Good day, everyone, and welcome to The Estée Lauder Companies' Fiscal 2016 Third Quarter Conference Call. Today's call is being recorded and webcasted. 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, everyone. On today's call are Fabrizio Freda, President and Chief Executive Officer; and Tracey Travis, Executive Vice President and Chief Financial Officer. Fabrizio and Tracey will review our third quarter results and full-year outlook and then discuss the new initiative we announced this morning called Leading Beauty Forward. 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 nine-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 expectations are before restructuring and other charges. You can find the reconciliations between GAAP and non-GAAP figures in our press release and on the Investor Relations section of our website. During the Q&A session, 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 now, I'd like to turn the call over to Fabrizio. Fabrizio Freda - President, Chief Executive Officer & Director: Thank you, Dennis, and good morning, everyone. In the third quarter, we delivered solid performance with strong gains, particularly from our makeup category and international business. In constant currency, sales grew 6% and earnings per share rose 5%, before charges, to $0.76. Based on our results to-date, we are on track to achieve our sales and earnings guidance for the full fiscal year, excluding charges. We continue to benefit from a highly diversified business with multiple engines of growth and the flexibility to move investment quickly to support areas that provide the best returns. We…

The floor is now open for questions. Our first question today comes from Nik Modi from RBC Capital Markets.

Hey. Good morning, everyone. So, Fabrizio, I had a question on innovation. If you are to characterize the pipeline going back five years, three years, and then today, how would you explain it to us? And I'm really coming at this from a point of it takes time usually for the pipeline to get filled versus the product actually hitting the marketplace. So, I just wanted to get some context on how you feel about the pipeline today versus maybe five years ago. Fabrizio Freda - President, Chief Executive Officer & Director: I feel very strong. I think our pipeline versus five years ago, I would say, is almost doubled in terms of the power of extra business. We have a very clear internal process where we look for sufficiency of our innovation pipeline versus our next three years, five years goals. And I can tell you, we consider our innovation pipeline more than sufficient. Now the characteristic of the pipeline has changed in some way also. First of all, today the pipeline is much richer in makeup because as you heard, the makeup category is in this moment a fast-growing in the world and also very fast changing. So, there is some outstanding innovation pipeline in makeup, and the makeup pipelines tends to be done by many smaller products versus few very big products, which is more typical of the skin care pipeline. So, that's a change and we have adjusted to that change. Our skin care pipeline is strong; but again, within skin care, the pipeline is more focused on what we call instant benefit skin care versus the long-term anti-aging, and that's changed. And third, but probably very, very important, our pipeline in the fragrance business is changed. It is done by much more high-end luxury artisanal fragrances which will allow us, in my opinion, to continue gaining market share in the high-end profitable fragrance business. And finally, in hair care, our pipeline, particularly in the styling, more profitable part of hair care, is stronger than ever. So in that, I feel positive about the sufficiency of the pipeline, and also I feel positive by the fit of our pipeline to the future of the markets as identified by our compass.

Our next question is from Dara Mohsenian from Morgan Stanley. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Hi. Obviously, you're seeing very strong growth in makeup, as is the category. Can you discuss how long you think this cycle of makeup category strength can continue as you look out over the next few years? And what's driving the category growth? And then on the e-commerce side, how sustainable do you think the strong growth is that you're seeing on that business? You were kind of earlier than a lot of peers in focusing resources there on that channel. So, I guess, is there any risk going forward that competitors start to catch up with you? Or do you think you're widening your gap versus peers in terms of the way you manage the business? Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: Yeah, on makeup, first of all, I believe this is a long-term trend. The makeup category is growing, driven by several aspects. The first one is that the Asian consumer, the Asian women are becoming more avid users of makeup. And so this is an enormous amount of growth, potentially, that will develop – it is developing now and will continue to develop in the next years. The second big trend is that the Millennials are, on average, using more makeup than the previous generation, so there is an increase of consumption per individual in all markets, including developed markets. And this is a long-term trend, also because what it is driving, the more usage of makeup, is what historically has been our strength in our business model, which is education and customization. But now the education is available also via online, exactly our e-commerce activities, and via social media, which is booming the…

Our next question is from Olivia Tong from Bank of America.

Hey. Good morning. First, Fabrizio, I want to go back – get into advertising a little bit for this particular quarter. Because coming into the quarter, you probably planned to increase A&P support in the businesses of course to continue driving sales and support some of the product launches. But the sales growth did decelerate a little bit, probably a little bit more than people had expected. So, can you help with some – provide a little bit more insight in how you go about making decisions on A&P spend? Because that line does continue to move around a fair bit quarter-to-quarter. And then also in terms of the Chinese tourism, do you think you're making up the shortfall in Hong Kong from lack of Chinese tourists in other areas? Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: So, first of all, in terms of the sales for the quarter, we continue to believe that we will deliver the fiscal year in the 7% to 8% range, which means if you look at the numbers that we assume actually an acceleration of the sales trend in the fourth quarter. So, the sales by quarter depend a lot by initiatives, launches, and what happens in specific markets. And the way we take A&P decisions is really, we base the decision off if we believe there is enough rate of return on that investment in that moment. For example, in quarter three, the things that we saw going less strong than we expected was Hong Kong, and so when we add markets that decrease their growth significantly, we do decrease our spending there and we keep the spending for better moments where there is better market traction. So, what you're seeing in the third quarter, very specifically, is reduced spending…

Our next question is from Bill Schmitz from Deutsche Bank.

