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Signet Jewelers Limited (NYSE:SIG)
Q4 2018 Earnings Conference Call
March 14, 2018, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Signet Jewelers Limited Fourth Quarter and Fiscal Year 2018 Results conference call. During the call, all participants will be in a listen only mode. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time.

If at any time during the conference you need to reach an operator, please press the * followed by 0. Please note that this call is being recorded today, March 14th, 2018 at 8:00 a.m. Eastern time. I would now like to turn the meeting over to your host for today's call, James Grant, VP of Investor Relations. Please go ahead, James.

James Grant -- Vice President of Investor Relations

Good morning and welcome to our fourth quarter earnings conference call. On the call today are Signet's CEO, Gina Drosos, and CFO, Michele Santana. The presentation slides that we will be referencing are available under the investors section of our website, signetjewelers.com.

During today's presentation, we will in places make certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We urge you to read the risk factors, cautionary language, and other disclosures in our annual report on form 10-K and quarterly reports on form 10-Q. And we also draw your attention to slide No. 2 in today's presentation for additional information about forward-looking statements.

Additionally, we ask that you limited your questions to two so that we are able to take as many questions as possible. So, with that, I'll turn it over to Gina.

Virginia Drosos -- Chief Executive Officer

Thank you, James. Good morning, everyone and thank you for joining today's call. Today, Michele and I will discuss Signet's fourth quarter and full-year results, including the issues that developed following our credit outsourcing transaction and related operational challenges. We will also discuss Signet's comprehensive three-year companywide plan to reinvigorate Signet and transform the company to be a share-gaining OmniChannel jewelry category leader. We will then open the line for your questions.

As a member of the Signet board since 2012, I developed an appreciation for the fundamental strength of Signet's business -- outstanding team members and attractive market opportunities. Since becoming CEO seven months ago, I have taken a look at the business through a new lens, diving deeply into our operating plan details, demand creation capabilities, and cost structure. As a result, I have gained a much greater insight into Signet's operations and enhanced my understanding of the opportunities for Signet moving forward and what needs to be done to position the company for improved performance.

It is clear that Signet is working from a strong foundation. The company continues to be the market share leader in North America in a large, growing, and highly fragmented category with the opportunity for additional share gains as we leverage our scale in innovation, marketing, and procurement. We have a good balance between a steady bridal business, a fashion, gifting, and self-purchasing business, and a design, repair, and maintenance business, which continues to drive traffic to our stores after a purchase has been made.

Additionally, our bridal and anniversary businesses involve big ticket items that are purchased infrequently and often after careful deliberation with the assistance of a knowledgeable, trusted sales professional. And overall, our store footprint is highly strategically placed. As we improve our e-commerce and especially our mobile capabilities, the jewelry category gives us an opportunity to use our stores as a key advantage to provide customers with a superior OmniChannel experience.

We plan to build on this foundation as we aspire to be the preferred authority and destination for jewelry products for bridal occasions, fashion and gift occasions, custom design, and jewelry repair and maintenance services.

But before we can fully achieve this objective, we have some immediate challenges to address. These include the operational issues associated with the outsourcing of our prime credit business and the need to transform our business to invest in growth initiatives while lowering our cost structure and repositioning our real estate portfolio.

As you know, we completed the first phase of our credit outsourcing plan in October when we sold Kay and Jared's prime receivables to ADS for $950 million and outsourced servicing of our non-prime receivables to Genesis. Today, we are pleased to announce the final phase with the signing of a multi-year agreement with investment funds managed by CarVal Investors to purchase our book of non-prime receivables. Michele will cover these transactions in more detail shortly.

When it closes, this credit transaction will complete Signet's transition to a fully outsourced credit structure while maintaining a full spectrum of category-leading financing and leasing options for customers. Together, these transactions are expected to significantly reduce consumer credit risk on our balance sheet, reduce our working capital needs and enable us to focus squarely on our core retail business. Importantly, these transactions also enable us to continue to return significant capital to shareholders.

At the completion of Signet's transition to a fully outsourced credit model, we expect that the credit transactions will have generated more than $1.3 billion in proceeds, which are being used for debt repayment and significant share repurchases. From a combination of available cash and proceeds from the credit transactions subject to market conditions, we expect to repurchase approximately one-quarter of Signet's shares outstanding.

For all of these reasons, I am confident that these transactions will prove to be very beneficial to the company over the long-term. However, the transition of the credit function to an outsourced model has led to operational issues that significantly impacted our same-store sales. We are making steady progress fixing these issues and have seen some signs of improvement in credit participation and application volumes in February versus fourth quarter trends, although still below prior year levels. We do continue to expect the transition to be a headwind during Fiscal Year 2019 as we work through change management in the stores.

The credit transition was not the only challenge we faced last year. As I conducted my deep dive review of our operations and strategy, it became clear that there are some additional operational issues that require attention. We did not invest fast enough in OmniChannel initiatives, particularly mobile, and have been too slow to capture our fair share of the online channel, both in terms of traffic and conversion.

We have had less effective product innovation success and did not invest enough in differentiated products. As product lifecycles have shortened, our innovation pipeline has not been robust enough to offset the natural decline of some of our larger collections. Our banner brand equities have become less relevant and our in-store experience and communication platforms need updating.

Across banners, we have relied too heavily on the promotional lever, which has incentivized customers to buy on deal and created a value perception problem in non-heavy promotional periods. And employee morale has suffered as we have experienced organizational change, headcount reductions, negative press, and complications from the outsourcing of credit.

These company operational issues have been exacerbated by several changes in the retail environment which we have been slow to respond to, including declining mall traffic and shifts in customer buying behavior. The good news is many of our problems are fixable. We can and we will correct them. There are significant operational improvement opportunities at our disposal. Capturing these opportunities allows us to stabilize and then start improving our results while planning for and investing in the future.

We are disappointed in our Fiscal 2019 outlook but feel it is important to have this year as a transition year to kick off our transformation plan. Signet Path to Brilliance is a three-year comprehensive transformation plan to reposition the company to be a share-gaining, OmniChannel jewelry category leader. The plan is designed to increase our cost competitiveness by driving out costs customers do not see or care about while enabling growth investments in our three key strategic priorities of customer first, OmniChannel, and building a culture of agility and efficiency.

