the investments we have made to build out our China infrastructure.

Now, a little more detail on the Americas, which includes the U.S., Canada, Mexico and Brazil. Retail revenues for the quarter decreased 6% in U.S. dollars and in constant currency with G by GUESS being our best-performing concept.

Both revenues and comp were negatively impacted by traffic declines and lower AURs in what was a highly promotional holiday quarter with an erratic traffic cadence during the quarter. Wholesale revenues grew 1% in U.S. dollar and 4% in constant currency, driven by growth in both the U.S. and Canada during the quarter.

We are particularly pleased with our Canadian business that grew in U.S. dollar and constant currency for the year. Stepping back, while pleased with the progress in our international business in Europe and in Asia, it is clear that the Americas Retail has underperformed significantly relatively to our expectation a year ago.

This is why our plan for the Americas has changed fairly grammatically and we will continue to monitor and evolve our strategy at market process dictates. The goals associated with our three-year plan that we outlined a year ago are no longer achievable due to the headwinds in the Americas.

However, we have the flexibility to react and refocus our resources on regions that have strong trends and a very positive, longer term outlook. And we plan to take advantage of this in order to drive long-term profit growth.

As I think about the future of our Company, it is critical that we remain focused on flowing high-quality product, delivering best-in-class digital and in-store experiences, and maintaining our long-term brand building approach anchored in continued investment and advertising and marketing, a supply chain and our digital platform.

In summary, we are executing both, an impactful growth strategy in Europe and Asia, and we expect to improve profitability in the Americas by reducing our footprint and our cost structure. In the fourth quarter, we repurchased just under 300,000 shares of our stock for $3.5 million.

We have the financial wherewithal to finance our Company’s aggressive growth in Asia and in Europe, pay a healthy dividend to our shareholders, and opportunistically buy back shares. One last point, I continue to reinvest all my Guess? dividend in purchasing Guess? stock.

Sandeep?.

Thank you, Victor, and good afternoon. During this conference call, our comments reference certain non-GAAP or adjusted measures. Please refer to today’s earnings release for GAAP reconciliations or descriptions of such measures. Fourth quarter revenues were $679 million, up 3% in U.S. dollars and 4% in constant currency versus prior year.

I would like to highlight that this was a second consecutive quarter of revenue growth this year, even though revenues finished at the low end of our guidance in constant currency.

Total Company gross margin decreased 170 basis points to 34.8% due to the negative impact of markdowns, occupancy deleverage in the Americas, and mix, partially offset by higher IMU in Europe.

SG&A as a percentage of sales increased by 100 basis points as cost savings from the global cost reduction plan was more than offset by a sales deleverage in the Americas. During the fourth quarter of fiscal 2017, we recorded asset impairment charges of $33 million that relates primarily to Americas store impairments.

Adjusted operating income for the fourth quarter was $54 million and operating margin finished down 270 basis points at 7.9%, including the negative impact of foreign currency of roughly 40 basis points. Please refer to our press release from today for additional information on operating margins by segment.

Our fourth quarter adjusted tax rate was 37%, up from 30% last year. Adjusted diluted earnings per share finished at the low end of our guidance at $0.41. This compares to adjusted diluted earnings per share of $0.57 in last year’s fourth quarter. The net negative impact of currency on earnings per share in the quarter was roughly a $0.01.

Moving on to the balance sheet. Accounts receivable was up 1% in U.S. dollars and 2% in constant currency. Inventories were $367 million, up 18% in U.S. dollars and in constant currency versus last year. The increase in inventory is driven entirely by Europe and Asia to support their revenue growth plans and as well as timing of receipts.

We have significantly reduced future receipts of inventory in the Americas, as we continue to execute our store closure plan and bring inventories down in line with expected decline of sales in the region.

Free cash flow was an outflow of $19 million compared to an inflow of $124 million on an adjusted basis in the prior year, a decrease of $143 million. This decrease was driven by increase in working capital, lower earnings and increased capital expenditures.

We ended the quarter with cash and cash equivalents of $396 million compared to last year’s $445 million, including $35 million related to the sale of our minority interest investment earlier in the year. Cash less debt at the end of the fourth quarter was $372 million compared to $439 million last year.

During the year, we returned $80 million to shareholders in the form of dividends and share buybacks. Since the start of our dividend program in 2007, we have returned over $1.3 billion to our shareholders in the form of dividends and share buybacks.

Moving on to the guidance, I should point out that our outlook for the first quarter of fiscal 2018 and the full fiscal year 2018 does not assume any restructuring or asset impairment charges. Also, guidance for revenues and comp sales by segment is included in a supplemental table attached to our earnings release.

