Earnings Call Transcript - CRUS Q4 2024

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic Fourth Quarter and Full Fiscal Year 2024 Financial Results Q&A Session. At this time, all participants are in a listen-only mode. After a brief statement, we will open up the call for questions from analysts. Instructions for queuing up will be provided at that time. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference call over to Ms. Chelsea Heffernan, Vice President of Investor Relations. Ms. Heffernan, you may begin.

Chelsea Heffernan, Vice President of Investor Relations

Thank you and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic’s President and Chief Executive Officer and Venk Nathamuni, Chief Financial Officer. Today at approximately 4 P.M. Eastern Time, we announced our financial results for the fourth quarter and full fiscal year 2024. A Shareholder Letter discussing our financial results, the earnings release, and the webcast of this Q&A session are all available at the company's Investor Relations' website. This call will feature questions from the analysts covering our company. Additionally, the results and guidance we discuss on this call will include non-GAAP financial measures that exclude certain items. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release, and are all available on the company's Investor Relations' website. Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise. Please refer to the press release in the Shareholder Letter issued today, which are available on the Cirrus Logic website and the latest Form 10-K as well as other corporate filings registered with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations. Now, I'd like to turn the call over to John.

John Forsyth, President & CEO

Thank you, Chelsea, and thank you everyone for joining today's call. As you've seen in the press release, in the March quarter, Cirrus Logic delivered revenue of $378.1 million, above the top end of our guidance range due to stronger-than-anticipated demand for smartphone products. In FY 2024, Cirrus Logic delivered full fiscal year revenue of $1.79 billion, down 6% year-over-year due to a reduction in general market and custom components, primarily in non-smartphone applications. Despite those challenges, we are proud that our disciplined execution helped to grow both non-GAAP earnings per share year-over-year for the quarter and both grow GAAP and non-GAAP EPS for the full year. Venk will take the reins in a few moments to walk us through the details of the financial results for the quarter and for the year. But before I turn the call over, I want to share an update on the progress we've been making on our strategy in the past four quarters. We've previously communicated that our growth strategy is based around three broad principles: number one, maintaining leadership in our core flagship smartphone audio business; number two, expanding into areas of high-performance mixed signal functionality in smartphones; and number three, leveraging our audio and high-performance mixed signal capabilities to penetrate new markets. This year, we have made exciting progress on all three fronts. In our flagship smartphone audio business, most notably in the past year, we completed our design work on and delivered to our customer two next-generation products: a Boosted Amplifier and a Smart Codec. The Boosted Amplifier introduces an innovative new architecture, significantly improving system performance and efficiency, while saving valuable board space. The Smart Codec will be Cirrus Logic's first 22-nanometer product and will similarly deliver meaningful advances in audio and mixed signal processing capabilities to our customers. Taken together, these devices represent a considerable engineering investment and the culmination of many years of work and close collaboration with our customer. We anticipate both products will launch in devices in the fall of this year. Looking beyond audio, we also made significant investments in certain HPMS areas where we believe our mixed signal design and signal processing expertise can enhance our customers' products. A core element of our HPMS strategy is camera controller products, where we shipped our third generation controller in the fall of 2023, itself a key enabler of marquee features in customer devices. Moreover, in the last quarter, we continued to develop our roadmap by taping out new camera controller IP on a new process node, an early investment, which we expect will pave the way for further enhancements as we also continue to invest in feature and performance advancements in the future. Beyond camera controllers, we also continue to invest in a number of power and battery-related technologies and innovations. While new product introductions in these domains are a little further out, we are excited about the progress we made in the development of both key intellectual property and silicon in these areas in FY '24. During the year, we also saw encouraging signs that our IP in audio and HPMS can be valuable and highly relevant as we reach into new markets, most immediately in laptops. In FY '24, we sampled designs and shipped a new codec and a new boosted amplifier that were specifically designed for this market. We also won customer designs with new power converter products intended for the laptop market and sampled a laptop-focused haptic driver product. Three of these devices—the codec, the boosted amplifier, and the power converter—were also featured as part of Intel's Lunar Lake reference design, and their capabilities contribute meaningfully towards our customers being able to create better laptops. Compared to competitive alternatives, Cirrus Logic solutions sound better, play louder, conserve battery life, and save board space. While there is still a lot of work ahead of us in the laptop space, we exit the year optimistic about the momentum that we are building in this market. Against this backdrop of investment in supporting our customers and future growth, we remain committed to disciplined execution. Throughout the year, we worked hard on increasing our operational efficiency, and the efficiency, competitiveness, and diversity within our supply chain. Additionally, during the year, we returned $186 million of cash to shareholders in the form of share repurchases. These combined actions, along with a decrease in our tax rate during the year contributed to a $0.17 year-over-year increase in non-GAAP earnings per share to $6.59. With that, let me now turn the call over to Venk to provide an overview of our financial results for the fourth quarter and full fiscal year 2024 as well as the outlook for the first quarter of fiscal 2025.