The growth priorities of the transformation plan are number one, as part of our customer first strategic priority, we are aggressively addressing customer relevance and value. Although Signet remains the category leader, we have not been leading category growth and have lost market share. We must become more customer-focused. There is a need to clearly differentiate our banners and drive higher brand equity, shift our advertising and media mix to become more relevant, use analytics for actionable insights, and provide a clear and compelling value proposition.

We are in the process of completing new brand positioning work, which is intended to clearly differentiate our banners. With Kay, Zales, and Jared effectively targeted to different customer segments with unique benefit propositions, reducing overlap, improving banner differentiation, and increasing customer relevance will enable more effective merchandising, in-store experience, and marketing. The new banner positionings are built on deep data analytics and will be tested this year.

We are also continuing to shift our media mix to digital to reach customers where they are with greater targeting, personalization, and efficiency. Linear TV will remain a competitive advantage for our brands but will no longer represent the majority of our spend. We are augmenting our wealth of consumer data with access to new data to allow us to move beyond demographic and behavior marketing, which is focused on a limited number of customer characteristics, to predictive modeling and trigger moment marketing, where hundreds or even thousands of characteristics are used in combination to find the shoppers most likely to respond.

We are also investing in data science expertise and new analytics tools to measure marketing impact at the individual level, setting the stage for in-flight optimization of campaigns to drive engagement by providing the information customers want next, whether that's diamond education or fashion inspiration, we can personalize content to meet their needs.

Disney Enchanted is a great early example of this, where we targeted Disney fans through activities, reaching almost 600,000 customers at a very low cost, helping drive the strength of Zales' sales.

Finally, we are beginning to utilize the latest digital identification technology, enabling us to take the customer along their journey even if they switch devices, search for information on different websites, or go in store.

To optimize our customer value equation, we are closely evaluating our pricing structure. Our historical model has been high-low at Kay and Zales with a reliance on promotions, which has made purchasing confusing for customers. We are evaluating our promotional spend as well as conducting pricing studies with the goal of learnings to address price perception issues and identify areas where we have gaps. At Jared, we have a less promotional model, but are benchmarking our value equation and merchandise assortment. Any changes will be made thoughtfully with the goal of providing superior customer value and experience while carefully managing the trade-off between sales growth and margin.

Innovation is also a top customer first priority to drive traffic and conversion in-store and online. We think of innovation in two broad buckets -- core and disruptive -- and across several vectors, including product, experience, digital, and delivery innovation. We are driving a renewed focus on core innovation within our newly formed banner teams and functions, which I'll discuss in a few minutes.

These efforts are important in driving growth and are lower risk and faster to execute. Our goal is increase relevance and move quickly in this area given that customer habits have changed and the lifecycle of products is shorter, requiring more continuous newness. For example, we have implemented new and faster idea screening approaches and vendor summits to increase effectiveness in new product design and launch.

To drive disruptive innovation, Signet is launching a new Innovation Engine. Our Innovation Engine team is responsible for idea generation, qualification, piloting, and ultimately rolling out the best ideas across new product breakthroughs, experiences, and business models. Our goal over time is to drive a higher mix of disruptive innovations, which have the potential of being more incremental to sales.

For example, this team is currently piloting and optimizing a new digital innovation program in Jared stores, where we are making over 100,000 diamonds available to customers through a virtual diamond vault, leveraging R2Net visualization and diamond market technology.

Number two, OmniChannel and e-commerce initiatives -- our aim is to develop best-in-class mobile shopping and a fully connected in-store and online experience. We want our websites to be an easy, informative, and delightful experience for our customers. So, we have already begun using R2Net technology across our websites to deliver product-leading visualization, try-on, and custom design capabilities.

In addition, to give a better sense of scale, we are starting to show every product we can on a model, the early result of which is a double-digit increase in conversion. We are being disciplined about improving our on-site research capabilities and modernizing and speeding up checkout pages, all of which we know enhance customer delight.

We know that our customers have multiple digital touchpoints before they arrive on our websites and that they usually research online before they then go into a store. So, we are strengthening our capability to track this digital journey. New analytical tools will enable us to maximize our marketing spend by targeting the message not only to the right customers, but also at the right time through the right digital platform.

Number three, as part of our focus on building a more agile and efficient culture, I'd also like to highlight some important organizational changes we've made to drive stronger employee engagement. We have reorganized to increase accountability and focus on results for each of our major North America banners, with a general manager and a dedicated multi-functional team working on Kay, Jared, Zales, and Piercing Pagoda.

This moves us away from a Zales versus Sterling division structure to a North America structure. Functional leaders and their teams within marketing, store operations, and merchandising will support all banners, delivering innovation informed by customer insights, effectively allocating Signet's resources and ensuring shared best practice.

This structure is designed to emphasize accountability, enable innovation, strengthen collaboration, and accelerate decision making. Along with these organizational changes, we are also placing greater emphasis in our annual incentive plans on topline sales growth within each banner and at the corporate level.

Of course, in an organization like Signet, where customer interaction happens on the frontline, it is critical that we attract, grow, and engage our employees to deliver an extraordinary experience for our customers. We are highly focused on reigniting employee engagement through training and development opportunities and we are providing a one-time special cash award to non-exempt employees below manager level in Fiscal 2019 as we kick off our transformation efforts as well as a three-year transformation incentive program for all employees.

The growth drivers I have just discussed will be funded by a more than $200 million net cost reduction program related to strategic sourcing, logistics, information technology spend, third-party contracts, and corporate expenses. We have spent considerable time evaluating cost reduction plans over the past four months with the help of several expert consulting teams and are confident our implementation will deliver these substantial savings.

In addition, as part of becoming more agile and efficient, we must optimize our real estate footprint. Our stores are a competitive advantage and billboards for our brand. As such, we must reinvent and reinvigorate them to continue to provide a compelling customer experience. Over the next three years, our store footprint must evolve and we are approaching this evolution in a thoughtful manner. Decisions regarding store rationalization will be economically driven based on the cash financial outlook for each store, the remaining life on leases, as well as competitive assessment.

In Fiscal 2019, we expect to close over 200 stores. Most of the Fiscal 2019 store closings will occur after the holiday season. New store openings are expected to be limited and will be focused on already proven off-mall formats and desirable markets. As we move out into Fiscal 2020 and beyond, we will be testing more new store concepts, monitoring sales retention success, and being opportunistic with what the real estate market provides in terms of rent reductions or store relocations. We expect overall store count at the end of the transformation plan to be lower than Fiscal 2019 yearend levels.

