Welcome to the Impinj Third Quarter 2021 Earnings Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now turn the conference over to Mr. Andy Cobb, Vice President, Strategic Finance. Please go ahead. Thank you, Grant. Good afternoon, and thank you all for joining us to discuss Impinj's Third Quarter 2021 Results. On today's call, Chris Diorio, Impinj's Co-founder and CEO, will provide a brief overview of our market opportunity and performance. Cary Baker, Impinj's CFO, will follow with a detailed review of our third quarter 2021 financial results and fourth quarter 2021 outlook. We will then open the call for questions. Jeff Dossett, Impinj's CRO, will join us in the Q&A session. You can find management's prepared remarks plus trended financial data on the investor relations section of the company's website. We will make statements in this call about future expectations and financial performance that are based on our outlook as of today. Any such statements are forward-looking under the Private Securities Litigation Reform Act of 1995. While we believe we have a reasonable basis for making these forward-looking statements, our actual results could differ materially because any statements we make are subject to risks and uncertainties. We describe these risks and uncertainties in the annual and quarterly reports we file with the SEC. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, except as required by applicable law. On today's call, all financial metrics, except for revenue or where we explicitly state otherwise, are non-GAAP. Balance sheet and cash flow metrics are on a GAAP basis. Please refer to our earnings release for a reconciliation of non-GAAP financial metrics to the most comparable GAAP metrics. Before turning to our results and outlook, note that we will participate virtually in the Roth 10th Annual Technology Event on November 17, and the Raymond James 2021 Technology Investors Conference on December 7. We look forward to connecting with many of you at those events. I will now turn the call over to Chris. Thank you, Andy, and thank you all for joining the call. Our third quarter results were strong, with revenue and profitability exceeding our guidance. Demand was also strong, driven by enterprise needs for omni-channel fulfillment, supply chain visibility, environmental sustainability, and process digitization. At the same time, COVID-related manufacturing and shipping disruptions compounded our ongoing product shortfalls, accentuating our difficulty meeting that demand and constraining our third quarter revenue. Third quarter also brought wafer, component, assembly, packaging, and shipping cost increases that are now too large for us to absorb. We began passing those increases to our customers in fourth quarter. Despite those increases, we still enter the quarter with demand greatly exceeding our supply. All told, our fourth quarter outlook is strong, buoyed by those cost pass-throughs and that demand, albeit with insufficient product supply that continues to disappoint our customers. Endpoint IC revenue grew sequentially, driven by accelerating Impinj M700 sales. Despite regional factory shutdowns due to COVID-19, we doubled our 300-millimeter post-processing capacity in the quarter and plan a further 50% increase in fourth quarter. By year-end, we will be wafer supply limited rather than post-processing limited, able to quickly turn any 200 millimeter or 300 millimeter outsourced wafers we receive from our foundry partner. Regardless of the cause, our wafer shortfall means our inlay partners continue running hand-to-mouth, periodically lines down, and with critically low inventory. Like for last quarter, third quarter endpoint IC demand exceeded shipments by more than 50%. In September, our endpoint IC foundry partner gave us first half 2022 wafer supply commitments that should allow us to equal or exceed fourth quarter 2021 shipment levels through mid-2022. Like us, they recognize the mission-critical importance of RAIN to the global supply chain, and they have prioritized us for more wafers. Inopportunely, in October, our wafer costs increased. Even as we began passing those cost increases to our inlay partners, demand remained so strong that they would layer additional bookings onto our order backlog if we could procure more wafers. Third quarter systems revenue exceeded expectations, with strong reader and reader IC shipments partially offsetting the decline in loss prevention engine shipments. Reader revenue set a quarterly record even as channel inventory declined further, with component shortfalls again constraining our reader production. Although we expect modest improvement in reader build quantities in the fourth quarter, we also expect some of those readers to come too late to ship in quarter. We had significant reader backlog entering fourth quarter, and we expect to have backlog again entering first quarter, with our supply normalizing in first quarter at the earliest. Third quarter reader IC revenue continued recovering from our first half 2021 supply shortfall. We expect supply to finally catch up to demand in