Greetings, and welcome to The Chefs' Warehouse Fourth Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Aldous, General Counsel, Corporate Secretary and Chief Government Relations Officer. Please go ahead, sir.

Thank you, operator. Good morning, everyone. With me on today's call are Chris Pappas, Founder, Chairman and CEO, and Jim Leddy, our CFO. By now, you should have access to our fourth quarter 2024 earnings press release. It can also be found at www.chefswarehouse.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial measures, including among others, historical and estimated EBITDA, adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted operating expenses, net debt leverage and free cash flow. These measures are not calculated in accordance with GAAP and may be calculated differently in similarly titled non-GAAP financial measures used by other companies. Quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release and fourth quarter 2024 earnings presentation. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements, including statements regarding our estimated financial performance. Such forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's release. Others are disclosed in our annual report on Form 10 K and quarterly reports on Form 10-Q, which are available on the SEC website. Today, we are going to provide a business update and go over our fourth quarter results in detail. For a portion of our discussion this morning, we will refer to a few slides posted on The Chefs' Warehouse website under the Investor Relations section titled Fourth Quarter 2024 Earnings Presentation. Please note that these slides are disclosed at this time for illustration purposes only. Then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

Thank you, Alex. Thank you all for joining our fourth quarter 2024 earnings call. Business activity and demand remained consistently strong through the fourth quarter amidst a healthy environment for our core upscale casual to higher-end dining customer base. Our teams across domestic and international markets provided excellent product and service amidst a busy holiday season and delivered the first billion-dollar plus revenue quarter in Chefs' Warehouse history and strong growth in gross profit dollars in March. During the quarter, we continued growing market share, both in the year with strong year-over-year growth in unique item placement and new customer acquisition. I'd like to thank the entire Chefs' Warehouse team for their dedication and commitment in delivering a strong 2024 for our team members, customers, supply partners, and shareholders. Now please refer to Slide 3 of the presentation. A few highlights from the fourth quarter include 8.7% growth in net sales. Specialty sales were up 11.5% over the prior year, which was driven by unique customer growth of approximately 4.5%, placement growth of 12.3%, and specialty case growth of 6.1%. Pounds in center-of-the-plate were approximately 3.6% higher than the prior year fourth quarter. Gross profit margins increased approximately 23 basis points. Gross margin in the specialty category increased approximately 22 basis points as compared to the fourth quarter of 2023, while gross margin in the center-of-the-plate category decreased approximately seven basis points year-over-year. Jim will provide more detail on gross profit margins in a few moments. Now please refer to Slide 4. Chart one provides a full-year 2024 update to gross profit dollars per route as compared to 2019. Chart two provides full-year 2024 adjusted operating expense as a percentage of gross profit dollar improvement by 24 basis points versus 2023 and 92 basis points versus 2019. Full-year 2024 adjusted EBITDA per employee increased 13% versus 2023 and 18% versus 2019. Now please refer to Slide 5. The charts here display the progression of customer orders coming via our digital platform, which include orders coming via mobile and website. Investments in our digital platform continue to contribute to margin enhancement as our team drives both online order adoption growth, enhancements to customer-facing functionality, and improved real-time data and app analytics, supporting our sales teams. As of the fourth quarter of 2024, approximately 56% of customers ordering through our domestic specialty locations are online versus 48% in 2023 and 20% at year-end 2019. Now please refer to Slide 6. Slide 6 outlines the five key areas that our teams are focused on in order to deliver our expectation of continued above-industry average top-line gross profit dollar and adjusted EBITDA growth, as well as targeted incremental adjusted EBITDA margin improvement over the next four years. We look forward to expanding more on each of these areas at our Investor Day this coming March. With that, I'll turn it over to Jim to discuss more detailed financial information for the quarter and an update on our liquidity. Jim?

