學樂 (SCHL) 2027 財年第一季財報電話會議：隨著娛樂業務成長重申財測指引

重點提要

• 2027 會計年度第一季營收年減 4% 至 2.168 億美元，主因教育部門以及兒童圖書出版與發行部門營收下滑，加上售後租回交易後租金收入消除所致。
• 學樂 (Scholastic) 報告營業損失為 9,220 萬美元。調整後營業損失由 8,190 萬美元擴大至 8,870 萬美元，不過在可比基礎上，增加金額為 200 萬美元。
• 娛樂部門營收自 1,360 萬美元增至 2,010 萬美元，受惠於製作營收增加，其調整後營業損失改善 240 萬美元至 160 萬美元。
• 教育部門營收減少 970 萬美元至 3,040 萬美元，主因學區面臨更高的固定成本、未獲資助的法定指令，以及 ESSER（中小學緊急救濟）資金於 3 月結束。
• 管理層重申 2027 會計年度財測，預計營收成長約 2% 至 4%，調整後 EBITDA 為 1.35 億至 1.45 億美元，自由現金流為 3,500 萬至 4,000 萬美元。
• 書展預訂量與舉辦場次高於去年同期，秋季出版陣容則包含《哈利波特》(Harry Potter)、《神探狗狗》(Dog Man) 與《飢餓遊戲》(The Hunger Games) 的重大新書發行與周邊聯名作品。

核心財務業績

學樂在本季度向股東回饋約 2,960 萬美元，其中包括 2,580 萬美元的股票買回與 380 萬美元的股利發放。截至 8 月 31 日，其股票買回授權額度尚餘約 1.57 億美元。

業務與營運績效

兒童圖書出版與發行：營收自 1.094 億美元下滑至 1.058 億美元。書展營收為 3,320 萬美元，去年同期為 3,410 萬美元，主要反映時間點差異。管理層表示，在回歸學校、新學校、基督教學校及擴展書展形式的支持下，秋季預訂量與舉辦場次均領先去年。

讀書會營收自 180 萬美元增至 210 萬美元。合併零售營收自 7,350 萬美元降至 7,050 萬美元，主因去年同期的國際聯合出版銷售未再出現。受惠於包含戴夫·比爾奇 (Dav Pilkey) 作品在內的出版績效，美國零售營收成長 4%。該部門的調整後營業損失由 3,430 萬美元擴大至 3,780 萬美元。

第二季的出版計畫包括 HBO 改編劇上映前的《哈利波特》活動、11 月發行的 《Dog Man: A Sprinkle in Time》，以及電影改編作品 《飢餓遊戲：收割日出》(The Hunger Games: Sunrise on the Reaping) 的聯名出版品。管理層預期這些熱門 IP 與其他系列作品將推升更強勁的零售營收。

娛樂部門：由於製作活動增加，營收增加 650 萬美元至 2,010 萬美元。調整後營業損失自 400 萬美元改善至 160 萬美元。管理層指出，營運槓桿、已簽約專案及持續擴大的專案管道是支撐全年成長與盈利能力改善的動力。大紅狗克里弗 (Clifford) 的 YouTube 觀看次數年增 52%。

教育部門：營收自 4,010 萬美元下滑至 3,040 萬美元，調整後營業損失由 2,120 萬美元擴大至 2,330 萬美元。管理層正在重組產品與營運、改善銷售執行力，並使成本適應受壓的市場環境。公司預計訂閱認列與關鍵機會（特別是下半年）將改善全年業績。

國際部門：營收自 5,940 萬美元增至 6,050 萬美元。若扣除 120 萬美元的有利外匯影響，營收大致持平。受惠於成本管理與營運效率提升，調整後營業損失由 410 萬美元改善至 270 萬美元。

管理層財務預測

學樂重申其 2027 會計年度展望：

• 營收成長約 2% 至 4%。
• 調整後 EBITDA 約為 1.35 億至 1.45 億美元。
• 自由現金流約為 3,500 萬至 4,000 萬美元。

調整後 EBITDA 範圍是以可比基礎與 2026 會計年度進行比較，納入了兩個期間售後租回交易的全年影響。管理層預期營收年成長將於第二季開始，並持續至 2027 會計年度剩餘時間。