Excluding currency impacts, the top end of our guidance for the year reflects 9% adjusted EPS growth and operating margin expansion of 50 basis points as strength in the Europe and Asia business is expected to be more than offset by weakness in the Americas business.

In Europe, we will be focused on growing our store base, comps and ecommerce, maintaining the momentum from last year.

In Asia, we are pleased with the traction we are seeing or beginning to see in Greater China as we start to scale the infrastructure investments we have made, to build the long-term growth platform and expect to continue growing our store base, comps and ecommerce.

In Americas Retail, our focus for fiscal 2018 will be the profitability improvement plan that Victor talked about earlier. This plan is expected to partly mitigate the deleverage in operating margins from negative comp trends we are projecting due to an environment of declining traffic.

Considering these factors for the first quarter of fiscal 2018, we expect revenues for the quarter to be up 2% to 4% in constant currency, driven by the expected strong growth in Europe and China, partially offset by an expected decline in Americas Retail.

At prevailing exchange rates, we estimate that currency will be roughly at 2.5 percentage point headwind on consolidated revenue growth for the quarter.

While we are pleased our supply chain initiatives have fuelled IMU improvement, we expect occupancy deleverage from the Americas Retail to pressure gross margins that should finish down slightly for the quarter.

The SG&A rate is expected to be up compared to last year, primarily as we are expecting to deleverage in the Americas due to negative comp projections. We are planning an operating margin for the quarter between minus 7% and minus 6% including the impact of currency headwind of roughly 30 basis points.

Earnings per share is planned in the range of a loss of $0.33 per share to a loss of $0.30 per share and excludes the impact of any share repurchase. Currency is expected to be a $0.03 favorable impact on earnings per share in the quarter. Our tax rate for the first quarter is estimated to be 15%.

We expect consolidated revenues for the year to be up between 4% and 6% in constant currency. It should be noted that we expect an increase in revenues, even after having closed in many stores in the Americas.

At prevailing exchange rates, we estimate that currency will be a roughly 2 percentage point headwind on consolidated revenue growth for the year. For the full-year, we expect gross margins to be up due to improved IMUs in both the Americas and Europe, and a mix shift as we close unproductive doors that enables an offset to occupancy deleverage.

The SG&A rate is expected to be up for the year due to deleverage in the Americas business and reset of incentive compensation. Our tax rate for the year is estimated to be 40%. We are planning an operating margin between 2.2% and 3% including the impact of a currency headwind of roughly 40 basis points.

And our guidance assumes foreign currencies remain roughly at prevailing rates. Earnings per share is planned in the range of $0.28 per share and $0.40 per share. Earnings per share guidance includes a currency headwind of roughly $0.08 per share.

CapEx for the year is expected to range from $85 million to $95 million, as we continue to invest in our retail expansion in Europe and Asia, and our technology infrastructure to support that long-term growth.

The Board of Directors has approved a quarterly dividend of $0.225 per share, payable to shareholders of record at the close of business on April 13, 2017. In conclusion, we expect our Europe and Asia businesses to continue growing sales and profit margins in the year, increasing their share of company profits.

As we cycle the store closures in the Americas, the relative weight of the increasingly profitable international businesses will increase in the Company. This mix shift, combined with improving profitability for the Americas business, will be a driver of long-term company operating margin expansion.

With that, I will conclude the Company’s remarks and open the call up for your questions..

Thank you. [Operator Instructions] And our first question comes from Eric Beder from Wunderlich Securities. Please go ahead..

Two questions, one is, you talked in the ICR conference about longer-term goal of operating margins of 7.5% approximately.

Is that still the goal, and how should we think about the timing to getting there? And the second is, in terms of the store closures in the U.S., what stores are you closing, what changes, is it cross, up and down, is it primarily -- what’s being closed?.

Okay. So, let me take this, Eric. I think at the ICR conference, we talked about the 7.5% operating margin goal as a long-term goal.

And I think where we are, given the cadence of what’s been happening in the Americas and the trends being a lot worse than what we expected, we are taking very rapid action, as you heard in the prepared remarks to shrink our footprint in Americas.

So, to the extent that we are going to take a look at more time to restructure that portfolio, the margin goal may get pushed out a bit. But, I think it’s still very much a longer term operating margin goal; it’s maybe a bit delayed by a few years, but not too long as we actually build the international businesses.