Thank you, Chris, and good morning, everyone. I'll now provide a comparison of our current quarter operating results versus the prior year quarter and provide an update on our balance sheet and liquidity. Please refer to Slide 7. Our net sales for the quarter ended December 27, 2024 increased approximately 8.7% to $1.034 billion from $950.5 million in the fourth quarter of 2023. Net inflation was 3.8% in the fourth quarter consisting of 5.1% inflation in our specialty category and inflation of 1.8% in our center-of-the-plate category versus the prior year quarter. Reported inflation was impacted by two primary factors in the fourth quarter versus the prior year quarter. Prices in the chocolate category continued to remain elevated versus the prior year and specialty product cross-sell growth in Texas. As we combine our legacy specialty and protein sales with our Hardie's produce operation, average revenue per case in Hardie's increased approximately 15% versus the fourth quarter of 2023 as the mix of higher dollar specialty cases increased. Excluding the impact of the Texas cross-sell growth, aggregate specialty inflation was approximately 3.6%, and overall inflation for the company was approximately 3%. Gross profit increased 9.8% to $251 million for the fourth quarter of 2024 versus $228.6 million for the fourth quarter of 2023. Gross profit margins increased approximately 23 basis points to 24.3%. Our procurement, sales, pricing, and operating teams delivered strong gross profit dollar growth across categories during the quarter. Selling, general, and administrative expenses increased approximately 8.9% to $206.8 million for the fourth quarter of 2024 from $190 million for the fourth quarter of 2023. The increase was primarily due to higher depreciation and amortization driven by facility investments and costs associated with compensation, facilities, and distribution to support sales growth. Adjusted operating expenses increased 7.7% versus the prior year fourth quarter, and as a percentage of net sales, adjusted operating expenses were 17.7% for the fourth quarter of 2024. Operating income for the fourth quarter of 2024 was $46.5 million compared to $38.2 million for the fourth quarter of 2023. The increase in operating income was driven primarily by higher gross profit, partially offset by higher selling, general, and administrative expenses versus the prior year quarter. Our GAAP net income was $23.9 million or $0.55 per diluted share for the fourth quarter 2024 compared to net income of $16 million or $0.38 per diluted share for the fourth quarter of 2023. On a non-GAAP basis, we had adjusted EBITDA of $68.2 million for the fourth quarter of 2024 compared to $59 million for the prior year fourth quarter. Adjusted net income was $23.9 million or $0.55 per diluted share for the fourth quarter of 2024 compared to $20.2 million or $0.47 per diluted share for the prior year fourth quarter. Turning to the balance sheet and an update on our liquidity, please refer to Slide 8. At the end of the fourth quarter, we had total liquidity of $261.4 million comprised of $114.7 million in cash and $146.7 million of availability under our ABL facility. For the full fiscal year 2024, we prepaid $14 million principal on our 2029 term loan. We settled the December 2024 maturity convertible notes in a combination of cash and shares due to the partial conversion by certain holders. This resulted in $39.7 million of debt reduction and an increase in share count by 696,000 shares net of 162,000 shares repurchased shortly following the conversion. Share repurchases under our authorized $100 million plan totaled $17.4 million for the full year of 2024. The timing of any future repurchases under our plan will continue to be dependent on share price, market conditions, and free cash flow generation. As of December 27, 2024, total net debt was approximately $557.8 million net of all cash and cash equivalents. Net debt to adjusted EBITDA was approximately 2.5x as compared to approximately 3.4x as of year-end 2023. Due to the timing of certain payments at year-end, we estimate that net debt to adjusted EBITDA will be in the range of 2.5x to 2.8x for the foreseeable future. Turning to our full-year guidance for 2025. Based on the current trends in the business, we are providing our full-year financial guidance as follows. We estimate that net sales for the full year of 2025 will be in the range of $3.94 billion to $4.04 billion. Gross profit to be between $951 million and $976 million and adjusted EBITDA to be between $233 million and $246 million. Please note for the full year 2025, we expect the convertible notes maturing in 2028 to be dilutive and therefore we expect the fully diluted share count to be approximately 46.3 million to 47 million shares.

Thank you. We will now begin the question-and-answer session. The first question comes from Mark Carden with UBS. Please go ahead.

Good morning. Thanks so much for taking the questions. So to start, you guys called out strength across the quarter. Did you see any impact from the softer industry traffic that we've heard about in December? Or did the higher-income consumer simply activate differently? And then how much of an impact have you guys seen quarter-to-date from the Southern winter storms and the California wildfires?