first quarter 2022. Excitingly, we booked significant orders for our new reader ICs as we grow the partner base building products with those ICs. With more than 75 design wins to date, we expect those reader ICs to be a key driver of RAIN adoption. Like for endpoint ICs, third quarter brought significant cost increases for our systems products. Like for endpoint ICs, we began passing those increases to our systems partners. Demand remains strong even with those increases. On the project front, for the fourth consecutive quarter, the Asia-based global retailer drove meaningful reader revenue from their self-checkout deployment. The Europe-based global retailer began transitioning from deployment to the operational phase of their loss prevention rollout. The second North American supply chain and logistics customer further advanced their deployments. Each project progressed nicely, and we continue to see strong opportunities ahead. I'd like to now say a few words about environmental sustainability, which I've always expected to be a driver of RAIN adoption, which we are now seeing. RAIN helps enterprises digitize and virtualize their operations, providing real-time data that can improve operational efficiencies and reduce waste. As one example, our partner Lyngsoe Systems upgraded Norway Post's RAIN infrastructure using the ItemSense platform, improving real-time package visibility and helping Norway Post identify process improvements that will reduce fuel consumption, cut CO2 emissions, and meet their sustainability goals. Before I close, I'd like to say a few words of thanks to the Impinj team. With incredible effort and grace under pressure, they, over the past 18 months, launched and ramped new products across every Impinj product line, migrated to a new ERP system, and transitioned to a largely work-from-home environment, all during an unprecedented global pandemic with unparalleled supply chain disruptions. To call their effort Herculean doesn't do justice to what they have accomplished. To each and every Impinj team member, I'd like to give my heartfelt thank you. In closing, we exceeded our third quarter revenue and profitability guidance, accelerated our M700 production, navigated unprecedented challenges, and see strong long-term demand from enterprise digital transformation. By year-end, we will have sufficiently straightened and widened our endpoint IC post-processing pipes that we will be well primed for upside wafers whenever they may come. Until then, we continue working side by side with our ecosystem partners to navigate today's supply chain challenges, so both we and they emerge stronger on the other side of COVID-19. I will now turn the call over to Cary. Cary? Thank you, Chris, and good afternoon, everyone. On today's call, I will review our third quarter financial results and fourth quarter financial outlook. Third quarter revenue was $45.2 million, down 4.4% sequentially compared with $47.3 million in second quarter 2021, and up 60.3% year-over-year compared with $28.2 million in third quarter 2020. Third quarter endpoint IC revenue was $32 million, up 3.8% sequentially compared with $30.8 million in second quarter 2021, and up 48.1% year-over-year compared with $21.6 million in third quarter 2020. Absent COVID-related factory shutdowns that exceeded expectations embedded in our third quarter guidance, endpoint IC revenue could have been higher. Looking forward, we expect fourth quarter 2021 endpoint IC revenue to increase sequentially, driven by both the initial impact from our cost pass-through and incremental upside wafers. Third quarter systems revenue was $13.2 million, down 19.7% sequentially compared with $16.5 million in second quarter 2021, and up 100.2% year-over-year compared with $6.6 million in third quarter 2020. Both reader and reader IC revenue increased sequentially and year-over-year, while gateway revenue declined sequentially and year-over-year. Our gateway revenue faced a difficult comparison to second quarter, which included $6 million for the loss prevention engine shipments. We expect fourth quarter 2021 systems revenue to decline sequentially as supply-related decline in reader revenue more than offsets continuing strength in our reader ICs. Third quarter gross margin was 53.3%, compared with 54.5% in second quarter 2021 and 50.1% in third quarter 2020. The quarter-over-quarter decline was driven by indirect costs and product mix, partially offset by sales of fully reserved inventory. The year-over-year increase was driven by sales of fully reserved inventory, product mix, and underlying product margins. Third quarter gross margin benefited from selling that reserved inventory was 200 basis points. Another bright spot, the M700 provided gross margin tailwind in third quarter, and looking forward, we expect that trend to continue as M700 volume grows as a percentage of our endpoint IC mix. Total third quarter operating expense was $24.4 million, compared with $22.4 million in second quarter 2021 and $20.4 million in third quarter 2020. The sequential increase was due primarily to increased engineering