Our plan is focused on closing our lowest performing stores. These stores are not losing meaningful operating income, but do not meet our return expectations. We expect a small positive impact on operating profit from closing these stores as well as lower capital expenditures, lower working capital, and stronger underlying sales growth. Over time, we expect our remaining store footprint to be more productive and to drive an overall improvement in return on capital invested for Signet.

Strategically, the goal of our real estate transformation is to provide compelling customer experiences with seamless integration between our stores and our e-commerce platforms, resulting in higher sales productivity per store. Additionally, we are highly focused on sales retention, making sure we maintain customer relationships as we close stores.

Approximately three-quarters of stores expected to close are within the same mall as another Signet banner. We are current modeling an approximately 30% sales retention rate. Sales retention is a key objective of our real estate transformation and we have already been testing and learning with new programs to help us increase our sales retention rate.

This is a comprehensive transformation plan. We are confident that the activities we have outlined will move the company in the right direction to deliver sustainable, profitable growth. They will take time to fully implement and show up in our financial results.

For Fiscal 2019, we expect negative same-store sales as we continue to work through the credit transition and as our innovation and marketing efforts ramp up. Declining same-store sales, along with the change to a credit outsourcing model, will negatively impact operating profit, somewhat offset by lower interest expense and a lower share count. We expect to see improved operational and financial performance beginning in Fiscal 2020 as our efforts come more fully online.

We intend to responsibly manage the business for topline growth, drive efficiency, and reinvest appropriately to position Signet for sustainable, long-term growth. And we plan to remain highly disciplined toward capital allocation with the majority of free cashflow being returned to shareholders in the form of dividends and share repurchases.

Finally, before I turn it over to Michele, I am very pleased to announce that we have appointed two new members to our Board of Directors, Sharon McCollam and Nancy Reardon.

Sharon most recently served as Executive Vice President, Chief Administrative, and Chief Financial Officer of Best Buy. She is widely recognized as the copilot of Best Buy's successful "Renew Blue" turnaround strategy and as having overseen Williams-Sonoma's operational transformation. Sharon will be a great asset to Signet as we embark on our own transformation.

Nancy brings of a wealth of human resources experience and deep knowledge of the retail, consumer, and industrial industries. Having led the major organization and culture changes at three Fortune 500 companies, including the Campbell's Soup company, Nancy is well-suited to provide expert oversight to Signet as we execute on our Path to Brilliance transformation.

I am confident that the addition of these outstanding leaders will further strengthen the Board of Directors and enable and support the successful execution of our transformation. I am thrilled to welcome them to the Signet team.

And with that, I'll pass the call to Michele for more details on our financial results and guidance.

Michele Santana -- Chief Financial Officer

Thank you, Gina and good morning, everyone.

I'll start with a review of our fourth quarter results. After that, I'll first move to details around the announcement of Signet's proposed sale of our non-prime accounts receivables, then secondly, discuss some of the financial impact of transformation strategy and lastly, conclude with a review of our guidance and capital allocation for Fiscal 2019.

Our fourth quarter results came in as expected and reflected the trends we discussed in our holiday call in January. Therefore, my comments on the fourth quarter will be relatively brief. For the fourth quarter, total sales were $2.3 billion, up 1% year over year on a total basis and flat on a constant currency basis. This includes the benefit of a 14th week, which added $84 million of sales.

In addition, R2Net, which we acquired in September of 2017 added $64 million of revenue in the quarter. On a comparable 13-week basis, total sales in the fourth quarter were down 5.1%. Same store sales, which excluded the impact of the 14th week, decreased 5.2%, including a 90-basis point benefit from R2Net.

Signet's e-commerce sales were up 56.8% on a 14-week basis or 52.8% on a 13-week basis and in total represented 11% of quarterly sales compared to 7% of sales in the prior quarter. Excluding R2Net, e-commerce sales were up 13% on a comparable 13-week basis.

Sales trends by division remain broadly consistent with the results that we shared on our holiday call with the continued momentum in the Zales division being more than offset by weakness in our Kay, Jared, and UK banners. The growth margin rate was 40.1% in the quarter, down 160 basis points on a 14-week basis and 39.9% on a 13-week basis.

The decline in rate was due to one, deleverage on fixed cost as a result of lower sales, primarily in our Sterling division, two, a lower gross margin rate associated with R2Net, and three, merchandise mix. Net bad debt expense had no material impact on the gross margin rate in the quarter.

SG&A expense was 27.7% of sales in the quarter and 27.3% of sales on a 13-week basis. The 14th week added $31 million of expense. Excluding this week, total SG&A expense was lower than prior year by approximately $11 million. Lower expense was realized primarily in advertising and store labor costs. In addition, SG&A was positively impacted by credit outsourcing as we had $21 million in outsourcing cost in the fourth quarter offset by $25 million related to in-house credit operation savings.

Other operating income declined 130 basis points or $30 million versus prior year due to the sale of our prime accounts receivable portfolio that occurred in the third quarter this year. Signet's operating margin declined 350 basis points driven by one, deleverage on fixed cost, two, the impact of the phase one credit outsourcing transaction, and three, the addition of R2Net, which carries a lower margin rate.

As we expected the overall impact of the phase one credit transaction was an unfavorable impact of $21 million in the quarter. This was primarily driven by the loss of finance income that I referenced earlier.

GAAP EPS for the quarter was $5.24, including the favorable one-time non-cash benefit related to the revaluation of net-deferred tax liabilities related to US tax reform. Non-GAAP EPS was $4.28 for the quarter when excluding the $0.96 benefit related to the revaluation of net-deferred taxes. This was in line with the guidance range provided on our January holiday call.

So, let me briefly touch on comments about our credit portfolio performance for Q4. As discussed previously and in connection with the sale of our prime receivables and the outsourcing of our in-house servicing to Genesis Financial Solutions for non-prime receivables, we adjusted our account servicing, our billing terms, and delinquency parameters to a contractual basis.

In addition, at conversion and in conjunction with the change to contractual aging, we changed our minimum payment structure, lowering the required minimum levels closer to those of other retail credit card programs. The impact of these changes coupled with the disposal of the prime portfolio results in substantial changes to a number of our core portfolio metrics when compared to the historical ratios.

Our reserve as a percentage of total AR is now approximately 15% for the retained non-prime portfolio compared to pre-conversion levels of 7% to 8% for the consolidated prime and non-prime receivables. Likewise, our collection rate after lowering the minimum required payment for the retained non-prime receivables was approximately 7% compared to the prior year fourth quarter rate of 10%.