No, I would say that the cadence during the fourth quarter was just pretty evenly solid or strong. I think a lot of people were anticipating maybe some impact from the shorter period from Thanksgiving to Christmas, but we really didn't see that. Those three weeks were typically strong for a holiday season. So there's really nothing to call out on the fourth quarter in terms of weather impacts or anything that we saw from a demand perspective. In terms of January and some of the weather impacts, the fires in LA did not really have a hugely material impact on us. We only had a handful of customers that actually lost their properties. And LA is a very big wide market, geographically for us. So there was a little bit of an impact, but it's not going to have a material impact.

Great. That's helpful. And then in terms of, I know it's a fluid situation, but there's a potential for tariffs coming back to play with Mexico, Canada, and Europe. If that occurs, how much exposure do you have to these markets from an import perspective? And could you pass through the inflation in most cases? Or do you look to pivot sourcing?

Yes. I mean, historically, we went through a period of some tariff wars years ago. I remember that we were dealing with some products that come from Italy, France, and Spain, I believe. We have over 4,000 suppliers right now throughout our system at Chefs' Warehouse. A tremendous amount of our products are domestic, and we've always been able to navigate it, find other solutions and pass on. I mean, again, I think the largest sector is the product lines like fruits and vegetables from Mexico. A lot of these are $20 boxes. So you're talking about a few bucks a case. I think our customer base is kind of used to the ups and downs. We do sell a more high-end type of operation, and it's more labor cost that drives much of the costs. I mean, right now, everybody's talking about eggs. Eggs are the biggest headwind we have had from avian flu causing eggs to go up. But when you think about eggs, even if they’re up $0.50 an egg, how much of that goes into a recipe for our average customer who's charging $20, $30, $40 for an entrée? So there's an effect, but it’s not something that really keeps me up at night.

Great. Thanks so much. Good luck, guys.

Thank you.

Thank you. The next question comes from Alex Slagle with Jefferies. Please go ahead.

Thanks. Hi guys. Congrats on the quarter. I wanted to ask about the margin opportunities for 2025. When you look at the implied midpoints for gross margin and operating expenses, where do you think you see the greater opportunity to get more favorability? I ask that because your adjusted operating expense percentage in the fourth quarter started to flatten out and leverage year-over-year for the first time in seven or eight quarters. So from the outside, it looks like a solid place to see some upside opportunity, but I'm curious about your perspective.

Yes. Thanks for the question, Alex. In terms of 2024, we were upfront in our guidance that our operating leverage was going to be heavily weighted to the back half of the year, especially the fourth quarter, given that we didn't lap some of the big facility investments and rent impacts until the fourth quarter. So that kind of played out how we expected. We had very little operating leverage in the first three quarters of the year and then a lot in the fourth quarter. That resulted in the kind of 15 to 20 basis points of EBITDA margin improvement versus '23. In '25, the guidance is obviously a range. Our goal is to incrementally over the next four years improve operating leverage and EBITDA margin by kind of that 20 to 25 basis point range that we're close to executing in '24. A lot of the goals are outlined in the chart we put up about our 2028 financial goals, with all of those projects below them driving gross profit dollar growth and improvement as well as adjusted operating leverage on the operating expenses. So it’s just about executing and letting the teams do the work.

Okay. And on the food cost inflation outlook, do you think that Hardee's cross-sell impact will continue through '25 to the same degree?

Well, I think we'll continue to grow the cross-sell. With Hardee's, it's similar to New England. We’re trading out of some lower margin kind of what we call chunky corporate business and replacing it with what we call street sales, which are independent restaurants and the core customer that we're really good at serving. So that will continue. And if it continues to have a bit of an outsized impact on the reported inflation number, we will call it out. Product mix changes impact the inflation versus volume number and we will continue to mention things that are having some outsized impact one quarter versus another.

