Welcome to Best Buy's Q1 Fiscal Year 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available by approximately 11 a.m. Eastern Time today. [Operator Instructions] I will now turn the conference over to Mollie O'Brien, Vice President of Investor Relations. Please go ahead, madam.

Good morning and thank you. Joining me on the call today are Hubert Joly, our Chairman and CEO; and Corie Barry, our CFO. During the call today, we will be discussing both GAAP and non-GAAP financial measures. 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 meaningful can be found in this morning's earnings release, which is available on our website, investors.bestbuy.com. Some of the statements we will make today are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may address the financial conditions, business initiatives, growth plans, investments and expected performance 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 our most recent 10-K 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. I will now turn the call over to Hubert.

Good morning, everyone, and thank you for joining us. I'll begin today with a review of our first quarter performance and then provide an update on our progress against our fiscal 2019 priorities as we continue to implement our Best Buy 2020, Building The New Blue strategy. I will then turn the call over to Corie for additional details on our quarterly results and our outlook. So today, we're reporting a first quarter Enterprise comparable sales growth of 7.1% and non-GAAP diluted EPS of $0.82, which is up 37% compared to last year. This strong performance was broad-based with positive comparable sales across all channels, geographies and most of our product categories. The top line strength is a result of 3 main factors: continued healthy consumer confidence, product innovation in multiple areas of technology and our unique value proposition resonating with customers. We are executing well, and customers are responding positively to the unique experience we provide to them online, in stores and in their homes. This is, of course, tied to our continued investments in the customer experience. And so I want to thank all of our associates for their commitment to our company's purpose, to enrich lives through technology, and their continued great leadership and execution. Now we not only had a strong first quarter, we also continued to make significant progress in the implementation of our strategy. As I mentioned, our purpose as a company is clear, it is to enrich lives through technology. We aim to do this by addressing key human needs in areas such as entertainment, productivity, communication, food preparation, security and health and wellness. To fulfill our purpose and grow the company, we're focused on expanding what we sell and evolving how we sell and building the related key enablers while continuing to…

Good morning, everyone. Before I talk about our first quarter results versus last year, I would like to talk about them versus the expectations we shared with you last quarter. On Enterprise revenue of $9.1 billion, we delivered non-GAAP earnings per share of $0.82, both of which exceeded our expectations. The higher-than-expected revenue occurred in most product categories, with the home theater, computing and tablet categories being the largest drivers. The EPS was primarily driven by better-than-expected performance in both the Domestic and International segments. Our gross profit rate and SG&A rate were both in line with our expectations. SG&A dollars were higher than expected, primarily due to incremental incentive compensation expense for our field employees and increased variable costs associated with the higher revenue. A lower effective tax rate also provided a benefit of approximately $0.02 versus our earnings per share guidance. I will now talk about our first quarter results versus last year. Enterprise revenue increased 6.8% to $9.1 billion, primarily due to the comparable sales increase of 7.1%. I would like to add a few clarifying points on our comparable sales calculation. First, our comparable sales are computed on like-for-like fiscal weeks and are not shifted to more closely aligned calendar weeks following last year's 53-week year. If we were to adjust our last year Q1 comparable sales to match this year's calendar week, the comp would be approximately 70 basis points higher than the 7.1% we reported. Second, as a result of our March 1 announcement to close all our Domestic Best Buy Mobile stores, we excluded these stores from our Q1 fiscal 2019 comparable sales results beginning this past March. Lastly, in Q1 fiscal 2019, we adopted new revenue recognition guidance that will change the timing of revenue recognition and the presentation of revenue for…

[Operator Instructions] We will now take our first question from Dan Wewer of Raymond James.

Corie, I wanted to follow up on your comments about Total Tech Support and margin implications. How do you see the gross margin rate evolving in the second year that a customer is in the program? And also if you could discuss what type of operating expenses are associated with Total Tech Support and the implications for the operating profit rate.

Yes. Thanks, Dan. As we look into the out-years, second, third, further years out in the program and you start to lap some of that initial first year usage, we like what we see in some of those out-years. And here's what I'd say, if you just take one step back, and I think Hubert did a nice job in his comments talking about -- our purpose here is around creating more relationships with our customers and longer-term relationships with our customers. And so both financially, but more importantly, in terms of our interaction with our customers, as you get into those out-years, it becomes a less dilutive financial model for us. In terms of our ability to deliver and fulfill on our offer, as of right now, we like the infrastructure we have in place to deliver on that. We've been testing for a while. We have a nice, broad cadre of Geek Squad agents, both who can help you remotely, who can help chat, who can help phone. And thus far, we have a lot of the infrastructure in place to actually deliver on this offer. And hence, the reason that the combination of both the customer interaction that we really, really like and the ability to already have a lot of fulfillment infrastructure in place. As time goes on, we really fundamentally believe this is the right thing to do for the business.