In addition to the impact of the lower minimum payments, the collection rate was adversely impacted in November and part of December by our previously discussed disruptions at conversion. However, our bad debt expense remained consistent with pre-conversion trends.

In closing out my quarter and Fiscal 2018 comments, cashflow was an area of strength in Fiscal 2018, with $751 million in free cashflow when excluding proceeds of $952 million from the sale of the prime receivables to ADS. This compares to $400 million in Fiscal 2017. The higher cash generation was due to lower inventory and a favorable impact on working capital related to accounts receivable.

So, let me move now to discuss the sale of our non-prime receivable portfolio and the overall impact of our business model of not only the sale but also the phase one transaction.

Today, we announced an agreement to sell Signet's non-prime receivables to investment funds managed by CarVal Investors and entered a five-year committed forward flow purchase program for future origination. Upon closing, this will complete Signet's transition to a fully outsourced credit structure. Under the terms of the agreement, the non-prime accounts receivable will be sold at a price expressed as a percentage of the par value of the accounts receivable of 72%, which is net of estimated servicing expenses for the receivable.

Historically, Signet has carried these receivables at approximately 85% of par value. The current sales price represents approximately 85% of Signet's historical carrying value. The estimated par value of receivables at closing is $585 million to $635 million. The final amount of receivables sold will be dependent upon sales levels and other portfolio activity between now and closing, which we expect to occur in the second quarter.

Additionally, there will be a 5% holdback of the receivable's purchase price at closing, which may be paid out at the end of two years depending on the performance of these receivables in that period.

As I said, closing is expected in Signet's fiscal second quarter. This timing is embedded in our Fiscal 2019 guidance. Signet expects to receive $401 million to $435 million in proceeds at closing and incur $7 million of transaction cost. Net proceeds from the transaction will be used for share repurchases in Fiscal 2019 subject to market conditions.

We expect to book a pre-tax loss or charge associated with the sale of the non-prime receivables of approximately $165 million to $170 million, which is inclusive of a lump sum payment of $45 million to $55 million of servicing expenses related to these receivables as well as transaction costs of $7 million in Fiscal 2019.

Approximately $140 million of the total loss will be recognized in the first quarter upon reclassifying the receivables to assets held for sale and the remainder of the amount will be recognized in the second quarter. This loss is included in our GAAP EPS guidance and excluded in our non-GAAP EPS guidance.

With respect to future non-prime receivable originations post-closing, Signet will remain the account issuer. Two business days thereafter, CarVal is obligated to purchase these receivables from Signet at a discount to par pursuant to a five-year agreement. The discount is a fee calculated on the credit sale amount inclusive of servicing and will be recorded as incremental SG&A expense in our Fiscal 2019 and beyond P&L.

From a customer experience perspective, servicing for the non-prime receivables will continue to be handled by Genesis. There are no customer or store-facing systems integration activities required by Signet to close this transaction and we do not expect any changes to the current credit application process as a result of closing phase two.

For further details on this transaction, I reference you to the Form 8-K we filed this morning.

Now that I've provided an overview of the phase two transaction, I would like to take a step back and review the expected financial impact of our credit outsourcing in totality.

From a financial perspective, as Gina mentioned, the company will ultimately have received over $1.3 billion due to the combined sale of the prime and non-prime portfolio. While the outsourcing of our credit portfolio lowers our operating profit, it also reduces share count and interest expense as proceeds from the sale transactions have been and are expected to be used to pay down debt and repurchase shares.

Additionally, the transactions will free up meaningful working capital. From a P&L perspective, after the completion of the second transaction, Signet will no longer earn finance or late charge income on those accounts and no longer incur bad debt expense. Signet will continue to pay some minimal fees directly to Genesis for new account origination while all other servicing costs are included in the discount on forward receivables sold. The discount on forward receivables will be partially offset by the elimination of the costs related to our former in-house credit operations.

Slide 11 depicts the net impact of all these items and is posted on our website for your reference. I also encourage you to see page 14 in the release this morning that provides additional details with the slide.

In Fiscal 2019, there was a reduction in operating income of $21 million in the fourth quarter solely reflecting the impact of the initial credit outsourcing of prime receivables to ADS and servicing of non-prime receivables to Genesis.

Our Fiscal 2019 guidance embeds approximately $118 million to $133 million incremental to year over year reduction and operating income reflecting a combination of the following -- an additional eight months of impact of the prime portfolio outsourcing, five months of servicing costs on the non-prime portfolio receivable, and seven months of the impact from the future discount rate associated with new credit sales that CarVal will purchase which embeds servicing costs.

For Fiscal 2020, we expect a small year over year impact on operating income ranging from zero to a benefit of $5 million. The Fiscal 2020 estimate is based on an assumed discount rate for the CarVal arrangement and could change if the discount rate were to reset higher or lower under certain review provisions in the agreement.

So, with that, let me now move to review financial considerations associated with our transformational plan.

Our transformational plan, which we are calling the Signet Path to Brilliance, is expected to result in net cost savings of $200 million to $225 million over three years. In Fiscal 2019, the transformation plan is expected to deliver net cost savings of $85 million to $100 million with further incremental cost reductions of $115 million to $125 million by the end of the three-year program.

Total preliminary pre-tax charges are anticipated to be $170 million to $190 million over three years with $125 million to $135 million of charges in Fiscal 2019. Preliminary cash charges are anticipated to be $105 million to $120 million over the three years, of which $60 million to $65 million are expected to be paid in Fiscal 2019.

Lastly, moving on to guidance and capital allocation. This year, we are providing revenue dollar guidance to help you model total sales given the number of store closures we had in Fiscal 2018. Total revenues are expected to be $5.9 billion to $6.1 billion and same store sales are being guided down low to mid-single digits for Fiscal 2019.

Keep in mind we had an extra week in Fiscal 2018 which provided $84 million in revenue. We also closed stores in Fiscal 2018 that had revenue of $150 million. Both of these amounts should be removed from the 2018 base when working through your models.

In addition, we will be adopting the new revenue recognition accounting standard this year, which will reclassify certain items as revenue that were previously recorded as reductions to expenses. This is expected to result in approximately $100 million of revenue included in total sales dollar guidance with no impact on profit, as this is simply a geography change on the P&L.