And I think in terms of the store closures in the U.S. Well, previously we’ve said that our more productive stores the Factory and G by GUESS and that’s why I think the majority of the store closures will be more towards the Guess? and MARCIANO concept.

But there are few stores being closed in the other concepts as well, because the criteria is really whether the stores are profitable or not..

Our next question comes from Randy Konik from Jefferies. Please go ahead..

Yes, thanks a lot. So, I guess following up on that. How you guys thought about what the U.S. footprint should ultimately look like? So, I think that you kind of talked through the ability -- you have a lot of financial feasibility and flexibility, at least on the horizon with about, I think you said 50% of your U.S.

stores either up for lease expiry or kicking out process over the next three years. So, you talked about closures versus renegotiated leases.

Can you walk us through what the process of why choose a lower rent versus an actual closure? And what ultimately do you actually think the store number should be in the United States, what the revenue number should be in the United States? And when you get to that kind of level, what would be the profit margin you guys be thinking about in realistic operating segment margin for the U.S.

market, considering that, I agree that you’re doing good job in Europe and Asia? The goal is to kind of minimize the destruction of U.S. market as quickly as possible in the financial statements. So, I just kind of wanted to get your, kind of end game or end goal for the U.S. market? Thanks..

Well, basically what is clear and is a fact that this year we will close 60 stores in North America. So, having said that, what is going to happen afterwards, at least we have a lot of flexibility, because half of our stores will have a kick-out close or a lease expiration over the next three years.

So, this is giving us a lot of flexibility, and this is what we are going to do. It’s basically, we will -- the process on this rent renegotiation or closing the stores will be basically we’ll approach landlord, we’ll try to renegotiate, and if we are not happy with our rent renegotiation, we will close the store.

So, I mean, imagine the flexibility we have is that -- I mean, at this moment, we have more than 400 stores. So, we can close in the next four years, 60 this year and another more than 100 stores or 120 during the next year.

Having said that and seeing the structural changes that we are always seen in the U.S., basically what we are trying to do is to become very profitable in the U.S. and trying to grow anywhere else.

For example, as we mentioned during the last -- for the last six quarters, we’ve been seeing positive comps in Europe; for the last two quarters we’ve been seeing very positive comps in Asia. So, what we are trying to create -- rebalance a little bit our business between the international and the domestic.

And basically, when I’m saying structural changes, what I want to say is that we are seeing in the U.S. market, a significant drop on traffic which is see leading us on the fourth quarter to a more promotional environment. And at the same time, this is basically, as a consequence, declining our margins..

Randy, just to follow up on your question on margins. Definitely, I think everything Victor is talking about is really to restructure the footprint and making a smaller core. And I think that makes it easier to actually reflect operating margins to where it’s a profitable business and move from -- in the right direction from here.

But I think to his point, the main priority is to have a greater weight of our international businesses in the portfolio..

Can I just ask one follow-up? Do you know how in the U.S. market it tends to be a retail centric model and then Europe, it’s more of a wholesale centric business. Do you think in the U.S.

-- obviously those partner stores have their own issues but do you envision like a significantly reduced retail centric model in the United States along with some -- maybe compare back on the wholesale.

I guess, what I’m trying to get at is I’m trying to figure out what the ultimate volume and points of distribution you think is appropriate for the U.S. market? I know you are reducing stuff, stores and what not because these lease expirations.

I’m just trying to get a sense of where you think the ultimate level of business from a volume standpoint, but also a point of distribution standpoint should be in the U.S.

market, considering you are doing very well in Europe and Asia?.

The thing is that we were a wholesale centric model in Europe. But, I think that we don’t need -- we have to create also a balance over there. I think that right now 55% of our retail -- our sales in Europe is coming from retail. So., basically, we were defined in Europe as a wholesaler.

And right now, we are becoming clearly a balance between a strong retail organization plus the complement of a wholesale organization. Whereas in -- as you saw in our results, we are up on wholesale in North America. And this is a very important point. But, at the same time, we are very retail centric.

I don’t see in the future that we are going to become much more wholesale-driven in North America. But, at the same time, we will try to create a balance according to how the North America business is going to evolve..

Our next question comes from John Kernan from Cowen and Company. Please go ahead..

Thank you. This is Krista Zuber on behalf of John Kernan. Thank you for taking our questions.

First one, the same-store sales increases you are experiencing in Europe and China, for fiscal 2018, can we expect to be again a combination of traffic and increasing average transaction, could you give some insight into that?.

Yes. I mean, we expect that basically our positive comps will continue in Europe and in Asia for fiscal year 2018, and even further, and basically will be an increase on traffic.