Hi. Good morning. Fabrizio Freda - President, Chief Executive Officer & Director: Good morning. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: Good morning.

Can you just talk about some of the U.S. NPD trends? Because it's not just Estée Lauder, but the bigger brands like still continue to lose market share from some of the smaller niche brands. So, is there a strategy in place to find a way to kind of outflank them? And then maybe most – I don't want to say problematic, but it seems like M•A•C is declining quite a bit in the U.S. – I shouldn't say quite a bit, but it's declining. So, can you just talk about the M•A•C U.S. versus international split and if the international growth can offset some of the softness in the U.S.? Fabrizio Freda - President, Chief Executive Officer & Director: Yeah, starting for M•A•C, M•A•C is really doing very, very well internationally. M•A•C is growing strong double-digits in every single market of the world and is – the temporary flattening of the retail trend in the U.S. is being more than offset by a booming international business. The temporary flattening of the U.S. trend is driven by two aspects. One, as I said, is the fact that the lower traffic in mid-tier department store is one of the driver. And the other is tourists. I mean, M•A•C business is driven by tourists of the world that visit the U.S. in a significant way, because the brand is very, very popular around the world. So, the important decrease of tourists, particularly Brazilians and Russian, as I said, have temporarily limited the retail of M•A•C also because these stores were very strong in the base period that we are comparing this to. But overall, in total, M•A•C continues to be absolutely one of the strong drivers of our success around the world, and we have programs to ensure that this will continue.…

Our next question is from John Faucher from JPMorgan.

Thanks. Good morning. If we take a look at your margin performance over the past couple of years, it seems to have moderated a little bit here in terms of the year-over-year increases, and I realize there's FX as well as the acquisition impact in that. But, it really seems to have slowed, particularly since the end of the 2010 to 2013 restructuring program. And so, I guess as we look at your new restructuring program, is that a sign, maybe, that the incremental margins on organic revenue growth is lower than what it was? And I guess if that's the case, there's been a discussion and you guys have talked about the costs of growth not having gone higher, but the math would seem to indicate that again, maybe that incremental margin isn't as high as it had been historically. Any thoughts on that? Fabrizio Freda - President, Chief Executive Officer & Director: Yeah, first of all, I'll let Tracey give more answer. But, first of all to say that this fiscal year we have 50 points, the half a margin point, just affected by currency. And 30 basis points just by acquisitions. So, 80 are affected by currency and acquisitions. So yes, that's a new fact in the margin evolution. But then the combination of our business and cost savings is actually producing the power to continue growing margin. Obviously, if currency and acquisition will stop affecting it negatively, this would be more visible. The other thing is there is also a mix change in our business. So, we have more freestanding stores and we have more makeup versus skin care that also are changing the impact of mix in our business. So, we need to continue to deliver our growth, we need to become more efficient and…

Our next question is from Lauren Wolff from Piper Jaffray. Lauren Wolff, your line is open. Lauren M. Wolff - Piper Jaffray & Co. (Broker): Apologizes. Thanks for taking our questions. We have a couple for you this morning. And I'm calling on behalf of Steph Wissink. The first question we have I guess we have seen an ad spend shift into Q4 related to Estée and Clinique. Is that tied to specific product line introductions or in response to other channel plans? And then secondarily, just examples of speed and agility, is that largely in the product development and marketing pipeline? Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: So, I think on the A&P, Fabrizio did speak with that – speak to that a bit earlier, Lauren. It is tied somewhat to some of the launches that we are expecting from particularly Estée Lauder and Clinique in the fourth quarter. It's also tied a bit to some stores that slipped in terms of store openings from Q3 into Q4, primarily related to M•A•C; so those are the primary drivers. And as Fabrizio mentioned also previously, the slowdown in Hong Kong and a couple of other markets slowdown, North America, we've seen the last few years post-holiday traffic has been quite slow and it has taken longer to start to see traffic flow back into particularly the department store channel and particularly the mid-tier department store channel. So, those factors are what caused us to think that the A&P spend that we had initially planned for Q3 would be better spent in Q4.

Our next question is from Javier Escalante from Consumer Edge Research.