And then just as a quick follow-up. Inventory finished the quarter up almost 9% per square foot year-over-year. How do you see the growth in inventory playing out for the balance of the year?

Yes. I feel very good about our inventory situation. So I'd say a couple of things. One, big kudos to our inventory demand planning teams who have found a way to have the quality of our inventory be as good as I've ever seen it in my history here. We have less at-risk inventory than we've ever had in our history. So that's one important note. Two, we absolutely have built inventory in line with the sales figures that we've been seeing. And frankly, it is very much reflected in our NPS results, where our customers are consistently telling us one of the big drivers of that improved customer experience year-over-year is inventory availability, both online and in stores. And so I feel very good about the targeted quality of the inventory and then also the levels in support of the business we've been seeing. I think we've proven even historically that we'll ratchet that up and down as we see sales figures, but we have found it to be very much in our advantage to make sure we have the inventory there for our customers.

We will now take our next question from Peter Keith of Piper Jaffray.

A big-picture question for you, Hubert. Just regarding the Supreme Court case with South Dakota versus Wayfair in reference to state sales tax, I know you've had some public statements out there. It sounds like you're in support of a more level playing field. I guess -- but I was curious to get insights on you is, do you have a sense today of what amount of industry shares done in a tax-free environment? And then when you look at Amazon rolling out sales tax to first-party purchases, where have you seen market share lift in those states?

So thank you. So yes, we are very excited about the decision of the Supreme Court to take this case and to hopefully revert Quill and, indeed, establish a level playing field. In terms of the first part of your question, there's been significant progress in the last several years in terms of pure online players collecting on their first-party sales, including Amazon today, based on our understanding, collects the sales tax across the country where there's sales tax on their first-party business. They don't, in general, on their third-party business or marketplace business. Trying to estimate this may not be very precise, but let's maybe imagine it could be half of their business, where they don't collect the sales tax. That's very meaningful. And of course, there's other players. Wayfair is party to the lawsuits. They don't collect across the country. So it is still a meaningful fight, given the large market share that Amazon first and third party enjoy online. In terms of the impact on our business, as you can imagine, on large purchases now, the average ticket in our business is not -- I mean, it's higher than most other categories, but it's not thousands of dollars. It's, let's say, it's maybe around $200 or something like this. But there's some product part of our business where customers are going to pay several hundred dollars, several thousand dollars and an 8% on, let's say, $1,000 is very meaningful. And so when we studied, in the last 5 years, really to see states start collecting the sales tax on the first-party business, it was helpful incrementally. Now as a company, we've never relied on this as a way to restore our competitiveness and move forward. But I would say it's incrementally positive as we -- not a game changer, but incrementally positive. That's how I would characterize it.

We'll now take our next question from Kate McShane of Citi.

Corie, I was wondering if you could remind us why the calendar shift is going to have that level of impact and what week you're gaining in the second quarter.

Yes. So we're trying to be as clear as we can on the calendar shift here. So in second quarter, when we adjust, we keep this year the same, and we adjust last year's comp base. What that does is it takes out a week in May, the first week in May, and it brings in a week in August, the first week in August. Those August weeks are back-to-school weeks and heading into football weeks. They tend to be much heavier weeks. So you back out that lighter May week out of the base, and you put in that heavier August, pre back-to-school week. And so when you go apples-to-apples then, it takes that comp down for Q2. Q2 is the quarter with the largest week shift effect to it. As you head into the back half, it becomes much more minimal in the 50 to 70 basis point range. But this is a lot more. We thought it was important to be transparent. You pick up a lot of extra because of the shift of the weeks. Does that makes sense, Kate?

Yes, that's helpful. And then just a follow-up question with regards to the upside that you saw to your comp this quarter, how it compared versus your plan and how should we think about the parameters as to what could drive a higher-than-guided comp in Q2.

