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dollargeneral.com under News & Events. Such as statements about our strategy, plans, including but not limited to our 2021 real estate outlook, our initiatives, goals, priorities, opportunities, investment, guidance, expectations or beliefs about future matters, including but not limited to, beliefs about COVID-19's future impact on the economy, our business and our customer and other statements that are not limited to historical fact. We also may reference certain financial measures that have not been derived in accordance with GAAP. dollargeneral.com under News & Events. Despite continued significant uncertainty in the operating environment, our team members have been unwavering in their commitment to fulfilling our mission of serving others, by providing affordable, convenient and close to home access to everyday essentials, at a time when our customers need them most. I could not be more proud of their efforts. As always, the health and safety of our employees and customer continues to be our top priority. We continue to closely monitor CDC and other governmental guidelines regarding COVID-19 and are evaluating and adapting our safety protocols as that guidance evolves. As one of America's essential retailers, we remain committed to being part of the solution during these difficult times. And we believe we are well positioned to continue supporting our customers through our unique combination of value and convenience, including our expansive network of more than 17,000 stores located within 5 miles of approximately 75% of the US population. At the same time, we remain focused on advancing our operating priorities and strategic initiatives, as we continue to meet the evolving needs of our customers and further position Dollar General for a long-term sustainable growth. To that end, and from a position of strength, I'm excited to share an update on some of our more recent plans. First, as you saw in our release, we plan to further accelerate our pace of new store openings and remodels in 2021. In total, we expect to execute 2,900 real estate projects next year, as we continue to lay and strengthen the foundation for future growth. As previously announced, we recently introduced our newest store concept pOpshelf, further building on our proven track record of store format innovation. We opened our first two locations during the quarter and while still early, we are encouraged by their initial results. Finally, one of our core values is representing and respecting the dignity and differences of others. Building on this core value, along with our commitment to diversity and inclusion, we recently updated our fourth operating priority to better capture and express our intent. We will discuss each of these updates in more detail later in the call. But first, let's recap some of the results for the third quarter. The quarter was once again highlighted by exceptional growth on both the top and bottom lines. We're particularly pleased that for the quarter, our three non-consumable categories once again delivered a combined sales increase, well in excess of our consumable business. Of note, this represents our 10th consecutive quarter of year-over-year comp sales growth in our non-consumable business, which speaks to the strong and sustained momentum in these product categories. From a monthly cadence perspective, comp sales for Q3 periods range from the low double digits to mid-teens with the best performance in August followed by modest moderation as we move through the quarter. Overall, third quarter net sales increased 17.3% to $8.2 billion, driven by comp sales growth of 12.2%. These results include significant growth in average basket size, partially offset by a decline in customer traffic, as we believe customers continue to consolidate shopping trips in an effort to limit social contact. Once again this quarter, we increased our market share in highly consumable product sales, as measured by syndicated data, driven by double-digit increases in both units and dollars. Importantly, our data suggests an increase in new customers this quarter, as compared to Q3 of 2019. These new customers skew younger, higher income and more ethnically diverse, further underscoring the broadening appeal of our value and convenience proposition. We are also encouraged by the repurchase rates of new customers and are working hard to retain them, with more targeted marketing and continued execution of our key initiatives. We're particularly pleased with the -- and how we delivered significant operating margin expansion, which contributed to third quarter diluted earnings per share of $2.31, an increase of 63% over the prior year. Collectively, our Q3 results reflect strong and disciplined execution across many fronts and further validate our belief that we are pursuing the right strategies to create meaningful long-term shareholder value. We operate in one of the most attractive sectors in retail and with our unique combination of value and convenience, further enhanced through our initiatives, we believe we are well positioned to successfully navigate the current environment and emerge even stronger than before. Now that Todd has taken you through a few highlights of the quarter, let me take you through some of its important financial details. Unless I specifically note otherwise, all comparisons are year-over-year and all references to earnings per share refer to diluted earnings per share. As Todd already discussed sales, I will start with gross profit, which was positively impacted in the quarter by meaningful increase in sales including the impact of COVID-19. Gross profit as a percentage of sales was 31.3% in the third quarter, an increase of 178 basis points and represents our sixth consecutive quarter of year-over-year gross margin rate expansion. This increase was primarily attributable to a reduction markdowns as a percentage of sales, higher initial markups on inventory purchases, a greater proportion of sales coming from non-consumables categories and a reduction in shrink as a percentage of sales. These factors were partially offset by increased distribution and transportation costs, which were driven by increased volume and our decision to incur employee appreciation bonus expense. SG&A as a percentage of sales was 21.9%, a decrease of 62 basis points. Although we incurred incremental costs related to COVID-19, these costs were more than offset by the significant increase in sales. Expenses that were lower as a percentage of sales this quarter include, occupancy costs, utilities, retail labor, depreciation and amortization, repairs and maintenance and employee benefits. These items were partially offset by increases in incentive compensation expense and hurricane-related expenses. Moving down the income statement, operating profit for the third quarter increased 57.3% to $773 million, compared to $491 million in the third quarter of 2019. As a percentage of sales, operating profit was 9.4%, an increase of 240 basis points. Operating profit in the third quarter was positively impacted by COVID-19, primarily through higher sales. The benefit from higher sales was partially offset by approximately $38 million of incremental investments that we made in response to the pandemic, including additional measures taken to further protect our employees and customers, and approximately $25 million in appreciation bonuses for eligible frontline employees. Year-to-date to the third quarter, we have invested approximately $153 million in COVID-19 related expenses including about $99 million in appreciation bonuses for our frontline employees. Our effective tax rate for the quarter was 21.6% and compares to 21.7% in the third quarter last year. Finally, as Todd noted earlier, earnings per share for the third quarter increased 62.7% to $2.31. Turning now to our balance sheet and cash flow, which remained strong and provide us the financial flexibility to further support our customers and employees during these unprecedented times, while continuing to invest for the long term. We finished the quarter with $2.2 billion of cash and cash equivalents, a decrease of $760 million compared to Q2 and an increase of $1.9 billion over the prior year. Merchandise inventories were $5 billion at the end of the third quarter, an increase of 11.8% overall and 5.9% on a per store basis. While out of stocks remain higher than normal for certain high demand products, we continue to make good progress with improving our in-stock position and are pleased with our overall inventory levels. Year-to-date to Q3, we generated significant cash flow from operations totaling $3.4 billion, an increase of 103.7%. Total capital expenditures through the first three quarters were $698 million and included our planned investments in remodels and relocations, new stores and spending related to our strategic initiatives. During the quarter, we repurchased 4.4 million shares of our common stock for $902 million and paid a quarterly dividend of $0.36 per common share outstanding at a total cost of $88 million. At the end of Q3, the remaining share repurchase authorization was $1.6 billion. Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in high return growth opportunities, including new store expansion and our strategic initiatives. We also remain committed to returning significant cash to shareholders through anticipated share repurchases and quarterly dividend payments, all while maintaining our current investment grade credit rating and managing to a leverage ratio of approximately 3 times adjusted debt-to-EBITDAR. Moving to an update on our financial outlook for fiscal 2020. We continue to operate in a time of significant uncertainty regarding the severity and duration of the COVID-19 pandemic, including its impact on the economy, consumer behavior and our business. As a result, we are not providing guidance for fiscal 2020 sales or earnings per share at this time and are unlikely to resume issuing guidance to the extent such uncertainties persist. Let me now provide some context as to what we expect in the fourth quarter. Given the unusual situation, I will elaborate on our comp sales trends thus far in Q4. From the end of Q3 through December 1, comp sales accelerated increasing approximately 14% during this timeframe, reflecting increased demand in our consumables business. And while we remain cautious in our sales outlook, we are encouraged with our sales trends, particularly as we move further past government stimulus payments and the expiration of enhanced unemployment benefits under the CARES Act. That said, significant uncertainty still exists concerning the duration of the positive sales environment, including external factors related to the ongoing health crisis and their potential impact on our business. Beyond these macro factors, there are number of more specific considerations as it relates to the fourth quarter. First, we anticipate higher transportation and distribution costs in Q4. Like other retailers, our business is seeing the effect of higher transportation costs due to a tight carrier market, as a result of driver shortages and a greater demand for services at third-party carriers. In addition, we are in the process of building, expanding or opening a number of distribution centers across our dry and DG Fresh networks. And while we expect, these investments will enable us to drive even greater efficiencies going forward and further support future growth, these investments will pressure gross margin rates in Q4. Also please keep in mind that the fourth quarter represents our most challenging lap of the year from a gross margin perspective filing 60 basis points of rate improvement in Q4 2019. With regards to our strategic initiatives, we continue to anticipate they will positively contribute to operating margin over time as the benefit to gross margin continues to scale and outpace the associated expense with both NCI and DG Fresh on pace to be accretive to operating margin in 2020. However, our investment in these initiatives will pressure SG&A rates in the fourth quarter, as we further accelerate their rollouts. Finally, we expect to make additional investments in the fourth quarter as a result of COVID-19, including up to $75 million in employee appreciation bonuses, which includes our recent announcement to award approximately $50 million in additional bonuses, bringing our full year investment in appreciation bonuses to approximately $173 million, as well as continued investments in health and safety measures. In closing, we are very proud of the team's execution and service resulting in another quarter of exceptional results. As always, we continue to be disciplined in how we manage expenses and capital with the goal of delivering consistent, strong financial performance, while strategically investing for the long term. We remain confident in our business model and our ongoing financial priorities to drive profitable same-store sales growth, healthy new store returns, strong free cash flow and long-term shareholder value. Let me take the next few minutes to update you on our four operating priorities. Our first operating priority is driving profitable sales growth. The team once again did a fantastic job in Q3, executing against a portfolio of growth initiatives. Let me highlight some of our recent efforts. Starting with our cooler door expansion program which continues to be our most impactful merchandising initiative. During the first three quarters, we added approximately 49,000 cooler doors across our store base. In total, we expect to install more than 60,000 cooler doors this year. The majority of which will be in our higher capacity coolers, creating additional opportunities to drive higher on-shelf availability and deliver an even wider product selection. Turning now to private brands, which remain a priority, as we look to drive overall category awareness and even greater customer adoption through rebranding, repositioning and expansion of select brands as well as the introduction of new product lines. We're very pleased with the continued progress across these fronts, including the successful rebranding of six product lines and the introduction of two new brands so far this year. And we're excited about the continued momentum we're seeing across the portfolio. Finally, a quick update on our FedEx relationship. During the quarter, we completed our initial rollout of this convenient customer package pick-up and drop-off service, which is now available in more than 8,500 stores. We're very pleased with the reception this offering is receiving from our customers and we continue to explore innovative opportunities to further leverage our unique real estate footprint to provide even more solutions for our customers in convenient and nearby locations. Beyond these sales driving initiatives, enhancing gross margin remains a key area of focus for us. In addition to the gross margin benefits associated with our NCI, DG Fresh and private brand efforts, foreign sourcing remains an important gross margin opportunity for us. The team once again did a great job during the quarter, working with our supply partners to ensure product availability. Looking ahead, we continue to pursue opportunities to increase our foreign sourcing penetration, while further diversifying our countries of origin. We also continue to pursue supply chain efficiencies including the continued expansion of our private fleet, the opening of additional DG Fresh facilities and the recent purchase of our future Walton, Kentucky dry distribution center, which should contribute to a further reduction in stem miles beginning early next year. In addition, we recently began construction on our first ever ground up combination DG Fresh and dry distribution center in Blair, Nebraska. We anticipate this facility will be completed in early 2022, enabling us to drive even greater efficiencies as we move ahead. The team is also executing against additional opportunities to enhance gross margin, including further improvements in shrink, as we continue to build on our success with electronic article surveillance. Our second priority is capturing growth opportunities. Our proven high-return low-risk real estate model continues to be a core strength of our business. As previously announced, we recently celebrated a significant milestone with the opening of our 17,000th store. This is a testament to the fantastic work of our best-in-class real estate team as we continue to expand our footprint and enhance our ability to serve even more customers. As a reminder, our real estate model continues to focus on five metrics that have served us well for many years in evaluating new real estate opportunities. These metrics include, new store productivity, actual sales performance, average returns, cannibalization and the payback period. Of note, we continue to see strong performance across these metrics. For 2020, we remain on track to open 1,000 new stores, remodel 1,670 stores and relocate 110 stores. Through the first three quarters, we opened 780 new stores, remodeled 1,425 stores, including more than 1,000 in the higher cooler count, DGTP or DGP formats, and we relocated 76 stores. We also added produce in more than 140 stores, bringing the total number of stores which carry produce to more than 1,000. As Todd noted for fiscal 2021, we plan to execute 2,900 real estate projects in total including 1,050 new stores, 1,750 remodels and 100 store relocations. Additionally, we plan to add produce in approximately 600 stores. Notably, we expect approximately 50% of our new unit openings and about 75% of our remodels to be in the DGTP or DGP formats. The remainder of our new store openings and remodels will primarily be in the traditional format with higher capacity coolers. Our plans also include having approximately 30 stores in our new pOpshelf concept, which Todd will discuss in more detail by the end of fiscal 2021 up from two locations today. Overall, our real estate pipeline remains extremely robust and we are excited about the significant growth opportunities ahead. Our third operating priority is to leverage and reinforce our position as a low-cost operator. Over the years, we've established a clear and defined process to control spending, which governs our disciplined approach to spending decisions. This zero based budgeting approach, internally branded as Save to Serve keeps the customer at the center of all we do, while reinforcing our cost control mindset. We continue to build on our success with Fast Track, which Todd will discuss in more detail later. As a result of our efforts to-date, our store associates are able to better serve our customers during this period of heightened demand, as evidenced by our recent customer survey results where we continue to see overall satisfaction scores at all time highs. Our underlying principles are to keep the business simple, but move quickly to capture growth opportunities, while controlling expenses and always seeking to be a low-cost operator. We have three business operating priorities. But at the heart of them is our foundational fourth operating priority. This priority is anchored in our people and it's truly foundational to everything we do at Dollar General. Our fourth operating priority is investing in our diverse teams through development, empowerment and inclusion. As Todd noted, this updated language more fully expresses our values and core beliefs and more closely aligns with the investments we continue to make in the development of our people. Importantly, we believe these investments continue to yield positive results across our store base, as evidenced by continued, record low store manager turnover, record staffing levels, healthy applicant flows and a robust internal promotion pipeline. As a growing retailer, we also continue to create new jobs and opportunities for career advancement. In fact, more than 12,000 of our current store managers are internal promotes and we continue to innovate on the development opportunities we can offer our teams. We believe, the opportunity to start and develop a career with a growing and purpose-driven Company is a unique competitive advantage and remains our greatest currency in attracting and retaining talent. We also recently completed our annual community giving campaign, where employees across the organization come together to raise funds for a variety of important causes. I was once again humbled by the generosity and compassion of our people. This event truly embodies the Serving Others culture that is so deeply embedded at Dollar General. In summary, we are executing well from a position of strength and our operating priorities continue to provide a strong foundation from which we can drive continued growth in the years ahead. I'm proud of the great progress the team has made in advancing our strategic initiatives. Let me take you through some of the most recent highlights. Starting with our non-consumable initiative or NCI. As a reminder, NCI consist of a new and expanded product offering in key non-consumable categories. The NCI offering was available in 5,200 stores at the end of Q3, and given our strong execution to date, we now expect to expand the offering to more than 5,600 stores by the end of 2020. Including approximately 400 stores in our NCI lite [Phonetic] version. This compares to our prior expectation of more than 5,400 stores at year end. We're especially pleased with the strong sales and margin performance our NCI stores once again delivered in the quarter. We also continue to benefit from incorporating select NCI products and planograms throughout the broader store base. And we are pleased with the performance of our lite stores which incorporates a vast majority of the NCI assortment, but through a more streamlined approach. As noted earlier, we are also excited about the recent introduction of pOpshelf and the opening of our first two locations, which further builds on our success and learnings with NCI. pOpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience, delivered through, first, continually refresh merchandise, primarily in targeted non-consumable product categories. Second, a differentiated in-store experience, including impactful displays of our offering designed to create a highly visual, fun and easy shopping experience. And third, exceptional value with approximately 95% of our items priced at $5 or less. Importantly, while pOpshelf delivers many of Dollar General's core strengths, including customer insights, merchandise innovation, operational excellence, digital capabilities and real estate expertise, it is specifically tailored to a different shop indication. We'll primarily be located in suburban communities and initially targets a higher income customer, potentially unlocking additional and incremental growth opportunities going forward. We're proud of all of the incredible work the team has done in standing up this concept and with the initial work now behind us, we look forward to welcoming additional customers to pOpshelf, as we move forward, our goal of approximately 30 stores by the end of 2021. Turning now to DG Fresh, which is a strategic multi-phase shift to self-distribution of frozen and refrigerated goods. As a reminder, the primary objective of DG Fresh is to reduce product cost on our frozen and refrigerated items, by removing the markup paid to third-party distributors, thereby enhancing gross margin. And we continue to be very pleased with the product cost savings we are seeing. In fact, DG Fresh continues to be the largest contributor to gross margin benefit we are realizing from higher initial mark-ups on inventory purchases. Importantly, we expect this benefit to grow as we continue to scale this transformational initiative. Another important goal of DG Fresh is to increase sales in these categories. We're pleased with the success we are already seeing on this front, driven by higher overall in-stock levels and the introduction of more than 55 additional items, including both national and private brands in select stores being serviced by DG Fresh. And while produce is not included in our initial rollout plans, we plan -- we plan and continue to believe DG Fresh could provide a potential path forward to expanding our produce offering to even more stores in the future. In total, we were self-distributing to more than 13,000 stores from eight DG Fresh facilities at the end of Q3. We expect to capture benefits from this initiative in more than 14,000 stores from 10 facilities by the end of this year and are well on track to complete our initial rollout across the chain in 2021. Next, our digital initiative, where our strategy consist of building a digital ecosystem specifically tailored to provide our customers with an even more convenient, frictionless and personalized shopping experience. In an environment where customers continue to seek safe, familiar and convenient experiences, we believe our unique footprint combined with our digital assets, provides a distinct competitive advantage. More specifically, I'm pleased to note that during the quarter, we expanded DG Pickup, our buy online, pickup in the store offering to nearly 17,000 stores compared to more than 2,500 stores at the end of Q2, providing another convenient access point for those seeking a more contactless customer experience. In addition to DG Pickup, our plans include further expansion of DG GO checkout, as we look to make this feature available in select stores that includes self checkout further enhancing our convenience proposition. By leading our channel in digital tools and experiences, we believe we are well positioned to drive more in-store traffic, grow basket size and offer even greater convenience to new and existing customers. Moving now to Fast Track, where our goals, including increasing labor productivity in our stores, enhancing customer convenience and further improving on-shelf availability. We continue to be pleased with the labor productivity improvements we are seeing as a result of our efforts around rolltainer optimization and even more shelf-ready packaging. The second component of Fast Track is self checkout, which provides customers with another flexible and convenient checkout solution, while also driving greater efficiencies for our store associates. During the quarter, we accelerated the rollout of self checkout to more than 900 stores, compared to approximately 400 stores at the end of Q2, with plans for further expansion as we move forward. And while still early, we are pleased with the initial results, including our customer adoption rates as well as positive feedback from both customers and employees. Overall, we remain focused on controlling what we can control, while taking actions, including the continued execution of our key initiatives to further differentiate and distance Dollar General from the rest of the discount retail landscape. As a mature retailer in growth mode, we are also laying the groundwork for future initiatives and continue to believe we are pursuing the right strategies to capture additional growth opportunities in a rapidly changing retail landscape. In closing, we are very proud of the team's performance and our results through the first three quarters of 2020, which further demonstrate that our unique combination of value and convenience continues to resonate with our customers and positions us well going forward.

compname posts q3 earnings per share $2.31. q3 earnings per share $2.31. q3 same store sales rose 12.2 percent. q3 sales $8.2 billion versus refinitiv ibes estimate of $8.15 billion. declares q4 2020 cash dividend of $0.36 per share. plan to award a total of up to $75 million in appreciation bonuses to eligible frontline employees in q4. for fy 2021, co plans to execute 2,900 real estate projects. since the end of the third quarter, the company has continued to experience elevated demand in its stores. same-store sales increased about 14% as compared to comparable timeframe in 2019 fiscal year.

dollargeneral.com under News & Events. Such as statements about our financial guidance, strategy, initiatives, plans, goals, priorities, opportunities, investments, expectations or beliefs about future matters and other statements that are not limited to historical fact. We will also reference certain non-GAAP financial measures. dollargeneral.com under News & Events. Despite, what continues to be a challenging operating environment, including elevated cost pressures and broad-based supply chain disruptions, our teams remain focused on controlling what we can control, and they are delivering for our customers. We are grateful for their efforts. Looking ahead, we believe we are well positioned to navigate the current environment. And although we've experienced higher-than-expected costs, both from a product and supply chain perspective we're very confident in our price position. As our price indexes relative to our competitors and other classes of trade remain in line with our targeted and historical ranges. And because so many families depend on us for everyday essentials at the right price, we believe products at the $1 price point are important for our customers and they will continue to have a significant presence in our assortment. In fact, approximately 20% of our overall assortment remains at $1 or less. And moving forward we will continue to foster and grow this program where appropriate. As the largest retailer in the US by store count, with over 18,000 stores located within five miles of about 75% of the US population, we believe our presence in local communities across the country provides another distinct advantage and positions us well for continued success. Overall, we remain focused on advancing our operating priorities and strategic initiatives. As we continue to strengthen our competitive position, while further differentiating and distancing Dollar General from the rest of the discount retail landscape. To that end, I'm excited to share an update on some of our more recent plans. First, as you saw in our release, we expect to execute a total of nearly 3,000 real estate projects in 2022, including 1,100 new store openings as we continue to lay and strengthen the foundation for future growth. Of note, these plans include the acceleration of our pOpshelf concept, as we expect to nearly triple our store count next year, as compared to our fiscal '21 year-end target of up to 50 locations. In addition, given the sustained performance of our pOpshelf concept, which continues to exceed our expectations, we plan to further accelerate the pace of new store openings as we move ahead. Targeting a total of about 1,000 pOpshelf locations by fiscal year-end 2025. Importantly, we anticipate these new pOpshelf locations will be incremental to our annual Dollar General store opening plans, as we look to further capitalize on the significant growth opportunities we see for both brands. We are also now at the early stages of plans to extend our footprint into Mexico, which will represent our first store locations outside the Continental United States. We believe Mexico represents a compelling expansion opportunity for Dollar General given this demographics and proximity to the US, and we are confident that our unique value and convenience proposition will resonate with the Mexican consumer. While our initial entry in the Mexico is focused on piloting a small number of stores in 2022. We expect to seize -- we plan today will ultimately turn into additional growth opportunities in the future. Finally, as previously announced, we recently introduced our digital services by partnering with DoorDash to provide delivery in under an hour, in over 10,000 locations. Further enhancing our convenience proposition, while broadening our reach with new customers. Jeff will discuss these updates in more detail later in the call. But first let's recap some of the top line results for the third quarter. Net sales increased 3.9% to $8.5 billion following a 17.3% increase in Q3 of 2020. Comp sales declined 0.6% to the prior year quarter, which translates to a robust 11.6% increase on a two-year stack basis. From a monthly cadence perspective, comp sales were lowest in September, with October being our strongest month of performance. And I'm pleased to report that Q4 sales to-date are trending in line with our expectations. Our third quarter sales results include a year-over-year decline in customer traffic, which was largely offset by growth in average basket size, even as we lap significant growth in average basket size last year. In addition, during the quarter, we saw an improvement in customer traffic, as compared to Q2 of 2021. And we continue to be pleased with the retention of the new customers acquired in 2020. We're also pleased with the market share gains as measured by syndicated data in our frozen and refrigerated product categories. And even as our market share in total highly consumable product sales decreased slightly in Q3, we feel good about our overall share gains on a two-year stack basis. Collectively, our third quarter results reflect strong execution across many fronts. And further validates our belief that we are pursuing the right strategies to enable sustainable growth, while supporting long-term shareholder value creation. We operate in one of the most attractive sectors in retail. And as a mature retailer in growth mode, we continue to lay the groundwork for our future initiatives, which we believe will unlock additional growth opportunities as we move forward. Overall, I've never felt better about the underlying business model and we are excited about the significant growth opportunities we see ahead. Now that Todd has take you through a few highlights of the quarter, let me take you through some of its important financial details. Unless we specifically note otherwise all comparisons are year-over-year, all references to earnings per share refer to diluted earnings per share and all years noted refer to the corresponding fiscal year. As Todd already discussed sales, I will start with gross profit. As a reminder gross profit in Q3 2020 was positively impacted by a significant increase in sales, including net sales growth of 24% in our combined non-consumable categories. For Q3 2021, gross profit as a percentage of sales was 30.8%, a decrease of 57 basis points, but an increase of 121 basis points, compared to Q3 2019. The decrease compared to Q3 2020 was primarily attributable to a higher LIFO provision, increased transportation costs, a greater proportion of sales coming from our consumables category and an increase in inventory damages. These factors were partially offset by higher inventory markups and a reduction in shrink as a percentage of sales. SG&A as a percentage of sales was 22.9%, an increase of 105 basis points. This increase was driven by expenses that were greater as a percentage of sales in the current year period, the most significant of which were retail, labor and store occupancy costs. The quarter also included $16 million of disaster-related expenses attributable to Hurricane Ida. Moving down to income statement. Operating profit for the third quarter decreased 13.9% to $665.6 million. As a percentage of sales, operating profit was 7.8%, a decrease of 162 basis points. And while the unusual and difficult prior year comparison create pressure on our operating margin rate, we're very pleased with the improvement of 78 basis points, compared to Q3 2019. Our effective tax rate for the quarter was 22.2% and compares to 21.6% in the third quarter last year. Finally, earnings per share for Q3 decreased 10% to $2.08, which reflects a compound annual growth rate of 21% over a two-year period. Turning now to our balance sheet and cash flow which remain strong and provide us the financial flexibility to continue investing for the long-term, while delivering significant returns to shareholders. Merchandise inventories were $5.3 billion at the end of the third quarter, an increase of 5.4% overall and a decrease of 0.1% on a per store basis. And while we're not satisfied with our overall in-stock levels, we continue to make good progress and are focused on improving our in-stock position particularly in our consumables business. Looking ahead, we are pleased with our inventory position for the holiday shopping season and our teams continue to work closely with suppliers to ensure delivery of goods for the remainder of the year. Year-to-date through [Phonetic] the third quarter, we generated significant cash flow from operations totaling $2.2 billion. Capital expenditures to the first three quarters were $779 million and included our planned investments in new stores, remodels and relocations, distribution and transportation projects and spending related to our strategic initiatives. During the quarter, we repurchased 1.6 million shares of our common stock for $360 million and paid a quarterly dividend of $0.42 per common share outstanding at a total cost of $97 million. At the end of Q3, the total remaining authorization for future repurchases was $619 million. We announced today that our Board has increased this authorization by $2 billion. Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in high return growth opportunities, including new store expansion and our strategic initiatives. We also remain committed to returning significant cash to shareholders through anticipated share repurchases and quarterly dividend payments, all while maintaining our current investment grade credit rating and managing to a leverage ratio of approximately 3 times adjusted debt-to-EBITDA. Moving to an update on our financial outlook for fiscal 2021. We continue to operate in a time of uncertainty regarding the economic recovery from the COVID-19 pandemic, including any changes in consumer behavior and the corresponding impacts on our business. Despite continued uncertainty, including cost inflation ongoing pressure throughout the supply chain, we are updating our sales and earnings per share guidance, which reflects our strong performance through the first three quarters, as well as our expectations for Q4. For 2021, we now expect the following: Net sales growth of approximately 1% to 1.5%; a same-store sales decline of approximately 3% to 2.5%, but which reflects growth of approximately 13% to 14% on a two-year stack basis; and earnings per share in the range of $9.90 to $10.20, which reflects a compound annual growth rate in the range of 22% to 24% or approximately 21% to 23%, compared to 2019 adjusted earnings per share over a two-year period. Our earnings per share guidance now assumes an effective tax rate of approximately 22%. Let me now provide some additional context as it relates to our outlook. In terms of sales, we remain cautious in our outlook over the next couple of months, given the continued uncertainties arising from the COVID-19 pandemic, including additional supply chain disruptions and the impact of the end of certain federal aid such as additional unemployment benefits and stimulus payments. Turning to gross margin. Please keep in mind, we will continue to cycle strong gross margin performance from the prior year where we benefited from a favorable sales mix and a reduction in markdowns, including the benefit of higher sell-through rate. Consistent with Q2 and Q3, we expect continued pressure on our gross margin rate in the fourth quarter, due to a higher LIFO provision, as a result of cost of goods increases, a less favorable sales mix, compared to the prior year quarter, and an increase in markdown rates as we continue to cycle the abnormally low levels in 2020. We also anticipate higher supply chain costs in Q4 compared to the 2020 period. Like other retailers our business continues to be impacted by higher costs due to transit and port delays, as well as elevated demand for services at third-party carriers. However, despite these challenges we are confident in our ability to continue navigating these transitory pressures. With regards to SG&A, we continue to expect about $70 million to $80 million, an incremental year-over-year investments in our strategic initiatives. This amount includes $56 million in incremental investments made during the first three quarters of 2021. However, in aggregate, we continue to expect our strategic initiatives will positively contribute to operating profit and margin in 2021, driven by NCI and DG Fresh, as we expect the benefits to gross margin from our initiatives will more than offset the associated SG&A expense. Finally, our updated guidance does not include any impact from the proposed federal vaccine and testing mandate, including potential disruptions to the business or labor market or any incremental expense. In closing, we are pleased with our third quarter results, which are with testament to the strong performance and execution by the team. As always we continue to be disciplined and how we manage expenses in capital with the goal of delivering consistent strong financial performance, while strategically investing for the long-term. We remain confident in our business model and our ongoing financial priorities to drive profitable same-store sales growth, healthy new store returns, strong free cash flow and long-term shareholder value. Let me take the next few minutes to update you on our operating priorities and strategic initiatives. Our first operating priority is driving profitable sales growth. The team did a great job this quarter, executing against a robust portfolio of growth initiatives. Let me highlight some of our more recent efforts. Starting with our non-consumables initiative or NCI. The NCI offering was available in nearly 11,000 stores at the end of Q3, and we continue to be very pleased with the strong performance we are seeing across our NCI store base. Notably, this performance is contributing an incremental 2.5% total comp sales increase on average in NCI stores along with a meaningful improvement in gross margin rate, as compared to stores without the NCI offering. Overall, we now plan to expand this offering to a total of more than 11,500 stores by year-end, including over 2,000 stores in our light version. And we expect to complete the rollout of NCI across nearly the entire chain by year-end 2022. Moving to our pOpshelf concept, which further builds on our success and learnings with NCI. pOpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience, delivered through continually refreshed merchandise, a unique in-store experience and exceptional value with the vast majority of our items priced at $5 or less. During the quarter we added 14 new pOpshelf locations, bringing the total number of stores to 30. Opened our first 14 store within a store concepts and celebrated the one-year anniversary of our first pOpshelf store opening. For 2021, we remain on track to have a total of up to 50 pOpshelf locations by year-end, as well as up to an additional 25 store with an in-store concepts, which incorporate a smaller footprint pOpshelf shop into one of our larger format Dollar General market stores. Importantly, as Todd noted earlier, we continue to be very pleased with the performance of our pOpshelf stores, which have far exceeded our expectations for both sales and gross margin. In fact, we anticipate year one annualized sales volumes for our current locations to be between $1.7 million and $2 million per store and expect the initial average gross margin rate for these stores to exceed 40%. We believe this bodes well for the future as we move toward our goal of about 1,000 pOpshelf locations by year-end 2025. Turning now to DG Fresh, which is a strategic multiphase shift to self-distribution of frozen and refrigerated goods. As a reminder, we completed the initial rollout of DG Fresh across the entire chain in Q2, and are now delivering to more than 18,000 stores from 12 facilities. The primary objective of DG Fresh is to reduce product costs on our frozen and refrigerated items. And we continue to be very pleased with the savings we are seeing as DG Fresh remains a meaningful contributor to our gross margin rate. Another goal of DG Fresh is to increase sales in these categories. And we are very happy with the performance on this front, as overall comp sales of our frozen and refrigerated goods outperformed all other product categories in Q3, even against a difficult prior year sales comparison. Going forward, we expect to realize additional benefits from DG Fresh, as we continue to optimize our network, further leverage our scale, deliver an even wider product selection and build on our multi-year track record of growth in cooler doors and associated sales. With regards to our cooler expansion program, during the first three quarters we added more than 52,000 cooler doors across our store base. In total, we expect to install approximately 65,000 additional cooler doors in 2021. The majority of which will be in high capacity coolers. Turning now to an update on our expanded health offering, which consist of about 30% more feet of selling space and nearly 400 additional items, as compared to our standard offering. This offering was available in nearly 800 stores at the end of Q3, with plans to expand to approximately 1,000 stores by year-end. Looking ahead, our plans include further expansion of our health offering, with the goal of increasing access to basic healthcare products and ultimately services overtime, particularly in rural America. In addition to the gross margin benefits associated with the initiatives I just discussed, we continue to pursue other opportunities to enhance gross margin, including improvements in private brand sales, global sourcing, supply chain efficiencies and shrink. Our second priority is capturing growth opportunities. We recently celebrated a significant milestone with the opening of our 18,000 stores, which reflects the fantastic work of our best-in-class real estate team, as we continue to expand our footprint and further enhance our ability to serve additional customers. Through the first three quarters, we completed a total of 2,386 real estate projects, including 798 new stores, 1,506 remodels and 82 relocations. For 2021, we remain on track to open 1,050 new stores, remodel 1,750 stores and relocate 100 stores, representing 2,900 real estate projects in total. In addition, we now have produce in approximately 1,900 stores with plans to expand this offering to a total of over 2,000 stores by year-end. For 2022 we plan to execute 2,980 real estate projects in total, including 1,110 new stores, 1,750 remodels and 120 store relocations. We also plan to add produce and approximately 1,000 additional stores next year with the goal of ultimately expanding this offering to a total of up to 10,000 stores over time. Of note, we expect approximately 800 of our new stores in 2022 to be in our larger 8,500 square foot new store prototype, allowing for a more optimal assortment and room to accommodate future growth. Importantly, we continue to be very pleased with the sales productivity of this larger format, as average sales per square foot continue to trend about 15% above an average traditional store. Our 2022, real estate plans also include opening approximately 100 additional pOpshelf locations, bringing the total number of pOpshelf stores to about 150 by year-end, as well as, up to an additional 25 store with in-store concept. As Todd noted, we are also very excited about our plans to expand our footprint internationally for the first time, with plans to open up to 10 stores in Mexico by year-end 2022. As we look to extend our value and convenience offering to even more communities, while continuing to lay the foundation for future growth. Overall, our proven high-return, low-risk real estate model continues to be a core strength of our business. And the good news is, we believe we still have a long runway for new unit growth ahead of us. In fact, across our Dollar General, pOpshelf and DGX format types, we estimate there are approximately 17,000 new store opportunities potentially available in the Continental United States alone. Although, these opportunities available to all small box retailers, we expect to continue capturing a disproportionate share as we move forward. And while still early, we expect our entry into Mexico will ultimately unlock a significant number of additional new unit opportunities in the years to come. When taken together, our real estate pipeline remains robust and we are excited about the significant new store opportunities ahead. Next, our digital initiative, which is an important complement to our physical store footprint, as we continue to deploy and leverage technology to further enhance convenience and access for our customers. Our efforts remain centered around building engagement across our digital properties, including our mobile app. Of note, we ended Q3 with over 4.4 million monthly active users on the app, and expect this number to grow as we look to further enhance our digital offerings. As Todd noted, our partnership with DoorDash is another example of meeting the evolving needs of our customers, by providing the savings offered by Dollar General, combined with the convenience of same-day delivery in an hour or less. And while still early, we are pleased with the initial results, including better-than-expected customer trial, strong repurchase rates, high levels of sales incrementality and a broadening of our customer base. Our DG Media Network, which we launched in 2018 is also seeing strong results, including significant growth in the number of campaigns on our platform. Overall, we remain very excited about the long-term growth potential of this business. And we look to better connect our brand partners with our customers in a way that is accretive to the customer experience. Going forward, our plans include providing more relevant, meaningful and personalized offerings, with the goal of driving even higher levels of customer engagement across our digital ecosystem. Our third operating priority is to leverage and reinforce our position as a low-cost operator. We have a clear and defined process to control spending, which continues to govern our disciplined approach to spending decisions. This zero based budgeting approach internally branded as safe to serve, keeps the customer at the center of all we do, while reinforcing our cost control mindset. Our Fast Track initiative is a great example of this approach, where our goals include, increasing labor productivity in our stores, enhancing customer convenience and further improving on-shelf availability. The first phase of Fast Track consisted of both rolltainer and case pack optimization, which has led to the more efficient stocking of our stores. The second component of Fast Track is self-checkout, which provides customers with another flexible and convenient checkout solution, while also driving greater efficiencies for our store associates. Looking ahead, our plans now include expanding this offering to over 6,000 stores by year-end 2021, and to the majority of our store base by the end of 2022, as we look to further extend our position as an innovative leader in small box discount retail. Our underlying principles are to keep the business simple, but move quickly to capture growth opportunities, while controlling expenses and always seeking to be a low-cost operator. Our fourth operating priority is investing in our diverse teams through development, empowerment and inclusion. As a growing retailer, we continue to create new jobs in the communities we serve. As evidenced in 2022, we plan to create more than 8,000 net new jobs. In addition, our growth also fosters an environment where employees have opportunities to advance to roles with increasing levels of responsibility and meaningful wage growth in a relatively short timeframe. In fact, over 75% of our store associates at/or above the lead sales associate position were internally placed. And we continue to innovate on the development opportunities we offer our teams. Importantly, we believe these efforts continue to yield positive results across our store base, as evidenced by our robust promotion pipeline, healthy applicant flows and staffing above traditional levels. We believe the opportunity to start and develop a career with a growing and purpose-driven company is a unique competitive advantage and remains our greatest currency in attracting and retaining talent. We also recently completed our annual community giving campaign, where our employees came together to raise funds for a variety of important causes. And I was once again inspired by the generosity and compassion of our people. Our mission of serving others is deeply embedded in the daily culture of Dollar General. And I'm so proud to be a part of such an incredible team. In closing, we are making great progress against our operating priorities and strategic initiatives. And with the actions and multi-year initiatives we have in place, we are confident in our plans to drive long-term sustainable growth and shareholder value creation.

compname reports q3 earnings per share of $2.08. q3 earnings per share $2.08. sees fy sales up about 1 to 1.5 percent. q3 sales rose 3.9 percent to $8.5 billion.