expense, including a partial quarter of cost for our new RF design team and general and administrative expense. Research and development expense was $11.8 million. Sales and marketing expense was $6 million. General and administrative expense was $6.6 million. We expect fourth quarter operating expense to increase sequentially. Third quarter adjusted EBITDA was a loss of $400,000, compared with a gain of $3.3 million in second quarter 2021 and a loss of $6.2 million in third quarter 2020. Third quarter GAAP net loss was $12.9 million. Third quarter non-GAAP net loss was $900,000 or $0.04 per share using a weighted average diluted share count of 24.3 million shares. Turning to the balance sheet. We ended the third quarter with cash equivalents and short-term investments of $113.3 million, compared with $112 million in second quarter 2021 and $105.1 million in third quarter 2020. The sequential cash increase was due primarily to reduced inventory and proceeds from stock option exercises, partially offset by capital expenditure from our endpoint IC post-processing expansion. Inventory totaled $18.4 million, down $5.6 million sequentially. Based on our current visibility to wafer and component supply, we do not anticipate building inventory in fourth quarter 2021. Third quarter net cash provided by operating activities was $5.4 million. Property and equipment purchases totaled $6.3 million. Free cash flow was -$900,000. Before I turn to our fourth quarter guidance, I want to highlight items unique to third quarter and give an update on a few of our strategic initiatives. First, product costs across all product lines increased markedly over the past year. In October, we began passing those increased costs to our customers. We have factored those increases as we see them today into our fourth quarter guidance. Second, we anticipate a favorable mix of specialty and industrial endpoint ICs in fourth quarter, driving margin rich revenue. We expect that favorable mix, coupled with increasing M700 volumes as a percentage of endpoint IC revenue to drive an increase in our fourth quarter gross margins. Third, we expect CapEx spending to decline in fourth quarter as we complete our current endpoint IC post-processing capacity expansion. Looking forward, we expect 2022 CapEx spending to be similar to 2021 as we continue investing in our business. Turning to our fourth quarter outlook. We expect revenue between $46 million and $48 million, a 29% year-over-year increase at the midpoint of the range compared with $36.4 million in fourth quarter 2020. We expect adjusted EBITDA between a loss of $500,000 and a gain of $1 million. On the bottom line, we expect non-GAAP net income between a loss of $1.1 million and a gain of $400,000, reflecting non-GAAP earnings per share between a loss of $0.04 and a gain of $0.02 on a weighted average diluted share count between 24.3 million and 26.5 million shares. In closing, I want to thank our Impinj team, customers, suppliers, and investors for your ongoing support. I will now turn the call to the operator to open the question-and-answer session. Grant? We will now begin the question-and-answer session. To ask your 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. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Harsh Kumar with Piper Sandler. Please go ahead. Yeah. Hey, guys. First of all, let me just congratulate you guys on some tremendous execution. There's a lot of headwind, but I think you guys are doing all the right things in terms of supply and execution. So huge congrats. My question was, Thank you. Thank you. My question was, the chip revenues, the endpoint IC revenues jumped up. I know supply was a pretty big concern for you guys. You were expecting additional wafers coming later on in the quarter around November timeframe. Is that the set of wafers that you were able to already secure, or is that still, I guess supposedly on the come? Hi, Harsh. This is Cary. Thanks for the question, and it's a good one. You know, as we've talked previously, endpoint IC volumes typically decline in fourth quarter. Even with our accelerating demand, we said the last quarter that typical 5%-10% decline would hold in Q4 because we were limited by supply. The incremental wafers we've received in Q3, we are now able to satisfy more of that demand. Certainly not all of it, but more of that demand than we had thought last quarter, and it's allowing us to deliver endpoint IC unit volume in Q4 that beats that typical seasonality. The price increases then layer on top of that better than seasonal volume, and those two factors will drive the sequential increase in endpoint IC revenue. Understood. Thank you, Cary, for the clarification. Then you guys talked about increased wafer commitments. Through the first half, I was hoping you could because, you know, we're sitting on a situation where demand is far exceeding supply, so this is something very good. I was curious if you could elaborate on what kind of wafer commitments and what size of wafer commitments have you guys secured. As a courtesy, I'll get back in line after this. Yeah. Harsh, thank