morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.'s Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. We'll be hosting a question and answer session after management's prepared remarks. Please note today's event is being recorded. I would now like to turn the call over to the first speaker today, Mr. Jeremy Ji, Director of Corporate Development and Investor Relations of the company. Please go ahead, sir.
Thank you, Jason. Hello, everyone, and welcome to ATRenew's third quarter 2023 Earnings Conference Call. Speaking first today is Kerry Chen, our Founder, Chairman, and CEO, and he will be followed by Rex Chen, our CFO. After that, we'll open the call to questions from analysts. The third quarter of 2023 financial results were released earlier today. The earnings release and investor slides accompanying this call are available at our IR website, ir.atrenew.com. There will also be a transcript following this call for your early convenience. For today's agenda, Kerry will share his thoughts of our quarterly's performance and business strategy, followed by Rex, who will address the financial highlights. Both Kerry and Rex will join the Q&A session. Let me cover safe harbor statements.
Some of the information you will hear during our discussion today will consist of forward-looking statements, and I refer you to our safe harbor statements in the earnings press release. Any forward-looking statements that management makes on this call are based on assumptions as of today, and that ATRenew does not take any obligations to upgrade our assumptions on these statements. Also, this call includes discussion of certain non-GAAP financial measures. Please refer to our earnings press release, which contains a reconciliation of non-GAAP measures to GAAP measures. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB, and all comparisons are on a year-over-year basis. I'd now like to turn the call over to Kerry for business and strategy updates.
Hello, everyone, and welcome to ATRenew's third quarter 2023 Earnings Conference Call.... 是二手回收和交易的规模增长，持续，持续引领了行业的增长。其中，我们的1P自营回收业务的发展仍然是集团整体增长的战略重心，是增长的主引擎。3P加强服务，平台交易的服务能力，长期促进商家活跃，是支持和辅助的动力。
Our quarterly results surpassed expectations. This was primarily attributable to the growing scale of the recycling and resale business, which consistently drives industry expansion. Within this context, the development of our 1P business remains our core strategic focus, serving as the primary driver of our growth. At the same time, enhancing the service capabilities of our 3P platform business to encourage long-term merchant engagement service, serves as important supplementary driver.
第三季度，自营业务同比增长31.4%至29.1亿元，29.2亿元人民币。一方面，我们现有的C2B回收核心业务，我们以全国现有的近2,000家门店作为基础，改造升级为爱回收的特色门店，提升用户对于多品类回收的认知，强化爱回收的国民回收品牌的用户心智。在回收端，为用户提供有吸引力的报价，以便捷和值得信赖的回收场景覆盖，赢得了更多用户的青睐，锁定了更多的货源。更多货源回收，也推动了单效、店效的提升，成本的降低。分享两个1P自营业务的 数据亮点。第一个是，今年第三季度，我们用户walk in直接到店回收的收入占主营回收收入的比例，较去年同期提升了6个百分点，说明爱回收品牌直达消费者的影响力提升。第二个数据亮点是，今年10月份，爱回收在北京和上海单城单月回收额均突破了1亿元里程碑。随着更多的爱回收门店具备多品类回收能力，我们相信爱回收在一线城市的天花板会进一步提升。
During the third quarter, our 1P business revenue grew by 31.4% year-over-year to RMB 2.92 billion. Within our core C2B business, we leverage our existing network of nearly 2,000 nationwide offline stores and upgraded some into premier stores. These stores are designed to raise user awareness of multi-category recycling and AHS Recycle as a national brand.
Alongside the competitive costs we offer to users, our convenient and reliable services have attracted a larger customer base and secured a greater supply of pre-owned products, which further increases store performance while reducing costs. I'd like to share two noteworthy highlights resulting from this strategic upgrade. First, in the aspect of walk-in revenue as a percentage of core C2B revenues, there has been a 6% year-over-year increase during the quarter, underscoring the increasing strength of our AHS brand and its impact on consumers. Second, during October, the monthly recycling values in Beijing and Shanghai both exceeded RMB 100 million. We believe that as more AHS Recycle stores are equipped with multi-category recycling capabilities, the celling of our C2B business in higher tier cities will be further raised.
