Alan Quan - Herbalife Ltd. Michael O. Johnson - Herbalife Ltd. Richard P. Goudis - Herbalife Ltd. John G. DeSimone - Herbalife Ltd. Desmond J. Walsh - Herbalife Ltd..

Timothy S. Ramey - Pivotal Research Group LLC Michael A. Swartz - SunTrust Robinson Humphrey, Inc. William Leach - Tidal Bore Capital Advisors LP..

Good afternoon, and thank you for joining the Third Quarter 2016 Earnings Conference Call for Herbalife Ltd. On the call today is Michael Johnson, the company's Chairman and CEO; Des Walsh, the company's President, Richard Goudis, the company's COO; John DeSimone, the company's CFO; and Alan Quan, the company's Vice President, Investor Relations.

I would now like to turn the call over to Alan Quan to read the company's Safe Harbor language..

Before we begin, as a reminder, during this conference call, comments may be made that include some forward-looking statements. These statements involve risk and uncertainty. And as you know, actual results may differ materially from those discussed or anticipated.

We encourage you to refer to today's earnings release, and our SEC filings for a complete discussion of risks associated with these forward-looking statements in our business.

We do not undertake any obligation to update or release any revisions to any forward-looking statements or to report any future events or circumstances or to reflect the occurrence of unanticipated events except as required by law.

In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements, prepared in accordance with U.S. Generally Accepted Accounting Principles, referred to by the Securities and Exchange Commission as non-GAAP financial measures.

We believe that these non-GAAP financial measures assist management and investors in evaluating our performance and preparing period-to-period results of operations in a more meaningful and consistent manner as discussed in greater detail in the supplemental schedules to our earnings release.

Please refer to the Investor Relations section of our website, herbalife.com, for additional supplemental information and to find our press release for this quarter, which contains a reconciliation of these measures. Additionally, when management makes reference to volumes during this conference call, they are referring to volume points.

I'll now turn the call over to our Chairman and CEO, Michael Johnson..

Thank you, Alan, and welcome, everyone. Our President, Des Walsh and our Chief Operating Officer, Rich Goudis are joining us from Thailand where they are attending an important year-end distributor event.

As we've seen from our press releases today, we have some great news and I'd like to start by congratulating Rich who'll succeed me in the role of Chief Executive Officer next June.

As we begin the process over the next six months and turn the management reins to Rich, the board and I do so knowing that the company is in a very strong place and in steady and capable hands. This is an exciting milestone for Herbalife Nutrition.

When I first joined as a Chief Executive Officer in 2003, I knew that I was becoming part of a special company in whose mission I passionately believed.

Thanks to the great work of our distributors, management team, and employees, we have literally changed peoples' lives across the world from providing an economic opportunity to our distributors to helping millions of customers lead healthier lives through our quality nutrition products in our personalized community approach to health and wellness.

My passion for what drives our company has only grown stronger each year, and as Executive Chairman, I look forward to furthering our thought leadership about the future of nutrition and the critical role it plays in addressing many of our global health issues.

In this capacity, I will be traveling the world to our distributor events to share with them key nutrition issues and trends and to inspire and motivate them as they further our mission globally.

We've been planning the process of succession management over the past several years and have outlined a seamless transition plan that will provide for business continuity. Rich has been a key leader since we hired him as Chief Financial Officer in 2004. I promoted him to Chief Operating Officer in 2010.

So for more than a decade, he and I have worked side-by-side and I've witnessed firsthand his tremendous leadership and vision. As Chief Operating Officer, Rich is reasonable for dramatically expanding our worldwide operations to better meet the demand for our product.

He increased our focus on product innovation and quality to the point that we now have over 300 employees with science degrees including 36 who hold Ph.D. Rich has championed our people, our values and our culture around the world, working with our distributors and our workforce, which now exceeds 8,000 employees.

Board and I are confident that Rich is the right person to lead Herbalife Nutrition well into the future and we know that the company will continue to thrive under his leadership, when he assumes the CEO role in June. You'll hear from him in just a minute, but let me now quickly turn to our financial performance.

Quarter three was another strong quarter. We had solid volume point growth across five of our six regions, with six out of our top 10 countries experiencing double-digit growth. For the quarter, we grew worldwide volume 0.56% compared to the same period last year.

