Ladies and gentlemen, thank you for standing by. Welcome to the Best Buy's Third Quarter Fiscal 2016 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available approximately by 11 a.m. Eastern Time today. [Operator Instructions] I would now like to turn the conference over to Mollie O'Brien, Vice President, Investor Relations.

Good morning, and thank you. Joining me on the call today are Hubert Joly, our Chairman and CEO; and Sharon McCollam, our CAO and CFO. This morning's conference call must be considered in conjunction with the earnings press release we issued this morning. Today's release and conference call both contain non-GAAP financial measures that exclude the impact of certain business events. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparison, which should not be considered superior to, as a substitute for and should be read in conjunction with the GAAP financial measures for the period. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful can be found in this morning's earnings release. Today's earnings release and conference call also include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements address the financial condition, results of operations, business initiatives, growth plans, operational investments and prospects of the company and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's current earnings release and SEC filings for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. In today's earnings release and conference call, we refer to consumer electronics industry trends. The consumer electronics industry, as defined and tracked by The NPD Group, includes: TVs; desktop and notebook computers; tablets, not including Kindle; digital imaging; and other categories. Sales of these products represent approximately 65% of our Domestic revenue. It does not include mobile phones, appliances, services, gaming, movies or music. I will now turn the call over to Hubert.

Good morning, everyone, and thank you for joining us. I will begin today with our third quarter results and an overview of the progress we're continuing to make against our priorities. I will then provide highlights of our holiday plans, before turning the call over to Sharon for additional details on our quarterly results and commentary on our financial outlook. First, our Q3 results. In summary, we have delivered another quarter of Domestic comparable sales growth and operating income expansion. At the Enterprise level, on revenue of $8.8 billion, we increased our non-GAAP operating income rate by 40 basis points to 2.8% and our non-GAAP diluted EPS by $0.07 to $0.41, an increase of 21%. In the Domestic business, our comparable sales, excluding the impact of installment billing, increased 0.5%. This increase was the result of growth in computing, major appliances, health and wearables and large-screen televisions, partially offset by declines in tablets, mobile phones, digital imaging and services. Online comparable sales increased 18% as our new mobile site and enhanced dotcom capabilities continue to drive higher conversion rates and increase traffic. I note that during Q3, industry sales in the NPD-tracked categories were down 4.3%. In the International business, we continue to see the ongoing revenue impacts of the Canadian brand consolidation store closures, foreign currency and softness in the Canadian economy and consumer electronics industry. However, the stronger product mix and a more effective promotional strategy have resulted in better-than-expected profitability. I would now like to discuss our progress on our key priorities, starting with merchandising. In Appliances, we've completed our planned rollout of Pacific Kitchen & Home stores-within-a-store for the year, adding 59 stores for a total of 176. We also rolled out 225 Samsung Open House appliance experiences, and with 20 consecutive quarters of growth in…

Thank you, Hubert, and good morning, everyone. Before I talk about our third quarter results versus last year, I'd like to talk about them versus the expectations we shared with you last quarter. Enterprise revenue of $8.8 billion was in line with expectations. Our non-GAAP operating income rate of 2.8% exceeded our expectations due to a Domestic $0.04 periodic profit-sharing benefit from our externally managed service plan portfolio and better-than-expected profitability in our International business. Additionally, our non-GAAP effective income tax rate was 37.1% versus our expectations of 39% to 40%, resulting in additional $0.01 of EPS versus expectations. I will now talk about our third quarter results versus last year. Again, Enterprise revenue of $8.8 billion decreased 2.4%, driven primarily by the Canadian brand consolidation, the impact of foreign currency fluctuations and softness in the Canadian economy. Enterprise non-GAAP diluted EPS increased $0.07 or 21% to $0.41. This increase was primarily driven by a stronger year-over-year performance in the Domestic business and the $0.04 periodic profit-sharing benefit that I just discussed. These increases were partially offset by a $0.02 negative impact of the Canadian brand consolidation and the lapping of a prior year inventory-related legal settlement of $0.02 that did not recur this year. In our Domestic segment, revenue increased 1.2% to $8.1 billion. Our revenue growth was primarily driven by comparable sales growth of 0.5%, excluding the benefit from installment billing; an estimated 30 basis point benefit associated with installment billing; and a 30 basis point benefit from the periodic profit-sharing benefit. Our Domestic comparable online revenue increased 18.3%, driven by increased traffic and higher conversion rates. As a percentage of total Domestic revenue, online revenue increased 130 basis points to 8.8%, versus 7.5% last year. From a merchandising perspective, comparable sales growth in computing, major appliances, health…