dollargeneral.com under news and events. We also will reference certain non-GAAP financial measures. dollargeneral.com under news and events. Our fourth quarter performance was impacted by sustained and rising inflation, ongoing global supply chain pressure and a surge in Omicron cases, which impacted staffing levels at our distribution centers, contributing to elevated out-of-stocks. Despite these challenging conditions, our teams continued to focus on controlling what we can control and being there for our customers. Because of their efforts and great execution over the past two years, we believe our underlying business is even stronger than before the pandemic, which positions us well to deliver solid sales and profit growth in 2022 and beyond. And while we expect this challenging environment to persist over the near term, which is reflected in our Q1 and fiscal 2022 outlook, we're confident we are taking the appropriate actions to manage through this period and deliver on our full year plan. In fact, I'm pleased to report our staffing levels are back to 2019 pre-COVID levels in both our stores and distribution centers, and we are seeing a meaningful improvement in our in-stock positions. Additionally, although we experienced higher-than-expected product and supply chain cost in Q4, we are very confident in our price position as our price indexes, relative to competitors and other classes of trade, remain in line with our targeted and historical ranges. And because so many families depend on us for everyday essentials at the right price, we believe products at the $1 price point are important to our customers, and they will continue to have a significant presence in our assortment. In fact, approximately 20% of our overall assortment is $1 or less. And moving forward, we expect to continue to foster and grow this program where appropriate. population, we believe we are well positioned to continue supporting our customers through our unique combination of value and convenience, even in a challenging economic environment. Looking ahead, we remain focused on advancing our operating priorities and strategic initiatives as we continue to strengthen our competitive position while further differentiating Dollar General from the rest of the retail landscape. Turning now to our fourth quarter performance. Net sales increased 2.8% to $8.7 billion, following a 17.6% increase in Q4 of 2020. Comp sales declined 1.4% compared to the prior year period, which translates into a robust 11.3% increase on a two-year stack basis. From a monthly cadence perspective, Comp sales were lowest in January, with December being our strongest month of performance. Our fourth quarter sales results include a decline in customer traffic, which was largely offset by growth in average basket size. Notably, our average basket size at year-end was approximately $16 and consisted of nearly six items. This compares to an average basket size of about $13 and five items at the end of 2019, which we believe reflects the growing impact of our strategic initiatives and a degree of inflation. In addition, we are pleased with the market share gains as measured by syndicated data in our frozen and refrigerated product categories, where we have placed a good deal of emphasis over the past years in an effort to provide customers with an even wider variety of options. And even as our market share in highly consumable product sales decreased slightly in Q4, we feel good about our share gains on a two-year basis. We are also pleased with the retention rates of new customers acquired in 2020, which continues to exceed our initial expectations. For the full year, net sales increased 1.4% to $34.2 billion, which was on the high end of our full year guidance and on top of a robust 21.6% increase in fiscal 2020. Comp sales for the year decreased 2.8%, which translates into a very healthy 13.5% increase on a two-year stack basis. In total, we completed more than 2,900 real estate projects during the year, including the opening of our 18,000th Dollar General store and 50 stand-alone pOpshelf locations as we continue to build and strengthen the foundation for future growth. From a position of strength, we also made targeted investments in key areas, including the acceleration of our pOpshelf concept, as well as our most recent initiatives focused on health and international expansion as we continue to meet the evolving needs of our customers and further position Dollar General for long-term sustainable growth. Overall, we are proud of our fourth quarter and full year results, which further validate our belief that our strategic actions and targeted investments positions us well for continued success while supporting long-term shareholder value creation. We operate in one of the most attractive sectors in retail. And while our mission and culture remain unchanged as the foundation for our success, with our robust portfolio of short and long-term initiatives, I believe Dollar General is a much different company and is in a much stronger competitive position than it was just a few short years ago. As a result, I've never felt better about the underlying business model, and we are excited about the enormous growth opportunities we see ahead. Now, that Todd has taken you through a few highlights of the quarter and the full year, let me take you through some of its important financial details. Unless we specifically note otherwise, all comparisons are year over year, all references to earnings per share refer to diluted earnings per share and all years noted refer to the corresponding fiscal year. As Todd already discussed sales, I will start with gross profit. As a reminder, gross profit in Q4 2020 and fiscal year 2020 were both positively impacted by a significant increase in sales, including net sales growth of 24% and 28%, respectively, in our combined non-consumables categories. For Q4 2021, gross profit as a percentage of sales was 31.2%, a decrease of 131 basis points. The decrease compared to Q4 2020 was primarily attributable to a higher LIFO provision, increased transportation and distribution costs and a greater proportion of sales coming from our consumables category. Of note, while we expect some relief as we move through 2022, our Q4 supply chain expenses were significantly higher compared to Q4 2020, resulting in a headwind to gross margin of approximately $100 million. These factors were partially offset by a reduction in markdowns as a percentage of sales in higher inventory markups. SG&A as a percentage of sales was 22% in the quarter, a decrease of 16 basis points. This decrease was primarily driven by lower incremental costs related to COVID-19, lower hurricane-related expenses and a reduction in incentive compensation. These items were partially offset by certain expenses that were higher as a percentage of sales, including retail labor, occupancy costs, and depreciation and amortization. Moving down the income statement. Operating profit for the fourth quarter decreased 8.7% to $797 million. As a percentage of sales, operating profit was 9.2%, a decrease of 116 basis points. Our effective tax rate for the quarter was 21.2% and compares to 22.7% in the fourth quarter last year. Finally, earnings per share for the fourth quarter decreased 1.9% to $2.57, which reflects a compound annual growth rate of 10.6% over a two-year period. Turning now to our balance sheet and cash flow, which remained strong and provided us the financial flexibility to continue investing for the long term while delivering significant returns to shareholders. Merchandise inventories were $5.6 billion at the end of the year, an increase of 7% overall and 1.4% on a per store basis. Importantly, as Todd noted, we have begun to see a meaningful improvement in our in-stock levels since the end of the year and expect continued improvement as we move through 2022, underscoring our optimism that we are well positioned to serve our customers with the products they want and need. In 2021, we generated significant cash flow from operations totaling $2.9 billion. Total capital expenditures for the year were $1.1 billion and included our planned investments in new stores, remodels and relocations, distribution and transportation projects and spending related to our strategic initiatives. During the quarter, we repurchased 2.2 million shares of our common stock for $490 million and paid a quarterly dividend of $0.42 per common share outstanding at a total cost of $97 million. At the end of the year, the remaining share repurchase authorization was $2.1 billion. Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in high-return growth opportunities, including new store expansion and our strategic initiatives. We also remain committed to returning significant cash to shareholders through anticipated share repurchases and quarterly dividend payments, all while maintaining our current investment-grade credit rating and managing to a leverage ratio of approximately three times adjusted debt to EBITDAR. Moving to our financial outlook for fiscal 2022. First, I want to remind everyone that our fiscal year 2022 includes a 53rd week which will occur during the last period of the fourth quarter. We also continue to operate in a time of uncertainty regarding, among other things, the impacts on the business arising from the current geopolitical conflict and the recovery from the global COVID pandemic, including recovery of the U.S. economy, changes in consumer behavior, labor markets and government stimulus and assistance programs. Despite these uncertainties, including cost inflation, ongoing pressure in the supply chain and rising fuel costs, we are pleased to provide annual guidance that reflects our confidence in the business. With that in mind, we expect the following for 2022. Net sales growth of approximately 10%, including an estimated benefit of approximately two percentage points from the 53rd week, same-store sales growth of approximately 2.5%, and earnings per share growth of approximately 12% to 14%, including an estimated benefit of approximately four percentage points from the 53rd week. Our earnings per share guidance assumes an effective tax rate range of 22.5% to 23%. We also expect capital spending to be in the range of $1.4 billion to $1.5 billion, which includes the impact of increases in the cost of certain building materials, as well as continued investment in our strategic initiatives and core business to support and drive future growth. With regards to shareholder returns, our board of directors recently approved a quarterly dividend payment of $0.55 per share, which represents an increase of 31%. We also plan to repurchase a total of approximately $2.75 billion of our common stock this year, reflecting our continued strong liquidity position, the benefit from the 53rd week and our confidence in the long-term growth opportunity for our business. Let me now provide some additional context as it relates to our outlook. In terms of quarterly cadence, we anticipate both comp sales and earnings per share growth to be much stronger in the second half of the year than the first half. As a reminder, we are lapping a significant stimulus benefit from Q1 2021, including gross margin expansion of 208 basis points. We also anticipate ongoing cost inflation, including elevated supply chain and fuel costs. While we do not typically provide quarterly guidance, given the unusual lap in the significant inflationary environment in Q1, we are providing more specific detail on our expectations for the first quarter. To that end, we expect a comp sales decline of 1% to 2% in Q1 with an earnings per share in the range of approximately $2.25 to $2.35. Turning now to gross margin for 2022. We expect to continue realizing benefits from our initiatives, including DG Fresh and NCI. In addition, we are optimistic that distribution and transportation efficiencies, including significant expansion of our private fleet, could drive additional benefits over the year despite continued cost pressures in the near term. Partially offsetting some of these benefits are rising fuel costs, as well as an expected return to recent historical rates of markdowns and shrink, all of which are expected to be headwinds in 2022. With regards to SG&A, we expect continued investments in our strategic initiatives as we further their rollouts. However, in aggregate, we continue to expect they will positively contribute to operating profit and margin in 2022 as we expect the benefits to gross margin from our initiatives will more than offset the associated SG&A expense. We also continue to pursue efficiencies and savings through our Save to Serve program, including Fast Track. And we believe these savings in 2022 will offset a portion of an expected increase in wage inflation. In summary, we are proud of our fourth quarter and full year results in 2021, which are a testament to the perseverance and execution by the team. Looking ahead, we are excited about our plans for 2022, including our outlook for sales and earnings per share growth, as well as our planned significant returns to shareholders via an increased dividend payout and increased share repurchases. As always, we continue to be disciplined in how we manage expenses and capital with the goal of delivering consistent, strong financial performance while strategically investing in our business and employees for the long term. We remain confident in our business model and our ongoing financial priorities to drive profitable same-store sales growth, healthy new store returns, strong free cash flow and long-term shareholder value. Let me take the next few minutes to update you on our operating priorities and strategic initiatives, including our plans for 2022. Our first operating priority is driving profitable sales growth. We have a growing portfolio of initiatives which are contributing to our strong results, as well as strengthening the foundation for future growth. Let me take you through some of the recent highlights, as well as some of our next steps. Starting with our non-consumables initiative, or NCI, which was available in more than 11,700 stores at the end of 2021. We continued to be very pleased with the strong sales and margin performance we are seeing across the NCI store base. Notably, NCI stores outperformed non-NCI stores in both average ticket and customer traffic, driving an incremental 2.5% total comp sales increase on average in NCI stores, along with a meaningful improvement in gross margin rate. We expect to realize ongoing sales and margin benefits from NCI in 2022, and we are on track to complete the rollout across nearly the entire chain by the end of the year. Moving to our newest store concept, pOpshelf, which further builds on our success and learnings with NCI. As a reminder, pOpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience delivered through continually refreshed merchandise, a differentiated in-store experience and exceptional value, with the vast majority of our items priced at $5 or less. During the quarter, we opened 25 new pOpshelf locations, bringing the total number of stores to 55 and exceeding our initial goal of 50 stores. Additionally, we opened 11 new store within a store concepts during Q4, bringing the total number of Dollar General Market stores with a smaller-footprint pOpshelf store included to a total of 25 at the end of the year. And we continue to be pleased with the results. In 2022, we plan to nearly triple the pOpshelf store count and open up to an additional 25 store-within-a-store concepts, which would bring us to a total of more than 150 stand-alone pOpshelf locations and a total of approximately 50 store-within-a-store concepts. We continue to anticipate year one annualized sales volumes for our current locations to be between $1.7 million and $2 million per store and expect the average gross margin rate for these stores to exceed 40%. In addition to the early success of pOpshelf, we have been able to take some of our learnings and apply them in our Dollar General store base, particularly in further enhancing our nonconsumables offering. Overall, we are very pleased with the results from this unique and differentiated concept, and we are excited about our goal of approximately 1,000 pOpshelf locations by year-end 2025. Turning now to DG Fresh, which is a strategic, multi-phased shift to self-distribution of frozen and refrigerated goods, along with a focus on driving continued sales growth in these areas. As a reminder, we completed the initial rollout of DG Fresh across the entire chain in 2021 and are now delivering to more than 18,000 stores from 12 facilities. The primary objective of DG Fresh is to reduce product cost on our frozen and refrigerated items, and we continue to be very pleased with the savings we are seeing. Notably, DG Fresh was a meaningful positive contributor to our gross margin rate in 2021, and we expect to see continued benefits in 2022. Another important goal of DG Fresh is to increase sales in our frozen and refrigerated categories. We are pleased with the performance on this front, including enhanced product offerings in stores and strong performance from our perishables department. In fact, our perishables department had a high single-digit comp increase in Q4 and contributed more comp sales dollars than any other department for both Q4 and the full year. Importantly, the sales penetration of these categories has increased to approximately 9% as compared to approximately 8% prior to the rollout of DG Fresh. In 2022, we expect to realize additional benefits from DG Fresh as we continue to optimize our network, further leverage our scale and deliver an even wider product selection. And while produce is not included in our initial rollout, we continue to believe that DG Fresh provides a potential path forward to expanding our produce offering to more than 10,000 stores over time. To that end, at the end of Q4, we offered produce in more than 2,100 stores, with plans to expand this offering to a total of more than 3,000 stores by the end of 2022. Finally, DG Fresh has also extended the reach of our cooler expansion program. During 2021, we added more than 65,000 cooler doors across our store base. In 2022, we again expect to install more than 65,000 additional doors as we continue to build on our multiyear track record of growth in cooler doors and associated sales. Turning now to an update on our expanded health offering, which consists of up to 30% more feet of selling space and up to 400 additional items as compared to our standard offering. This offering was available in nearly 1,200 stores at the end of 2021, with plans to expand to a total of more than 4,000 stores by the end of 2022. As we move toward becoming more of a health destination, particularly in rural America, our plans include further expansion of our health offering, with the goal of increasing access to basic healthcare products and ultimately services over time. In addition to the gross margin benefits associated with the initiatives I just discussed, we continue to pursue other opportunities to enhance gross margin, including improvements in private brand sales, global sourcing, supply chain efficiencies and shrink reduction. Our second priority is capturing growth opportunities. Our proven high-return, low-risk real estate model has served us well for many years and continues to be a core strength of our business. In 2021, we completed a total of 2,902 real estate projects, including 1,050 new stores, 1,752 remodels and 100 relocations. For 2022, we remain on track to execute nearly 3,000 real estate projects in total, including 1,110 new stores, 1,750 remodels and 120 store relocations. As a reminder, we expect approximately 800 of our new stores in 2022 to be in our larger, 8,500 square foot store format, allowing for an expanded assortment and room to accommodate future growth as we respond to our customers' desire for an even wider product selection. Importantly, we continue to be very pleased with the sales productivity of all of our larger-format stores as average sales per square foot are about 15% above an average traditional store. In addition to our planned Dollar General and pOpshelf growth in 2022, and included in our expected new store total, we are very excited about our plans to expand internationally with the goal of opening up to 10 stores in Mexico by the end of 2022. Overall, our real estate pipeline remains robust with more brick-and-mortar stores than any retailer in the country. And we are excited about our ability to capture significant growth opportunities in the years ahead. Next, our digital initiative, which is an important complement to our physical footprint as we continue to deploy and leverage technology to further enhance convenience and access for our customers. Our efforts remain centered around building engagement across our digital properties, including our mobile app. We ended 2021 with over million monthly active users on the app and expect this number to grow as we look to further enhance our digital offerings. As with everything we do, the customer is at the center of our digital initiative. Our partnership with DoorDash is the latest example of these efforts as we look to extend the value offering of Dollar General, combined with the convenience of same-day delivery in an hour or less. This offering was available in more than 10,700 stores at the end of Q4, and we are very pleased with the early results, including our ability to generate profitable transactions, as well as better-than-expected customer trial, strong repurchase rates, high levels of sales incrementality and a broadening of our customer base. In addition, our DG Media Network is becoming increasingly more relevant in connecting our brand partners with our customers. To that end, we significantly grew the reach of this network in 2021, increasing from 6 million unique active profiles to more than 75 million, enabling our vendors to now reach over 90% of our DG customers through the DG Media Network. After establishing the foundation over the last few years, we are poised to meaningfully grow this business in 2022 and beyond as we expand the program and enhance the value proposition for both our customers and brand partners while increasing the overall net financial benefit for the business. Overall, our strategy consists of building a digital ecosystem specifically tailored to provide our customers with an even more convenient, frictionless and personalized shopping experience. And we are pleased with the growing engagement we are seeing across our digital properties. Our third operating priority is to leverage and reinforce our position as a low-cost operator. We have a clear and defined process to control spending which continues to govern our disciplined approach to spending decisions. This zero-based budgeting approach, internally branded as Save to Serve, keeps the customer at the center of all we do while reinforcing our cost control mindset. Notably, the Save to Serve program contributed more than $800 million in cumulative cost savings from its inception in 2015 through the end of 2021. Our Fast Track initiative is a great example of this approach, where our goals include increasing labor productivity in our stores, enhancing customer convenience and further improving on-shelf availability. The first phase of Fast Track consisted of both rolltainer and case pack optimization, which has led to the more efficient stocking of our stores. The second component of Fast Track is self-checkout, which provides customers with another flexible and convenient checkout solution while also driving greater efficiencies for our store associates. Self-checkout was available in more than 6,100 stores at the end of 2021. We continue to be pleased with our results, including strong and growing customer adoption rates and high scores on speed and ease of checkout. In 2022, we plan to expand this offering to a total of up to 11,000 stores by the end of the year as we look to further extend our position as an innovative leader in small box discount retail. Looking ahead, the next phase of Fast Track consists of increasing our utilization of emerging technology and data strategies, which includes putting new digital tools in the hands of our field leaders in 2022. When combined with our data-driven inventory management, we believe these efforts will reduce store workload and drive greater efficiencies for our retail associates and leaders. I also want to highlight our growing private fleet, which consisted of more than 700 tractors and accounted for approximately 20% of our outbound transportation fleet at the end of 2021. We are focused on significantly expanding our private fleet in 2022, as we plan to more than double the number of tractors, we expect will account for approximately 40% of our outbound transportation fleet by the end of the year. Importantly, we save an average of 20% of associated costs every time we replace a third-party tractor with one from our private fleet. Moving forward, we believe our private fleet will become an increasingly significant competitive advantage as it gives us greater operational control in our supply chain while further optimizing our cost structure. Our underlying principles are to keep the business simple, but move quickly to capture growth opportunities while controlling expenses and always seeking to be a low-cost operator. Our fourth operating priority is investing in our diverse teams through development, empowerment and inclusion. As a growing retailer, we created thousands of new jobs in 2021, providing career growth opportunities for existing associates and the start of a career for many others. In 2022, we now expect to create more than 10,000 net new jobs as a result of our continued growth. Our internal promotion pipeline remains robust, as evidenced by our internal placement of more than 75% of our store associates at or above the lead sales associate position. We also continue to innovate on development for our teams to provide ongoing opportunities for career advancement, and in turn, meaningful wage growth. These investments include offering an enhanced college tuition benefit for our associates and their families, as well as continuing to facilitate driver training programs for associates who would like to become drivers in our private fleet. In addition to our focus on development, we continue to focus on further enhancing the associate experience and our strong workplace culture. Collectively, these investments continue to yield positive results across our organization, including healthy applicant flow and strong critical staffing levels. We believe the opportunity to start and develop a career with a growing and purpose-driven company is a unique competitive advantage and remains our greatest currency in attracting and retaining talent. Overall, we made significant progress against our operating priorities and strategic initiatives in 2021. These efforts have further strengthened our foundation and position heading into 2022 as we continue to drive long-term sustainable growth. In closing, I'm proud of the team's strong and resilient performance in 2021. As we enter 2022, we are laser-focused on executing and delivering our robust plans, which we believe will further enhance our unique combination of value and convenience for our customers while delivering strong returns for our shareholders.

q4 same store sales fell 1.4 percent. sees q1 earnings per share $2.25 to $2.35. q4 earnings per share $2.57. q4 sales rose 2.8 percent to $8.7 billion. q4 same-store sales decreased 1.4%; increased 11.3% on a two-year stack basis.

Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about factors that could lead to material changes in performance is contained in D.R. Horton's annual report on Form 10-K, which is filed with the Securities and Exchange Commission. drhorton.com and we plan to file our 10-Q later today or tomorrow. The D.R. Horton team delivered an outstanding first quarter, highlighted by a 48% increase in earnings to $3.17 per diluted share. Our consolidated pre-tax income increased 45% to $1.5 billion on a 19% increase in revenues and our consolidated pre-tax profit margin improved 380 basis points to 21.2%. Our homebuilding return on inventory for the trailing 12 months ended December 31 was 38.5% and our consolidated return on equity for the same period was 32.4%. These results reflect our experienced teams, their production capabilities and our ability to leverage D.R. Horton's scale across our broad geographic footprint. Even with the recent rise in mortgage rates, housing market conditions remain very robust and we are focused on maximizing returns while continuing to increase our market share. There are still significant challenges in the supply chain, including shortages in certain building materials and a very tight labor market. We are focused on building the infrastructure and processes to support a higher level of home starts while working to stabilize and then reduce construction cycle times to our historical norms. After starting construction on 25,500 homes this quarter, our homes and inventory increased 30% from a year ago to 54,800 homes with only 1,000 unsold completed homes across the nation. Our January home starts and net sales holders were in line with our targets and we are well positioned to achieve double-digit volume growth in 2022. We believe our strong balance sheet, liquidity and low leverage position us very well to operate effectively through changing economic conditions. We plan to maintain our flexible operational and financial position by generating strong cash flows from our homebuilding operations while managing our product offerings, incentives, home pricing, sales base and inventory levels to optimize returns. Earnings for the first quarter of fiscal 2022 increased 48% to $3.17 per diluted share compared to $2.14 per share in the prior-year quarter. Net income for the quarter increased 44% to $1.1 billion compared to $792 million. Our first quarter home sales revenues increased 17% to $6.7 billion on 18,396 homes closed, up from $5.7 billion on 18,739 homes closed in the prior year. Our average closing price for the quarter was $361,800, up 19% from the prior-year quarter, while the average size of our homes closed was down 1%. Our net sales orders in the first quarter increased 5% to 21,522 homes, while the value increased 29% from the prior year to $8.3 billion. A year ago, our first quarter net sales orders were up 56% due to the surge in housing demand during the first year of the pandemic when we had significantly more completed homes available to sale and prior to the significant supply chain challenges we've experienced since. Our average number of active selling communities decreased 3% from the prior-year quarter and was up 3% sequentially. Our average sales price on net sales orders in the first quarter was $383,600, up 22% from the prior-year quarter. The cancellation rate for the first quarter was 15%, down from 18% in the prior-year quarter. New home demand remains very strong despite the recent rise in mortgage rates. Our local teams are continuing to sell homes later in the construction cycle so we can better ensure the certainty of the home close date for our homebuyers with virtually no sales occurring prior to start of home construction. We plan to continue managing our sales pace in the same manner during the spring and we expect our number of net sales orders in our second quarter to be equal to the same quarter in the prior year were up by no more than a low single-digit percentage. Our January home sales and net sales order volume were in line with our plans and we are well positioned to deliver double-digit volume growth in fiscal 2022 with 29,300 homes in backlog, 54,800 homes in inventory, a robust lot supply and strong trade and supplier relationships. Our gross profit margin on home sales revenues in the first quarter was 27.4%, up 50 basis points sequentially from the September quarter. The increase in our gross margin from September to December reflects the broad strength of the housing market. The strong demand for homes combined with a limited supply has allowed us to continue to raise prices and maintain a very low level of sales incentives in most of our communities. On a per square foot basis, our home sales revenues were up 3.4% sequentially while our cost of sales per square foot increased 2.9%. We expect our construction and lot costs will continue to increase. However, with the strength of today's market conditions, we expect to offset most cost pressures with price increases in the near term. We currently expect our home sales gross margin in the second quarter to be similar to or slightly better than the first quarter. In the first quarter, homebuilding SG&A expense as a percentage of revenues was 7.5%, down 40 basis points from 7.9% in the prior-year quarter. Our homebuilding SG&A expense as a percentage of revenues was lower than any first quarter in our history and we remain focused on controlling our SG&A while ensuring our infrastructure adequately supports our business. We have increased our housing inventory in response to the strength of demand and are focused on expanding our production capabilities further. We started 25,500 homes during the quarter, up 12% from the first quarter last year, bringing our trailing 12-month starts to 94,200 homes. We ended the quarter with 54,800 homes in inventory, up 30% from a year ago. 25,600 of our total homes at December 31 were unsold, of which only 1,000 were completed. Our average cycle or average construction cycle time for homes closed in the first quarter has increased by almost two weeks since our fourth quarter and two months from a year ago. Although we have not seen much improvement in the supply chain yet, we are focused on working to stabilize and then reduce our construction cycle times to historical norms. At December 31, our homebuilding lot position consisted of approximately 550,000 lots, of which 24% were owned and 76% were controlled through purchase contracts. 23% of our total owned lots are finished and at least 47% of our controlled lots are or will be finished when we purchase them. Our growing and capital-efficient lot portfolio is a key to our strong competitive position and is supporting our efforts to increase our production volume to meet demand. Our first quarter homebuilding investments in lots, land and development totaled $2.2 billion, of which $1.2 billion was for finished lots, $570 million was for land development and $390 million was to acquire land. Forestar, our majority-owned residential lot manufacturer, operates in 55 markets across 23 states. Forestar continues to execute extremely well and now expects to grow its lot deliveries this year to a range of 19,500 to 20,000 lots with a pre-tax profit margin of 13 and a half to 14%. At December 31, Forestar's owned and controlled lot position increased 33% from a year ago to 103,300 lots. Horton or subject to a right of first offer based on executed purchase and sale agreements. $330,000 million of our finished lots purchased in the first quarter were from Forestar. Forestar is separately capitalized from D.R. Horton and had approximately $500 million of liquidity at quarter end with a net debt to capital ratio of 33.9%. With its current capitalization, strong lot supply and relationship with D.R. Horton, Forestar plans to continue profitably growing their business. Financial services pre-tax income in the first quarter was $67.1 million with a pre-tax profit margin of 36.4% compared to $84.1 million and 44.9% in the prior-year quarter. For the quarter, 98% of our mortgage company's loan originations related to homes closed by our homebuilding operations and our mortgage company handled the financing for 66% of our home buyers. FHA and VA loans accounted for 44% of the mortgage company's volume. Borrowers originating loans with DHI Mortgage this quarter had an average FICO score of 721 and an average loan-to-value ratio of 88%. First-time homebuyers represented 55% of the closings handled by the mortgage company this quarter. Our rental operations generated pre-tax income of $70.1 million on revenues of $156.5 million in the first quarter compared to $8.6 million of pre-tax income on revenues of $31.8 million in the same quarter of fiscal 2021. Our rental property inventory at December 31 was $1.2 billion compared to $386 million a year ago. We sold one multifamily rental property of 350 units for $76.2 million during the quarter. There were no sales of multifamily rental properties during the prior-year quarter. We sold two single-family rental properties totaling 225 homes during the quarter for $80.3 million compared to one property sold in the prior-year quarter for $31.8 million. At December 31, our rental property inventory included $519 million of multifamily rental properties and $642 million of single-family rental properties. As a reminder, our multifamily and single-family rental sales and inventories are reported in our rental segment and are not included in our homebuilding segments, homes closed, revenues or inventories. In fiscal 2022, we continue to expect our rental operations to generate more than $700 million in revenues. We also expect to grow the inventory investment in our rental platform by more than $1 billion this year based on our current projects in development and our significant pipeline of future projects. We are positioning our rental operations to be a significant contributor to our revenues, profits and returns in future years. Our balanced capital approach focuses on being disciplined, flexible and opportunistic. During the three months ended December, our cash used in homebuilding operations was $115 million as we invested significant operating capital to increase our homes and inventory to meet the current strong demand. At December 31, we had $4.1 billion of homebuilding liquidity consisting of $2.1 billion of unrestricted homebuilding cash and $2 billion of available capacity on our homebuilding revolving credit facility. We believe this level of homebuilding cash and liquidity is appropriate to support the scale and activity of our business and to provide flexibility to adjust to changing market conditions. Our homebuilding leverage was 17.3% at the end of December and homebuilding leverage net of cash was 6.9%. Our consolidated leverage at December 31 was 25.1% and consolidated leverage net of cash was 15.2%. At December 31, our stockholders' equity was $15.7 billion and book value per share was $44.25, up 29% from a year ago. For the trailing 12 months ended December, our return on equity was 32.4% compared to 24.4% a year ago. During the quarter, we paid cash dividends of $80.1 million and our board has declared a quarterly dividend at the same level as last quarter to be paid in February. We repurchased 2.7 million shares of common stock for $278.2 million during the quarter. Our remaining share repurchase authorization at December 31 was $268 million. We remain committed to returning capital to our shareholders through both dividends and share repurchases on a consistent basis and to reducing our outstanding share count each fiscal year. As we look forward to the second quarter of fiscal 2022, we are expecting market conditions to remain similar with strong demand from homebuyers, but continuing supply chain challenges. We expect to generate consolidated revenues in our March quarter of $7.3 billion to $7.7 billion and homes closed by our homebuilding operations to be in a range between 19,000 and 20,000 homes. We expect our home sales gross margin in the second quarter to be approximately 27.5% and homebuilding SG&A as a percentage of revenues in the second quarter to be approximately 7.5%. We anticipate the financial services pre-tax profit margin in the range of 30% to 35% and we expect our income tax rate to be approximately 24% in the second quarter. For the full fiscal year, we continue to expect to close between 90,000 and 92,000 homes, while we now expect to generate consolidated revenues of $34.5 billion to $35.5 billion. We forecast an income tax rate for fiscal 2022 of approximately 24% and we also continue to expect that our share repurchases will reduce our outstanding share count by approximately 2% at the end of fiscal 2022 compared to the end of fiscal 2021. We still expect to generate positive cash flow from our homebuilding operations this year after our investments in home building inventories to support double-digit growth. We will then continue to balance our cash flow utilization priorities among increasing the investment in our rental operations, maintaining conservative homebuilding leverage and strong liquidity, paying an increased dividend and consistently repurchasing shares. In closing, our results reflect our experienced teams and production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands. Our strong balance sheet, liquidity and low leverage provide us with significant financial flexibility to capitalize on today's robust market and to effectively operate in changing economic conditions. We plan to maintain our disciplined approach to investing capital to enhance the long-term value of the company, which includes returning capital to our shareholders through both dividend and share repurchases on a consistent basis. Horton team for your focus and hard work. We are incredibly well positioned to continue growing and improving our operations in 2022. We will now host questions.

q1 earnings per share $3.17. qtrly consolidated revenues increased 19% to $7.1 billion. homes closed in quarter decreased 2% to 18,396 homes compared to 18,739 homes closed in same quarter of fiscal 2021. qtrly net sales orders increased 29% in value to $8.3 billion on 21,522 homes sold. reaffirms its previously issued fiscal 2022 guidance. homebuilding revenue for q1 of fiscal 2022 increased 17% to $6.7 billion from $5.7 billion in same quarter of fiscal 2021. updating its fiscal 2022 guidance for consolidated revenues to range of $34.5 billion to $35.5 billion.

Although D.R. Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about factors that could lead to material changes in performance is contained in D.R. Horton's Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q, both of which are filed with the Securities and Exchange Commission. drhorton.com and we plan to file our 10-Q early next week. The D.R. Horton team delivered an outstanding third quarter, highlighted by a 78% increase in earnings to $3.06 per diluted share. Our consolidated pre-tax income increased 81% on a 35% increase in revenues to $7.3 billion and our pre-tax profit margin improved 490 basis points to 19.4%. Our homebuilding return on inventory for the trailing 12-months ended June 30 was 34.9% and our consolidated return on equity for the same period was 29.5%. These results reflect our experienced teams and their production capabilities, our ability to leverage D.R. Horton scale across our broad geographic footprint and our product positioning to offer homes at affordable price points across multiple brands. Housing market conditions remained very robust, and we are focused on maximizing returns and increasing our market share further. However, multiple disruptions in the supply chain, combined with the improvement in economic conditions and strong demand for new homes have resulted in shortages in certain building materials and tightness in the labor market, which has caused our construction time to become less predictable. As our top priority is to consistently fulfill our commitments to our homebuyers, we have slowed our home sales pace to more closely align to our current production levels and are selling homes later in the construction cycle, when we can better ensure the certainty of home close date for our homebuyers. We expect to work through these issues and increasing our production capacity. We started construction on 22,600 homes this quarter and our homes in inventory increased 44% from a year ago to 47,300 homes at June 30, 2021, positioning us to finish 2021 strong and to achieve double-digit growth again in 2022. We believe our strong balance sheet, liquidity and low leverage positioned us very well to operate effectively through changing economic conditions. We plan to maintain our flexible operational and financial position by generating strong cash flows from our homebuilding operations and managing our product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on our inventory investments. Earnings for the third quarter of fiscal 2021 increased 78% to $3.06 per diluted share compared to $1.72 per share in the prior year quarter. Net income for the quarter increased 77% to $1.1 billion compared to $630.7 million. Our third quarter home sales revenues increased 35% to $7 billion on 21,588 homes closed, up from $5.2 billion on 17,642 homes closed in the prior year. Our average closing price for the quarter was $326,100 and the average size of our homes closed was down 2%. The value of our net sales orders in the third quarter increased 2% from the prior year to $6.4 billion, while our net sales orders for the quarter decreased 17% to 17,952 homes. Our average number of active selling communities increased 1% from the prior year quarter and was down 3% sequentially. Our average sales price on net sales orders in the third quarter was $359,200. The cancellation rate for the third quarter was 17%, down from 22% in the prior year quarter. As David described, in this very strong demand environment, our local teams are restricting the sales order pace in each of their communities based on the number of homes in inventory, construction time and lot position. They continue to adjust sales prices to market on a community-by-community basis, while staying focused on providing value to our buyers. Based on the stage of completion of our current homes in inventory, production schedules, and capacity, we expect to continue restricting the pace of our sales orders during our fourth fiscal quarter. As a result, we expect our fourth quarter net sales orders to be lower than the third quarter. However, we are confident that we will be well-positioned to deliver double-digit volume growth in fiscal 2022 with 32,200 homes in backlog, 47,300 homes in inventory, a robust lot supply and strong trade and supplier relationships. Our gross profit margin on home sales revenue in the third quarter was 25.9%, up 130 basis points sequentially from the March quarter. The increase in our gross margin from March to June exceeded our expectations and reflects the broad strength of the housing market. The strong demand for a limited supply of homes has allowed us to continue to raise prices or lower the level of sales incentives in most of our communities. On a per square foot basis, our revenues were up 4.7% sequentially, while our stick and brick cost per square foot increased 3.5% and our lot cost increased 1.7%. We expect both our construction and lot costs will continue to increase on a per square foot basis. However, with the strength in today's market conditions, we expect to offset any cost pressures with price increases. We currently expect our home sales gross margin in the fourth quarter to be similar to or slightly better than the third quarter. We remain focused on managing the pricing, incentives and sales pace in each of our communities to optimize the return on our inventory investments and adjust to local market conditions and new home demand. In the third quarter, homebuilding SG&A expense as a percentage of revenues was 7.1%, down 80 basis points from 7.9% in the prior year quarter. Our homebuilding SG&A expense, as a percentage of revenues, is lower than any quarter in our history and we remain focused on controlling our SG&A, while ensuring that our infrastructure adequately supports our business. We have increased our housing inventory in response to the strength of demand and we expect the current constraints on our supply chain to ultimately subside. This quarter, we started 22,600 homes, up 33% from the third quarter last year, bringing our trailing 12-month starts to 94,500 homes. We ended this quarter with 47,300 homes in inventory, up 44% from a year ago. 15,400 of our total homes at June 30 were unsold, of which 500 were complete. At June 30, our homebuilding lot position consisted of approximately 517,000 lots, of which 24% were owned and 76% were controlled through purchase contracts. 25% of our total owned lots are finished and at least 44% of our controlled lots are or will be finished when we purchase them. Our growing and capital efficient lot portfolio is a key to our strong competitive position and it'll support our efforts to increase our production volume to meet homebuyer demand. Our third quarter homebuilding investments in lots, land and development totaled $1.8 billion, of which $910 million was for finished lots, $540 million was for land development and $350 million was to acquire land. $300 million of our total lot purchases in the third quarter were from Forestar. Forestar, our majority owned subsidiary, is a publicly traded well-capitalized residential lot manufacturer operating in 55 markets across 22 states. Forestar is delivering on its high-growth expectations and now expects to grow its fiscal 2021 lot deliveries by approximately 50% year-over-year to a range of 15,500 to 16,000 lots with a pre-tax profit margin of 11.5% to 12%, excluding their $18.1 million loss on extinguishment of debt recognized during the quarter. At June 30, Forestar's owned and controlled lot position increased 91% from a year ago to 96,600 lots. 61% of Forestar's owned lots are under contract with D.R. Horton or subject to a Right of First offer under our master supply agreement. Forestar is separately capitalized from D.R. Horton and had approximately $470 million of liquidity at quarter end with a net debt-to-capital ratio of 37.8%. With a strong lot supply, capitalization and relationship with D.R. Horton, Forestar plans to continue profitably growing their business. Financial Services pre-tax income in the third quarter was $70.3 million with a pre-tax profit margin of 37.3% compared to $68.8 million and 43.9% in the prior year quarter. The year-over-year decline in our Financial Services pre-tax profit margin was primarily due to lower net gains on loans originated this quarter caused by market fluctuations and increased competitive pricing pressure in the market. For the quarter, 98% of our mortgage company's loan originations related to homes closed by our homebuilding operations and our mortgage company handled the financing for 66% of our homebuyers. FHA and VA loans accounted for 45% of the mortgage company's volume. Borrowers originating loans with DHI Mortgage this quarter had an average FICO score of 721 and an average loan-to-value ratio of 89%. First-time homebuyers represented 58% of the closings handled by the mortgage company this quarter. At June 30, our multi-family rental operations had 11 projects under active construction and an additional four projects that are completed and in the lease-up phase. Based on leased occupancy in our marketing process, we expect to sell two or three of these projects during the fourth quarter of fiscal 2021. Our multi-family rental assets sold $458.3 million at June 30. Last year, we began constructing and leasing homes as income-producing single-family rental communities. After these rental communities are constructed and achieve a stabilized level of leased occupancy, each community is marketed for sale. During the third quarter, we sold our second single-family rental community for $23.1 million in revenue and $11.4 million of gross profit. At June 30, our homebuilding inventory included $303.1 million of assets related to 44 single-family rental communities, compared to $87.2 million of assets related to 10 communities at the beginning of the fiscal year. We are pleased with the performance of our single and multi-family rental teams and we look forward to their growing contributions for our future profits and returns. Our balanced capital approach focuses on being disciplined, flexible and opportunistic. During the nine months ended June, our cash provided by homebuilding operations was $276 million even while we have reinvested significant operating capital to expand our homebuilding inventories in response to strong demand. At June 30, we had $3.7 billion of homebuilding liquidity, consisting of $1.7 billion of unrestricted homebuilding cash and $2 billion of available capacity on our homebuilding revolving credit facility. We believe this level of homebuilding cash and liquidity is appropriate to support the increased scale and activity in our business and to provide flexibility to adjust to changing market conditions. Our homebuilding leverage was 16% at the end of June with $2.5 billion of homebuilding public notes outstanding and no senior note maturities in the next 12 months. At June 30, our stockholders' equity was $13.8 billion and book value per share was $38.54, up 27% from a year ago. For the trailing 12-months ended June, our return on equity was 29.5% compared to 19.9% a year ago. During the quarter, we paid cash dividends of $72.1 million and our Board has declared a quarterly dividend at the same level as last quarter to be paid in August. We repurchased 2.6 million shares of common stock for $241.2 million during the quarter for a total of 8.1 million shares repurchased fiscal year-to-date for $661.4 million. Our remaining share repurchase authorization at June 30 was $758.8 million. We remain committed to returning capital to our shareholders through both dividends and share repurchases on a consistent basis and to reducing our outstanding share count each fiscal year. In the fourth quarter of fiscal 2021, based on today's market conditions, we expect to generate consolidated revenues of $7.9 billion to $8.4 billion and our homes closed to be in a range between 23,000 and 24,500 homes. We expect our home sales gross margin in the fourth quarter to be in the range of 26% to 26.3% and homebuilding SG&A, as a percentage of revenues, in the fourth quarter to be approximately 7%. We anticipate our Financial Services pre-tax profit margin in the range of 40% to 45% and we expect our income tax rate to be approximately 23.5%. For the full fiscal year of 2021, we now expect consolidated revenues of $27.6 billion to $28.1 billion and to close between 83,000 and 84,500 homes. This year, we have prioritized reinvestment of our operating capital to increase our housing and land and lot inventories to support higher demand. Our other cash flow priorities remain balanced among increasing our investment in our multi and single-family rental platforms, maintaining conservative homebuilding leverage and strong liquidity, paying a dividend and repurchasing shares to reduce our outstanding share count by approximately 2% from the beginning of fiscal 2021. In closing, our results reflect our experienced teams and production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands. Our results also illustrate the growth opportunity in front of us as we increase production capacity in response to homebuyer demand. Our strong balance sheet, liquidity and low leverage provide us with a significant financial flexibility to capitalize on today's robust market and to effectively operate in changing economic conditions. We plan to maintain our disciplined approach to investing capital to enhance the long-term value of the company, which includes returning capital to our shareholders through both dividends and share repurchases on a consistent basis. As a result of these efforts, we are incredibly well-positioned to continue growing and improving our operations. We will now host questions.

d r horton q3 earnings per share $3.06. q3 earnings per share $3.06. qtrly homes closed increased 35% in value to $7.0 billion on 21,588 homes closed. qtrly consolidated revenues increased 35% to $7.3 billion. qtrly net sales orders increased 2% in value to $6.4 billion on 17,952 homes sold. homebuilding revenue for q3 of fiscal 2021 increased 35% to $7.1 billion from $5.2 billion in same quarter of fiscal 2020. at june 30, 2021, company had 47,300 homes in inventory. housing market conditions remain very robust. have slowed our home sales pace to more closely align to our current production levels. homebuyer demand exceeding our current capacity to deliver homes across all of our markets. are also selling homes later in construction cycle when we can better ensure certainty of home close date for our homebuyers. sees 2021 consolidated revenues of $27.6 billion to $28.1 billion.