Reported net sales grew 2% to $1.1 billion, it's our third consecutive quarter of positive year-on-year reported net sales growth despite the challenging currency environment. On a constant currency basis, our net sales increased 5% versus the third quarter of 2015.

This growth combined with our continued focus on managing expenses has yet again resulted in our ability to exceed expectations on EPS. In fact for the quarter, both reported and adjusted diluted EPS exceeded the high-end of our guidance. John, will go over our financials in more detail.

As you can see from our results, our business continues to perform well and we see important progress on several fronts. In EMEA, third quarter volume points grew 15% as we continue to advance our product innovation.

In September, we launched exclusively in EMEA, Beta heart; its key ingredient is clinically proven within the EU to lower and maintain blood cholesterol. This is an important product for Europe, because cholesterol levels there are among the highest in the world.

We also launched our new Formula 1 Raspberry and Blueberry with 20% less sugar than many of our other flavors, and contains no artificial sweeteners or color. We're looking to further reduce in our already low level of sugar in our range of great tasting shakes. In China, this quarter was softer than we projected.

We believe we have identified the reasons to the slower level of growth compared to the prior quarters and are working with our local service providers to refocus their efforts on their face-to-face activities with customers on more targeted promotions and seasonal products and wellness campaigns.

This market remains a huge opportunity, given the increasingly health-conscious consumer and demand for premium brands. In the U.S., we reported a strong 9.5% volume point growth this quarter versus last year. A number of new members in the U.S. grew 7% this quarter versus Q3 last year, and the number of new sales leaders grew 29%.

These extremely positive metrics are testament to the dedication and focus of our distributors here in the U.S. and their confidence in their ability to thrive under the FTC settlement announced in July. We will provide training and support for the adoption of the new procedures and believe that our U.S.

business will emerge stronger than ever following the successful implementations of these new regulatory requirements. By collecting sales data, we will gain tremendous insight into our customers' nutrition habits, and this will allow us to further personalize their wellness experience.

As we said in our last call, we believe these changes will be good for our company and for our distributors and support our growth down the road. Rich was appointed to lead our implementation of the FTC settlement and I'd like to recognize him and the team he is assembled for their impressive (07:50) progress.

They've accomplished a great deal in a short period of time and we are on track to meet all of our regulatory requirements by May 2017. I'll turn the call over to him now to share more details, but I want to reiterate how happy we are to have Rich stepping into the role of CEO next year. Congratulations, my friend..

number one, place distributor purchase orders in the three categories I just mentioned; number two, take payment and generate receipts for product sales to retail customers in the field; number three, take payment and generate receipts for club memberships and consumption and register nutrition clubs; and number four, manage customer data and review customer activity whenever it occurs, whether that would be in a club, in the field, on Go Herbalife or through the MyHerbalife preferred member portal.

And to provide our distributors with education material starting on November 7 and running through the end of May, we will be hosting weekly webinars on the use of the new online ordering and receipt tools. Looking ahead, by the end of December, we plan to have the backend receipt repository completed. This is where all receipts will be stored.

This will allow us to upgrade our distributor facing tools, so that distributors will have full visibility into their levels of retail volume, well ahead of May requirement. Lastly, in January, we will introduce a new retail customer loyalty program for those retail customers that transact directly with our distributors.

This would be a valuable tool in helping distributors to enhance the activity and retention of their customers. So, I just want to reiterate, we're on track with our implementation timeline and appreciate the support of our distributors, who've really embraced the segmentation of our member base and the new tools.

With that, let me turn it back over to you, Michael..

Thank you, Rich. I'm optimistic and confident about the future and I want to thank all of our Herbalife distributors and staff worldwide for their tremendous effort in delivering these great results. Our Chief Financial Officer, John DeSimone will now take you through the financial numbers and additional regional performance in more detail.

John?.

Thank you, Michael. Today, I will start by discussing the company's third quarter 2016 reported and adjusted results, including key market highlights. I will then review our fourth quarter and our initial full-year 2017 guidance.

For the third quarter, we delivered another strong volume performance with worldwide volume points growing 6% compared to the third quarter of 2015. Five of our six regions and approximately 70% of our worldwide markets experienced volume point growth in the quarter.

Reported worldwide net sales for the third quarter increased 2% to $1.1 billion and increased 5% on a constant currency basis compared to the prior-year period. This marks the third consecutive quarter of year-over-year reported net sales growth in our seventh consecutive quarter of constant currency net sales growth.