在書展業務方面，公司繼續預計舉辦場次增加且單場營收溫和成長，營運槓桿將有助於改善盈利能力。國際營收預計全年將成長，而國際營業利益預計將略微下降，部分原因是一些市場的通膨以及燃料和運費成本上漲。

風險與關注焦點

• 會計年度第一季通常是學樂營收最低的季度，因為學校大部分時間處於放假狀態；去年第一季僅占全年營收的 14%。
• 受人員配備及固定成本增加、未獲資助的法定指令擴大以及 ESSER 資金到期的影響，教育支出持續面臨壓力。
• 售後租回交易推升了租金費用並消除了租金收入，影響了經常性費用、現金流以及各年度間的可比性。
• 國際業務在某些市場面臨通膨以及燃料和運費成本上漲的挑戰。
• 儘管書展場次和預訂量令人鼓舞，但管理層表示，必須完成更多書展後才能自信評估單場營收。

分析師問答環節重點

管理層澄清，燃料成本上升特別針對國際市場，且已納入重申的 2027 會計年度預測中。

在娛樂業務方面，管理層將較強的利潤率表現歸因於業務組合與營運槓桿，因為製作營收規模擴大分擔了固定成本。

在書展方面，管理層表示整體場次符合或高於內部預期，且高於去年同期。成長反映了學校回歸以及新地點採用擴展形式，其中規模較大的學校舉辦書展的數量更多。

完整法說會逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Good day, and thank you for standing by. Welcome to the Scholastic Reports First Quarter Fiscal Year 2027 Results. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Jeffrey Mathews, Executive Vice President, Chief Growth Officer and President, Scholastic Education.

Jeffrey Mathews

Hello, and welcome, everyone, to Scholastic's Fiscal 2027 First Quarter Earnings Call. Today on the call, I'm joined by Peter Warwick, our President and Chief Executive Officer; and Haji Glover, our Chief Financial Officer and Executive Vice President. As usual, we have posted the accompanying investor presentation on our IR website at investor.scholastic.com, which you may download now if you've not already done so.

We would like to point out that certain statements made today will be forward-looking. These forward-looking statements, by their nature, are subject to various risks and uncertainties, and actual results may differ materially from those currently anticipated. In addition, we will be discussing some non-GAAP financial measures as defined in Regulation G. The reconciliations of those measures to the most directly comparable GAAP measures may be found in the company's earnings release and accompanying financial tables filed this afternoon on a Form 8-K.

This earnings release has also been posted to our Investor Relations website. We encourage you to review the disclaimers in the release and investor presentation and to review the risk factors disclosed in the company's annual and quarterly reports filed with the SEC. Should you have any questions after today's call, please send them directly to our IR e-mail address, investor_relations@scholastic.com.

And now I'd like to turn the call over to Peter Warwick to begin this afternoon's presentation.

Peter Warwick

Thank you, Jeff, and good afternoon, everyone. Scholastic continued to advance its fiscal 2027 priorities over the summer, while positioning our businesses for an important and promising second quarter. Our first quarter is typically Scholastic's smallest revenue quarter with schools largely out of session and sales particularly light for our Children's Books and Education divisions. For reference, last year's first quarter represented only 14% of full year revenue.

Consistent with the expectations we outlined in July, we recorded an operating loss in the quarter, reflecting the seasonality of the business as well as the full period impact of the sale-leaseback transactions completed last December. During the quarter, we continued to invest in our growth priorities and advance strategic transformation across the company. We remain 100% focused on driving stronger top and bottom line performance this year and beyond. Our fiscal 2027 priorities remain unchanged, translating the strategic and operating progress we achieved last fiscal year to drive stronger performance gains. We remain confident in the trajectory we outlined in July and are affirming our full year fiscal 2027 guidance.

So with that, let me turn to our Children's Book Publishing and Distribution segment. Our Book Fairs business is now entering its important fall season and early performance indicators are strong. Bookings and fair count are ahead of the prior year, and we continue to see traction in Christian schools and other extended formats as we expand the total addressable market for fairs by reaching new school communities. These leading indicators echo the momentum we saw in fiscal 2026 and reinforce our confidence in Book Fairs as a core growth and earnings engine for our Children's Book Group.