[Operator Instructions] We'll go first to Seth Sigman.

So a question on the fourth quarter outlook. So it sounds like the expectation is that the industry is going to be similar to Q3 overall, but you did note that the business got progressively worse throughout the quarter. So it would seem to imply that trends will improve throughout Q4? I mean, how should we be thinking about the drivers of that overall?

The drivers of forecasting the industry. Welcome to forecasting in a hit-driven business. What we're very clear about is what we control, and as we said, we're extremely well positioned to deliver. Clearly, we've been gaining market share, and so that gives us enormous confidence. Exactly what's going to be the demand during the quarter? You've seen a lot of volatility across retail categories in the last few months. So we've noted these facts. We want to be transparent with our shareholders. Our forecast reflects everything we know at this point, and you see us determined to -- irrespective of what's going to happen in the market, there's so much we control, and what we've put in place, the capabilities we have, allow us to win. And so we're in this to win this. And so I'm afraid that it's hard to directly answer your question about exactly what the demand is going to be, but we've tried our best today to give you as much transparency as possible around the categories. I would say there's a lot of excitement in a number of product categories. I mean, TVs, the demand for 4K TVs in our customer experience in this category is a great example of what we can accomplish. Appliances is less of a giftable item, maybe, but our momentum continues to be strong in the market, and that category continues to be very strong. There's a lot of excitement in health and wearables, connected devices. I'm planning to buy a drone myself, so if you want to join me, but there's these recent trends we saw at the end of the quarter that we wanted to highlight for our investors in this period of transparency.

And Seth, this is Sharon. I'll just add to that, that we believe there was another dynamic in October, which is pent-up demand with people waiting to anticipate Black Friday deals, because Black Friday, as we all know, has turned into Black November, and we believe that, that has a particularly stronger impact on the consumer electronics category than other categories. So even going from the last weeks of October to the first week of November, we just got that data off the press. We actually saw a significant improvement from the last weeks of October and the first week of November. So again, that was in our backdrop and in our -- view when we were looking at our Q4 outlook.

Okay. That's very helpful. So to follow up, thinking about the promotional outlook and whether that's going to be a driver in the fourth quarter here. And you talked a lot about the price investments you're making in Services. Maybe looking beyond Services, you've made a lot of price investments over the last few years that have helped drive market share. How do you feel about your pricing in kind of the rest of the business today? And do you think there's a need to be more aggressive through this holiday period?

Seth, we feel very good about our pricing. In the -- outside of Services, we've made these investments over time in hardware and accessories. I think if you follow -- if you have time to follow some of the blogs around the Black Friday deals, in particular in the TV category, which is the hard category, my sense is that the widespread sentiment is that we have the best deals for holiday in TV. So we feel really good about our price positioning, which is what I highlighted in my prepared remarks. We have not only an amazing assortment, amazing prices, and we have the quantities for consumers. So it's one thing to have an item at a price that looks great, but if you have 5 of those and then you are done, not particularly competitive. We have -- we're going to have deep inventory making the products available to the customers.

We'll go next to Matthew Fassler.