Venk Nathamuni, Chief Financial Officer

Great. Thank you, John, and good afternoon, everyone. I'll start with a summary of our financial results for both our fiscal Q4 as well as full year fiscal 2024 and then provide guidance for our fiscal Q1 2025. Revenue in Q4 was above the high end of our guidance range at $371.8 million as shipments remained robust throughout the March quarter. On a sequential basis, revenue was down 40% due primarily to a reduction in smartphone volumes, which follows a stronger-than-seasonal December quarter, which, as you recall, was a 14-week quarter. On a year-over-year basis, revenue was roughly flat. Fiscal year 2024 revenue of $1.79 billion was down 6% from a year ago. The decline was driven by a reduction in shipments of our general market and custom products, primarily in non-smartphone applications. Turning to gross profit and gross margin, non-GAAP gross profit in the quarter was $193 million, and non-GAAP gross margin was 51.9%. Gross margin was above the high end of our guidance range, due mostly to supply chain efficiencies and lower freight expenses. On a sequential basis, gross margin increased by 50 basis points, driven by a favorable year basis, with gross margin increasing 180 basis points due largely to lower supply chain costs, including freight. This was partially offset by a less favorable product mix. Non-GAAP gross profit for our full fiscal year 2024 was $917.5 million, and non-GAAP gross margin was 51.3%. Gross margin increased year-over-year due to a decline in supply chain costs, including the absence of wafer premiums, lower freight expenses, as well as a reduction in inventory reserves. All of this was partially offset by a less favorable product mix. Now I’ll turn to operating expenses. Non-GAAP operating expense for the fourth quarter was $116.5 million. On a sequential basis, OpEx declined $9.2 million, primarily due to decreased variable compensation, lower employee-related expenses, mostly due to one fewer week of salaries, as well as increased R&D incentives. On a year-over-year basis, operating expense was down $3.3 million, largely due to an increase in R&D incentives and lower product development costs. This was partially offset by an increase in variable compensation. Non-GAAP operating income for the quarter was $76.5 million or 20.6% of revenue. For the full fiscal year, non-GAAP operating expense was $470.4 million, down $16 million from the prior year, primarily due to increased R&D incentives, a reduction in variable compensation, and lower product development expenses. This was partially offset by an increase in employee-related expenses. Non-GAAP operating income for fiscal year 2024 was $447.1 million, which resulted in the full fiscal year 2024 operating margin coming in at 25%, up slightly from the prior fiscal year despite the revenue headwind we experienced in fiscal 2024. Turning now to taxes, for the March quarter, our non-GAAP tax rate was 17.6%. However, for the full fiscal year, the non-GAAP effective tax rate was roughly 21%, which was in line with our previous guidance. Lastly, on the P&L, non-GAAP net income in the fourth quarter was $69 million, or $1.24 per share as the higher revenue and profitability flowed through to the bottom line. For the full fiscal year, non-GAAP net income was $369.3 million, or $6.59 per share, up $0.17 from fiscal 2023. The increase in non-GAAP earnings per share was driven by our disciplined execution, share repurchases, as well as a decrease in the tax rate that I alluded to earlier. Let me now turn to the balance sheet. Our balance sheet continues to remain strong, and we ended fiscal 2024 with nearly $700 million in cash and cash equivalents. Our ending cash balance was up $182.6 million from the prior year, primarily due to strong cash flow from