Roku, Inc Q1 FY2021 Earnings Call

Welcome to the Q1 2021 Roku Earnings Conference Call. My name is John. I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. And I will now turn the call over to Conrad Grodd.

Thank you, operator. Good afternoon, and welcome to Roku's financial results conference call for the first quarter ended March 31, 2021. I'm joined on the call today by Anthony Wood, Roku's Founder and CEO; Steve Louden, our CFO; and Scott Rosenberg, Senior Vice President, General Manager of our Platform business, who will be available for Q&A. Full details of our results and additional management commentary are available in our shareholder letter, which can be found on the Investor Relations section of our website at ir.roku.com. The following discussion, including responses to your questions, reflects management's views as of today, May 6, 2021 only, and we do not undertake any obligation to update or revise this information. Some of the statements made on today's call are forward-looking and are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding the expected performance of our business, future performance results, the future of TV, TV streaming and TV advertising globally, the impact of the COVID-19 pandemic on our industry, business and financial results and the future growth of our business and our industry. Our actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to today's shareholder letter and Roku's periodic filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You'll find a reconciliation of non-GAAP measures to the most comparable measures discussed today in our shareholder letter, which is posted on our website at ir.roku.com. And I encourage you to periodically visit our IR website for important content. Finally, unless otherwise stated, all comparisons on this call will be against our results for the comparable period of 2020. Now, I'd like to hand the call over to Anthony.

Thank you, Conrad, and thanks to everyone for joining today's call. I am pleased to report that Roku delivered an exceptional first quarter, driven by strength in platform monetization. This quarter, we saw that advertisers are increasingly moving money to streaming. The Roku Channel's virtuous cycle is attracting viewers, advertisers, content partners and the creative community. And streaming services are taking advantage of the tools Roku offers to help build audience and make their streaming business successful. We believe the inevitability of streaming is clear and that Roku's business model allows us to optimize streaming for all stakeholders, including viewers, advertisers and content partners. With that, let me hand the call over to Steve.

Thanks, Anthony. In Q1, we exceeded our outlook for revenue, gross profit and adjusted EBITDA and continue to make significant operational and financial progress. Before taking your questions, I'll walk through highlights and discuss our approach to outlook, given the current level of macro uncertainty. We added 2.4 million incremental active accounts in Q1, ending the quarter with 53.6 million. Sales of player units were up 14% year-over-year, while average selling price decreased 2% year-over-year. Roku users streamed 18.3 billion hours in the quarter, an increase of 49% year-over-year. Platform monetization continued to increase with ARPU of $32.14 on a trailing 12-month basis, up 32% year-over-year. Total Q1 revenue increased a record 79% year-over-year to $574.2 million. Platform segment revenue was up 101% year-over-year to $466.5 million, representing 81% of total revenue, while player revenue growth of 22% year-over-year was in line with our expectations. Our key financial metric, gross profit, grew a record 132% year-over-year in Q1 to $326.8 million, resulting in a record gross margin of 57%. The player gross margin of 14% was higher-than-expected due to fewer promotions, owing in part to tight inventory related to supply chain disruptions. As a reminder, Q1 is traditionally a lighter promotional period in the retail calendar, resulting in higher-than-average player gross margins. Platform gross margin of 67% was also more-than-expected due to a favorable mix of higher-margin activities as a result of new direct-to-consumer launches with investments in audience development and positive 606 accounting impacts from increases in the estimated lifetime deal values of our content distribution agreement. Q1 adjusted EBITDA of $125.9 million exceeded our outlook due to the outperformance in Platform monetization. Q1 OpEx was $251 million, up 28% year-over-year. As a reminder, Q1 was the last quarter before we begin lapping our actions in 2020 to slow the rate of OpEx and CapEx growth to manage COVID-related uncertainty. Thus, we anticipate more difficult expense growth comparisons going forward. Roku significantly increased its cash and liquidity position in Q1, raising approximately $1 billion in incremental equity capital via an at-the-market offering. We ended Q1 with approximately $2.1 billion of cash, cash equivalents, restricted cash and short-term investments. With that, let's turn to our outlook. We believe we have sufficient visibility into Q2 to offer a formal outlook. But as we move further out into the future, a number of uncertainties make providing a formal outlook for the full year 2021 difficult. Our Q2 outlook calls for robust growth with total net revenue of $615 million at the midpoint, up 73% year-over-year and total gross profit of $300 million at the midpoint, up 104% year-over-year, implying an overall gross margin of approximately 49%. Strong gross profit growth is expected to outpace OpEx growth, resulting in Q2 adjusted EBITDA of $65 million at the midpoint. Q2 OpEx is expected to be roughly 15% higher than in Q1, in part due to organic headcount growth and the inclusion of OpEx related to recent acquisitions. For modeling purposes, please note that Q2 adjusted EBITDA excludes stock-based compensation of roughly $39 million and an estimated $12 million of depreciation and amortization and net other income. As we observed in our shareholder letter, we will face a mix of headwinds and tailwinds for the rest of 2021 and into 2022 as we lap periods that were significantly impacted by COVID-19. These volatile year-over-year comparisons will likely be exacerbated by decreased player inventory availability and anticipated cost increases associated with the global supply chain and logistics issues. We anticipate revenue growth rates in the second half of 2021 will be robust, but at a slower rate than the first half. For the full year, we expect overall gross margins to be in the high 40% range. We anticipate that platform gross margin will be similar to 2020 levels as we expect the outperformance of content distribution to normalize in Q2 and in the back half of the year. Looking ahead at the player business, as a reminder, we do not optimize for player gross profit, but rather account growth. As such, given the supply chain issues we face, we anticipate slightly negative player margins for Q2 and the likelihood of increasing negative player margins in the second half of 2021, given anticipated component cost increases. I'll summarize by saying how pleased we are with the performance of the business and the strong momentum we are seeing across the broader streaming landscape that benefits Roku. With that, let's turn the call over for questions. Operator?

