Good morning, and thank you for holding. Welcome to Rent-A-Center’s Second Quarter Earnings Conference Call. As a reminder, this conference is being recorded, Thursday, August 5, 2021. Your speakers for today are Mr. Mitch Fadel, Chief Executive Officer of Rent-A-Center; Maureen Short, Chief Financial Officer; Jason Hogg, Executive Vice President of Acima; Anthony Blasquez, Executive Vice President, Rent-A-Center Business; and Brendan Metrano, Vice President of Investor Relations. I would now like to turn the conference over to Mr. Metrano. Please go ahead, sir.

Thank you, Demaria. Good morning, and thank you all for joining the Rent-A-Center team to discuss our results for the second quarter of 2021. Hopefully you’ve had an opportunity to review our earnings release, which was distributed after the market closed yesterday. The release and all related materials, including a link to the live webcasts are available on our website at investor.rentacenter.com. As a reminder, some of the statements provided on this call are forward-looking statements, which are subject to many factors that could cause actual results to differ materially and adversely from our expectations. These factors are described in our earnings release issued yesterday as well as in the company’s SEC filings. Rent-A-Center undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. This call will also include references to non-GAAP financial measures. Please refer to our second quarter earnings release, which can be found on our website, for a description of the non-GAAP financial measures and the reconciliations to the most comparable GAAP financial measures. With that, I’ll turn the call over to Mitch.

Thank you, Brendan. For starters, I’d like to introduce Brendan Metrano, who recently joined us as the Head, Investor Relations. Brendan comes to us from Western Union where he also headed investor relations. And prior to that, he was a sell side analyst for over a decade. So he brings a strong understanding of equity markets and the investment community, especially in payments and fintech. So welcome, Brendan. And thank you and good morning, everyone. And thank you again for joining us this morning to discuss our second quarter results. If you’ve hopefully seen in our press release yesterday afternoon, our business continues to deliver outstanding results with over 20% pro forma organic top line growth and over 200 basis points of pro forma margin expansion in the quarter. We had strong momentum heading into the second half of the year and is on the path of major transformation with the Acima acquisition that positions us to significantly benefit from secular changes in the market. So very exciting time for our team, our customers, retail partners and investors. Before jumping into the quarter, let’s take a minute to explore this favourable fundamental backdrop behind our story. Essentially it boils down to our business being well positioned to benefit from some prevailing trends that seem to have a long runway, including shifts in consumer behavior, a need for more demographic inclusivity and technological disruption. As I think we’re all familiar with today many aspects of consumer behavior are evolving quite rapidly, much of it enabled by technology and recently accelerated by the COVID-19 pandemic. One change that pertains to us is the adoption of all types of payment plans. It’s becoming increasingly acceptable, if not preferable to pay for goods and services with a stream of small payments, rather than running…

Thanks, Mitch. To start, I would reemphasize your comments on Acima. After a full quarter of getting deeper into the business, we continue to be impressed with its quality, especially on the technology side, the decision engine, data and analytics and tech talent are all best-in-class. Acima has been a leap forward for our virtual LTO capabilities and has been complimentary with initiatives we were already working on. So we are very enthusiastic about our position in the virtual LTO industry and the expansive possibilities we see for this business. As Mitch noted, earlier this week we issued a press release outlining some of the key solutions we’ll continue to roll out and launch over the next few quarters that will make up the Acima Ecosystem, which we believe can double the estimated total addressable market for Acima to something approaching $100 billion. We are excited about the growth opportunities for the Acima Ecosystem and the proprietary patent pending elements of our solutions. I’ll expand on some of the highlights of this week’s press release in a few minutes, but first I’d like to take an opportunity to step back and provide a big picture perspective on how we think about the Acima opportunity. The traditional retail shopping payment system, primarily comprised of cash, credit cards and debit cards essentially exclude a large segment of the population, the financially underserved from securing the use of durable goods because these consumers have insufficient cash or credit profiles to meet the standards of most payments solution providers. On top of this most options that are available today, offer an undesirable experience that can treat financially underserved customers as second class citizens. This system is also suboptimal for retailers who would certainly offer durable goods to this large segment of customers, but lack…