you. This is Chris. We do have visibility now to first half 2022. Obviously, there's possibility for further wafer upsides. That visibility to the first half of next year allows us to say that we will be able to equal our fourth quarter shipments in the first half of the year. Thank you. Appreciate it. Congrats, guys. Thank you, Harsh Kumar. Our next question comes from Derek Soderberg with Colliers Securities. Please go ahead. Hey, guys. Thanks for taking my questions. I wanna start with the commentary on demand being 50% higher, sort of consistent with last quarter. Just given the wafer supply commitments that you guys are getting, that's improving a bit, do you guys expect to start to eat into that 50% demand that's above, you know, sort of the ability for the industry to supply? Or would you expect that, you know, even with the wafer allocations, that demand is gonna continue, you know, beyond that 50%? Derek, this is Chris. Thanks for the question. You know, we guide one quarter at a time. We're getting some advanced visibility at this point in time, just given the wafer supply shortfalls. You know, we don't guide as far out as would be able to answer your question, but demand does remain strong. And as I said, you know, for this quarter or for, I'm sorry, for last quarter, demand exceeded supply by more than 50% for our end customers. If and when we get upside wafers, we will layer on, you know, that additional supply to meet some of that additional demand. In terms of the strength of demand, we see strong demand continuing to be strong across our industry, and we will give further guidance in terms of further visibility in our next earnings call. Got it. As my follow-up, you know, I understand Impinj wants to drive industry tag volumes forward, and pricing is a big piece of that. You know, to me it seems like the cost structure of the M700 is such that, you know, you could take a pretty substantial haircut to the ASP and still generate a stronger gross margin on the M700 versus prior generations. I'm sort of wondering how you're balancing, you know, that desire to maximize tag volumes and market share with, really a great opportunity for you guys to expand gross margin. So how are you thinking about those trade-offs? And then if you could share sort of, you know, what you guys are targeting for the M700 gross margin, that'd be great. Thanks. Hi, Derek. This is Cary. Thanks for the question. You know, from a pricing perspective, or maybe let me first start with the cost, we've seen a wide array of cost increases across all of our product lines. To the extent it has made sense in maintaining our margin model, we've passed those costs on to our customers. We are very price sensitive. We believe in the elasticity of pricing in the RAIN market. In this environment, when we are so supply constrained, we've really focused on maintaining the margins as we look to take on those cost increases. Great. Thanks, guys. Thank you, Derek. Our next question comes from Chris Grenga with Needham & Company. Please go ahead. Hi. Thanks for taking the call. This is Chris Grenga in for Jim Ricchiuti. Congrats on the great quarter. Chris had mentioned some strong opportunities ahead on the project side. Could you talk about the pipeline for large projects in the systems area, and whether you're seeing more underlying demand from larger customers, or from customers who have been in earlier stages of project deployment? Thanks for your question, Chris. This is Jeff. I think overall I would say the pipeline remains strong. In each of the large projects that we've discussed on prior earnings calls, those projects are continuing to progress well. Overall, we're seeing a diversification of opportunity across multiple sectors, multiple geographies, with particular strength in supply chain and logistics and ongoing strength in retail. Got it. Thanks. Have you observed whether retailers are slowing or revising deployment schedules for RAIN RFID in light of the IT shortages? I'm not aware of any slowdowns as it relates to deployments in retail. In fact, we're seeing strength in the continuing strength in retail deployments servicing the increasing desire for omni-channel fulfillment, for self-checkout. Retail remains a strong growth opportunity for Impinj. I'll just add that there's very strong interest for RAIN to drive enterprise digitization in retail, supply chain, and logistics, and many other verticals. It is, you know, obviously with a short supply, you know, the propensity of projects or small, you know, newer projects to move forward could be delayed a bit. I will actually say, you know, the other side of that coin is that demand, as we see it right now, is very strong right now in the market from those end customers to drive that enterprise digitization. Great. Very helpful. Thank you very much. Thank you, Chris. Our next question comes from Harsh Kumar with Piper Sandler. Please go ahead. Yeah. Hey, guys. Thanks again for accommodating me. I had a multipart question, but I think it's the same thing, so I'll just ask the two or three questions together, and