Yes. Unfortunately, Alex, I think that it makes your job a little harder trying to look at us over the past 10 years. I think we continue to say you really have to understand Shaft. You have to understand that our goal was to become a complete solution company in every market. We have our protein offerings and we now have our fresh offerings combined with the specialty broad line. The numbers are going to continue to evolve because our goal is to be that solution company in every market. It’s going to fluctuate depending on whether protein is growing faster than fresh or fresh is growing faster. It depends on the maturity of each market. But we're very happy with how our teams are growing continually. We've called it a hybrid sell for a long time. I think I'm going to start using a different phrase because maybe it’s our total solution go-to-market strategy that continues to evolve and succeed, and I think you're seeing the success of how the teams are doing as we continue to get leverage on our overhead, especially where we've invested heavily in people and technology and on our new facilities. And as we start to grow the volume, you start to see us get that leverage that we keep talking about, 20 basis points a year for the next few years, and we’re marching towards our goals.

Got it. Thanks. Congrats again.

Thank you, Alex.

Thank you. The next question comes from the line of Peter Sarra with BTIG. Please go ahead.

Great. Thanks and congrats on a great year. I wanted to ask maybe first on just, if you give us a little bit of an update. Chris, you mentioned labor costs and maybe you could just give us an update on what you're thinking for labor availability and inflation in 2025, if you think that's going to be in line with historical or outsized? And then just on general commodity inflation, I know in the past you've mentioned optimal scenario is 2% to 3% commodity inflation with a little bit of volatility. Just any thoughts on what you're expecting in 2025 would be helpful. And then I've got a quick follow-up? Thanks.

Sure. Well, let me get the crystal ball out again, Peter. But if you back out what we're seeing right now with mainly, I mean, eggs is really what's got people going crazy at this point. The chocolate market is better, but it's still inflated. If we back out those two big categories, we're kind of seeing that 2% to 3%. So I don't see anything that would change that drastically. I mean, everyone's talking about tariffs, tariffs, tariffs, but I don’t know from my seat today, I see the 2% to 3% that we talk about and probably with a little volatility. Hopefully the egg market stabilizes once we gain control over the avian flu, and the egg prices start to come down and give people relief. But yes, the meat market, we all talk about it; there aren't enough cattle for the next two to three years. So I don't think we're going to get much relief on that. But we're seeing stabilization. We're not seeing anything crazy besides the big headwind on the ag market. Our category managers are doing a great job right now, and I think you see the results.

Great. And then just can I ask on the sales force? Can you give us an update on how the investments you guys have made in the sales force, maybe the growth rate? Where are you getting most of this talent from? Are they coming from outside the industry, within the industry? Any insight there would be helpful. Thank you.

Yes. I didn't answer your labor question before. Labor is a hard job. Working night shifts, driving big trucks in cities, delivering it up and downstairs can be really tough. These people work really hard. We believe we pay very fairly, better than most of our competitors. We try to, because we're delivering great, expensive product to the best restaurants in the world, so we need to have the best team. I don't think labor availability is an issue anymore. Coming out of COVID was tough, but I think it has really stabilized. I don't see labor as the headwind that we faced before. As for the sales force, we hire from kitchens, from front of the house, as well as people who have a passion for food, perseverance, and I think from all walks of life. It's a very diverse sales force, and I think it continues to get even more diverse. Our investments in training, HR practices, and recruiting have been paying off. It takes time to become a real Chefs' Warehouse person who can sell our entire range of products, and we want to make sure we're hiring the right people who will stay.

Thank you very much.

Thank you. The next question comes from Todd Brooks with Benchmark Company. Please go ahead.

Hey, good morning and congrats on a great 2024.

Thanks, Todd.

A couple of follow-up questions here. The strength that we saw in gross margin, you pointed at some specific drivers around the digital ordering mix, some beneficial inflationary experience, and the higher kind of case value and profitability at Hardee's. As we’re looking forward for gross margin outlook for '25. Just your thoughts on kind of key drivers of continued improvement, and maybe if we can boil that into a magnitude, that would be great.

Thanks for the question, Todd. I would go back to what I alluded to earlier. The guidance implies a very similar kind of gross profit margins as we delivered for the full-year of 2024. That's really because gross profit margins are now influenced by things like product mix changes, as well as inflation and deflation. We're focused on driving gross profit dollars and gross profit dollar growth.

Yes. And again, Todd, I think we've been staying focused on our spread between overhead, what it costs to run the business and the gross profit dollars because we're seeing a marketplace that didn't exist before. You have a case of eggs that was say $30 and now it's $200. You don’t need to make 25% on that because you're making the gross profit dollars considering how high your input cost is. The overhead costs have risen, but not at the same rate. We must operate in this new environment.