Thanks, Jay. The Rent-A-Center business segment had another strong quarter with revenue growth of 10.2%, on same-store sales growth of 16.6%, which marks 14 consecutive quarters of positive same-store growth. Underlying fundamentals remain strong with our lease portfolio opposed 17% at the end of the second quarter, similar to where it was at the end of the first quarter. As Mitch noted earlier, I’m really pleased with the team’s performance this quarter and with our position heading into the back half of the year, as we’re maintaining that strong year-over-year portfolio increase. One area where we’ve had a lot of success is introducing new categories to our platform that have expanded our addressable market, things such as tools, handbags, e-bikes and tires. Tires are a great example of how we see opportunities that can continue to drive incremental growth. E-commerce continues to be a key growth driver with revenues up 19% in the quarter, even with us comping against 58% growth last year during peak pandemic disruption. Traffic and conversion trends remain strong running well above pre-pandemic 2019 levels. Importantly, e-commerce is transforming Rent-A-Center. This has made us a more nimble and dynamic company and changed how we interact with our customers resulting in faster decisioning and enhanced engagement. That helps our customers make better decisions. In combination with our leading retail outlets, we believe we are well positioned to deliver a true seamless omni-channel experience for our customers. Our retail outlets continue to be a key element of our competitive advantage. Rent-A-Center remains committed to our heritage of serving the local communities where our customers live and building lasting relationships. In fact, we just opened the first new store in a few years in Oklahoma, and we planned to launch at least a handful more locations this year. Moving on to profitability, adjusted EBITDA margin was 25.9% in the second quarter, compared to 20% in the prior year with improved decisioning, low loss rates and strong collection activities. I’ll close out with some comments on our outlook for the second half of this year. On top of strong execution, tailwinds have probably been a more beneficial factor than normal for the first half of this year with stable economic activity and ongoing government support. For many of our customers, we think the favorable tailwinds will start to normalize over the second half of the year, which will likely translate into some slight moderation in sales growth with same-store sales in the second half still estimated to be very strong in the low double-digit range. Similarly, we think some of the factors that have benefited margins will also begin to moderate as we expect our EBITDA margins to level out in the low-20s in the second half of the year. With that, I’ll now turn it over to Maureen.

Thanks, Anthony. Second quarter consolidated revenues were $1.2 billion, a 75% increase versus the prior year period, primarily due to the acquisition of Acima, which closed in mid-February. On a pro forma basis, revenues grew 22%. Consolidated adjusted EBITDA of $182 million more than doubled year-over-year and on a pro forma basis grew 41%. Adjusted EBITDA margin was 15.2% in the second quarter compared to the pro forma margin of 13.1% in the prior year, with solid margin expansion for both the Rent-A-Center business and Acima segments led by revenue growth, lower loss rates and operating efficiencies. GAAP EPS was $0.90 in the second quarter compared to $0.70 in the prior year period and included one-time cost related to the Acima transaction and integration. After adjusting for special items that we believe do not reflect the underlying performance of our business, non-GAAP EPS was $1.63 in the second quarter of 2021 compared to $0.80 in the prior year period. We generated $101 million of free cash flow in the second quarter, which as a percentage of net income was in line with historical trends. We ended the quarter with $145 million cash balance and gross debt of $1.3 billion. During the quarter, we paid down $55 million on our ABL revolving credit facility and have fully paid down the outstanding balance. As a result of our continued strong operational performance and debt reduction, our leverage ratio at the end of Q2 was 1.7 times and we had over $600 million of available liquidity. During the quarter, we paid a cash dividend of $0.31 per share, which was approximately 7% higher year-over-year. Turning to our 2021 guidance given our better than expected portfolio performance and favorable underlying fundamental trends, we have increased 2021 guidance and tightened ranges. Our guidance assumes no…

[Operator Instructions] Your first question will come from Kyle Joseph with Jefferies. Please proceed.

Good morning. Thanks for taking my questions and congratulations on a really, really strong quarter, and appreciate all the commentary you gave across all of the segments. From a high level, as we’re thinking about 2022 here and not asking for guidance specifically, but can you walk us through and maybe – it might be helpful to do it by segment, but how you’re thinking about a normalization of revenues, obviously, Acima may be different than the Rent-A-Center segment, and then as we think about losses and margins? And then Mitch, I think you did a good job kind of addressing some of the offsetting factors, whether it’s maybe less buyout activity or a normalization of credit demand, if losses do impact normalize in 2022, but just walk us through kind of some of the offsetting impacts as we look out longer term on the business segments.