Reported and adjusted EPS for the third quarter 2016 both exceeded the high end of our guidance by $0.17 and $0.13 respectively. Reported diluted EPS was a $1.01 while adjusted diluted EPS was a $1.21 compared to a $1.09 and $1.26 in the same period last year. Third quarter EPS included a $0.21 negative impact due to currency fluctuations.

Moving on to our regional and market highlights. The U.S. maintained a good growth trend with volume points up 9.5% compared to the third quarter 2015. Members in the U.S. have demonstrated strong focus and resiliency in preparation for the upcoming regulatory changes.

As Michael previously highlighted, we've already initiated certain aspects of the implementation process and expect to release the new customer point-of-sale tracking tool in mid-November. Volume points in China increased 2% compared to the third quarter 2015.

We believe that the recent lower rate of sales volume increase is attributed to members testing new business methods through social media in China.

Although social media has been an excellent complementary approach to reach new consumers, its exclusive use as a primary business model has proven to drive increased levels of trial, but less repeat business.

Members are now refocusing their attention on proven business methods, increased customer segmentation, targeted marketing, and product promotions. The market will continue to face challenging year-over-year comparisons as it refocuses its efforts.

Asia-Pacific volume growth exceeded expectations in the quarter with multiple countries showing strong volume performances. Volume points in the region increased 7% compared to the prior year period. Volume points in Asia-Pacific, excluding Korea increased by 18% compared to the prior year, while South Korea finished down 29% in the quarter.

Mexico with volume growth of 13% marked its fourth consecutive quarter of year-over-year growth. Members in Mexico continue to focus on building sustainable businesses, aided by improvements in product pick-up and payment capabilities from our third-party distributor partners.

The devaluation of the Mexican peso continues to be a challenge as reported net sales finished down 1% in the quarter despite 14% growth in constant currency. EMEA continues to post consistent volume growth with approximately three-quarters of the markets in the region showing growth.

This has resulted in a regional volume point increase of 15% compared to the prior year period. Russia volume points were up 10%, compared to the third quarter of 2015. Lastly, third quarter volume decreased 15% in South and Central America region compared to the prior year period.

The region continues to be impacted by Brazil, which declined 28.5% compared to the third quarter 2015.

Our management team in Brazil is extremely focused on developing strategies to further mitigate the impact of depressed consumer spending driven by the challenging macroeconomic and political conditions in the country, excluding Brazil and Venezuela, volume points in the region were flat.

Continuing with our financial highlights for the third quarter, as previously mentioned in the third quarter, worldwide volume points grew 6%, while reported net sales grew 2% to $1.1 billion and grew 5% on a constant currency basis, both as compared to the third quarter of 2015.

Third quarter reported net income was $87.7 million, or $1.01 per diluted share, which exceeds the high-end of our guidance range of $0.84. The reported results include a $0.21 currency headwind compared to $1.09 per diluted share for the third quarter of 2015.

Our reported EPS continues to include items we consider to be outside of normal company operations, but we believe will be useful to investors when analyzing period-over-period comparisons of our results. Please refer to our third quarter earnings press release for details of these adjustments.

Third quarter 2016 adjusted diluted EPS was $1.21 per diluted share, which exceeded the high end of our guidance of $1.08 and compared to $1.26 per diluted share for the same period a year ago. Similar to reported EPS, our adjusted EPS in the third quarter was negatively impacted by approximately $0.21 due to currency fluctuation.

Gross margins for the third quarter 2016, when compared to the third quarter 2015, included among other items, the favorable impact of cost savings through strategic sourcing and self-manufacturing from a 114 basis points, retail price increases of 29 basis points, both were partially offset by the unfavorable impact of currency fluctuations of 143 basis points.

For the third quarter, reported SG&A as a percentage of net sales was 39.3% which was essentially flat compared to the prior year period. Excluding the impact of non-GAAP items which I have disclosed in today's press release, SG&A was 38.2% of net sale, a decrease of approximately 20 basis points compared to the prior year period.

Excluding China member payments, adjusted SG&A as a percentage of net sales was 29.3%, approximately 40 basis points above last year. Reported third quarter effective tax rate was 32.2%, while our adjusted effective tax rate was 31.5%, approximately 100 basis points worse than the adjusted tax rate in the third quarter of 2015.