同时，在今年七月起，我们的B2C零售品牌拍拍严选融入爱回收，并升级为爱回收严选，以加强对C端用户的服务能力，强化爱回收主品牌品质和信赖心智。通过品牌升级，我们进一步拉通了产业链，夯实了从C2B回收到B2C优选零售的完整价值链闭环，将To C销售作为有力的能力补充。在合规翻新业务方面，三季度整体贡献达到CNY 200 million收入，为更多的电子产品实现循环重生，赋予更高的使用价值。七月底，我们签署了华为的官方维修授权，探索了多个安卓品牌的产翻新能力，以可控的维修成本，整体撬动4%-5%的毛利增加，为用户提供更多样化的换新机的购买选择。行业标准方面，三季度我们作为主要发起人，联合深圳电子行业协会共同起草了二手手机交易规范团体标准。同时，我们与深圳电子行业协会合作，共同成立了中电协二手电子交易中心，促进了拍机堂和线下产业的融合，共同推进了二手交易的合规和健康发展。
Starting in July this year, our B2C retail brand, Paipai Selection, was integrated into the AHS main brand, which was renamed AHS Selection. This strategic initiative is intended to provide enhanced services for our retail users and bolster the quality and trustworthiness of the AHS Recycle brand. This brand upgrade further solidifies our secondhand retail value chain from C2B to B2C by complementing the closed loop with direct-to-consumer sales capabilities. In terms of compliance refurbishment, in the third quarter, the compliance refurbished business contributed a total of RMB 200 million in revenue, adding greater value to more models of pre-owned electronic products. Since the end of July, we have been authorized to recondition Huawei products while exploring the refurbishment capabilities of multiple Android products.
With controllable costs, we could gain a margin growth, marginal gross profit of 4%-5%, and consumers will further benefit from a greater variety of refurbished products. In terms of industry standards, in the third quarter, as the main sponsor, we jointly drafted the secondhand mobile phone transaction group standard with the Shenzhen Electronics Industry Association. At the same time, in collaboration with the association, the China Secondhand Electronic Trading Center was jointly established to promote online and offline integration and to promote healthy development of secondhand transactions.
另一方面，关于苹果的官方回收合作，我们的回收业务快速嵌入苹果的中国零售体系，服务于苹果的官网和线下旗舰店的回收和以旧换新的用户。今年十一月份开始，我们进一步争取到了主流的N-1、N-2代产品的回收资格，即用户可以在苹果直营渠道用iPhone 13、iPhone 14这样的主流型号回收换新，旧机由苹果完成前端预约后交给爱回收来处置，这是对我们供应链能力的认可。
Turning to our services embedded in Apple's official channels. Our recycling business has been rapidly integrated into Apple's retail network in China, providing recycling and trading services on Apple's official website and in its offline flagship stores. During November this year, we obtained a qualification that allows us to recycle the two most recent generations of iPhone lineups, specifically, when a user trades in an iPhone 13 or iPhone 14 for a new iPhone 15 lineup product through Apple's official website and storefronts, their used devices go to AHS Recycle for further handling. This presents a significant recognition of our supply chain capabilities.
平台业务方面，我们的服务能力持续提升，3P的收入同比增长7.3%至13.3%，3.3亿元人民币，综合服务费率达到5.4%。我们持续加强对拍机堂商家的赋能，以机大侠便携自检终端为商家专属的研发、批量采购、入库管理功能，及时库存进行经营分析，帮助商家节省时间和人工成本，提升生意效率。经过多年发展，拍即堂B2B交易平台已经成为二手手机，3C行业的基建设施，是行业价格的风向标。截止三季度末，拍即堂注册商家总数超过53万，交易商家数同比增加15.4%。
In terms of our marketplaces, we are continuously improving our service capabilities. During the quarter, 3P revenue increased by 7.3% year-over-year to RMB 330 million, with an overall take rate of 5.4%. Regarding our PJT Marketplace, we have improved our services for merchants and equipped them with Device Hero, our portable quality inspection terminal. The proprietary features embedded significantly enhance their box purchasing and shipping management capabilities. The device also lifts the burden of real-time inventory management and business analysis, reducing time and labor costs while realizing faster turnover. PJT Marketplace has become an infrastructure of B2B transactions. By the end of the third quarter, PJT had amassed over 530,000 registered users, while the number of active users increased by 41.5% year-over-year during the period.
