Ladies and gentlemen, thank you for standing by. And welcome to Brilliant Earth Third Quarter Fiscal 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that Today's conference is being recorded. I would now like to hand the conference over to Allison Malkin of ICR. Thank you. Please, go ahead.

Thank you. Good morning, everyone. Thank you for joining us for our third quarter fiscal year 2021 conference call. Joining me today are Beth Gerstein, our Chief Executive Officer, and Jeff Kuo, our Chief Financial Officer. For this morning's call, Beth will begin with an overview of the company, our differentiation and mission, highlights of our third quarter financial and operational performance and the drivers of our future growth. Jeff will follow with more details on our third quarter financial results and introduce our guidance. Following this, the operator will begin the Q&A session with our presenters Beth and Jeff available to answer the questions you have for us today. Before we start, I would like to remind you that management will make certain remarks today that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a description of the risks that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. These forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise for publicly released results of any revision to these forward-looking statements, in light of new information or future events. Also, during this call, we will discuss both GAAP and non-GAAP financial measures. You will find additional information regarding these non GAAP financial measures and a reconciliation of these non GAAP to GAAP measures in today's earnings release, which is available at the investor relations section of our website at investors.brilliantearth.com. A live broadcast of this call is also available at the investor relations section of our website. With that, I'll turn the call over to Beth.

Thank you, Allison. Good morning, everyone. And thank you for joining us this morning. I am delighted to speak with you today and share our record third quarter performance highlighted by strength across our financial metrics and continued progress on our long term growth initiatives. The quarter also marked an exciting milestone in our history, as we completed our IPO. I want to thank our team for their hard work and dedication. I am proud of all that we have accomplished together and I'm excited about the many opportunities that lie ahead of us in the near and long term. Before I discuss our results, for those new to Brilliant Earth, let me first share our vision and approach the modernizing and transforming the jewelry industry. Brilliant Earth is a next-generation fine jeweler for millennial and Gen Z consumers. We offer a personalized, joyful omni-channel shopping experience, with a leading e-commerce platform and 14 showrooms across the United States. And always underlying this are the mission-driven values we were founded on; our commitment to sustainability, transparency, giving back and diversity, equity and inclusion. We are transforming the industry with our approach and are proud to have become a global leader in ethically sourced Fine Jewelry. Our unique business is highly profitable and well positioned to deliver sustained growth over the long-term. Let me share why Brilliant Earth is both compelling and incredibly hard to replicate. First, the Brilliant Earth brand. We've spent over a decade building a globally recognized premium jewelry brands with an authentic ESG focus and mission driven values. We're proud that these are the principles that we've founded the company on 16 years ago. We're always reminding ourselves that this is a journey that we need to continually work towards, and that our values are and always…

Thanks, Beth, and good morning, everyone. I'm also pleased to speak with you on our first earnings calls as a public company. I'll begin my discussion with an overview of our business and proceed with a review of our third quarter results. Following this, I'll share our outlook for fiscal year 2021. Our digitally native, technology-driven business model has allowed us to grow rapidly, profitably and in a capital efficient manner. I'd like to highlight some of the key distinguishing characteristics of our business. First, consistent robust top-line growth. Our revenue has grown at a CAGR of more than 30% since 2016. Strong gross margins and adjusted EBITDA. Our business has had strong, consistent and increasing gross margins. We generate positive net income, adjusted EBITDA and operating cash flow, in contrast to many other rapidly growing direct-to-consumer companies. An inventory light negative working capital model. We run our business in a capital efficient manner. We are paid in full in advance of product fulfillment and typically before we pay our vendors. This combined with our inventory returns of more than 10 times allows us to operate with negative working capital and generate strong operating cash flow conversion. Compelling showroom economics. Our showrooms also drive transformative customer acquisition economics in the metros where we open them, as Beth mentioned. This strong top-line uplift is coupled with a very CapEx and OpEx efficient model to drive robust showroom economics. We believe our omnichannel model gives us the ability to achieve broad coverage of the US market with a footprint of fewer than 100 showrooms. Now turning to our results. We're pleased to report strong third quarter performance highlighted by significant growth in sales, gross profit margin and adjusted EBITDA compared to the third quarter of fiscal 2020. I'll focus on adjusted non-GAAP…