At the end of the quarter, we had $788.3 million in cash of which approximately 48% was held in the U.S. Looking ahead to guidance, starting with the fourth quarter 2016, we estimate volume points to be in a range of a decline of 1.5% to growth of 2.5%.

Volume point growth in the quarter will be negatively impacted by 120 basis point to 170 basis point, as a result of the timing of price increases in India and Indonesia, primarily due to price increases in Q4 of last year, that we believe had the effect of pulling forward volume from Q1 of this year.

For full year 2016, we estimate a range of 4.5% to 5.5% growth per volume point. Net sales will continue to face currency headwinds. For the fourth quarter, we estimate reported net sales to be in a range between a decline of 2.5% to growth of 1.5% and for the full year growth of 1% to 2%.

On a constant currency basis, we estimate net sales to be within a range of negative 0.5% decline, 3.5% growth for the fourth quarter and a range to 6.3% to 7.3% growth for the full year 2016.

Reported EPS for the fourth quarter is estimated to be in a range of $0.90 to $1.10 and adjusted diluted EPS guidance is estimated in the range of $0.80 to $1 per share, which includes the projected currency headwind of approximately $0.12 per diluted share versus the fourth quarter of 2015.

Full year 2016 EPS is now estimated to be in a range of $2.77 to $2.97 on a reported basis and on an adjusted basis, EPS guidance is expected to be in the range of $4.65 to $4.85. Full-year 2016 currency headwinds are projected to be $0.96 per share compared to 2015, which is $0.06 higher than the guidance the company provided a quarter ago.

Capital expenditures for the fourth quarter are expected to be in a range of approximately $33 million to $43 million and for the full year, we're now projecting a range of $145 million to $155 million, a decrease from the previous full year guidance of $160 million to $180 million. Fourth quarter effective tax rate guidance is 25% to 28%.

Our full year 2016 effective tax rate guidance has been updated to a range of 28% to 30% compared with the previous range of 27.5% to 29.5%.

Moving ahead to guidance for the full year 2017, worldwide volume points are estimated in a range between 2% and 5% growth coupled with worldwide net sales of 3.5% to 6.5% growth on a reported basis and 3.9% to 6.9% growth on a constant currency basis.

Full year 2017 guidance for reported diluted EPS is in a range of $3.95 to $4.35 with adjusted diluted EPS guidance in the range of $4.60 to $5. On a constant currency basis, adjusted diluted EPS guidance would be in a range of $4.75 to $5.15 per share.

Adjusted diluted EPS guidance includes a projected currency headwind of $0.15 per diluted share compared to the full year 2016 results. Our effective tax rate guidance for next year is 27.5% to 29.5%. Capital expenditures for 2017 are estimated in the range of $130 million to $160 million.

Moving on to capital structure, our current portion of our debt includes a $410 million revolver that is due March 2017.

As discussed on last quarter's earnings call, we've begun the process to explore capital structuring alternatives, that process is still ongoing with nothing specific to announce at this time, it is a priority for the company, but one that will be based solely on economics and executing what the Board of Directors believes will be in the best long-term interest of the company and its shareholders.

If and when there's something more definitive to announce, we will certainly do so. I will now turn the call back to Michael for some remarks before taking questions..

Thanks, John. Before we take questions, I want to bring further attention to our global partnership with the Special Olympics that we announced in September. This is the second year we are working with them and our employees, distributors and customers and they're all excited about the continued collaboration.

We will bring greater awareness to the Special Olympics through our specially marked boxes of products and anticipate that our distributors will once again sponsor many of the athletes around the globe, you'll recall that at the last World Games in Los Angeles, our distributors sponsored approximately 10% of all the athletes.

Additionally, we intend on using the expertise of our sport scientists to assist the Special Olympics with nutrition and fitness education resources, the Special Olympics does so much around the world, we're extremely proud of our association with them. Okay. Let's go on to the Q&A..

And our first question is from Tim Ramey from Pivotal Research..

Good afternoon. Thanks a lot, and congratulations, Rich. It makes me very pleased to hear that news..

Thanks, Tim..

We discussed the balance sheet recast in – (26:35) – Sorry, we discussed the balance sheet recast in August and also at the second quarter call and it just didn't seem like that heavier lift and I'm surprised that you don't have more to say about it today or more to actually implement or report today.