operations, which was partially offset by stock repurchases. We continue to have no debt outstanding and have $300 million undrawn on our revolver. The inventory balance at the end of the fourth quarter was $227.2 million, down from $256.7 million in Q3 2024. Days of inventory were up 38 days sequentially, and we ended the quarter with approximately 116 days of inventory. Looking ahead, in Q1 fiscal 2025, we expect inventory to increase from the prior quarter as we begin to build ahead of seasonal product launches in the second half of the calendar year. In fiscal 2025, inventory is expected to be elevated as we continue to support customer demand and fulfill our wafer purchase commitments in accordance with our long-term capacity agreement with GlobalFoundries. Turning now to cash flow, cash flow from operations was $170.5 million in the March quarter, and CapEx was roughly $7.7 million, resulting in a non-GAAP free cash flow margin for the quarter of roughly 44%. For the 12-month period ending in the March quarter, cash flow from operations was $421.7 million, and CapEx was roughly $38.3 million, resulting in a non-GAAP free cash flow margin of roughly 21%, a 500 basis point improvement compared to free cash flow margin of 16% in fiscal 2023. On the share buyback front, in Q4, we utilized $50 million to repurchase approximately 548,000 shares of our common stock at an average price of $91.3. For the full fiscal year, we returned $186 million of cash to shareholders as we repurchased 2.3 million shares at an average price of $80.68. At the end of Q4 fiscal 2024, the company had $315.1 million remaining in its share repurchase authorization. We expect to continue to return capital in the form of stock repurchases, which we believe will provide a long-term benefit to shareholders going forward. Now on to the guidance. For Q1 of fiscal 2025, we expect revenue in the range of $290 million to $350 million, reflecting seasonal weakness in the general market product sales and lower smartphone units. We expect gross margin to range from 49% to 51%. I'd like to point out that we expect gross margin during the current quarter to be towards the lower half of the range as we incur costs to ramp production of our new 22-nanometer codec, as well as the new boosted amplifiers. Non-GAAP operating expense is expected to range from $118 million to $124 million, up sequentially due to an increase in product development and employee-related expenses. I'd note that with the start of a new fiscal year, our annual merit increase takes effect during the June quarter. This is partially offset by lower variable compensation expense. We'll continue to control discretionary spending while investing strategically in product development to drive long-term growth. We expect our fiscal 2025 non-GAAP tax rate to be approximately 22% to 24%, which is slightly higher than our tax rate in fiscal 2024. You may recall that we had a large one-time tax benefit last quarter from applying new IRS guidance to our capitalized R&D amounts. We do not expect to have a similar one-time benefit in fiscal 2025. In closing, thanks to the collective efforts of the entire Cirrus Logic team over the past year, we increased operating efficiencies and exercised fiscal discipline, which contributed to year-on-year earnings per share growth. We are pleased with the progress we have made this year, and we'll continue to focus on the best opportunities to enable the company to grow both revenue and profitability over the long term. Before we begin the Q&A, I'd like to note that we understand there is intense interest related to our largest customer. In accordance with Cirrus Logic's company policy, we will not discuss specifics about this business relationship. With that, let me now turn the call over to Chelsea to start the Q&A session.