Thanks a lot, Sharon, for that last point on the quarter-to-date trends, but I want to focus for a moment on the NPD trends that you saw over the course of Q3. Can you talk about where the erosion took place? Was it broad based? Or was it category focused? And then along with that, I know the phone market is not included in the NPD data. I also know that wireless shifted from a sales driver for you in Q2 to a category that declined in Q3. So any color you can give us on the outlook for phones, product-wise and otherwise, would be terrific.

Yes, Matt, on the NPD, I know this will sound like a strange statement, but the good news is, it actually was across all the categories. We like that because that's what really led us to our premise, especially in October, around the pent-up demand. Because it really isn't product specific. It was sort of categorically specific. So that was, in our minds, again another data point, which just says the customer was looking forward to Black Friday. Because remember, the first Black Friday deals were released in the first week of November. By some retailers, second week, they were -- we released 8 deals. So that -- we'll just follow through on that. And October was the most notable month during the 3-month period. As you pointed out, there are categories that are outside of that. Appliances is another category that is actually outside of NPD. And with that, we saw exceptional growth again this quarter, and we are so encouraged by the work that we're doing on the Appliance side. In the mobile category, we did see, I believe -- we believe the industry grew. Knowing what the industry did for mobile is very difficult, but we do believe if you look just at units that there was growth. But for us, at Best Buy, the shift of the iPhone launch by a week was not helpful. So we will see. But as you know from our remarks this morning, mobile was not our strongest category. It was one of our down categories.

We'll go next to Brian Nagel.

I'm going to try to phrase this in a question, but it's probably going to come across more as a comment that we can just opine upon [ph]. And it's a follow-up to, I guess, the prior 2 questions as well. But as I look at the results today, I just see a real disconnect between what seemed to be, actually, a decent Q3, and in even some of the qualitative commentary you're making about the third quarter and then into the holiday, and then the guidance that we put out there. And most importantly, the implied earnings decline of that guidance -- that is implied in that guidance. So I guess, what I'm wondering is what -- is there some type of X factor here? Is there an air of conservatism as you head into the holidays, which is -- I get. Is it a stepped-up investment cycle the last -- the next few months? What's actually happening there?

So I would say 2 things. As Hubert mentioned it in his prepared remarks and I mentioned it in my own, with NPD down 4, which was a significant change versus Q2, we believe that going into Q4, we should enter the quarter and enter the outlook that we provided today with the appropriate industry backdrop. So to your question about did we go into this with a lens around what the environment feels like: we did. When you look at other retailers that have come out in the last 2 weeks, we have seen what you've seen, which is a smattering of good news and not-so-good news. And several of the areas where the retailers tend to be catering to the higher-end consumers and have a less broad customer base, they seem to have had a slightly more impactful outlook for the fourth quarter. So we've tried to balance that between the 2, and -- but without question, we are coming into this with that as our backdrop. So is that helpful?

No, that's very helpful, Sharon. It's very helpful, and then, so just to drill down one. With respect to price promotions and having followed consumer electronics now for a very long time, that's typically the biggest hurdle, if you will, competitive price promotions with -- as we head into the holidays. It doesn't seem, again, in all the points you've laid out -- it's kind of what frames your guidance. It doesn't seem as though you're expecting an overly aggressive promotional holiday, at least as of now. Is that correct?

I think we expect something as usual, in general terms. Let me add a couple of comments to what Sharon was saying and to your question. The trend we're seeing is that we are outperforming the industry and that -- based on our value proposition and great execution. You saw that in Q3. You've seen what other retailers have reported as it relates to consumer electronics. And you've seen our results, and you've seen -- you've heard our confidence getting into Q4 in terms of our ability to win and execute some of the investments we're making and some uncertainty around the market, and I think you'll see us transparent on that. Regarding the price -- the promotionality, we don't see anything unusual for this quarter. In fact, if anything, it's possible that given some of the industry trends and the difficulty of competing in consumer electronics, some retailers, and we have commented on that last quarter, are less enthusiastic about this category. The potential flip side that you could see, of course, again in the spirit of transparency, if the market is bad, you can always have the risk of people wanting to liquidate their inventory, but that's not the ingoing assumption. And we think we are competitively priced, and we think we're going to win.