The offsetting expense is 70% cost of goods sold and 30% SG&A. Our same store sales guidance of negative low to mid-single digits assumes the positive momentum we saw in our Zales banner in the fourth quarter to continue and to be offset by negative sales growth in our Kay and Jared banners. Please note that our same store sales excludes revenue recognition changes.

We continue to work on change management initiatives from our credit outsourcing transition as well as address the challenges Gina mentioned earlier around product innovation, improving our e-commerce capabilities, and working on the consumer value equation. As our initiative and plans begin to take hold, we do anticipate to see gradual signs of improvement and same-store sales trends as we head to the fourth quarter.

Now, moving on to operating profit -- Fiscal 2019 operating profit will be negatively impacted by deleverage of fixed cost due to lower sales, the impact of the credit transactions discussed earlier in my comments, and a $50 million year over year increase related to compensation primarily driven by the restoration of our short-term incentive compensation that did not pay out in Fiscal 2018.

These headwinds are somewhat offset by expected net cost savings of $85 million to $100 million related to our transformation plan. As many of you know, our business model has a large fixed cost component which impacts our margins in a declining sales environment. As the transformation plan begins to take hold, this should become a benefit to margins when same store sales trends improve from current levels.

Now, going back to credit for just a moment and as a reminder, we will recognize a total pre-tax charge related to our phase two transaction of $165 million to $170 million and we anticipate a pre-tax charge of $125 million to $135 million related to the transformational plan. Our GAAP EPS guidance of $0.00 to $0.60 includes these charges and they are excluded from our non-GAAP EPS guidance of $3.75 to $4.25.

In addition, the GAAP EPS guidance includes an estimated tax benefit of $62 million to $67 million, driven by the anticipated charges that I just discussed. Our non-GAAP EPS guidance embeds a tax rate of 8% to 10%.

In addition, we have provided both common basic shares and diluted shares as part of our guidance. For purposes of calculating both GAAP and non-GAAP EPS, we expect to use the basic share count for the first, second, and third quarters as well as the full year due to the projected level of net income. For the fourth quarter only, diluted share count should be used in modeling EPS.

While we are not providing quarterly guidance, please note the following items for modeling purposes. The cost savings related to the transformation plan are second half-weighted, while reinvestments are more evenly spread across the year. The revenue impact related to credit transition execution is expected to be more pronounced in the first half of the year.

Lastly, beginning in the first quarter of Fiscal 2019, we will be modifying our segment reporting to align with the organizational structures that Gina outlined earlier. We will be moving to a segment reporting structure with a new North America division encompassing the legacy Sterling and Zales divisions and continuing with the UK division.

We will continue to provide revenues and same store sales by banner, consistent with our current practice. For simplicity, we will also not be using slides in our future conference calls. And for Fiscal 2019, we will be issuing a holiday release only and will not be hosting a call.

Finally, turning to capital allocation and cash return, we announced this morning that we will increase our Fiscal 2009 quarterly dividend by 20%. We expect to repurchase approximately $475 million in shares in Fiscal 2019, funded primarily by the sale of non-prime receivables as well as cash on hand.

With respect to leverage, we anticipate to receive the high-end of our 3.0 to 3.5 times target leverage ration in Fiscal 2019 as we begin our transformation, but expect to be back within that range before the end of the three-year transformational plan.

Signet plans to remain highly disciplined toward capital allocation with the majority of free cashflow being reinvested in strategic growth and/or returned to shareholders in the form of dividends and buybacks.

And with that, I'll pass the call back to Gina for closing comments.

Virginia Drosos -- Chief Executive Officer

Thanks, Michele.

Fiscal Year 2019 will be a transition year as we invest in the business and continue to take actions to position Signet for sustainable, profitable growth. We must reinvigorate and rejuvenate this great company for our customers, suppliers, employees, and importantly, our shareholders.

Before we turn to Q&A, I would like to thank James Grant for his six years of excellent service to Signet Jewelers. Randi Abada has recently joined our team as the Senior Vice President of Corporate Finance, Strategy, and Investor Relations. Randi has over a decade of buyside equity research experience and has also held senior corporate finance roles at consumer companies. We are thrilled to have her on board. We are appreciative that James will stay on until the end of April to ensure a seamless transaction of the investor relations function.

I'd now like to ask the Operator to please open the line for questions.

Questions and Answers:

Operator

At this time, those with questions should lift their phone receiver and press * followed by the number 1 on their telephone keypad. To cancel a question, please press the number sign. Please hold for a brief moment while we compile the Q&A roster.

And our first question comes from the line of Simeon Siegel with Nomura Instinet. Your line is open.

Simeon Siegel -- Nomura Instinet -- Analyst

Thanks. Good morning, guys. Gina, can you speak to the transaction growth at Zales versus the drop at Sterling? How do you view the industry landscape right now? Why do you think Zales beat them all and Sterling missed, I think even beyond credit, and where you think those shoppers might going? Any color there would be helpful. And then, Michele, obviously increasing the dividend shows confidence in your cashflow. Can you just speak to what you expect cash generation to look like going forward with credit behind you? Thanks.

Virginia Drosos -- Chief Executive Officer

Thanks, Simeon. As I said previously, we were able to get a number of our strategic initiatives in place faster at Zales than our other businesses. For example, Zales has been operating in our new banner accountability organization model since August with a dedicated multi-functional team and has had faster, more banner-focused decision making.

What this really allowed them to do is to improve our product assortment at Zales more quickly. So, Disney, Vera Wang, and solitaires performed very well. This shift toward fashion, more fashion jewelry purchasing is something that we really captured at Zales in a way that drove our topline improvement.

The third thing is that our e-commerce started to improve post our Hybris implementation, which had caused a temporary dip in search and conversion, especially on mobile. And then finally, as you also noted, Zales is not impacted by the credit transition, having had their credit transitioned for a while now.

Michele Santana -- Chief Financial Officer

Yes, Simeon, in terms of your question on the cashflow and as I called out in my comments, that for sure was a point off strength for us in our Fiscal 2018. As we think about moving forward in the transaction between phase one and phase two, the sale of the $1.8 billion of total receivables for sure reduces the total invested capital and will also help improve our return on invested capital profile as we move forward, and as I said on the call, will also provide meaningful working capital reductions, which will also help to drive free cashflow enhancements.

Simeon Siegel -- Nomura Instinet -- Analyst

Any color on what that would look like embedded within the guidance for this year?