That's very helpful. Thanks, Chris. And just one quick follow-up with inflation being a key topic on this call. How are you looking at potential issues as you go down the supply chain, from labor availability, whether it's migrant labor on the produce side of the business, or labor on the meat processing and packaging side as an incremental pressure on your inflation outlook for '25? Thanks.

Yes. I think we got ahead of it the past few years. We raised many wages, and it became clear we had to pay in each market to attract the best talent. I don't believe we're going to see a significant headwind from the labor front since we're already compensating workers well. I think that’s built into our market.

Todd, I would just add that on the processing side. Given the facility investments we've made over the last couple of years, we put in a lot of processing automation and that's allowed us to hire fewer resources but still maintain efficiency.

Yes. All our systems in the warehouse are making us more efficient, which is essential for our future success, and I believe our teams are doing a phenomenal job at that.

Okay, great. Thank you both.

Thank you, Todd.

Thank you. The next question comes from the line of Eli Niebuhr with Lake Street Capital Markets. Please go ahead.

Hi guys, this is Eli on for Ben Klieve. Congrats on a strong quarter and thanks for taking my questions. First, could you provide an update on the utilization levels in the new Texas, California, and Florida locations? How do these compare to your initial expectations? Are you seeing any regional trends going forward?

Well, we don't really disclose utilization levels by operating company or by market. But in general, in Northern California, we completed the consolidation of four processing facilities into one. We completed that move in December of 2024. We're in the early innings of that operation, and it's really exciting. We have a lot of room for growth in that facility, and we're starting to realize the benefits of removing four separate processing facilities and gaining synergies on the operating cost side. In Texas, we've taken some additional space in Houston and are in the process of, as I mentioned earlier, trading out of some non-core businesses to free up space for growth in the specialty and protein side of the business, particularly with the large Hardie's customer base we acquired with that acquisition.

Yes, that's great. Thanks. And then a second question, and then I'll hop back in queue. Could you break down your CapEx expectation for this year in terms of growth versus maintenance spending? How should we think about your capital allocation strategy between expansion initiatives and sustaining existing operations?

Yes, sure. We guided to CapEx of $40 million to $50 million for '25, very similar to what we’re doing in '24. Our goal is to gradually get that down towards 1% of revenue. I think we'll be closer to that versus I think we were at 1.3% in '24. In general, because we're a growth company, 80% of our CapEx is basically investing in facility expansion. We have two major projects for '25. That's our Philadelphia, Southern New Jersey facility retrofit, optimizing our distribution footprint between the New York Metro Area, the Mid-Atlantic, and Pennsylvania, and that's underway. The other is our Portland, Oregon facility build-out that will allow us to consolidate multiple facilities from an acquisition in Portland over a couple of years that we anticipate to complete by the end of this year or early Q1 of '26. The rest of our CapEx is investments in technology, our digital platform, and then the rest is maintenance CapEx.

That's great. Thanks, guys. That's it for me.

Thank you.

Thank you. Our next question comes from Kelly Bania with BMO Capital Markets. Please go ahead.

Good morning. Thanks for taking my questions. I was wondering if you could just talk a little bit more about the 4% to 7% organic growth and help us break that down between how much high growth markets are contributing versus more mature markets. Obviously, tie in Texas into that conversation and just what you're learning about the Texas market and the receptivity to the categories as you integrate protein and specialty there?

So thanks, Kelly. I'll start with a little bit about the high growth markets and the mature markets, and then I'll turn it over to Chris to add some color on Texas and the strategy there. On the 4% to 7%, we have markets like Dubai and Florida and Seattle, even Southern California, Northern California, Texas, New England, where we've made significant acquisitions aimed at growth and invested in capacity. Most of these markets are growing double digits, anywhere between 10% and 20%. Our mature markets are still growing, but obviously they're growing through category growth and penetration. They're still growing mid-single-digits or that kind of growth. Hopefully, that frames the 4% to 7% growth. I'll ask Chris to comment on Texas and the strategy there.