We'll go next to Peter Keith.

I wanted to just ask about the growth investments that you're making, $100 million for this year. It clearly looks like these are working, and it's allowing you to take share. How should we think about this on a go-forward basis? Is this something now that we should expect maybe $100 million per year next year and going forward?

No, as a matter -- yes, we are going to continue to make investments. But as we look to fiscal '17, and we start to see benefits coming from other initiatives that we are currently working on, what our anticipation is in fiscal '17 is that the growth investments are going to be offset with cost reductions and other eliminations of waste and efficiency in the company.

So just to understand, would that be a net neutral impact? Or do you think with the Renew Blue cost reductions that seem to be pretty comparable to the growth investments this year that looking forward, the cost reductions would outpace the growth investments?

I think that next year, we will definitely offset the investments, and then what we recover out of the Renew Blue Phase 2 cost reductions, we will see some upside, but a large portion of the savings next year, again, will be offset with the investments.

Okay, very good. And I just want to pivot quickly to mobile. And it seems the industry is changing to more broad-based installment billing platform, and I wanted to get your take on how that might change your competitive positioning. Does that change your ability to take share? And what might it do to the frequency of upgrades in your view?

Yes. The -- we're excited about the shift to installment billing. We are -- as a retailer, we are very well positioned to offer these plans, both online and in the stores, again the only one to offer that from the 3 retailers. So another thing that's going to be helpful to us is these carrier stores-within-the-stores that will continue to improve the experience for the customers. The churn in the industry is very low. So most of the customers are interested in having a very tight connection to the carrier and the degree of expertise in our stores, the dedication to individual carriers, the access, the complete access to the carriers' products and services, systems, and so forth, is going to be very helpful. And then beyond mobile as the business shifts towards connected and smart devices, one of the great assets we have, as we've talked about in the past, is our ability to connect other devices and win in that next wave of technology innovation. So as the business transitions, we're evolving the business model, and we're excited about the opportunities.

We'll go next to Michael Lasser.

Your guidance implies that you're going to sustain this rate of outperformance versus the industry of about 400 to 500 basis points. How long do you think you can maintain that gap with the sector?

Thank you, Michael, for your question in highlighting by how much we are beating competition or winning in the marketplace. We think we have a long runway. If you average our market share across all of the categories in which we compete, it's around 15%. Now of course, it varies by product categories and types of customers, but our share of wallet of existing customers is not that high. So jokingly, I tell our teams as long as we're below 90% market share, we have a long runway. As you can appreciate, they love that. Clearly, we have a lot of runway to continue to grow. And then, of course, we're going to play where the puck is going. This industry and our business is characterized by waves of technology, and planning where the next waves are is something that Best Buy is very good at. And as the business moves to the connected devices, the Internet of Things, we are extremely well positioned to win these waves. So we see -- in the short term, we see no limits to our ability to grow that -- continue to grow that.

That's helpful. My follow-up question is, Hubert, the fourth quarter in the consumer electronics space is a little different than the first 3 quarters of the year. The first 3 quarters of the year, you have to be price competitive against other players who are trafficking in consumer electronics. In the fourth quarter, in the holiday, you're competing against other product categories for wallet share. So I think everyone appreciates that your prices on consumer electronics for the Black Friday ad are competitive, but how do you think about the cross-price elasticity of demand? So if sweaters are going to be 75% off, perhaps that will look more compelling to a consumer over the next couple of months versus buying a TV that may not have as much of a discount. And if we see that shape up, will you have to get progressively more promotional as we get closer to Christmas? Especially in light of what looks like pretty heavy inventory positions, given that your inventory outpaced your sales by a few basis points. Wal-Mart and Target talked about their weakness in consumer electronics, and so arguably, the industry's heading into this holiday with a pretty heavy industry -- inventory position.