Michele Santana -- Chief Financial Officer

No. We're not guiding the actual free cashflow number. I think we gave the pieces and parts on what we anticipate the sales proceeds to be. And then in addition, the other caller I'd point you to is we did provide the capital expenditures and you can see that range of $165 million to $185 million is lower from the prior period as we continue to focus on IT and also will have reduction on new store investments. So, that will also help to drive and enhance free cashflow.

Simeon Siegel -- Nomura Instinet -- Analyst

Great. Thanks. Best of luck for the year.

Michele Santana -- Chief Financial Officer

Thanks, Simeon.

Virginia Drosos -- Chief Executive Officer

Thank you.

Operator

Okay. Next question comes from the line of Ike Boruchow with Wells Fargo. Your line is open.

Ike Boruchow -- Wells Fargo -- Analyst

Hi, good morning, everyone. Michele, just two questions for you -- can you confirm that the phase two transaction is EPS accretive? It seems to be a little dilutive on my rough math, but I'll admit the numbers are a little confusing on my end. So, any help there would be great.

Michele Santana -- Chief Financial Officer

Yeah, Ike. In terms of the EPS accretion, as you would imagine, there's going to be a number of assumptions and there's time to go when we close and get the actual proceeds, it's going to be dependent in terms of level of receivables. And then when we think about those proceeds, obviously what the share price would be at the time we do our share repurchases. So, I think it's premature for me to comment accretion or dilution.

Ike Boruchow -- Wells Fargo -- Analyst

Okay. Then just a follow-up -- can you give us anymore detail on maybe explicitly what discount rate is being used on the credit sales to your partner to get to the numbers you kind of laid out, the 118 to 133? There has to be something kind of embedded in there. I'm not sure if you can share that or give us color.

Michele Santana -- Chief Financial Officer

Well, you're definitely right. There is a discount rate embedded in the numbers we've provided. We're not going to share what that MDR -- we refer to it as the merchant discount rate -- what that rate is just for competitive reasons and sensitivity of the information, but what we have provided in the release, which is why we also provided the view for FY 20 so you can understand in a more normalized, annualized basis what we anticipate the impact to SG&A expenses to be.

Ike Boruchow -- Wells Fargo -- Analyst

Got it. Thank you.

Michele Santana -- Chief Financial Officer

Thanks, Ike.

Operator

Your next question comes from the line of Oliver Chen with Cowen and Company. Your line is open.

Oliver Chen -- Cowen and Company -- Analyst

Good morning, Gina and Michele. Thank you. Regarding the consumer value equation, a lot of our research at Cowen does focus on deep value and value for price and pricing. What do you think needs to be done and how will that manifest in the Brilliance plan in terms of how we model the comp on NUR versus transaction and timing? Reorienting toward value can be quite complex and some things may be easier versus longer.

And our second question is just about banner differentiation. You've been on a journey regarding this in the past. So, what's different about what you're seeing and how should we interpret the new studies versus the former studies and where you want to go with banner differentiation? Thank you.

Virginia Drosos -- Chief Executive Officer

Great. Well, thanks, Oliver. So, let me start with the customer value equation first. So, obviously our value equation is comprised of a number of different things -- the price of our product, the assortment, the service that we provide in store, the education, the seamless OmniChannel experience that we provide because we know that fine jewelry shoppers are online, in-store and back again. So, there are a lot of components of that.

But a couple of things I mentioned in remarks that we're doing uniquely now are first, we're doing some pricing studies to carefully evaluate and benchmark versus key competition as well as evaluating our promotional spend. So, I also mentioned that we've become a bit too promotional, we believe, at certain times of the year and this is creating confusion for consumers and also creating an environment which damages brand equity instead of building it up.

So, we're taking a look at both of those elements to see what the right kind of value equation is for us to have it. That may vary across our different banners given to the answer to your second question, which is banner segmentation.

So, you're absolutely right. Several years ago, we had Bain come in and do a study about the market and who are the shoppers within the market. Then we kind of lined each of our brand banners up against one of those consumer groups. But having done a lot of branding work throughout my career and repositioning brands for growth, it's more complicated than that.

So, we've brought some deep data analytics to bear in addition to that to show us which consumers are already buying in which banners, which are the consumer groups that are growing the most, and what are the significant benefit promises that those consumers really want to see. Then we've been doing work on what each of our brand banners can stand for and how we might target these consumer groups in a different and more personalized, more individualized way.

So, that's the work that's been going on over the last six months since I came. I've seen some work on it very recently. I think it's coming along very well and we're getting ready to get some of that into execution and testing, which we'll be doing over the coming months so that we can really better differentiate our customer groups and reduce the overlap.

The great thing is that that carries over to other things as well. It carries over to new store concepts, new service concepts, our merchandise mix. As we've talked before, we've gotten into a situation of sameness across our banners over the last couple of years, where the merchandise looks very similar across our banners. With the benefit of a fresh look at the segmentation, we can now pull that apart a little bit and differentiate the merchandise that particular customer groups want to see in banners better than we have before.

Oliver Chen -- Cowen and Company -- Analyst

Okay. Gina, I know you've done some interesting work with millennials and Gen-Z. How does that manifest in terms of the store experience and how you see that evolving and what the kind of on-demand capital-light customer service and mixed service model may mean for how you're thinking your store experience should evolve to make sure you capture the share of new generations and acquire new customers and maintain existing?

Virginia Drosos -- Chief Executive Officer

Well, it's a great question. So, thanks for asking that one. Obviously, our customers are beyond millennials because people are buying birthday gifts, anniversary gifts, female self-purchasing, all of that. But a large portion of our sales, especially on bridal, are focused with millennials. So, we've done particular research in that group. I'll give you three examples of things that we're focusing on that we believe will delight millennial shoppers.

One is OmniChannel -- so, the seamless integration of online and in-store experience. There are a couple of things that we've brought to life that I'm excited about. These are small test and learn activities, but everything we're testing we're learning about. I think we're seeing strong growth results. So, we'll see that impact our business more broadly as we roll it out.

A few examples of that are bringing our R2Net technology and product visualization to our websites. Another one is allowing customers to check our inventory in any store from online before they go to the store. Just in the fourth quarter, we had 1.7 million customers check our website for online inventory. And that's a new service that we just started offering. I've talked about adding appointment booking to our websites. We had over 3,800 appointments booked online during the fourth quarter. So, immediately customers are responding to that.

I talked a bit about personalized content. When someone has visited our website before, we should be able to make their second, third, and fourth experience much more customized and personalized. Last year for holiday, we were doing that about 3% of the time. In the fourth quarter this year, it was about 34% of the time -- so, a significant increase there.