I believe the answer is similar, in terms of scope. Chris, you mentioned several times demand is much greater than supply. My question is you also mentioned that in 1Q, you expect supply to catch up to demand, and you're getting increased demand. Inference should be that if there was any seasonality in 1Q, we shouldn't expect that because you are seeing increased demand. You got demand and you're not getting supply. Should that basically lead me to think that we should not worry about seasonality whatsoever, that you should be up and to the right? Is that the correct way for me to think? I've got a small follow-up. Harsh, thanks for your question. I'll answer the first part of it in terms of demand catching up to supply, and then I'll hand off to Cary. When we mentioned that, I'm sorry. I said demand catching up to supply. I meant it the other way around, supply catching up to demand. When we were talking about supply catching up to demand, it was not relative to endpoint ICs. It was in the reader ICs and us catching up on the fixed readers. For our endpoint ICs, demand continues to exceed supply very significantly, and that's where we said in the third quarter, demand exceeded supply by more than 50%. We have not said anything about catching up to on the endpoint ICs, and in fact, the wafer shortfalls continue with Fortuitously, we got commitments from our foundry partners such that we will be able to deliver endpoint ICs at least at fourth quarter levels through the first half of 2022, but demand is much higher than that. Cary, can you take the second part of the question on seasonality? Yeah. Harsh, thanks for the question. It's still a little too early to predict how seasonality is gonna play out next year. From today's vantage point, we anticipate continuing to be constrained on both wafer supply and systems components. As I think about endpoint IC, as Chris mentioned, Q4 supply remains well below demand, and I think that continues into 2022. The incremental wafer supply that we've received over the last several weeks gives us the confidence that we can supply volumes that meet or exceed Q4 levels through at least middle of 2022. The significant investment we've made this year in our 300-millimeter post-processing capacity, plus our existing 200-millimeter capacity, positions us well to quickly turn any wafer outside that we receive in that period. I'll add to Chris's point. On the systems side, we did see the situation improving modestly as we enter the new year. You know, as Chris said, reader IC fleet is coming online late in Q4 and will benefit Q1, and reader IC should catch up with supply in Q1. Hey, Harsh, this is Chris. I'm gonna just jump in right at the end here. I just wanna point you to a particular sentence in the script that we just delivered, which is relative to endpoint ICs. We said, "Even as we began passing those cost increases to our inlay partners, demand remains so strong that they, our inlay partners, would layer additional bookings onto our order backlog if we could procure more wafers. Sure. Okay, great. Very helpful, guys. That sort of like blend very nicely into my second question, which was, what is the cause of the reader IC shortages? Is it just the general supply constraints that everybody's seeing and you guys are sort of in there with the general chatter about supply shortages? What are the possible solutions to that you could work on as a company? Yeah, Harsh. This is Chris again. For the reader ICs particularly, this is not the endpoint ICs, just the reader ICs. Sure. We were significantly packaging limited in terms of our ability to procure packaging and get the packaging done. We expect to be able to catch up for the supply to catch up to demand in first quarter because we have caught up on some of that packaging. For those particular products, the issue was not so much wafer supply as it was packaging and factory ability to package our ICs. Great. That's all for me, guys. Thank you. Thank you, Harsh. Thanks, Harsh. Our next question comes from Troy Jensen with Lake Street Capital. Please go ahead. Hey, gentlemen. Congrats on the nice results. Thank you, Troy. Thanks, Troy. Hey, maybe Chris, for you. I mean, you touched briefly on loss prevention in Europe and the cashless checkout in Korea. Your thoughts on, you know, which one's moving faster, which one's gonna be a bigger, you know, application for you guys in 2022? Thanks, Troy, for the question. What I'm gonna say is that the driver for both deployments is self-checkout. There's the self-checkout deployment in Asia, and then although we talk about loss prevention in Europe, the driver for that loss prevention is self-checkout. 