As we look ahead, we are so excited about our business and expect our positive momentum to continue in the near and long-term. The holidays are an exciting and important time for us, and our team has done an incredible job preparing for the upcoming holiday search. We have a robust supply chain with significant redundancy. We also have minimal exposure to geographies that are experiencing major supply chain disruptions. And with our new product assortment, gifting and omnichannel experiences, we believe that we are well poised to succeed and thrive during the holiday quarter. We are very happy with our financial and operational performance in the third quarter. And we believe we can continue to build on our positive momentum in the fourth quarter and beyond. And now, I would like to turn the call over to the operator to begin the Q&A portion of the call.

Thank you. [Operator Instructions] Our first question comes from Michael Binetti with Credit Suisse. Your line is open.

Hey guys, congrats on a great quarter. And very nice to have you on a public call here; look forward to the story as we go here. I think the first thing that jumps out is a bit of a model question for Jeff. Jeff, the 700 basis points of gross margin, if we look at that, as we learned about the company through the IPO process, we didn't hear about gross margin with a five handle on it in over the planning horizon, maybe longer term. But I know you said look, let's not get over our skews and we expect some promotions in the fourth quarter, but is the 50 plus gross margin in third quarter something that you feel like we build on going forward into 2022 after we get pass that holiday quarter that you gave, and I know you said, I'm sure you're rank ordering some of the inputs there, but I think when we talked, you thought over the next few years there's about 100 basis points of opportunity on the gross margin from the pricing optimization, it seems like you got more than that already here. So maybe just a little bit more thinking on what drove the 700 and what you think you might get back, or what’s single point in time? And then aside from the gross margins maybe for best, I'm just curious on the Fine Jewelry, I know you're very excited about the category, I know it's a big opportunity for brands like yours it’s great to see that up over 100%. Maybe a little bit more what's working there, it sounds like the marketing is working well, but how much of it was from new skews versus skews that you already had in place, are they just getting better lift for marketing or anything like that? We’d love to hear a little bit more as it seems like a good opportunity for you guys?

Sure. Thanks, Michael. So I’ll take each of your questions. So in terms of what drove the gross margin, strongest gross margin performance in Q3, we described it as our one, the very strong customer affinity that we have that allows us to command premium prices. And then as you discuss the pricing engine that we have that incorporates proprietary technology enabled algorithms, and is very dynamic and lets our team continually test and refine pricing to optimize both revenue and gross margin. And we'd say in Q3, everything really came together ideally, and we, I would describe it as an out performance, even against our expectations in terms of how well everything worked together on those levers. We do continue to see long-term upside in gross margin, we’d say that in the going forward period, not to expect necessarily the same high level of gross margin out performance as we saw in Q3 as we don't want to assume the same, kind of, almost perfect set of circumstances that we saw in the quarter. But we do expect to continue delivering strong gross margin and do see long-term upside there. We, in terms of specifically on 2022, not yet providing guidance on 2022, we do expect to provide an outlook as part of our annual earnings call. But we do continue to see long-term upside potential in gross margin, but Q3 was a really perfect convergence of everything and out performance in some way for us?

Thanks Jeff.

Sure.

Hi, Michael, I just wanted to address your question on Fine Jewelry and thanks for the question. We were really excited to see the growth in the Fine Jewelry category and really the continued growth of the category, as Jeff mentioned, it's been growing for many quarters now. In terms of, of what's working, I think there's, several factors there. One, I think the fact that we have such strong customer connections, and that loyalty to the brand, I think is really important here. We've mentioned in the past that the brand really resonates with the giver, the receiver with all genders involved. And both of those genders are actually involved in the bridal purchase. And I think that, really, we see that, she is really excited to receive a Brilliant Earth's product. And that helps to drive repeat overall. So we do see a lift and repeat. We also see new customers coming to us for that experience. And I think that that customer connection is just so important. The showrooms also help to drive that. We see increased repeat, if you come into the showroom. And I think that as we build out our showrooms, that is going to be a bigger contributor. So the second thing I would say is the product assortment, I think is really working across all levels, both new skews and existing skews. I think some of the new skews are pretty early in terms of the release. So we're really excited to see, how they perform over holiday, but I do think that, that assortment is, key. And the fact that we have a data driven design, and that we really excel here, I think really positions us very well. And then, the third thing I think that's really important is, is that marketing and that the marketing efforts that we have are showing early promise as it relates to driving new customers as well as that repeat. So I think we're seeing strength in all areas. And the fact that we have that digital experience that we're really improving over time. And that new gifting experience, I think is also positioned us really well for holiday. So I know that there's, a lot of factors there. But I think it's really important that we're really checking on all sides.