Another example in visualization is showing our product on models, which is, I think, a pretty exciting opportunity. When we showed jewelry on a hand, a wrist, a neck of a model, we were delivering double-digit conversion increases above what we were doing and the way we were visualizing product previously.

So, we're bringing a lot of excellent small test and learn projects into our OmniChannel experience. They're working and they're learning. So, we'll begin to start rolling those out. So, OmniChannel is a big one.

Service is the second one. So, how we approach millennial consumers from a selling method in our stores makes a difference. So, even things like wish lists that can exist online and in-store, the level of information education we provide, the way we provide that we're modifying.

And then a third one is location. We're looking at some urban store concepts. We have a very interesting mind-opening fact -- 43% of consumers who get engaged have kids already. So, this is indicative of a different relationship journey that a lot of millennial consumers have. So, how do we make it easier for them than having to bring the kids to the mall and sit for two hours at a counter? How do we provide bridal concierge services and things like that that can delight them?

So, these are three things -- OmniChannel, service, and the location in which we provide our jewelry to our customers.

Oliver Chen -- Cowen and Company -- Analyst

Sounds very creative. Thank you very much.

Operator

Your next question comes from the line of Rick Patel with Needham & Company. Your line is open.

Rick Patel -- Needham & Company -- Analyst

Thank you. Good morning, everyone. Just a quick clarification -- I wanted to be crystal clear that your non-GAAP EPS guidance excludes the $475 million in buybacks. Assuming that it does exclude it, how should we think about the timing of when those repurchases will happen? And then secondly, Michele, I was hoping to get more color on the comment you made about how this transaction would impact SG&A as Signet originates future receivables and sells them to CarVal, just what exactly that SG&A impact would represent and any thoughts on quantifying that.

Michele Santana -- Chief Financial Officer

Sure, Rick. Good morning. So, first, let me help you with your non-GAAP question. For sure, GAAP and non-GAAP embed the consideration of approximately $475 million worth of share repurchases. So, apologies if that was somehow confusing, but that is in there and we would anticipate that probably aligns -- since we'll be using the proceeds from the sale, will align with the closing which we had said we expect to occur in the second quarter.

In terms of giving color on the transaction and understanding the SG&A, I'll give you two reference points but then I'll give you some color. If you go on to page 14 of the release we put out this morning, we give you the impact for FY 19 and then we also give you the estimated impact for FY 20. There are a couple paragraphs that speak to the SG&A, the moving parts.

As you think about how we guided the impact for 19, $100 million to $115 million, and then if you look at the impact for FY 20 as it relates to phase two, primarily what's running through SG&A is what we refer to as the discount rate associated with the forward flow of these receivables. So, really, that discount rate, as we said, has two components. It's the discount rate for CarVal, who's going to be funding the receivables for us, but that also embeds the servicing costs for Genesis to service the receivables.

So, I think if you go back and look at that as well as slide 11 that we had on the presentation, that will give you the estimated impact that you're looking for.

Rick Patel -- Needham & Company -- Analyst

Okay. That's helpful. My second question -- as you close 200 doors this year, you noted that existing stores could potentially recapture 30% of those lost sales. I'm just trying to understand the assumption there and whether that's something you've seen in the past with store closures or whether that's an estimate and your level of confidence in being able to recapture those lost sales.

Virginia Drosos -- Chief Executive Officer

So, the 30% is our historical average from stores that we have closed previously. That's really without having a very robust sales retention program in place. So, what we've done is over the last several months, we've been testing and learning on several ideas which can help us to improve sales retention further.

So, one of those, for example, is announcing to our store staff and to our customers earlier that we'll be closing a store and helping to redirect them to another Signet banner that's nearby. Remember, about 75% of the time, it can even be across the hall.

We're also being much more robust in using our clienteling to reach out to customers of a closing store and offer them a one-time incentive to shop at our new store, so really guiding them there. Then the third thing is that we're actually transferring some of our sales associates from one store to the other so they bring their customers with them or we're creating a buddy system where they literally can walk their customers across the hall or down the mall to introduce them to a new sales associate in a nearby store who can help them.

So, we're moving from kind of an era of just letting it happen, which was the 30% and what we've modeled, to an era where we're being very intentional about trying to retain those sales.

Rick Patel -- Needham & Company -- Analyst

I understand. Thank you very much.

Operator

Your next question comes from the line of Brian Tunick with RBC. Your line is open.

Brian Tunick -- RBC Capital -- Analyst

Great. Thank you. Two quick ones for Michele and then maybe one for Gina. I guess, Michele, on other operating income line for 2019 now, can you maybe give us what you're assuming in your guidance -- and same thing with interest expense. And then Michele, on the quarterly viewpoint, clearly, the first half of the year last year had some nuances with shifts of Mother's Day and I think you reported a negative 12% comp for Q1. So, I just want to understand from a quarterly buildout how we should be thinking about maybe the first half this year with those timing shifts and then maybe other income and interest expense views.

And then Gina, I'm curious on your market share competitive landscape study. Maybe talk about bridal versus non-bridal competition and what you see has changed maybe since you've been at the company. Thank you very much.

Michele Santana -- Chief Financial Officer

Great, Brian. So, let me start with your first few questions. I think the first one related to the finance charge income for Fiscal Year 2019, if we can provide any color on what that would look like. As we say, once we close the phase two transaction, we no longer will have finance charge income reported. But clearly, there will be some level within the first half-year prior to closing. We're not separately guiding on that line item. I would reference you back to the number that we provided in terms of the operating impact is inclusive of that change.

Your second question on interest expense -- we will anticipate some reduction from our interest expense that we saw in FY 18 since we paid off the ABS facility of $600 million in the third quarter as part of the phase one transaction. So, you would anticipate some reduction. We're probably in the $35 million, $40 million or so of interest expense. And did you have one other question for me, Brian, or did I hit them all?

Brian Tunick -- RBC Capital -- Analyst

Yeah, I did. I did. It was really about the timing shift from last year, the Mother's Day shift. Q1, I think, was down 12% last year. Obviously, you're still having, it sounds like, credit issues, but should we be viewing the first quarter as an opportunity, the timing shift between Q1 and Q2, just anything like that on those issues.