Although D.R. Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about factors that could lead to material changes in performance is contained in D.R Horton's annual report on Form 10-K and subsequent reports on Form 10-Q, all of which are or will be filed with the Securities and Exchange Commission. drhorton.com and we plan to file our 10-K toward the end of next week. All of this can be found at investors. Today, we also have Paul Romanowski with us. He was recently promoted to Executive Vice President and Co-Chief Operating Officer. Paul has been with D.R Horton since 1999, serving as our regional Florida as our Florida South Division President for 15 years and most recently as our Florida region President for seven years. I'd like to take a brief moment to have Paul introduce himself before we get started. I'm excited for the opportunity to serve into my new role on the D.R Horton management team and I look forward to getting know our investors and analysts in the coming year. Given that Paul is new to his role, he will not be an active participant today, but we are glad to have him with us and believe his extensive homebuilding experience will strengthen our executive team. The D.R Horton team finished the year with a strong fourth quarter, which included a 63% increase in consolidated pre-tax income to $1.7 billion and a 27% increase in revenue to $8.1 billion. Our pre-tax profit margin for the quarter improved 480 basis points to 21.3% and our earnings per diluted share increased 65% to $3.70. For the year, consolidated pre-tax income increased 80% to $5.4 billion on a $27.8 billion of revenue. Our pre-tax profit margin for the year improved 460 basis points to 19.3% and our earnings per diluted share increased 78% to $11.41. We closed a record 81,965 homes this year, an increase of over 16,500 homes or 25% from last year. While also achieving a historical low homebuilding SG&A percentage of 7.3%, our homebuilding return on inventory was 37.9% and our return on equity was 31.6%. These results reflect our experienced teams in their production capabilities, our ability to leverage D.R Horton scale across our broad geographic footprint and our product positioning to offer homes at affordable price points across multiple brands. Our homebuilding cash flow from operations for 2021 was $1.2 billion. Over the past five years, we have generated $5.9 billion of cash flow from homebuilding operations, while growing our consolidated revenues by 128% and our earnings per share by 383%. During this time, we also more than doubled our book value per share, reduced our homebuilding leverage 220% and increased our homebuilding liquidity by $2.8 billion, all while significantly increasing our returns on inventory and equity. Housing market conditions remain very robust and we are focused on maximizing returns and increasing our market share further. However, there are still significant challenges in the supply chain, including shortages in certain building materials and tightness in the labor market. As a result, we continued restricting our home sales pace during the fourth quarter by selling homes later in the construction cycle to align with our production levels and better ensure certainty of home closing date for our homebuyers. We expect to work through the supply chain challenges and ultimately increase our production capacity. After starting construction on 22,400 homes, our homes and inventory increased 26% from a year ago to 47,800 homes at September 30, 2021. In October, we started more than 8,000 homes, further positioning us to achieve double-digit growth and again in 2022. We believe our strong balance sheet, liquidity and a low leverage position us very well to operate effectively through changing economic conditions. We plan to maintain our flexible operational and financial position by generating strong cash flows from our homebuilding operations and managing our product offerings, incentives, home pricing sales pace and inventory levels to optimize our returns. Diluted earnings per share for the fourth quarter of fiscal 2021 increased 65% to $3.70 per share, and for the year diluted earnings per share increased 78% to $11.41. Net income for the quarter increased 62% to $1.3 billion and for the year, net income increased 76% to $4.2 billion. Our fourth quarter home sales revenues increased 24% to $7.6 billion on 21,937 homes closed, up from $6.1 billion on 20,248 homes closed in the prior year. Our average closing price for the quarter was $346,100, up 14% from last year and the average size of our homes closed was down 1%. Net sales orders in the fourth quarter decreased 33% to 15,949 homes and the value of those orders was $6 billion, down 17% from $7.3 billion in the prior year. A year ago, our fourth quarter net sales orders were up 81% due to the surge in housing demand during the first year of the pandemic when we had significantly more completed homes available to sell and prior to the supply chain challenges that arose in 2021. Our average number of active selling communities decreased 5% from the prior year and was down 3% sequentially. Our average sales price on net sales orders in the fourth quarter was $378,300, up 23% from the prior year. The cancellation rate for the fourth quarter was 19% flat with the prior year quarter. As David described, new home demand remains very strong and our local teams are continuing to restrict our sales order pace where necessary on a community-by-community basis based on the number of homes and inventory, construction times, production capacity and lot position. They also continue to adjust sales prices to market, while staying focused on providing value to our buyers. We are still restricting the pace of our sales orders during our first fiscal quarter, but to a lesser extent than during our fourth quarter. As a result, we expect our first quarter net sales orders to be approximately equal to or slightly higher than our 20,418 sales orders in the first quarter last year. Our October net sales order volume was in line with our plans and we remain confident that we are well positioned to deliver double-digit volume growth in fiscal 2022 with 26,200 homes in backlog, 47,000 homes in inventory, a robust lot supply and strong trade and supplier relationships. Our gross profit margin on home sales revenue in the fourth quarter was 26.9%, up 100 basis points sequentially from the June quarter. The increase in our gross margin from June to September reflects the broad strength of the housing market and benefited from the better alignment of our sales order pace to our construction schedules. The strong demand for a limited supply of homes has allowed us to continue to raise prices or lower the level of sales incentives in most of our communities. On a per square foot basis, our revenues were up 7% sequentially, while our stick and brick cost per square foot increased 7.5% and our lot cost increased 2%. We expect both our construction and lot costs will continue to increase. However, with the strength in today's market conditions, we expect to offset any cost pressures with price increases. We currently expect our home sales gross margin in the first quarter to be similar to the fourth quarter. We remain focused on managing the pricing, incentives and sales pace in each of our communities to optimize the return on our inventory investments and adjust to local market conditions and new home demand. In the fourth quarter, homebuilding SG&A expense as a percentage of revenues was 6.9%, down 70 basis points from 7.6% in the prior year quarter. For the year, homebuilding SG&A expense was 7.3%, down 80 basis points from 8.1% in 2020. Our homebuilding SG&A expense as a percentage of revenues is at its lowest point for a quarter and for a year in our history and we are focused on continuing to control our SG&A, while ensuring that our infrastructure adequately supports our business. We have increased our housing inventory in response to the strength of demand and are focused on expanding our production capabilities further. We started 22, 400, hundred homes during the fourth quarter and 91,500 homes during fiscal 2021, which is an increase of 21% compared to fiscal 2020. We ended the year with 47,800 homes in inventory, up 26% from a year ago. 21,700, hundred of our total homes et September 30th were unsold, of which 900 were completed. Although we have not seen significant improvement in the supply chain yet, we expect the current constraints to ultimately moderate at some point in 2022. At September 30th, our homebuilding lot position consisted of approximately 530,000 lots, of which 24% were owned and 76% were controlled through purchase contracts. 24% of our total owned lots are finished and at least 47% of our controlled lots are or will be finished when we purchase them. Our growing and capital efficient lot portfolio is key to our strong competitive position and will support our efforts to increase our production volume to meet homebuyer demand. Our fourth quarter homebuilding investments in lots, land and development totaled $1.8 billion, of which $1 billion was for finished lots, $330 million was for land, and $440 million was for land development. Forestar, our majority owned subsidiary is a publicly traded, well capitalized residential lot manufacturer operating in 56 markets across 23 states. Forestar continues to execute extremely well on its high growth plan as they increase their lot sold by 53% to 15,915 lakhs during fiscal 2021 compared to the prior year. Forestar's pre-tax profit margin for the year improved 400 basis points to 12.4%, excluding an $18.1 million loss on extinguishment of debt. At September 30th, Forestar's owned and controlled lot position increased 60% from a year ago to 97,000 lots. 61% of Forestar's owned lots are under contract with D.R Horton or subject to a right of first offer under our master supply agreement. $370 million of D.R Horton's land and lot purchases in the fourth quarter were from Forestar. Forestar is separately capitalized from D.R Horton and had approximately $500 million of liquidity at year-end with a net debt to capital ratio of 35.2%. With its current capitalization, strong lot supply and relationship with D.R Horton, Forestar plans to continue profitably growing their business. Financial services pre-tax income in the fourth quarter was $103 million on $223 million of revenue with a pre-tax profit margin of 46.1%. For the year, financial services pre-tax income was $365 million on $824 million of revenue, representing a 44.3% pre-tax profit margin. For the quarter, 98% of our mortgage company's loan originations related to homes closed by our homebuilding operations and our mortgage company handled the financing for 66% of our homebuyers. FHA and VA loans accounted for 45% of the mortgage company's volume. Mortgage this quarter had an average FICO score of 722 and an average loan to value ratio of 89%. First-time homebuyers represented 59% of the closings handled by our mortgage company this quarter. Our multifamily and single-family rental operations generated combined pre-tax income of $742 -- $74.3 [Phonetic] million in the fourth quarter and $86.5 million in fiscal 2021. our total rental property inventory at September 30th was $841 million compared to $316 million a year ago. We sold three multifamily properties totaling 960 units during fiscal 2021 for $191.9 million, all of which were sold in the fourth quarter compared to two properties totaling 540 units sold in fiscal 2020. We sold three single family rental communities totaling 260 homes during fiscal 2021 for $75.9 million, including one sale of 64 homes during the fourth quarter for $21 million in revenue. In fiscal 2022, we expect our rental operations to generate more than $700 million in revenues from rental property sales. We also expect to grow the total inventory investment in our rental platforms by more than $1 billion in fiscal 2022 based on our current rental projects in development and our significant pipeline of future single and multifamily rental projects. We are positioning our rental operations to be a significant contributor to our revenues, profits and returns in future years. Our balanced capital approach focuses on being disciplined, flexible and opportunistic. During fiscal 2021, our cash provided by homebuilding operations was $1.2 billion and our cumulative cash generated from homebuilding operations for the past five years was $5.9 billion. At September 30th, we had $5 billion of homebuilding liquidity consisting of $3 billion of unrestricted homebuilding cash and $2 billion of available capacity on our homebuilding revolving credit facility. This level of liquidity provides significant flexibility to adjust to changing market conditions. Our homebuilding leverage was 17.8% at fiscal year-end with $3.1 billion of homebuilding public notes outstanding, of which $350 million matures in the next 12 months. At September 30th, our stockholders' equity was $14.9 billion and book value per share was $41.81, up 29% from a year ago. For the year, our return on equity was 31.6%, an improvement of 950 basis points from 22.1% a year ago. During the quarter, we paid cash dividends of $71.6 million for a total of $289.3 million of dividends paid during the year. During the quarter, we repurchased 2.3 million shares of common stock for $212.6 million dollars and our stock repurchases during fiscal year 2021 totaled 10.4 million shares for $874 million. Our outstanding share count is down 2% from a year ago and our remaining share repurchase authorization at September 30th was $546.2 million. We remain committed to returning capital to our shareholders through both dividends and share repurchases on a consistent basis and to reducing our outstanding share count each fiscal year. Based on our financial position and outlook for fiscal 2022, our Board of Directors increased our quarterly cash dividend by 13% to $22.5 per share. As we look forward to the first quarter of fiscal 2022, we are expecting market conditions to remain similar with strong demand from homebuyers, but continuing supply chain challenges that will delay home construction, completion and closing. We expect to generate consolidated revenues in our December quarter of $6.5 billion to $6.8 billion and our homes closed by our homebuilding operations to be in a range between 17,500 homes and 18,500 homes. We expect our home sales gross margin in the first quarter to be 26.8% to 27% and homebuilding SG&A as a percentage of revenues in the first quarter to be approximately 8%. We anticipate our financial services pre-tax profit margin in the range of 30% to 35% and we expect our income tax rate to be approximately 24% in the first quarter. Looking further out, we currently expect to generate consolidated revenues for the full fiscal year of 2022 of $32.5 billion to $33.5 billion and to close between 90,000 homes and 92,000 homes. We forecast an income tax rate for fiscal 2022 of approximately 24%, subject to changes and potential future legislation that could increase the federal corporate tax rate. We also expect that our share repurchases will reduce our outstanding share count by approximately 2% at the end of fiscal 2022 compared to the end of fiscal 2021. We expect to generate positive cash flow from our homebuilding operations in fiscal 2022 after our investments in homebuilding inventory to support double-digit growth. We will then balance our cash flow utilization priorities among increasing the investment in our rental operations, maintaining conservative homebuilding leverage and strong liquidity, paying an increased dividend and consistently repurchasing shares. In closing, our results reflect our experienced teams and production capabilities, industry leading market share, broad geographic footprint and diverse product offerings across multiple brands. Our strong balance sheet, liquidity and low leverage provide us with significant financial flexibility to capitalize on today's robust market and to effectively operate in changing economic conditions. We plan to maintain our disciplined approach to investing capital to enhance the long-term value of the company, which includes returning capital to our shareholders through both dividends and share repurchases on a consistent basis. Your efforts during 2021 were remarkable. We closed the most homes in a year in our company's history, achieving 10% market share with record profits and returns and we are incredibly well positioned to continue growing and improving our operations in 2022. We will now host questions.

q4 earnings per share $3.70. qtrly consolidated revenues increased 27% to $8.1 billion. homebuilding revenue for q4 of fiscal 2021 increased 24% to $7.6 billion from $6.2 billion in same quarter of fiscal 2020. homes closed in quarter increased 8% to 21,937 homes compared to 20,248 homes closed in same quarter of fiscal 2020. net sales orders for q4 ended september 30, 2021 decreased 33% to 15,949 homes. sees 2022 consolidated revenues of $32.5 billion to $33.5 billion. sees 2022 homes closed between 90,000 homes and 92,000 homes.

danaher.com, under the heading Quarterly Earnings. The supplemental materials describe additional factors that impacted year-over-year performance. We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. As a result of the size of the Cytiva acquisition and its impact on Danaher's overall core revenue growth profile, we're presenting core revenue on a basis that includes Cytiva sales. References to core revenue growth includes Cytiva sales and the calculation of period-to-period sales growth comparing the current period Cytiva sales to the historical period Cytiva sales prior to acquisition. In the first quarter of 2021, we got off to a very strong start, delivering better-than-expected core revenue growth across our portfolio. Our broad-based performance was driven by double-digit core revenue growth in our base business, our ongoing contributions to the development and production of COVID-19 vaccines and therapeutics and strong demand for Cepheid's point-of-care molecular diagnostic tests. Our record top line performance also contributed to outstanding earnings-per-share growth and free cash flow generation. Our well-rounded first quarter results are a testament to the unique positioning of our portfolio and our commitment to continuous improvement. We have an exceptional collection of market-leading franchises and technologies all powered by the Danaher Business System, that serve attractive end markets with durable secular growth drivers. We believe that this powerful combination differentiates Danaher and reinforces our sustainable, long-term competitive advantage. So with that, let's turn to our first quarter results. We generated $6.9 billion of sales in the first quarter with 30% core revenue growth. All three of our reporting segments delivered better-than-expected growth, led by Life Sciences and Diagnostics. We believe we continue to capture market share, particularly at some of our larger businesses, including Cytiva, Pall, Radiometer, Leica Biosystems, Hach and Videojet. Over the last several years, we've prioritized high-impact growth investments in innovation, sales and marketing, to ensure that we're well positioned both near and long term. Through new product introductions and the impact of our Danaher Business System growth tools, we've enhanced our competitive advantage and believe we've achieved notable market share gain. Geographically, revenue growth was broad-based across both developed and high-growth markets. We saw over 20% growth in the developed market, led by North America and Western Europe. High-growth markets were up more than 45%, largely driven by the recovery in China. Our gross profit margin increased 580 basis points year-over-year to 62% in the first quarter, largely due to higher sales volumes and the positive impact of higher-margin product mix. Our operating profit margin of 29.1% was up 1,300 basis points year-over-year, including more than 900 basis points of core margin expansion as a result of higher gross margins and lower operating expenses as we continue to see limited travel and other related costs. Adjusted diluted net earnings per common share of $2.52 were up 140% versus last year. We generated $1.6 billion of free cash flow in the quarter, an increase of 135% year-over-year. Now in the first quarter, we deployed more than $400 million of capital toward mergers and acquisitions across all three segments. Most notably, IDT and Cytiva completed their first bolt-on acquisition with IDT adding Swift Biosciences, which brings complementary capabilities and a broad portfolio of next-gen sequencing library preparation and enrichment solutions for DNA, RNA and methylated DNA samples. And Cytiva acquired Vanrx Pharmasystems, which provides innovative, automated aseptic tolling technologies used to fill vials, syringes and cartridges, a critical final step to complete the bioprocessing workflow. We also continued to make significant organic investments and high-impact growth initiatives across all of Danaher. Over the past six months, we've invested in a meaningful expansion of production capacity at Cepheid, Cytiva, Pall Biotech and Beckman Life Sciences. Near term, these investments will support COVID-related demand, but they're equally important to support the long-term growth of these businesses, where we see tremendous runway ahead given the underlying growth drivers and the durability of the markets they serve. Between these four businesses, we're investing more than $1 billion in 2021 to continue to meet our customers' needs today and well into the future. So now let's take a look -- a more detailed look at our results across the portfolio. Life Sciences reported revenue increased 115% as a result of the Cytiva acquisition, and core revenue was up 41.5%. We saw strong double-digit core revenue growth across all of our largest operating companies in the platform, led by Cytiva, Pall Life Sciences, Beckman Life Sciences and IDT. In our bioprocessing businesses, accelerating demand for COVID-related vaccines and therapeutic development and production drove a combined core revenue growth rate of more than 60% at Cytiva and Pall Biotech. Excluding the impact of COVID-related activity, our underlying biopharma business grew in the low 20s range. We believe that our ability to continue meeting customers' needs across their bioprocessing workflows enabled us to gain market share in the quarter, particularly within our cell culture media and single-use product line. Reported revenue was up 34%, and core revenue grew 31%. Each of our largest operating companies in the platform achieved high single digit or better core revenue growth, led by Cepheid, which achieved more than 90% core revenue growth. In response to the unprecedented demand for Cepheid's rapid point-of-care molecular test, the team again increased production capacity and shipped over 10 million respiratory test cartridges in the first quarter. Roughly half of the tests shipped were COVID-only tests, and the other half were 4-in-1 combination test for COVID-19 Flu A, Flu B and RSV. We also saw increasing demand for nonrespiratory tests across Cepheid's market-leading test menu, including sexual health, hospital-acquired infections and urology, demonstrating the broad applicability of Cepheid's molecular diagnostic offering. Moving to our Environmental & Applied Solutions segment. Reported revenue grew 6.5% and core revenue was up 3.5%. Our Water Quality platform was up slightly and product identification was up high single digits. Our Water Quality businesses support customers' day-to-day mission-critical water operations, providing water testing, treatment and analysis across a variety of applications around the world. We saw good underlying demand for our analytical chemistries and consumables during the quarter, and we're encouraged by the improvement in equipment sales, which returned to growth as customers got back up and running at more normalized levels. In Product Identification, we saw mid single-digit core revenue growth in our marking and coding businesses and double-digit growth in packaging and color management. Esko and X-Rite benefited from the underlying market recovery and saw good momentum from customers initiating new projects and investments in the first quarter. So with that context from what we saw by segment during the quarter, let's take a look -- walk through some of the trends we're seeing across our end markets and geographies. Customer activity around the world is approaching pre-pandemic levels as we all collectively adapt to working in this new environment. We're seeing this in the form of strong sales funnels and order book growth. Service levels at or near pre-pandemic levels and an uptick in equipment revenues. While some of this dynamic is a result of pent-up demand in the wake of widespread lockdowns, we're starting to see underlying recovery across most of our end markets that were impacted. Now if we take a closer look at these dynamics by geography, China appears to be the furthest along in terms of reopening, with activity levels largely back to normal. The U.S. is not all the way back just yet, but is moving in the right direction. And an increase in vaccination rates across the country appear to be driving some of this progress. Europe is improving broadly. And while certain areas have recently experienced setbacks in the process of reopening, we've not seen any material impact. In Life Sciences, activity in the broader biopharma market remains robust. There has not been any slowdown in the double-digit growth trend we've seen over the last several quarters across non-COVID-related biopharma activity. Within COVID-related biopharma activity, the significant ramp-up of vaccines and therapeutics is driving record bioprocessing demand. We're involved in the majority of COVID-19 vaccine and therapeutic projects under way around the world today, including all of those in the U.S. that are currently on the market or in later-stage clinical trials. Our operating companies are playing a significant role in the development and production of new therapies and vaccines across the biopharma pipeline. And given the breadth of our offering and the production capacity we're adding in 2021, we're uniquely positioned to support our customers in their mission today and well into the future, which is to make more life-saving treatment available to more patients faster. In clinical diagnostics, we continue to see heightened demand for rapid point-of-care molecular testing. As we look across the COVID-19 testing landscape and consider the durability of the demand that we're seeing, we believe that Cepheid's positioning is the strongest among the various testing modalities and settings. Cepheid's leading presence at the point of care, combined with the speed, accuracy and workflow advantages of their molecular offering, uniquely positions the business to support customers' testing needs, not only for COVID-19, but beyond the pandemic as well. Across hospital and reference labs, patient volumes are at or near pre-pandemic levels in most major geographies as elective procedures and hospital visits have rebounded from last year. Consumables growth is accelerating as a result, and we're encouraged by the momentum of instrument placement. Finally, in the applied market, consumables remain solid across essential business operations like testing and treating water and safely packaging food and medicine. And growth is picking up on the equipment side as customers get back to more normal operations and initiate capital investments. Now let's briefly look ahead to our expectations for the second quarter and the full year. We expect to deliver second quarter core revenue growth in the mid-20s range. We anticipate low double-digit core revenue growth in our base business and a low double-digit core growth contribution from COVID-related revenue tailwind. Additionally, we expect to have operating profit fall-through of approximately 40% in the second quarter and for the remainder of 2021. For the full year 2021, we now expect to deliver high teens core revenue growth. We anticipate that COVID-related revenue tailwinds will be a high single-digit to low double-digit contribution to the core revenue growth rate. This would include an estimated $2 billion of 2021 revenue at Cytiva and Pall Biotech associated with vaccines and therapeutics, which is higher than our previous expectation of $1.3 billion. And at Cepheid, we'll continue ramping capacity through the year and now expect to ship approximately 45 million tests in 2021 compared to our prior estimate of 36 million tests. And in our base business, we now expect that core revenue will be up high single digits for the full year. So to wrap up, we had a very strong start to the year and feel good about the momentum we're seeing across all of Danaher. Our first quarter results are a testament to the commitment and capability of our team and a durable, balanced positioning of our portfolio. We believe this combination differentiates Danaher and sets us up well to outperform in 2021 and beyond. In our pursuit of continuous improvement, we'll strive to keep building an even better, stronger company and to positively impact the world around us in meaningful ways for all of our stakeholders. We see tremendous opportunities ahead to do just that. That concludes our formal comments.

q1 adjusted non-gaap earnings per share $2.52. q1 revenue rose 58 percent to $6.9 billion. for q2 2021, company anticipates that non-gaap core revenue growth will be in mid-20 percent range. for full year 2021, company now anticipates that non-gaap core revenue growth rate including cytiva will be in high-teens percent range.

danaher.com under the heading Quarterly Earnings. The supplemental materials describe additional factors that impacted year-over-year performance. We may also describe certain products and devices which have applications submitted and pending for regulatory -- certain regulatory approvals or are only available in certain markets. As a result of the size of the Cytiva acquisition and its impact on Danaher's overall core revenue growth profile, we are presenting core revenue on a basis that includes Cytiva sales. References to core revenue growth exclude Cytiva sale in the calculation of period to period sales growth. We appreciate you joining us on the call today. We're very pleased with our strong start to the year with another terrific results in the second quarter. We saw broad-based strength across the portfolio, which helped us deliver over 30% core revenue growth, more than 70% adjusted earnings-per-share growth and outstanding free cash flow generation. This well-rounded performance is a testament to the positioning of our portfolio and our exceptional team who are committed to leading and executing with the Danaher Business System every day. During the second quarter, we continued to strengthen our competitive advantage through significant high impact organic growth investments and enhanced our portfolio with strategic growth accelerating acquisition. We prioritize innovation across Danaher and increased our production capabilities, all of which we believe contributed to the market share gains in several of our businesses. We also announced our pending acquisition of Aldevron which will expand our presence into the fast-growing and important frontier of genomic medicine. Putting it all together, we believe the combination of our leading portfolio and DBS driven execution differentiates Danaher today and provides a strong foundation for sustainable long-term outperformance. So with that, let's turn to our second quarter results. Our sales were $7.2 billion and we delivered core revenue growth of 31.5% with strong contributions from all three of our reporting segment. Geographically, high growth markets grew nearly 35% and developed markets were up more than 25%. Revenue in each of our three largest markets, North America, Western Europe and China was up 30% or more in the quarter. Our gross profit margin increased by 710 basis points to 60.9% primarily due to higher sales volumes, the favorable impact of higher margin product mix and the impact of prior year purchase accounting adjustments related to the Cytiva acquisition that did not repeat in 2021. Our operating profit margin increased to 27.8% including 775 basis points of core operating margin expansion, primarily as a result of higher gross margin and continued lower operating expense as travel and other related costs remains below pre-pandemic levels. Adjusted diluted net earnings per common share of $2.46 were up 71% compared to 2020. We generated $1.8 billion of free cash flow in the quarter, up over 40% year-over-year. In June, we announced our intention to acquire Aldevron a producer of high quality plasmid DNA, mRNA and protein serving academic, biotechnology and pharmaceutical customers. The addition of Aldevron will expand our capabilities into the important field of genomic medicine where we're seeing the accelerated adoption of gene and cell therapies, DNA and RNA vaccines and gene editing technology. We anticipate Aldevron will be accretive to Danaher on multiple levels as we expect the business to generate $500 million of revenue in 2022, with more than 20% annual revenue growth and a strong margin profile. We look forward to welcoming this incredibly talented and innovative team to Danaher once the transaction closes. In addition to announcing the Aldevron acquisition we also accelerated several organic growth investments across the portfolio. One of our core values at Danaher is innovation defines our future and we have made a significant commitment toward our research and development effort increasing our research and development spend by more than 30% year-over-year to bring more impactful solutions to our customers. At SCIEX we launched ZenoTOF 7600, a high resolution accurate mass spectrometry system that enables scientists to identify, characterize and quantify molecules at previously undetectable level, helping to advance the development of new biotherapeutics and precision diagnostics. At Beckman Coulter Diagnostics, we recently introduced the DxA 5000 Fit a compact automation solution designed for small and mid-sized laboratories that reduces up to 80% of the manual steps typically required for sample preparation. These are just a few great examples of how we're continuing to invest for growth across Danaher to support our customers and enhancing our competitive advantage through innovation. Additionally, we're making substantial investments to expand capacity across our bio processing businesses and Cepheid. Near term, these investments are supporting existing customer demand driven by both the market and meaningful share gain, but they are equally important to support the long-term growth of these businesses where we see tremendous runway ahead, given the underlying structural growth drivers in the markets they serve. We expect our total capital expenditures across Danaher to be approximately $1.5 billion in 2021 as we continue to invest in supportive of our customers' needs today and well into the future. We believe the strategic combination of these organic and inorganic investments across our portfolio will reinforce our competitive advantage and accelerate our growth trajectory going forward. Now, let's go into more detail on our quarterly results across the segment. Life Science's reported revenue increased 41.5% with core revenue up 35%. This growth was broad based with most of our major businesses in the platform, delivering 30% or better core growth. We continue to see strong demand for our bioprocessing solutions with combined core revenue growth of more than 40% at Cytiva and Pall Biotech. Our non-COVID related bioprocessing business was up low double-digits where we saw robust customer activity and order rates. COVID related vaccine and therapeutic revenues were consistent with the first quarter and exceeded $1 billion over the first 6 months of the year. So I'd be remiss if I didn't take a moment to reflect on Cytiva's fantastic first year as part of Danaher. We've established a new company with a new brand name added more than 1500 associates and made substantial progress in the transition to Danaher, all while maintaining world-class support of our customers, significantly ramping production capacity and growing revenues by more than 50%. I think it's fair to say, they've exceeded our expectations in every way and that's really a testament to the Cytiva team who've embraced Danaher and the Danaher business system and continued to execute exceptionally in support of our customers. Moving to Diagnostics, reported revenue was up 40.5% and core revenue grew 37% led by more than 50% core growth at Cepheid. Beckman Diagnostics and Leica Biosystems each grew more than 30% as patient volumes and clinical diagnostic activity approached pre-pandemic levels around the world. At Cepheid, growth outside of respiratory testing was led by our sexual health and hospital-acquired infection assays, particularly among newly acquired Cepheid customers. In respiratory testing, we believe we continued to gain market share as expanded manufacturing capacity enabled the team to produce and ship approximately 14 million cartridges in the quarter. As expected COVID-only test accounted for approximately 80% of these shipments while our 4 in 1 combination test for COVID-19 Flu-A, Flu-B and RSV represented approximately 20%. This broad-based performance across Cepheid was driven by the team's thoughtful installed base expansion over the last 15 months and as evidence of the significant value, Cepheid provides to clinician with the unique combination of fast, accurate lab-quality results and the best-in-class, easy to use workflow at the point of care. Moving to our Environmental and Applied Solutions segment, reported revenue grew 15.5% and core revenue was up 13%. Revenue growth accelerated across both platforms with water quality up high single-digits and product identification up approximately 20% in the quarter. In our water quality businesses, demand for our analytical chemistries and consumables was driven by improving activity across municipal, chemical, food and beverage end market. Equipment order rates accelerated as customers got back up and running and began to invest in larger projects. In product identification Videojet was up mid-teen and our packaging and color management businesses were up more than 25% in the quarter. This acceleration reflected a broad-based recovery with growth across most major geographies and end market. So, with that as a backdrop to what we saw this quarter let's spend some time going through trends geographically and across our end market. Looking at conditions around the world most major regions and countries have broadly returned to or are approaching normal operations. This is reflected in the strong results we've seen across the US, Europe and China. That said, we're mindful of the emerging COVID-19 variants driving further outbreaks and have taken action to help minimize the potential impact on our respective businesses. And at this point, we've seen no material impact from recent variant or selective lockdown. We saw positive momentum across our businesses with order growth trending above revenue growth. Most of our end markets have largely recovered with growth rate at or above pre-pandemic level as customers have adopted to the new environment. In-person commercial activity continues to rebound and we're seeing our teams spend more time on site with their customers, a trend we expect to continue as we move through the year. Across Life Sciences, we're seeing healthy demand in most of our end market led by Biopharma where the pace of customer activity remains elevated. Biotech funding levels are robust and the number of lifesaving biologic and genomic-based therapies in development and production continues to rise and it's further augmented by the work around COVID-19 vaccines and therapeutics. Today, there are over 1,500 monoclonal antibody-based therapies in development globally, which is more than 50% increase from just 5 years ago. We also see over 1,000 gene therapy candidates in development today, a 10-fold increase over the last several years as these technologies mature and therapies gain regulatory approval. Given that many of these candidates are still in early stage research we expect the growth rate of this market to remain strong for many years to come. In addition to the growth in biologics and genomic based medicines, there is significant demand related to COVID-19 vaccines and therapeutics, both on the market and in development today. Given the interest we're seeing from customers looking to address emerging variants and increased global supply, as well as evolving vaccination guidelines globally we expect to see durable growth in the segment of the Biopharma market for the foreseeable future. At the current pace of vaccination it's clear that vaccine demand will continue well into next year. We expect to recognize $2 billion in COVID related vaccine and therapeutic revenue in 2021 and anticipate entering 2022 with approximately $1.5 billion in COVID-related backlog. These assumptions do not include the potential contribution from booster shot or an expansion of availability to populations under 12-year-old due to the level of uncertainty around each of these scenarios. Given the growing numbers of drug being developed and the increasing scientific sophistication required to discover and manufacture these complex therapies, customers are looking to partner with vendors who can reliably supply them solutions for their most challenging problems as they move from the lab to production scale. Our comprehensive bio-processing portfolio and scientific expertise positions us well to do just that and we're confident, our proactive investments in innovation and capacity will help us meet this growing customer demand now and far into the future. In the clinical diagnostics market, patient volumes are at or near pre-pandemic levels in most major regions as patients are returning for wellness checks, routine screenings and other elective procedures. In molecular diagnostics, while PCR, respiratory testing volumes in the US have declined we're seeing persistent demand for Cepheid testing at the point of care. Outside of the US, which makes up approximately half of Cepheid's revenue, we continue to see strong demand for our testing as vaccination rates lag and emerging variants drive outbreak. Now, as I mentioned earlier we shipped approximately 14 million respiratory tests during the second quarter, up from 10 million shipped in the first quarter and we now expect to ship approximately 50 million tests in 2021. Looking ahead with the assumption that COVID-19 will be an endemic disease, we believe that the point of care molecular respiratory testing market will expand significantly from where it was prior to the pandemic and given Cepheid's leading positioning around speed, accuracy and the ease of use workflow advantages we believe will continue to gain market share. The combination of these market share gains, the expansion of Cepheid's leading global installed base and the broadest molecular diagnostic test menu on the market, create significant opportunities ahead for broader utilization and demand for Cepheid's point of care molecular testing solutions. Moving to the applied markets, we're seeing a continuation of the steady improvement over the first half of the year. Customer activity is accelerating in line with broader economic activity, which we see in healthy order rates for consumables and increasing investments equipment. Across municipal markets globally consumables demand remains solid as customers continue to test and treat water and instrument-oriented project activity is accelerating with the improving funding environment. Now, let's look ahead to our expectations for the third quarter and the full year. We expect to deliver third quarter core revenue growth in the mid to high teens range. We anticipate high single-digit core revenue growth in our base business and a high single-digit core growth contribution from COVID related revenue tailwind. Additionally, we expect to generate operating profit fall through of approximately 40% in the third quarter and for the remainder of 2021. For the full year 2021, we now expect to deliver approximately 20% core revenue growth. We anticipate that COVID related revenue tailwinds will be an approximately 10% contribution to the core revenue growth rate and in our base business we now expect that core revenue will be up 10% for the full year, an increase from our prior expectation of high single-digit. So, to wrap up we've had a great start to the year and we see meaningful opportunities across Danaher to build upon this outstanding performance. Our second quarter results reiterate the power of our portfolio and our exceptional team, a unique combination that differentiates Danaher today and provides a strong foundation for sustainable, long-term outperformance. And with that, back to you, Matt. That concludes our formal comments.

q2 adjusted non-gaap earnings per share $2.46. q2 revenue $7.2 billion versus refinitiv ibes estimate of $6.72 billion. for q3 2021, anticipates that non-gaap core revenue growth will be in mid- to high-teens percent range. for full year 2021, now anticipates that non-gaap core revenue growth rate including cytiva will be about 20%.