We're bullish about sustainable and profitable growth in fairs for 3 key reasons. First, the unique competitive advantages provided by our scale, brand, content and operations. Second, the significant growth opportunities serving new kinds of schools and offering new types of fairs. And third, the strong operating leverage in this business. Our focus now is on execution through the fall while continuing to expand the reach of this highly differentiated business. In Book Clubs, we remain focused on simplifying the program and innovating our promotions and incentives to better engage teachers and families. Together with fairs, Book Clubs remains an important part of Scholastic's direct connection to schools and classrooms as well as an important channel for our publishing.

Turning to our Trade Publishing business. We're entering a very exciting second quarter and holiday selling season with a strong publishing schedule across our portfolio of global franchises, best-selling series and new titles. We have an extraordinary Harry Potter publishing program this fall, ahead of the new HBO series premiering this Christmas. As a reminder, HBO's epic adaptation of the series currently planned to roll out over 10 years will introduce our beloved books to a new generation of American readers.

Earlier this month, we launched a major Back to Hogwarts campaign with coordinated publishing, bookseller, school channel and marketing activity continuing through the fall and holiday season. This includes a Read It Before You See It campaign around the first book in the Harry Potter series, connecting our publishing with growing anticipation for the upcoming television series. In October, we will publish the full-color illustrated edition of Harry Potter and the Half-Blood Prince alongside a robust range of new titles, including a paperback Philosopher's Stone tie-in with an iconic cover from the HBO show, a continuation of Pocket Potters and additional licensed titles centered around creativity and crafting.

Looking further ahead, we also see opportunities to build on the Harry Potter franchise around major publishing milestones, including the 30th anniversary of its U.S. publication in 2028. Another reason for excitement in quarter 2 will be the November release of Dav Pilkey's Dog Man: A Sprinkle in Time as we celebrate 10 years of Dog Man, now with more than 70 million books in print worldwide. We're also looking beyond this fall with new Pilkey publishing planned in 2027 and 2028, including the recently announced interactive book, Dog Man Dynamite, continuing the momentum of one of Scholastic's most important global franchises and the publishing relationship with Dav spanning nearly 3 decades.

November also brings another major moment for The Hunger Games with the film adaptation of Sunrise on the Reaping supported by tie-in publishing and renewed activity around the franchise. And importantly, our fall publishing slate includes much more. In July, Heartstopper 6 (sic) [ Heartstopper: Volume 6 ] became the first young adult title to debut at #1 this year and was the #1 selling book across adult and children's titles during the month, according to Circana.

We've also got new titles ahead across best-selling series, including The Baby-Sitters Club, Wings of Fire and I Survived. So together, the breadth of our publishing program and the major franchise activity ahead give us confidence in Trade's positioning for the year. Our focus is on executing against that slate and increasing coordination across our publishing, marketing and diverse channels to extend the reach of our books and franchises across the Children's Book group and Scholastic.

Turning now to Scholastic Entertainment. Building on the momentum and visibility we discussed in July, the business delivered a strong first quarter. Production activity increased significantly year-over-year, driving substantial revenue growth and improved profitability. Just as importantly, our pipeline for fiscal 2027 remains strong and continues to build with additional contracted projects and opportunities, supporting our expectation for accelerating growth in the business. Meanwhile, Scholastic Entertainment's digital platforms continue to extend the reach of Scholastic IP.

Clifford remains one of the leading franchises across our digital portfolio with YouTube views increasing 52% year-over-year in the first quarter. We're building on that audience engagement ahead of the new Clifford the Big Red Dog animated series expected to premiere on PBS KIDS in 2027. Together, the growth in production activity, continued visibility into the pipeline, and expanding engagement with Scholastic's IP reinforce our confidence in Entertainment's growth and profitability opportunity in fiscal 2027.

Turning to Scholastic Education. During that business's smallest quarter, we continue to take significant actions to reposition it. The go-to-market transformation that accelerated this spring under our new Chief Revenue Officer is focused on improving sales productivity and execution. Further actions to restructure our products and operations are helping us diversify the customer base and better align the cost structure with current pressured market conditions. We believe the actions underway are creating a more streamlined and diversified education business with stronger commercial execution and a cost base better aligned with the opportunities ahead.