Michele Santana -- Chief Financial Officer

Yeah. So, the first comment I'm going to say is we're not going to guide quarterly comps. When we think about calendar shifts, the way the comp calculation works because of the 53rd week, etc., it actually becomes normalized for the promotional or for the shift that we saw last year. So, I wouldn't say that there's probably any major callout for Q1 to be thinking of.

Virginia Drosos -- Chief Executive Officer

I'd just build on that to say we are still fixing our credit transition issues in Kay and Jared and we're just beginning to get some of these strategic initiatives in place. So, I would expect us to see gradual and incremental progress throughout the fiscal year.

And then let me answer your question on market share and what's changed since I've been here. In terms of market share, we have done a deep analysis on when we don't get a sale, where does it go. We're seeing that be different across bridal and fashion, as you correctly pointed out. So, in bridal, it's typically moving online, which, as you'll remember, is something the company didn't expect several years ago, but we think we have a competitive advantage to capture more of that over time with our R2Net visualization technology.

Also, sometimes to independent jewelers who are offering a very personalized relationship with customers, again, we think we have an opportunity to provide significantly more assortment to customers. I talked a bit about our Jared test, where we're able now in a number of our stores to provide a choice of over 100,000 diamonds to customers, which is something that is truly a competitive advantage.

And I think as we're using clienteling better and using the data analytics I talked about to track customer's journey, this is another place where we have a competitive advantage in our ability to create individualized relationships with customers both online and in-store in a very integrated way that we believe independent competition can't match.

On the fashion side of the equation, if we lose the sale, it's typically to department stores, which is part of why we're doing the pricing analysis and also an assortment analysis that I mentioned to see what are those products where we may be missing.

One of the things we're excited about are the proprietary brands that we are able to bring. So, Vera Wang is a great example. As we've moved into fashion on that brand, we've had great success, same with Disney as we introduced more fashion over the holidays. We saw both of those work very well at Zales.

So, again, small steps -- we're testing and learning on these things, but each one we're seeing some progress and we think we'll see more substantial growth drivers as we grow and scale those.

What's changed since I've been here? I would say the big answer to that is focus. When I think about what are the key growth drivers for us going forward, I think we've got all of our organization now rowing in the same direction, that it's all about positioning and providing clarity of the market position for Kay, Zales, Jared, and running that all the way through our marketing mix, our service mix, and our product mix.

It is product. It's being more aware of fashion and gifting as a big opportunity, not ever forsaking bridal, where we'll always have competitive advantage, but even being more attuned to trends on bridal like we were on solitaires for Zales over holiday and like we are now on Kay and Jared for solitaires as we're upping the inventory on those.

The third one I can't say enough is digital, how we're driving traffic in e-commerce and in stores with all the analytics that we're putting in place. And the fourth is innovation. We've got our company now set up to be able to deliver that with our new banner accountability structure and some of the new capabilities that we're building.

Operator

And your next question comes from the line of Scott Krasik with Buckingham Research. Your line is open.

Scott Krasik -- Buckingham Research Group -- Analyst

Hey, everyone. Thanks for taking my questions. One quick one and then two, I guess, tougher ones -- first, your original guidance, I think, for selling the phase one was that there would be a $50 million impact to operating profit and I guess $21 million has been recognized. So, has that changed at all?

Michele Santana -- Chief Financial Officer

So, if we go back in terms of we had guided, yeah, in a range $50 million, $55 million in terms of the phase one transaction on an annualized basis, which included the ADS taking on the prime receivables and also included a servicing element related to the non-prime receivables.

So, how we're guiding now is the totality of the transactions combined, which obviously still includes the ADS component, and the servicing is still there, although it's embedded in the discount rate that we'll be paying to CarVal. So, that $50 million, how I'd characterize it is I think you should look at in totality of how we guided the $100 million to $150 million impact for FY 19.

Scott Krasik -- Buckingham Research Group -- Analyst

Okay. Thanks. And then Gina, could you give us an update on how your employees are dealing with the credit sale process? You don't have to give us a comp for Valentine's Day, but did they handle it better? Did you get that transition from one to the progressive any better? And then Michele, how do you handle -- let's say the whole sub-prime market starts to get a little tighter. Do you have any flexibility to pay a little bit more to keep the sales going or is that totally in CarVal's hands? Thanks.

Virginia Drosos -- Chief Executive Officer

So, in terms of the credit transition issues that we experienced pretty much as soon as we outsourced on phase one, I will say we're making good progress, but we're not there yet. This is much more complex than I think we originally realized. But what we've done a great job of over the last number of months is really diagnosing what all the issues are and getting strong resources against fixing those. So, we're moving as fast as we can. We're beginning to see some good results on that, but this is something that I think is going to still impact us, not only in Q1, but for the rest of this fiscal year.

So, the project team has put in place a multi-month implementation horizon of new system enhancements that will get us first back to where we were in terms of the level of information and ease of being able to use credit at the store level and then secondly will take us beyond that to actually improve versus what we had before and make credit a much easier process than it ever was in the past.

So, one example of that is that our store personnel have been dealing with really three discreet systems, if you will -- the ADS prime system, the Genesis non-prime system, and then progressive leasing -- and it has not been as seamless a process of one financing offering as we want it to be or as we originally expected. We have some IT improvements coming online over the next couple of months which link all of those together to make it a significantly more seamless process.

Scott Krasik -- Buckingham Research Group -- Analyst

Good. And then just on the sub-primes...

Michele Santana -- Chief Financial Officer

Yeah. In terms of your question on the sub-primes -- as we announced this morning with the deal with CarVal, they're obligated to purchase that forward flow. Signet will continue to originate those accounts and will pay the MDR to CarVal over that period of time. That MDR rate is subject to change periodically. So, we'll have latitude and flexibility to address whatever the market condition might be.

Scott Krasik -- Buckingham Research Group -- Analyst

Thanks. Good luck.

Operator

We have no further questions at this time. Thank you, ladies and gentlemen. That concludes today's call. You may now disconnect.

Duration: 79 minutes

Call participants:

James Grant -- Vice President of Investor Relations 

Virginia Drosos -- Chief Executive Officer

Michele Santana -- Chief Financial Officer

Simeon Siegel -- Nomura Instinet -- Analyst

Ike Boruchow -- Wells Fargo -- Analyst

Oliver Chen -- Cowen and Company -- Analyst

Rick Patel -- Needham & Company -- Analyst

Brian Tunick -- RBC Capital -- Analyst

Scott Krasik -- Buckingham Research Group -- Analyst

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