danaher.com under the heading Quarterly Earnings. The supplemental materials describe additional factors that impacted year-over-year performance. We may also describe certain products and devices which, have applications submitted and pending for certain regulatory approvals or are available only in certain markets. As a result of the size of the Cytiva acquisition and its impact on Danaher's overall core revenue growth profile, we're presenting core revenue on a basis that includes Cytiva sales. References to core revenue growth, including Cytiva sales, and the calculation of period to period sales growth. And we really appreciate you joining us on the call today. Our team delivered another outstanding results in our third quarter with over 20% core revenue growth, nearly 40% adjusted earnings-per-share growth and strong free cash flow generation. This well-rounded performance is a testament to the unique positioning of our portfolio and our exceptional team, who are committed to leading and executing with the Danaher Business System every day. We highlighted our fantastic portfolio of market-leading franchises in highly attractive end markets, the exceptional team we have out on the field every day and how we differentiate with the Danaher Business System. And we certainly saw this powerful combination in action during the third quarter as our results attest. Now we also talked about our sustainability efforts, and just last week, we published our 2021 Sustainability Report. This year's report reflect the measurable progress we've made across the three pillars of our sustainability program, which are innovation, people, and the environment, and how we use the Danaher Business System to execute on this increasingly important strategic priority. Now I hope you all get a chance to read through the report and learn more about the important work that we're doing across Danaher to positively impact the world around us for generations to come. So, with that, let's turn to our third quarter results. Our sales were $7.2 billion and we delivered 20.5% core revenue growth with portfoliowide strength led by Diagnostics and Life Sciences. Geographically, high growth markets grew approximately 25% and developed markets were up nearly 20%. In fact, revenue in each of our three largest markets, North America, Western Europe and China was up approximately 20% or more in the quarter. Our gross profit margin increased by 550 basis points to 60.3% primarily due to higher sales volume, the favorable impact of higher margin product mix, and the impact of prior-year purchase accounting adjustments related to the Cytiva acquisition that did not repeat in 2021. Now, adjusted diluted net earnings per common share were $2.39 and were up 39% compared to 2020 and we generated $1.7 billion of free cash flow in the quarter, bringing our year-to-date total to $5.2 billion, which is up 46.5% year-over-year. We continue to accelerate organic growth investments across the entire portfolio and increased our research and development spend by approximately 30% year-over-year. At our Investor Day recently, we highlighted how we use DBS growth tools and processes to accelerate innovation and bring more impactful solutions to our customers faster. In fact, recently launched products like the SCIEX Zeno 7600 and the Triple Quad 7500 and Beckman Life Sciences' CytoFLEX SRT benchtop cell sorter are just a few great examples of how we're driving market share gains through proprietary innovation and enhancing our growth trajectory going forward. We're also making substantial investments to expand production capacity across our bioprocessing businesses and at Cepheid. Near term, these investments are supporting existing customer demand and driving meaningful share gains. But they're equally important to support the long-term growth of these businesses where we see significant runway ahead, given the underlying structural growth drivers in the sectors they serve. And we expect our total capital expenditures across Danaher to be approximately $1.5 billion in 2021 as we continue to invest in support of our customers' needs today and well into the future. So now let's go into more detail on our quarterly results across the segments. Life Sciences reported revenue increased 24.5% with core revenue up 20%. This growth was broad-based across the segment with most major operating companies achieving high teens or better core growth. Now these strong results were led by continued demand for our bioprocessing solutions as in Cytiva bioprocessing and Pall Biotech, both grew more than 30% in the quarter, including low double-digits non-COVID related core growth. COVID-related vaccine and therapeutic revenue contributed -- continued to be strong and now exceeds $1.5 billion year-to-date. At Cytiva, we passed an important milestone last month when we exited the last of our transition services agreement with GE. We successfully completed this process ahead of schedule, which is a testament to the entire Cytiva and integration team and their collective commitment to the Danaher Business System. Cytiva also added more than 1,500 new associates to the global team since joining Danaher to help ensure that we're supporting our customers today and continue meeting their needs well into the future. Aldevron is a leading producer of high quality plasmid DNA, mRNA and proteins, and provides a fantastic beachhead for us in our genomic medicine enterprise. We're seeing the rapid development of gene and cell therapies, DNA and RNA vaccines, and gene editing technologies. And Aldevron expands our capabilities in these areas to ultimately help our customers bring more life-saving therapies and vaccines to market faster. So we're really excited about the quality, the scale, the turnaround time and the reputation that Aldevron brings to the Danaher portfolio. In Diagnostics, reported revenue was up 29.5% and core revenue grew 28.5% led by more than 60% growth at Cepheid. Each of our other major diagnostic businesses, Beckman Coulter, Radiometer, and Leica Biosystems, grew low to mid-teens in the quarter as clinical diagnostic activity and patient volumes around the world largely returned to pre-pandemic levels. In respiratory testing at Cepheid, we further expanded manufacturing capacity, which enabled the team to produce and ship approximately 16 million cartridges during the quarter. COVID-only tests accounted for approximately 80% of those shipments and our 4-in-1 combination tests for COVID-19 Flu-A and B and RSV represented approximately 20%. And non-respiratory core growth at Cepheid was up double-digits as well, led by demand for hospital-acquired infections, sexual health and virology testing. We also saw strong growth in our installed base as system placements continue to exceed pre-pandemic rates. And we believe the team's thoughtful placement of the GeneXpert and Infinity Systems over the last 18 months is setting up Cepheid very well for future growth opportunities. So, let's move to our Environmental & Applied Solutions segment. Reported revenue was up 7% with core revenue up 7.5%. Water Quality grew mid-single digits and our product identification platform was up low double-digit. Across our Water Quality businesses, we saw good underlying market strength, particularly in food and beverage and various industrial applications, as activity returned to more normal levels. Municipal projects picked up, given the improving funding environment and as more customers return to in-person work. On product identification, both Videojet and our packaging and color management businesses were up low-double digits in the quarter. Comparable strength across consumables, service and installed base growth was driven by more normalized levels of customer activity and investment. We believe that our ability to meet our customers' needs, particularly on the equipment side of Videojet enabled us to gain market share and expand on the industry-leading installed base of printers. So with that as the backdrop for what we saw this quarter, let's spend some time going through regional and end-market trends. Most major regions and countries around the world are largely back to pre-pandemic activity levels. Customers have adapted to the current operating environment and protocols and broadly resumed in-person commercial activities and site access. This is reflected in the strong results we've seen across the U.S., Europe and China. And this momentum is also reflected in our strong order book growth, which is trending above revenue growth. Now we're mindful of potential COVID-19 variants or outbreaks and selective lockdowns, but we're not currently see any material negative impact from these scenarios. And while we are seeing some global supply chain constraints, we're leveraging the Danaher Business System tools like Daily Management and actively working with our customers and suppliers to help mitigate any impact. Across Life Sciences, we're seeing robust customer activity and demand across all major end-markets. Lab and other site access is largely back to pre-COVID levels and we're seeing this through more normalized productivity levels, installations and project initiations, driven by a strong funding environment. Now biopharma continues to lead the way as the number of life-saving biologic and genomic-based therapies in development and production continues to rise and is augmented by the ongoing work around COVID-19 vaccines and therapeutics. And at our recent Investor Day, we spent time covering how well positioned we are to support this complex life-changing work that our customers are pursuing. Our combined bioprocessing portfolio across Cytiva and Pall Biotech is the broadest offering in the industry with leading position in upstream and downstream applications. And we further support our customers with best-in-class scientific services partnering to solve their most challenging problems as they move from the lab to production scale. And our global reach enabled us to reliably and consistently meet our customers' needs. Now in addition to the industrywide opportunities in biologics and genomic-based medicines, we continue to see significant demand related to the development and production of COVID-19 vaccine and therapeutics. Our customers are working to address emerging variants and increased global supply, and given that only about a third of the global population has been vaccinated, we believe we'll see durable growth in this biopharma segment for the foreseeable future. We continue to expect about $2 billion of COVID-related vaccine and therapeutic revenue in 2021. And since we spoke at our Investor Day, we now expect to enter 2022 with approximately $2 billion in COVID-related backlog versus our previous expectation of $1.5 billion of backlog. And moving to the clinical diagnostic market, non-COVID testing volumes are essentially back to pre-pandemic levels in most major regions as patients are returning for wellness checks, routine screening, and other elective procedures. In molecular diagnostics, strong global demand persists for Cepheid point-of-care PCR respiratory testing as a result of the Delta variant and outbreaks, along with lower vaccine vaccination rates in many regions. As I mentioned earlier, we shipped approximately 16 million respiratory tests during the third quarter and we now expect to ship approximately 55 million tests in 2021 versus our prior expectation of 50 million. Now as we head into the traditional respiratory virus season, we're hearing from customers that they expect this to be a much more active season than last year's. In preparation, their preference is for our 4-in-1 combination test, so we're seeing an uptick in demand for those cartridges, particularly given the recent outbreaks of RSV across the U.S. Cepheid's 4-in-1 test was also recently approved with a third gene target for SARS-CoV-2 detection, ensuring it can continue to accurately detect future COVID-19 viral mutations and reinforcing Cepheid's competitive advantage in the respiratory testing market. Now moving to the applied market. Customer activity has largely rebounded to pre-pandemic levels, which we see in robust order rates across both consumables and equipment. In the global municipal market, consumables demand remains solid and the pace of instrument oriented project activity continues to pick up with the improving funding environment and broad return to work. So now let's look ahead to our expectations for the fourth quarter and the full year. We expect to deliver fourth quarter core revenue growth in the low to mid teens range, with high single-digit core revenue growth in our base business and a mid to high single-digit core growth contribution from COVID-related revenue tailwind. Additionally, we expect to generate operating profit fall through of approximately 40% in the fourth quarter, a similar level to what we achieved in the third quarter. Now for the full year 2021, we now expect to deliver more than 20% core tailwind and our base business will each contribute more than 10% to our 2021 core revenue growth rate. So to wrap up, we're proud to deliver another terrific result here in the third quarter. Our performance is a testament to the power of our unique portfolio, the strength of our end markets and our team's commitment to leading and executing with the Danaher Business System. And this unique combination differentiates Danaher today and it reinforces our opportunities ahead for sustainable long-term outperformance. So with that, back over to you, Matt. That concludes our formal comments. Emma, we're now ready to take questions.

q3 adjusted non-gaap earnings per share $2.39. q3 revenue $7.2 billion versus refinitiv ibes estimate of $7 billion. for q4 2021, company anticipates that non-gaap core revenue growth will be in low-to-mid teens percent range. for full year 2021, company now anticipates that non-gaap core revenue growth rate including cytiva will be more than 20%.

I'm joined by John Peyton, CEO; Allison Hall, Interim CFO and Controller; Jay Johns, President of IHOP; and John Cywinski, President of Applebee's. When we spoke last quarter, I shared my belief that the industry and our brands, in particular, were on the cusp of a restaurant renaissance. And our headline today is that the renaissance is here. I love this notion of renaissance because it's all about resurgence and creativity and pushing beyond established boundaries, and that's exactly what we're doing at Dine Brands. We're changing the way people think and we are turbocharging creativity and experimentation. A willingness to learn and adapt is flourishing throughout our organization. I see it every day from our franchisees, to our company staff, to the restaurant teams, our general managers and our servers. And that's why I'm so proud of our company and our franchisees. I'm proud of our management team, and I'm especially proud of the thousands of hard-working restaurant team members around the world. Now as I look back on the first quarter, it's remarkable how we continue to persevere and grow. Our brands posted meaningful improvements during the first quarter. So let me share those results through the lens of store sales, total revenue and cash generation because, obviously, each one leads to the next. Average weekly sales at both IHOP and Applebee's exceeded pre-pandemic levels several different times during the first quarter. According to Black Box, and this is impressive, Applebee's increase in same-store sales for Q1 outperformed the casual dining segment. Off-premise, in March, both IHOP and Applebee's off-premise sales reached absolute dollar levels, higher than when the restaurants were 100% off-premise in 2020, indicating the staying power of this largely incremental business. We achieved revenue of $204.2 million and EBITDA of $58.1 million, reflecting strong underlying performance across our business. Cash, we generated free cash flow of $30.7 million which, in part, enabled us to repay our $220 million revolver in early March. And also importantly, our franchisees opened 10 new restaurants during the quarter, indicating that they're beginning to pivot toward growth. We're very encouraged by our Q1 performance, and we're certainly optimistic that economic tailwinds will sustain us throughout 2021. Contributing to that view is historically high consumer savings, the Federal spending that we've been enjoying as well as a new potential infrastructure bill. The unemployment rate is the lowest since the pandemic began. And with vaccinations rising, the economic growth outlook firming and the strength and resilience of our brands, I'm confident that we'll build on the strong Q1 performance to drive market share gains and deliver profitable growth throughout the year. Now our fundamental strengths are something many CEOs would love to have. Number one, we are an asset-light 98% franchise model that is a significant generator of cash. Second, we've got two iconic world-class brands that are number one in both the casual and family dining categories. And third, we've got the most talented, most resilient team members in the industry today, along with the next generation of workers still to be hired. And as tough as the past year has been, the pandemic actually gave us new competitive competencies. Here's what we have today that no one could have even imagined pre COVID. We've got significant incremental off-premise business in both brands. Our teams moved quickly and aggressively to add the tech and operations capability needed to nurture and sustain this new business. Second, we leaned heavily into ghost kitchens and virtual brands like Cosmic Wings and others on the horizon that offer new sources of revenue per dine in our franchisees, all of that due to the creativity and talent of our people. And we advanced our digital platform and loyalty programs that will increase our share of wallet. So with COVID-19 vaccine appointments now more widely available and capacity restrictions being eased across the country, we are seeing increased traffic in our restaurants. A couple of questions that might be on your mind. First is about hiring, and that is certainly a challenge in the industry today and all around the country. So I want you to know that we are aggressively working to help our franchisees recruit adequate staffing to accommodate the increase in demand. And this is a great example of where dine scale makes a big difference. We're launching national campaigns for two recruiting days next week. Applebee's and IHOP are collaborating with their franchisees on the 17th and 19th with the goal of hiring more than 20,000 new team members, and we're making it easy to apply via text, email and in-person, and both brands are leveraging very creative social campaigns to generate interest. Your second question today might be around procurement, and I want you to know that we're working to secure the continuity of our supply chain. During the past few months, the surge in guests going out to eat created demand that has outpaced supply. This is actually not a terrible problem to have, as we see it as just a moment in time. Nonetheless, our purchasing co-op remains heavily engaged with both brands, and we've adjusted our full year food forecast slightly upward due to generally higher commodity and input costs. However, we expect prices to fall back to equilibrium as our suppliers adjust to the new demand forecasts over the remainder of the year. We want the world to know right now that Applebee's and IHOP are open for business. So our marketing plans encompass national TV, digital media, social media platforms and one-to-one marketing. Both IHOP and Applebee's have standard operating procedures in place, and our employees have done a terrific job of adhering to best practices like QR code menus upon request, tables that aren't set until the guest is seated, the proper use of masks and enhanced cleaning protocols. And so with safety in place, we're doubling down on innovation to fuel the renaissance. And specifically, we've got five growth platforms that build on Dine's competitive advantage. Number one, we're developing and investing in new smaller restaurant prototypes for both brands. Flip'd is a good example of our new thinking; number two is off-premise enhancing technology like FlyBuy; number three, virtual brands, think Cosmic Wings; number four is ghost kitchens. For IHOP, they're up and running in Dubai, Kuwait and Saudi Arabia. And for Applebee's and Cosmic Wings, we're up and running in L.A., Philadelphia and coming soon in Miami. And as always, we're focused on new culinary creations like IHOP's Burritos & Bowls. So I know that you're waiting for our comprehensive long-term growth plan. And I can tell you that we're currently conducting a top to bottom strategic review of the business. And as part of that process, we're embracing a bigger and more holistic vision for our future. But in the near term, I can tell you that we've already decided to lean into three incremental investments that I know will make a difference, and since we spoke last quarter. First is technology that enhances the guest experience. We -- we're accelerating the redesign of ihop.com and the IHOP app. We're accelerating the Flip'd website and its app as well as the platform needed to support our loyalty programs for IHOP and Applebee's. Second, we're leaning into Flip'd by IHOP. We'll increase investment to accelerate the launch of this IHOP sister brand. And on that topic, I can just say, stay tuned for some news coming soon. And third, we're making investments to improve the guest experience in our portfolio of 69 company-owned Applebee's restaurants in the Carolinas, which by the way, consistently ranked among the top performers in the domestic Applebee's system based on sales. So these three investments that I just mentioned are largely an investment in capex, and they represent an additional $5 million in capex since we last spoke. We don't expect them to alter our previously issued G&A guidance. So I'm confident in our plans and very confident in our management team. We've identified the building blocks for the restaurant renaissance, and we'll use those as a way for all of you to continue to follow the progress of our story. An important part of our story is a strong balance sheet because it enables us to create that future, and Allison will now give you an update on that as well as on our financial results. I'll begin with an update on the business. Our performance in the first quarter reflects pent-up consumer demand for our brands. Vaccine is being administered across the country, the distribution of government stimulus checks and the gradual easing of dining room restrictions. At the end of the first quarter, 99% of our domestic restaurants were open for dining operations, with restrictions in some states. I'm pleased to reiterate that we repaid the $220 million drawdown from our revolving credit facility in early March 2021 as planned. We now expect to achieve an annual interest savings of approximately $5 million. Our cash position remained strong. We ended the first quarter with total unrestricted cash of $179.6 million. This compares to unrestricted cash of $163.4 million for the fourth quarter of last year, excluding the $220 million that was drawn against our revolving credit facility, a 10% increase. Switching gears to our operating results. I'll start with the income statement. For the first quarter, adjusted earnings per share was $1.75 compared to $1.45 for the same quarter of 2020. The year-over-year improvement was primarily due to lower tax expense as well as a higher gross profit, driven by an increase in revenue from Applebee's company-operated restaurants, due to a higher average check and increased traffic. We believe the distribution of the latest round of government stimulus checks in March favorably impacted both traffic and average checks. The increase in average check was also partially attributable to favorable product mix and daypart ships. Gross profit for our Applebee's company-owned restaurants increased 5.9 percentage points to 9% for the first quarter compared to the same quarter in 2020. Rental segment revenue for the first quarter of 2021 was $26.1 million compared to $29 million for the same period last year. The variance was primarily due to the decrease in base rent, resulting from restaurant closures and lease buyouts, and a decline in percentage of rental income based on franchisees' retail sales. Rental segment gross profit was 19.8% for the first quarter of 2021. This represents sequential improvement of 12 percentage points compared to the fourth quarter of 2020, which was more heavily impacted by charges related to the planned closures of underperforming IHOP restaurants. Turning to our GAAP effective tax rate for the first quarter. Our effective tax rate for the first quarter of 2021 was negative 6.6% compared to 23.2% for the same quarter of 2020. The change in effective tax rate was primarily due to onetime recognition of excess tax benefits on stock-based compensation related to the departure of our previous CEO. Switching gears to G&A. G&A for the first quarter of 2021 was $39.9 million compared to $37.6 million for the same quarter of last year. The increase was primarily due to higher personnel costs associated with equity-based and other incentive compensation, partially offset by lower travel costs. We continue to view G&A as a significant lever for the organization. Turning to the cash flow statement. Cash from operations for the first quarter of 2021 was $30.6 million compared to $29.6 million for the same quarter last year. The increase was primarily due to the recognition of excess tax benefits on stock-based compensation. Our highly franchised model continues to generate strong adjusted free cash flow of $30.7 million for the first quarter of 2021 compared to $27.5 million for the same quarter in the prior year. The variance was primarily due to the increase in cash from operations just discussed and lower capex compared to the first quarter of 2020. We believe that our strong cash position, cash from operations, disciplined G&A management, and the ongoing improvement in our business will allow us to invest and grow as the recovery from the pandemic continues. Regarding capital allocation and financial flexibility, our business decisions are driven by the improvements in our restaurant operations and industry conditions. As a result of our progressive recovery, we chose to repay the $220 million drawn against the revolver in early March. We'll continue to evaluate our business performance, which will influence our decisions on capital allocation. Turning to our franchisees assistance programs. As of March 31, 78% of the $61.9 million in royalty, advertising fees and rent payment deferrals that Dine Brands provided to 223 franchisees across both brands has been repaid. Dine Brands started the year strong, both Applebee's and IHOP posted meaningful sequential improvement in comp sales. Average weekly sales in dollars for both brands increased to pre-pandemic levels in certain weeks during the first quarter. We ended the first quarter with a strong cash position, allowing us to make additional investments in our business. We're very pleased with our start to 2021, and we remain optimistic about the second half of the year. Now you will hear more from brand President, John Cywinski, who will tell you about the significant progress we're making at Applebee's, John? After a year of navigating the pandemic, March and April represented an extraordinarily positive inflection point for the Applebee's brand. In fact, in more than four years as President of Applebee's, I honestly can't recall the brand being better positioned than it is at this very moment. We just delivered the two highest monthly sales volumes Applebee's has achieved since the inception of Dine in 2008. In fact, it's quite likely March and April represent two of our all-time highest volume months in the 40-year history of the brand, but I really can't confirm this as our database only goes back 13 years. What I can confirm is that March comp sales were positive 6.1% versus 2019, reflecting the confluence of consumer stimulus, compelling marketing and most importantly, operational excellence. Momentum continued to accelerate in April as Applebee's delivered a plus 11.4% comp sales result versus that same 2019 baseline. While it's impossible to determine how much of this momentum can be attributed to government stimulus versus organic demand, it's very clear to me that America is dining out again in full force. So here's the real story. According to Black Box, 2021 comp sales versus 2019, as John referenced, Applebee's has now significantly outperformed the casual dining category for 12 consecutive weeks. And get this, an average of 560 basis points. In many respects, this is reminiscent of Q1 of last year when we posted 10 consecutive weeks of positive comps before the emergence of COVID. Clearly, Applebee's momentum has returned, and it's returned in a very powerful way. It's important to remember that this momentum started to emerge in the last week of February, well before stimulus checks, when we introduced our successful Burgers and Wings event. This message really resonated with Applebee's guests behind the enormously popular Chicken Fried lyrics from our friends at the Zac Brown band. In the April return of our signature Irresist-A-Bowls currently on air, is the latest example of Applebee's providing big flavor and abundant value. This advertising was choreographed to the classic AC/DC Rock Anthem Back in Black and it delivered breakthrough results. This is just more evidence of Applebee's talented marketing team continuing to innovate around what I firmly believe to be the most enduring, memorable and likable ad campaign in the entire industry, and frankly, outside of the industry. Of course, I'm talking about eating good in the neighborhood, something that's a real point of pride for our franchise partners, the restaurant teams and our entire organization. We hear about our advertising all the time from our guests, and it always brings a smile to my face. Equally important to our guests is the innovation our team continues to deliver behind Applebee's $5 Mucho Cocktails, as we begin to see the alcohol business steadily return to pre-COVID normalcy. The easing of capacity constraints, the opening of bar seating and the reemergence of our late night daypart represent clear incremental growth opportunities as we progress through the year. And after scaling back media spending in January and February, our national media plan is now substantial, and equally balanced throughout the remainder of the year with favorable Q2, Q3 and Q4 comparisons with each of the same quarters in 2019, which bodes very well for the brand. Additionally, there are other indicators that our performance isn't short-term in nature. Applebee's unaided brand awareness and advertising awareness continue to significantly outpace all casual dining competitors. In key metrics such as affordability, menu variety, guest satisfaction, brand affinity and likelihood to visit consistently outperform the category average. Now, I'd like to share a few insights regarding our on-premise and off-premise business. For both March and April, Applebee's restaurant sales averaged an impressive $54,000 per week. As anticipated, our on-premise business has steadily increased as dining restrictions have eased. It's worth noting here that our off-premise volume has held steady between $17,000 and $18,000 per week per restaurant reflecting the staying power of this off-premise business. Without question, Applebee's has significantly broadened its reach and relevance within this important convenience driven segment. For the month of April, Applebee's sales mix consisted of a 67% dine in, 20% Carside To-Go and 13% delivery. Included in this delivery segment is our new virtual brand, Cosmic Wings, and after about 10 weeks in market, Cosmic Wings sales have averaged about $330 per restaurant per week with significant geographic variability, reflecting Uber Eats coverage. For context, individual restaurants range from a low of $100 per week to a high of $2,000 per week. Now importantly, we add Postmates delivery this week and then expand to include DoorDash later this month, which will significantly enhance Cosmic Wings distribution, visibility and trial. After this expansion, I should be able to quantify the size of the Cosmic Wings opportunity. In the meantime, you can use your imagination as to what the addition of DoorDash may mean for the business. Now, with respect to restaurant operations. I'm very encouraged with the integration of handheld tablets in about 500 Applebee's restaurants. With staffing challenges across the country, these tablets provide a meaningful hedge against labor inflation, while enabling our service to be far more efficient in taking care of the guests. Bottom line of servers love these tablets because it makes their job easier and allows them to make more money. Additionally, one of the positive outcomes of this past year was the approximate 33% reduction in our core menu and the simplification of our operation. The resulting food and labor benefits have had a favorable impact on restaurant margins as well as restaurant execution. I should also reinforce that over the past year, our teams have been quietly focused on building an awesome innovation pipeline of culinary, beverage, marketing and technology initiatives for future deployment. So in wrapping up, it's quite evident to me that America trusts Applebee's, as we're beginning to see the benefits of the goodwill that our franchise partners worked so hard to create over this past year. Virtually all of our restaurants are now open, royalty collections remain rock solid. Our advertising fund is now comparable to what it was in 2019, and it's a big lever for us moving forward. We have an exceptionally talented team who have been eagerly awaiting this day and franchisees are aligned behind our business plan and confident in our ability to not only perform but to thrive in this environment. For the first time in a long time, I now believe we control our own destiny, and we're poised to unlock the full potential of this great brand. While I'm sure there'll be other challenges along the way, there always are, Applebee's has genuine momentum right now, and I couldn't be more optimistic about our future than I am right now. And with that, I'm going to turn it to my partner, Jay. John, you must be really proud of those results and what your team and franchisees are accomplishing right now. I know I'm very proud of it. So a nice job. Like Applebee's, we've made great progress this quarter compared to where we were during the pandemic as well. Our first quarter comp sales improved sequentially by 8.9 percentage points compared to the fourth quarter. As our business improved, our average weekly sales in dollars has grown significantly and surpassed pre-pandemic levels at times during the quarter as stimulus checks provided our guests with additional buying power. Average weekly sales were approximately $26,000 for January and sequentially increased to just under $36,000 from March, reaching a high for the quarter of approximately $40,000. Regarding our domestic restaurants opened for business, 97% of restaurants were opened for dine-in service with restrictions in most states as of March 31. That compares to only 70% with dine in as of December 31. With guests eager to return to in restaurant dining, we're pleased that California recently increased indoor restaurant capacity to 50%. IHOP's presence in California makes up approximately 13% of our domestic business. So we're optimistic about the potential lift overall there. To drive sustainable growth, we're continuing to execute against four strategies. As I discussed with you last quarter, these are focusing on our p.m. dayparts, providing compelling value, maintaining our gains in off-premise sales, and lastly, our development growth. Our plans have yielded tangible results. To provide some color on our first two strategies, focusing on that p.m. daypart in value. We launched IHOPPY Hour in September of last year to offer our guests a broad selection of value options during those nonpeak daypart hours, mainly two to 10 p.m. IHOPPY Hour continues to drive incremental sales even as business improves across all of our dayparts. Additionally, IHOPPY Hour traffic is two to three times higher than the rest of the day compared to September 2020 when we launched it. This actually equates to a low to mid-single-digit lift in sales for the entire day. To further increase the appeal of our IHOPPY Hour's menu, which has been very well received by our guests, we plan to update the menu items over time. We're continually innovating to maintain IHOP's category-leading position in family dining. Our latest innovation is IHOP's new steakhouse premium bacon, which is available on our new bacon obsession menu. This makes IHOP the first national family dining restaurant chain to offer this type of thick cut premium bacon. The bacon obsession menu continues to solidify our position as the leader in breakfast and highlights our commitment to both innovation and value across all of our dayparts. During 2020, we played both defense and offense to remain resilient during and also prepare to thrive after the pandemic. We played defense by making operational changes and moving heavily or completely at times into alternative occasions. But we also invested heavily in our menu and preparation for the recovery. We wanted to be ready with a fresh and appealing menu for guests to enjoy when they return to our restaurants, but also accommodate guests, who choose to dine on-premise. This culminated in the launches of IHOPPY Hour and our signature Burritos & Bowls. Both have been very well received by our guests. Burritos & Bowls perfectly filled the gap we had in our menu and continues to capture 8% to 10% of total ticket order incidents since we launched it with really minimal promotion. Our overarching menu strategy underscores innovation and supports both breakfast and non-breakfast occasions while also being portable for guests on the go. Now let's switch gears to our third strategy of maintaining our gains in on-premise sales. Despite capacity restrictions generally being eased across the country in the first quarter, our off-premise sales held steady at 33.3% of total sales. That's flat compared to the fourth quarter. However, we've seen a steady increase in net off-premise sales in dollars. For the first quarter, our sales mix consisted of 66.7% dine-in, 16.8% to go and 16.4% delivery. We continue to believe that sustaining off-premise sales mix at a much higher rate is feasible in a post pandemic environment, and will strongly complement the anticipated return of our dine-in business. In fact, our weekly off-premise sales in March reached dollar levels higher than we were 100% off-premise last year, even at the higher than shutdowns. In the first quarter, as the overall business increased, so has the to-go business. The pandemic has certainly influenced consumer behavior and change how guests use IHOP. We adapted to the changes in this behavior through innovation and developing highly affordable items such as Burritos & Bowls. We believe the convenience of takeout delivery will remain appealing to our guests. Turning to our forward strategy development. We have the benefit of being able to now provide our franchisees with four different development platforms. These includes -- include our traditional formats, nontraditional, our first Flip'd by IHOP locations, which we plan to open in 2021 and a new small prototype that we intend to test this year. In the first quarter, our franchisees opened eight new restaurants globally, and for the remainder of the year, we expect to resume development that was paused due to the pandemic. Looking ahead, we have a plan in place for more robust development starting in 2022. We believe the brand can potentially exceed its historical annual average of approximately 60 new restaurants opened over the last decade. As we begin to plan our growth for the next three years, we intend to have a blended mix between these four types of development vehicles. We made great progress over the last 12 months. We're successfully executing against our four strategies and are seeing tangible results. IHOP remains in a position of strength and is poised for long-term growth. Look, I can't say it enough to all of you on the call, but the restaurant renaissance is here, and our Q1 performance is certainly evidence of that. I've got so much confidence in our future because I really believe that restaurants are an essential part of society and people want a place to gather and celebrate. And after 13 months of being locked in our houses, we, Americans, are ready to do that. Our people, our teams, our franchisees and the thousands of restaurant team members across the country are amazingly resilient. I mentioned last time that I worked in my parents restaurant when I was in high school. And that's why I think the favorite part of my job is when I get to visit team members in the field. I've finally gotten to do that in the last couple of weeks, and it's truly energizing and invigorating and what impressed me the most on my recent visits to our restaurants is that even after 13 months of extreme challenge, I was greeted with unbelievable enthusiasm and optimism about the future. So as we transition to a post pandemic environment, Dine will continue to invest in innovation and the strategic platforms that we know will drive long-term sustainable growth.

q1 adjusted earnings per share $1.75. q1 gaap earnings per share $1.51.99% of domestic restaurants open. currently cannot provide a complete business outlook for fiscal 2021. qtrly total revenue $204.2 million versus $206.9 million.

I'm joined by John Peyton, CEO; Vance Chang, CFO; Jay Johns, President of IHOP; and John Cywinski, President of Applebee's. We're pleased with our strong Q2 results, and I'm excited to hear from Vance Chang, our talented new CFO. I'll start by defining this moment in time. The restaurant renaissance is clearly driving our rebound at Dine Brands and Americans are returning to indoor dining. And now that Americans are back, we're pivoting from triage to acceleration. And what I mean by that is we're accelerating the innovation and the reinvention of the guest experience. Today, I'm thrilled to report that our investments in innovation and the resiliency of our franchisees and team members is clearly paying off. During Q2, both Applebee's and IHOP posted significant improvements in comp sales. And this is important, both brands are fundamentally improved businesses due to off-premise sales. And I'm seeing that for myself. I've been on the road. I've now met with 61 franchisees and toured our restaurants in Ohio, New York City, Connecticut, New Jersey, Vegas and Atlanta. And each conversation with a franchisee or a team member or a restaurant manager reinforces for me our unique advantages that ensure our business is built to win. First, we've got two iconic brands that thrive based on guest connection. Collectively, Applebee's and IHOP has been serving communities for more than 100 years. Both brands are beating their comp set because our guests have long-lasting emotional connections that endure even during these tough times. Second, our guest satisfaction is strong, and that's impressive because many of our restaurants are operating with less labor than they're used to. And finally, we work side-by-side with experienced, talented franchisees who are doing extraordinary things and as a result, are emerging from the pandemic with stable financial fundamentals. So here we go. I'll recap second quarter highlights, including comp sales, EBITDA, free cash flow, off-premise growth and development. So first, according to Black Box, and this is terrific, Applebee's and IHOP, each outperformed their segments in Q2, and both brands' second quarter comp sales improved compared to the first quarter. Specifically, Applebee's second quarter comps increased by 10.5%, and IHOP's comps declined by 3.4%, which reflects an improvement of 17.8 percentage points compared to the first quarter. We achieved revenue of $233.6 million and EBITDA of $71.7 million, which reflects the continued strength of our franchise model and a gradual return to steady state. We generated free cash flow of $107.3 million during the first six months of the year, which is consistent with Dine's track record of generating strong and stable adjusted free cash flow. And finally, in Q2, we opened 10 new restaurants signaling the growing confidence our franchisees have in our brands and in putting their capital back to work. Now despite what is still a fluid and unpredictable environment due to the delta variant and COVID-19, we remain cautiously optimistic, and there are two main reasons why. First, improving consumer confidence is approaching pre-pandemic levels. It looks like federal spending will continue this time via the Infrastructure Bill and low unemployment are all meaningful tailwinds. Now that said, our optimism is somewhat tempered by continued volatility. For example, the labor shortage is affecting wages, hours of operation and the availability of certain SKUs in our supply chain. Inflation is also in concern for our guests as well as for our network. We're seeing its effect on the cost of paper and packaging, oils, poultry, pork products and eggs. And based upon current conditions, we now expect commodity inflation in the range of approximately four percent to five percent for the full year. And the final unknown, of course, is the delta variant, which is largely regional at this time. Our outlook would certainly be impacted if large areas of the country return to lockdowns or restaurant guests become uncomfortable dining out. And now that I've covered our performance, I want to give you a more complete picture of how we're accelerating innovation through digital technology. At Dine, we're leaning into our scale. Our strategy is to build one common digital architecture for both Applebee's and IHOP that enables us to do more for both brands than either brand could invest on its own. So far, just in 2021, we've implemented a new CRM and digital platform that enables sophisticated offer management, strengthens our digital marketing and marketing analytics and improves our management of customer data while also serving as the backbone for our loyalty programs. We've also rolled out upgrades to our apps and our websites. Now we provide a more seamless food order experience. For example, guests now have more ability to customize their orders, and it takes fewer clicks to navigate the menu. And these new apps and websites provide us a more comprehensive understanding of our guest purchasing preferences and online behavior. We've also added cool functionality like geo sensing to track guest arrival in advance of car side or in-restaurant pickup and delivery. And in our call center, approximately 150 Applebee's are on our new AI and fully automated voice ordering platform. In 2021, we've also introduced tech to improve the on-premise dining experience. That includes handheld devices for servers that are now in 500 Applebee's restaurants. Those handhelds drive faster table turns, additional drink orders and most importantly, one of our servers in Atlanta told me that she's earning more money because she's turning her tables faster. We also introduced pay-and-go that enables guests to pay at the table using their own device, and the digital wallet that allows guests to redeem offers and coupons from their phone. And finally, later this year, IHOP will begin to roll out new point-of-sale and kitchen display technology. We expect the new POS and KDS systems to reduce the cost of labor, ensure food is served hot and with improvements in order accuracy. And importantly, the new POS and KDS will integrate order flow between digital and on-premise to seamlessly support car side and to-go orders. All of these digital set capabilities are new in 2021. And by end of the year, approximately 75% of our digital technology tools will be modernized or new. And this is the most robust delivery of digital tech in Dine's history. Our franchisees will be adopting the on-premise technology in the restaurants throughout 2021 and 2022. I'll wrap up by emphasizing that our performance, our brands and our finances are strong. We understand that today's environment remains fluid, and we're drawing on our deep experience and guest insights to continue to share -- to continue to grow share today and in the future. Our new CFO, Vance Chang, is going to share more information about our financial results in just a moment. But first, let me proudly introduce the newest member of our leadership team. Vance spent the past 20 years in both banking and building high-growth consumer and healthcare companies. Vance is here because he's an operations-oriented CFO. He'll lean into our domestic and international businesses and work with those teams to fuel growth and improve profitability for Dine and for our franchisees. Vance is a high-impact executive who's got a track record of driving innovation and delivering on execution. And that's exactly the profile we need as we pivot from the crisis to innovation that accelerates our growth. I'm excited to be here today, and we look forward to working with all of you in the months and years ahead. It's great to be with everyone on my first earnings call as CFO of Dine. During my first month at the company, I've been meeting with team members and franchisees in reviewing plans. The onboarding process was instrumental and reinforced my confidence in the business and our direction. I spent the past 20 years in my career in advising, investing and building high-growth consumer healthcare companies providing strategic leadership during times of meaningful change. While we all continue to emerge from the pandemic, we know there are very real challenges still ahead of us, and I recognize the obligation we have as leaders within our industry. For me, it's a humbling responsibility as we work together to maximize the full potential of the enterprise and to deliver profitable growth for all of our stakeholders, including our shareholders, franchisees and team members. John just highlighted some of our baseline results, but let me spend now a few minutes talking about the financials. I'll begin my remarks with a review of our cash position. The continued improvement in our business has helped us maintain our strong cash position. We finished the second quarter with a total unrestricted cash of $259.5 million. This is a 44% increase over the first quarter's unrestricted cash balance of $179.6 million. Turning to our operating results. Franchise revenues for the second quarter were $167 million compared to $67.9 million for the same quarter of 2020. Turning to the company restaurant segment. Sales for the second quarter were $38.2 million compared to $16.8 million for the second quarter of 2020. Rental segment revenue for the second quarter of 2021 were $27.4 million compared to $23.7 million for the same quarter of 2020. The improvement was due to an increase in percentage rental income based on franchisees' retail sales. Adjusted earnings per share for the second quarter of 2021 was $1.94 compared to an adjusted net loss per diluted share of $0.87 for the same quarter of 2020. The improvement was due to an increase in gross profit as our business continued to recover from the effects of the pandemic. Regarding our GAAP effective tax rate. Our effective tax rate for the second quarter of 2020 was 24% expense compared to an 8.2% benefit for the same quarter of last year. The main reason for the variance was due to the nondeductible impairment of goodwill in the second quarter of 2020. G&A for the second quarter of 2021 was $39.3 million compared to $30.9 million for the same quarter of 2020. The increase was primarily due to higher personnel costs associated with our incentive compensation accrual based on company performance. Turning to the cash flow statement. Cash from operations for the first six months of 2021 was $106 million compared to cash used in operating activities for the first six months of 2020 of $10.5 million. The improvement was primarily due to the recovery of our business, as discussed earlier. We believe the positive trend in our liquidity and comp sales will allow us to strategically invest for growth and innovation. Now I would like to share some thoughts about the back half of the year. We expect G&A to be higher in Q3 and Q4 relative to the first half of the year. As a reminder, our G&A does include noncash expenses such as depreciation and stock-based comp that we normally add back as EBITDA, but expected increase in G&A is primarily driven by two factors: first, we pushed professional services and travel expenses to the second half of the year given the uncertainties that we faced during the first half of the year. Second, higher incentive compensation is expected in the second half which is a variable component of G&A that will fluctuate based on our business performance. Additionally, I would point out that our Q2 financial performance reflects strong pent-up demand that we may not experience at the same level in Q3 and Q4 in addition to the normal trends that we typically experience in the second half of the year. We also have more restaurants in the first half than we will have in Q3 and Q4 due to recent closures. Turning to our 2021 financial performance guidance. I would like to highlight a revision to our G&A guidance primarily due to the factors discussed earlier. We now expect G&A to range between $168 million and $178 million. This compares to our previous expectation for G&A to range between $160 million and $170 million. Our guidance for capex of approximately $90 million for 2021 remains unchanged. Moving on to capital allocation. We took proactive measures to reinforce our financial flexibility in early 2020, which included the temporary suspension of our quarterly cash dividend and share repurchase program. On past calls, when asked about our plan to return cash to shareholders we have indicated that we wanted to see several quarters of improving performance before reinstating a dividend or buyback program. Since the start of the year, our fundamentals have continued to improve contributing to our strong adjusted free cash flow position as referenced earlier. As we enter the back half of the year, we will have a shareholder return strategy to share with you and are considering all options to maximize shareholder return and deliver sustained long-term profitable growth for the system. We will have more details on our third quarter call. And a few points on our capital structure. In early 2020, Dine took pre-emptive steps to mitigate the effects of the pandemic on its operations and its franchisees including voluntarily increasing the interest reserve for our securitized debt from the required $16.4 million to $32.8 million. I would like to highlight that due to the improved -- strong improvement in our business over the last 12 months, we have decided to reduce the interest reserve back to $16.4 million. Our leverage ratio as of June 30 was 4.9 times compared to four times as of March 31. With our leverage ratio back below 5.25 times, we will no longer be required to make principal payments on our 2019 Class A-2 notes after September. I would also like to highlight that we continue to have significant cushion in our debt service coverage ratio, or DSCR, at 4.6 times as of June 30. This is an improvement from the DSCR of 3.45 times as of March 31. As a reminder, the first key DSCR measurement is not tripped until the ratio falls below 1.75 times. Maintaining our financial flexibility to meet our debt service obligations is one of our highest priorities. We'll continue our disciplined approach to monitoring liquidity, especially during these times of uncertainty due to the pandemic. We're very pleased with our achievements and remain cautiously optimistic about our recovery. We've done a lot of the heavy lifting to build a solid foundation for long-term growth. Your timing is good. I'm very pleased to report that Q2 was an exceptional quarter for the Applebee's brand. When compared with our 2019 baseline, April, May and June comp sales were positive 11.7%, positive 8.1% and positive 11.4%, respectively. This combined plus 10.5% result marks the best quarterly sales performance throughout the 14-year history of Dine Brands. Of course, that excludes the anomaly of the 2021 versus 2020 pandemic year. Restaurant sales delivered approximately $53,000 per week throughout the quarter. To put this in proper perspective, the months of March, April, May and June in sequence ranked as Applebee's four highest weekly sales months under Dine's ownership. I'm particularly proud of our franchisee partners and the entire Applebee's team as they continue to showcase their restaurant-level excellence within an obviously challenging environment. According to Black Box Intelligence, Applebee's has now outperformed the casual dining category on comp sales for 25 consecutive weeks by an average of 596 basis points. As expected, with guests returning to our dining rooms, we experienced a natural shift from off-premise sales to dine-in sales in Q2. To better understand this trajectory, dine-in mix moved from 67% in April to 72% in June, with 16% Carside To-Go and 12% delivery in June, reflecting this gradual migration to a normalized post-pandemic mix. Applebee's off-premise weekly sales in June was $14,700 per restaurant. And as a percentage of total sales, it's reasonable to assume our off-premise mix may ultimately settle in the low to mid-20% range. I should note, this represents about double our pre-pandemic off-premise mix of 12%, illustrating Applebee's enhanced relevance within this convenience-driven occasion. Given the importance of this business, we are expanding our initial drive-through test to include an additional six units in Q4 for a total of seven dedicated Applebee's pickup windows. Now this off-premise mix includes our Cosmic Wings virtual brand, which we were planning to expand to DoorDash, as you recall, in early May. However, due to significant chicken wing supply challenges across America, we postponed our DoorDash expansion to a date to be determined contingent upon supply availability. We anticipate meaningful incremental demand with this expansion, and we want to ensure supply -- sufficient supply to properly satisfy this demand. In the meantime, I'll hold off commenting further on Cosmic Wings results until we pull this lever with DoorDash hopefully at the end of Q4. Turning to restaurant execution. Applebee's continues to resonate with our guests on key operational metrics such as guest satisfaction, brand affinity and visit intent. This is noteworthy given persistent labor challenges throughout the industry. To address this challenge, we executed our first National Hiring Day back on May 17. Leveraging our extensive digital assets, we offered a free appetizer in return for an application and an interview, something we playfully branded, Applebee's app for an app. Hoping to generate 10,000 applications, our franchise partners ended up securing more than 40,000 applications with a single day event, ultimately hiring about 5,000 new team members that week, a terrific result. And our success here once again illustrates the benefits of scale and brand reputation in navigating this tough labor environment. Applebee's continues to lead the casual dining category on affordability, menu variety, to-go awareness, brand awareness and advertising awareness, which remain important attributes for us in this competitive landscape. With smart and strategic media allocation, our teams introduced a balance of new salads, bowls and beverage innovation throughout Q2 with our newest menu hitting restaurants in two weeks. We also shifted our brand messaging to focus on the genuine emotional connection Applebee's has with its guests, a connection we believe is more important and relevant than ever given all this country has endured over the past 16 or 17 months. I'm proud of the authenticity and resonance this work delivered in Q2. And since music is so much a part of our brand DNA, I also wanted to highlight that the current number one song in iTunes in Billboard's top country music is titled Fancy Like from artist Walker Hayes. And this is important because this song lyrically is all about date night at Applebee's, and it's gone viral in a big way on social media, TikTok, Instagram and YouTube, providing great buzz for the Applebee's brand. Additionally, we entered into a very exciting relationship with The Walt Disney Company in support of their current number one film Jungle Cruise as a way to celebrate and encourage the return to dinner and a movie this summer, a wonderfully familiar part of Americana that we all weren't really able to enjoy for a very long time. Hopefully, you've had a chance to see our advertising featuring Dwayne, The Rock Johnson and Emily Blunt, set to the classic tunes Rock the Boat and Born to be Wild. Both of those debuted in the NBA championship game on July 20. And to capitalize on the synergy, we've also developed a business partnership with Dwayne Johnson, the entrepreneur to introduce his new and fastest-growing premium tequila brand, Teremana into all Applebee's restaurants in July. Dwayne has proven to be a tremendous partner as these signature $7 Mana Margaritas are now available everywhere and proving to be extremely popular with our guests. As we look forward, you can expect our Q3 and Q4 media spending to remain substantial and favorable when compared with the same quarters in 2019. To wrap up, while Applebee's momentum remains strong, it would be unrealistic to expect these unprecedented double-digit sales to sustain in the back half of this year. With that said, Eatin' Good in the Neighborhood has never been more relevant than it is today, and I'm confident in Applebee's ability to continue to thrive in this environment. I'll now turn it to Jay Johns for an overview of the IHOP business. Congratulations on another great quarter. I'm pleased to report that IHOP's solid trajectory continued this quarter. Our second quarter comp sales improved sequentially by 17.8 percentage points compared to the first quarter and outperformed the family dining category as well by 150 basis points according to Black Box. Another indication of the health and stand of our business is the growth in domestic average weekly sales every month in the first half of the year. For the second quarter, average weekly sales were 28% higher than Q1. Average weekly sales per week were approximately $38,000 in April and increased to just over $39,000 by June, reaching a high for the quarter of approximately $40,000. As dining room capacity restrictions were eased and consumers satisfied the longing for a sit-down meal to favorite IHOP, our off-premise sales mix moderated as anticipated. Off-premise sales accounted for 26.1% of sales mix for the second quarter compared to 33.3% for the first quarter. However, we continue to believe that we'll retain the majority of the off-premise sales growth attained over the last 15 months, partly due to changes in consumer behavior. According to a May 2021 survey by McKinsey & Company, consumers intend to continue with many digital behaviors even after COVID-19 subsides, including restaurant curbside pickup. In fact, our net off-premise sales in dollars improved each month in the second quarter. Additionally, off-premise comp sales increased 169% in the second quarter of 2021 compared to the same period of 2019. For the second quarter, our sales mix consists of 73.9% dine-in, 13.9% delivery and 12.2% To-Go. Approximately 85% of our domestic restaurants are open for standard operating hours or greater and approximately 27% are operating 24/7. We believe that having more restaurants operating on standard hours or longer, reduced capacity restrictions and higher vaccination rates could be a potential tailwind in the second half of the year. To drive traffic and sustainable long-term growth, we're executing a multi-pronged strategy. This includes our new approach to marketing, launching a loyalty program, developments and virtual brands. I'll provide some color on each of these. We're adopting a new marketing tone aimed at leveraging the emotional connection of our guests that they have for IHOP. Our new creative is designed to remind consumers why they love the brand. We're taking a multichannel approach to better utilize our resources such as increasing our digital exposure. We believe doing so will allow for more effective one-to-one marketing and better targeted messaging to different audiences. I'm pleased to say the marketing transformation is already underway. Regarding our loyalty program. We plan to launch a loyalty program in the fourth quarter to increase guest engagement. Our goal is to drive trial and importantly, incremental visits from existing IHOP guests. At IHOP, the pandemic forced us to reflect and refocus on our relationships with our guests within a transforming restaurant industry. At the same time, we actually grew our investments in CRM and customer-facing technologies, delving down our commitment to modernize our guest relationships. Over the past 12 months, we've invested in CRM, loyalty and digital experiences. While much of this work has been foundational, we expect to see some of these elements coming to life later this year. We're focused on returning to strong unit growth. I highlighted last quarter, we have the advantage of being able to provide our franchisees with four platforms to accommodate their development needs. These include our traditional platforms, nontraditional, a new small prototype is scheduled to test this year and our first Flip'd by IHOP locations, which we plan to open in the next few months. Regarding Flip'd, we now plan to open our first location in Lawrence, Kansas in the third quarter. This location will be approximately 3,500 square feet and is a freestanding structure with 55 seats. Our second Flip'd location is now scheduled to open late in the third quarter in New York City. This location is a conversion space that will be approximately 1,800 square feet with only 25 seats. Both locations will have the same menu that will address all three dayparts while leveraging the equity of IHOP that guests love. Importantly, IHOP provides franchisees with conversion opportunities across all of these platforms, which can be very cost effective. At the sites we've approved for the future this year, approximately 42% are conversions. For 2021, we believe the brand can develop 40 to 50 new restaurants. Looking ahead in the next three years, our development strategy includes a blend of our four development platforms. And with the addition of Flip'd and the introduction of small prototype, we believe the brand can significantly exceed its historical annual run rate over the last decade. Turning to virtual brands. While our focus so far this year has been on restarting and have strong development, we believe the time is appropriate to start evaluating third parties with several brands to partner with. Given that approximately 70% of our domestic restaurants have two full kitchens, we have capacity that can accommodate multiple virtual brands. We're currently reviewing our daypart strategy and assessing how to best utilize our existing capacity. Due to the fact we're in the preliminary stage of this, it's too early to discuss who we may work with as a virtual brand partner. We've made good progress over the last year. Our business has improved significantly, off-premise sales remained strong even as dining room capacity restrictions were generally eased. The majority of our domestic restaurants are operating on standard hours or longer, and we believe there's additional upside as well as restaurants resume standard operating hours later than the year. We have a multipronged plan in place for long-term growth. The road ahead for IHOP looks bright, and I'm very pleased with our position.