All right, we hear it. Thanks a lot.

Thank you. Our next question comes from Matthew Ross with JPMorgan. Your line is open.

Great. Thanks and congrats on a really nice quarter.

Yes.

So, Beth, on your 35% revenue growth CAGR this quarter, and I think more than 30% implied guidance for the fourth quarter. How much would you attribute recent performance to an expanding industry TAM, given the accelerated penetration of Digital and the Fine Jewelry market? As opposed to company specific execution and market share gains? And what I know you've pointed out as a fragmented industry backdrop?

I think -- thanks for the question. And it's nice to talk about. So what I would say is that really, I think there's, a few different factors. You mentioned the fact that ecommerce is experiencing fast growth I think that really plays to our strengths and as a digital first company here. The fact that branded remains a really big opportunity. It's the fastest growing segment within Fine Jewelry and the Jewelry Industry, I think is really important for us. And the fact that we represent a really strong-brand, a premium-brand that really resonates with that younger consumer, I think is really going to be instrumental to the growth and has been in the past as well. And then, I think the fact that we are really small relative to that $300 billion market is really important. We're really disruptors here, we continue to gain share within this market, given that differentiated business model that we talked about. So really, I think it's actually all the factors. I think jewelry is also expanding. Weddings are expected to have the highest levels that they've had in decades. And I think that also has contributed to the growth.

Great answer. Jeff, maybe as a follow-up. On your long-term, EBITDA margin target 15% to 20% plus, I guess two questions. Help us to think about linearity, multi-year beyond this year on that margin target? And then how high is the plus on that 15% to 20% plus, in your view?

Thanks. And could I confirm on the first part of your question, were you asking about the linearity on the EBITDA target or another compound?

Yes. EBITDA target, just how best to think about it multi-year in terms of it being linear from the exiting -- exit point of this year to the 15% to 20% and then the 15% to 20% plus, what -- how do you view the potential of the plus?

Yes, so in terms of linearity, you know, we may be hard to project, necessarily on a year-over-year basis. What I can say is that we do expect because that there's upside -- upside potential, both in terms of growing gross margin with some of the factors that we've described, such as our premium brand positioning, the pricing engine, and other procurement efficiencies as well as with SG&A leverage as we grow, which we expect to be able to drive leverage in the longer term model in marketing as well as employee costs and other G&A. So I would say that, while I can't necessarily speculate it, very precisely on the exact linearity, that there is upside potential in the different layers, the different layers of our cost structure. And we're pleased with our strong performance and continue to see upside in the different areas of our costs. And then, could you -- I'm sorry, can you repeat the second part of your question one more time?

So your long-term EBITDA margin target is 15% to 20% plus, how high could the plus be?

Yes, I would say that there is -- I would say that there is some meaningful upside to their -- can necessarily point to a specific number, but I would say that our stroke approach to modeling has been to be prudent in terms of how we think about our targets. And we think that the engines of margin growth, if you will, that we have all have long-term legs, all have delivered, delivered historically, and we think that there is -- there's potential as we grow all of our strategic initiatives to exceed that, but I can't point to a specific number.

That's great color. Best of luck.

Thank you.

Thank you. Our next question comes from Randy Konik with Jeffries. Your line is open.

Yes, great. Good morning. Thanks a lot. I really appreciate allowing me to ask my question. So a couple things. One, I guess first Jeff, will be really instructive is if you give us some perspective on the sub pricing optimization engine. You talk about granularity, you talk about the dynamic, how dynamic it is, can you give us a little bit more detail on the how granular the engine gets? How dynamic does the engine get in terms of giving us perspective on how your team utilizes this engine? Not to absolutely know about it, but want to understand, how often things are changing. And then if you the -- learnings from this engine can you -- can you see more improved permanence and merchandise margin improvement over time, because of the early learnings or the productivity of the engine getting better and better. Thanks.