Finally, our International business continues to benefit from Scholastic's global franchises, local publishing and operating discipline across key markets. We began to see early benefits from renewed Hunger Games activity ahead of the film this fall, building on the franchise's strong performance across our international markets last year. The new Dog Man title publishing in November provides another important franchise moment across our international markets in the second quarter.

We also recently announced a publishing and distribution partnership with Mattel in India, bringing brands, including Barbie, Hot Wheels and Masters of the Universe to young readers across the subcontinent through Scholastic's local publishing expertise and reach. More broadly, as we move through the important fall selling season, our focus remains on execution. With the first quarter behind us, we remain confident in our plan and full year outlook.

So with that, I'll turn the call over to Haji to discuss our first quarter financial results and outlook in more detail.

Haji Glover

Thank you, Peter, and good afternoon, everyone. Please refer to the tables in today's earnings release and our SEC filings for a complete discussion of onetime items and reconciliations of all non-GAAP measures discussed today, including adjusted operating income or loss, segment adjusted operating income or loss, unallocated adjusted overhead costs, adjusted EBITDA, adjusted net income or loss, adjusted net income or loss per share, free cash flow and results presented on a comparable basis to the most directly comparable GAAP measures. I'll identify our adjusted results and other non-GAAP measures as I discuss them. As Peter noted, the first quarter is typically Scholastic's smallest revenue quarter, reflecting the summer period when schools are largely out of session and activity in our school-based businesses is limited.

Let me begin with our consolidated financial results. In the first quarter, revenues decreased 4% to $216.8 million compared to $225.6 million in the prior year period, primarily reflecting lower revenues in Education and Children's Book Publishing and Distribution as well as the elimination of rental income following the sale-leaseback transactions, partly offset by higher entertainment revenues. Operating loss was $92.2 million, in line with the prior year period. Adjusted operating loss, excluding onetime items in both periods, was $88.7 million compared to $81.9 million in the prior year period, primarily reflecting higher overhead costs, partly offset by improvement in Entertainment and International.

To facilitate consistent year-over-year comparisons and provide a clearer view of operating performance given the impact of the sale-leaseback transactions, I'll discuss certain results on a comparable basis after reflecting the full period impact of the sale-leaseback transactions in the prior year period. Please refer to today's release or the table in the appendix to this call's presentation, where you will find a reconciliation of adjusted operating income and adjusted EBITDA by segment on this comparable basis. On a comparable basis, as I just described, the year-over-year increase in adjusted operating loss was $2 million. Adjusted EBITDA was a loss of $63.6 million compared to a loss of $55.7 million in the prior year period.

On the same comparable basis, adjusted EBITDA improved $0.6 million. The underlying year-over-year performance primarily reflected improvement in Entertainment and International, partly offset by timing of overhead costs. Net loss was $71.2 million or $3.77 per diluted share compared to $71.1 million or $2.83 per diluted share in the prior year period. Adjusted net loss was $68.6 million or $3.63 per diluted share compared to adjusted net loss of $63.3 million or $2.52 per diluted share last year. The increase in adjusted loss per share reflected the higher adjusted net loss and fewer shares outstanding following our significant share repurchase activity in fiscal 2026.

Turning to our segment results. In Children's Book Publishing and Distribution, revenue for the first quarter decreased $3.6 million to $105.8 million compared to $109.4 million last year. As a reminder, activity in our proprietary school-based channels is minimal during the first quarter, while U.S. schools are out of session. Book Fair revenues were $33.2 million compared to $34.1 million in the prior year period, primarily reflecting timing-related impacts. We continue to expect higher fair count and modest revenue per fair growth to contribute to revenue growth in our Book Fairs business this fiscal year, with the operating leverage in this business expected to support improved profitability.

Book Clubs revenue were $2.1 million in the quarter compared to $1.8 million a year ago. Consolidated trade revenues decreased $3 million to $70.5 million in the first quarter compared to $73.5 million in the prior year, primarily reflecting higher international co-edition sales in the prior year period that did not reoccur. Within consolidated trade, U.S. trade revenues increased 4% year-over-year, supported by strong performance across our publishing, including Dav Pilkey's titles. Looking ahead, we continue to expect stronger trade revenues in the second quarter and for the full year, supported by the robust publishing pipeline and major franchise activities, which Peter discussed. Segment adjusted operating loss increased to $37.8 million from $34.3 million in the prior year period. On a comparable basis, adjusted operating loss increased $0.6 million.

