Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Companies Second Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will conduct a question-and-answer session. I would like to turn the call over to Mr. Jim Giannakouros, Carlisle's Vice President of Investor Relations and Financial Planning and Analysis. Jim, please go ahead.

Thank you, Josh. Good afternoon, everyone, and welcome to Carlisle's second quarter 2020 earnings conference call. We released our second quarter financial results after the market closed today. And you can find both our press release and earnings call slide presentation on our website at www.carlisle.com in the Investor Relations section. On the call with me today are Chris Koch, Chairman, President and Chief Executive Officer; and Bob Roche, our Chief Financial Officer. Today's call will begin with Chris discussing business trends experienced during the second quarter and provide context around our confidence in achieving Vision 2025. Bob will discuss Carlisle's second quarter performance and current financial position. Following Chris and Bob's remarks, we will open up the line for questions. Before we begin, please refer to Slide 2 of our presentation, where we note that certain statements made during this call may be forward-looking and actual results may differ materially from our expectations due to a number of factors, including impacts from COVID-19. A discussion of some of the risks and uncertainties that may affect our results are provided in our press release, and in our SEC filings on Forms 10-K and 10-Q. Those considering investing in Carlisle should read these statements carefully and review reports we file with the SEC before making an investment decision. With that, I turn over the call to Chris.

Thanks, Jim. Good afternoon, everyone. Please refer to Slides 3, 4, and 5 for these opening comments. I'd like to begin by saying how proud I am of Carlisle's global team and their perseverance and ability to execute in these uncertain times. Carlisle's employees have rallied around each other, our customers and their communities by supporting critical infrastructure, continuing to operate our factories and distribution centers at a high level despite limitations, borne out of adherence to rigorous global health and safety guidelines, all the while remaining supportive and positive contributors to their families and local communities. Their dedication to a safe work and home environment is commendable. As I mentioned in the press release, while overall infections in our global organization have remained low, we are saddened as we reflect on the loss of three Carlisle family members to the virus. Maria, Roy, Gilberto, they will be missed. And as with any loss at Carlisle, we are all affected, and we all wish their families the best as they grieve their loss. I cannot leave this subject without also stating as I have done through my weekly correspondence with our global employees since the start of the pandemic that the reality is that this virus is a serious threat to our health and our economy, and that our efforts to protect ourselves and each other must have the highest of priorities. I would like to now transition to the second quarter results. As we review the results, I want to reiterate that Carlisle has been deeply impacted by the virus in many ways, but we are fortunate to have a strong and solid foundation as a company. Throughout the second quarter, our businesses remained in operation as they were deemed essential, which we view as evidence of the importance…

Thanks. As Chris mentioned earlier, we had a challenging revenue and earnings quarter, but I'm pleased with the resilience of our cash flow, the strength of our balance sheet and our liquidity position, with $738 million of cash on hand and $1 billion undrawn under our revolving credit facility. As a reminder, late in the first quarter, we drew $500 million from our revolving credit facility due to the instability of the financial markets at that time. This was fully repaid in the second quarter as credit market stabilized. Please now turn to the revenue bridge on Slide 7 of the presentation. Revenue decreased 22.1% in the quarter to $1 billion. Organic revenue declined 23.8%. Acquisitions contributed 1.9% of sales growth for the quarter and FX was a 20 basis point headwind. Turning to our margin bridge on Slide 8. Q2 operating margin declined 470 basis points. Pricing and volume headwinds combined were minus 730 basis points, and acquisitions were a minus 90 basis points. Offsetting those, COS added 100 basis points, net restructuring and rationalization costs were additional 50 basis point headwind, freight, labor, raw material, other operating costs netted to a 300 basis point improvement. On Slide 9, as always, we have provided an EPS bridge. We reported second quarter diluted EPS from continuing operations of $1.36, which compares to $2.65 last year. Volume price and mix combined were $1.63 year-over-year decrease, while tax and interest combined for a $0.11 headwind. Restructuring was a $0.09 headwind, while COVID-related and acquisition-related costs were both $0.05 headwinds. Partially offsetting these, raw material, freight and labor costs netted to a $0.15 benefit, COS contributed $0.18 and lower operating expenses contributed $0.25. While volume declines clearly represented the most significant headwind during the quarter, our teams around the world did a commendable…