Thank you. We will now begin the question-and-answer session. Our first question is from Ralph Schackart from William Blair.

Good afternoon, and thanks for taking my question. A question on platform revenue, it accelerated again. In the letter you talked about capturing larger share of TV budgets, but also talked about performance advertising and social budgets. And Steve, you had mentioned some positive 606 impacts. So I'm just curious what was driving that outperformance, if you could sort of give us a sense of that. And then second, maybe more importantly, given that we're starting to see some sense of reopenings now, I'm just curious on the TV budgets that have shifted over since the pandemic. Give us a sense of the scale of that, the durability of that and sort of the impacts on the business and the driver of future platform growth going forward? Thank you.

Hey, Ralph, this is Anthony. I'll just make a few introductory remarks, and then I think Scott can take this. Overall, the shift to streaming is in full gear. It’s mainstream, but there's still a long way to go, a lot of growth ahead of us. If we look at advertising, for example, which you asked about, we've said historically that the biggest impediment or governor of our ad business growth has been TV buyers' buying patterns that they traditionally tend to prefer traditional linear TV versus new things like streaming. And there's a gap there as viewers move over to streaming versus the ad dollars. What we saw, I think, in the pandemic was that that gap started to close, but there's still a big gap and a lot of room to go. Advertising momentum in general is very strong. Scott, if you'd like to add to that.

Yes, I'll add on to that, Anthony. Thanks, Ralph, for the question. We believe the pandemic accelerated advertisers’ reallocation of TV budgets towards streaming. I'd offer a couple of data points as proof that this reallocation was accelerated and is here to stay. For example, according to Nielsen in March, linear TV ratings for adults 18 to 24 were down 22%. Q1 TV ad spending was down 11% according to Media Radar. Meanwhile, we doubled monetized video ad impressions on the platform, and ad spending by major agency holding companies with Roku more than doubled. We saw strength really up and down the ad business. A couple of areas that I'd call out where we saw strength: one is the entertainment side of our ad business. We're now at a point where every major direct-to-consumer service has launched. Those launches have created great opportunities for Roku to partner with these service providers. These partners are leaning in closely and investing with us to promote their services to our users. So we saw very strong growth in the entertainment side of our business. We also are continuing to diversify the business, especially with performance advertisers. While we continue to aggressively grow our business with ad-age top 200 advertisers, we grew business with non-top 200 advertisers significantly faster. That's an indication of the broad appeal of our platform to all advertisers, both traditional, top-of-funnel, branding-oriented advertisers as well as mid- and long-tail advertisers who are focused on performance. An example: Home Chef, a performance-based advertiser, invested with us and saw a 2.4x return on ad spend and then came back and significantly invested more with us. We have case studies like that left and right. It's a unique attribute of streaming that can both compete as a top-of-funnel branding medium as well as a mid- and bottom-funnel performance medium. Overall, a really strong quarter for the advertising business and an indication that the reallocation of TV budgets as well as digital and social budgets towards streaming is here to stay. Thanks, Ralph, for the question.