Turning to our Entertainment segment. Revenues increased $6.5 million to $20.1 million compared to $13.6 million in the prior year, driven by higher production revenues. Segment adjusted operating loss improved $2.4 million to $1.6 million compared to $4 million a year ago, primarily reflecting higher revenues. Production activity and pipeline visibility remains strong. We continue to expect growth and improved profitability for the full year, supported by increased production activity and growing slate of greenlit projects.

Turning to our Education segment. Revenues were $30.4 million in the first quarter compared to $40.1 million a year ago, a decrease of $9.7 million during the segment's seasonally smallest quarter. School and district spending on curriculum and supplemental materials remained under pressure this summer as districts managed higher staffing and fixed costs, expanding unfunded mandates and the conclusion of ESSER funding in March. Segment adjusted operating loss increased to $23.3 million compared to a loss of $21.2 million in the prior year period.

On a comparable basis, adjusted operating loss increased $1.3 million. The decline primarily reflected lower revenues, largely offset by the benefits from the segment's improved cost structure. Looking ahead, we continue to target an improved performance for the full year. We expect revenue trends to improve as the year progresses based on the timing of key opportunities and recognition of subscriptions, particularly in the second half, with improved profitability.

Turning to our International segment. Revenues were $60.5 million in the first quarter compared to $59.4 million a year ago. Excluding the $1.2 million favorable year-over-year impact of foreign currency exchange, revenues were approximately in line with prior year period. Segment adjusted operating loss improved to $2.7 million compared to $4.1 million in the prior year period, primarily reflecting continued cost management and operational efficiencies. Looking ahead, we continue to expect full year revenue growth supported by our publishing and franchise activity across key markets, while operating income is expected to be modestly lower, partly reflecting inflation and higher fuel and freight costs in some markets. We remain focused on operating discipline and continued efficiency improvements across the business.

Finally, unallocated adjusted overhead costs increased $5 million to $23.3 million in the quarter compared to $18.3 million in the prior year period. On a comparable basis, adjusted overhead costs increased $3.9 million, primarily reflecting higher costs related to corporate strategic initiatives as well as the timing of employee-related expenses. As discussed in July, overhead will continue to reflect full year impact of the sale-leaseback transactions, including the loss of rental income and a portion of additional lease expense. We continue to manage corporate costs with discipline while making targeted investments to support our fiscal 2027 growth priorities.

Now turning to cash flow and the balance sheet. In the first quarter, net cash used by operating activities was $94.6 million compared to $81.8 million in the prior year period, primarily reflecting working capital requirements, lower cash remittance as well as higher rent expense and loss of rental income related to the sale-leaseback transactions, partly offset by lower inventory and royalty advance payments. Free cash use was $110.8 million compared to a free cash use of $100.2 million last year, reflecting higher cash used in operating activities and higher capital expenditures, partly offset by net borrowings of film-related obligations.

At quarter end, net debt was $86.8 million compared to net debt of $242.8 million in the prior year period, primarily reflecting net proceeds from the sale-leaseback transactions completed last December, partly offset by capital return to shareholders. During the first quarter, we returned approximately $29.6 million to shareholders, including $25.8 million through share repurchases and $3.8 million in dividends. As of August 31, approximately $157 million remained authorized for future repurchases under our share repurchase program. We expect to continue purchasing shares from time to time as conditions allow.

Now turning to our outlook for the full year. We are affirming our fiscal 2027 outlook for revenue growth of approximately 2% to 4% and adjusted EBITDA of approximately $135 million to $145 million. The adjusted EBITDA range represents growth compared to fiscal 2026 on a comparable basis, reflecting the full year impact of the sale-leaseback transactions in both periods. As we outlined in July, we expect year-over-year revenue growth to begin in the second quarter and continue through the balance of the year with the important back-to-school and fall season now underway. We also continue to expect full year free cash flow of approximately $35 million to $40 million.

Overall, our first quarter results and current outlook remain consistent with our full year plan we outlined in July. We remain focused on executing against our growth priorities while maintaining cost discipline and financial flexibility.

Thank you for your time today. And now I'll turn the call back to Peter for his final remarks.