Sure. Yes. So this includes price optimization engine I can provide maybe just a bit of color. So this is -- it's something that we've developed in house over many years. And it's -- so it's proprietary to us. It's very data driven, you know, relies on that continual input of data that we see in terms of product sales, consumer behavior, and it does cover many for different products. To how dynamic and granular it is, it can get quite granular down to the product level, in terms of the level of precision that allows our teams to be making decisions. And it's dynamic in terms of, it's something that the team can look at on a daily basis to see different trends in products and how we should be adapting accordingly to be thinking about both our top line and our gross margins. So it's something that is proprietary, very data driven, continually used by our team. And it's also of course, not a static tool. It's something that as we look at look at performance, we can continue to refine the input and the operations of that engine. So it's -- it's a very powerful tool for us and really a differentiator for us. And we do believe that it has led to structural improvements in our in our gross margin structure and we’ll continue to be able to drive long-term accretion to gross margin.

Super helpful. Thanks.

And what I would add to that is one of the learnings that we have is because we have unique offerings. So you know, we've mentioned in the past that how two thirds of our products are proprietary to us in terms of that design. And you know, you think about offerings, like blockchain, for example, these are unique offerings to us, I think that because of that, we're able to command that higher prices. And that's something that we've learned over time, and that we've been able to adjust in a dynamic fashion.

Super, helpful. And now I want to kind of go after it. So we think about the quarter. You know, a lot of it seems like the gross margin expansion is driven by this price optimization, and you didn't get a lot of benefit from fine jewelry. Next, going up we’re still in the early stage. So maybe give us some perspective on where is fine jewelry penetration right now? Where was it last year? And where do you think it sits in the next we'll say five years from now? Where can that penetration go? And then finally, just remind us, the gross margin differential between fine and engaging tool. Thanks, guys.

So maybe I can start that. We're not providing that particular metric. But what I can say is that it's still remains relatively small, though, we think that it's going to increase, certainly as we continue to improve our offering, and I think we're into the journey in that respect. Jeff, do you want to comment on the second part?

Yes, in regards to the gross margin potential. So it's -- it's not something that I plan to break out in terms of product level gross margins, we can say that it is this -- this group product is definitely one that's accretive to our gross margins and higher than those for the business as a whole. And if you look at players in the space that are much more that are much more weighted towards fine jewelry, that there's a lot of gross margin accretion potential as fine jewelry becomes a larger and larger part of our business.

The other thing I would mention is we were really excited to see gross margin improvement across the categories including fine jewelry, so it will be increases, gross margin increases. I think all of that is trending upward.

Thanks, guys.

Thank you.

Our next question comes from Oliver Chen with Cowen. Your line is open.

Hi, thank you. Beth one of the distinguishing factors is ESG, a Brilliant Earth, as you think about the consumer and the younger as well as your broader consumer, which factors of sustainability and other efforts that you're making are really in demand from the customer and which ones that they appreciate most. And then Jeff and Beth, best on the Lab grown opportunity, do you have any thoughts around how that may impact AOB and/or margins over time and some key things we should monitor as it seems like also a big opportunity where Brilliant Earth is well-positioned? Thank you.

Thanks Oliver. So, in terms of ESG, obviously, it's an integral part of our company, we're really founded based on these values and it's the DNA of the company. In terms of which factors, I really think that it's the holistic offering. I think the fact that our customers understand the importance to us and how integral it is to our company, to our offerings. The fact that we're continually messaging on it, whether it's the recycled content of our metals, that new fair mine collection, it's really top of mind for us. And I think it just comes across in a really authentic way and our customers just know that we're doing work on their behalf and that we're a trusted ESG retailer for them. So, I think that that is really important. But I also think that sustainability right now is table stakes. I think that really you need to have a complete offering. So, sustainability is very important, but I think you need to complement it. And the fact that we have that design that overall experience, both digital and in showroom that's really joyful. All of those, I think work together in a really seamless way. And I think all of that is important as the -- really the brand to the customer and that's really where we are. And in terms of your second question on Lab, we don't, we don't disclose -- talk about that specific metric and break down subcategories in that way. But what I can say is that overall, we've seen expanding AOBs within engagement rings, and that's really how we think about it as customers come to us for the engagement ring. They -- we'll start with the design, they will balance all of the different characteristics, whether it's slab and natural, the foresees, and frankly, it's a very complex process. And we're -- we want to guide them into what they're looking for. We're agnostic in terms of which they decide, but we have seen that AOB will be has increased over time as we're seeing as this premium brand.