Sure, Kyle, this is Maureen. I can answer that and then see if Mitch has any additional comments. But our longer-term guidance is, as we’ve talked about, hasn’t really changed. The $6 billion target is still our 2023 target. Some of the assumptions that go into that growth projection are that Acima will grow 20% to 25% in GMV as well as revenue over the next three years. We assume low to mid single-digit comps in the Rent-A-Center business. We are seeing some of the benefits of the portfolio carry forward into the second half of 2021. And there could be some upside if that portfolio growth continues to play out throughout the year, but our current projections for 2022 and 2023 still assume that low to mid single-digit comps. We also assume $40 million to $70 million of annualized run rate synergies with the Acima transaction and integration. And it does not include, as we’ve mentioned in the past the benefits of any national accounts, any large national accounts that we had or incremental revenue associated with the MasterCard agreement.

Got it. That’s very helpful. And then quick one-off here, obviously, child tax credit payments started going out last month. Did you see any sort of impacts on either segment?

No, really. Good morning, Kyle, this is Mitch. Really nothing to speak off, I think our customer, the payments are still strong. I mean, our customers are in pretty good shape still, but it’s not like payouts went up like when bigger stimulus checks hit and things like that, so demand remains strong, collections remains good, but no big pop on payouts or anything that would actually drop the portfolio.

Got it. Thanks, Mitch. And then one last one from me, probably either Maureen or Jason, just on Acima, obviously, we saw really good EBITDA margin expansion quarter-on-quarter recognizing there’s some moving parts there, and you only have roughly six weeks of contribution from Acima in the first quarter? But can you walk us through the drivers of that? It seems like losses were stable. Was it less buyout activity obviously benefited from the full quarter of Acima, but just walk us through the drivers between the big uptick and EBITDA margin there?

Sure, Kyle. Most of the improvement in EBITDA margin was through gross margin. You can see it sequentially increased a couple 100 basis points or 150 or so basis points, which is most of the improvement in EBITDA margin. There were also some benefits of higher revenue, less payouts, as you mentioned, translates to higher margins and also converting some of our preferred lease stores to Acima, to their technology, it results in a higher yield. So those are the main growth drivers we do expect margins to increase progressively throughout the year, as we mentioned last quarter, mainly due to the synergies, really taking hold and increasing throughout the year.

Got it. Very helpful. Thanks a lot for answering all my questions.

Thanks, Kyle.

Your next question will come from Vincent Caintic from Stephens. Please proceed.

Thanks. Good morning. Thanks for taking my question. I think first questions for Jay, so on the GMV volume growth that 43%, that’s really impressive year-over-year. I guess first, if you think that’s a sustainable number, and then second perhaps if you could break it up between what you’re seeing in the organic growth from your existing merchants versus your new account wins, I’m guessing with a 43% number, it’s going to be a mixture of both, but I guess it would be impressive if that was all organic or mostly organic from existing margins. So perhaps if you could kind of separate those two out. That’d be very helpful. Thank you.

Yes. Good morning, Vincent. It’s good to hear your voice. We, if you look at the GMV trends for the balance of the year I think what we’re expecting is to grow around 20% and growth decelerates because we’re comping high growth rates from last year, obviously with pandemic and everything else that’s happening. One of the other things that we think is going to be a tailwind from a forecast in GMV includes the online traffic and the activity metrics to customer accounts. So we’re actually doing a really good job with regard to our opening new doors. And then most importantly, as we’re bringing on some of the new technologies that I mentioned in my comments of the ability to increase the turns for customer number of leases, and that will have a direct effect. And then like I also mentioned, we have a number of both e-commerce which currently represents about 15% of the segment and is going to continue to grow as we’re bringing on more and more both partners there and also bringing the digital channels online with the assets that we announced this week.

Yes. And I’d add to that, Jay, that the 15% that the e-comm it was in the low single digits a year ago.

That’s right. I mean, it’s going to continue to grow as a portion of the business as we continue to turn up the volume on all of these efforts in our omni-channel approach.