关于拍拍B2C平台，在保障品质的前提下，我们持续为消费者提供物美价廉的二手商品购买选择，支持京东零售低价战略，整体调整了平台商品的陈设和等级区间，合理加强零售价格体系与用户低价消费偏好的适配。本季度，我们升级了拍拍B2C寄卖业务模式，打通了京东主站，实现了供货和销售的分离，降低了中小商家在京东主站的入驻、供货和经营门槛。同时，通过平台统一自检管理，实现了更好的质量保障。这种创新模式大幅降低了行业小商家的零售供货参与门槛，为平台提供了丰富的货源供给，同时充分保障了商品质量和买家的消费体验。
Our Paipai Marketplace continues to allow us to meet broader consumer demand for cost-efficient, high-quality, pre-owned products. We support JD's low price retail strategy by enhancing our retail price system through adjustments to product grade range, ranges to align with users' preferences for more affordable goods. During the quarter, we upgraded Paipai's B2C consignment business model on JD's main site.... This further opened up the platform to small and medium-sized merchants to join, provide supplies, and operate on JD.com. Our platform ensures quality with a unified quality system. Such an innovative model substantially reduces the entire entry barriers for small retail businesses in the industry, providing them with ample and easy access to platform resources, while ensuring product quality and buyer satisfaction.
再看成本端，首先呢，我们持续降低经调整的履约费用率，三季度不含股权激励费用和无形资产摊销的递延费用，经调整，履约费用率为8.7%，较去年同期下降了2个百分点。具体来看，一方面，物流费用较去年同期节约了11%，来自全国仓储布局的优化。另外一方面，我们持续发挥自动化大仓的质检技术与规模优势，基于Matrix 3.0自动化质检系统，由于质检失误造成的退货损失同比降低20.5%。其次是销售费用率的优化，经调整，销售费用率同比下降2.8个百分点至7%。本次优化主要来自于，一，爱回收品牌力的进一步提升，使无需支付营销费用的自有回收渠道占比上升。二，我们扁平高效的组织架构，进一步提升了城市大区的地推和销售团队的工作产出效率。
Turning to our expenses. Firstly, we continue to lower the non-GAAP fulfillment expense ratio to 8.7% by 2 percentage points year-on-year. This was primarily due to an 11% year-over-year decrease in logistics expenses, thanks to our updated national operation station footprint. Return losses from testing errors saw a 20.5% year-over-year reduction, thanks to the technological and efficiency advantages provided by our automated operation centers, especially the Matrix 3.0 system. Secondly, we obtained optimization in ROI for selling and marketing expenses. During the third quarter, adjusted selling and marketing expenses as a percentage of revenues were 7%, representing a year-over-year decrease of 2.8 percentage points. The strength of our brand name played a key role as we had a higher percentage of 1P recycling channels that required fewer selling expenses.
We also streamlined our regional sales team and increased our sales output.
基于手机3C大盘业务增长和利润的确定性，我们也加快了多品类业务的发展，测试孵化新媒体账号矩阵。多品类战略方面，第三季度总回收业绩达到3.5亿元人民币，连续多个季度实现业务规模的快速增长。非3C回收业务在爱回收用户群体中获得了广泛的欢迎，其中体验是重要的一环。在奢侈品回收的到店体验方面，商品获取商家端报价的时间进一步缩短，用户对报价的满意度进一步提升，回收放款进一步加快。通过立足门店的面对面回收的信任感和服务的体验优势，我们相信长此以往做下去，将打开我们在回收业务的增量空间，并且提升服务品质和门店店效。除此之外，作为内部营销资源的调整和对多品类回收业务的支撑，我们培养了新媒体账号的流量。在短视频平台启动门店的本地号，以本地化内容做低成本的内容输出，展示探店、上门回收等用户故事。基于位置算法，吸引周边用户到店体验。由于新媒体流量能力是内部培养，本期并未产生显著的销售费用。
Building on our robust growth in consumer electronics categories, we actively diversify our multi-category recycling business and explore marketing opportunities through new media. The recycling volume of our multi-category business amounted to RMB 350 million in the third quarter. This is a testament to the rapid growth over the past quarters. Non-consumer electronics recycling services have gained wide popularity among the AHS user community. Experience is the most important part of our flywheel. We shortened the waiting time for in-store pricing of luxury goods recycling, further enhancing user experience. User satisfaction with the quotation was improved, and payments were made even faster. Through trust and service experience advantages of in-store face-to-face fulfillment, we are able to break the glass ceiling while uplifting service frequency and UE of our stores.