Yes. So in Q1, we saw a few things happen. And in terms of our internal plan, and I think you heard it in our prepared remarks, our incentive comp was higher than expected. That's because even versus all of our internal plans, this is a materially better outcome than we had expected. And again, we said it, we saw strength in almost every category, which was really nice coming out of holiday. In terms of potential upside into Q2, so let me take a step back. One more thing that we saw in Q1 because I think it's pertinent is you did see some pretty good overall industry health. And we had said in the prepared remarks, we're continuing to see consumer health, we continue to see industry health and then we like very much how we're positioned within those 2 things. And so we saw even NPD for our categories again only 60% roughly of what we have. But we saw NPD up about 2.8%, which is -- that reflects a good, healthy interest in technology. So as we head into Q2, there's a few things that could continue to perform better than we see right now. You could continue to see even more strength in home theater, I think, depending on how the new models hit. We came out of transition very cleanly. We've got a beautiful new set of TVs. You potentially could see a bit more strength there. We aren't expecting one of the categories that was strong. You saw in our list of categories was tablets. That had a lot to do with kind of a refresh of the line and some of the pens and things that came with some of these new tablets. We aren't expecting that to continue quite at the pace that we've been seeing. But if that demand continues to be very strong, you might some upside there. So I think there's a few -- like the boats can continue to rise. But we felt like given what we could see in front of us, the Q2 and what we're lapping from last year, we felt like the Q2 was a very reasonable, reasonable guide.

We'll now take our next question from Matt McClintock of Barclays.

Yes. Actually, I would like to take the answer to the last question and kind of extrapolate it longer term. Hubert, you'd said in your prepared remarks product innovation in multiple areas. And I was trying to think about the broad-based innovation and strength we're seeing in the industry today and try to compare it to historical times when your business was strong just off of one specific product category, whether that be tablets or televisions, et cetera. Can you kind of think longer term and give us your views on how this industry -- the strength that we're seeing today -- could actually be sustainable well beyond what a typical historical product cycle has been in the past for your business? That's my first question.

Yes. Thank you, Matt. I think we -- and we had talked about this at Investor Day and have spoken about this consistently. I continue to be impressed by the magnitude and pace and breadth of technology innovation. What is unique in this era is how technology now gets embedded into more and more things -- lightbulbs, doorbells, large appliances, small appliances, and then how all of these products are now connected. People call this the Internet of Things and so forth and with broader and broader application. One of the things we've talked about is how technology can help people stay in their home for longer, and there's a lot of excitement around helping people do that and reduce -- improves people's health and wellness and reduce health care costs for the country. And of course, what's exciting about the future is that we're just at the beginning of this era. The penetration of these devices and the use-cases are just beginning. And so I think we are in for a -- I mean, predicting the future is always tricky. I can share with you what I believe and what we believe as a company is that we're in a cycle -- I don't even want to talk about the cycle. There's a wave that will continue to deepen and broaden, and so I think we have this positive environment. One of the reasons we talk about an opportunity-rich environment is because of this. The other reason is that even though we are a leader, market share [Audio Gap] customers is only 26%. So this gives us multiple drivers over time to really sustain significant growth for the company.

And then just as a follow-up, kind of related. Corie, you did a really good job of explaining the online business and the share gains that you're taking even at a reduced growth rate. I was just wondering, at this stage of evolution of where technology is today, are we seeing strength in the brick-and-mortar channel relative to the online channel just because consumers are less familiar with some of this product and it's for earlier stages and so they need that customer service, they need to go into the store? Is that potentially the explanation for why we're seeing that type of trend?

So I'm going to try to separate this into a couple of pieces. One, I do fundamentally believe that there is a need amongst consumers to touch, feel, make final decisions, particularly when you're talking about the price points that Hubert mentioned earlier and the technologies. So I do believe there's a need there. I don't want to imply that I think all the business is suddenly going to switch into the stores. I think what we're trying to say is -- and Hubert teed it up -- there is more interplay between all the channels. And I know it gets overused, but it's fundamentally true. Our data shows us, we literally do not have a customer who only shops us in one channel. I mean, there might be one. But on the whole, we don't have customers that only shop us in one channel. And I think you saw in my remarks I talked about -- like this was very much about some specific products where we had good availability, we moved through a ton online and you lap some of that. It doesn't change the fundamental belief, which is our customers are in multiple channels. I mean, the fact that we continue to see material increases in in-store pickup even with all of the fulfillment options that are available to customers just says to me people want to play amongst the channels and get things and see things and touch them in the way that they want. So I don't want to imply I think the whole world is shifting, but I think it just continues to emphasize our point of view that perfectly isolating these channels separately and talking about their growth individually is exceptionally hard to do.

The other thing I would add is that back to the continued product innovation, the need to integrate these products and the need for customer for help, that plays really well to our ability to help customers across technology and product categories and ecosystems and across multiple touch points. The ability we have to help them online, in the stores and then in their home. These 2 things across product categories, ecosystems and across touch points gives us a very unique competitive advantage. So that's why you can hear and feel the excitement about the opportunities we have, and of course, you see the momentum that we have.

We will now take our next question from Mike Baker of Deutsche Bank.

I'm going to ask 2 questions if I could. First, not increasing the guidance. I get it's early in the year, and a lot can happen. But in the first quarter last year, I believe you did increase your guidance. So I'm just wondering if there's anything more to read into the not-increasing-guidance here except that it's early in the quarter or early in the year.

Genuinely, there is not more to read into. I know we did it last year. We just felt like there's so much of the year still in front of us, set it specifically at only 15%. What I would say out loud is we believe right now, we're trending toward the higher end of our revenue range, and it was a wide range we gave this year. And that's one thing, we gave much wider ranges this year even than we did last year. And so we kind of like where we're headed right now. But we just want to give ourselves plenty of room as we head through the rest of the year, given how much of the year there is left.

Yes, okay. That makes perfect sense. Second question, just on some of the cost. You talked about 3 things. Can you sort of give us order of magnitude between the investments presumably and things like In-Home Advisors versus higher associate pay and incentive comp? And I guess what I'm getting at is, are we still in the phase in the in-home services where you're in investment mode, where you're spending upfront for revenues to hopefully eventually catch up and start to leverage that spend?

Yes. So to be clear, we put those things in the order of size. So investments being the largest, the variables as the next piece and then the incentive comp being the smallest of those 3 drivers year-over-year. In terms of the investments and where we are, remember, we launched the In-Home Advisors full scale in the back half of last year and, actually, just before holiday, relatively heading into holiday. We have continued to ramp up that program since then. We, right now, ended the quarter with about 380 In-Home Advisors. They also ramped up performance to exactly your question as they become more educated, have a little bit more time in role and grow their skill base. And so you're still absolutely seeing a little bit of a mismatch between we're investing, we're training, we're bringing new people on and their productivity is ramping over time. And so I think throughout, still, this year as we add more In-Home Advisors, as they continue to gain confidence and build their book of business, you're going to continue to see that program ramp.

We will take our next question from Anthony Chukumba of Loop Capital Markets.

I have 2 questions. So the first question, the 7.1% comp store sales growth in the first quarter, when is the last time you put up a comp like that in the first quarter? I -- my model just doesn't go back that far.

It was a long time ago. We're just focused on moving forward, Anthony. We're not going to compare it to how long it's been, but it's a long time. I could say over 10 years.

Got it, fair enough. Fair enough. I guess I'll go back and look in the microfiche. Second question, so service -- the services business. So this is the second quarter in a row in which you've done a 7% comp in the services business. I know we sort of touched on this a little bit before. But I guess I'm just trying to figure out what's driving that because you only have 380 In-Home Advisors at this point, and you just rolled out Total Tech Support. So I'm just trying to figure out what exactly is driving the growth that we're seeing there.

Yes. Thank you, Anthony. The -- so to be clear, the scope of the [ slide ] does not include In-Home Advisor, because by the way, In-Home Advisor, the visits are free. What it includes is the extended warranties, installation and support services. And you're right, Total Tech Support is new. So it's not material here. I think in general, the growth of our online business is related to, of course, the growth of our product business because a lot of it is attached, and of course, we are selling more products. So that's the first driver. And then second, I think that over the last several quarters, our teams have done an increasingly good job of selling solutions and positioning not just the hardware, but also the services. So we're seeing selectively attach rates go up, and it's been helpful from that standpoint. Now of course, as we move to Total Tech Support, because of the revenue recognition that Corie described, you'll see some different direction as we move forward. But we're -- one thing I'm excited about is that the services focus is increasingly becoming a core focus of the company, and that's really apparent in the way we're launching Total Tech Support. It's not an afterthought. It's not oh, by the way, I need to sell this to you. This is a core element of our brand positioning and brand identity. So now to be clear, the focus of our strategy is not principally to drive services revenue. It's to build the relationship, the overall relationship with customers. So as we move forward, you've not heard us say the services revenue is going to be x percent of our total revenue. Services is a component of a bigger relationship, and over time, we may use services as a way to broaden the relationship with customers or as a revenue driver. It's not a goal -- the services P&L is not a goal in and of itself.