Thanks, Bob. At Carlisle, we remain committed to our Vision 2025 objectives, ultimately driving to $15 in earnings per share. The foundations of Vision 2025 success rest on driving organic growth with leverage, utilizing COS consistently to drive efficiencies, building scale with synergistic acquisitions and over $3 billion in capital deployment. When coupled with our long-standing and defining management approach of combining continuous improvement and entrepreneurial spirit and decentralization with an increasingly center-led framework, we created a unique culture, which assures that the day-to-day energy, focus and efforts of our employees are directed towards actions that drive results and support the key initiatives within the context of Vision 2025. In closing, I want to again express my thanks to our dedicated employees, their families, our business partners and all those associated with Carlisle's success. Given our 100-year history and the resilience this company has shown in times of adversity and uncertainty, we remain confident in Carlisle's outlook, our strong financial foundation, cash generating capabilities, unwavering commitment to our Vision 2025 strategic plan and to providing products and services essential to the world's needs. This concludes our formal comments. Josh, we are now ready for questions.

[Operator Instructions] And your first question comes from Bryan Blair with Oppenheimer. Please go ahead.

Good afternoon, guys. Hope everyone is doing well.

Hi, Bryan.

Thank you.

I was hoping you could provide a little more detail on CCM volume by month. We know April was tough, down over 30%. And then there is some recovery from there. So any numbers you could offer on May, June and July to date would be helpful.

Bryan, I wouldn't want to give any specifics, but definitely, it was worse in April and then improved straight through June and has improved into July as well.

Okay. So there is some momentum going into the third quarter?

Definitely some momentum going into the third quarter.

Got it. And then on price cost, you've realized about $36 million for the first half. So updated guide implies about $24 million in the back half. How should we think about that cadence? Is it reasonable to assume most of that comes through in the third quarter?

Yes. It's going to be more heavily weighted to the third quarter and then probably about five, I'd say in the fourth quarter as we are sitting here today.

Got it. Okay. And then Chris, you mentioned confidence in your prepared remarks about the health of the reroofing cycle. If we take that as is and think about the growth prospects of your newer growth platforms, what kind of declines would there have to be in the smaller new construction revenue that you have in CCM to offset the drivers that will likely be there the next year or two?

Bryan, I am going to have to defer that one. Can I get back to you? I'd hate to give you a number without significant thought into that. All our focus right now has really been focused on 2020 here and getting through and being happy with what we've seen. But let me get back to you on that one.

Okay. That's fair. Thanks guys.

Your next question comes from Tim Wojs with Baird. Please go ahead.

Yes. Hey guys. Good afternoon.

Hey, Tim.

Maybe just – I guess dovetail on the last question there. I mean, how are you thinking about just the underlying reroof dynamics in CCM, I guess has anything really changed your view? And I guess, as you look at your contractor base and some of the backlogs, how would you kind of talk about reroof today versus maybe new construction and just the visibility to that as you go into 2021?

Well, I think we start with the information, and I think Bob has been pretty good about providing relative to reroofing demand as we look at the roofing cycle, we look at the 20-year roof as typical, and then we look at how that builds certainly through the end of this decade and a little bit into the next decade. I hate to look any further out in – than that time period that would be speculative. I think there'll be some product developments that change things, obviously, as we get into the 30s. I think if you look at the backlog, it's been relatively flat, maybe a little bit decline in the second quarter in contractor backlogs. But I think the work is still out there. And obviously the delays that occurred in April and May, as people work through this the requirements and the shutdowns and all that that impacted the reroofing market only in the sense that it just added to the back. We still have the same amount of roofs. They still have to be done. They just keep getting prolonged and hopefully we can get through those. I think on the new construction side, you'll see some variability. There’s been a lot of talk across the country about different working habits, more working from home. We know that suburban environments provide better opportunities for flat roof constructions than, let's say, Downtown Manhattan. So I think it's a little bit early to tell on the new construction side and what's going to happen. Obviously, that's impacted as it can be deferred, and new construction can be challenged. It has to go through the CapEx process, where I think on the reroofing side, as we've said in many cases, even I'll give you the example of old KMarts or Sears or buildings like that, that are being repurposed. The roof still has to be done. So I think we're just still on the same track we were on for reroofing. We're still bullish on reroofing. Obviously, COVID in the second quarter impacted us. That will linger into Q3, but we don't see any reduction in our backlog of reroofing projects as we go through into 2021 and 2022 and on from there.