Furthermore, as part of our internal marketing resource allocation and to support a multi-category recycling business, we test the water of traffic generation from new media. We have already launched local accounts for our offline stores on short video platforms, where we create cost-effective, localized content that showcases user experiences while exploring our stores and utilizing doorsteps recycling. By leveraging location algorithms, we attract a higher number of local users to our stores. Since the content is developed in-house, we didn't have any significant expenses.
以上是我们对于场景能力，加强供应链能力，加强技术能力，长期战略坚持的结果。这些结果也验证了二手消费品行业规模大，价值长期的属性。再次感谢我们的团队团结奋战以及他们的付出，让万物新生连续取得可喜的成绩。最后补充，公司可持续发展的动态。今年九月，万物新生加入了联合国全球契约组织，作为国内二手消费电子产品行业首家加入该国际组织的成员，承诺支持关于人权、劳工、环境和反腐败四个领域的十大原则，巩固企业的可持续发展根基，以践行长期使命。
In summary, this result came from our steadfast strategies of occupying precise scenes, consolidating supply chain capabilities, and aligning a tech-driven business. The results also verify the second-hand industry's substantial potential for scale and enduring value. I would like to thank our united and hardworking team again for their tireless efforts. Finally, I would like to provide an update on our sustainability efforts. In September 2023, as a Chinese company from the pre-owned consumer electronics industry, we are honored to become the first signatory to join the United Nations Global Compact. We are committed to upholding the ten universally accepted principles in the areas of human rights, labor, environment, and anti-corruption. This commitment strengthens the foundation for our company's sustainable development and aligns with our long-term mission.
下面请公司的CFO Rex Chen介绍一下财务情况。
Now, I'd like to turn the call over to our CFO, Rex, for financial update.
Great, thank you. Hello, everyone. We are pleased to report another profitable quarter as we achieved yet another new record in GAAP operating income on revenues that exceeded the top end of our guidance. Before going into our financial details, please note that all amounts are in RMB and our comparisons are on a year-over-year basis, unless otherwise stated. In the third quarter, total revenues increased by 28.4% to RMB 3,256.8 million, mainly driven by growth in net product revenues. Net product revenues increased by 31.4% to RMB 2,924 million, while net service revenues increased by 7.3% to RMB 332.8 million. Growth in net product revenues was primarily driven by an increase in the sales of pre-owned consumer electronics, both through the company's online and offline channels.
Sales of 1P refurbished devices totaled RMB 2 billion, more than doubled compared with the same period last year. The increase in service revenues was primarily due to the recovery of Paipai and the PJT marketplaces from the COVID-19 pandemic influence during 2022, and an increase in the overall take rate, which grew to 5.4% from 4.45%. Turning to our operating expenses, to provide greater clarity on the trends in our actual operating-based expenses, we will also discuss our non-GAAP operating expenses, which better reflect how management views our results of operations. The reconciliations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form 6-K furnished with the SEC. Merchandise costs increased by 35.1% to RMB 2,611 million. The increase was in line with the growth in product sales revenues.
Gross margin at the group level was 19.8% in the third quarter. Gross margin for our 1P business was 10.7%. Fulfillment expenses increased by 3.8% to CNY 287.7 million, excluding share-based compensation expenses, which we will refer to as SBC from here on. Non-GAAP fulfillment expenses increased by 4.2% to CNY 282.3 million under the Non-GAAP measures. The increase was primarily due to an increase in personnel costs as the company's recycling activities developed compared with the same period of 2022. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.7% from 10.7% in the same period last year.