Chelsea Heffernan, Vice President of Investor Relations

Thanks, Venk. We will now start the Q&A portion of the earnings call. Please limit yourself to a single question and one follow-up. Operator, we are now ready to take questions.

Operator, Operator

Thank you. The floor is now open for questions. Your first question comes from the line of Matt Ramsay with TD Cowen.

Matt Ramsay, Analyst

Thank you very much, everybody. Good afternoon. I wanted to start on the gross margin aspect. You mentioned in your script that you may be slightly below the middle of the range for June, which is fine. I wanted to ask, as you roll through the next 12 to 15 months, you will be introducing the new codec and the new boosted amplifiers. You would think that the laptop business becomes a more material aspect of the company. If you could just kind of walk us through how you're thinking about things on the gross margin front, given all of those variables. I don't really care that much about one quarter, but just over this product cycle, if there's anything new that we should consider on the puts and takes of margins? Thanks.

Venk Nathamuni, Chief Financial Officer

Yes, thanks for the question, Matt, and good afternoon. Yes, in terms of just the overall gross margin, as you correctly pointed out, with the current quarter, we do expect to see it slightly below the midpoint, primarily because of the ramp costs that I alluded to in the prepared script. But as you've seen over the last several quarters, we have made significant strides in terms of improving our supply chain efficiencies and lowering freight costs and so forth. Our long-term gross margin model continues to be 49% to 51%. That's the range that we're still comfortable with. Now obviously, we'll continue to improve the efficiencies as we go forward. However, we'll provide guidance later on as we get more visibility into the gross margin performance. As it relates to your question about the mix as things progress, we are making some good strides in the PC space today. It's still as we talked about in the previous earnings call, we expect in fiscal 2025 that PC contribution will be somewhere in the low tens of millions of dollars. As it becomes a bigger portion of our revenue in future years, it will have some impact on gross margin. But right now, think of it as being in line with our corporate average and we will provide updates as we get further along.

Matt Ramsay, Analyst

Got it. Thank you for that. I guess just as my follow-up, it's a new market for you guys in notebooks, and you've sized it in the near term. John, maybe you could give us a little bit on how the early strides have gone in notebooks. I mean, can this be a much bigger market over time? Relative to where you thought you'd be as you sort of start down this path, what's been the early experience and the breadth of interest across the different platforms at the PC OEMs? Is this a niche for now that is growing over time? Or are you sort of pleased with the early progress, and maybe it's potentially a bit larger than you thought?

John Forsyth, President & CEO

Thank you, Matt. We're certainly pleased with the early progress. It's going to take time to grow it to be a real needle mover for us, but we see a great opportunity there. When we look a few years out, we see over $1 billion of SAM (Serviceable Available Market) for us to attack, as I've mentioned previously. If you look back over the past year, in particular, I think we've hit a number of really positive milestones, both with sampling our new Codec and Boosted Amplifier design for the laptop market and then seeing those launch in customer products, and now since the last quarter's report, seeing them actually shipping into end users' hands. So, that's great. Alongside that, we had the integration of that Codec and Boosted Amplifier along with the power converter product in the Intel Lunar Lake reference design. That we do believe can be a great engine for further design wins and growth in the coming years. So, Lunar Lake will be something that makes more of a difference to us in calendar 2025. That is currently in the hands of many OEMs, and they are all in various stages of evaluating Lunar Lake and building designs based on it. We’ll see those come to market during calendar 2025, which means that the bulk of the impact on our P&L will be from FY 2026 and beyond. Our view on what we expect in FY 2025 is unchanged. As Venk said, we think of that as low tens of millions, but with a great opportunity to grow it as we look forward.

Operator, Operator

Your next question comes from the line of Christopher Rolland with Susquehanna.

Christopher Rolland, Analyst

I appreciate it. And despite my interest in your largest customer, this question will be about all of the revenue not related to that customer. Last year, it was about $232 million total. I'm wondering, as we enter this next fiscal year, how should we think about growth there? Is like the 30% area with these laptop and other handset gains a reasonable expectation? How should we think about that? Thanks.

Venk Nathamuni, Chief Financial Officer

Yes, Chris, thanks for the question. I will split the non-top customer revenue into a couple of smaller buckets just for some additional clarity. The composition of that business can vary anywhere from 12% to 15% at the high point, which is probably about 20% of our revenues. I'll break it into three components. The first part is what we call the general market catalog business, which is not very dissimilar from a general purpose, high-performance analog portfolio. This business is sold predominantly to distribution. We've seen, just like our peers, this business has been fairly weak for the last several quarters. However, we are seeing some signs of stabilization there. In the last couple of quarters, we’ve seen distribution inventory stabilize, and I think that will recover as the economy improves and as general market conditions improve. That segment is very much tied to the overall macro. The second piece of that business is the Android business; the non-big customer smartphone business. I would say we're doing fairly well in that space today. We've had some good wins there, and we're participating in whatever is happening there in that market. The third piece is the PC space, where we've made significant strides in terms of design wins. There’s a lot of momentum across multiple OEMs, and we're seeing more adoption, especially with the Intel Lunar reference design wins. It will take a few quarters, maybe even a few years for that to become a genuine needle mover. I think in the fiscal '25 timeframe, we have framed it as low tens of millions of revenue with expectations of substantial growth in fiscal '26 and beyond. That's the way I would frame the portion of our business that's not related to our top customer.