Okay. And I guess if you guys had to guess, how much do you think destock costs you in the quarter?

It was significant. Bob, can probably give you a better answer for that than me. But what I would say is, it was significant. And I think that was – people were pretty public about not wanting to load up and that really we would have started that right end of March, and we carried through, and it was impactful. Bob, any thoughts on that?

Yes. I mean, we're down 20% overall, Tim. So you can think maybe 5% of that could have been destocking from the data we're seeing. But it's hard to judge because you don't know what that would have been sold through the end customers in the time we sold. As Chris mentioned on the call, we shipped more direct this quarter than we did last quarter or last year this quarter. So it was really hard for us to quantify that exactly.

Okay. I got you. And then I guess on the cost savings, so let's, sort of, have just the cost savings, the $35 million to $45 million of charges this year. What would you think the cost savings or the annualized cost savings would be around those charges? So you get the charges back to some extent next year and what would be kind of the associated cost savings of that?

Yes. Tim, the big issue there is a lot of this is not infrastructure related. It's not like the Medina – it's all sort of Medina move where you're taking our fixed costs. The quick stuff we did, I mean, we did take out one factory in CIT, but a lot of it is reducing capacity and capability with the massive reduction in aerospace and in our other plant. So it will be down as long as it will go on, but as soon as volumes come back, we're going to have to add some of these costs back.

Okay. That makes sense. All right. Thanks guys. Good luck on second half.

Thank you.

Your next question comes from Adam Baumgarten with Credit Suisse. Please go ahead.

Hey guys. Thanks for taking my question. Just on the net price. Our net raw benefit, that obviously contemplates price. Is the outlook today worked for price alone within that, just more qualitatively better than it was when you last guided in April, given volume outlook's a little bit better and just oil is up a ton?

Yes. Hi, Adam. I mean, I think our outlook on prices is – and cost is obviously weighted to where we are in the cycle, right. We had a point a quarter ago where oil was down to – I don't know, I think it was $15 a barrel. It's gone up since then. So we're feeling more confident in the cost side, but we also don't know how much further that's going to run, and those who followed us for a long time, we usually conservative on the out two quarters of cost because these things have a tendency to spike pretty quickly if they do spike. And on the price side, price is – we're maintaining price for the first half of the year essentially flat. And then the second half, price is all going to be tied to volumes. So if we're able to maintain volumes and have volumes flat or growing, we feel we can maintain our price. If things get tough and volumes remain down, people will be chasing some share, and we'll going to have to play along a little bit. So we're trying to balance those two together of what's going on, on one side with the other, and they aren't mutually exclusive.

I guess then just secondly, just back to the contractor backlogs, anything that's jumping out, whether it's regionally or even by commercial vertical at this point? Or is it all pretty consistent what you're seeing?

No, there's been some deviation between some of the verticals. I think we've seen some pretty consistent and maybe even a little bit of acceleration around educational spending. Some of the retail has been down. Obviously, everyone understands the impacts there and what's happening. So I think on the Dodge reports, in that, you would see that kind of thing. Again, within most of our business on the reroofing side, again, it's spread across those verticals and we don't see that same impact because again, you've got to fix that roof or replace it when it occurs. But I think on the new construction side, you would see some differences in the verticals.

Great. Thank you.

Yes. Thanks Adam.

Your next question comes from Garik Shmois with Loop Capital Markets. Please go ahead.

Hi, thanks. Just wanted to follow-up on the destocking question. Do you think that restocking is going to normalize here by the end of the third quarter? Or do you think that maybe this shift to direct-to-jobs-site shipping could end up being a permanent phenomenon?

Well, I'll take the first one. I don't think it's going to be a permanent phenomenon. We are set up to do that. We do it because of the size of the jobs and the packaging of the material and the efficiency to deliver it, but our distributors play a very key role in a lot of the business that we do that’s smaller, stuff they can store on site. And I do think we will see some resumption of restocking as confidence returns in some normalcy. I mean, I think the thing that on that side that really hurts you is, if you're a distributor, you don't want to all of a sudden get a mandate that we're not doing construction anymore. There's some restrictions. People can't come into your distributorship or that. And then you're sitting on inventory that's costing you dollars and you're not moving it. So I do think as things stabilize and we'll see some restocking there. I don't think we'll see the big restocking we would've seen pre the season. I think we've dealt with that and getting into the third quarter, we're done with that. So on the first question, Bob, you want to handle that.