Selling and marketing expenses decreased by 12.1% to CNY 299.5 million, excluding SBC expenses and amortization of intangible assets. Non-GAAP selling and marketing expenses decreased by 8.7% to CNY 227.9 million, primarily due to a decrease in the expenses in relation to marketing activities. Non-GAAP selling and marketing expenses as a percentage of total revenues decreased to 7% from 9.8% in the same period last year. G&A expenses increased by 9.7% to CNY 69.8 million. Excluding SBC expenses, Non-GAAP G&A expenses increased by 9.3% to CNY 50.6 million. Non-GAAP G&A expenses as a percentage of total revenues decreased to 1.6% from 1.8% in the same period last year.
Technology and content expenses decreased by 21.3% to RMB 39.4 million, excluding SBC expenses and amortization of intangible assets. Non-GAAP technology and content expenses decreased by 23.2% to RMB 33.7 million.... This was primarily due to the decrease in technological expenses as the company's platforms matured. Non-GAAP technology and content expenses as a percentage of total revenues decreased to 1% from 1.7% in the same period last year. As a result, our Non-GAAP operating income was RMB 73.8 million in the third quarter of 2023. Non-GAAP operating profit margin was 2.3%, marking a new record high. The Non-GAAP operating margin was 0.4% in the same period last year.
As of September 30, 2023, cash and cash equivalents, restricted cash, short-term investments in the funds receivable from third-party payment service providers totaled RMB 2.3 billion. Our sufficient cash on hand safeguards a sustainable growth outlook. During the third quarter of 2023, we repurchased 1.6 million ADSs in the open market for a total cash consideration of $4 million. As of September 30, 2023, we had repurchased a total of 13.8 million ADSs for approximately $48.4 million under our share purchase programs. Now turning to the business outlook. For the fourth quarter of 2023, the company currently expects its total revenues to be between RMB 3,730 million and RMB 3,830 million, representing a year-on-year increase of 25.1%-28.5%.
This forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. When asking a question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone in the call. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Victor Tang from Goldman Sachs. Please go ahead.
Thank you, Victor, for taking my question. I'm asking this question on behalf, on behalf of our analyst, Ronald Keung. Can management share some color on the key Singles' Day brand promotion performance? And what is management take on the outlook for 2024? Can management also provide an update on iRecycle's inclusion in Apple's official channel in mainland China, and will the recent revival of Huawei's cell phone impact your recycling performance? Thank you, management.
好，谢谢 Victor。今年双十一期间，我们看到用户的回收和以旧换新的热情，非常高涨。双十一开门红期间，我们 C2B 的回收额取得了同比60%的显著增长。上海和北京两个城市在十月均达到了单月回收交易额超过了 RMB 1 亿元的里程碑。我们 B2C 的业务，双十一期间，当天的全渠道成交额突破了 RMB 1.6 亿元，同比增长24%。我们的回收和 B2C 销售业绩，是广大用户对爱回收品牌的认可，也证明了循环经济的商业模式的韧性和行业巨大的增长潜力。进入了十一月的尾声，我们对于 2023 年第四季度给出 RMB 37.3 亿元- RMB 38.3 亿元的总收入指引，对应为 25.1%-28.5% 的同比增长区间。对于 2024 年财年，我们保持对循环经济发展确定性的积极预期。我们对集团战略，尤其是苹果官方全渠道回收和以旧换新，多品类回收战略，利润贡献更加显著的换新机战略，自动化技术对规模效率提升的战略充满信心。
Thank you, Victor, for your question. Throughout this year's Double Eleven, we observed a surge in user enthusiasm for recycling and trading. During the pre-sale period of the brand promotion, the total value of C2B recycling orders increased significantly by 60% year-on-year. Both Shanghai and Beijing also reached the 100 million RMB milestone in single-month transaction values in October. Our B2C sales on November the eleventh, across all channels, total 160 million RMB, representing an increase of 24% year-on-year. Our recycling business performance speaks volumes about user loyalty towards the AHS Recycle brand, and thus growing the resilience and immense growth potential of our business model within the circular economy.