Peter Warwick

Thank you, Haji. As we continue to execute during the important back-to-school and fall period, our priorities are clear. We remain focused on the plan we laid out in July and on translating that work into stronger performance through the balance of fiscal 2027. We're particularly excited about the next 3 months. It's not every quarter that there's a Hunger Games movie. It's not every year that Harry Potter begins a 10-year reimagining for a new generation. And on top of that, we have another Dog Man title in November, excellent early performance metrics for our Book Fairs and a strongly growing Entertainment business. I'd like to thank our employees, authors and illustrators, educators, customers and shareholders for their continued support.

Now let me turn the call back to Jeff.

Jeffrey Mathews

Thank you, Peter. With that, we will open the call for questions. Operator?

Operator

[Operator Instructions] And our first question comes from the line of Brendan McCarthy with Sidoti & Company.

分析師問答

Brendan Michael McCarthy

Haji, I wanted to circle back to your statement on the fiscal 2027 guidance. I think you mentioned you're expecting operating income to be modestly lower this year, and that's due to higher fuel costs weighing on certain markets. Is that a new development? And has that been, I guess, factored into the reaffirmed 2027 adjusted EBITDA guidance?

Haji Glover

Yes, Brendan. This is Haji. Can you hear me?

Brendan Michael McCarthy

Yes, Haji, can you -- hear you well.

Haji Glover

Yes. So just to be clear on that point, I was actually referring specifically to the international markets where we're seeing the fuel cost because of the war causing us to have a little bit more cost. But some of the stuff we've already anticipated within our forecast, our full year forecast. So we're in line with everything right now, and that's the reason why we're reaffirming our guidance.

Brendan Michael McCarthy

Understood. Turning to the Entertainment segment. It looks like it was a really strong quarter, profitable on an adjusted EBITDA basis. And it sounds like you're seeing contracted revenue really support the outlook for the year. Can you touch on the adjusted EBITDA margin? It looks like it expanded to 28% from mid-single digits last fiscal quarter. I know that scheduled entertainment revenue can really vary based off the production schedule, but just wondering if you could give more detail on the margin profile there.

Haji Glover

Yes. It's all based on the operating leverage and the mix of the business in which we do. We have fixed depreciation from the acquisition itself within our EBITDA calculation. So those are the things that really drive that. And as you remember, the reason why we got into this business was because of a lot of operating leverage in it. So we're excited to see the change and looking forward to the future.

Brendan Michael McCarthy

Great. Great. And on the Book Fairs business, it sounds like early indicators have been strong. Has that growth rate exceeded your expectations? And how are some of the newer models been selling?

Peter Warwick

It's Peter here. No, we -- I mean, the metrics that we have in anticipation of the fall season for Book Fairs are really strong. I mean, we are feeling very confident about it. The number of book fairs that we have has been at or above what we were expecting and is at and is certainly above last year. The number of book fairs that we have, which are in larger schools, which are really what we want, is also greater. And we're expecting our revenue per fair to be good. I mean, at the moment, we can't really give an accurate validation of that in the sense that you really need to see some more of our -- we need to see some more of our book fairs before we can be totally confident about that.

But what we do know is that we're getting very strong response with our new models. I mean, what we're basically doing is expanding the market for book fairs in a way that nobody has ever done that before. We're in a very unique position. It's an incredible business model, as you know, with a lot of leverage within it. And we're feeling very, very bullish about it. We've had good engagement with hosts. Our Scholastic Dollars are in very good shape. So we're feeling very confident about that, Brendan, very confident.

Brendan Michael McCarthy

And has that really driven an increase in the number of schools engaging in fairs? Or has it really been more returning schools engaging in a second fair for the school year, or maybe a mix of both?

Peter Warwick

It's basically both. I mean, the number of schools returning is good, and we've also got new schools and new places for the new formats as well. So we're feeling good about that. I mean, the overall fair count is very, very promising. So there's very good feelings all around about that.

Operator

Thank you. And this concludes our Q&A. I will pass the call back to Peter Warwick for any closing remarks.

Peter Warwick

Well, thank you all for joining today's call. I mean, we really appreciate your support, and we look forward to updating you on our progress through this very exciting and important fall season that we have in front of us when we report our second quarter results in December. So with that, thank you all very much, and goodbye.

Operator

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