Christopher Rolland, Analyst

Okay. Low tens of millions of revenue, which would be just 10% and then layer these other opportunities on top. If it's tens of millions, $20 million, I mean that would be 10% plus growth. Moving on, you talked about you guys taped out your next-gen CLC. Just curious about any new functionalities or ASP? If not, discuss your new power and battery products, even though the timetable is further out.

John Forsyth, President & CEO

Thank you, Chris. Yes, I mentioned that we, in the past quarter, did see silicon for our first camera control IP on a new process. We're excited about that. That's running ahead of our roadmap to integrate new processes, new IP, and new customer features. What we see in that part of our product portfolio is a continued desire over time for increased processing capability. That translates into higher performance, stabilization focus, and other features that are very meaningful to the end-user camera experience. We believe we have a pretty rich roadmap and we will continue to invest in it and anticipate a consistent rate of growth that we’ve seen since the introduction of the first camera controller four years ago. In the battery and power space, we've made considerable progress over the past year on IP, both in design and much of that seeing silicon. We're actively engaged with customers to ensure it gets to market. Clearly, there are areas in the general market business where you can see our power IP being productized. For instance, I mentioned the power converter product. This is part of the Lunar Lake reference design. We want to ensure it reaches as many of our customers across as much of our business as possible. We're excited about that progress we’re making.

Operator, Operator

Your next question comes from the line of Tore Svanberg with Stifel.

Tore Svanberg, Analyst

Yes. Thank you. And congratulations on the strong cash flows. I had a question for you first, John. I’m not inquiring about your largest customer or anything like that. With LLM starting to trickle down to edge devices like PCs and smartphones, I assume that the best interface is voice for AI at the edge. I’m wondering from an architectural perspective if that is something that you’re seeing new designs with your IP for those types of use cases? There are many angles here: battery, power, voice, audio. Any color you could share about new design strengths evolving around LLMs trickling down to edge devices?

John Forsyth, President & CEO

Absolutely, Tore. I think we see numerous positives and opportunities around the Gen AI space, and voice is certainly one of them. Across our customer base, we have multiple customers who are interested in how the voice interface evolves to assist user interaction with generative AI. That's clearly one area we're very interested in exploring. The opportunity set, however, is broader than just voice for us in the AI space. It significantly impacts the signal path through our silicon, hence our core focus on voice. Generative AI at the edge will likely necessitate increased processing power and data management on client devices, driven by privacy and latency concerns. We anticipate that will lead to the need for additional memory and processing capabilities, alongside bigger batteries, thereby placing more constraints on board space. Our advanced mixed-signal engineering efforts are right in line with these trends, as we routinely offer complex, integrated solutions. The increasing premium on board space and power efficiency aligns directly with our R&D investments.

Tore Svanberg, Analyst

That's great. As my follow-up, you're ramping the smart codec and amplifiers, which should mean higher content, especially at the outset. However, those products should remain workhorse products for a while. How should we think about ASP declines yearly once these products are introduced to market? Should we expect low to mid-single-digit declines?

John Forsyth, President & CEO

It’s difficult to say precisely, Tore, although I do believe we’re entering a more typical pricing environment than we've seen in recent years. So a reasonable assumption might be that we will see some pricing pressure and a small decline in ASPs coming in the next few years. Our aim will always be to offset this through operational efficiencies while ensuring feature enhancements and integrating other functions into the devices we deliver. I believe we're moving towards a pricing curve that aligns more closely with historical norms.

Operator, Operator

Your next question comes from the line of Thomas O'Malley with Barclays.

Thomas O'Malley, Analyst

Hey, guys. Thanks for taking my question. I just wanted to ask something related to the broader smartphone ecosystem. A few other players related to your largest customers have talked about a weaker June due to some inventory work down. I want to understand your timing with customers. Do you typically recognize some benefit in the June quarter from new platforms on a year-over-year basis? Are you seeing any inventory headwinds that we've heard about in the market from others?