Thank you, Michael. There is, indeed, a risk that I mentioned that we've talked about, which is the -- if the industry is soft, then there's this risk of people being desperate and liquidating their inventory. We don't think that's the main thesis at this point in time. But going back to the fight against the sweaters, our teams completely understand that. I mean, I'm very proud of our team, and which is one of the reasons why we bought early, and often, we start our marketing campaigns early in the season. You've seen us, in fact, before the end of October starting to talk to customers because we want to be front and center. I think that in the apparel category, I think you've seen a lot of softness, frankly. But somehow, the products in that category don't seem to be resonating that well with consumers. And in many ways, the consumer market and consumer electronics in particular, great supply creates demand, and I think the products we have, the assortment, the customer experience can be extremely exciting. If you gave me time, I could try to sell each one of you on the call some great products, but I'm not sure Sharon would let me do that. So we -- yes, we understand it's a broader battle. We understand the game is different, and we play it slightly differently than in the rest of the year, focusing on product, product availability, being price competitive and being very convenient with delivery. Our free 2-day delivery capabilities are very significant. So you can feel how excited and good we feel about this fight. Bring them over. We're ready.

And if you take a look -- I'll just add to that. When you look at the outside of Best Buy industry data points about what people believe is going to be big sellers for holiday, even NPD put out a holiday outlook. And within that, one of the top categories that they expected was around video games and tech-type items. In addition to that, they thought that one of the biggest sellers this holiday, big drivers of holiday, is going to be big screen TVs, where we continue to have such substantial share, and as you guys know, probably the best assortment in all of retail. So we are so prepared to take advantage of those, as Hubert pointed out, and we discussed in the prepared remarks. Our inventories are probably in the best position that we've ever entered a fourth quarter in recent history, and we feel very confident in our ability to execute that. And reminder that it's hard to execute when you are going into these categories that carry such large cubes. You really need capabilities in that area. I don't -- whether you're selling it through the stores or selling it online, you need very strong capabilities. Not everyone is going to come out of the chute really great at this. So I think there are a list of competitive advantage, but there are numerous external data points that you can research that are saying that this is going to be a very strong category this holiday.

We'll go next to Anthony Chukumba.

Actually had a little bit of a different question specifically on, I guess, capital allocation. You bought back over $300 million of common stock in Q2 and then you only bought back $64 million in Q3, and your stock price was pretty depressed throughout the quarter. So I guess, I was just wondering first off, why the sequential decline in terms of share repurchases in Q3 versus Q2 and also what your thoughts are going forward.

Thank you, Anthony. We will continue. As you know, we've got $1 billion authorization out there. As you pointed out, we bought over $300 million in Q3 and then the -- in Q2 and then the additional in Q3. We do expect to continue to purchase our shares under that program, and we see our stock currently just like you do, as a value.

All-in.

We'll go next to David Magee.

I just had 2 questions, 1 being the -- with regard to the NPD data, what do you think is driving that number lower of late? And then my second question is -- I'm curious whether you think it's the weather or is it the Texas impact or some combination? Then my second question has to do with the Service investment in price, and what your plans might be to communicate those to customers.

So as relates to NPD, the change in trajectory, so you have 2 parts in your question. One is why was Q3 lower than Q2 in a sense from a trend standpoint? And what has happened during the quarter? The first thing I think we all have to recognize is the nature of this industry is to have some volatility, right? Because it's so hit driven, product innovation driven and so forth. I think we also have to remember that Q2 was relatively better compared to previous trends. So we saw a difference. The most significant in a sense is the change in trajectory within the quarter that was quite significant. What exactly drove the change in trajectory was -- there's 2 aspects. One is it was broad based, but then there's some product-specific elements. I think it's a widespread elements that's widely known is the decline -- the sharp declines of tablets. It is -- this is a category in which we have a very large market share, of course, so it impacts us. But from an industry standpoint, there was a significant decline in that. Now since then, there's been new product introductions that we can all be very familiar with. Does the weather plays a role. I think the apparel players would have spoken about this. Our science is not sophisticated enough. The people, in particular in Minnesota, like to go to their lake rather than shopping. It's not -- don't think so, okay? So that's the color I would give. Looking ahead, again to the extent that there is amazing great products and so forth, number one, it can help the industry, and certainly will help us, and we will take advantage of it. I would like to ask you, David, to repeat your question around service, because I'm not sure I fully understand it. Do you mind repeating it? Because I want to do a great job of answering your question.