Hello, everyone. My question has to do with your expansion of freestanding stores in the third quarter. My understanding is that you had opened 90 out of the 250 target that you set up for the year by the second quarter. 90 by the second quarter. So, if you can tell us how many stores you opened in the third quarter, in what regions, what was the contribution to growth, and whether – what is slotted for Q4 is what it's going to drive the re-acceleration of the top line growth? Thank you. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: So Javier, we opened net 25 stores in the third quarter, a little bit less than what we had expected, and as I just mentioned, more of those will shift to the fourth quarter. We don't comment on the incremental sales by channel related to growth from our different channel activity outside of travel retail and online. But certainly the incremental stores will contribute some to the growth in the fourth quarter. A pickup in performance in the U.S. is also expected to drive more of the fourth quarter growth as well and in particular our bigger brands, Estée Lauder and Clinique, in addition to M•A•C.

Our next question is from Caroline Levy from CLSA.

Well, thanks so much. Good morning. Two questions I have to ask on China, of course. If you could talk a little bit about the shift in channels. And obviously, online is doing really well, but could you talk about your strategy within department stores? How many freestanding stores you're opening beyond the Tier 1 cities and whether over time, you think freestanding stores will be throughout the country or online? How big could online get there? My second question is simply on innovation in skin. I'm just wondering, if you're changing the way you look at that innovation, given the challenges to the growth in the category now? Fabrizio Freda - President, Chief Executive Officer & Director: Yeah. So on China, we have been growing 5% our net sales this quarter and 8% our retail sales. So retail sales, 8% in China is good, is strong, and the profile of our growth, first of all by brand, is that all brands are growing double-digit, with the exception of our Estée Lauder brand, which is the biggest brand in that profile. So, first of all, even before distribution we are diversifying our brand portfolio that goes with the distribution, because different brands are in different distribution. And we are diversifying geographically, because as I explained, our timing was through also this quarter, we are opening new cities and new geographical area of China. We opened one new city, we opened 13 new doors just in the quarter three. In term of the channels, online is doing well and will continue to do well. Today, we have now 10% of our business by now in online in China, versus 12% in the U.S. So, China is catching up with the U.S. at the speed of light. We are opening more freestanding…

Our next question is from Joe Altobello from Raymond James. Joseph Nicholas Altobello - Raymond James & Associates, Inc.: Hey. Thank you. Good morning. First question on Hong Kong. Fabrizio, you mentioned earlier that you think that's going to be a temporary phenomenon, but it's been going on now for five or six quarters. Is there anything that you're seeing that leads you to believe that that should get better anytime soon or is that going to be with us well into fiscal 2017? And then shifting gears to skin care a little bit. You just mentioned the new reality in that category. Is there anything that could be done to re-accelerate the category? Or is that going to be demographically challenged for some time? Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: Yeah, okay. On Hong Kong, so I don't know what I don't know. I'm saying it's temporary because Hong Kong is a gray market with an enormous internal demand of local consumers. And it's a very attractive market for Chinese, in general. So, it has been declining substantially in the last period. I believe at a certain moment it will stabilize. I personally don't have the expectation that we'll go back to big growth fast, but I do have the expectation that this trend will stabilize. And it will stabilize also because the local consumption is actually continuing to increase, and so is the mix between local consumption and tourist, particularly Chinese tourists, that at a certain moment will stabilize. And I just came from Hong Kong. As I said in my prepared remarks, I was in Asia last week, I visited Hong Kong and Korea, and the other thing that gave me confidence is the strength of our team there, which is managing this…

Our next question is from Lauren Lieberman from Barclays.

Great. Thank you. I just had one clarifying question on the door openings and second on the investment spending. So first on the doors, just I wanted to confirm that 250 doors is still the right number for this year. So there would be 135 doors opening roughly in the fourth quarter? And then secondly, if that's the case, that would actually suggest that a lot of the step-up in spending budgeted for this year is really affiliated with those doors more so than necessarily a specific step-up in advertising. So, if you'd comment on that, it's great. And within the AMS line, I know it's not reported quarterly, but on a full-year basis, if you could talk about how that mix has maybe shifted over time. If there is some reduction in some buckets, like sampling or merchandising, with less reliance on department stores, but an increase in the kind of core advertising dollars, that would be really helpful. Thank you. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: So, Lauren, I'll start, and then I'll let Fabrizio add. In terms of the door openings, you're right, approximately 130 doors in the fourth quarter, possibly a little bit less. And yes, we do see and expect to see a step-up in our store-related expenses, so selling expenses, store ops expenses related to many of those store openings. We also do, though, however, expect to see a step-up in A&P expense related to some of the programs that we are supporting in the fourth quarter, and it runs the gamut in terms of the spend. Certainly there is some sampling that's involved in that A&P spend, so we did talk about the fact that promotion was down in the third quarter. We do expect it to be…

That concludes today's question-and-answer session. If you were unable to join for the entire call, a play back will be available at 1:00 p.m. Eastern Time today through May 17. To hear a recording of the call, please dial 855-859-2056, passcode number 91609680. 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.