Okay, great. Thank you. And then a second question, I think this is for Mitch. So you mentioned M&A in the prepared remarks and I was kind of curious what you might be thinking of, when we look at the competitive landscape, it seems like up and down the point of sale financing spectrum and in like buy now pay later and lease to own, you’ve seen the competitor by not being a labor company to be fully in the ecosystem and then another competitors kind of focused or doing more on partnerships with other [indiscernible] guys, I’m just wondering when you think about M&A or partnerships or the kind of the broad spectrum what are you thinking there? Thank you.

Sure, Vincent. I think, we’re open to looking at anything that’s good at a right – the right multiple in – sorry, ecosystem. And like I said, it’s the right multiple for us to get a good return on. So I wouldn’t cut off any category. We’re open to that. Obviously right now, we’re pretty focused on the integration of Acima, but it’s gone smooth as Jay was talking about it. We’re six months into it. So and cash is building, you saw the share repurchase because that’s the – it was part of the capital allocation. Cash flow is better than we anticipated at this point. So we’ll obviously continue to fund new accounts and national accounts will take up some of that cash, but we will be – look, we’ll look at anything from an M&A standpoint, I wouldn’t not look at anything in any of those categories that you mentioned.

Okay, got it. That’s helpful. Thanks for much.

Thanks, Vincent.

Your next question will come from Brad Thomas with KeyBanc Capital Markets. Please proceed.

Good morning. And let me add my congratulations on a great quarter and all the momentum in the business. I was hoping we could talk a little bit more about the loss rates, the skip/stolen that continue to track it really favorable levels. Can you talk a little bit more about the changes you’re making in the decisioning and how much that is benefiting the loss rates and how sticky you think that maybe some of these more favorable trends might be?

Yes, Brad, thanks. This is Jay, thanks for the question and good morning. And I’ll kick off the answer and then hand it over to Anthony as well. So one of the things that we have been sort of most impressed about with the acquisition is the decision engine and the advantage that gives us as well as our data sciences group and so what we’re finding is that the combination of the dataset that we’re able to use from our legacy business in combination with Acima’s technology is enabling us to underwrite better from two components. The first component is from a fraud perspective and being able to dial in and reduce down our fraud losses and skip/stolen resulting from that. And then the second thing is actually, we’re able to provide a better underwriting decision with regard to line and customer. And so that results in a materially kind of better ticket for us overall. So the combination of the two things is giving us an opportunity, Anthony?

Yes, I would echo those sentiments on the Rent-A-Center business as more of the portfolio transitions to e-comm. One of the things that we’re always concerned with is how do we reduce fraud? And the centralized decisioning has really given us an opportunity to reduce that substantially as it continues to be a larger part of the portfolio. And that’s really the most important thing for us, is reduce the fraud and go ahead and convert more of the customers. And another thing that we’ve introduced recently as well is approval amounts for our customers. So now not only can we go ahead and approve more customers, we can go ahead and throttle the potential for loss by going ahead and making a determination on the approval amount, so it’s benefited the Rent-A-Center business. And also the increase in digital payments has benefited as well with more than half of our payments coming digitally. That’s helping as well.

Just real quick one, one last thing attack on the Acima segment, you have the data services capability now as bolted into our collections activities. So it enables us to anticipate in advance and make sure that we’re being more targeted with regard to doing preventative activities on a loss side.

And the only thing – other thing I’d add, Brad, you think about the Acima side in a virtual business like that decision is always going to be a main component of it and always try and improve it. And obviously, we think it’s working really, really well right now. And one of the best parts of Acima is the decisioning and it continues to get better every, basically every week when the underwriting committee meets and review things. So that’s a core element of the Acima business and getting better every week. On the Rent-A-Center side, it’s relatively new in the last year. And we never had much of a loss problem at Rent-A-Center, as you know, Brad. Okay, so we’ve gone from the mid-3s to the mid-2s. That’s fantastic that 1% important and you can point to the decision engine for the majority of that. Like I said, 1% is important, but beyond that, the customer experience to run a certain store and the efficiency of using a decision engine versus manual verification is, you could almost call it a game changer, a 45-minute transaction for our customer inside our brick and mortar store, they now takes 10 minutes. And the efficiency, the labor savings on our end, the customer experience, you don’t hear us talking a whole lot about labor costs because of the efficiencies we found with decisioning and the digital payments that Anthony mentioned, even now wages are up, I mean, at the entry level – hourly wages, what Anthony in – it’s like 15%, 20% range. You don’t hear us talking a lot about it because there’s a lot of offset with efficiency and using less hours to make up for that higher pay. And the technology and the e-com advanced with technological advancements overall are the reason for that and much more efficient business. And then you add onto that it’s a better customer experience for repeat business and all that. And it’s much more of a game changer at Rent-A-Center than just the 1% difference probably in the loss margin.