Sure, Hubert. My second question has to do with just the price investments you're making on service, and I know that's a big part of the future there in terms of developing that business further. I'm curious what the plans would be in terms of getting consumers aware of Geek Squad and, perhaps, a lower pricing, and just improving that awareness?

Yes, thank you for that question. So let's clarify first what we've done, what the impact is and what we have still ahead of us around that. So what we've done is we've redefined the service offering with the Geek Squad services for computing and tablet. We launched that on September 13 with Geek Squad Protect and Support Plus. And we also launched AppleCare with ramping up our Apple service provider capabilities. So we've changed the offering, moving away from pure warranties to something that is helpful to customers, and we've materially lowered the price. I think that this is something -- we've been consistent in wanting to be price competitive. Our field, our stores are very excited about this. The service offering is very good. We've seen initial pickup in the attach rates. We're very excited about that. We also know that perceptions change slowly, and like our previous investments, we do expect that it's going to take time before it pickups fully. We don't expect in this category to completely offset -- to have the elasticity completely offset the price investments, but we do expect to make progress. But the actions we're taking to help the customers be aware of that is the training and the proficiency of our Blue Shirts and of course the Geek Squad agents. We're also investing on the site. And I think that in the quarters ahead, we'll see continued progress. More broadly -- because this is just one small first step in our Services strategy. And if you step back, what we've said is that Services is actually playing -- will play a bigger role than just being a revenue and profit center. Services for us can be a part of the value proposition. So if you're going to buy a big TV, if it's going to be above 55 or 60 inches, you want somebody to deliver it and install it for you and do it really well. And of course, we have unique capabilities. We also see Services being a growth driver. So when we have somebody coming to your house, who understand your needs and build a solution for you, we're not going to charge for the in-home visit, but this is -- this has the ability to drive business, and we see it today with our Magnolia Design Centers and there's more where it's coming from. And then as we continue to innovate our Services and evolve the positioning of the brand, you're going to see it appear more and more in our various marketing vehicles. It's true today a little bit on the site. It's truing the circular in our -- in the stores. With everything we've done, and that's going to be consistent in the last 3 years of our transformation, it's gradual and incremental. We've started that journey, and you're going to see us continue moving forward in that direction. So more to come.

We'll go to our last question from Greg Melich.

I have 2 questions. Hopefully, one is more for Sharon and other one more for Hubert. Sharon, I want to understand the gross margin impact that you were calling out on Services pricing, and how we should think about it vis-à-vis the periodic profit share. If I got this right, that goes from 20 bps in the third quarter to 50 bps in the fourth quarter of help. And we should think of Services as like a 20, 25 bp offset, the pricing. Is that -- am I thinking about that right?

Yes, that's right. Just when you take a look at Q4, Greg, let me try to reconcile it for you. Last year, in Q4, we earned $1.48. The Canadian brand consolidation is costing us about $0.06 to $0.08. And then in addition to that, the tax rate last year at 34.5%, going up to the current rate, is going to cost us about $0.05 to $0.06. So on a -- if you just go back and you take those up against last year, that really puts last year's EPS at about $1.35 on a comparable basis to what we have this year. Then when you go into the outlook I gave you, we talked about the fact that we've got the 25 basis point investment in Services pricing. So that's going to come off the gross profit, right? We have the higher distribution costs associated with growth in the online channel and then the appliance and large-screen TV -- large cube costs will hit us in Q4. Of course, we're going to have the revenue as well. And then there's some product mix issues that are -- we're expecting to hit us in Q4. And then all of those downsides will be offset by the 50 basis point -- it's actually 55 basis point profit-sharing benefit. So when you're really thinking about this outlook, when you get down to the EPS range that you get when you take the Enterprise level reduction on the OI rate, quite frankly, it is not look -- it's starting to look a lot like last year and, maybe, even on the high end a little bit better.