q2 adjusted earnings per share $1.94. believes that its consolidated financial results for 2021 could continue to be materially impacted by covid-19. revises expectations for general and administrative expenses for 2021 to range between about $168 million and $178 million. qtrly total revenues $233.6 million versus $109.7 million. dine brands global - looking ahead, optimism is somewhat tempered by continued volatility, which include labor shortages and variants of covid-19.

I'm joined by John Peyton, CEO; Allison Hall, Interim CFO and Controller; Jay Johns, President of IHOP; and John Cywinski, President of Applebee's. I'll start by saying it's an honor for me to join Dine Brands. I believe in Dine Brands because I believe in restaurants. Restaurants are essential to strong communities and human connection and people appreciate that now more than ever before. I believe we're on the cusp of the restaurant renaissance. And as we enter what we expect to be the beginning of the end of the pandemic, all restaurants face the common challenge and that's the eating out in America has changed. Those will win in the new era of restaurants are those who remained resilient and those who invested in new menu and service innovations and new technology during 2020. And that's the story of Dine Brands. We have solid fundamentals, two category-leading iconic brands and certainly the most talented team members and franchisees in the industry. Let me pause and tell you a bit about my story. As a teen, I worked in my parent's restaurant. It was called the [Indecipherable] Philadelphia and I was certainly humbled and stunned by the almost 24/7 demands required at my parents'. After college, I went on to work as a consultant for PwC, I then was at Starwood Hotels and most recently at Realogy. I joined Dine because I believe in the power and lure of strong brands. 20 years ago, a mentor of mine who was a marketing wizard, taught me that brands win when they're different, better and special. And our brands are truly different, better and special. IHOP, for example, is a pancake obsessed breakfast innovator that makes the most important meal of the day, also the most fun. And Applebee's embodies what it means to be all American and locally relevant. We call that Eatin' Good in the Neighborhood. In other words, Applebee's and IHOP are iconic brands that connect in an emotional way with our guests. And that's important because we know restaurants are essential to the fabric of community and human connections. I also like our business model. We're 98% franchise and asset light. We are a significant generator of cash. Our franchise model helps buffer us from fluctuations in the market and our model generally requires less significant investments of capital and it allows those who are best operating restaurants or franchisee owners to do so with our support. My 20-plus years at Starwood and Realogy taught me that successful franchising requires true partnership and that we work hard every day to ensure that our independent franchisees build valuable businesses that create generational wealth. So over the last two months, I've been on the move. I've conducted a deep dive across the Company, learning more and more about our brands and Dine's dynamic corporate culture. So far, I've spoken with 40 franchisees in the U.S. and around the world and they represent 50% of the Applebee's system and more than a third of our IHOP restaurants. I've also connected with our suppliers and our vendors and our team members. I visited our restaurants, and our test kitchens. And I can report that our network is aligned and is desired to grow and to invest and to win. Now, despite the impact of the pandemic, Dine's fundamentals remain solid. You may recall that in March of 2020, S&P placed the Company's whole business securitization notes on credit watch-negative as it did with two other whole business securitizations in our industry at that time. Six months later, S&P removed our notes in credit watch and reaffirmed our BBB rating. Dine was the only issuer of the series and not have its notes downgraded or remain on credit watch due to the pandemic. S&P's decision last fall was a greatest achievement for Dine and illustrates that our fundamentals remain strong. And because we emerged in 2020 on sound financial footing, we plan to repay in full the $220 million drawn from our revolver last March. We expect to complete the repayment this month, resulting in interest expense savings of approximately $5 million. In addition to strong fundamentals, we have passionate franchisees who remain in very good standing. Our collection rate for royalty and marketing fees stands at approximately 99% and the fees we deferred during Q2 of last year are being paid back according to schedule. And in addition to our fabulous franchisees, importantly, both brands are led by veteran executive team with exceptional experience and industry knowledge. You'll hear from Jay and John shortly and it's their expertise and collective wisdom that truly paid off via their extraordinary stewardship of the brands in our franchisees throughout the challenge of 2020. So looking ahead, we're anticipating rebound in the second half of the year, driven primarily by increases in vaccination rates. Overall weekly sales trends for both brands have also improved since the week ending January 3 of 2021, Applebee's improving by approximately 8 percentage points and IHOP posted gains of about 6 points. We're also encouraged by our off-premise business. Both brands maintained off-premise sales of approximately one-third of total sales during the fourth quarter and we view off-premise dining as a new consumer behavior that will live beyond the pandemic. We're continuing to invest in technology to support our growing off-premise business and we're certainly optimistic about the outlook for Applebee's and IHOP because during times of crisis, guests just like me, and just like you look to brands we trust and if restaurant guests return to indoor dining, guests will trust that our franchisees and restaurant team and IHOP and Applebee's are committed to their health and safety. So taken collectively, these fundamentals uniquely position Dine Brands to endure the challenges brought on by the pandemic and position us for long-term sustainable growth. Our team is focused on three objectives over the next 12 months to 24 months. The first is to navigate what we believe is the beginning of the end of the crisis. The second is to win the recovery and win the new normal that follows. And the third is to evaluate long-term growth vehicles. So allow me to share a bit of my thinking about each of those. First is to navigate the beginning of the end of the crisis. Of course, we'll continue to monitor and protect cash and we will also focus on continuous improvement in operational health and safety standards in our restaurants. We're preparing compelling marketing campaigns and new products to drive the recovery growth and we are working intensely to ensure the financial health of our franchisees. Second, we'll win the recovery and win the new normal by leveraging our recent investments in business and consumer insights, CRM and digital to reactivate our guests via one-to-one and highly targeted marketing and we'll realign our menu to reflect learnings in the past 12 months and we'll reset the channel mix to reflect those earnings as well. And third, we'll continue to evaluate long-term growth vehicles both traditional and non-traditional development, which includes everything from new prototypes for both brands, virtual brands and ghost kitchens, both of which we have the efforts under way and we'll take a look at international expansion opportunities in key markets and possibly explore incorporating a third brand at the right time. So as I wrap up, I want to emphasize the Dine views the crisis as both a threat and an opportunity. And while we knew it was important to play defense to protect our liquidity and our flexibility, we also played offense so that we would emerge from the crisis in a position to serve more guests both inside and outside of our restaurants. Because we played offence in 2020, we continue to invest in new digital and CRM products that are coming online early this summer as well as innovative menu items like IHOPPY Hour and Burritos & Bowls at IHOP and Applebee's new virtual brand, Cosmic Wings. And while we were investing in new technology and menu offerings, our franchisees invested in supporting the local communities by feeding and sheltering frontline workers and those in need. And so if all of these investments combine, that will pay off as our guests return to indoor dining. I'll begin with a business update, then review our results for the fourth quarter and the full year. Lastly, I'll discuss our financial performance guidance for 2021. During a very challenging year, we took steps to maintain our financial flexibility, including drawing down $220 million in March 2020 from our revolving credit facility, all of which remain outstanding as of December 31. As John just mentioned, we plan to repay the $220 million during the month of March. Due to this proactive measure, we continue to have very strong liquidity. We ended 2020 with total cash and cash equivalents of $456 million, which includes restricted cash of $72.7 million. Excluding the $220 million drawn from our revolver, cash on the balance sheet was $64 million higher at the end of 2020 compared to year-end 2019. The increase was primarily due to the temporary suspension of both our quarterly cash dividends and our share repurchase program. These steps were taken in response to COVID-19 pandemic and the need to maintain financial flexibility. Additionally, we maintain tight G&A management during the year of austerity and we're able to lower compensation costs following the difficult decision to furlough approximately one-third of our corporate staff for several months during 2020. Turning to our financial results, I'll begin with the notable changes on our income statement. For the fourth quarter, adjusted earnings per share of $0.39 compared to $1.78 for the same quarter of 2019. For 2020, adjusted earnings per share was $1.79 compared to $6.95 in 2019. The year-over-year decrease was due to a significant decline in customer traffic resulting from governmental capacity restrictions on dining room operations. This led to declines in domestic comp sales at both brands and a decrease in the number of Applebee's and IHOP effective restaurants and lower gross profit. The impact of the pandemic on franchise operations resulted in an increase in bad debt. For 2020, our bad debt was approximately $12.8 million as compared to virtually no bad debt for 2019. Switching gears to G&A. Given our asset-light business model, G&A remains an important lever for us. In 2020, it constituted 30% of our total revenues excluding advertising revenues. G&A for the fourth quarter of 2020 improved to $39.4 million from $41.7 million for the same quarter last year. The decline was primarily due to lower travel and compensation costs. G&A for the fourth quarter was lower than our guidance of approximately $45 million, primarily due to our ability to tighten G&A controls in response to the resurgence of coronavirus cases. G&A for 2020 was $144.8 million, including $4.3 million related to the company restaurants segment. This compares to $162.8 million in 2019. The decline was primarily due to G&A tighter management around that, which included a decrease in compensation and travel-related costs. Now turning to the cash flow statement. Cash from operations for 2020 was $96.5 million compared to $155.2 million in 2019. The change was primarily due to a decrease in total revenue, resulting from the decline in guest traffic at our restaurants as previously discussed. Our highly franchised model continued to generate strong adjusted free cash flow of $106.6 million in 2020 compared to $148.8 million in the prior year. The decline was primarily due to the decrease in cash from operations just discuss, primarily offset by lower capex compared to 2019. We believe that our cash on hand, cash from operations and the steps we've taken to mitigate the effects of the pandemic will allow us to continue to remain with strong liquidity throughout the year as our business continues to improve. Now regarding capital allocation, we continue to reevaluate our capital allocation strategy as industry conditions continue to improve and normal restaurant operations resume. As previously discussed, we plan to repay the $220 million drawn last March. Additionally, we will review reinstating our quarterly cash dividends and resumption of our share repurchase program. We will also reevaluate investments in our existing brands to enable both -- platforms for both organic and non-organic growth. Now for an update on our franchisee assistance program. Dine Brands provide approximately $55.7 million in royalty, advertising fees and rent payment deferrals to our franchisees and continue to provide assistance on a case-by-case basis. In total, we provided approximately $61 million deferrals to 223 franchisees across both brands, of which 61 have repaid their deferred balances in full. Overall, a total of approximately $32 million of the original subsequent deferrals have been repaid and repayments are on track. Regarding adjusted EBITDA, our consolidated adjusted EBITDA for 2020 was $158.7 million compared to $273.5 million for 2019. The decrease was primarily due to a significant decline in customer traffic resulting from a governmental mandated dine-in capacity restrictions discussed earlier. This led to decreases in both revenues and gross profit in 2020 compared to 2019. Because of our asset-light model and low capex requirements, we continue to have very high quality adjusted EBITDA as capex represented only 7% of 2020 adjusted EBITDA. Lastly, I will review our financial performance guidance for fiscal 2021, which reflects the projected impact over the pandemic on our guidance as of today. Due to ongoing uncertainty created by COVID-19, we clearly cannot provide a complete business outlook for the year. As our business conditions continue to improve and dining capacity restrictions are lowered, we will evaluate providing additional performance guidance as necessary. We're not offering guidance around development comp sales because of the uncertainty of the recovery this year. However, I can tell you, G&A is expected to range between approximately $160 million and $170 million including non-cash stock-based compensation expense and depreciation of approximately $45 million. Please note that this range includes approximately $5 million of G&A related to the company restaurants segment and capital expenditures are expected to be approximately $14 million inclusive of approximately $5 million related to the company restaurants segment. To wrap up, Dine Brands has significant cash on the balance sheet and has maintained strong financial flexibility despite the adverse conditions in 2020. Comp sales of both brands have improved significantly since the onset of the pandemic. Although there is a lot of work that's still ahead of us, we believe accomplishments this year have laid a solid foundation for growth. I'm very proud of what this Applebee's team accomplished in 2020 and remain extremely optimistic about our business prospects here in '21. In partnership with our franchisees, we fundamentally altered our business model to adapt to this new environment. Applebee's comp sales progressed from minus 49.4% in Q2 to minus 13.3% in Q3 to minus 1.9% in the month of October when we last spoke. Almost immediately thereafter, the country experienced a rather abrupt resurgence of COVID directly impacting our Q4 trajectory. As a result, November comp sales were minus 15% while December came in at minus 30.1%. Now the good news is that business is now improving as comp sales for January and the first three weeks of February combined were minus 18.1%, rolling over a very strong 3.3% increase from the same timeframe last year. Additionally, given COVID-related restrictions, we scaled back our media spending in December, January and February. It's also important to note that not all casual dining brands are impacted equally by these restrictions given each brand's geographic distribution. Applebee's has a disproportionately heavy penetration of its restaurants in the Northeast and Midwest, two geographies, obviously hardest hit by dining restrictions. While reflected in these recent results, this will ultimately and disproportionately benefit us as restrictions are eased over the coming months. For context, at the end of December, 412 of our dining rooms were closed due to government imposed mandates. In many respects, our current operating environment feels very similar to late summer of last year if you recall when we saw Applebee's sales momentum accelerate as restrictions were eased, including our first positive sales week at the end of September. And barring unforeseen circumstances, I anticipate a similar dynamic to unfold very soon here in '21. Now for the month of February, Applebee's sales mix consisted of 63% dine-in, 22% Carside To Go, and 15% delivery. On the off-premise front, we continue to enhance Carside To Go with the upcoming introduction of a third-party app called FlyBuy that notifies restaurant teams through geofencing the moment our guest arrives on the lot. Also, our franchise partner in Arkansas recently opened Applebee's first drive- thru window. In addition to being very well received by team members and guests, this dedicated drive-thru lane eliminates weather challenges, improves throughput and importantly extends our late night to-go operating hours. From a delivery perspective, our tamper-evident packaging is now fully deployed throughout the brand as another visible point of guest reassurance. Without question, our off-premise investments over the past year have broadened Applebee's reach and relevance across this important convenience-driven occasion. Now with respect to Applebee's on-premise business. I anticipate our 63% sales mix to naturally elevate this year, as indoor dining gradually returns. And I firmly believe dining room service will be an unmistakable core strength for Applebee's, as guests look for that long overdue escape from home, where they can once again connect with one another over a good meal and perhaps a drink. Most importantly, these guests will naturally gravitate to brands that have earned their trust and loyalty throughout the pandemic. On this front, we're confident Applebee's is exceptionally well positioned. This optimism is supported by our very strong brand affinity and visit intent metrics, which have proven to be reliable leading indicators of brand performance. And as the year progresses, we'll continue to deploy guest-facing digital technology such as our pay-and-go initiative designed to provide easy mobile payment options without the need for a server. Now, I'd like to take a moment to discuss our virtual brand evolution. As you may know, we just launched Cosmic Wings nationally on February 17, introducing a fully differentiated virtual brand, targeting a younger audience around the wings meal occasion. At the moment, Cosmic Wings remains an online delivery-only concept available via Uber Eats and fulfilled through approximately 1,250 Applebee's kitchens. In addition to craveable wings, tenders, waffle fries and onion rings, the team has developed a proprietary menu of Cheetos original wings, Cheetos Flamin' Hot wings as well as Cheetos cheese bites. This innovation work is exclusive to Applebee's and the culmination of our ongoing partnership between our culinary and marketing teams, franchisees, PepsiCo and Frito-Lay. While it's far too early to draw any conclusions, Cosmic Wings averaged $510 of incremental sales per restaurant last week in its first full week of operation, showing a steady build from day to day. We're very pleased with these initial results, and we'll certainly be in a better position to quantify the ultimate financial impact of Cosmic Wings on our next call. We've also been active in piloting our first ghost kitchens in partnership with our franchisees, with two in Philadelphia, one in Los Angeles and another soon to open in Miami. To clarify, these are low capital investment, small footprint kitchens without a street front presence designed to satisfy online delivery demand for Applebee's, where we currently don't have restaurant penetration. The business model here appears attractive in the right geographies, where a brick-and-mortar presence may not be feasible. Now, as I reflect upon this past year, I know our guests genuinely trust Applebee's perhaps now more than ever. Whether it's in their family rooms or in our dining rooms, there is no more relevant brand positioning for this environment than Eatin' Good in the Neighborhood as John referenced. To this point, last week, we launched our latest national event, 5 Boneless Wings for $1 with the purchase of any burger, which is resonating extraordinarily well. In fact, last week, Applebee's achieved our single highest sales volume week since the pandemic outbreak in mid-March of last year, that's 50 weeks ago. It's also worth noting that we are strategically and tactically aligned with our franchisees around our full-year marketing and innovation plan along with contingencies, given the obvious need for agility in this environment. In closing, I believe Applebee's is near an inflection point, and that America's pent-up demand for dining out is indeed very real. We saw this trajectory last year up until the resurgence of the virus, and I'm confident we'll see it again this year very soon. And when this does occur, our franchise partners are very well positioned to not only return to sustained growth, but to thrive in a post-pandemic environment as they unlock the full potential of the Applebee's brand. With that, I'll turn it to Jay. We are very optimistic about the road ahead for IHOP for several reasons. First, our quarterly comp sales improved meaningfully from a decline of 59.1% for the second quarter to a decline of 30.1% for the fourth quarter, reflecting a net increase of 29 percentage points since the pandemic began. Second, the brand is well positioned to benefit from pent-up demand when restrictions on the dining room capacity are eased and we have a strategy in place to capture it. Lastly, our development pipeline remains strong and new opportunities are being pursued. As we closed out the fourth quarter, IHOP's comp sales declined 30.1%, which is on par with the family dining category. Our performance, especially the final six weeks, was adversely impacted by the resurgence in coronavirus cases. We were particularly impacted in California and Texas, which collectively comprised approximately 25% of our domestic restaurants. Our results for January 2021 improved to minus 26.8%, representing a gain of 10 percentage points from December. February comp sales through week ending February 21 were down 27.6%. For the same period, our sales mix consisted of 66% dine-in, 16.9% to-go and 17.1% delivery. As we continue to navigate the ever-changing environment, we have four strategies to help the brand drive growth. Number 1, focusing on our PM daypart; Number 2, value; Number 3, maintaining our gains in off-premise sales; and Number 4, development growth. We believe this new value platform will not only play an important part of the strengthening and expanding our PM business, but also drive off-premise sales in locations where it's available. IHOPPY Hour is driving incremental sales in the mid to high teens and approximately 20% incremental traffic compared to the rest of the day. This equates to a low- to mid-single-digit lift in both sales and traffic for the whole week. IHOPPY Hour is consistently four times more effective at driving traffic than any window we've had during that time. Our third strategy is growing our strong off-premise business. As consumer sentiment is shifting and off-premise is becoming more accepted around the country, our mix has remained strong. For the fourth quarter, off-premise was 33.3% of total sales, compared to 32.4% for the third quarter. To provide more color, to-go accounted for approximately 17% of sales mix and delivery accounted for approximately 16%. Off-premise comp sales for the fourth quarter grew by 130%, driven primarily by traffic. We believe that we can retain a significant amount of this growth even as dining room capacity restrictions are eased over time. Conducive to this is our -- is the high portability of IHOP's menu and our proprietary off-premise packaging, which keeps our food warm approximately 40 minutes after leaving the restaurant. Additionally, we implemented curbside to-go quickly at the onset of the pandemic and continue investments in our IHOP and Go platform. IHOP's latest menu innovation is our all-new signature, Burritos & Bowls, which is introduced this past January. The six new Burritos & Bowls were designed with creative flavor combinations and easy portability in mind for guests to enjoy wherever they please and appeal to guests across all dayparts. The results since the launch are very encouraging, with Burritos & Bowls capturing approximately 8% of check at order incidents based on our soft launch without a full media and marketing campaign. Switching gears to our fourth strategy, development. As we look at growth heading into 2021 and beyond, we will grow our IHOP brand with four different platforms. First, traditional development, of which we have a stable pipeline as a result of franchisee obligations that were deferred as part of our assistance during the pandemic. Second, non-traditional development, which is led by our largest agreement in our 62-year history, with TravelCenters of America for 94 restaurants over five years. Third, the resumption of work on our Flipped by IHOP concept, which we expect to open our first location this year. And fourth and finally, we've developed a new small prototype that we intend to test this year. We expect it to provide new opportunities for franchisee growth with a higher return on investment, allowing us to go into areas we might not have been able to penetrate previously. For 2021, we expect to continue to reinvigorate our growth that was hindered by the pandemic. Now, for an update on our domestic restaurants open for business. As of December 31, 1,174 restaurants or 70% of our domestic system was open for in-restaurant dining with restrictions. This compares to 1,425 restaurants or 85% as of September 30. The decline in locations open for in-restaurant service was primarily due to the spike in coronavirus cases discussed earlier. Turning to the unit guidance for restaurant closures we provided in October. As a reminder, given the impact of the pandemic on individual restaurant level economics, we evaluated only greatly underperforming restaurants that we determine had a greater chance of not being viable coming out of the pandemic. These restaurants were generally some of the lowest performing units in the system, based on sales and franchisee profitability. This program concluded with 41 closures over the last six months, which is well below our initial projection of up to 100 restaurants. We remain confident that we'll eventually replace these severely underperforming locations and grow our footprint with better performing restaurants that had volumes closer to our pre-COVID AUV of approximately $1.9 million. To close, we're executing against our four strategies to drive our growth which includes PM daypart expansion, value, maintaining our gains and off-premise sales and development growth. We've done the heavy lifting to position the brand for long-term success and build an insurmountable lead in family dining. I'm pleased with what our franchisees and team members have accomplished during a very challenging year and I'm very optimistic about the road ahead. It's truly because of their leadership, particularly during the pandemic, that Dine and its brands are poised to enjoy significant upside potential in 2021 and beyond. Understandingly through meaningful change in performance trajectory will not happen immediately, but I am confident in our ability to restore sustainable same restaurant sales momentum in the second half of 2021 as more people are vaccinated and guests [Indecipherable] dine out return to restaurants. I have absolute faith in our franchisees and our talented team members will lead us into a new restaurant renaissance. Our strong fundamentals remain intact. We're positioning Dine for long-term growth and continuing to evolve as a guest-centric data-driven organization.

compname reports q4 adjusted earnings per share $0.39. q4 adjusted earnings per share $0.39. ihop's comparable same-restaurant sales decreased 30.1% for q4 of 2020. consolidated financial results for 2021 could continue to be materially impacted by global impact from covid-19. company currently cannot provide a complete business outlook for fiscal 2021. dine brands - capital expenditures expected to be about $14 million, inclusive of approximately $5 million related to company restaurants segment for fy 2021.