Hi, Garik. Maybe you can rephrase your first question again?

No. I think you answered it. I mean it was really a question, I guess one question, two parts just around the timing of any restock and if the phenomenon is going to be sustainable long-term. So I'm good there. Thank you. Second question is just on any regional trends that stood out in the quarter in CCM, you had some of the shutdowns in the Northeast impacted April. Did you see those markets come back? And then I guess conversely, as we've gotten into late June and July with the virus spreading more into South, is there any change to demand in some of those regions that are newly impacted by the virus?

I think it's a little bit early to be picking up any real significant changes in these new hot areas, Florida, Texas, and, Arizona in that. I mean, those have been good states for us. Texas though has been good. Florida is good. In the first part of this crisis, City of Boston was shut down. That impacted things. We had New York shut down. We had Pennsylvania shut down. We had Washington shut down. Those states were obviously affected. I think Pennsylvania had some retrenchment last week around further restrictions. I'm not sure they extended into the construction industry in terms of shutting down job sites, but they did impact our employees at our Carlisle facilities within Pennsylvania. So there were a few states that were more heavily impacted and I think I stated who those are, and then I think we'll have to watch and see what happens. I can tell you that the contractors that I've talked to have done a really good job of implementing CDC guidelines at the workplace. You're finding hand sanitizers out on a job site, a specific mask wearing. If they're not wearing them already for the jobs they're doing, social distancing, and it has put a little bit of a damper on the work and the efficiency there. But I think the contractors and distributors are doing a lot to at their locations to make sure that we don't shut down again and we could keep that revenue flow and get these jobs done and keep people employed.

Okay. Thanks. And just last question, just on CIT. It looks like just from a sequential standpoint, you're looking for relatively flat revenues in the third quarter compared to the second quarter. And I was wondering if you're looking out into the end of the year, would you expect any sort of sequential improvement in CIT as you kind of look out in your order book at this point?

I don't think so. I think like you, we're looking out in the future. We hear a lot of different forecasts, everything from things coming back in 2022 to – I saw something on TV the other day, no one will ever fly again, now that they can do a Zoom meeting. So somewhere in between the two, we're probably or there's some version of the truth out there that hasn't really unfolded. I know Airbus did not have any new orders in June or so far in July. I think Boeing struggling with the 737 MAX issues to get that up. We did see some issues around the 787. I think it would be overly optimistic to think anything great is going to occur in the fourth quarter. So I think we'll probably just be looking at more of the same through the end of the year.

Got it. Thanks for the help.

You bet.

Your next question comes from Kevin Hocevar with Northcoast Research. Please go ahead.

Hey everybody.

Hey.

Curious on – I was impressed with pricing remaining flat in CCM is pretty impressive given the volume declines that we've seen in the period and similarly the expectation that we're going to continue to see volume decline at least into the third quarter. So what do you attribute that to – I'm just curious your thoughts on the ability to hold price in that environment.

Yes. I mean, Kevin I go right back to the Carlisle experience, the team at Carlisle, and what a great job they do around making sure people understand the value that Carlisle is providing. And that's really what it comes down to our teams. And I was on a weekly Zoom call with our sales leaders. And I can tell you that they're not selling a commodity. They're not selling a product that is out there and everybody else has the same thing. Products are similar, but our service levels, our committed to the contractors, the systems we put in place, the ability to solve difficult problems. Some of our new products are creating a lot of excitement around CAF group too, our APEEL systems, things like that, they really are differentiators out with our contractors and distributors. And I think, I just – that we keep summing up in the Carlisle experience. That's what people, once they get on board and they start working with CCM, they see and they want that, and they don't want crews standing around waiting for shipments to arrive. They don't want product that fails in the field. They don't want to be short shipped. And our team is able to successfully quantify that value for them and show them why it is better for their businesses to pay a little bit more for CCM to save costs and others later.