Okay. And then your free cash flow conversion rate is really outstanding as well. As you're extending to find and maximize LTV as well as think more holistically about your offering. What do you think about the inventory management on that side of the business and how you'll pursue it? And any things we should think about on a longer term basis with working capital? Thank you.

Jeff, do you want to?

Yes. So I can talk to that. I think our free cash flow conversion in or negative silicon capital model are definitely differentiators for us as a business, combined a few different factors, such as our -- getting paid in full view from our customers before we're fulfilling, keeping a light inventory, typically getting paid before we pay our vendors. So it's definitely a powerful tool for us. And we believe that we will continue to operate in a very working capital efficient manner. I would say, some things I would point to is like, as we continue to introduce new products, we’re able to do this in a very data driven way. We don't need to bring on a lot of inventory to stock, hundreds of 1000s of stores, and we were able to test and iterate very, very efficiently. We have a very strong online business. And then our relationships with our suppliers and our differentiated ability to produce in a quick turnaround fashion, that's a capability that we've developed over many years, involves a lot of technological integrations with our supply chain and allows us to really develop and produce in a very agile and inventory like fashion. So, I think that going forward, we continue to expect to operate in a very working capital efficient model as this has been and we think will be -- continue to be a differentiator for us.

Thank you. Best regards.

Thanks.

Our next question comes from Ed Yruma with KeyBanc. Your line is open.

Hey, good morning, guys, and congrats on the IPO. First, a quick question around inflation, I know you guys don't carry the same balance sheet risks that a traditional jeweler might have, given some time factoring, but talk about, if gold prices start to move, and we noted that raw diamond prices started to move inside of the first quarter, what's the implications for margins? Did you benefit from that in the quarter and how you think about that, if we do see this inflationary pressures longer term? And then as a follow up on the fashion jewelry side, any insight into how the marketplace is doing, specifically to Coryy? Thank you.

Great. I can take that. And maybe I'll start with the second one. So, in terms of our to Corey partnership, we're really pleased with the performance there. I think that it shows that we really are a destination for the younger consumer. And I think having a curated offering, where we collaborate with other brands, and we’re selected there. I think the fact that we had that IPO really increases our visibility. And so, we're going to have increased opportunity there, but that collection has been performing well. And we think that there's future opportunity there, both with to Corey as well as other partners. In terms of the first part, I think that, as it relates to gold pricing and diamonds that the real beauty, I think of the model is just the fact that, we're able to adjust dynamically our prices. So, as we see gold pricing, increasing and decreasing, and keep in mind, we also offer platinum. And so, there's a lot of dynamics in play there. We are able to adjust dynamically, that pricing engine is really powerful. And so, in the past, we have been able to maintain our margins, even in the face of increasing costs. And I think 2020 was a great example of this. Our margins continued to expand even as gold prices increased. So, really, I think -- we're if -- we're very well positioned, regardless of what happens in terms of the input prices.

Great. Thanks so much.

Thank you. Our next question comes from Erinn Murphy with Piper Sandler. Your line is open.

Great. Thank you. Good morning. Beth, my question is for you around the iOS privacy changes, a lot of DTC brands have seen challenges over the last six months. Can you just drill down on that topic? How are you navigating this for Brilliant Earth? And then have you seen any erosion in advertising metrics as far as a result?

Great. So marketing, the marketing increase that we had was intentional it was part of our overall strategy. And our digital marketing efforts continue to remain efficient. And I think, there's a few points that are worth mentioning. First, organic referrals and word of mouth for us are strong contributors to deriving new customers, two-thirds of our customers are influenced by word of mouth, I think that is an important factor. Second, the approach we have to digital advertising is diversified. It's multi-channel. And it's not overly concentrated in any specific channels such as Facebook. And I think that has served as well it in the face of some of the changes that have happened. Third, we do have a very data driven, fanatic approach. And we're continually refining and optimizing across our digital channels, because Jewelry is a very considered purchase. Many years ago, we've developed capabilities to be able to optimize across multiple actions along the customer journey. I think this approach has really been robust against the changes in the digital landscape, including some of the recent privacy changes that you mentioned with Apple. And then, finally, the way we think about it is -- is really have a strong opportunity to strategically invest in marketing to be able to build brand awareness, to support the brand momentum that we've seen, as well as support future growth initiatives, including Fine Jewelry. So the bottom line is, I think that, we have a really robust offering in the face of some of the changes that we've seen.

Great. That's super helpful. Thank you. And then maybe just a different take on the gross margin Jeff for you. I guess, historically, if we look back at the model, Q4 has been a higher gross margin quarter on a linear basis versus Q3. Is there anything different about this fourth quarter that would prevent that from being the case? Thank you.

Yes. I would say is that, with respect with respect to Q4, I mean, I think that is, is a time that, their competitive holiday dynamics in play, I would say probably think about it that, that we did have a very strong. We did have that very strong outperformance in Q3, with the convergence of a lot -- a lot of factors coming together in an ideal -- ideal fashion. I think going into -- going into Q4, we may not have that same convergence of perfect, perfect factors. We, then there are competitive holiday dynamics. We do expect to have a strong gross margin performance in Q4. And then I think our dynamic engine will allow us to continue to adapt to that environment that we see in the holiday. And so we expect to maintain our premium pricing. But there's -- less potential for margin expansion in the holiday season.

Okay. So still looking for expansion year-on-year, but potentially not to the level that would get it towards that 50% plus. Is that am I interpreting or kind of thought process correctly?

Yes, I think that, we would expect to deliver kind of, similar better gross margin than we have historically in the fourth quarter, but unlike the not necessarily the same….

Okay.

Level of outperformance as we saw in Q3.

Thank you.

Thank you. Our last question comes from Telsey with Telsey Advisory Group. Your line is open.

Good morning, everyone and congratulations on the nice results. As you think about some of the partnerships that you've engaged with recently like Tacori? How is that performing? Should we see more partnerships like that as you move forward? And then on the new showrooms that have been opening. Any difference in the results that you've seen from prior showrooms? And given availability of real estate, does anything change in terms of number of new showroom expected to open? Thank you.

Great. Well, I'll start with the first part of the question. In terms of the partnerships with Tacori, as I mentioned, I think that -- it performed really well. I think it's proven itself that it's a nice aspect to our model. And we do think that there is room to add additional partnerships, as well as to expand that Tacori partnerships. So look for more in the future there. In terms of the showrooms -- as you mentioned on the call, we continue to have strong conviction in our omnichannel model. We are really encouraged by the recent performance with our newest launches, and certainly excited to have those new team members in those locations as well. Jeff has mentioned in his remarks that we expect to reach under 100 showrooms that provides really nice U.S. coverage. And we do expect to reach out over the next several years. So nothing that has really changed there. In the near-term, we really feel confident about the robust pipeline that we've developed across many different Metro markets. And I think the strength of the brand, the increased brand visibility that we've had has really been beneficial in influencing some of the compelling real estate opportunities that we're seeing, that's increasingly available to us And we really have an attractive demographic for some of these centers. And as we continue to look at a variety of different retail formats, I think that also helps to complement the offering. So really, I think feeling very positive about that omnichannel strategy. And will continue to add and complement the digital experience. And I think the omnichannel experience that we're developing is really going to be, key in this category. And I think that's what we're building towards. And we're definitely on the path.

Thank you.

Thank you. And I'm currently showing no questions at this time, I like turn the call back over to Beth Gerstein for closing remarks.

Great. So thank you, everyone, for taking the time to speak with us. We are very excited we have completed such a successful quarter. Our first as a newly public company, and we're excited about the elevator platform we have now to continue modernizing and transforming the Jewelry Industry, pursuing our mission and to being the fine Jeweler of choice for millennial and Gen Z Jewelry consumers. I wish each of you a happy holiday and New Year. And look forward to speaking with many of you at upcoming Investor Meetings, including the JPM Conference on November 15th.

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