As we approach the end of November, our guidance for total revenue in the fourth quarter of 2023 ranges from CNY 3,730 million to CNY 3,830 million, reflecting 25.1%-28.5% year-over-year growth. Looking ahead to fiscal year 2024, we remain confident in the promising evolution trends of the circular economy and our business strategies. We are confident in executing our strategy to realize higher profitability from our compliance refurbished business. Our involvement in Apple's official recycling and trading programs, expansion of our multi-category recycling, and efficiency enhancements from automation technology. Thank you for the question.
The next question comes from Jiajing Chen from CICC. Please go ahead.
Thanks, management, for taking my question. Could management talk about the use of cash and how you are handling the shares repurchased? Thank you.
Okay, thank you for the question. As of September 30, 2023, our total cash and cash equivalents, restricted cash, short-term investments in the funds receivable from third-party payment service providers summed to CNY 2.3 billion to support our long-term strategic and business development. So first, for the maintenance of pre-owned consumer electronics, we will continue to strengthen the control of the use of cash, improve the operating cash flow, and increase the positive cash inflow from core mature business. Second, we will deploy cash in a disciplined manner into areas with long-term potential, especially multi-category business based on existing AHS Recycle stocks. We believe that the enhanced operational cash flow and prudent capital expenditure will be conducive to the further strengthening of the company's competitive advantages and the long-term value to shareholders. We have been continuously repurchasing our shares since late 2021.
Through the share repurchase programs we adopted. The purchased stocks are booked as treasury stock, which are devoid of rights to dividends or voting. By the end of the third quarter of 2023, a total of $48.4 million had been spent through the share repurchase program since December 2021. We plan to continue to conduct stock repurchase in the foreseeable future. Thank you for your question.
There is one another question from Joyce Ju of Bank of America, but due to technological issues, I'll read out her question on behalf of her. Congrats on another strong quarter. My first question is about margins. Can management share more color on gross profit margin and your non-GAAP operating margin? What's the outlook for your margins? My second question is on refurbishment. Can management comment on the progress and expectations of the compliant refurbishment business? Thank you.
... Okay, thank you. Thank you for the question. So in the third quarter of 2023, so overall gross profit margin was the 19.8%, which was a year-over-year decline due to our strategic shift in revenue mix. Over the past 5 quarters, we have focused on bolstering our 1P businesses, and as such, the 3P service revenues, which involves several costs, contributed 10.82% to our total revenues, downsizing by 2% year-over-year. So taking a detailed view of the gross profit of the 1P business. The third quarter gross profit margin stood at 10.7%. This aligned with our expectations that 1P gross profit margin would contract in this quarter. There are two reasons behind this.
First, during the new phone sales season in September, we proactively adjusted our sales price of refurbished devices in preparation for seasonal market fluctuation. We also adjusted as to finished product selling prices. Such adjustment aims to meet the demand of 3P merchants by reducing their procurement costs and ensuring their profitability. Second, to supplement our supply, we procured secondhand devices from industry partners, resulting in a relatively lower gross margin for such supply. However, as our automation technology further improves our fulfillment efficiencies, along with optimized selling and marketing cost efficiency, our fulfillment expenses ratio and the selling and the marketing expense ratio against the total revenues dropped to 8.7% and 7%, delivering on the GAAP OP margin of 2.3%. Although overall gross margin decreased, we were able to provide consumers with more competitive recycling prices and joyful experiences.
In the third quarter, our compliant refurbishment service business generated RMB 2 billion in revenue, reflecting notable user acceptance of pre-owned electronic devices, especially pre-owned Apple devices. Research suggests that an iPhone's lifespan can reach up to eight years, with 50% of globally activated iPhones being pre-owned devices. While the domestic compliant refurbishment market is still in its early stages, our refurbishment business shows promising growth potential. We anticipate an improvement in overall adjusted operating margins attributable to the growth of refurb business and Apple businesses. Thank you for the question.
As there are no further questions at this time, I'd like to hand the conference back to management for closing remarks.
Thank you. Thank you all again for joining us. A replay of today's call will be available on our IR website shortly, followed by a transcript when ready. If you have any additional questions, please feel free to email us at ir@atrenew.com. Have a nice day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.