And then I think in the prepared remarks and definitely in the press release, you talked about, many roofing participants, sounding like maybe they took a little bit harsher actions during the downturn, which might have created an opportunity for you guys to show your value and everything. So did that lead to – are you – do you believe that you're gaining share, more share, I guess as a result of maybe some of those actions that you've taken at least in the second quarter? Or just curious of your thoughts?

No. I think that we – the pricing we held on to, we did walk away from a few jobs. I mean, there were a lot of people that threw some prices out there that were just unacceptable and didn't adequately capture the value we provide. I think will be interesting to see is if the actions taken in the second quarter cause any material shortages as we move into Q3 and into Q4. Remember, if we couple the destocking efforts with other cost savings measures, those wouldn't have shown up in the second quarter. Those will typically show up as people work through their jobs. And obviously, we highlighted that we've been putting an inventory and we're still working and we're there to support the contractors and distributors. So we'll see how that unfolds in the third quarter. If people were too aggressive and there's a shortage of their products, obviously, we'll be able to step in and fill that void. And at that point then we'd probably gained some share and we're prepared to do that, but right now, I haven't seen any of that.

Okay, got you. And last one for me. Just given the environment, sticking with CCM, are you noticing any customers doing more like patch and repair work or something where they can kick the can down the road a couple of years before needing to replace it? Or are you not seeing that? Just curious if you're seeing that at all.

Yes. I mean my limited exposure here would tell me that the only reason they would be doing a patch and repair rather than a full replacement, if it was needed was only because they weren't able to have access to the building for very long because of restrictions let's say in Boston or something, it could only do an emergency or that. But I mean the contractors we're dealing with are the – they're the best in the industry. They follow the best practices. I mean, nobody's going to go up and do a patch and repair when a full replacement is needed. They're just not going to do that. So if we did see any of that, it was really, I think just to get them through the restrictions that were there and then people that we associated with and sell Carlisle and work with Carlisle only do good jobs. And so I don't think you'd see any short drifting on a job or trying to get by for a couple of years. They're just going to do the right job for the customer.

Okay. Makes sense. Thank you.

You're welcome.

Your next question comes from David MacGregor with Longbow Research. Please go ahead.

Yes. Good afternoon, everyone.

Good afternoon.

Hey, David.

To what extent do you feel that any of your products – I'm thinking like maybe the TPO or that group, but any of these products could benefit from an energy reform agenda or legislation if Biden wins the elections this fall? And what would increased energy efficiency standards mean for your commercial roofing in your business?

Well, I'll tell you what. I don't know about Biden being elected, and I don't know what he would do for our business. But what I can tell you is if we look back, you can see the growth in our polyiso insulation that was related to two things. One was a local building code reform where people understood that doing the simple thing of adding another layer of polyiso insulation dramatically affected the energy savings in those buildings. And so we saw that run through the United States. I'm going to say starting maybe six, seven years ago it was codified in a lot of areas, it continues to be. It has become kind of standard industry practice. And if you look at our polyiso sales over the last seven years, you can see that that growth in polyiso has corresponded nicely to that. And so we think that's one of the good stories around energy efficiency savings and the Carlisle experience, and really putting together systems that can benefit from that. We've also sold a lot of, what we call, green roofs, where we have people planting kind of different things and putting ponds and things on roofs with our membranes and creating a more, I'd say, sustainable environmentally friendly roof. So I think whatever administrations there, I know our customers are looking for different ways to reduce energy expense to create a more green environment. And I think a lot of that has gained some much momentum that I don't know that you need a political agenda to do that. People are doing, because it's the right thing to do in it, and it saves them money in the long-term.

Okay. Thanks for that. And then the secondly, is there any way you can just comment on what you're seeing in terms of bidding patterns right now. And just, I guess to a question asked earlier on the call, is there any way to quantify the volume of business that you think is maybe being pushed out to 2021? I'm guessing your sales guys are coming back and saying that project is going to be done, but it's going to be done next year rather than this year. And I'm just wondering if there's any way to put a magnitude or to quantify the extent of that push out?