Anthony, just one more clarifier to just -- I know you weren't saying this, but I just want to make sure I'm clear. On the In-Home Advisor side of things, there isn't revenue associated with In-Home Advisor in and of itself. Often, it sells more services so it may drive more. But I just want to be clear. We don't characterize the products that are sold by In-Home Advisors as a services sale. That is just included in the normal product side of things.

We'll take our next question from Simeon Gutman of Morgan Stanley.

I wanted to focus on margin, incremental margins. In the U.S. business, sales were up like $500 million. EBIT rose. I think it was just about $5 million. So I want to talk about where the buckets that are being spent on. Is it performing as you planned? Are you investing anywhere? And I think you mentioned this in the past, Corie, that there's not many places you can speed up investments. So you're probably investing ratably. But just trying to think about flow-through, where you are on the continuum and in the context of not promising much margin upside over time, but just thinking about flow-through.

Yes. So we -- the investments that we hit on were paced roughly how we expected them to be paced, both on the people side and on the capital side. And so I'd characterize our investment profile as very much in line with what we had expected and how we had guided. There was, this time around, some gross profit rates pressure, which we had also guided for and, in fact, was a little bit better than even what we had guided for, meaning it was a little less of a drain year-over-year. And really, that had to do with some of the evolving economics of mobile, which we've talked about quite a bit, somewhat offset by some of the cost reduction. I think Q1 is continuing on the journey that we laid out, which is, for the year, a relatively flattish OI rate on a 52-week basis. We're going to make these investments ratably over the year, so that we can continue to ramp up some of the things we talked about, like In-Home Advisor and Total Tech Support. We feel like it's important to get this running start early in the year. And frankly, I'm exceptionally proud of the team to have, even in a more rapid way than in some prior years, ramped up some of the technology builds and some of the physical work in the stores even faster than we've done historically. So I think we're -- we feel like we're right on pace with what we would expect, and we feel like we're investing in the right things. We're monitoring the returns, and then trust me, if they're not returning the way that we think they should be, we're going to make some different decisions.

And if I can follow up just on the TV category. Can you share with us how units are performing for you, if you can disclose that? And then for ASPs, I think that's -- it's been an ASP increasing story. Can you share with us if that's accelerating, decelerating or staying the same?

Yes. So broadly, in TVs, we -- it's a better performance than we expected. We continue to see a similar theme for us, which is ASPs continue to increase, and so we like the positioning of the category. We saw unit growth decelerate a little bit for us in Q1, but like I said, better than even our internal projections. And so I think versus the industry, there's a little bit of noise in the industry numbers, because again, that 53rd week makes things funky. We think we were like roughly flattish versus the industry, maybe down just a little bit. But we like the positioning. We like that we transitioned very cleanly into the new lines, and we're excited with the lines that we have heading into Q2.

We'll now take our next question from David Schick of Consumer Edge Research.

Just wanted to walk through the math, the recapture math on the Best Buy Mobile stores that are closing. How many of those customers are you seeing back in the store? How's that going? Are you losing them -- you would lose some, are you losing them at any different rate than you expect?

Yes. So it's obviously very early in us closing all these stores, so it's a little bit early to comment broadly on what you're seeing when it's a closure of this size. We obviously have been closing some stores over time, and so we have a relatively good feel for recapture rates based on that. Based on those expectations, so far, we're not seeing anything that would give us pause or worry us that this is kind of turning out in a different way than we would have expected. But like I said, it's still very early in closing these stores.

We'll take our next question from Brian Nagel of Oppenheimer.

So I guess my first question is more bigger-picture perspective. You now put up 2 consecutive quarters of really solid, outsized sales growth. It's clearly happening as you --as there's been a number of internal initiatives at Best Buy, but also where we've seen sales across retail pick up as well. So the question I have is as you look at your data and you know your customers really well, how much of what we're seeing right now, from an industry demand perspective, is potentially a catch-up, maybe after a period of more subdued spending versus actual true demand that could prove more sustainable?

Yes. Thank you for highlighting the last 2 quarters. For a minute, I would like to -- the last 4 quarters of comp's above 4%. You see there's no doubt that the consumer environment is better. And you're right, we're seeing strong numbers across many, many retailers. The -- of course, I think our numbers are higher than probably most retailers, I would say. In our case, it's really a combination, right? So you have the consumer that is feeling better. You have the continued housing recovery, it's helpful. And it's the technology innovation that's driving us, and of course, we're continuing to gain market share. So we have 3 engines, if you will, driving our current growth. Now of course, if one of the engines slows down, that's going to have an impact. But it doesn't impact the other 2 engines. So now on the 7%, what percentage is -- the first one is hard to know. What we know is that the combination of the first and the second is material because Corie highlighted NPD at 2.8%. Again, it's a fraction of what we do, but we all remember the days where NPD was negative. And so the combination of the first 2 factors is helping this, no doubt. Hard to know between the first and the 2, what is the breakdown.