And the 55, how much of that is catch-up? And effectively, where at the end of this year you're truing up that there's just -- the warranties just aren't costing as much. Or is it just an ongoing type number?

Yes. So it is always -- the way this periodic payment works, it is always a settling up of prior reserves, and the settlement is usually only done once a year. If you go back in history, some years, we had one, some years, we didn't, but we have made such substantial changes in the program. Best Buy has taken action. We put deductibles in on the phone repair, which we were the only ones in the industry, historically, that didn't have one. You'll recall that. We had some plans that were multiyear plans. We have had repair reductions, where we're doing the repairs. We're sourcing parts differently. There are all kinds of changes that we have made in the last couple of years, Greg, that operationally are driving this. In addition, at the same time, that we were making operational improvements around the fulfillment of claims associated with the extended warranties, from an industry point of view, and this is really a quality -- vendor quality point of view. The devices have been extremely durable, and we have not seen the frequency of claims. So the combination of those are driving that. Now I can tell you that in fiscal '17 in the prepared remarks, we said we do not know what this will be, and we do not believe it'll be as high as it is this year. There will be next year; it will come in Q4. There will be some level, our gut tells us. You never know for sure, but we believe there will be a periodic payment next year. This year, I think it is -- we think it is unusually high. In addition, there's the premium to be paid. Every time we sell a new warranty, there will be premiums that we pay to the insurer to take on that liability. And because of these factors, our premiums went down in the back half of this year. They will continue into next year and then on top of that, we will see another likely premium assessment downward next year. So that -- we can talk more about it in the one-on-one call, if you'd like further color, so that I can get to your second question, but...

That's very helpful. I did want to ask a bigger-picture one that I think is important. I think, Hubert, in your prepared comments, you mentioned all the store-within-a-store programs, the Samsung Open Houses, the new Apple stores. Could you give us some metrics as to how that's really helping drive the business and bigger ASPs and conversion? If you think about it over the last 2 or 3 years, have we moved from 10% to 25% of sales that are store-within-a-store or one of these type programs? Or how can we kind of frame that? Or how do you think about it?

Yes, thank you for your question. It's been such an important part of our journey. For me, the most important driver or impact of the stores-within-a-store has manifested itself in our market share gains. The customer experience we provide is massively better and improved. The experience of the customers has changed dramatically. And so we're seeing more expertise, better experience resulting in market share gains. And we see that in all of the categories, and clearly, the vendors see that as well because they've continued to look at that. Now it's an ongoing process. Looking ahead, we want to make sure that a key factor for our profitability is profit per square feet -- per square foot. And so as we look ahead with our various vendors in the various parts of our stores, we'll want to continue to optimize that, so that we win with the customers, something we want to win for our vendors, but we also want to win for us and drive -- continue to drive great outcomes. When you are in our stores -- and of course, every store is different, but there are some stores where these stores-within-a-store with the addition of the Pacific Kitchen & Home, and Magnolia Design Centers today occupy a large part of the stores. So they're a big part of our winning with customers. So in summary, we feel a great quarter in Q3, we -- the combination of online revenue growth and margin expansion in Q3 in the environment that we're all familiar with is the great outcome. Hopefully, you felt our excitement for Q4. Hopefully, you felt that we try to provide as much color as possible on the outlook, and we'll see you either in stores or online. Remember to shake your phone with the app to get access to our agents and Blue Shirt. And thank you for your continued support in the company. Have a great day, great holiday, everyone.

That does conclude our conference for today. We thank you for your participation.