Great. Thanks, Scott. Thanks, Anthony. Appreciate it.

Our next question is from Jason Olson from Oppenheimer.

Hi, guys, this is Sean on the call for Jason. Can you provide some commentary on how OneView has changed the overall ad sales effort of the Company? And then also, can you comment on volume versus pricing trends? Has demand started to offset the very large increase in supply to the point where CPMs are growing? Thank you.

Scott, do you want to take that?

Thanks, Jason, for the question. OneView is already playing a very prominent role in our advertising relationships. For example, we kicked off the IAB NewFronts on Monday and OneView was featured very prominently. Marketers are accelerating their plans to automate media spending and optimize that spending towards performance, and a DSP platform like OneView is ultimately a better toolset for them than the traditional way of writing insertion orders and trading TV. The importance of OneView is it's not just a better way to take advantage of Roku's unique identity and data to optimize ad spend for reach and frequency across many supply sources, it's also a way to optimize outcomes and drive better results for our advertisers. It's a way for us to add value in transactions between an advertiser and publishers on our platform. So it's a way for us to work with advertisers not just when they're buying media from us, but when they're buying media from third parties where that transaction would benefit from our data. It's a significant new dimension in the way that we work with advertisers. A brand like Lexus is using OneView and our ACR data to optimize how they spend in streaming to manage reach and frequency holistically across their traditional TV spend and OTT spend. Regarding volume and CPMs, our product remains a premium product. We've added better data, better targeting, better measurement and newer ad products over time. That bodes well for commanding premium CPMs. Streaming is increasingly also a performance medium. Advertisers will increasingly look not just at the top-line CPM, but the effective cost per outcome—cost per site visit or cost per purchase. Long-term, streaming CPMs won't be one price; there will be a spectrum of prices dictated by the tactic and outcome the advertiser is executing on. Jason, I hope that answers your question. Thanks.

Very helpful. Thank you.

Jason, let me just add an interesting anecdote. I got an email a couple of days ago from one of our smaller content partners. They spend close to zero on advertising with us, but they were going to increase that to $5 million because they could now buy on a CPA basis, cost per acquisition. So it opens up the market to many companies that otherwise wouldn't be spending with us.

Our next question is from Justin Patterson from KeyBanc.

On The Roku Channel, you've made some nice progress in building its reach and adding originals. With more unique content coming to The Roku Channel, I'm curious how this is changing your conversations around attracting more advertisers, licensing from content creators and then working with the B2C streaming companies?

This is Anthony. The Roku Channel is doing really well—it's on fire. There's a virtuous cycle where more consumers coming into The Roku Channel increases our ad revenue, which allows us to spend more on content, which drives that flywheel. For example, reach and engagement in The Roku Channel: streaming hours grew more than twice as fast as the platform overall, which itself grew faster than last quarter. We license content from almost 175 different companies today and we'll continue to do that. As our content budget grows commensurate with revenue, we will maintain a scalable business model. As budgets grow and licensing deals evolve, we are doing more creative deals, licensing originals—for example, through buying Quibi content, which brought some originals. Better quality content brings in more viewers. We're focused on a diversified content strategy that will continue. Advertisers are interested in higher-quality content as well. Scott, do you want to comment on advertiser relationships?

Yes. Justin, before I get into advertiser relationships, I'll say most of our channel partners who have apps on our platform are also working with us in The Roku Channel. It's not an either/or proposition. Rights owners can execute a big direct-to-consumer strategy while monetizing parts of their catalog elsewhere. They also look at The Roku Channel as a place to help market their services and drive awareness. The Roku Channel has broadened and deepened our relationships with channel and content partners. Regarding advertising, one core reason we launched The Roku Channel nearly four years ago was to wholly own and innovate in the user experience and the kinds of ad products we could deliver in ways not possible when serving ads into third-party channels. This manifests in sponsorships, integrations, and with the launch of our brand studio, advertiser-underwritten experiences that we might not otherwise create. It serves consumers and content partners, and it's an important strategy for our advertisers as well. It performs well and drives significant effect; Taco Bell found The Roku Channel to be five times more efficient at reaching adults 18-plus because of our ability to target and control frequency relative to traditional linear TV investment.

Our next question is from Shyam Patil.

Congrats on a great quarter. I had a couple of questions. First, on the Nielsen deal, can you talk a little bit about how this enhances your value proposition and feedback you've gotten so far from advertisers and agencies? And second, you alluded to this a little bit in your shareholder letter but with the upcoming privacy changes with iOS 14 and the upcoming cookie deprecation, how do you think about that in terms of shifting dollars around? Do you think that CTV is going to be a beneficiary? Do you think it could be a positive catalyst for Roku to get maybe more of a budget shift than you might have otherwise gotten?

Let me talk a bit about the privacy changes, and then Scott can add on and talk about Nielsen. The privacy and platform changes generally make it more tenable to have a targeted ad business when you have a first-party relationship with customers, like Roku does. That relationship allows you to offer value to viewers and get any consent or opt-in as needed with fairly high take rates. When you don't have that direct first-party relationship, it becomes very difficult to do targeted ads in this environment. We think we're in a good position in that regard. Scott?

On privacy, Anthony is right. We're uniquely positioned as a platform to leverage our identity and data to help advertisers reach our users, and it is a more challenging environment for independent ad tech with the deprecation or more difficult access to IDFA on iOS and pending cookie changes. Because we have that relationship, whether you're buying media from us directly or through OneView, we're able to deliver more scale and precision than you'd get buying through a third party. Regarding the Nielsen deal, there are two reasons we did it. First was to acquire ACR or video fingerprinting technology that we've had embedded in our TVs for the last five years—we've had a long-standing relationship with Nielsen around this tech. Now we own the tech and IP as well as digital ad insertion or the ability to do linear ad replacement on the fly. That won't have a significant impact on 2021 revenues but is a significant new development for us. On Roku TVs, while streaming is growing, there's still substantial traditional linear TV consumption via the HDMI input or over-the-air. The ability to dynamically use our data in partnership with programmers to swap an ad that's more relevant to the user opens up a new class of inventory and additional reach we can deliver to ad clients in partnership with programmers. Second, we expanded our measurement partnership with Nielsen to enable cross-screen measurement. This will enable advertisers to do holistic reach and frequency measurement across four screens—traditional linear television, streaming, desktop and mobile—and manage reach, frequency and audience measurement as well as do attribution across those screens. It's a significant deal and a great opportunity. Still early days, but we're excited about it.

Let me add one small thing: DAI, digital ad insertion, is really relevant to television and has to be done inside of TV. Our position as the number one TV software platform in the United States makes it especially valuable to us, and we believe there's no one else as well-positioned as we are to take advantage of it.

Next question is from Matthew Thornton from Truist Securities.

Maybe two quick ones for me. Following up on the Nielsen question, I'm wondering if there's an opportunity to license that technology out to other platforms as well, to expand the scope of that opportunity, and whether you've gotten any initial feedback from networks and broadcasters? Second, are you thinking about an opportunity around a sponsored TV guide on the landing page—something like a sponsored listing model or a feature that's always on the landing page? Any thoughts around that opportunity?

In terms of licensing the tech, we license our Roku TV operating system to TV manufacturers, which includes technology and IP we've built over many years as well as what we purchased. Regarding the program guide on the home screen, our live TV guide is something we offer on streaming players and smart TVs, and we've been enhancing it. We just released OS 10, which added several new features to our live guide or EPG, and we'll continue to enhance that, including adding sponsorships and similar features.

Matt, we remain open to licensing the tech to third parties, but we're focused on making the promise of DAI a reality. It's a model that's been discussed for a long time, but we think we are uniquely positioned with the ingredients—scale, data, tech, TVs in the field and deep partnerships with programmers—to deliver on that promise. We're focused on execution. We don't think it will have a substantial effect in 2021, but it's a bigger long-term opportunity that we're excited about. Feedback from programmers has been positive. They're keen to enrich their inventory, command better CPMs and deliver a better ad product to advertisers.

Our next question is from David Beckel from Berenberg Capital.

I have two questions. First, media and entertainment ad growth was a meaningful driver this quarter. Can you help enlighten us as to how that rate of growth this quarter compared to prior? I would imagine the dynamic of direct-to-consumer apps and content competition will only grow. Second, how material is OneView's third-party business—revenue for ads placed outside of Roku's platform or third-party publishers using the DSP? Is that becoming a material part of the business or more material than when you purchased it?

On direct-to-consumer apps, it's a huge industry development. During the pandemic, many media companies launched direct-to-consumer apps aggressively and are taking advantage of our tools to attract consumers, recruit viewers, increase engagement and reduce churn. We've seen large media companies reorient their business models around streaming—even releasing some theatrical releases directly to streaming. It's a huge transition and obviously great for Roku and streaming viewers. It's still early days and competition for viewers will increase, but streaming is mainstream and has a long way to go until all TV is streamed. We expect that business to continue to grow. Scott, do you want to talk about OneView and the mix?

Dave, on the media and entertainment side, we've seen strong growth not only because of the surge in consumer interest but because of the launch of these services and our improved promotional products to drive adoption. We can deliver guaranteed outcomes for those services, for example cost-per-trial or cost-per-incremental-subscriber buys, which is a key attractor. Regarding OneView, growth has accelerated significantly—more than doubled—and that's across all media, not just media on Roku. The use of OneView to buy media on Roku is growing even faster because we have data and identity and optimization capabilities that outperform third-party DSPs. We also have strong cross-screen use cases—using ACR data to retarget a user on desktop and mobile based on what they watch on TV and conversely using site visitation to inform TV ads. These cross-screen use cases are driving growth in spending through OneView on media off the Roku platform. Thanks, Dave.

I will just comment quickly that another unappreciated driver of our ad business is our commitment to machine learning and AI. We've invested heavily and built out capabilities and have a strong internal commitment to world-class machine learning algorithms that help us correctly target and allocate our limited display inventory most effectively.

Our next question is from Michael Morris from Guggenheim.

I have two questions. First, on platform gross margin expansion—I'm curious what's driving five consecutive quarters of expansion. Is it better profitability at The Roku Channel, mix shift to audience development or other third-party? Second, on privacy: you say Roku possesses a direct relationship with consumers and doesn't rely on third-party identifiers or cookies. How are you getting the information to make your targeting so robust if it's not coming from third-party sources? Help me understand that progression.

On privacy, a simple example: with features like ACR, we felt consumers should opt in. We ask them the first time they start using the product if they want to opt in for ACR because they get more relevant ads and features like "more ways to watch," which surface options like watching all back episodes on The Roku Channel. These features directly improve the viewer's experience, so opt-in rates are very high on Roku TVs. It's the mutual value exchange—building trust with consumers through the interface, offering them benefits, and making it worth their while to participate in targeting. Scott, anything to add?

Another example: insights about consumer taste profiles drive recommendations in The Roku Channel. We've made huge gains in our ability to put the right tiles in front of consumers to drive engagement. It's mutual value: more relevant ads and better recommendations improve user experience, and consumers are willing to accept more relevant ads if the trade-off is compelling. Roku, as the holder of the direct relationship with the consumer, is uniquely positioned to achieve that value exchange.

Michael, on platform gross margins: Q1 platform gross margin was roughly 67%. The platform segment comprises a number of different businesses with different margin profiles, and quarterly margin trends often reflect mix—the relative growth in different parts of the platform. In Q1, the combination of new direct-to-consumer services, strong media and entertainment spend, and favorable 606 accounting increases to the lifetime value of several content distribution deals pushed the mix toward higher-margin activities. Looking forward, we expect platform gross margins in Q2 and the back half of the year to be more in line with 2020 as that outperformance in content distribution normalizes.

And our next question is from Jason Bazinet from Citi.

You had really good financials, but one area that missed our numbers was active accounts in the quarter. I'm just wondering if 2019 might be a better net add cadence versus 2020 given COVID? Or given chip shortages or both? Any comment would be helpful.

You're right that we recently started comping over the initial stay-at-home lockdown orders in the U.S., which hit in mid-March 2020. That makes for volatile year-over-year comps across metrics throughout 2021 and into 2022. The initial parts of the pandemic showed elevated growth in active accounts and streaming hours. While year-over-year growth numbers are down a bit from Q1 to Q4 sequentially, prior to those comps growth was tracking above Q4 levels. It's apt to look at active accounts and streaming hours on a net change quarter-over-quarter or year-over-year basis. We added roughly 2 million active accounts in Q1 2019 and 2.4 million in Q1 this year. We do anticipate engagement continuing to increase over time; streaming hours in 2021 should be greater than 2020. COVID-related impacts were significant, but we're early innings and the long-term shift to streaming is durable. Our position as the number one streaming TV platform in the U.S. gives us a good opportunity to capture value from that shift.

Our next question is from Laura Martin from Needham.

Could you discuss the three forms of advertising growth—brand advertising from television, performance advertising, and content studio ads—and how you see that mix changing over the next three years? Also, when you licensed new content that became number one, is that because you used data to inform licensing decisions, or because you put it on page one and got better at promoting exclusive content?

We use our knowledge of viewers and data to inform what will perform well on The Roku Channel and to target promotions. These insights also help determine how much to pay for content. We use our promotion capabilities to target people who are likely to be interested in a title, which can make lesser-known titles perform very well. As scale grows, we can invest in higher-quality content involving brand-name talent; on a cost-per-streamed-hour basis, it can be more efficient if it drives more viewership. So yes, we use data to inform licensing and to promote content effectively.

Laura, on ad categories: connected TV is positioned to capture traditional linear TV ad budgets, and our brand studio elevates sponsorships and ad innovations beyond the 15- and 30-second spot. Historically, brand experiences have gone to interactive media and social; CTV can compete for that spend. Streaming can serve as both a branding medium and a performance medium. We're unsure of the long-term mix among these categories, but each is substantial. There are also related opportunities: linear ad replacement, AI-driven optimization, self-service tools for small and medium businesses, local advertising and commerce-related advertising enhancements. We're bullish on the size of these opportunities but uncertain about the precise long-term mix.

And our last question is from Shweta Khajuria from Evercore.

Two questions. First, how meaningful is international today and how should we think about measuring success in international markets this year or next? Second, Steve, in your last shareholder letter you said operating expense growth for the full year would be comparable to 2019 levels. Does that still hold for the full year, and how should we think about it affecting full year EBITDA?

International is a key investment area for us—one of our four strategic areas alongside Roku TV, The Roku Channel and advertising. Streaming is a global phenomenon and we'll apply the formula that worked in the U.S. to international markets, often focusing one market at a time. Our early markets: Canada, where we're number one in TV OS and one in three smart TVs sold are Roku TVs; Mexico, where we're the number two smart TV platform; Brazil, where we entered with TVs and streaming players and are making progress; and the U.K. We focus first on building active accounts scale, then engagement, then monetization. Success is becoming the number-one platform in a market, which leads to being number one in active accounts and then monetization. We're starting to monetize internationally, for example selling ads in Canada and launching The Roku Channel in Canada and the U.K. It's early days but we're making progress.

Shweta, regarding OpEx, we haven't provided formal guidance for the back half of the year. We discussed in the shareholder letter and my prepared remarks that year-over-year OpEx comps will be variable. We proactively reduced cost growth and CapEx starting in Q2 of last year, so we anticipate year-over-year growth of OpEx to rise starting in Q2 as we lap those actions. In terms of overall OpEx level, a pre-COVID comp is still a reasonable reference and we're continuing to invest in the business given the strong momentum. We'll continue investing in international, advertising, Roku TV and The Roku Channel. Also note that recent acquisitions will add OpEx going forward.

One more note: we did a few acquisitions recently, and part of the sequential OpEx growth from Q1 to Q2 will include OpEx from those acquisitions as well.

I'll now turn the call back over to Anthony Wood for closing remarks.

I want to end the call by thanking our employees, customers and partners for an excellent quarter. The shift to streaming will be global and will transform the way content is distributed and monetized, and we're excited about the road ahead. Thank you for joining today's call.

Thank you. Ladies and gentlemen, that concludes today's call. Thank you for participating, and you may now disconnect.