As we begin the final year of The Walt Disney Company's first century, I am pleased to share our results for the first quarter of fiscal 2022, starting with the highlights. Our adjusted earnings per share of $1.06 is up from $0.32 a year ago. Our domestic parks and resorts achieved all-time revenue and operating income records despite the Omicron surge. And our streaming services ended Q1 with 196.4 million total subscriptions after adding 17.4 million in the quarter, including 11.8 million Disney+ subscribers. I'll share more about those items shortly. But first, I want to talk about this unique moment in the history of The Walt Disney Company. It is perhaps fitting that our 100th anniversary comes at a time of significant change for us and our industry. In the midst of a global pandemic, fast-changing consumer expectations and a leadership transition, we reimagined our parks business, substantially increased our investment in content creation and executed a reorganization that will facilitate our ongoing transformation. Each of those actions has helped set the stage for our second century. And as we approach that remarkable milestone, I am filled with optimism. We have the world's most creative storytelling engine, an unmatched collection of brands and franchises and an ability to tell stories that form deep emotional connections with audiences. We have a portfolio of distribution platforms, including powerful and growing streaming services. We have diverse revenue streams that span business models and industries, but which all are interconnected to create entertainment's most powerful synergy machine. We have the country's top news organization and the most trusted brand for following sports and our theme parks continue to be the most magical places on Earth. In short, our collection of assets and platforms, creative capabilities, and unique place in the cultural zeitgeist give me great confidence that we will continue to define entertainment for the next 100 years. To carry through on that promise, we will be guided by three strategic pillars: storytelling excellence, innovation, and audience focus. Storytelling excellence is, of course, dependent on having excellent storytellers. I am thrilled to share that our legacy of being home to the most accomplished leaders in the industry will continue, as nearly all of our top creative executives have recently renewed, extended, or signed new contracts. I could not be more excited to continue working with these creative powerhouses. The quality content from our teams was recognized just yesterday with a fantastic 23 Oscar nominations, including three of the five best animated feature films: Pixar's Luca; Walt Disney Animation's Raya and the Last Dragon; and our newest franchise, Walt Disney Animation's Encanto, which received three nominations. Summer of Soul was recognized in the best documentary category, and Nightmare Alley and West Side Story both received best picture nominations. As you may have seen earlier today, we announced West Side Story will debut in most Disney+ markets on March 2, and we can't wait for our subscribers to see this incredible film. In Q1, our studios took us deeper into the Marvel Cinematic Universe with Eternals and the Disney+ original series, Hawkeye, and returned us to that galaxy far, far away with another Disney+ original series, The Book of Boba Fett. Our general entertainment teams also continued to produce programming of the highest quality. In fact, last year, our general entertainment team produced nearly a quarter of the industry's best-reviewed shows. And Q1 saw 10 of their shows achieve a 100% critic score on Rotten Tomatoes. That includes Abbott Elementary, the first freshman broadcast comedy to earn the 100% Certified Fresh score since ABC's own Modern Family in 2009. Our success in branded storytelling is, of course, no secret. However, it's often lost that the depth, breadth, and quality of our general entertainment content is also a driving force behind the success of our streaming services. In fact, six of the 10 most-watched programs across our services are general entertainment titles produced by our own team. And general entertainment is an increasingly powerful driver of engagement in most of our international markets where such content is already included in our service under the Star brand. Going forward, integrating more owned general entertainment into our services, especially Disney+, will be a priority. In fact, just today, we added episodes of Grown-ish, Black-ish, and The Wonder Years to our domestic Disney+ service. Rounding out our content focus is, of course, sports. Sporting events continue to be the most powerful draw in television, accounting for 95 of the 100 most-watched live broadcast in 2021. And ESPN once again set the bar this quarter with live games across each of our four major U.S. sports, including the revolutionary Monday Night with Peyton and Eli. And I am pleased to announce that we have expanded our agreement with Peyton Manning and his Omaha Productions company to extend our relationship through the 2024 NFL season. While multiplatform television and streaming will continue to be the foundation of sports coverage for the immediate future, we believe the opportunity for The Walt Disney Company goes well beyond these channels. It extends to sports betting, gaming, and the metaverse. In fact, that's what excites us, the opportunity to build a sports machine akin to our franchise flywheel that enables audiences to experience, connect with and become actively engaged with their favorite sporting events, stories, teams, and players. Turning to distribution results. The continued growth of our streaming services was certainly a standout. Our success at Disney+ this quarter was not the result of any one item, but instead a combination of organic growth and powerful new content, our strategic decision to include the Disney bundle with all Hulu Live subscriptions, and new market launches. The remainder of this fiscal year will feature compelling Disney+ originals from across our brands and franchises, beginning with Pixar's Turning Red and Marvel Studios' Moon Knight in March. And the back half of FY '22 will feature a truly stunning array of content, including two Star Wars series: Andor and the highly anticipated Obi-Wan Kenobi, which I am excited to announce will premiere on May 25. We'll debut two Marvel series, Ms. Marvel and She-Hulk; fresh new shorts from Disney Animation and Pixar featuring the worlds of Big Hero 6 and Cars; a live-action reimagining of the Disney classic Pinocchio, starring Tom Hanks as Geppetto; and one of the most anticipated sequels in some time, especially in the Chapek household, Hocus Pocus 2. As I've said before, we continue to manage our services for the long term and maintain confidence in our guidance of 230 million to 260 million total paid Disney+ subscribers globally by the end of fiscal 2024. Christine will provide more detail into our theatrical results. However, I want to reiterate that we continue to see value in the moviegoing experience, especially for big franchise blockbusters. And given the performance of titles like Spider-Man: No Way Home, we are looking forward to kicking off our summer slate with another Marvel franchise film, Doctor Strange in the Multiverse of Madness. That said, audiences will be our North Star as we determine how our content is distributed. And we do not subscribe to the belief that theatrical distribution is the only way to build a Disney franchise. This quarter, audiences proved us right as Encanto became a phenomenon within days of its arrival on Disney+ after families' continued reluctance to return to theaters resulted in a muted theatrical performance. With outstanding music from Lin-Manuel Miranda, it became the fastest title to cross 200 million hours viewed on Disney+ and took social media by storm. People around the world expressed their fandom through their own content and conversation, and the Encanto hashtag has been viewed more than 11 billion times. The soundtrack, which debuted at No. 197 on the Billboard 200 chart, reached No. 1 shortly after debuting on Disney+. And eight of the film's songs hit the Hot 100 chart, including We Don't Talk About Bruno, which became the first Disney song to reach No. 1 since Aladdin's A Whole New World in 1993. At the same time, sales of Encanto merchandise defied traditional post-holiday declines and actually increased following the film's release on Disney+ on Christmas Eve and guests at Disney California Adventure have loved seeing Mirabel in real life. These results are exactly what you would expect from the launch of a new Disney franchise, and we are thrilled that Disney+ was the catalyst. We are more confident than ever in this platform as a content service, a franchise engine, and as a venue for the next generation of Disney storytelling. Finally, I could not be more pleased with the performance of our Parks, Experiences and Products segment, which posted its second best quarter of all time. Over the last several years, we've transformed the guest experience by investing in new storytelling and groundbreaking technology, and the records at our domestic parks are the direct result of this investment. From new franchise-based lands and attractions, to craveable food and beverage offerings, to must-have character merchandise, there is more great Disney storytelling infused into every aspect of a visit to our parks than ever before. At the same time, we're giving guests new tools to personalize their visits and spend less time in line and more time having fun. While we anticipated these products would be popular, we have been blown away by the reception. In the quarter, more than a third of domestic park guests purchased either Genie+, Lightning Lane, or both. That number rose to more than 50% during the holiday period. While demand was strong throughout the quarter at both domestic sites, our reservation system enabled us to strategically manage attendance. In fact, their stellar performance was achieved at lower attendance levels than 2019. As we return to a more normalized environment, we look forward to more fully capitalizing on the extraordinary demand for our parks, along with the already realized yield benefits that took shape this quarter. And we, of course, will continue to invest in the guest experience. I am personally looking forward to Star Wars: Galactic Starcruiser at Walt Disney World, a two-night adventure into the most immersive Star Wars story ever created. Later this summer, we will debut an innovative new roller coaster at Epcot, Guardians of the Galaxy: Cosmic Rewind, and open Avengers Campus at Disneyland Paris, where the iconic Quinjet landed a few weeks ago ahead of the resort's 30th-anniversary celebrations. Our company is truly extraordinary, and I am honored to work with the most talented team in the industry to create the next generation of Disney stories and experiences through our focus on storytelling excellence, innovation, and our audience. With that, I'll hand it over to Christine. Excluding certain items, diluted earnings per share for the quarter were $1.06, an increase of $0.74 from the prior-year quarter. Fiscal 2022 is off to a good start as evidenced by our first-quarter results and our continued progress toward more normalized operations across our businesses. At parks, experiences, and products, operating income was up $2.6 billion year over year as all of our parks and resorts around the world were open for the entirety of the fiscal first quarter. In the prior-year quarter, Walt Disney World Resort and Shanghai Disney Resort were open for the entire quarter, while Hong Kong Disneyland Resort and Disneyland Paris were each open for a limited number of weeks and Disneyland Resort was closed for the entire quarter. At our domestic parks, we were very pleased with the strong levels of demand we saw from both Walt Disney World and Disneyland. And as Bob mentioned, our reservation system has allowed us to strategically manage attendance. Overall, attendance trends at our domestic parks continued to strengthen in the quarter with Walt Disney World and Disneyland Q1 attendance up double digits versus Q4, in part reflecting holiday seasonality. Per capita spending at our domestic parks was up more than 40% versus fiscal first quarter 2019 driven by a more favorable guest and ticket mix, higher food, beverage and merchandise spending and contributions from Genie+ and Lightning Lane. Putting these factors together, our domestic parks and resorts delivered Q1 revenue and operating income exceeding pre-pandemic levels even as we continued managing attendance to responsibly address ongoing COVID considerations. Looking ahead to Q2, our demand pipeline for domestic guests at Walt Disney World and Disneyland remain strong, benefiting from our 50th-anniversary celebration at Walt Disney World and new attractions and experiences at both parks. At international parks, a profitable first quarter reflected improving trends at Disneyland Paris. We also saw improved results at Hong Kong Disneyland, although the resort is now temporarily closed in response to a resurgence in COVID cases in the region. We expect international parks will continue to be impacted by COVID-related volatility for the remainder of Q2. Moving on to our media and entertainment distribution segment. First-quarter operating income decreased by more than $600 million versus the prior year as revenue growth across our lines of business was more than offset by higher programming and production costs. Revenue growth in the quarter was primarily driven by increased subscription fees from our direct-to-consumer services. We also delivered record advertising revenues for the segment as we continue to see strong advertiser demand for our live sports and streaming and digital businesses. Turning to our results by line of business. At linear networks, you may recall that we guided to a decrease in operating income of nearly $500 million for Q1 versus the prior year. Operating income of $1.5 billion came in better than expected, primarily driven by our international channels, which I'll discuss in a minute. At our domestic channels, both broadcasting and cable operating income decreased in the first quarter versus the prior year. Lower results at broadcasting were impacted by an adverse comparison to prior year political advertising revenue at our owned television stations, as we noted in the guidance we gave last quarter. At cable, the year-over-year decrease in operating income reflected higher programming and production costs and increased marketing spend, partially offset by increases in advertising and affiliate revenue. Growth in advertising revenue was driven by ESPN as we benefited from the start of a normalized NBA calendar and increased viewership for football. ESPN advertising revenue in the first quarter was up 14% versus the prior year and second quarter-to-date domestic cash advertising sales at ESPN are currently pacing up. Total domestic affiliate revenue increased by 2% in the quarter. This was primarily driven by six points of growth from higher rates, offset by a four-point decline due to a decrease in subscribers. Operating income at our international channels decreased slightly versus the prior year. These results came in more than $200 million better than our prior guidance primarily due to lower programming and production costs as well as better-than-expected advertising and affiliate revenues. At direct-to-consumer, first-quarter operating results decreased by $127 million year over year, driven by higher losses at Disney+ and ESPN+, partially offset by improved results at Hulu. I'll note that beginning this quarter, we are providing disclosure on our programming and production expenses by service as well as additional detail for Disney+ in our 10-Q. Operating losses at Disney+ increased versus the prior year as growth in subscription revenue was more than offset by higher programming, technology, and marketing costs. We ended the quarter with nearly 130 million global paid Disney+ subscribers, reflecting over 11 million net additions from Q4. Taking a look at subscriber growth by region. We added 4.1 million paid domestic Disney+ subscribers, including a benefit of approximately 2 million incremental subscribers from our strategic decision to include Disney+ and ESPN+ as part of a Hulu Live subscription. In international markets, excluding Disney+ Hotstar, we added 5.1 million paid subscribers, primarily driven by growth in Asia Pacific and European markets. I'll note that growth in Asia included the benefit of new market launches in South Korea, Taiwan, and Hong Kong in the quarter. Finally, we were able to resume growth in Disney+ Hotstar markets with 2.6 million paid subscriber additions in the quarter. Overall, we are pleased with Disney+ subscriber growth in the quarter and are looking forward to new market launches and a strong content slate later this year. As I've previously shared, we don't anticipate that subscriber growth will necessarily be linear from quarter to quarter, and we continue to expect growth in the back half of the fiscal year to exceed growth in the first half. At ESPN+, we ended the first quarter with over 21 million paid subscribers versus 17 million in Q4. Results decreased compared to the prior year as growth in subscription revenue was more than offset by higher sports programming costs driven by the NHL and LaLiga. And at Hulu, higher subscription revenues versus the prior year were partially offset by higher programming and production costs driven by increased affiliate fees for live TV. Hulu ended the first quarter with 45.3 million paid subscribers, inclusive of 4.3 million subscribers to our Hulu Live digital MVPD service. Moving on to content sales/licensing and other. Results decreased in the first quarter versus the prior year to an operating loss of $98 million, driven by lower theatrical results and higher film impairments, partially offset by improved TV SVOD results. As I noted last quarter, while theaters have generally reopened, we are still experiencing a prolonged recovery to theatrical exhibition, particularly for certain genres of films, including non-branded general entertainment and family focused animation. This dynamic contributed to increased losses in the quarter as we released more titles in Q1 this year versus the prior year, resulting in lower theatrical results. This was partially offset by income from our co-production of Spider-Man: No Way Home. As we look ahead, we would like to give you some context around two items that may impact our second-quarter results. First, as we continue to increase our investment in content, we expect programming and production costs at DMED to increase versus the prior year, primarily driven by direct-to-consumer and linear networks. At direct-to-consumer, we expect programming and production expenses to increase by approximately $800 million to $1 billion, including programming fees for Hulu Live. At linear networks, we expect programming and production expenses to increase by approximately $500 million, reflecting factors including COVID-related timing shifts. We aired four additional NFL games at the start of the current quarter. And as a reminder, the Academy Awards will be held in Q2 of this year, while it fell into Q3 of the prior year. Second, at content sales/licensing and other, a difficult Q2 comparison to prior year TV and SVOD program sales is due in part to our strategic decision to hold more of our owned and produced content for our direct-to-consumer services. As a result, we expect operating income to be adversely impacted by more than $200 million versus the prior-year quarter. [Operator instructions] And with that, operator, we're ready for the first question.

q1 earnings per share $1.06 excluding items. 11.8 million disney+ subscribers added in q1. saw significant increase in total subscriptions across our streaming portfolio to 196.4 million. as of quarter-end total hulu paid subscribers were 45.3 million. at disney media and entertainment segment, our film and television productions have generally resumed. we have seen disruptions of production activities depending on local circumstances. in fiscal 2022, domestic parks and experiences are generally operating without significant mandatory covid-19-related restrictions. qtrly lower results at disney+ reflected higher programming and production, marketing and technology costs. have incurred, and will continue to incur, costs to address government regulations and safety of employees, guests and talent. qtrly higher subscription revenue at disney+ was due to subscriber growth and increases in retail pricing.

A playback of today's call will be archived in our Investor Relations website located at investors. dicks.com for approximately 12 months. And finally, a few admin items. First, a note on our same-store sales reporting practices. Our consolidated same-store sales calculation includes stores that we chose to temporarily close last year as a result of COVID-19. The method of calculating comp sales varies across the retail industry, including the treatment of temporary store closures as a result of COVID-19. Accordingly, our method of calculation may not be the same as other retailers. Next, as a reminder, due to uneven nature of 2020, we plan 2021 off of 2019 baseline. Accordingly, we will compare 2021 sales and earnings results against both 2019 and 2020. We are extremely pleased to announce yet another quarter of record results as we continued to execute at a very high level and capitalize on incredibly strong consumer demand. We're in a great lane right now, and 2021 will be our boldest and most transformational year in the company's history. We believe the future of retail is experiential, powered by technology and a world-class omnichannel operating model. Importantly, we are reimagining the athlete experience, both across our core business and through new concepts that we have been working on for the past several years, which will collectively propel our growth in the future. We've recently debuted DICK's House of Sport in Rochester, New York. It's off to a great start and is on track to become among our highest volume stores in the chain. We've reimagined virtually everything in the store and believe it sets the standard for sport retailing and athlete engagement. Our partners who have visited the store all agree there is nothing like it, and we hope everyone has the opportunity to see it in person. Next we are completely reengineering our Golf Galaxy business. The game of golf is in great shape. Our golf business has been tremendous. With Golf Galaxy comps significantly outperforming the company average in recent quarters, we're leaning into this straight by investing in our Golf Galaxy business and adding TrackMan technology to enhance the fitting and lesson experience. We are also investing in talent to elevate the in-store service model and are remodeling 18 stores this year. The new stores we've remodeled are showing promising results. Looking ahead, we expect golf to have a long runway, and we are committed to leveraging this momentum for future growth within our business. We've been working on Public Lands for several years and look forward to opening our first two stores later this year. Based on our research, we think there is an opportunity in the marketplace and believe this new concept will be a great growth vehicle for us. Importantly, conservation will play a prominent role in our new Public Lands concept. And we will champion environmental issues as we speak up to protect the planet and our Public Lands. As a member of the outdoor industry, we have also joined forces with other retailers to advocate for conserving 30% of the U.S. lands and waters by 2030. We expect to have the same voice and as much impact on these issues as we've had inside the DICK's business, highlighting the youth sports crisis and sensible gun legislation. We'll be sharing more details about our plans for Public Lands in the weeks and months ahead. In closing, you can see DICK's is a growth company, and we will continue to invest in our business to grow our lead as the nation's largest sport retailer. We see significant growth opportunities within DICK's and Golf Galaxy as well as with House of Sport and Public Lands. We will continue to invest in our vertical brands. And with our key partners, including Nike, North Face, Callaway, TaylorMade and others, to elevate the athlete experience across the stores and online. Our Q1 consolidated same-store sales increased 115% as we anniversaried the majority of our temporary store closures from last year. The strength of our diverse category portfolio, supply chain, technology capabilities and omnichannel execution helped us continue to capitalize on strong consumer demand across golf, outdoor activities, home fitness and active lifestyle. We also saw a resurgence in our team sports business as kids began to get back out on the field after a year in which many youth sports activities were delayed or canceled. Our strong comps were supported by sales growth of over 100% within each of our three primary categories; the hardlines, apparel and footwear as well as increases in both average ticket and transactions. Like others, we also benefited from the recent stimulus checks. These results combined translate to a 52% sales increase when combined -- sorry, when compared to the first quarter of 2019. From a channel standpoint, our brick and mortar stores generated significant triple-digit comps, and importantly, delivered an approximate 40% sales increase when compared to 2019 with roughly the same square footage. Our eCommerce sales increased 14%, which was on top of our 110% online sales increase in the same period last year when the vast majority of our stores were closed for over six weeks. This represented nearly a 140% increase when compared to 2019. Within eCommerce, in-store pickup and curbside continued to be a meaningful piece of our omnichannel offering, increasing approximately 500% when compared to BOPIS sales during the first quarter of 2019. And as a percent of online sales, we saw sequential growth compared to the second half of last year. These same-day services along with ship from store are fully enabled by our stores which are the hub of our industry-leading omnichannel experience, both serving our in-store athletes and providing over 800 forward points of distribution for digital fulfillment. During Q1, our stores enabled approximately 90% of our total sales and fulfilled approximately 70% of our online sales through either ship from store, in-store pickup or curbside. Throughout the quarter, we remained disciplined in our promotional strategy and cadence, and certain categories in the marketplace continue to be supply constrained. As a result, we expanded our merchandise margin rate by 787 basis points versus 2020 and 312 basis points versus 2019. This merchandise margin expansion, along with substantial leverage on fixed costs, drove a significant improvement in gross margin. In total, our first quarter non-GAAP earnings per diluted share of $3.79 not only represented a 511% increase over Q1 2019, but eclipse our full year 2019 non-GAAP earnings per diluted share of $3.59. During the first quarter last year, we recorded a net loss per share of $1.71 as we temporarily closed our stores to promote the safety of our teammates, athletes and communities. Looking ahead, we remain very enthusiastic about our business and we're raising our full year sales and earnings guidance. Our financial outlook balances this enthusiasm with the uncertainties that still exist, particularly as it relates to the second half of the year. Lee will address our outlook in greater detail within his remarks. Now let me provide a few updates on our strategic growth drivers. First, within merchandising, our well defined brand strategy drive differentiation and exclusivity within our assortments as we leverage both our key national brand partnerships and our highly profitable and growing vertical brand portfolio. During the quarter, our vertical brands continue to be a significant source of strength, posting triple-digit comps with merchandise margin rate expansion that outperformed the company average. We saw sustained success in DSG, our largest vertical brand as well as in CALIA, our second largest women's athletic apparel brand. This year we are investing to make our vertical brands even stronger through improved space in-store and increased marketing. In March, we augmented our men's athletic apparel collection by launching VRST, our new premium apparel brand that serves the modern athletic male. The team has done a great job with VRST, and it's off to a really strong start. Next, to increase engagement with our athletes, we're taking steps to dial-up service in our stores and to make our stores more experiential. As Ed mentioned, we've been very pleased with the early results from our first DICK's House of Sport and are excited for the grand opening of our second location in Knoxville next week. Virtually everything in House of Sport is new; from our engagement and service models to our merchandising standards, brands and concept shops as well as an adjacent outdoor field to host sports events and promote product trial. These highly experiential stores are exploring the future of retail and they provide us a great opportunity to test and learn. We'll continue to refine and grow the House of Sport concept while also rolling the most successful elements into our core DICK's stores. Beyond House of Sport, we continue to evolve the DICK's athlete experience. During the quarter, we added more than 30 soccer shops that provide a high level of service from in-store soccer experts who are especially trained to help athletes find the equipment and cleats they need to excel at the game. The soccer shops also feature a variety of updated in-store elements, including an elevated cleat shop, an expanded selection of licensed jerseys and soccer trial cages in select locations. We've been pleased with the initial results and plan to add additional shops throughout the year. As discussed on prior calls, footwear is a key pillar of our merchandising strategy. And during the quarter, we converted more than 40 additional stores to premium full service footwear. Over 50 more stores will be converted by the end of the year, taking this experience to approximately 60% of the DICK's chain. Lastly, as the number one premium golf retailer in the world, we are benefiting from renewed interest in the game. Participation rates are healthy and energy for the game of golf continues to increase with women, juniors and young adults contributing to the game's growth. As a result of this robust demand, our golf business has been great at both DICK's and Golf Galaxy with Golf Galaxy comps significantly outperforming the company average in recent quarters. In 2021, we're investing over $20 million to transform our Golf Galaxy stores via combination of elevated experience, industry-leading technology and unmatched expertise through our certified PGA and LPGA professionals. As part of this, we've rolled out TrackMan technology to over 80% of the chain to enhance the fitting and lesson experience. We've also completely redesigned nearly 20 stores. In addition, we enabled online booking of lessons and club fittings and invested in talent and training to elevate our in-store service model. We supported these efforts through our first Golf Galaxy specific brand campaign, Better Your Best, across TV, social and in-store. Now moving to our omnichannel capabilities. We continue to drive significant improvement in the profitability of our eCommerce channel through fewer promotions, leverage of fixed costs and strong athlete adoption of in-store pickup and curbside. We're continuing to enhance the curbside experience with new features like proxy pickup as well as through improved inventory availability and reduced pickup wait time for athletes. During Q1, over 90% of curbside orders were ready within 15 minutes. And upon checking at the store, 50% were delivered to the athlete's car in under 2.5 minutes. Looking ahead, we continue to expect curbside pickup will remain a meaningful piece of our omnichannel offering as our athletes turned to this service for speed and convenience. Along with curbside, our ScoreCard program continues to be a key to our omnichannel offering with more than 20 million active members who drive over 70% of our sales. We're using data science to drive more personalized marketing and engagement with our athletes, which is resulting in strong retention of the 8.5 million new athletes we acquired last year. Speaking of new athletes, we acquired nearly 2 million new athletes this past quarter. And relative to our existing athletes, they continue to skew younger and more female, representing a great opportunity for future growth. In closing, we are a growth company, steeped in technology and omnichannel experience with a bold path forward. As we continue to execute against our strategic priorities, we are enthusiastic about our business and confident that our investments will strengthen our leadership position within the marketplace. I had the pleasure of visiting many of our stores during this first quarter. Let's begin with a brief review of our first quarter results. Consolidated sales increased 119% to approximately $2.92 billion. Including the impact of last year's temporary store closures, consolidated same-store sales increased 115%. This increase was broad-based with each of our three primary categories of hardlines, apparel and footwear comping up over 100%. Transactions increased 90%, and average ticket increased 25%. Compared to 2019, consolidated sales increased 52%. Our brick and mortar stores comped up nearly 190% as we anniversaried last year's temporary store closures. And compared to 2019, increased approximately 40% with roughly the same square footage. Our eCommerce sales increased 14% over last year and increased 139% versus 2019. As a percent of total net sales, our online business was 20%. As expected, this decrease from the 39% of net sales in 2020 given last year's temporary store closures, but increased compared to the 13% we had in 2019. Lastly, in terms of stimulus. While this can be difficult to quantify, we recognize that our athletes had more cash spend during the quarter and believe we benefited from this during the first quarter. Gross profit in the first quarter was $1.09 billion or 37.3% of net sales and improved approximately 2,100 basis points compared to last year. This improvement was driven by leverage on fixed occupancy cost of approximately 1,000 basis points from the significant sales increase and merchandise margin rate expansion of 787 basis points, primarily driven by fewer promotions and a favorable sales mix. Additionally, last year included $28 million of inventory writedowns, resulting from our temporary store closures, which were subsequently recovered in the second quarter of 2020 due to better than anticipated sales and margin on merchandise nearing the end-of-life upon the reopening of our stores. The balance of the improvement was driven by lower shipping expense as a percent of net sales due to higher brick and mortar store sales penetration following last year's temporary store closures. Compared to 2019, gross profit as a percent of sales improved by 795 basis points, driven by leverage on fixed occupancy costs of 475 basis points due to the significant sales increase and merchandise margin rate expansion of 312 basis points, primarily driven by fewer promotions. SG&A expenses were $608.3 million or 20.84% of net sales and leveraged 940 basis points compared to last year due to the significant sales increase. SG&A dollars increased $205.1 million, of which $21 million is attributable to the expense recognition associated with changes in our deferred compensation plan investment values. This expense is fully offset in other income and has no impact on net earnings. The remaining $183 million is primarily due to normalization of expenses following our temporary store closures last year to support the increase in sales as well as higher incentive compensation expenses due to our strong first quarter results. SG&A expenses include $13 million of COVID-related safety costs, which in light of the latest CDC guidance, we expect these costs to decline significantly beginning in the second quarter. Compared to 2019's non-GAAP results, SG&A expenses as a percent of net sales, leveraged 446 basis points from the -- due to the significant sales increase. SG&A dollars increased $122.3 million due to increases in store payroll and operating expenses to support the increase in sales and hourly wage rate investments and COVID-related safety costs as well as higher incentive compensation expenses. Driven by our strong sales and gross margin rate expansion, we delivered record quarterly non-GAAP EBT and EBT margin results. Non-GAAP EBT was $477.1 million or 16.35% of net sales, and it increased $684.8 million or approximately 3,200 basis points from the same period last year. More relevantly, compared to 2019, non-GAAP EBT increased $396 million or approximately 1,200 basis points as a percent of net sales. In total, we delivered non-GAAP earnings per diluted share of $3.79. This is compared to a net loss per share of $1.71 last year and non-GAAP earnings per diluted share of $0.62 in 2019, a 511% increase. On a GAAP basis, our earnings per diluted share were $3.41. This includes $7.3 million in non-cash interest expense as well as 9.2 million additional shares that will be offset by our bond hedge at settlement, but are required in the GAAP diluted share calculation. Both are related to the convertible notes we issued in the first quarter of 2020. Now looking to our balance sheet, we are in a strong financial position, ending Q1 with approximately $1.86 billion of cash and cash equivalents and no borrowings on our $1.85 billion revolving credit facility. While our quarter end inventory levels decreased 4% compared to the same period last year, our strong flow of products supported Q1 sales growth in excess of our expectations. Looking ahead, our inventory is very clean and we continue to expect a robust product flow. In terms of supply chain expense, we are seeing elevated costs, which we expect to continue, but thus far have mitigated this pressure through higher ticket as a result of being less promotional and increasing prices in select categories. Turning to our first quarter capital allocation. Net capital expenditures were $57.2 million and we paid $33 million in quarterly dividends. During the quarter, we also repurchased just over 1 million shares of our stock for $76.8 million at an average price of $74.59 and we have approximately $954 million remaining under our share repurchase program, and our plan for 2021 continues to include a minimum of $200 million of share repurchases. Now let me move on to our fiscal 2021 outlook for sales and earnings. As a result of our significant Q1 results, we are raising our consolidated same-store sales guidance and now expect full year comp sales to increase by 8% to 11% compared to our prior expectation of down 2% to up 2%. At the midpoint, our updated comp sales guidance represents a 22% sales increase versus 2019 compared to our prior expectation of up 11%. While we have been very pleased with the start of our second quarter and are highly encouraged about the rest of the year, beginning in June, we will start to anniversary significant comp sales gains from last year. There is also continued uncertainty around when consumer behavior will normalize and what the new normal will be. And we are limited in our ability to forecast demand, particularly as it relates to the second half. Given this, within our updated outlook, we have maintained our Q3 and Q4 performance expectations in line with our original guidance, which assumes comps will decline in the range of high-single to low-double-digits. Non-GAAP EBT is now expected to be in the range of $1 billion to $1.1 billion compared to our prior outlook of $550 million to $650 million, which at the midpoint and on a non-GAAP basis, is up 142% versus 2019 and up 45% versus 2020. At the midpoint, non-GAAP EBT margin is expected to be approximately 10%. Within this, gross margin is expected to increase versus 2019, driven by leverage on fixed expenses and higher merchandise margins. When compared to 2020, gross margin is also expected to increase driven by leverage on fixed expenses, while merchandise margins are expected to be approximately flat. This assumes a gradual normalization promotions beginning in the second quarter and modest deleverage on fixed expenses in the second half. SG&A expense is expected to leverage versus both 2019 and 2020 due to the significant projected increase in full year sales. As a reminder, at the beginning of 2021, we transitioned last year's premium pay program to a more lasting compensation program, including increasing and accelerating annual merit increases and higher wage minimums. The impact of these programs has been included within our guidance. In total, we are raising our full year non-GAAP earnings per diluted share outlook to a range of $8 to $8.70 compared to our prior outlook of $4.40 to $5.20. At the midpoint and on a non-GAAP basis, our updated earnings per share guidance is up 126% versus 2019 and up 36% versus 2020. In closing, we are extremely pleased with our Q1 results and remain very enthusiastic about the future of DICK's Sporting Goods. This concludes our prepared comments.

compname reports record quarterly earnings in first quarter 2021; delivers 115% increase in same store sales compared to the first quarter of 2020 and raises full year guidance. sees fy non-gaap earnings per share $8.00 to $8.70. q1 sales rose 119 percent to $2.92 billion. 115% increase in consolidated same store sales in q1. qtrly consolidated net income $3.41 per share. qtrly non-gaap net income $3.79 per share. plans to repurchase a minimum of $200 million of its common shares in 2021. for 2021, incurred about $13 million of covid-related safety costs in q1. expects to relocate 11 dick's sporting goods stores in 2021.

In particular, the extent of the continued impact of COVID-19 on our business remains uncertain at this time. During today's call, we will discuss GAAP and non-GAAP financial measures. After the content of today's call, Lewis will begin with a recap of Dolby's financial results and provide our second quarter 2021 outlook, and Kevin will finish with the discussion of the business. I think I'll jump right into the numbers. First quarter revenue was $390 million, which was above the guidance range of $330 million to $360 million and was also above the $271 million we saw in Q4 and the $292 million in Q1 of last year. Revenues were better than what we guided as we had a true-up in the quarter of about $20 million that relates to Q4 shipments, and we also had some recoveries in Q1 that came in sooner in the year than we thought. So that's more of a shift in timing within the fiscal year. Q1 also benefited from higher estimated market TAMs. In terms of the sequential growth from Q4, Q1 benefited from timing of revenue under contracts and higher recoveries, along with higher adoption, and this was consistent with what I highlighted at the beginning of the quarter. And in addition, sequential growth was helped by holiday seasonality, which is sort of a typical factor. In the year-over-year comparison, all of our cinema-related revenue streams were down significantly from last year's Q1, and that's because of COVID. But then more than offsetting that were higher revenues from timing under contracts, higher recoveries and greater adoption of Dolby. So the Q1 revenue of $390 million was composed of $373 million in licensing and $17 million in products and services. So let me discuss the trends in-licensing revenue by end market starting with Broadcast. Broadcast represented about 37% of total licensing in the first quarter. Broadcast revenues increased by about 36% year-over-year, and that was driven by higher recoveries; higher adoption of Dolby, including our patent programs; and a higher true-up, which relates to the Q4 shipments. And this was offset partially by lower market volume in set-top boxes. On a sequential basis, Broadcast was up by about 16%, driven by holiday seasonality for TVs, higher recoveries and higher adoption, offset partially by the lower set-top box activity. Mobile represented approximately 28% of total licensing in Q1. Mobile increased by a little over 200% from last year and about 170% from last quarter due primarily to timing of revenue under customer contracts and also helped by higher customer adoption. Consumer Electronics represented about 14% of total licensing in the first quarter. On a year-over-year basis, CE licensing was up by about 6%, mainly due to higher adoption of Dolby, including our patent programs. On a sequential basis, CE increased by about 52%, driven by higher seasonality, higher adoption in our patent programs and timing of revenue under contracts. PC represented about 9% of total licensing in Q1. PC was higher than last year by about 3% due to increased adoption of Dolby's premium technologies like Dolby Atmos and Dolby Vision. And this was offset partially by declining ASPs that comes from mix of disc versus non-disc units. Sequentially, PC was up by about 5%, driven by higher adoption of those premium Dolby technology. Other Markets represented about 12% in total licensing in the first quarter. They were up by about 8% year-over-year, driven by higher gaming from new console releases and also from higher Via admin fees and via the patent pool program that we administer. And that was offset partially by significantly lower Dolby Cinema box office share because of COVID. On a sequential basis, Other Markets was up by about 33%, driven by higher revenue from gaming and from the Via admin fees. Beyond licensing, our products and services revenue was $16.9 million in Q1 compared to $14.3 million in Q4 and $34.2 million in last year's Q1. We had anticipated the large year-over-year decrease in our guidance because most of this revenue comes from equipment that's sold to cinema exhibitors, and these customers continue to be negatively impacted by the pandemic. The Q1 total was slightly above guidance, and that was mostly attributable to exhibitors in China. Now I'd like to discuss Q1 margins and operating expenses. Total gross margin in the first quarter was 90.9% on a GAAP basis and 91.5% on a non-GAAP basis. Products and services gross margin on a GAAP basis was minus $5.5 million in Q1 compared to minus $15.5 million in the fourth quarter, and the fourth quarter included large excess of obsolete inventory charges because of our decision to exit the conferencing hardware arena. We are taking steps to reduce the cost structure in manufacturing, and we should start to see some impact of this by the end of this quarter. This quarter, meaning Q2. Products and services gross margin on a non-GAAP basis was minus $3.9 million in Q1 compared to minus $14.1 million in the fourth quarter. And I would apply the same comments here as I did in the GAAP section. Operating expenses in the first quarter on a GAAP basis were $189.8 million compared to $198.7 million in Q4. The Q1 total includes $13.9 million of gain from sale of assets as we completed the disposition of our former Brisbane manufacturing site during the quarter. But it also includes $10 million of restructuring expense, primarily for severances and the related benefits, consistent with the comments that I made at the beginning of the quarter when I provided guidance. Operating expenses in the first quarter on a non-GAAP basis were $167.1 million compared to $176.5 million in the fourth quarter. Non-GAAP operating expenses were below what we've guided primarily due to various marketing programs that shifted out in timing as well as lower bad debt expenses than we had projected. Operating income in the first quarter was $164.7 million on a GAAP basis or 42.3% of revenue compared to $48.6 million or 16.6% of revenue in Q1 of last year. Operating income in the first quarter on a non-GAAP basis was $189.7 million or 48.7% of revenue compared to $74.1 million or 25.4% of revenue in Q1 of last year. Income tax in Q1 was 14.5% on a GAAP basis and 19.9% on a non-GAAP basis. Net income on a GAAP basis in the first quarter was $135.2 million or $1.30 per diluted share compared to $48.8 million or $0.47 per diluted share in last year's Q1. Net income on a non-GAAP basis in the first quarter was $153.3 million or $1.48 per diluted share compared to $65.5 million or $0.64 per diluted share in Q1 of last year. For both GAAP and non-GAAP, net income in the first quarter was above guidance due to revenue higher than what we projected, combined with operating expenses lower than what we had estimated. During the first quarter, we generated about $82 million in cash from operations, which compares to about $31 million generated from operations in last year's first quarter. And we ended the first quarter this year with about $1.2 billion in cash and investments. During the first quarter, we bought back about 500,000 shares of our common stock and ended the quarter with about $147 million of stock repurchase authorization still available to us. We also announced today a cash dividend of $0.22 per share. The dividend will be payable on February 19, 2021, to shareholders of record on February 9, 2021. Now let's discuss the forward outlook. As a reminder, the approach we took at the beginning of the fiscal year was to give specific guidance for Q1, like normal, and then give a scenario of a revenue range for Q2 and then give some qualitative comments on the second half of the year. We took that approach because of the uncertainties from COVID, which was causing very limited forward visibility. Now nearly three months later, it's fair to say that visibility remains very limited. Not surprising, given the ongoing disruption we're seeing around the world from pandemic. So today, we'll take a similar approach to what we did before. I will discuss full P&L guidance for Q2 and then provide some color on the second half of the year, but not detailed guidance. Let me start by reminding you of a couple of comments I made last quarter that remained true today. At that time, I said that for the first half of FY '21, we were anticipating year-over-year growth in licensing revenue from higher adoption of Dolby technologies, but we are also expecting year-over-year decline in products and services revenue because of the COVID impact on the cinema industry. Let's talk more specifically now then about the Q2 revenue outlook. Last quarter, I provided a Q2 revenue scenario of $270 million to $300 million for the quarter. Today, our scenario is that Q2 revenue could range from $280 million to $310 million. The TAM data for Q2 has risen modestly compared to what we were seeing a few months ago, and we have factored that into this latest scenario. And to reinforce something I said last quarter, the transition from Q1 to Q2 this year reflects higher revenue in Q1 from timing under customer contracts and also recoveries. Last year, in FY '20, that order was reversed in the sense that Q2 was the quarter that benefited more from the timing and recoveries. So if I combine the Q2 actual that we just reported with the Q2 outlook I mentioned a second ago, that would put our first half revenue outlook range at $670 million to $700 million compared to our previous outlook range of $600 million to $660 million. So that's the first half. Now let's talk about revenue in the second half of FY '21. There's four main factors that I'd like to highlight: TAMs, the pace of recovery in cinema space, timing of revenue and higher adoption of Dolby. Let me explain a bit more. First of all, the industry TAM data that we're currently seeing from analysts continues to indicate that TAMs are projected to be lower in our second half on a year-over-year basis, mainly because of an uptick in shipment volume of certain devices like TVs and PCs that happened in the second half of FY '20 but is not projected to repeat in the same time frame of FY '21. Second, in the cinema space, the recovery that people might have been expecting seems to be pushing out in time, and that's judging by trends in content by big titles and screen openings or closings. Third, as I alluded to earlier, some of the upside in our Q1 revenue, the quarter we just reported, came from deals closing sooner than we thought, in other words, moving from second half into the first half. And fourth, we would anticipate that a higher adoption of Dolby technologies would drive year-over-year growth. And then from a sequential perspective, i.e., transitioning from first half '21 to second half '21, we had said before and we continue to say that we anticipate second half revenue would be below first half because of a combination of lower seasonality in consumer device shipments and lower revenue from timing under contracts and from recoveries. So considering these various factors, we could see a scenario for second half revenue in the mid- to high 500s. But as I said earlier, we'll stop short of providing detailed guidance because of the limited visibility right now. And of course, we plan to provide you all with an update in three months when we publish our Q2 actual results. So let me quickly finish up by providing an outlook on the rest of the P&L for Q2. I already highlighted the revenue range of $280 million to $310 million in total, of which licensing would comprise $270 million to $295 million, while products and services would comprise $10 million to $15 million. Q2 gross margin on a GAAP basis is estimated to range from 88% to 89%, and the non-GAAP gross margin is estimated to range from 89% to 90%. Within that, products and services gross margin is estimated to range from minus $3 million to minus $4 million on a GAAP basis and from minus $2 million to minus $3 million on a non-GAAP basis. Operating expenses in Q2 on a GAAP basis are estimated to range from $200 million to $210 million. In Q2, our annual salary increases for all the employees go into effect, and we also anticipate more activity in marketing programs as well as R&D projects. Operating expenses in Q2 on a non-GAAP basis are estimated to range from $175 million to $185 million, and the projected increase from Q1 is driven by the same comments I made about the GAAP operating expenses. Other income is projected to range from $1 million to $2 million for the quarter, and our effective tax rate for Q2 is projected to range from 20% to 21% on both a GAAP and non-GAAP basis. So based on the combination of the factors I just covered, we estimate that Q2 diluted earnings per share could range from $0.36 to $0.51 on a GAAP basis, and from $0.57 to $0.72 on a non-GAAP basis. That's all I have. Over to you, Kevin. Our fiscal year is off to a great start, and we continue to enable Dolby experiences to more people around the world. Dolby Vision and Dolby Atmos are increasingly available across a broad range of new devices and services, and we are enabling more Dolby experiences in music and gaming, which is adding to our value proposition for broader adoption in areas such as Mobile and PC. On top of that, we are excited about bringing Dolby to address everyday virtual experiences and interactions through Dolby.io. All of this adds to our confidence in the significant growth opportunities that we see ahead of us. As consumers spend an increased amount of time enjoying content within their homes, it is clear that the quality of these experiences matter. And Dolby Vision and Dolby Atmos are consistently highlighted among the devices and services that enable the best way for people to enjoy their content. The combined Dolby experience was highlighted at CES throughout the latest TV lineups from our partners, including LG, Sony and Panasonic. TCL and Skyworth also announced they are adding support for Dolby Vision IQ, which optimizes the picture on your TV to the surrounding light and the content being viewed. Earlier this quarter, OPPO launched their first TVs, which includes support for the combined Dolby Vision and Dolby Atmos experience. And Dolby Atmos continues to be highlighted among the top sound bars in the market, including the latest products announced at CES from LG, JBL and TCL. As we move beyond the living room, our partners are increasing the ways in which consumers can enjoy Dolby experience, including new adoption and headphones. Apple is supporting Dolby Atmos in AirPods Max, adding to the ways the consumer can enjoy the Dolby experience across Apple's devices and services. Samsung recently announced that their Galaxy Buds Pro supports Dolby Atmos and includes Dolby head tracking technology, which enables consumers to have a realistic and immersive sound experience as they physically move in relation to where their content is being played. Within PC, we continue to see growing momentum for broader adoption of Dolby technologies. Lenovo announced that they will be bringing the first PCs with Dolby Voice to market. Dolby Voice for PCs will optimize the communications experience to create clearer and more natural meeting experiences. This is another example of how we are bringing new value to our partners by addressing a primary use case for how consumers interact with their PCs on an everyday basis. Lenovo also continues to support Dolby Vision and Dolby Atmos across their latest PC lineups. Additionally, Dell continues to release new PCs that support Dolby Vision. And in India, we saw new Nokia PCs from Flipkart come to market with the combined experience. With a broad range of OEM partners and devices that support Dolby Vision and Dolby Atmos, it is becoming easier for consumers to discover content available in Dolby. HBO Max became the latest major streaming service to support the combined Dolby Vision and Dolby Atmos experience, starting with the release of Wonder Woman 1984. They joined top streaming services around the world like Netflix, Disney+, Apple TV+, Tencent, Rakuten and more that are enabling content and the combined experience. In addition, Amazon Prime video began to stream live English Premier League matches in Dolby Atmos, and Canal Plus is now supporting Dolby Atmos within their on-demand services in Poland. And while we're on the topic of movie and TV content, let me spend a moment on Dolby Cinema. As Lewis said, the environment remains challenging across the industry. At the same time, in certain regions where consumers have been able to return to the cinema and there is strong local content, we have seen that consumers will seek out a premium experience. As the industry continues to evolve, we are confident that Dolby Cinema enables the best way to enjoy a movie and our partners remain deeply engaged. 12 new Dolby Cinema locations around the world were opened this quarter, including our first site in Taiwan. So as we continue building on our strong presence within movie and TV content, we see significant opportunities to enable more Dolby experiences in areas like music and gaming. The music and Dolby experience continues to expand globally across artists, services and devices. Several new artists around the world released music in Dolby Atmos for the first time this quarter. Anghami, one of the largest music streaming services in the Middle East, announced that they will be enabling support for Dolby Atmos music within their Anghami Plus service. TIDAL continues to expand the number of devices within the home that enable the Dolby Atmos music experience with their TIDAL Connect feature. The music and Dolby experience adds to our value proposition for deeper adoption within mobile, and creates new opportunities in new device categories like automotive, where we see strong initial engagement from potential partners. Moving on to gaming. The Xbox Series X and Series S will be the first consoles to support the combined Dolby Vision and Dolby Atmos experience for gaming content with updates scheduled for later this year. New gaming titles like Call of Duty: Cold War and Immortals Fenyx Rising were released this quarter with support for Dolby Atmos. As we grow the amount of gaming content in Dolby, we increase the reasons for broader adoption in mobile and PC devices. Lenovo and ASUS recently announced new gaming PCs that will support Dolby experiences. And this quarter, QQ Speed Mobile by Tencent became the first mobile game with Dolby Atmos. Tencent games and Anghami Plus are examples of the growing momentum we have in enabling more Dolby experiences in gaming and music that address more of the content that consumers are most engaged with on their mobile devices. With the release of iPhone 12 at the beginning of the quarter, consumers can now record, share and enjoy their videos in Dolby Vision. BT is now streaming live sports in Dolby Atmos to mobile devices via their BT Sports app. And Bilibili, one of the largest video sharing sites in China, began supporting content in Dolby Atmos. As we continue to increase the amount of relevant content, we are adding to our value proposition for deeper and broader adoption of Dolby within mobile devices. We also continue to deepen our engagement within the developer community with Dolby.io. Having been in market now for about eight months, let me highlight a couple of opportunities that we are focused on. First, there is an increasing demand for high-quality real time interactions across a broad range of apps and services, including social media, live performance and online education. This is the use case for our interactivity APIs with Dolby Voice. For example, Kiddom, a digital platform for online education, is expanding their usage to include our full suite of interactivity APIs, including Dolby Voice, to improve the quality of the communications experience between teachers and students. Second, we see an opportunity to bring higher quality to recorded media content, starting with audio. Video platforms are embedding our media APIs to enable higher quality audio experiences ranging from social media and podcasts, to product videos and even footage used for news broadcasts. While we are still in the early days, we are learning from our engagement with developers to continue to involve our offer -- evolve our offering, increase usage and broaden the number of use cases that we can address. So to wrap up, the combined Dolby Vision and Dolby Atmos experience is consistently highlighted among the best ways to enjoy movie and TV content. We are seeing the Dolby experience expand across new forms of content, for music and gaming to user-generated content, all of which build upon our value proposition for broader adoption across devices and services. The engagement with our developer platform continues to grow, bringing Dolby to a broader world of content experiences and interactions. All of this gives us confidence in our ability to drive revenue and earnings growth into the future.

dolby laboratories q1 non-gaap earnings per share $1.48. q1 non-gaap earnings per share $1.48. q1 gaap earnings per share $1.30. expect continued uncertainty in global financial markets. dolby laboratories- anticipate that cinema sites and production of content could continue to be negatively affected through fiscal 2021 or longer. total revenue is estimated to range from $280 million to $310 million in q2 fiscal 2021. diluted earnings per share is anticipated to range from $0.36 to $0.51 on a gaap basis in q2 fiscal 2021. diluted earnings per share is anticipated to range from $0.57 to $0.72 on a non-gaap basis in q2 fiscal 2021.