Okay, that's -- that is helpful. The second question I have is sort of one. With regards to TVs,, I think it's a follow-on to a prior question, but obviously, still very early here in 2018. The holiday season still a ways off. But how should we think about just some of the innovations in the TV category that we'll see through the balance of this year as a potential sales driver in that important category versus what we've seen maybe in the last year, last couple of years?

I mean, I think this is a space where we've actually talked a lot about the idea of continued innovation and evolution, and it is definitely a space where we get the cycle question a lot. And instead, I think it's actually turning into something that is more like what you're asking, which is it started with 4K. Creeping up behind that, you can see technologies around OLED or QLED, HDR technologies, 8K on the horizon. I think that -- the far horizon, by the way, but still on the horizon. And I think this evolution of the technologies over time is going to continue to be the case in TV, and for us, it's why we think it's so important to highlight those new technologies. The second piece that I would say it's not just about technology. It is still also about size. There are still a lot of people who want to have a larger TV experience. And so that combination of the 2, I think it creates a lot of runway for people to experience both really cool technologies, but also frankly, just having a lot more TV for their money in their homes.

We'll now take our final question from Scott Mushkin of Wolfe Research.

A lot of my questions have been answered, so -- but I did want to go back to something that Simeon touched on and just make sure I understood the answer. And I hate to be so short-term focused, but it seems like with the 7% comp, the -- call it the flow-through or the profitability really would've been -- I thought it would've been more. And I guess I'm just trying to understand why it was -- the quarter was great, so I'm not trying to be overly critical here, honestly. I'm just trying to understand why maybe there wasn't as much flow-through.

Yes. So let me try to lay out kind of the 2 sides of this. On one side, especially as it relates to SG&A, we said out loud for the year, we were going to continue to invest against our strategic priority. The guide that we even gave for Q1 would say we're starting that investment early in the year. We're starting it in Q1 because we want to ramp as we go through the year. And so we knew there would be investments, and then we said on top of that, some level of variability in SG&A. The pressure in margin -- gross profit, excuse me, that we talked about was really a function of, and we talked about this, kind of that continued evolution of the mobile space and a bit of pressure there, and again, something we have seen in front of us and we assumed would be the case for the quarter. The teams are continuing to do excellent work in both gross profit optimization initiatives. They're continuing to pull cost out of the model. But we knew the phasing of the year. We knew we would be making some investments even earlier in the year. So even on the 7% comp, the gross profit pressure side of things, that's not going to change as much on the 7% comp. That's more volume. That's the mix of business that you're doing. And then on the SG&A side, like we said a couple of things that came up that we hadn't had in our forecast, is a comp this big and the incentive compensation that flows through with that. And so -- I mean, I think it's tough because from our internal perspective, most things were in line with what we would've expected for the quarter, except for we actually just saw a lot better performance than we expected and, therefore, got that wonderful opportunity to share that with our employees, which is not a bad situation.

Yes. And what I would add is that one of the things that are pleasing, I was going to say, is that we're able also to drive the top line, make the investments we're making. And because we're able to offset them, that profitability -- you're not seeing a [ drag ] of our -- a significant [ drag ] in our margin. There's others who are in a different situation from that standpoint. And so we likely -- it's really in line with what we had discussed at Investor Day, which is we're pushing the transformation of the company, pushing to growth. We're not trying to increase the profitability because we are trying to position the company for the future, continue to position the company for the future. There's -- a key belief we have is that the return for the winners in this space are going to be outsized because there's going to be greater and greater differentiation between winners and losers. And so this is the time, clearly, to invest, and we are pleased to be able to offset a lot of the investments. That's not to minimize your question, but stepping back and thinking strategically at what we're trying to do, we are pleased to be able to grow the company while continuing to increase the earnings. And we fundamentally believe there is significant shareholder value-creation opportunity as we move forward. So because of time, I'm going to just very briefly close and thank you all for your attention and reiterate my immense gratitude and appreciation and admiration for all of the associates at the company, who are delivering these results and who are helping customers enrich their lives through technology every day. It's beautiful to watch the leadership and the talent that exists at the company. And many of you are customers, so I appreciate your support as well. Have a great day. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.