That’s great. Yes, all very, very encouraging. Just to follow-up on that last point you made Mitch on the inflation front. Could you talk a little bit about how an inflationary backdrop in merchandise affects the business? I think many years where we were seeing deflation in areas like consumer electronics and even furniture. And how does the outlook for the business change with the merchandise cost inflation that we’re seeing?

Actually it’s very odd. And the impact on a lot of businesses is pretty negative. On our business, inflation actually can be a positive, has been in the past. And I think we’re seeing some of that right now. And it’s a positive, even when you pay more for product in that – if product gets more expensive at retail, that’s good for lease-to-own, right. I think everybody – it’s easy to understand that if it’s more expensive at retail it’s good for Acima. Because if products are 20% higher, I think we’re seeing furniture prices, maybe even at retail 30% higher. But if it’s not like they’re going to get approved by prime lenders for 30% more, just because of inflation, if anything, it’s going to get tighter with lenders, right? So more customers should start flowing into the Acima through the waterfall. So it’s good there when things get expensive at retail and then it’s also good for the Rent-A-Center segment. And when you get pass on the inflation that we’re seeing in the cost of goods in small payments at on average $2 a week, it doesn’t have much impact on demand at $2 a week and $2 or $3 a week, $10 a month. However, you want to look at it, it doesn’t affect demand there, but yet actually drives more gross margin dollars overall, because we’re more than covering the inflationary cost of the product, it’s more gross margin dollars, which actually helps the EBITDA margins, right, as it flows if you have more gross margin dollars. So it can be very positive in the lease-to-own business for all those reasons. As bad as inflation can be for the whole country in general for our business, where it’s really an anti-inflammation plate.

Really helpful perspective. Thanks, Mitch. Thanks everyone.

Thanks, Brad.

[Operator Instructions] Your next question will come from Anthony Chukumba with Loop Capital Markets. Please proceed.

Good morning and allow me to offer my congratulations on a really strong quarter as well. So first question, very encouraging to see the share purchase authorization, obviously buying back stock at these levels will be highly accretive to your earnings per share. Now is that share repurchase program going to be a 10b5-1 or is it going to be – are you going to do buyback stock opportunistically?

Yes. We’re going to think about share repurchases as a flexible way to return capital to shareholders with a preference for executing in a manner that generates value. Meaning when the stocks are better value, we’ll buy at a greater amount. And if the stock moves down towards fair value, we’ll buy less. Now we want to be able to continue to buy even within blackout periods and we’ll likely use a 10b5-1 plan. We’ve used it at times in the past. But we really want to balance more between dividends and share repurchases going forward with this new authorization.

Got it. Okay. That’s helpful. And then just one clarification. So you mentioned that your increased guidance does not assume any additional government stimulus payments. Are you counting the – are you considering the expanded child tax credit additional government stimulus payments? Because it seems to me like that is an additional government stimulus payments, just that people are going to be getting every single month as opposed to getting a $1,400 check. So I just wanted to clarify that.

Yes. I think, we saw such little impact in July with the first check come out as we model up the rest of the year. Certainly it’s in there. So I’d say no additional stimulus. I’m not sure, there’s going to be a big impact on the child tax credit. I haven’t seen much out here. I believe if there is an impact that’s positive, but it’s not like we put a whole bunch of positive momentum in our model because of it, because we saw little impact in July. So it’s really not in our model. It’s obviously out there and if anything, it will be a positive to the model, Anthony.

Got it. That’s helpful. Thank you.

Thank you.

Your next question will come from John Rowan with Janney. Please proceed.

Good morning, everyone.

Hi. John.

Mitch, you talked about national partners a little bit. Can you maybe give us an idea, I know y’all think ultimately specific, but what the pipeline is of people who are testing or that your sales group is talking to you, just give us an idea of how we’re moving toward the progress of getting a national partner.