Also, all the global initiatives that we are taking for the last 18 months, which is basically elevating the product, being very smart in terms of production or promotions as well we will try to be very smart as well on inventory management, particularly in the U.S.

Also, the marketing that we are -- the marketing expenditure going more into social media. We are going to try to develop as much as possible our CRM programs worldwide. And last but not least, we’ll continue doing a lot of initiatives on supply chain to improve our IMUs..

Okay. And then on the closings for North America.

How should we think about the cadence of those closings flow through fiscal 2018? Will it be more of a first half weighting or second half?.

It’s more backend weighted, Krista..

Okay, great. And then, finally, on your licensing business. In terms watches and handbags, obviously continue to be very challenging quarter for the sector in general. Just wondering if you could update us on your view on that side of the business? Thank you very much..

Yes. I think it was a tough year for us on the licensing business and we were down double digits for the year-end. I think it is broad decline. Watches are well talked about in the space. I think that’s been a difficult category.

But for what it is, I mean Q4 actually was a sequential improvement; we finished down high single digits compared to the year of down double digits.

And from what we’ve seen from our licensees, the projections that they are showing us are showing that there should be a slight sequentially improvement moving into fiscal 2018 as well, which is why they’re guiding down in the mid single digits. And we continue to monitor the situation, work closely with them on innovation.

So, let’s see how things develop over the course of this year..

At the same time for licensees, it’s all about to elevate the product, not only in our parallel business, but also the good news is that we have 25 product categories, some of them through licensees. And I believe that whatever we have the right product, we sell.

So, we are quite confident about the product that we have with them and hopefully we’ll see results soon..

And our next question comes from Betty Chen from Mizuho Securities. Please go ahead..

My first question is, it looks like when we look at the Americas wholesale guide for the year, it may be assuming for some acceleration, as we progress through the year. So, I was just kind of curious on the thinking behind that. And then, in terms of the inventory position. I believe you mentioned it’s for Europe and Asia and maybe some timing.

Can you help us maybe parse that out a little bit and also give us a sign of where the Americas inventory position is, if it’s down year-over-year? And my last question is regarding direct to consumer or omni-channel. It sounds like big opportunity in Europe and also coming up in Asia.

Can you remind us what that penetration is in each of the regions or consolidated? And how much of that could be some of your new services? We saw that you are launching some new in-app services that look really compelling. So, just kind of curious on how much of that may be coming from mobile nowadays..

All right, Betty. That’s a mouthful of questions....

Thanks, Sandeep..

So, I’ll take the first two and then Victor takes the third one. So, your first question was about the North America Wholesale cadence of shipments basically. And there is some timing in there in Q1, I think we’re guiding down low-singles, but I think for the year we are guiding up in the low-singles.

So, it’s a bit of timing across the quarters but overall, we expect a pretty stable wholesale business and I think you saw a bit of that happen already in Q4 of last year. So, we are pleased with where the wholesale business is trending and expected to trend. Now, moving to the next question on inventory.

Our inventory position is really an interesting one because I think in Europe and Asia, we are pretty happy where things are -- all the growth in inventory that we have at year-end was for Europe and Asia. And some of it was timing of receipts. We probably got receipts a bit earlier, timing of Chinese New Year and a few other things.

But the issue was really Americas region. But, there, we’d already by the end of the year gotten into a position where inventory was down slightly at year-end in value terms.

We are actively looking to cut receipts as we go along and we should see a material improvement in the inventory position by the end of Q1 and we are going to continue to make those improvements as we go through the year. And this is something that we are doing in a great disciplined fashion in terms of inventory.

We are looking at the comp trends that we are expecting, the store closure that we are planning, and ensuring that we are actually matching our receipts to what those trends are and the expectations are. And so, I think you’ll see a very different approach in terms of inventory as we go through the balance of this year.

So, the key over here is -- and we’ve said it all along throughout the entire year, we adapt. We’ve been adapting very quickly as we’ve gone through the entire past year. And our plans as, you said, have evolved. And we have tremendous capacity to adapt and make sure that we are moved in place of change.

If you see an inflection in the certain trends, we can react to it, and we have the resources to be able to react to it very quickly. And so, we are pleased about where the inventory is going and we are going to be managing it very actively this year. So, with that I’ll ask Victor to add..

Regarding the ecommerce business, I think that we are seeing very good results both in Europe and in Asia, and it’s a little bit softer in the U.S.

But having said that, what we are doing and all the initiatives that we are doing on online to offline or any other things like mobile, thank you for your complement on the application, actually we are implementing these everywhere.