In particular, the extent of the continued impact of COVID-19 on our business remains uncertain at this time. During today's call, we will discuss GAAP and non-GAAP financial measures. As for the content of today's call, Kevin will start with a discussion of the business. And Lewis will follow with a recap of Dolby's financial results and provide our fourth quarter, second half and fiscal 2021 outlook. Q3 was another strong quarter for Dolby. Our revenue and earnings for the quarter were solid, and we are on track to deliver annual revenue growth of over 10% and year-over-year earnings growth at an even higher rate. At the same time, Dolby experiences are accessible to a growing number of people around the world, highlighted by the launch of Dolby Atmos on Apple Music and the Tokyo Olympics broadcasted in Dolby Vision and Dolby Atmos. Before Lewis takes you through the numbers, I wanted to highlight the recent progress we have made in enabling Dolby experiences across a much broader range of content, which creates opportunities for continued revenue and earnings growth. The inclusion of Dolby Atmos on Apple Music marks a significant step forward in bringing Dolby Atmos Music to a much larger audience and establishing it as the best way to create and listen to music. The Dolby Atmos music experience has been prominently featured by Apple and has been met with positive and enthusiastic reactions from artists, industry partners and consumers. Apple Music subscribers around the world can easily access albums and playlists of Dolby Atmos songs and can enjoy their music across Apple's wide range of products that support the combined Dolby experience. And recently, Dolby Atmos-enabled Android devices can also enjoy Dolby Atmos on Apple Music. Beyond Apple Music, Naver Vibe, a music streaming service in South Korea, launched support for Dolby Atmos this quarter. And additionally, our partners like TIDAL, Amazon Music, Hungama and Anghami continue to grow the number of songs available in Dolby Atmos on their streaming services. As the ways in which consumers can enjoy Dolby Atmos music expands, we are also focused on growing the library of music through our engagement with artists and music distributors. DistroKid, a leading distributor of independent music, announced that they will be delivering songs in Dolby Atmos on both Apple Music and TIDAL. We see enthusiastic engagement from popular artists, including Ariana Grande, BTS, Billie Eilish and Glass Animals, who are among the many artists highlighting the availability of their music in Dolby. As we expand the availability of Dolby Atmos music to consumers, we add to the reasons to adopt Dolby Atmos in mobile, PC and automotive. We also had some exciting wins in live broadcast this quarter. Comcast is currently delivering NBC's Live Tokyo Olympics coverage in both Dolby Vision and Dolby Atmos to their X1 customers. This marks the first time that the Olympics can now be enjoyed in the combined experience. Also this quarter, Euro 2020 broadcasted in Dolby Atmos across multiple broadcasters in Poland, Malaysia, across the Middle East and North Africa. And the Eurovision Song Contest was broadcast in Dolby Atmos live to viewers in the Netherlands. By enabling a growing number of live broadcast events, we build upon our strong presence in movie and TV content and add to the value proposition for deeper adoption of Dolby in TVs, set-top boxes, DMAs and mobile applications. The momentum of Dolby Vision and Dolby Atmos content across streaming services continues to be strong as our partners bring new titles in Dolby Vision and Dolby Atmos. Paramount+ added support for Dolby Atmos when they recently released A Quiet Place II in the combined Dolby experience. We have also seen our partners expand the amount of original local content that is enabled in Dolby. iQIYI recently announced they will be making Dolby Vision and Dolby Atmos content available on their international app that is available in over 190 countries and will be enabling Dolby experiences in new original local content on their platform. Apple TV+ is enabling new local episodic content in Dolby Vision and Dolby Atmos in Korea. Netflix released their first original film for Thailand in Dolby Vision this quarter, and Disney+ Hotstar is enabling new local content for India in Dolby. Stan, a leading OTT service in Australia, now supports the combined Dolby experience on their platform. Enabling relevant local content in Dolby is another important factor in driving more adoption across the global markets that our OEM partners serve. This quarter, Xiaomi and Skyworth released new TV models highlighting both Dolby Vision and Dolby Atmos. In Japan, Regza launched their first TV with Dolby Vision IQ, adding to a growing list of partners that includes LG, Panasonic, TCL, Xiaomi and Hisense. Sagemcom recently launched their all-in-one video soundbox, which combines set-top box and sound bar functionality with support for Dolby Atmos. And LG announced the rollout of updates coming to their OLED TVs that optimize for the best gaming experience in Dolby Vision. Gaming is another area we are focused on growing the number of experiences in Dolby, and we have begun to see momentum with mobile games becoming available in Dolby Atmos. With gaming and music, we are enabling more of the relevant content for mobile phones and PCs to now be Dolby experiences, adding to the reasons for adoption on these devices. This quarter, we saw Dolby Atmos highlighted across several mobile phone launches in India, including Oppo and their Realme branded phones and Xiaomi's Redmi gaming smartphone. Within PC, Samsung recently launched a new Galaxy book lineup featuring Dolby Atmos. We continue to build our momentum of Dolby Vision and Dolby Atmos across content, services and devices. And at the same time, we still see significant opportunity to increase adoption as we grow the amount of content experiences available in Dolby. Let me shift to Cinema. We now have about 95% of our Dolby Cinemas open globally, and our partners remain deeply engaged. In recent months, more content has returned to the big screen, and we have seen positive signs in box office performance. This was highlighted in the U.S. with strong opening weekends from titles like Black Widow and F9: The Fast Saga that were both available in Dolby Cinema. We continue to see moviegoers seeking to enjoy these movies in the best way possible with box office skewing more towards Dolby Cinema and premium experiences compared to pre-pandemic levels. And we are now bringing Dolby expertise and innovations that create the best way to enjoy content to a much broader range of experiences and real-time interactions through Dolby.io. Marie brings strong leadership experience and a track record of leading engagement with developer communities, including most recently at DocuSign, where she established the company's first-class developer experience. During our first year with Dolby.io in market, our focus has been on building our engagement with the developer community, learning from these interactions and continually evolving our offerings to best meet the needs of developers. Since launch, we have seen strong demand for higher-quality, real-time experiences. We have now begun to roll out a significant update that will enable larger scale interactions with more participants. We have positive feedback from current customers who are now live with this release, and we are actively engaging a significant pipeline of potential customers that these increased capabilities can directly address. We see engagement across a variety of use cases, including podcasting, remote collaboration tools, virtual meetings and online education. We are excited by the many ways developers are engaging with our APIs, and we are just at the beginning of what Dolby.io can enable in creating higher-quality, everyday audiovisual experiences. So to wrap up, Dolby is available to a much larger audience across a wider range of content today than ever before. As we build upon our presence in movie and TV content with more Dolby experiences in music, gaming and live events, we increase the reasons for deeper adoption of Dolby across devices. And with Dolby.io, we are building the momentum to bring the Dolby magic to a wide range of use cases and experiences. All of this gives us confidence in our ability to drive revenue and earnings growth into the future. And with that, I'd like to hand it over to Lewis to take us through the financials. And as Kevin said in his opening comments, we did have another solid quarter. So let me go through the Q3 numbers, and then I'll walk you through the outlook for Q4. So starting off with revenue. Revenue in the third quarter was $287 million, which was at the higher end of our guidance range and included a true-up of about $14 million for Q2 shipments reported that were above the original estimates, and that item is not uncommon. On a year-over-year basis, third quarter revenue was about $40 million above last year's Q3 as we benefited from higher market TAMs, along with greater adoption of our Dolby technologies. And then on a sequential basis, revenue was down from Q2, mainly due to timing of revenues from contracts and from patent licensing programs, and both of these topics were anticipated when we gave guidance. So Q3 revenue was comprised of $272 million in licensing and $15 million in products and services. So let's discuss the trends in licensing revenue by end market, starting with broadcast. Broadcast represented about 46% of total licensing in the third quarter. Broadcast revenues increased by about 40% year-over-year, and that was driven by higher market volume, higher recoveries and higher adoption of our Dolby technologies. And then on a sequential basis, broadcast increased by about 18%, and that was due mostly to higher recoveries. In the mobile space, mobile represented about 18% of total licensing in Q3. Mobile declined by about 36% year-over-year, mainly due to lower recoveries, and that was offset partially by higher market volume. And then on a sequential basis, mobile was down by about 24%, due mostly to timing of revenue under contracts, and we did anticipate that. Consumer electronics represented about 14% of total licensing in Q3. And on a year-over-year basis, CE licensing increased by about 86%, driven by higher market volume, higher adoption of Dolby and higher recoveries. On a sequential basis, CE went down by about 22%, and that was due mainly to timing of revenue under contracts. PC represented about 9% of total licensing in the third quarter. PC was higher than last year by about 6%, due to higher market volume, along with increased adoption of Dolby Vision and Dolby Atmos, offset partially by lower recoveries. And sequentially, PC was down by about 51%, due mostly to timing of revenue, and that lines up with some of the comments I made last quarter about its increase that quarter because of timing. Other markets represented about 13% of total licensing in the third quarter. They were up about 42% year-over-year, and that was driven by higher revenue from Dolby Cinema, via admin fees and gaming. And on a sequential basis, other markets increased by about 4% due mostly to Dolby Cinema and to gaming. So if I go beyond licensing, our products and services revenue was about $15.2 million in Q3 compared to $16 million in Q2 and $11.8 million in last year of Q3. The year-over-year increase reflects just modestly higher demand in the cinema industry. So now I'd like to discuss Q3 margins and our operating expenses. Total gross margin in the third quarter was 89% on a GAAP basis and 89.7% on a non-GAAP basis. Products and services gross margin on a GAAP basis was minus $3.9 million in Q3 compared to minus $345,000 in the second quarter, and products and services gross margin on a non-GAAP basis was minus $2.6 million in Q3 compared to a positive $1.1 million in the second quarter. Both GAAP and non-GAAP product gross margins were lower than what I had guided, and that was due to write-downs we took during the third quarter for conferencing hardware. Operating expenses in the third quarter on a GAAP basis were $199.1 million compared to $204 million in Q2, and our operating expenses in the third quarter on a non-GAAP basis were $173.6 million compared to $178.4 million in the second quarter. Now operating expenses were below guidance in Q3, and that was mainly due to some of our marketing programs that shifted in timing from Q3 into Q4. And you will see that sort of mirrored back and reflected in our Q4 expense guidance, where the delta from Q3 to Q4 will be driven mostly by our marketing programs. And then our operating income in the third quarter was $56.1 million on a GAAP basis or 19.6% of revenue compared to $34.1 million or 13.8% of revenue in Q3 of last year. Operating income in the third quarter on a non-GAAP basis was $83.6 million or 29.1% of revenue compared to $60.5 million or 24.5% of revenue in Q3 of last year. Income tax in Q3 was 7.7% on a GAAP basis and 13.7% on a non-GAAP basis. Net income on a GAAP basis in the third quarter was $54.6 million or $0.52 per diluted share compared to $67.3 million or $0.66 per diluted share in last year's Q3. Now I'd like to point out as a reminder, last year's Q3 net income, and that's both GAAP and non-GAAP, included $36 million of discrete tax benefits, which does affect the year-over-year comparisons. So our net income on a non-GAAP basis in the third quarter was $74.8 million or $0.71 per diluted share compared to $87.5 million or $0.86 per diluted share in Q3 of last year. And again, that benefits -- the last year number benefits from that onetime tax credit. For both GAAP and non-GAAP, net income in the third quarter was above guidance due to revenue landing at the higher end of our range and expenses coming in below the range. During the third quarter, we generated $172 million in cash from operations compared to $134 million generated in last year's third quarter. We ended the third quarter with about $1.3 billion in cash and investments. During the third quarter, we bought back about 400,000 shares of our common stock and ended the quarter with about $37 million of stock repurchase authorization available. Today, we announced that the Board of Directors has approved an additional $350 million of stock repurchase authorization. So if I combine that new approval with the remaining balance that was at the end of June, means that as of today, we have $387 million of stock repurchase authorization available going forward. We also announced today a cash dividend of $0.22 per share. The dividend will be payable on August 19, 2021, to shareholders of record on August 11, 2021. So now let's discuss the forward outlook. Last quarter, when I discussed guidance for Q3, I laid out a scenario that said our second half revenue could range from $560 million to $600 million. Now with Q3 under our belt and having landed in the range, we are updating the second half revenue range to $570 million to $600 million, in other words, bumping up the lower end by $10 million, which means we are anticipating Q4 revenue to range from $280 million to $310 million. Within that, licensing could range from $265 million to $290 million, while products and services could range from $15 million to $20 million. With respect to market conditions and industry analyst reports that look out over the horizon, there's still a fair amount of uncertainty out there, and so we are maintaining similar assumptions as what we talked about last quarter, namely that PC TAMs in the second half could be higher on a year-over-year basis, while TAMs for TVs and other consumer devices could be down in the second half. We also continue to anticipate that we'll see organic growth on a year-over-year basis from broader adoption of Dolby technologies across various markets. And we also anticipate some higher revenue from Dolby Cinema as that industry looks to improve, which we have seen some signs of in recent times, and Kevin made a couple of comments about that with some of the titles that came out. So let me move on to the rest of the P&L outlook for Q4. Q4 gross margin on a GAAP basis is estimated to range from 88% to 89%, and the non-GAAP gross margin is estimated to range from 89% to 90%. Within that, products and services gross margin is estimated to range from about breakeven to $1 million on a GAAP basis and from about $1 million to $2 million on a non-GAAP basis. Operating expenses in Q4 on a GAAP basis are estimated to range from $216 million to $226 million, and operating expenses in Q4 on a non-GAAP basis are estimated to range from $190 million to $200 million. As I mentioned earlier, the increase from Q3 to Q4 would be driven primarily by specific marketing programs, some of which shifted in timing from Q3 into Q4. But in total, Q3 plus Q4 marketing is expected to land at a similar amount as we were thinking last quarter. And to repeat a comment I made last quarter, marketing expenses for the full year FY '21 would be similar to what they were last year or maybe a bit lower depending on how Q4 turns out. So let's finish up the Q4 guidance. Other income is projected to range from $1 million to $2 million for the fourth quarter, and our effective tax rate for Q4 is projected to range from 19% to 20% on both a GAAP and non-GAAP basis. Based on a combination of the factors I just covered, we estimate that Q4 diluted earnings per share could range from $0.25 to $0.40 on a GAAP basis and from $0.47 to $0.62 on a non-GAAP basis. And now that we've provided guidance for Q4, here's a full year outlook that would correspond to that. FY '21 revenue is anticipated to range from $1.28 billion to $1.31 billion, with gross margin ranging from 89% to 90% on a GAAP basis and 90% to 91% on a non-GAAP basis. Total operating expenses for the year are estimated to range from $810 million to $820 million on a GAAP basis and from $710 million to $720 million on a non-GAAP basis. And full year diluted earnings per share are estimated to range from $2.79 to $2.94 on a GAAP basis and from $3.57 to $3.72 on a non-GAAP basis. So operator, hopefully, my phone is working okay now. Can you queue up the first question? Yes, Mr. Chew, your line is open. Let's move on to the rest of the P&L outlook for Q4. I wasn't quite sure where I dropped off. Q4 gross margin on a GAAP basis is estimated to range from 88% to 89%, and the non-GAAP gross margin is estimated to range from 89% to 90%. Within that, products and services gross margin is estimated to range from about breakeven to $1 million on a GAAP basis and from about $1 million to $2 million on a non-GAAP basis. Operating expenses in Q4 on a GAAP basis are estimated to range from $216 million to $226 million, and operating expenses in Q4 on a non-GAAP basis are estimated to range from $190 million to $200 million. As I mentioned earlier, the increase from Q3 to Q4 would be driven primarily by specific marketing programs, some of which shifted in timing from Q3 into Q4. But in total, Q3 plus Q4 marketing is expected to land at a similar amount as we were thinking last quarter. And to repeat a comment I made last quarter, marketing expenses for the full year FY '21 would be similar to what they were last year or maybe a bit lower depending on how Q4 turns out. So let's finish up the Q4 guidance. Other income is projected to range from $1 million to $2 million for the fourth quarter, and our effective tax rate for Q4 is projected to range from 19% to 20% on both a GAAP and non-GAAP basis. Based on a combination of the factors I just covered, we estimate that Q4 diluted earnings per share could range from $0.25 to $0.40 on a GAAP basis and from $0.47 to $0.62 on a non-GAAP basis. And now that we've provided guidance for Q4, here's a full year outlook that would correspond to that. FY '21 revenue is anticipated to range from $1.28 billion to $1.31 billion, with gross margin ranging from 89% to 90% on a GAAP basis and 90% to 91% on a non-GAAP basis. Total operating expenses for the year are estimated to range from $810 million to $820 million on a GAAP basis and from $710 million to $720 million on a non-GAAP basis. And full year diluted earnings per share are estimated to range from $2.79 to $2.94 on a GAAP basis and from $3.57 to $3.72 on a non-GAAP basis. So operator, hopefully, my phone is working okay now. Can you queue up the first question?

compname reports q3 non-gaap earnings per share of $0.71. sees fy revenue $1.28 billion to $1.31 billion . q3 non-gaap earnings per share $0.71. q3 gaap earnings per share $0.52. board of directors has approved increasing size of its stock repurchase program by $350 million. h2 total revenue is estimated to range from $570 million to $600 million. fy diluted earnings per share is anticipated to range from $2.79 to $2.94 on a gaap basis and from $3.57 to $3.72 on a non-gaap basis.

In particular, we expect that the continued impact of COVID-19 on our business remains uncertain at this time. During today's call, we will discuss GAAP and non-GAAP financial measures. As for the content of today's call, Lewis will begin with a recap of Dolby's financial results and provide our first and second quarter 2021 outlook, and Kevin will finish with a discussion of the business. I hope everyone is doing well. Our Q4 revenue was above our guidance, but we are still down on a year-over-year basis and that reflects the ongoing impact of the pandemic. So let's go through the numbers. Fourth quarter revenue was $271 million, compared to $247 million in Q3 and $299 million in Q4 of last year. Our revenue guidance coming into the fourth quarter was a range of $225 million to $255 million. So compared to guidance, revenues were better than what we projected as we had a true-up of about $25 million in the quarter related to Q3 shipments, which was about $15 million higher than the true-up that we had last quarter, and with most of that improvement coming from TVs and set-top boxes, and PCs. Total company revenue in Q4 increased sequentially by $24 million compared to Q3, as we benefited from higher unit volumes in TVs, set-top boxes, DMAs and PCs, along with the higher true-up that I just discussed. And all of this was partially offset by lower revenue from mobile due to timing under contracts, and I will discuss that in a second. Now looking at Q4 on a year-over-year basis, total company revenue is down by $28 million from last year's Q4 and we can attribute that mainly to COVID-19, especially in products and services, which were down by about $20 million or nearly 60% below last year. The composition of Q4 revenue was $257 million in licensing and $14 million in products and services. So let's break down licensing revenue by end market, starting with broadcast. Broadcast represented about 47% of total licensing in the fourth quarter. Broadcast revenues increased by about 2% year-over-year, helped by the higher true-up related to the Q3 shipments and also driven by higher adoption in TVs and set-top boxes. And then this was then offset partially by lower recoveries in the quarter. On a sequential basis, broadcast was up by about 35% due to higher volume in TVs and set-top boxes along with higher recoveries and the higher true-up. Mobile represented approximately 15% of total licensing in Q4. Mobile was down by about 13% over last year due to lower recoveries, but partially offset by higher adoption of Dolby Technologies. For the sequential comparison, I should point out that last quarter Q3, Mobile was about 33% licensing, which was higher than normal, and that was due to timing of revenue under customer contracts, so we came into Q4 expecting Mobile revenue to decline this quarter and return to a more normalized percentage of revenue, which is what it did. So accordingly Mobile revenue was down sequentially by about 50%, and that was primarily due to timing of revenue under customer contracts. Consumer electronics represented about 13% of total licensing in the fourth quarter. On a year-over-year basis, CE licensing was down by about 8%, mainly due to lower recoveries. On a sequential basis, CE was about 68% higher than Q3. And as a reminder, Q3 was lower than usual and only 9% of licensing because of timing under contract. And so, the sequential increase from Q3 to Q4 was mostly a return to a more normal level. PC represented about 12% of total licensing in Q4. PC was higher than last year by about 26%, helped by the higher true-up and also because of the increased adoption of Dolby Technologies. And sequentially, PC was up by about 32% that's for similar reasons. Other markets represented about 13% of total licensing in the fourth quarter and they were down by about 19% year-over-year due to significantly lower Dolby Cinema box office share and that's because of the COVID restrictions and lack of big titles, and also because of lower revenues from gaming due to console life cycles and/or recoveries in automotive. On a sequential basis, other markets was up by about 32%, driven by higher revenue from gaming and from via admin fees and that's the patent pool that we administered. Beyond licensing, our products and services revenue was $14.3 million in Q4, compared to $11.8 million in Q3 and $34 million in last year's Q4. Our guidance had anticipated the large year-over-year decrease because most of this revenue comes from equipment that we sell to cinema exhibitors and these customers continue to be negatively affected by the pandemic. And speaking of products and services revenue, going forward into Q1, we're winding down and exiting conferencing hardware sales, as we will now be fully focused on expanding the availability of the Dolby Voice experience through software solutions, such as interactivity APIs on our developer platform. So later on, when I cover the outlook for FY '21, my comments on products and services revenue and gross margin will reflect the fact that we are exiting the conferencing hardware arena. Now I'd like to discuss Q4 margins and operating expenses. Total gross margin in the fourth quarter was 84.3% on a GAAP basis and 85.1% on a non-GAAP basis. Products and services gross margin on a GAAP basis was minus $15.5 million in the fourth quarter and a large portion of that consisted of charges for excess and obsolete inventory associated with conferencing hardware and that relates back to what I just said a minute ago, about our plans in that space. Going forward into Q1, we anticipate that products and services margin will still be negative, but more along the lines of around minus $3 million or minus $4 million. I'll cover this again in the outlook section in a few minutes. Products and services gross margin on a non-GAAP basis was minus $14.1 million in the fourth quarter, and my comments here are similar to what I just said for GAAP gross margins. Operating expenses in the fourth quarter on a GAAP basis were slightly above the high-end of the range that we had guided, coming in at a $198.7 million, compared to $182.9 million in Q3. And remember that Q3 was particularly low for us, because that was the first full quarter of reacting to COVID-19 and lots of our activities have been temporarily halted or pushed out. Operating expenses in the fourth quarter on a non-GAAP basis were $176.5 million, which is within our range and that was compared to $159.2 million in the third quarter, and basically the same comments that I made in GAAP apply here as well. Operating income in the fourth quarter was $30.1 million on a GAAP basis or 11.1% of revenue, compared to $51.2 million or 17.1% of revenue in Q4 of last year. Operating income in the fourth quarter on a non-GAAP basis was $54.3 million or 20% of revenue, compared to $77.6 million or 26% of revenue in Q4 of last year. Income tax in Q4 was 21.8% on both the GAAP and non-GAAP basis. The effective tax rate was slightly higher than guidance, and that was due mainly to the mix of our income between different tax jurisdictions. Net income on a GAAP basis in the fourth quarter was $26.8 million or $0.26 per diluted share, compared to $43.9 million or $0.43 per diluted share in last year's Q4. Net income on a non-GAAP basis in the fourth quarter was $45.8 million or $0.45 per diluted share, compared to $67.6 million or $0.66 per diluted share in Q4 of last year. For both GAAP and non-GAAP, net income in Q4 was above the guidance that we gave at the beginning of the quarter, and that was primarily due to revenue being above the high-end of our range, offset partially by the lower product and services gross margin that I mentioned a minute ago. During the fourth quarter, we generated about $113 million in cash from operations, which compares to about $130 million generated in last year's fourth quarter. We ended the fourth quarter with nearly $1.2 billion in cash and investments. During Q4, we bought back about 640,000 shares of our common stock and ended the quarter with about $187 million of stock repurchase authorization still available to us. We also announced today a cash dividend of $0.22 per share. The dividend will be payable on December 4, 2020 to shareholders of record on November 24, 2020. Before I go into the outlook for FY '21, let's summarize the results for the full-year FY '20. Total revenue in FY '20 was $1,162 million that compares to $1,241 million in the prior year with a year-over-year decline due to the impact from COVID-19. Within total revenue, licensing was $1,079 million, which was down about $28 million from last year due to lower consumer activity because of the pandemic, while products and services revenue was $83 million for the year, down about $51 million from last year due mainly to lower demand from the cinema industry because of restrictions brought on also by the pandemic. Operating income for the full-year FY '20 was $219 million on a GAAP basis or about 19% of revenue and operating income on a non-GAAP basis was $318 million or about 27% of revenue. Net income on a GAAP basis was $231 million or $2.25 per diluted share and net income on a non-GAAP basis was $305 million or $2.97 per diluted share. And cash flow from operations for the full-year was $344 million and that's slightly up from the previous year, where cash flow from operations was $328 million. So now let's discuss the full-year outlook. First, let me say that we'll be facing some interesting dynamics in FY '21 with our year-over-year comparisons. Because we have a September year-end, the first two quarters of FY '20 were mostly unaffected by COVID-19, while the last two quarters of FY '20 were fully affected by COVID. And as we head into FY '21, COVID continues to persist and visibility is very limited, even more so the further out you tried to look. So today, I'm going to provide an outlook scenario for the first half of the year, including our perspective on what Q1 and Q2 revenue could be and for the second half of the year because visibility is limited, we are not providing guidance at this time, but I will provide some color on some of the factors that could affect the second half. So let's discuss the first half. In the first half of FY '21, we currently anticipate year-over-year growth in licensing revenue, and that could be offset by year-over-year decline in products and services revenue. The anticipated growth that we could get in licensing would come mainly from higher adoption of our technologies as industry analysts currently are projecting market TAM to be flat to slightly down in the first half. And also, we anticipate Dolby Cinema licensing revenue to be significantly down year-over-year in our first half because of that COVID versus pre-COVID factor of comparison in the cinema industry. And then for that same reason, we are anticipating cinema product sales to be down year-over-year. Now within the first half of the year, based on what we currently see, here is the scenario we are assuming for Q1 and then Q2. In the first quarter of FY '21, we anticipate that total revenue could range from $330 million to $360 million. Within that, we estimate that licensing could range from $320 million to $345 million, while products and services is projected to range from $10 million to $15 million. At the midpoint of the range, we anticipate growth in lights seem to be driven by a higher adoption of our technologies across a range of devices. In addition, the Q1 licensing outlook is benefiting from timing of revenue under customer contracts, as well as potentially higher recoveries. Now we are not anticipating as much revenue from these items, namely the timing of the recoveries in our second quarter. And by the way, last year, it was Q2 not Q1 that benefited more from timing of recoveries. So with that in mind, and based on what we currently see and having just gone over the Q1 revenue outlook, we currently see our Q2 revenue scenario looking like a range of about $270 million to $300 million. And doing the math for you on the first half of FY '21 by combining the Q1 and Q2 figures that I just went over, our current outlook scenario assumes a first half FY '21 revenue range of $600 million to $660 million. We will plan to update you on how this picture has evolved after Q1 is completed. As for the second half, like I said, we are not giving guidance for the second half, but here are some points to consider. On a sequential basis in our licensing revenue, we typically see second half revenue is lower than the first half because of lower seasonality in consumer device shipments and also because of the timing of revenue on the customer contract. On a year-over-year basis, while we do expect to see continuing benefit from increased adoption of Dolby Technologies, it's worth noting that with respect to market TAM, current industry analysts reports are projecting markets like PC and TV TAM to be down on a year-over-year basis in the second half. And that's because of an uptick in unit shipments that happened in the latter part of FY '20 that might not repeat in that same timeframe next year. So, of course, it's much too early to know if that will be true, but that's what the current reports currently suggest. And as for Dolby Cinema and cinema products, the year-over-year comparison should be favorable in the second half, but we don't know to what extent or at what pace. So those are a few things to think about for the second half and we thought it was worth providing you that color. So let me now finish up by providing the outlook on the rest of the P&L for Q1, already highlighted the revenue range scenario of $330 million to $360 million. So Q1 gross margin on a GAAP basis is estimated to range from 90% to 91%, and the non-GAAP gross margin is estimated to range from 91% to 92%. Within that, products and services gross margin is estimated to range from minus $3 million to minus $4 million on a GAAP basis, and from minus $2 billion to minus $3 million on a non-GAAP basis. As I mentioned earlier, we are winding down and exiting the conferencing hardware space, and the demand for cinema products continues to be weak because of the industry conditions. And as a result, we are reducing certain resources in manufacturing, as well as other areas that were connected with conferencing hardware and cinema products. We anticipate that it will take several months to complete, various activities to smoothly transition our conferencing hardware partners and then customers. With respect to the impact on our products and services gross margin, we estimate that we could start to see savings in our cost of goods sold by around the end of fiscal Q2, and that's because of these transitioning activities that we have to undertake. Operating expenses in Q1 on a GAAP basis are estimated to range from $207 million to $219 million. Included in this range is approximately $7 million to $9 million of restructuring charges for severances and related benefits that are being provided to employees that are impacted by the actions that I just mentioned a minute ago. Operating expenses in Q1 on a non-GAAP basis are estimated to range from $175 million to $185 million, and this range excludes the estimated restructuring charge. Other income is projected to range from $1 million to $2 million for the quarter, and our effective tax rate for Q1 is projected to range from 20% to 21% on both the GAAP and non-GAAP basis. So based on a combination of the factors I just covered, we estimate that Q1 diluted earnings per share could range from $0.70 to $0.85 on a GAAP basis and from $0.97 to $1.12 on a non-GAAP basis. So that's it for me. Over to you, Kevin. I want to focus my comments on three main areas today. I will start by highlighting our continued progress, increasing the number of Dolby Vision and Dolby Atmos experiences around the world. I'll then spend a few minutes on the changes we have made in our cinema and conferencing hardware business to adjust to the evolving conditions in certain markets. And then I will share some thoughts on the exciting opportunity for Dolby to address a new world of content through our developer platform and related initiatives. In a year where we all face challenges and disruptions, we have continued to bring more Dolby experiences to more people around the world, and they are the driving force behind the Dolby magic. So let me start with the Dolby Vision and Dolby Atmos ecosystem that continues to grow. With the launch of the iPhone 12, consumers are now able to see the benefits of Dolby Vision when they record video and share it. We are excited about the opportunity to support this ecosystem so the Dolby Vision content can be enjoyed on social media, video sharing sites and more. This will vastly expand the content that can be enjoyed in Dolby Vision, adding more reasons for devices and services to adopt our technology and creating new opportunities for Dolby. During 2020, we continued to grow the presence of Dolby Vision and Dolby Atmos across the many ways that people enjoy movie and TV content. At the beginning of the year we saw the launches of Disney+ and Apple TV+ with the combined Dolby experience. Google Play, Showtime and PBS all began streaming in Dolby Vision this year. In this quarter, Watcher a streaming service in Korea began supporting content in Dolby Vision and Dolby Atmos. The momentum of Dolby Vision and Dolby Atmos within movie and TV content continues to drive an expanding lineup of devices within the home. The adoption of Dolby Vision and Dolby Atmos within 4K TV shipments grew significantly year-over-year. Our partners like TCL, Sony, Panasonic and Skyworth added support for the Dolby Vision and Dolby Atmos experience deeper within their TV lineups and have also broadened the global reach of their offerings, including this year into India. Xiaomi launched their first TV that supports Dolby Vision and Dolby Atmos just this year. And we continue to bring new innovations to market, like Dolby Vision IQ, which optimizes the picture on your TV by adjusting to the surrounding line and to the type of content being viewed. Our continued innovation brings new value to our partners and consumers and adds to the reasons for deeper adoption. Dolby Vision and Dolby Atmos continue to grow across a broader range of devices. Apple recently began enabling support for Dolby Atmos to the HomePod. Earlier this year, Sonos launched its first Dolby Atmos product with the Sonos Arc and Roku began supporting Dolby Vision and Dolby Atmos with the Roku Ultra. We are also beginning to see increasing adoption of the combined experience within set-top boxes, including the latest offerings from Free in France and Deutsche Telekom in Germany. Within Mobile and PC, Apple highlights the adoption of the Dolby Vision and Dolby Atmos playback with support throughout their iPad, MacBook and iPhone lineups. We also have strong initial adoption of Dolby Atmos within the latest flagship mobile phones from Samsung, OPPO and Sony. Lenovo launched several new PCs that support the combined experience and Dell began shipping Dolby Vision enabled PCs earlier this year. We see significant growth opportunities within both Mobile and PC as we gain new wins, drive deeper adoption within our partners' device lineups and expand the types of content that can be enjoyed with Dolby Vision and Dolby Atmos. In the same way, the Dolby Vision and Dolby Atmos enabled great movie and TV content, we see a significant opportunity to create immersive experiences within music and gaming. These are important forms of entertainment that expand our current value proposition and grow the number of devices that can benefit from the Dolby experience. Let me start with music. A year ago, we launched Dolby Atmos for music with Amazon Music HD and the Amazon Echo Studio. The music in Dolby experience has been met with deep and passionate engagement from artists. For example, those that we highlighted in the stories from Lizzo, Post Malone, Coldplay and J Balvin. Tidal became the second streaming service to support Dolby Atmos Music, enabling millions of Dolby Atmos devices within mobile and in the home. Our increasing presence in music will create opportunities to grow adoption in mobile, automotive, smart speakers and headphones. In gaming, Microsoft announced their new Xbox to be the first gaming console to support the combined Dolby Vision and Dolby Atmos experience for gaming. We are also seeing a growing number of gaming PCs adopt the Dolby experience, including new products from Lenovo and ASUS this year. As we grow the presence of Dolby Vision and Dolby Atmos within gaming content, we add to the value proposition for broader adoption within PCs, gaming consoles and mobile phones. Our momentum for Dolby Vision and Dolby Atmos across content, services and devices is strong and at the same time, we still see much of the opportunity ahead of us. We continue to grow our presence throughout devices within the home, and we made it even earlier stages of adoption within mobile and PC. We are focused on accelerating that adoption by increasing the amount of content and by broadening our presence in categories like music and gaming. Let me shift now to talk about the areas where we have made some changes to adjust to the evolving conditions in certain markets. The cinema environment remains challenging as the time of recovery is uncertain and the landscape is evolving. As Lewis discussed, we have made some adjustments to operations and manufacturing here to reflect a lower outlook for demand. At the same time, we remain confident that studios will continue to create great content that audiences will continue to want to experience these movies in the cinema and that they will take out the best experiences. Let me spend a few -- just a few moments on Dolby Voice. We entered the communication space with the goal of enabling higher quality and more natural meeting experiences. Our value proposition of enabling higher quality interactions remains as strong and relevant as ever and we see significant opportunities to broaden the reach of our technologies. As we move forward, we are winding down the sales of our conferencing hardware to focus all of our efforts on the larger opportunity to enable the Dolby Voice experience through our enterprise partners and our developer platform. And that brings me to the opportunity to bring the Dolby experience to the vast and growing amount of content that are a part of our everyday lives, from user-generated content to social media and casual entertainment to everyday virtual interactions. Today, developers can access our technology through Dolby.io to improve media and interactivity within their applications. We have seen growing engagement from developers across a variety of industries and use cases from improving audio quality in podcast, media production and online marketplace videos to enabling interactivity in online education, social media, and live streaming applications. This quarter, we began partnering with SoundCloud to enable artists to improve the quality of their tracks using our mastering APIs and have seen nearly 200,000 tracks mastered through our APIs in the few months since launch. We are also working to integrate our media APIs onto the box platform this quarter to enable their customers to enhance content with our media APIs right within the box experience. Additionally, we recently enabled our interactivity APIs to include the benefits of Dolby Voice and we have drawn strong engagement from developers since its release. As we look ahead, we will continue to expand our offerings to address more audio and video features. For example, now that consumers can create Dolby Vision with the iPhone 12. We see opportunities to support content platforms seeking to make the most of this expanding world of Dolby Vision content. While we are just at the beginning of these new opportunities, we are learning quickly from our early engagement with developers and evolving our offering to bring the Dolby experience to everyday applications and services. So to wrap up, the momentum of Dolby Vision and Dolby Atmos with movies and TV content is strong as our partners continue to bring new devices and services to market. Our opportunity remains ahead of us and we are enabling more content experiences in music and gaming that can accelerate the adoption across device categories. Consumers can now capture and edit in Dolby Vision for the first time, expanding the Dolby experiences into the growing world of user-generated content. And we are excited by the opportunity to bring the Dolby experience to new use cases and industries through our developer platform. All of this gives us confidence in our ability to drive revenue and earnings growth into the future. I look forward to updating you next quarter.

q4 non-gaap earnings per share $0.45. q4 gaap earnings per share $0.26. sees q2 revenue $270 million to $300 million. sees q1 2021 total revenue to range from $330 million to $360 million. sees q1 2021 diluted earnings per share to range from $0.70 to $0.85 on a gaap basis. diluted earnings per share on a non-gaap basis is anticipated to range from $0.97 to $1.12 for q1 2021. anticipate that cinema sites could continue to be negatively affected through first half of fiscal 2021 or longer.