I guess, and Bob can jump in on this. Give him a minute to think about it. But I think from my perspective, it goes back to that idea that we look out and I think probably Bob showed you his chart on roofs that are coming due after 20 years of life. And I think we would just say anything that wasn't done this year that fit our 70% to 80% reroofing is going to be done next year. And so I don't think there's anything that's lost there. I think that will move forward into next year. I think the biggest question again is, are we going to be facing a different work environment that's more difficult for contractors to operate, it's more difficult for them to be efficient. And if that happens, then that actually, obviously, will have an impact on how many of those projects we can get caught up in. But I think pretty much for our reroofing, it just carries over as we've seen in many situations with winters. When we have a tough winter, we pick it up the next year, or it gets added to backlog. Bob, do you want to add anything?

No, I think that's exactly it, Chris. And with the second quarter being down 20%, we expect that to get kicked out, as Chris said, into a future quarter within the near-term. Also, the other thing we didn't talk about is, the ability to get jobs done is built around the ability to get permits and the fact that people aren't in offices sometimes today. So that's having a little effect on delaying as well as the restrictions on the roof. So – and we expect that to come back as we get to the end of the year.

Okay. Great. Thanks very much, and good luck.

Thanks.

Thank you.

Your next question comes from Joel Tiss with BMO Capital Markets. Please go ahead.

Hey guys. How is it going?

We're all good. You?

All right. I wonder if you can just talk – any sense that you can give us between the structural cost savings that you guys are working on for 2020 versus more of just reactive is not the right word, but sort of adjusting to the current environment.

Yes. Joel, most of the cost, I mean the large restructuring is being directed towards CIT and largely the aerospace environment as we sit here today. I mean, there was some at CCM, some at corporate, some of the other businesses, but they're smaller in magnitude. And most of those are of the what user was reactionary to bring infrastructure down with demand. On CIT, we did close one factory early in the quarter, which is a structural cost change. But a lot of it, I would say 75% of the cost reductions at CIT even are just bringing workforce both direct and indirect down with the volumes we're seeing across the aerospace business, so not a lot of structural change right now.

Okay. And then do you think that $2 billion roughly capacity you guys have for acquisitions plus whatever kind of recovery we have is enough to get in the ballpark of your $8 billion of 2025 revenue goals?

For share.

Yes, absolutely.

Okay. Well, that's great. Thank you so much.

You bet, Joel. Thank you.

Your next question comes from Daniel Wang with Berenberg Capital. Please go ahead.

Hey guys. Thanks for taking my question. I just have a quick question on the Q2 operating cash flow. Pretty sizable improvement versus last year, obviously off a lower net income base. I was just wondering what primarily drove this? Perhaps some of it was a reversal of working capital headwinds experienced in Q1, but is there anything else worth highlighting?

Yes, a lot of it's good working capital, Daniel. As sales reduced, our teams did a good job of reducing inventory, collecting receivables. The one thing I, as a CFO, we’re really impressed with throughout this quarter in this tough environment that our receivable days did not increase. So that means our receivable balances came down. And the teams did a good job of managing inventory. While inventory is hard to take out quickly, we did a good job of managing it and pushing out as much as we can. So a lot of its working capital related. You'll see also that on the CapEx, we continue to invest in CapEx. We're not starving the business. We're looking to invest for the future. So it's working capital that we're able to manage.

Perfect. And just one follow-on. You might have briefly alluded to this already, but just any updates on the current M&A environment. Has activity in the pipeline improved since the end of last quarter? Are we still seeing, I suppose, sellers hesitant to monetize assets?

Yes. There's a bit of a delay, I think, in the second quarter, pretty much everybody was focused on the existential threat that appeared in April. And I think then we've seen some changes. We're seeing a little bit of deal flow come back. Certainly there are some assets that are out there. But I think the big thing for us is, again, we've always tried to be very judicious in our use of funds and how much we pay and making sure that we can get the – our hurdles to be covered in our cost of capital in that. And so I think right now, when you look at the uncertainty going forward, it makes it more difficult to get a value that both seller and buyer can kind of reach and agree and think it's reasonable for both, let's say.

Perfect. Thank you and good luck.

Thank you.

There are no further questions at this time. I'll turn the call back to management for any closing remarks.

Well, thanks Josh. Thanks to everyone. This concludes our second quarter 2020 earnings call. We want to, again, thank you for your participation, your interest in Carlisle. I hope everybody stays healthy, and we look forward to speaking with you at the third quarter call. Thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect.