Good day, everyone, and welcome to The Estée Lauder Companies' Fiscal 2016 Second Quarter Conference Call. Today's call is being recorded and webcast. For opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Dennis D'Andrea. Please go ahead, sir.

Good morning, everybody. On today's call, we have Fabrizio Freda, President and Chief Executive Officer, and Tracey Travis, Executive Vice President and Chief Financial Officer. Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC where you'll find factors that could cause actual results to differ materially from these forward-looking statements. To facilitate the discussion of our underlying business, our six-month and full year comparisons have been adjusted for the impact of the prior-year implementation of our Strategic Modernization Initiative, and the discussion of our financial results and our expectations are before restructuring and other charges. You can find reconciliations between GAAP and non-GAAP figures in our press release and on the Investor Relations section of our website. During the Q&A section, we ask that you please limit yourself to one question so we can respond to all of you within the time scheduled for this call. And I'll turn it over to Fabrizio now. Fabrizio Freda - President, Chief Executive Officer & Director: Thank you, Dennis, and good morning, everyone. We delivered strong results in our fiscal 2016, with sales growing 8% and earnings per share climbing 18% in constant currency before charges. This performance contributed to stellar first half results as constant currency sales also rose 8% and EPS was 17% higher before charges. Our company is helping to drive the momentum in global prestige beauty, which is resilient and growing despite significant economic volatility. We are strengthening our leadership by growing approximately twice as fast as the industry. Our success in this volatile environment has been driven by our broadly diversified business, powered by our multiple engines of growth, coupled with investment agility and strong execution. This was achieved thanks to our talented…

The floor is now open for questions. Our first question today comes from Steve Powers with UBS.

Great. Good morning. I wanted to pick up on the theme of agility, which was the center of the discussion we had a couple of months ago, and you began by calling it out again today. So really two questions, if I could, related it to. First, Fabrizio, can you maybe talk about some of the structural steps you've taken to enable that flexibility? Because I think there is some debate out there as to how much of what we are seeing is innate skill and a function of institutionalized discipline versus simply you benefiting from a spate of good luck that might eventually run out. That will be my first question. And then second, Tracey, can you talk about how the theme of agility relates to your ability to protect margins and profit? Because I am struck by the fact that here we are, you just beat the top end of your Q2 guidance by $0.14 and none of that is being passed through to your full year guidance to insulate the P&L from incremental FX pressure. And maybe that is prudent on your part. I am inclined to think that it is, but at the same time I just thought that with the top line strength, all the pricing levers you have, some of your productivity efforts that there would be more ability to be nimble and agile on that front as well and avoid the guide down. So I would just love your thoughts there too. Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: Okay. Now, on agility, as we discussed, so, first of all, we monitor the changes around the world. So the first institutional model is a continuous monitoring all the changes. Example, traveling corridor of tourist full, market growth in different levels.…

Your next question is from Dana Telsey with Telsey Advisory Group. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: Hello, Dana?

Hello. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: Hi.

Hello. Hi. Congratulations and wanted to get a better understanding of channel penetration, given that specialty multi is growing so fast. What does it mean for distribution of the business? What percentage could it account for over time? And how does that impact margins go forward? Thank you. Fabrizio Freda - President, Chief Executive Officer & Director: Okay. So, specialty multi is growing well globally. And what it means for our distribution that we are increasing distribution globally with our brand portfolio in specialty multi where appropriate. So you can expect a global increase of distribution gradually in this channel. However, we also learning how to win in this channel. So it's not only a distribution game, it's also a marketing game. This channel requires different marketing and selling techniques than the traditional department store core business that we have around the world. And so over time, I believe our organization is becoming better and better in partnering with specialty retailers around the world and learning how to grow our business in this channel better and better. The first thing is so you can expect that the percentage of our business in which channel will grow, but this is very different by country around the world depending on the penetration of this channel. So, I will not give frankly detail on percentages, also because they will be very much the results of mix by geographies rather than on specific advancement in a given brand or in a given country. Tracey, I don't know if you want to talk. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: No. I think you answered it well.

Your next question is from Wendy Nicholson with Citi Investment Research.

Hi. Could you give us a little bit more color on the Estée Edit? So it is going into 320 doors. How many SKUs is that? Can you give us some sense for how large a contribution to the revenue growth in the third quarter that will be? Is it 50 bps or whatever? Is it skincare and color or just color? And are there plans to expand it either to more Sephora doors or Ulta doors or any of the department doors as we go forward? And then, just following up on that, second of all, can you remind us or tell us; I don't think I heard it, Clinique and Estée Lauder, are you still expecting them as big brands to be up for fiscal 2016? Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: Yes. A lot of questions. So on Estée Edit – so, first of all, Estée Edit is exclusive to Sephora and will be launching Sephora brick and mortar and Sephora.com. And it's been developed also in strict collaboration with the Sephora teams. The Estée Edit is focused on makeup, but includes also some – how we call it, instant skincare benefit products. To us some core SKUs of Estée Lauder business. This brand will be supported by a very strong social media and very strong digital activities, really focused on the millennials and incorporation also in magazines that support the magazine and social media activity. So it will be a strong launch. In terms of the impact for the long term, obviously, it will depend from the success. We have a very strong belief that this will be a strong success. And in case of success, we assume it will be expanded to more Sephora doors over time, obviously. But we will…

Your next question is from Mark Astrachan with Stifel Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc.: Thanks and good morning, everybody. I wanted to ask about gross margins, so flat sequentially for the second straight quarter. Just curious, you talked about promotional activity in China and the press release talked about just general levels of promotional activity around the holiday period. How much did that impact gross margins in the quarter? Were there other drivers as well? As you sort of think longer term, is modest expansion still reasonable? And then, sort of related to all that, I guess just back to the previous question, so there is clearly going to be some mix effect, I would assume, from skincare. So, how does that factor in as well? Thank you. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: No. Great questions. So, promotion affected the margins slightly in the quarter. The bigger impact in terms of it being flat year-over-year was the category mix as you indicated. So tremendously strong growth in makeup and much softer growth in skincare and fragrance as well, so strong growth in fragrance. Those two factors do affect our category, or our gross profit margin mix. In terms of the future, yes, we do expect to see some modest improvement in gross profit margin over the next few years, not to the extent that we saw four years or five years ago, but certainly a continuation of modest improvement over the next few years.

Your next question is from Lauren Lieberman with Barclays Capital.

Great. Thanks. I was curious about the travel retail stepping up investments there because I feel like from an external perspective and some of your competitors, if anything, there is more concern about travel retail being a soft spot and I think even questions around whether we will see a resurgence when and if some of those wealthier emerging-market travelers start shopping again. And yet, you talked about increasing your investment in travel retail distribution. So, can you talk a little bit about that decision? Is it new airports? Is it new brands in some of your existing corridors? Just any color there would be great. Thank you. Fabrizio Freda - President, Chief Executive Officer & Director: Absolutely. So, first of all, we are applying to travel retail the same multiple engines of growth, diversification and investment agility philosophy that we are applying to the entire company. So as you said, travel retail has been having some outstanding momentum for years based on the Asian travelers' acceleration. And in this moment, the Asian dynamic, particularly the Hong Kong-Macau one, which is the worrying one and it's been soft, very soft in quarter two, we predicted the softness to stay in that part. But in reality, it's not the traffic which is declining. It is where consumers are going and how much they're shopping. So we are reacting to that. We are increasing brand distribution, yes. We are increasing penetration of airports where the traffic is going now, meaning more Europe and more other areas of Asia, for example. We are adjusting assortments to the new corridor, to the new traveling corridor. So give you an example. At the moment, Brazilians don't travel any more as much as they used to. And when they travel, they shop less. We adjust assortments.…

Your next question is from Joe Altobello with Raymond James. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Hi. Thanks. Good morning. Since we are talking about travel retail, I guess I will start there. Obviously, a big turnaround this quarter for your sales, although retail sales have been pretty good for the last few quarters. Is this an indication that the inventory adjustments we have seen in the past are now behind us or was this sort of a one-time blip in the quarter? And then secondly, on skincare, up 2% constant currency. Obviously, the market conditions of Hong Kong and China are not helping you, but how does that 2% compare to category growth overall? Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: So, I'll answer the first part of the question, which is basically, yes. We believe in this moment, as we said, the net-in and sellout retail seems to be aligned. Remember that the – part of this alignment that was caused by the MERS event in Korea, so we cannot eliminate the risk that more events like this will happen, or flus or things in other parts that will disrupt the relationship between net and retail in the future. But for the moment, I believe we are in a situation where they are realigned. And in absence of new disrupting event, hopefully, they will stay aligned. Tracey, you want to address... sorry. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: The skincare – I think the second question was skincare versus – the skincare growth in travel retail versus the category. Fabrizio Freda - President, Chief Executive Officer & Director: Oh, right. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: And as you might well know that our skincare travel retail business is heavily driven by Asia and Asian markets and Asian traveling consumers, so we did see softness in the Hong Kong and China part of our travel retail business that was largely related to skincare. We also saw some softness in Brazil that was more related to makeup. But for skincare, definitely, the Hong Kong/China softness impacted the category in travel retail. Yeah. Fabrizio Freda - President, Chief Executive Officer & Director: But I wanted again to stress what I said before that makeup is growing. The M•A•C brand travel retail trend is outstanding and the Joe Malone, for example, or the Tom Ford, so our high-end fragrances are really, really doing well.

Your next question is from Kevin Grundy with Jefferies.

Thanks. Good morning. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: Good morning.

So my question is on emerging markets, specifically, where you guys have delivered outstanding growth. What is your outlook for the year, broadly? And I am curious how that may have changed or may not have changed over the past three months to six months, given the difficult macro? And specifically, do you still think you can deliver this mid to high 20% growth that we have been accustomed to, just the fact the comparisons become more difficult in the third quarter? So any commentary there would be helpful. Thank you. Fabrizio Freda - President, Chief Executive Officer & Director: So the – sorry the question was the other markets, the other emerging markets? Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: Other emerging markets. Fabrizio Freda - President, Chief Executive Officer & Director: So, the other emerging markets, the China, that grew 30% in the first quarter grew 27% for us in the second quarter, and anyway this is three times the growth of these markets. So, we are growing market share by design in the emerging markets around the world from Mexico to Brazil, to Turkey, to South Africa, to India, to the Middle East. And in all these markets, we are growing double-digit. As we said, China is not in this group but when we say China, which is growing 9% and the rest of the emerging markets 27%. And I think we will continue. Actually as I said in my remarks, we plan to continue to invest for growth and beat market share in this market even if in some of them the currency issues is creating some economical issues in these markets. We will take the opportunity to further increase our market share in this moment, because also it can be done in a very efficient way and hopefully get the benefits of this when this market will go back to more normal economic growth. So it's a good momentum, our brands are loved, and the opportunities in front of us are enormous. And so if the question was, can this kind of growth be sustained? I believe, yes. This kind of growth can be sustained for the long time.

Your next question is from Ali Dibadj with Bernstein Research. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Hey, guys. I'm sorry. I have three questions, but they are relatively straightforward. One is, just going back to the agility, I want to better understand how you are organizationally structured to do that. So who is actually responsible for the dynamic resource allocation? Is it centralized? Is it decentralized? So some more color there would be interesting because it seems to really be helpful to you guys. Number two is – and it may relate to the first question or it may not, is your SG&A ex-advertising spend still seems relatively high here. So I'm trying to get a sense of how much opportunity you think there is there, especially perhaps as you become more nimble. Typically, that is fewer layers, fewer heads, et cetera, so some ideas there. And then, the third piece is something completely different, just about the fragrances. I guess two of the 12 fragrances that remain with P&G, Dolce & Gabbana and, I guess to a lesser extent, Christina Aguilera, and your interest in those, given what you are seeing trend wise in fragrances recently. Thanks. Sorry for the three. Fabrizio Freda - President, Chief Executive Officer & Director: So, I'll answer the first and the third, and let Tracey answer the second. So, how our methodology works. First of all, it is about how we are structured. So – but the short answer is centralized. This decision is pretty centralized. We have monthly meetings where the finance team with Tracey at the head and the group presidents, which are – we have two group presidents take care of the region, or they go to market, and two group presidents take care of the combination…

We have time for one more question, please, Caroline Levy with CLSA.

Thank you so much. Good morning. I was interested in just digging a little deeper into China, if I might. It used to be that prices were – I mean, I think at least 50% above, say, the United States. And I just wondered with some of the price changes that had gone into place, how much the price premium is in China today, on an average? And if you could just maybe walk around differentiating between Tier 1 cities, other cities, and obviously your online is doing very well, but where are the real pockets of weakness in China and what are the opportunities to change that even in the face of a soft consumer? Fabrizio Freda - President, Chief Executive Officer & Director: So, first of all, on pricing, in China, we have decreased the pricing, as you probably know, some time ago. And after the price decrease, the currency in China continues to devaluate. So in reality, the price differentials are much diminished on our brands. And I cannot tell you an average because it doesn't – but they are 10%, 15% in some cases, or 30%, 35% in other cases by SKU depending on many different dynamics. But they're much more reduced than they used to be in the past. So, the second part is where are the strengths, the weakness of China? Our strategy in China, like the one I explained for travel retail, is about diversification. So China is softer in this moment in the biggest skincare segment, is softer in the biggest cities; Shanghai, Beijing. Is – while China growth is very strong in Tier 2, Tier 3 cities, it's very strong online. It's very strong in smaller brands which are entering in areas in makeup and fragrances, which are fast-growing categories for this population. So again, it's about diversification. If you have multiple engines of growth, you can operate in new cities. You can operate online. You can operate in new growing segments like some makeup and some fragrance, high-end fragrance segments. There is an enormous amount of growth opportunity in China. And that is the diversification, multiple engine of growth work that we are doing also there and which are driving our results. Just to give you a number, our online business grew 80% in total in China during quarter two. 80%; 80. So it is a very strong acceleration, and that's what is the focus of our activity of creating the right engines of growth also in China for the long-term.

That concludes today's question-and-answer session. If you were unable to join for the entire call, a playback will be available at 1:00 p.m. Eastern Time today through February 19. To hear a recording of the call, please dial 855-859-2056; pass code 35830757. That concludes today's Estée Lauder Conference Call. I would like to thank you all for your participation and wish you all a good day.