'Cause if you've got regions where theft tends to be a little bit higher and you wanna do self-checkout, you actually can't have self-checkout without a functional loss prevention system. If you link to existing loss prevention technologies, for example, the hard tag with a pin that goes through a garment, that doesn't work for self-checkout because you can't give the detacher to the customer to remove the hard tag because, you know, they could just remove any hard tag then. In order to make the self-checkout work, you need to basically register the item as being sold or deactivate the tag at point of sale and then have the exit gate not recognize that same tag when the item is leaving the store or recognize the item is being sold. In both instances, it's self-checkout that is driving the opportunity. In parts of Asia, there's not as much need for loss prevention, although it's still there. We expect even in some of those Asian opportunities for loss prevention to come into play in the future. All right, that makes sense. Maybe just one for Cary. I know gross margins have bounced around a lot, and there's been some one-time items in there. But can you give us thoughts on, you know, gross margin expansion going forward or a business model target you can point us to or, you know, it's too early to talk about 2022 targets, but any thoughts on, you know, margins longer term? Yeah, it's a good question. Yes, gross margins have been nuanced throughout the year. Q4, it will continue to be nuanced. We will have the strong mix of the industrial and specialty SKUs, which are higher margin, and we will have an increasing mix of M700. Both of those factors, even without the benefit of E&O sales that we had in Q3, I anticipate gross margin increasing in Q4. As I look into 2022, I do not think we'll maintain that same level of industrial specialty SKU mix. We'll lose that benefit, but we'll maintain and likely increase the benefit coming from an increasing M700 mix. Awesome. All right, guys, keep up the good work. Thanks. Thanks. Thanks, Troy. Again, if you'd like to ask a question, it is star then one. Star then one to ask a question. Our next question comes from Scott Searle with Roth Capital. Please go ahead. Hey, good afternoon. Thanks for taking my questions. Nice job in a difficult environment, guys, and I apologize for the background noise. Just a couple of quick questions to get in. Looking to the fourth quarter, M700, I'm wondering if you could give us an idea of what that endpoint mix looks like now that you're starting to become less constrained on that front. And also to follow up on Troy's question as it relates to gross margins, looks like you got a favorable mix going into the fourth quarter. Cary, I wanna clarify that sequentially up gross margin, that is off of the reported number of 53% as opposed to an adjusted number reflecting the one-time reserves. Wondering also if you're thinking about any one-time reserves reversing in the fourth quarter? As we go into the first quarter, typically you get that pricing negotiation impact that takes a step down. Does that not happen this year, because you've just kind of gone through passing price increases through to your customers? Thanks. Thanks, Scott. Thanks for the question. Cary, why don't I take the first part, which is about the M700, and then I'll hand off to you. Okay. Is that okay? Thanks, Scott, for the question. Again, point I made, we are constrained on 200 millimeter wafers. We're constrained on 300 millimeter wafers. We're constrained on M700 going forward. The constraints are still there. The crossover between 200 millimeter and 300 millimeter products or the crossover to where the M700 is the primary product that we're supplying for our end customers is happening this quarter, and it will be our volume runner going forward. Okay, Cary, now you. Thanks. Scott, on gross margin, the commentary I made for Q4 and reinforcing that, yes, it is nuanced, was relative to Q3's 53.3% unadjusted for E&O sales. As I look to Q4, I think Q4 increases sequentially. We lose the benefit of E&O. We gain the benefit of the specialty and industrial SKU mix, and we gain the benefit of increasing M700 mix. Those two factors more than offset the lost benefit from E&O sales. E&O being fully reserved inventory. Excuse me. I was thinking of excess and obsolescence inventory. Fully reserved inventory more than offset that benefit in Q4, driving gross margins up. Then Cary, you know, as we look into the first quarter, the usual historical price decreases, price concessions, does that happen this year? Thanks. Hey, Scott. This is Jeff. Thanks for your question. In this supply environment, I think I would refer to it as atypical supply-demand environment. We are working very closely with our partners daily, weekly, monthly, quarterly to optimize our supply for their view of demand. As Chris mentioned in his opening remarks, we have been in a conversation with regard to cost pass-throughs. I think this is an atypical scenario, so I wouldn't anticipate the same seasonality that we've experienced in previous years with respect to ASP. Thank you. Thank you, Scott. Ladies and gentlemen, this will conclude our question and answer session. I'd like to turn the conference back over to Chris Diorio, Co-founder and CEO, for any closing remarks. Thank you, Grant. I'd like to thank you all for joining the call today. I hope you and your loved ones are, and remain, safe and well. Thank you again. Bye-bye. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.