Venk Nathamuni, Chief Financial Officer

Yes, Tom, thanks for the question. When we look at our booking patterns related to our top customer, aside from the pandemic, I would say over the last year and a half or so, we've returned to some semblance of normalcy. So there is a typical seasonal pattern that we're beginning to see, especially in the last four to five quarters. Based on those patterns, I would say there tends to be little new product introductions related to the June quarter. Regarding what some of our peers have mentioned on their earnings calls, especially in the smartphone space, I understand that some had inventory issues while others did not. It’s hard for us to correlate our booking patterns with what we're hearing from our peers, as the dynamics can be very different. We've had a 15-year history of close collaboration with this customer, providing us with much longer visibility into new products. Comparing our patterns with others’ data isn't something we can reliably predict.

Thomas O'Malley, Analyst

Super helpful. If I look at the full year, I know just being careful about customer specifics. You have a solid content roadmap this year with new codecs and new amplifiers. Given that, I don't see the expected growth in audio revenue that I would typically expect in a content-rich environment year-over-year. Could you discuss the headwinds in terms of overall unit expectations, and what conservatism you’re baking into your model over the next couple of quarters? Additionally, could you provide your expectations for smartphones in general this calendar year? Because while your planned content increases sound promising, I would expect a bit more revenue growth on the audio side. Thank you.

John Forsyth, President & CEO

Thanks, Tom. Obviously, we're guiding just the quarter right now. So I can't speak to what figures you may have for the full year. We don't get too far out with assumptions on units, as it’s prudent to stay cautious. At the same time, we feel confident about the content we have coming this fall. However, we aren't providing guidance for the down the line just yet.

Venk Nathamuni, Chief Financial Officer

To add to what John said, when we offer guidance, we consider all relevant factors, including ordering patterns and historical seasonality. We strive to give guidance that represents the probable outcome. However, looking beyond the current quarter is not something that we are particularly equipped for.

Chelsea Heffernan, Vice President of Investor Relations

We have time for one last question.

Operator, Operator

Your last question comes from the line of Ananda Baruah with Loop Capital.

Ananda Baruah, Analyst

Hey, thanks, guys. I appreciate you taking the question. Congrats on the great execution this quarter. I guess the question, John, in line with that, is given the new technology you have ramping, the boosted amp and smart codec, all else being equal, could you see better than typical seasonality through the back half of the calendar year?

John Forsyth, President & CEO

I don’t think I'm in a position to guide that right now, Ananda. Much of that will depend on the scheduling of orders around the ramp. It will be a significant ramp with the boosted amplifiers being three per device and then the codec with a one attach rate. That's a lot of material, meaning we’ll see how that unfolds in our results going forward. However, how that aligns with traditional seasonality is something I cannot predict in detail.

Ananda Baruah, Analyst

That sounds fair. Just one quick follow-up: Given your remarks about Gen-AI opportunities and various potential areas of needs, does that position the company better to expand its customer participation base? That’s it from me. Thanks.

John Forsyth, President & CEO

I certainly hope so. With our existing customer base, many of those brands will be bringing generative AI-centric devices to consumers. So we are well-positioned from that standpoint. We aim for deeper penetration with some of these customers moving forward. As mentioned, there are multiple product categories where we can remain relevant, with Gen AI being applicable across smartphones, watches, AR, VR, laptops, and so on. In some markets, we’re still in the early stages, laptops being a prominent example. Our product solutions today are highly relevant and anchored in delivering significant power efficiency, as well as our engineering and IP expertise that can seamlessly translate to participation in the AI cycle of products. So, yes, I hope for that outcome.

Chelsea Heffernan, Vice President of Investor Relations

In summary, we’re pleased to report these results for the quarter and the significant progress we made in fiscal 2024 across our main areas of strategic focus. I'd like to thank our customers for the trust they continue to place in us as a partner and supplier, and all of the Cirrus Logic employees worldwide whose commitment to excellence in everything they do drives our collective success. We remain very excited about the opportunities in front of us, and we thank you all for your continued interest in Cirrus Logic. Before we close, I would also like to note that we will be participating in the Cowen Conference in New York on May 29, and the Stifel conference in Boston on June 4. Please check our investor website for details. Thank you for participating in the call today. Goodbye.

Operator, Operator

That concludes today's conference call. You may now disconnect.