John, this is Jay, actually. Thanks for the question. So, we are now actually seeing our national account team get into what I would call a full swing. As I mentioned in the previous earnings call, we are in – we have a robust pipeline, so we kind of break it into two areas. There’s big national retailers and then e-comm. So we have several hundred big fish in process with regard to the national account side and over 1,000 from an e-comm target, which includes obviously large regionals. Then specifically, obviously we’re not going to comment on the partnerships themselves, but I can tell you that we’re in mid to late stage discussions with roughly a dozen of the national partners and probably double that with regard to the e-comm nationals and retailers. So really nice progress, we track this now. And the good news is we picked up a significant amount of talent as part of the acquisition of Acima. We’ve consolidated it with our existing national account team and our development office and we’re making really nice progress there.

All right. Thanks guys.

Thanks, John.

Your next question will come from Bobby Griffin with Raymond James. Please proceed.

Good morning, everybody. Thanks for taking my questions. I hope everyone’s doing well. I want to touch on the Rent-A-Center segment. And maybe, you talked a little bit about margins coming back down to maybe the low 20s range, which is still an incredible level when you look at where these margins, EBITDA margins were in 2019. So Mitch or Andy or Maureen whoever, can you maybe unpack some of the drivers there that structurally changed in the business and the confidence you have that these are not temporary stimulus changes and they’re more structural changes and you can maintain this low 20-ish EBITDA margin going forward.

Yes. Good question, Bobby. I think the primary reason is, it’s pretty cool, so fixed cost business. So when you’re growing, like we’re growing in demand is strong. You get EBITDA margins, a lot of it flows to the bottom line, think about the gross margins in the 70% range and not much cost below that as you bring on more customers, you get pretty good flow through, right? 50% anyhow flow through on every dollar. So it’s primarily growth. Now that e-comm helps from an efficiency standpoint, certainly even the inflation I mentioned earlier, given us more gross margin dollars, but the losses being lower with the decisioning, all those things working together. But I’d say, Anthony, the primary reason is just is the demand drives the top line. And of course, in a portfolio business, there’s a long runway on that demand. We can see quite a ways out. And that’s why our “slowdown” in the back half the year is to low double digit same-store sales. So and I say that with a little bit of a giggle, when you call that a slowdown low double digits. And so all these extra dollars drive quite a bit of flow through, and that’s going to be the biggest part of it.

Okay. And then maybe to follow up on Brad’s question and understanding how the inflation – if inflation is coming, it is coming on is how it drives the impact there. But are you starting to see it already in the numbers? So when we look at the 16.6% top, and the Rent-A-Center businesses that already benefiting from some merchandise inflation, or is that more kind of a go-forward type comment.

I’d say it’s more go forward. I think we’re just starting to see some price increases because of course, at our volume of purchases, our orders, we’re buying quite a ways out. So I think that’s a forward-looking benefit. Honestly, that we don’t have modeled. But it’s really not in the numbers to date.

Yes. We’re just starting to see it now and kick it as inventory flows through the system. But it’s early on.

Thank you. I appreciate all the details on both the questions and best of luck here in the second half.

Thanks, Bobby.

Thank you.

And at this time there are no further questions. I would now like to turn the call back over to Mitch Fadel for closing remarks at this time.

Thank you, Damira and thank you everyone for joining us this morning. Obviously, we’re really excited about how things are going and we believe the best is yet to come. A lot of people out there think, this is the peak, we do not – we see ongoing growth on the Rent-A-Center side as we’ve talked about. We didn’t spend much time talking about things like new product categories. Anthony, I think you mentioned it in your prepared comments. But new product categories driving the business, e-comm just flying almost 20% growth in e-comm and the Rent-A-Center comp over almost 60% last year during the shutdown. So fantastic stuff there. Acima obviously knocked it out of the park with their GMV. And we’re so excited about some of the proprietary stuff we announced this week that we really think increases the TAM. Jay’s plan of attack with those products, like the LeasePay Card and so forth, when you add that to Acima, and we really think we’ve got one plus one equals three here. The great plan, the great ecosystem plan that Jay had since he started last year is coming to fruition. And when you add that to the Acima, like I said, one plus one equals three. So I could go on all day about how excited we are. Most of you probably already hung up, but I’ll just stop there and say, everybody have a great day, and we appreciate your support. Thank you.

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