Can you give us some sense of what the sticking points here, or what's holding back this process?.

Yeah. Tim, hey, this is John. So nothing is holding it back.

I think, what we tried to communicate and I hopefully did communicate that while it is a priority that we're not rushing though this process, we're looking for the best economics, then we'll be going out to look at all the alternatives available and then pick what collectively from a capital structure standpoint, we want to implement and begin implementing it and we – when we have something definitively signed and done is when we'll announce, we generally don't announce in advance, but we're still working through that process, nothing has changed other than I think just the time it's taken to get this thing done right.

Again I think the most important thing for investors to take away is that we are focused on the economics of the deal more importantly than the timing of the deal and that we're still moving down that path..

Okay. And on the conversion preferred members, can you sort of further contextualize what 50,000 members means, what would you ultimately expect that to be in the U.S. in terms of member preferreds.

And is that – was that a better result than you thought going into the conversion process or about in line?.

Yeah. Let me see if I can take that, Tim. First, I think, it's better than we expected, but let me give you some context. More important than the number of people that we expect to convert, it's the amount of sales we expect to come from that group.

And we're about a third of where we want to be in terms of the amount of sales coming from that group, so we got a ways to go, but we just started in October. I think importantly, as Rich said in his opening remarks, the conversion rate has accelerated through October and so we still have a number of months left to get people to convert.

I think the biggest challenge is just getting the communication to the people so that they understand what and how to convert, and that's just going to take time..

Okay.

And just one more, you mentioned in earlier meetings that you thought you would be on track to giving the market metrics relative to kind of the post FTC operating environment, at some point maybe in the fourth quarter or maybe in the first quarter, how do you feel about your progress to having more information you can report on an ongoing basis about the post-FTC?.

Yeah. Great question. So, in October, beginning of October, I think, it was October 4th is when we began the conversion process, so that's one element, and we provided an update, which is the 50,000 people and about a third of the way we want to go from a percent of sales standpoint.

The second implementation was the implementation of the online tool for which distributors can order product either for resale or for self-consumption. That was launched on October 17. That training is still ongoing. But in the near-term, in near future, we'll have some statistics around that.

Further, in a few weeks, we'll launch the POS tools, the POS tools that in-field sales to, for clubs to use when they have consumption. So that, by the end of this quarter, we should have some statistics around that.

And lastly, new members joining in a couple of weeks should be able to self-select through the current process, meaning you get directed into the preferred member bucket, not the most streamlined approach, but they'll be able to self-select as either a preferred customer or distributor.

Come January 1, it'll be very streamlined and much easier for them to do, so we've got a little bit of work on that. So certainly when we next have an earnings call, we'll have a lot of statistics.

We'll have a full month of complete statistics in January or near-complete statistics for which we can track hardware comparing to some of the statistics that we hope to be tracking towards (31:25) to be in compliance with – in compliance is the wrong word, but to be able to play our full marketing plan out under the new regulatory rules..

Great (31:35). I hope the construction is going well there? Thanks..

(31:40)..

Our next question is from the line of Mike Swartz from SunTrust..

Hey, good evening, guys. Just wanted to....

Hey Mike..

Just wanted to touch on the commentary around China. By my math it was the slowest rate of growth I think in around five years.

Can you help us understand I guess when did this whole social media selling method or phenomenon start to take place? Is this the first quarter that you actually saw that or is that something that you've seen build over several quarters?.

Yeah, this is John. I'm going to pass it to Des who you know is in Thailand, but let me just start by saying, look, it's not uncommon for China, if you look at their growth in the last five years and other markets to have spiky growth. And so I'll start with that but pass over to Des for detail..

Yeah, so look we started to see the impact in the second quarter, but this is something that obviously has been developing.

We had some young emerging service providers who really have embraced social media, but unlike some of our older leaders, where they've used social media as a supplement to their club activity, what we've seen is that some of these other service providers have really focused on this as their core business method.

And what we're now seeing, of course, is that social media alone has less stickiness in terms of retaining that customer base. But whenever we have a group of leaders achieve tremendous success, then what tends to happen is that other leaders tend to follow that. And essentially that's what we saw happen in China predominantly in the third quarter.