Yes. Thanks, Kelly. Yes, I mean, Texas again is going to be a top three market, but we have to look at it over the next four or five years. We’ve been through this before with acquisitions where we bought some businesses. They weren't exactly what we call Chefs' Warehouse, and it takes time to get the buildings right, the technology, mix, and train the salespeople. Couldn't be prouder of our team in Texas and everything they are achieving in trying to create the Chefs' Warehouse formula. It’s going to take some time but we are making great headway. The team is going to continue to work hard over the next four or five years and I think it starts to resemble more and more like New York, and that is our goal.

Very helpful. Just another follow-up. I think the slide deck mentioned 56% of specialty customers ordering via digital. Just wondering if we could talk about that a little bit more. Are your smaller specialty competitors ramping with this type of service? And just how is this favorably impacting gross margin and gross profit growth? Where do you see that penetration of digital going over time?

Yes. I mean, I think that over time 80%, 90% of the customers are not going to pick up the phone, right? So it's email, it's text, and it's using our online capabilities. As we improve, we have tremendous upside still in enhancing our website, and that's just going to make the interaction with The Chefs' Warehouse more dynamic. We have over 55,000, in some markets, 80,000 items that pass through the system. It's a great tool to support our sales team. The sales force of the future are consultants. They don't have to do what they did years ago and be stuck at their computer waiting to take orders. Back in the day, it was paper and pencil. Later it became laptops, allowing salespeople to take orders from the road. I believe the next jump is for customers placing their orders—salespeople check in, refer items, and suggest solutions. This evolution supports margins and placements. We saw tremendous results in a year when the industry heard about traffic declines. Much is credited to our tools and our team's training. We haven't even implemented this fully into our protein divisions with our new companies. So I see tremendous upside as our capabilities mature.

Thanks, Kelly.

Thank you. The next question comes from the line of Andrew Wolf with CL King. Please go ahead.

Thanks. Good morning. I wanted to mention the deck where you referenced the increase in EBITDA per employee, really a big jump last year, a 13% year-over-year increase. James, you referenced better training and HR practices, but could you provide more color? Is that more on the gross profit line, if you were to break it down or more on the operating leverage line? Is there a significant catch-up in productivity, and is this something sustainable?

Yes. I would say that the 13% increase is aligned with our overall EBITDA and operating leverage improvement '24 over '23. As I mentioned earlier, it was a little uneven with much of that coming in the fourth quarter driven by the cadence of facility investments. Our teams did a great job of managing headcount and operating spend throughout the year, and that shows up in the productivity you mentioned. It comes from both gross profit dollar growth and margin improvement. However, achieving gross profit dollar growth with minimal margin improvement is common when selling more expensive boxes. The teams executed well on our strategy.

Thank you. I got that. And just one final one if I may. These integrated big distribution centers that you just launched in Northern California. I don't know if Florida is the longest-tenured one, but can you provide a sense of how they're performing to drive cross-sell and boost capacity, and how the capital returns are looking? I know it’s early for most of them.

Yes. The newest ones, I think we've been announcing Florida. I don't even know if it’s two years, right? Their performance is great, and we're really proud of them. We think they're firing on all cylinders. That LA facility was designed to quadruple the business and has a lot of capacity. They're doing very well. The most recent facility we opened was for processing, which Jim mentioned earlier, that consolidates several facilities into one state-of-the-art facility. We’re excited about it. The consolidation was quite a task, requiring considerable effort from the team, and now they can focus on growth. Other locations like Tennessee and Detroit remain small outposts but we're slowing down expansion to let everyone catch up. New England needs a new facility soon as they operate in multiple buildings. We just opened the Pennsylvania, South Jersey facility. There's a lot of exciting development.

Okay. Thank you for the color. Appreciate it.

Thanks, Andy.

Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Chris Pappas for closing comments.

Sure. We thank everybody for joining our call today. I think we're very proud of what the Chefs' Warehouse family of companies has accomplished in '24, and we're looking forward to a great '25 and beyond. We hope to see everyone at our next earnings call. Thank you very much.

Thank you. The conference of The Chefs' Warehouse has now concluded. Thank you for your participation. You may now disconnect your lines. Thank you.