The important thing as well is to really be fully omni-channel, try to be what I was mentioning in my call in last meeting is that basically digital first. And I think what we have to try to do is integrating as much as possible the retail channel with the online channel.

And this is what we are trying to do everywhere with several different results but at the same time, I think the results will -- I feel very confident where we are going on ecommerce and on our ecommerce business, not only here in the U.S. but specifically for example in China, we are seeing a huge increase on comps comparing with the last year.

And I think we should continue doing the same way as we are doing. Also, very important, as I mentioned before is our loyalties programs. I mean, we are focusing on those and also on our CRM platforms..

Victor, can you remind us what the ecommerce penetration is?.

Our ecommerce penetration is around 10% of our retail sales..

It’s similar in the Americas, as you can see in the press release..

Okay. No, that’s great. The new features are terrific. So, great job..

Thank you. Thank you very much..

Our next question comes from Janet Kloppenburg from JJK Research Associates. Please go ahead..

Janet? I think we can go to the next if Janet is not there..

Our next question comes from Jeff Van Sinderen from B. Riley. Please go ahead..

Let me just say congratulations on great work in Europe and Asia. I think you deserve that.

Aside from closing stores, can you talk a little bit more about what you think ultimately needs to happen in the North America segment, particularly domestic to get the comps and margins to turn around, in that segment? Maybe touch on why you think the product and the brand still aren’t resonating as well in North America and especially domestic.

And then, maybe you could just speak a little bit more about the North America e-com expectations.

I know, you mentioned that it’s been softer than EU, Asia, but has it been trending down and do you expect North American e-com to turn around?.

Yeas. I think when it comes to North America, the issues really are more structural than to do with us specifically I would say, Jeff. I mean, we’ve been looking at traffic declines in malls for years now.

And the fact that traffic has been declining and basically retailers are actually sharing -- are fighting for the consumer dollar, it’s gotten so much more promotional that profit margins have been squeezed a lot. And all brands that are playing in this space have actually been impacted by it.

So, what you are seeing now is a natural shakeout that’s happening in the space. And I think we are part of it where we are actually reducing our footprint. Because structurally, I think in the short-term as those things rebalance themselves in the marketplace, it’s going to be a bit tougher for us to actually compete in this environment.

And it’s not good for the long-term health of the brand.

But everything that we’ve been talking about doing, whether it’s the digital initiatives that we talked about previously, the marketing that we’re talking about, whether it’s social media or any other kind of digital media that we actually approach the consumer with, using celebrities, using bloggers to endorse our brand, all of that stuff is going on in parallel.

And I think that’s really key to the long-term health of the brand. And so, what we’re trying to do right now is mitigate the structural challenges that are facing us in the environment in which we’re operating. And then, if we cut the business down to a smaller core, getting it back to be more profitable, I think over time will be fine.

I mean, I think trying to do it with the business as big as it is right now with the structural headwinds that we are facing, this is quite challenging..

And Jeff, I want to add one thing regarding the product. At the end of the day, all the product initiatives that we are doing in places where we are doing a little bit better like for example Europe and Asia, we are applying in a much more significant way in U.S. But for the time being, it’s not working.

But I mean, all the product initiatives are global initiatives. And we’re seeing a lot of improvement in Europe and in Asia. But at this moment in the U.S., it’s a little bit softer..

Okay. And I’m sorry, just as a follow-up to that.

Are there any areas where it is actually starting to turn around or work better in domestic or North America in terms of product, anything to call out there?.

Yes. Our wholesale business. Our wholesale business is up 1% for the quarter, and it’s in both markets, in U.S. and Canada. So definitely, the product in North America, we are seeing some improvement, let’s put it this way, in our wholesale channel..

Okay.

No, I was thinking more in terms of in your own retail stores, if you were seeing any certain categories of products starting to turn around, like weather it’d be denim or tops or women’s, men’s, something along those lines or if it’s too early for that?.

I think it’s very difficult to tell you I mean what is -- of course I can tell you for example that -- I mean our tops are doing better than our denim or our denim is doing better than for example our handbags. But it’s not really so -- I don’t think that -- whenever it’s going to come, it’s going to come overall.

Because I mean, as you know, we are trying to focus on the total outfit. And I’m not trying to be a basically a specializing one product category. And if we put all our efforts in that particular product category, maybe we are losing some opportunities in other product categories.

Got it, okay. Thanks for taking my questions and best of luck..

Thank you..

[Operator Instructions] Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating and you may now disconnect..