What we're now doing, of course, is we're actually engaging with our service providers and actually along with the leaders who had previously sought to focus exclusively on social media, they are now getting a message out there that says that social media should be used as a supplement in order to attract customers to the clubs, but not used as a sole business method in and of itself..

Thanks for the color. When should we see maybe that rebound in the growth? It sounded like from the prepared comments it may be several quarters.

Do you have any insight into that?.

Yeah, look so anytime you have a group of members shift to a different way of doing the business, it always takes a little while before you actually shift them back, so it's a pendulum swinging. But having said that, we're very actively engaged with this group.

This group have recognized publicly that they over-focus in that particular area, so that message is really getting out there. We actually – as Michael mentioned at the outset, a number of us are actually in Asia at the moment and we're going to be going on to China from here.

We're actually having a meeting with our top leaders in China, but as also referenced, we have some challenging comps ahead and that's reflected in our guidance..

Okay. Thank you. And then, John, just with regards to some of the expenses around the implementation of the new rules, any update there? I think the prior call you had said $35 million to $50 million.

Is that still the number? And then how should we think about that playing out over the next few quarters until this go-live date?.

Yeah, I think there were two buckets – there was capital bucket that was I think $15 million to $20 million and then there was the operating costs, the one-time operating cost of $20 million to $30 million. That $20 million to $30 million is likely to come in towards the lower end, more like $20 million.

We spent around $5 million in Q3, probably similar amounts in Q4 and Q1, and trending down to May. And so much closer to the $20 million than the $30 million..

Okay. And then just with regards to the earnings beat, the revenue and volume was in line with expectations.

What can we attribute that to? Is that just simply cost savings or was there any kind of shift in any expenses between quarters we should think about?.

There was a $0.04 shift between quarters. Other than that, it's just expense control, nothing unusual..

It is that $0.04 out of the third quarter into the fourth quarter?.

Correct..

Okay. Thank you..

Our next question is from the line of Bill Leach from Tidal Bore Capital..

John, I just had a question on the....

Hi, Bill..

...hi – on the guidance. If you look at the midpoint of the currency-neutral guidance, it suggests EPS will be down 14% fourth quarter and grow only 4% next year. And you just posted 11% currency neutral gain for the third quarter.

So why would you expect things to slow down so much? Are you just being conservative?.

Now, so next year we have a $0.15 headwind from currency compared to the....

Yeah, I'm looking at currency neutral..

So there's an $0.08 headwind from ongoing costs. This is not one-time cost. This is on $0.08 headwind from ongoing cost of complying with the regulatory requirements. We had said last quarter that $5 million to $10 million and that's settling in right now closer to the $10 million, so it's about an $0.08 headwind.

If you adjust for that, you pretty much normalize out the margin swing from year to year..

But why would the fourth quarter EPS decline, currency neutral?.

Fourth quarter declined from....

The midpoint of your fourth quarter guidance is a $1.20, currency neutral versus a $1.19..

Well, you got currency neutral is $0.12, so that's $0.92 (37:47) midpoint, so you've got little bit higher expenses in Q4 this year than we had a year ago and that's really all that strikes me as an impact. We have $0.03 of FTC ongoing costs. So that's $0.03 of it. We have $0.04 from a tax rate.

So if you look at the tax rate guidance, it's $0.04 higher than a year ago. We have negative mix of around $0.04 in Q4, and then just some run rate on expenses..

Okay, seems conservative to me. Thank you..

Thank you, Bill..

And at this time, I'm showing no further audio questions. Presenters, I turn the call back to you..

Thank you very much. This is Michael. Today we announced that Rich will become Herbalife's new CEO next June. For distributors and employees and especially for shareholders, this is really great news. Since Rich has been around, Herbalife has grown considerably.

We've built an industry-leading product capability and increased the business opportunity to have more people making a full-time living and a part-time living as Herbalife distributors in any time in the history. We employ over 8,000 people. We operate in 90 markets. Our product is based in health and nutrition.

We give people an opportunity for extra income. No other company speaks to bettering people's life like we do. We're proud of this company, we're proud of this seamless change in management and succession. This is a great company. We're looking forward to great things in the future. Thank you all for being with us, and we'll see you next quarter..

Ladies and gentlemen, this does conclude today's conference call. We thank you for your participation today, and you may now disconnect. Presenters, please hold for one moment..