As for the content of today's call, Kevin will start with a discussion of the business and Robert will follow with a recap of Dolby's financial results and provide our first quarter and fiscal 2022 outlook. Our Q4 earnings per share came in above our midpoint, while revenue came in toward the low end of our guidance range. Looking at the full year, we had a strong fiscal 2021 with 10% revenue growth and our highest operating margin since fiscal 2014, and we created considerable momentum across many of our growth initiatives, that will allow more people to be entertained by premium Dolby experiences. Consumers can now easily record, edit and share their videos in Dolby Vision with their Apple iPhone. Music in Dolby is being enjoyed by a significantly larger audience, with the launch of Dolby Atmos on to Apple Music, and we have the first partners, who will enable the Dolby Atmos music experience in the car, with Mercedes-Benz and Lucid Motors, and gamers can now play some of their favorite titles in Dolby Vision for the first time, on the latest Xbox. During FY '21, our revenues benefited from robust increases in consumer device shipments, combined with increased adoption of Dolby Atmos and Dolby Vision, partially offset by a decrease in the cinema related revenues. As we enter FY '22, we are expecting revenue growth in the mid to high single digits, as we anticipate a shift in those factors, with accelerating growth of Dolby Atmos and Dolby Vision and a partial recovery in cinema related revenues, offset by a macro slowdown in consumer device shipments. It has been a dynamic environment. Before Robert takes you through the numbers in more detail, including a discussion on our licensing end markets, I want to walk you through some of the most important factors, as we think about long-term revenue growth. Our foundational audio technologies, increased adoption of Dolby Atmos and Dolby Vision and our opportunity to expand our addressable market with initiatives like dolby.io. Let's start with our foundational audio technologies, which include Dolby Digital Plus, AC-4 and our audio patent licensing. These foundational technologies made up roughly three quarters of our licensing business in FY '21, and have high attach rates across a diverse set of devices and end markets. In FY '21, our foundational audio technologies grew about 11% year-over-year, due largely to robust global shipments of DCs and higher TV volumes, particularly in North America and Europe. We also benefited from higher than normal true ups coming into the year. As we look ahead to FY '22, industry analysts' reports indicate that we will not see the level of market growth we saw in the previous year, noting uncertainties around global supply constraints and consumer spending. Of course, we partner with OEMs across multiple device categories, across all geographies and each of them is impacted differently. When we take all of this into account, we expect a decrease in the low single digits for our foundational audio revenues. Over the long term, we expect our foundational licensing revenue to generally reflect market trends and device shipments, driven by our strong presence across a wide set of consumer devices and markets, with opportunities to increase adoption in certain areas like mobile and automotive. The remainder of our licensing revenue includes Dolby Atmos, Dolby Vision and our Imaging Patent Technologies, where growth is being driven primarily by new adoption and new licensees. This portion of our licensing revenue also includes Dolby Cinema, where we expect strong year-over-year growth, as box office recovers from low attendance throughout FY '21, driven by the pandemic. In total, this portion is approaching one quarter of our licensing revenue and grew nearly 20% in FY '21. We see this growth accelerating to over 35% in FY '22. Our continued momentum with Dolby Vision and Dolby Atmos is a key driver here, and I'd like to take a few minutes to highlight our progress in these areas. Let me start with Dolby Atmos Music; the response from artists and consumers is clear. Dolby Atmos creates a whole new way to enjoy music. The engagement continues to build, with some of the world's most popular music artists like Justin Bieber and The Weeknd, describing the Dolby Atmos music experience as “game-changing,” and “an immersive world where you can feel every detail”. We also recently launched a new venue, Dolby Live at Park MGM, where concert attendees will be able to enjoy their favorite artists with the ultimate Dolby Atmos Music experience, and then seek the experience in all the ways they enjoy music. Amazon Music recently announced that they are making Dolby Atmos Music experiences more broadly available to their subscribers. The music in Dolby experience significantly increases the value that Dolby brings, across a wide range of devices, including mobile, PC and speaker products. Our growing presence in music has created a new value proposition for Dolby in the automotive space. Mercedes-Benz announced last month, that they are adopting the Dolby Atmos Music experience in two of their top luxury cars, the Mercedes Maybach and the Mercedes-Benz S-Class. And just yesterday, Chinese electric-car maker NIO, announced they are including Dolby Atmos in their ET7 model. We are excited that these new partnerships add to our early momentum within automotive, that started with Lucid Air earlier this year, which is now on the road in the U.S. We are just at the beginning of the significant opportunity we see ahead in this space. This quarter, the launch of the iPhone 13 lineup again highlighted the capability to enable consumers to record and share their videos in Dolby Vision. With a significant increase to the amount of Dolby Vision content being created through the iPhone, we are seeing a range of content platforms, now enabling support for Dolby Vision for the first time. This quarter, Bilibili, one of China's largest social video sites, began to support the upload and sharing of user generated Dolby Vision content. More recently, Vimeo became the first all-in-one platform to support playback of Dolby Vision content for the Apple ecosystem. With more content platforms supporting Dolby Vision content to broader audiences and used cases, we look to drive increased adoption of Dolby Vision playback and capture across more devices, particularly in mobile and PC. We are also building momentum to enable more live broadcast events in Dolby. Comcast delivered the 2021 MLB World Series and playoff games in Dolby Vision on Fox Sports. Thursday night football games will be available in Dolby Vision through Fox, and NBC will be delivering select college football games in Dolby Vision. Growing the number of Dolby content experiences, especially live content with dedicated followings, provides more impetus for greater adoption of Dolby Vision and Dolby Atmos. Gaming in Dolby Vision is now available on the Xbox series X and S, marking the first time gamers can enjoy playing in the combined Dolby experience. Microsoft also expanded their support of the combined experience, by adding Dolby Vision to their Surface devices. In the living room, we see our partners like Amazon, Xiaomi, TCL and Sky, highlight the combined Dolby Vision and Dolby Atmos experience in their latest TV launches, and we continue to garner support from streaming services with Hulu, adding Dolby Vision this quarter. The newer soundbar products from LG and Sonos showcase support for Dolby Atmos, and in mobile, we saw new Android phones and tablets this quarter from Samsung, Xiaomi and Realme with Dolby technologies. With a solid foundation and increasing adoption of Dolby Atmos and Dolby Vision, we are able to broadly address the world of premium content experiences like movies, TV and music, and are confident in our ability to drive continued growth. With Dolby.io, our developer-first API platform, we see an opportunity to greatly expand our addressable market, by focusing on use cases that benefit from Dolby's unique experience in media and communications. While our platform has broad applicability across a range of use cases, we are focusing where we think we can offer the most differentiation, virtual live performances, online and hybrid events, social audio, premium education, gaming and content production. Each of these verticals represents an opportunity of hundreds of billions of minutes annually. And collectively, we estimate the addressable market to be about $5 billion and growing. With the breadth and depth of our expertise, we are enabling higher quality capture, processing and playback capabilities compared to what is currently available in the market. Last quarter, we released a major platform update, which puts us in a position to address more of our potential customers' needs, by making our APIs more competitive on the number of concurrent users we can support. As we focus on our target use cases and learn from our engagement with developers, we continue to introduce new APIs and features that address the needs of developers and improve the overall developer experience. With these recent improvements, we are beginning to see increased self-service activity. And with our new leadership in place, we are focused on increasing awareness and building the pipeline. This quarter, we saw a number of new music distribution services, including UnitedMasters, integrating our music mastering API and enabling their users to create high-quality music tracks. Also, Cloudinary recently launched an integration of Dolby.io's audio enhance APIs with their MediaFlows product, allowing their customers to easily improve the audio quality of their videos. While we are still in the early days of Dolby.io, we are excited about the significant opportunity ahead. Before I wrap up, let me spend a minute on our operating model. We significantly increased operating margins in FY '21, due to a combination of gross margin improvements and reduced spending levels due to COVID. We anticipate a partial return of some of these operating expenses in FY '22, like travel and events, as well as a few specific items like our 53rd week of payroll. At the same time, on the strength of our operating model, including our improved gross margins, we will continue to generate higher operating margins, as compared to our pre-pandemic levels, while investing in our growth areas. So in summary, we have a strong foundation and fiscal 2021 was highlighted by significant wins like Dolby Atmos on Apple Music, the first cars that will support Dolby Atmos and enabling Dolby Vision across a wider range of content, from live events to gaming to the user-generated content. We see much of the opportunity ahead, as we drive broader adoption across more content and more devices, even as we seek to significantly expand our addressable market with Dolby.io. All of this gives us confidence in our ability to drive long-term revenue and earnings growth, as we look to FY '22 and beyond. Robert is an experienced leader, with a track record of guiding companies through growth, while delivering operational excellence and accountability. Robert has been onboard for about four weeks now. We are excited to have his expertise, as we work toward Dolby's next phase of growth. And with that, I will hand it over to Robert, to take us through the financials in more detail. I am very excited to be here and join the Dolby team. I hope that in the near term I get a chance to meet you all, if not in person, at least virtually. So let's go through the numbers for Q4 and full year 2021, and then I will take you through our outlook for fiscal year '22. Total revenue in the fourth quarter was $285 million, which was within the total revenue guidance range we provided, and also included a favorable true-up of about $3 million for Q3 shipments reported, that were above the original estimate. Revenue landed toward the low end of our guidance range, due to timing of the deal that pushed out of the quarter, and is now anticipated to result in revenue in fiscal year 2022. With our Q4 results, full year 2021 revenues were $1.28 billion compared to $1.16 billion in fiscal year 2020, generating 10% year-over-year growth. Within that, licensing revenue was $1.21 billion, while products and services revenue was $67 million. On a year-over-year basis, fourth quarter revenue was about $14 million above last year's Q4, as we benefited from greater adoption of Dolby Vision and Dolby Atmos and higher cinema-related revenues, partially offset by lower true-ups. Q4 revenue was comprised of $266 million in licensing and $19 million in Products and services. Let's discuss the full year and year-over-year quarterly trends in licensing revenue by end market, and I will also highlight the key factors, as we look ahead to fiscal '22. Broadcast represented about 39% of the total licensing in fiscal year 2021. Our full year revenues grew by $36 million or 8% on a year-over-year basis, driven by higher adoption of Dolby Vision and Dolby Atmos in TVs and set-top boxes. We also saw higher foundational audio revenues due to increased TV shipments in North America and Europe compared to fiscal 2020. In Q4, we saw broadcast revenues decline from prior year's Q4, as we saw lower true-ups for foundational audio revenues on a year-over-year basis, partially offset by higher revenues from Dolby Vision and Dolby Atmos. As we look out to fiscal 2022, we currently anticipate broadcast revenues to grow in the low single digits from fiscal '21, driven by higher adoption of Dolby Vision, Dolby Atmos and growth in our imaging patent programs. These growth factors are projected to be partially offset by lower foundational audio revenues, as we see lower recoveries and lower true-ups on a year-over-year basis, and industry analysts are projecting TV shipments to be flat to down low single digits. Mobile represented approximately 22% of total licensing in fiscal 2021. Mobile revenue increased by $34 million or 15% compared to fiscal 2020, as our foundational audio revenues benefited from timing of revenues, and we saw higher Dolby Vision revenues from increased adoption. Our Q4 mobile revenues were up about 2% compared to the prior year, due to higher adoption of Dolby Vision and Dolby Atmos. In fiscal year '22, we anticipate that mobile revenues could grow mid to high single digits, driven by increasing adoption of Dolby Vision and Dolby Atmos, as well as growth in our imaging patent programs. These factors will be partially offset by lower foundational audio revenues, due to timing of revenues under contract. Consumer electronics represented about 15% of total licensing in fiscal year 2021. On a year-over-year basis, CE licensing increased by $29 million or 19%, driven by higher foundational audio revenues, as a result of increased unit volumes in soundbars and AVRs, as well as higher recoveries. We also saw growth from higher adoption of Dolby Atmos and Dolby Vision across CE devices. Our Q4 CE revenues increased 28% compared to prior year, which was in line with full year growth drivers of both higher foundational audio revenues and growing adoption of Dolby Atmos and Dolby Vision. As you look ahead to fiscal year '22, we see CE revenues relatively flat year-over-year. We expect to see higher revenues from Dolby Vision and Dolby Atmos adoption, as well as increasing contributions from our imaging patent programs. These growth drivers will be partially offset by lower foundational audio revenues, as industry analysts are estimating unit volumes in DMAs and soundbars to decrease year-over-year and we anticipate lower CE recoveries. PC represented about 12% of total licensing in fiscal year 2021. Our fiscal year '21 PC revenues were higher than prior year by about $10 million or 7%, driven by higher foundational audio revenues, as a result of strong PC shipments throughout the year and growing revenues from Dolby Atmos and Dolby Vision. These growth factors were partially offset by lower recoveries compared to fiscal year '20. Our Q4 PC revenues were about 7% higher compared to prior year Q4, driven by increased Dolby Vision and Dolby Atmos revenues. As we look ahead to fiscal year '22, we see low to mid single digit growth in our PC revenues, as more PCs continue to adopt Dolby Vision and Dolby Atmos, as well as growth in our imaging patent programs. Other markets represent about 12% of total licensing in fiscal year 2021. They were up about $26 million or 21% year-over-year, driven by higher revenues from gaming, due to the console refresh cycle and higher foundational revenues related to patents. In Q4, we saw other markets grow about 26% year-over-year due to increased Dolby Cinema revenues as theaters reopen, and higher revenues from gaming. As we look ahead to fiscal '22, we anticipate that other markets revenues could grow at an even higher rate of over 25%, as we estimate Dolby Cinema revenues to continue momentum from Q4, as more people are able to return to the movies and we also see continued growth in gaming. Beyond licensing, our products and services revenue was $67 million in fiscal year '21, compared to $83 million in fiscal year 2020. Prior year included about two quarters of pre-pandemic activity related to our cinema products business, and included revenues for our communications hardware business, which we exited in early fiscal year '21. Products and services revenue in Q4 was $19 million compared to $14 million in last year's Q4. The year-over-year increase reflects higher demand in the cinema industry. Total gross margin in the fourth quarter was 89.2% on a GAAP basis and 90% on a non-GAAP basis. Operating expenses in the fourth quarter on a GAAP basis were $214 million. Operating expenses in the fourth quarter on a non-GAAP basis were $189.9 million, compared to $176.5 million in the prior year. Operating expenses were at the low end of our guidance for Q4. Operating income in the fourth quarter was $40.4 million on a GAAP basis or 14.2% of revenue, compared to $30.1 million or 11.1% of revenue in Q4 of last year. Operating income in the fourth quarter on a non-GAAP basis was $66.6 million or 23.4% of revenue, compared to $54.3 million or 20% of revenue in Q4 of last year. On a full year basis, operating income was $344.4 million on a GAAP basis or about 26.9% of revenue, compared to $218.7 million or 18.8% in fiscal 2020. Full year operating income in fiscal '21 on a non-GAAP basis was $450.7 million or about 35.2% of revenue compared to $317.9 million or 27.4% in the prior year. Income tax in Q4 was minus 3% on a GAAP basis and 13% on a non-GAAP basis. Our tax rate benefited from a number of discrete items, including return provision true-ups. Net income on a GAAP basis in the fourth quarter was $44.2 million or $0.42 per diluted share compared to $26.8 million or $0.26 per diluted share in last year's Q4. Net income on a non-GAAP basis in the fourth quarter was $60.4 million or $0.58 per diluted share, compared to $45.8 million or $0.45 per diluted share in Q4 of last year. During the fourth quarter, we generated $110 million in cash from operations compared to $113 million generated in last year's fourth quarter. We ended the fourth quarter with about $1.3 billion in cash and investments. During the fourth quarter, we bought back about 1 million shares of our common stock and ended the quarter with about $291 million of stock repurchase authorization available going forward. We also announced today a cash dividend of $0.25 per share, an increase of $0.03 or 14% compared to the prior quarter. The dividend will be payable on December 8, 2021, to shareholders of record on November 30, 2021. Now let's turn to guidance for fiscal '22. We currently estimate total fiscal year '22 revenues could range from $1.34 billion to $1.4 billion. This would result in about 5% to 9% of year-over-year growth as compared to the $1.28 billion in fiscal year 2021. Within this, licensing revenue could range from $1.260 billion to $1.315 billion compared to $1.214 billion in fiscal year '21, which would result in a 4% to 8% year-over-year growth. As I referenced earlier, discussing our revenue by end market, we expect strong growth in our other markets for increased Dolby Cinema and gaming revenues, as well as growth in mobile, PC and to a lesser extent, broadcast, due to increasing adoption of Dolby Vision and Dolby Atmos and growth in our imaging patent programs, partially offset by lower foundational audio revenues. For products and services revenues, we anticipate this could range from $75 million to $90 million for fiscal year '22, with improvements in cinema products and growth in Dolby.io. Gross margin for fiscal year '22 are expected to be relatively consistent with fiscal year '21. Let me shift to operating expenses; we have several factors that impact our year-over-year expectations. First, fiscal 2022 is a 53-week fiscal year for us, and that results in an extra week of payroll in Q1. As Kevin mentioned, we also see a return of some expenses like travel and events that were lower during the pandemic. In addition to normal annual merit increases that will typically go in effect in fiscal Q2. Lastly, we continue to invest in areas like Dolby Vision, Dolby Atmos and Dolby.io. With these considerations, we are estimating operating expenses for fiscal 2022 could range from $869 million to $889 million on a GAAP basis and between $750 million to $770 million on a non-GAAP basis. With all of this, our business model remains very strong, as we expect to deliver operating margins between 24% to 26% on a GAAP basis, and between 34% and 36% on a non-GAAP basis. Based on the factors above, we estimate that full year diluted earnings per share will range from $2.53 to $3.03 on a GAAP basis and $3.52 to $4.02 on a non-GAAP basis. Let me shift to how that translates and what we see for fiscal Q1. For Q1, we see total revenues ranging from $345 million to $375 million. Within that, licensing revenues will range from $330 million to $355 million. Note that in the prior year Q1, we benefited from a significant favorable true-up of over $21 million for Q4 fiscal '20 shipments, that was larger than normal, given the volatility of conditions during the pandemic. Last year's Q1 also benefited from recoveries and timing of revenue under contract. This was partially offset by increasing adoption of Dolby Vision and Dolby Atmos, and growth in our imaging patent programs. Q1 products and services revenue could range from $15 million to $20 million. Let me move on to the rest of the P&L outlook for Q1. Q1 gross margin on a GAAP basis is expected to be 90% to 91%, and the non-GAAP gross margin is estimated to be about 91% to 92%. Operating expenses in Q1 on a GAAP basis are estimated to range from $221 million to $231 million. Operating expenses in Q1 on a non-GAAP basis are estimated to range from $190 million to $200 million, which contemplates the impact of the 53-week fiscal year. Other income is projected to range from $1 million to $2 million for the first quarter. And our effective tax rate for Q1 is projected to range from 18% to 19% on both a GAAP and non-GAAP basis. Based on the combination of the factors I just covered, we estimate that Q1 diluted earnings per share could range from $0.71 to $0.86 on a GAAP basis and from $0.98 to $1.13 on a non-GAAP basis. With that, let's move on to Q&A. Operator, can you please queue up the first question.

q4 non-gaap earnings per share $0.58. q4 gaap earnings per share $0.42. q4 revenue $285 million versus $271.2 million. sees fy 2022 total revenue to range from $1.34 billion to $1.40 billion. sees q1 2022 total revenue in the range of $345 million to $375 million. sees fy 2022 diluted earnings per share to range from $2.53 to $3.03 on a gaap basis. sees q1 diluted earnings per share in the range of $0.71 to $0.86. sees fy 2022 diluted earnings per share to range from $3.52 to $4.02 on a non-gaap basis. sees q1 non-gaap diluted earnings per share $0.98 to $1.13.

Chief Investment Officer Greg Wright, Chief Technology Officer Chris Sharp, and Chief Revenue Officer Corey Dyer are also on the call and will be available for Q&A. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. Reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website. We continue to enhance our product mix with a record contribution from our sub-1 megawatt plus interconnection category. We extended our sustainability leadership with the publication of our third annual ESG report. We raised revenue and EBITDA guidance for the second quarter in a row, setting the stage for accelerating growth in cash flow. Last but not least, we further strengthened the balance sheet with the redemption of high coupon preferred stock and the issuance of low-cost, long-term fixed rate debt. Our formula for long-term value creation is a global, connected, sustainable framework. We continue to advance along these lines during the second quarter. Our business continues to globalize. And, once again, we generated solid performance and strong bookings across all regions. Our full-spectrum product offering continues to blossom with record sub-1 megawatt bookings in the second quarter and regional highs in both EMEA and APAC. Together, with interconnection, the sub-1 megawatt category comprised nearly half of our total bookings, demonstrating customers' enthusiastic adoption of PlatformDIGITAL to help accomplish their digital transformation initiatives. I'll discuss our sustainable growth initiatives on Page 3. In June, we were awarded the Green Lease Leader Gold award from the Institute for Market Transformation and the U.S. Department of Energy for the third year. We remain the only data center provider to receive this award, which recognizes Digital Realty as a leader in the real estate industry that incorporates green leasing provisions to better align our interest with our customers and drive high performance and healthy buildings. During the second quarter, we published our third annual ESG report, detailing our 2020 sustainability initiatives, including the utilization of renewable energy for 100% of our energy needs across our entire portfolio in Europe as well as our U.S. colocation portfolio and reaching 50% of our global needs. We also reported progress toward our science-based target, ensuring a deep focus on our renewable energy, energy efficiency and supply chain sustainability initiatives. Our ESG report highlights many of our ongoing initiatives, including our diversity, equity and inclusion efforts along with our community involvement. Digital Realty is committed to being an active member of and giving back to the communities where we operate globally. We encourage and celebrate community involvement and employee engagement activities through our Do Better Together initiative. We also recently underscored our commitment to transparency and accountability on our diversity, equity and inclusion journey with the publication of our EEO-1 report. Events over the past year and a half have demonstrated that now more than ever, ESG belongs at the forefront of our business. I'm proud of our leadership in this area as we advance our broader goal of delivering sustainable growth for all of our stakeholders, investors, customers, employees, and the communities we serve around the world. Let's turn to our investment activity on Page 4. We are continuing to invest in our global platform with 39 projects underway around the world as of June 30, totaling nearly 300 megawatts of incremental capacity, most of which is scheduled for delivery over the next 12 months. We are investing most heavily in EMEA with 19 projects totaling over 150 megawatts of capacity under construction. Most of this capacity is highly connected, including projects in Frankfurt, Marseille, Paris, and Zurich. Demand remains strong across these metros, and each continues to attract service providers as well as enterprise customers from around the world, many of which contributed to a truly standout performance by the region during the second quarter in the up-to-1 megawatt category. In North America, over half of our capacity under construction is concentrated in two hot markets, Portland and Toronto, that can sometimes be overlooked in favor of more traditional North American data center metros. We've had tremendous recent success in these two metros. We have 30 megawatts under construction in Portland or, more specifically, Hillsboro, that are now fully pre-leased, while our Toronto connected campus continues to gain momentum as the premier Canadian hub for global cloud service providers and enterprise customers. Finally, in Asia Pacific, we are accelerating our organic growth in this underserved region. We opened our third data center in Singapore, a 50-megawatt facility that received permitting prior to the moratorium on new data center construction. Demand for this scarce capacity is robust, and we have another 18 megawatts largely presold and scheduled to open this quarter. Also coming soon in this region are a pair of MC Digital Realty data centers in Japan. With the world's eyes currently on Tokyo for the Olympics, we are opening a new Tokyo facility that's poised to win the gold medal. We are also opening another data center in Osaka this quarter, along with our first data center and the first carrier-neutral offering in Seoul, Korea, during the fourth quarter. We are very excited about the opportunity in Seoul. Finally, earlier this month, we announced our intention to enter India in partnership with Brookfield Infrastructure. Given the success of our existing partnership on the Ascenty platform in Latin America, the complementary skills and expertise that we both bring to this partnership, and with the significant growth opportunity available in India, we are excited to expand our footprint in this robust and dynamic market. Let's turn to the macro environment on Page 5. We are fortunate to be operating in a business levered to secular demand drivers. Our leadership position provides us with a unique vantage point to detect secular trends as they emerge globally on PlatformDIGITAL. The first of these trends is the growing importance of data gravity for Global 2000 enterprises. Last year, we introduced the Data Gravity Index, our market intelligence tool, which forecasts the growing intensity of enterprise data creation life cycle and its gravitational impact on global IT infrastructure between key global markets. Earlier this year, we took the next step and published an industry manifesto, enabling connected data communities to guide cross-industry collaboration, tackle data gravity head-on, and unlock a new era of growth opportunity for all companies. Earlier this week, we announced a collaboration with Zayo to further interconnection business through the creation of an open fabric-of-fabrics. With data sets exploding and data gravity challenges expanding, this initiative will enable multinational enterprises to connect these data oceans through fabric and orchestration. Third-party research continues to support data gravity's growing importance. Market Intelligence firm, Gartner, recently conducted its 6th annual survey of chief data officers, and less than 35% of these executives reported their business have achieved their data sharing objectives, including data exchange with external data sources that drive revenue-generating business outcomes. Issues often arise due to multiple data hosting and processing meeting places together with the need for appropriate security controls and the inability to overcome latency challenges with direct private interconnection between many counterparties. PlatformDIGITAL was designed to solve these problems. Digital transformation is compounding this enterprise data and connectivity problem. Recent research indicates that enterprise workflows utilize an average of 400 unique data sources, while exchanging data with 27 external cloud products. Digital Realty's enterprise and service provider customers are turning to PlatformDIGITAL to overcome these issues by deploying their own data hubs and using interconnection to securely exchange data in and across multiple metros. Our leadership position is resonating with industry experts and influencers. For the second consecutive year, Digital Realty was named a global leader by IDC MarketScape for data center colocation and interconnection services, further acknowledgment of our consistently improving customer capabilities. This recognition reflects our execution against the PlatformDIGITAL road map, providing unique differentiated value for customers with our fit-for-purpose, full-spectrum global capabilities. Earlier this month, Cloudscene again ranked Digital Realty as the strongest provider of data center ecosystems in EMEA for the second consecutive year. Digital Realty was ranked second in both North America as well as Latin America and jumped up three spots to No. Also, in July, GigaOm published their analysis of edge infrastructure capabilities. Digital Realty ranked as an industry leader on multiple criteria across three broad categories. Our capabilities were ranked highest in vendor positioning and evaluation metrics comparison and second among the key criteria comparison. Given the resiliency of the demand drivers underpinning our business, and the relevance of our platform to meeting customers' needs, we believe we are well positioned to continue to deliver sustainable growth for customers, shareholders and employees, whatever the macro environment may hold in store. Let's turn to our leasing activity on Page 7. We signed total bookings of $113 million in the second quarter, including a $13 million contribution from interconnection. Network and enterprise-oriented deals of 1 megawatt or less reached an all-time high of $41 million, demonstrating our consistent momentum and the growing success of PlatformDIGITAL as we continue to capture a greater share of enterprise demand. The weighted average lease term was over eight years. We landed 109 new logos during the second quarter, with a strong showings across all regions, again, demonstrating the power of our global platform. The geographic and product mix of our new activity was quite healthy, with APAC and EMEA, each contributing approximately 20%, the Americas representing nearly 50%, and interconnection responsible for a little over 10%. The megawatt or less plus interconnection category accounted for almost half of our total bookings with particular strength in the cloud, content and financial services verticals. In terms of specific wins during the quarter and around the world, we landed a top five cloud service provider to anchor our new Tokyo campus. Close on the heels of this magnetic customer deployment, Japan's most popular social media applications selected PlatformDIGITAL on the same campus. NAVER, the leading Korea-based cloud provider serving the greater APAC region, selected our new carrier-neutral facility in Singapore to support data-intensive workloads for their high-performance computing and I -- AI-intensive technology-based platform. A European broadcaster is leveraging PlatformDIGITAL in Vienna and Frankfurt to rewire their network in favor of data-intensive interconnection with benefits in performance, scalability, and cost savings. A Global 2000 enterprise data platform is adopting PlatformDIGITAL in Amsterdam, Dublin and Frankfurt to orchestrate workloads across hundreds of ecosystem applications, delivering improved performance, security, cost savings, and simplicity. In London, PlatformDIGITAL is supporting a top three global money center banks fortification of their business continuity capabilities without compromising their data-intensive interconnection requirements. On the continent, our connectivity and operational capabilities are helping two independent fintech customers improve performance enhance -- and enhance access to their connected data communities. Finally, in North America, a life sciences digital marketing firm chose PlatformDIGITAL to improve their network architecture and enable future growth. Turning to our backlog on Page 9. The current backlog of leases signed but not yet commenced ticked down from $307 million to $303 million as commencement slightly eclipsed space and power leases signed during the quarter. The lag between signings and commencements was a bit longer than our long-term historical average at just over seven months. Moving on to renewal leasing activity on Page 10. We signed $178 million of renewals during the second quarter in addition to new leases signed. The weighted average lease term on renewals signed during the second quarter was just under three years, again, reflecting a greater mix of enterprise deals smaller than 1 megawatt. We retained 77% of expiring leases, while cash releasing spreads on renewals were slightly positive, also reflective of the greater mix of sub-1 megawatt renewals in the total. In terms of second quarter operating performance, overall portfolio occupancy ticked down by 60 basis points as we brought additional capacity online across six metros during the quarter. Same capital cash NOI growth was negative 1.5% in the second quarter, largely driven by the churn in Ashburn at the beginning of the year. As a reminder, the Westin Building in Seattle, the Interxion platform in EMEA, Lamda Helix in Greece and Altus IT in Croatia are not yet included in the same-store pool. So these same capital comparisons are less representative of our underlying business today than usual. Let's turn to our economic risk mitigation strategies on Page 11. The U.S. dollar fluctuated during the second quarter but remained below the prior year average, providing a bit of an FX tailwind. As a reminder, we manage currency risk by issuing locally denominated debt to act as a natural hedge so only our net assets within a given region are exposed to currency risk from an economic perspective. In addition to managing credit risk and foreign currency exposure, we also mitigate interest rate risk by proactively terming out short-term variable rate debt with longer-term fixed rate financing. Given our strategy of matching the duration of our long-lived assets with long-term fixed-rate debt, a 100 basis-point move in benchmark rates would have roughly a 75 basis-point impact on full year FFO per share. In terms of earnings growth, second quarter core FFO per share was flat year-over-year but down 8% from last quarter driven by $0.12 noncash deferred tax charge related to the higher corporate tax rate in the U.K., which came into effect during the second quarter. Excluding the tax charge, which was not previously contemplated in our guidance, we outperformed our internal forecast due to a beat on the top line with a slight assist from FX tailwinds as well as operating expense savings, partially due to lower property-level spending in the COVID-19 environment. For the second time this year, we are raising our full-year outlook for total revenue and adjusted EBITDA to reflect the underlying momentum in our business. The deferred tax charge does run through core FFO per share. Since it is noncash, the deferred tax charge does not hit AFFO. Most of the drivers of our guidance table are unchanged. But I would like to point out that we are lowering our expected recurring CapEx spend for the remainder of the year, setting a stage for accelerating growth in cash flow. As you could see from the bridge chart on Page 12, we expect our bottom line results to improve sequentially over the balance of the year as the deferred tax charge comes out of the quarterly run rate and the momentum in our underlying business continues to accelerate. We do still expect to see some normalization in our cost structure with an increase in property-level operating expenses that have been deferred due to COVID, along with an uptick in G&A expense as we return to the office and resume a more normal travel schedule. So your model should reflect these higher costs. Last, but certainly not least, let's turn to the balance sheet on Page 13. As you may recall, we closed on the sale of a portfolio of noncore assets in Europe for $680 million late in the first quarter, which impacted second quarter adjusted EBITDA to the tune of approximately $10 million. As a result, net debt to adjusted EBITDA was slightly elevated 6x as of the end of the second quarter but is expected to come back down in line with our long-term range over the course of the year through a combination of proceeds from asset sales and growth in cash flows as signed leases commence. Fixed charge coverage ticked down slightly, also reflecting the near-term impact from asset sales, but remains well above our target and close to an all-time high at 5.4x, reflecting the results of our proactive liability management. We continue to execute our financial strategy of maximizing the menu of available capital options while minimizing the related costs and extending the duration of our liabilities to match our long-lived assets. In mid-May, we redeemed $200 million of preferred stock at 6.625%, which brought total preferred equity redemptions over the prior 12 months to $700 million at a weighted average coupon of just over 6.25%, effectively lowering leverage by 0.3 turns. In mid-June, we issued 0.5 million shares under our ATM program, raising approximately $77 million. In early July, we raised another $26 million with the sale of the balance of our Megaport stock. We also took our first trip to the Swiss bond market in early July, raising approximately $595 million in a dual tranche offering of Swiss green bonds with a weighted average maturity of a little over six and a half years and a weighted average coupon of approximately 0.37%. This successful execution against our financial strategy reflects the strength of our global platform, which provides access to the full menu of public as well as private capital, sets us apart from our peers, enables us to prudently fund our growth. As you can see from the chart on Page 13, our weighted average debt maturity is nearly six and a half years, and our weighted average coupon is down to 2.2%. dollar-denominated, reflecting the growth of our global platform and serving as a natural FX hedge for our investments outside the U.S. 90% of our debt is fixed rate to guard against a rising rate environment, and 98% of our debt is unsecured, providing the greatest flexibility for capital recycling. Finally, as you can see from the left side of Page 13, we have a clear runway with nominal near-term debt maturities and no bar too tall in the out years. Our balance sheet is poised to weather a storm, but also positioned to fuel growth opportunities for our customers around the globe, consistent with our long-term financing strategy. Andrew, would you please begin the Q&A session?

q2 revenue rose 10 percent to $1.1 billion.

On the call today we will discuss non-GAAP financial measures, including adjusted EBITDA and free cash flow. Some of you may know her from her IR role with tech-driven companies like Groupon, and Lawson Software, and from Buffalo Wild Wings. Keith, Jane, and I look forward to working with her. We're pleased to have delivered improved third quarter results despite continued pandemic-related economic pressures, including nearly 300 basis point improvement in adjusted EBITDA margin. We continue to make meaningful progress on executing our overall transformation to One Deluxe. As discussed last quarter, we began to see an improvement in the latter part of our second quarter, which continued into the third quarter. We see our sequential improvement in topline revenue, GAAP and adjusted EBITDA margins as clear evidence of our continued momentum. By our estimates, we delivered sales driven growth, excluding COVID-related impacts, for the third consecutive quarter. We continue to win new business at an accelerated rate, and we're successfully cross-selling our products and services. We're pleased to have the financial strength and flexibility to support the long-term growth potential of the business. We've restored some of our investments in the company's overall infrastructure, including technology upgrades, continued real estate consolidations, streamlined organization design, talent enhancements and more, after slowing a bit in Q2. Importantly, we remain confident in our financial strength, as demonstrated by declaring our regular quarterly dividend. Our net debt is now at its lowest in more than two years. I continue to believe this is all compelling evidence our One Deluxe strategy is working. Here are some specifics. We delivered 23.3% adjusted EBITDA margins. A 290 basis point sequential improvement from last quarter, better improvement than we expected. We reported revenue of $439 million, improving over 600 basis points sequentially over second quarter with revenue down 11% or $54 million versus last year -- also better improvement than we expected. Our sales-driven performance continues. We've built cash reserves from operations. Our Q3 net debt is now at the lowest level in more than two years. We fully repaid our COVID-related draw on the revolver in October, demonstrating the strength of our business. Over the last seven months of the pandemic, we continued to generate cash from operations, naturally improving our liquidity and eliminating the need for any additional cushion. Our financial position continues to serve as a competitive advantage, helping us win across all our segments. Adjusting for decisions we made to slow progress of the pandemic, we're on path and on budget in our technology infrastructure upgrade and renewal. We closed nearly 50 of more than 80 sites, representing nearly a 60% reduction in the number of our locations over the last 18 months, including seven additional site closures in Q3. We're particularly pleased with the future operating savings and significant capital avoidance we're going to achieve by relocating both our Minneapolis headquarters and Atlanta technology facilities to more efficient spaces. Now, on to sales. We continue to make progress in becoming a sales-driven revenue growth company. Everyone sells at Deluxe. Our One Deluxe approach works, bringing the best of Deluxe to our customers to solve their problems rather than simply pedaling one solution at a time. We continue to outperform our pre-pandemic sales plan, and of course over a thousand deals with multi-year contracts year-to-date, including six of our top-25 targets. We signed significant wins in each of our four businesses during the third quarter. It will take time to onboard these wins and the pandemic environment lengthens implementation timelines as our clients work through sequencing their own priorities. However, we're very proud to be expanding our pipeline and closing new business at record rates, giving us confidence that we'll exit 2020 with a strong backlog for us to focus our efforts on converting to revenue. Some of our key wins for the quarter include securing a contract with M&T Bank for our treasury management services. We expanded our relationship with RE/MAX to provide national marketing, branded print and promotional solutions to their 65,000 agents. This is an excellent example of us growing share and moving from a transactional vendor to a recurring revenue managed services partner. And our MPX and DPX solutions added Delta Dental and Albertsons as customers too. Our telesales centers continued to cross-sell, delivering record average order value. Combined with our enterprise efforts, we've signed more than a 175 cross-sell deals totaling $11 million in total contract value. The results are clear even amid the COVID fog. We're winning new business across all our decisions, delivering record cross-sell performance selling our existing solutions to existing customers while adding new customers and distribution partners. This continued success gives us confidence that we'll be able to deliver sales-driven revenue growth in the low- to- mid-single digits with adjusted EBITDA margins of 20% or more over the long-term. Now, onto some segment details. Our Payments business continues to perform well and delivered 15.6% revenue growth over prior year. We are well positioned in our receivables, payables and SMB cash management businesses, where we're winning new clients and market share and benefiting from positive secular outsourcing trends as firms focus on speed and efficiency in accounts receivables. We continue to see new and long-standing customers shifting volume to the safety of Deluxe due to our strong balance sheet and trusted service levels. Our cloud and promotional solutions divisions continued to experience the greatest COVID-related impacts, and accordingly we expect revenue and profit growth to lag the recovery due to reduced discretionary spending. In cloud, this impact is visible in data-driven marketing revenue, where mainly financial institutions have deferred campaign spend. We believe the financial institution spend will return and, in fact, we saw increased demand in Q3 versus last year's quarter. We've also signed new financial institution customers as well. While our incorporation and website services have experienced weakened demand, we continue to focus on adding new relationships to deliver our incorporation and website services, including The Hartford and NFIB. Our Promotional Solutions delivered sequential quarterly improvement in revenue while driving significant benefit to adjusted EBITDA margins. While we did not repeat the benefit we saw from PPE in Q3, we did experience positive sequential growth in what we call our business essentials product area, forms and more that business use to operate. We also signed several new customers focused on our managed brand services program, giving us more confidence in our future profitable growth. As anticipated, the secular decline in the Checks business sequentially improved during the third quarter, consistent with the pattern of previous economic downturns. We continue to see an increase in new Check customers resulting from new business start-up. We're encouraged to see self-service and digital order volume acceleration in the third quarter, proving our digital strategy works. Competitively, we're winning new Check customers at a rate faster than before and we renewed a top-five Check customer. Our financial strength is a key factor here too, just like in Payments. The uncertainty of the pandemic continues. And as such, we will not provide detailed outlook for the fourth quarter or full-year 2021 today. Keith will provide some detail on our future expectations, which reflect today's environment. The macro environment remains challenged as we're in the midst of a second wave of COVID. Most importantly, given the work we've accomplished, the results we've delivered despite the ongoing challenges, I feel good about our relative position in the market and we continue to believe total company adjusted EBITDA margins will remain at our long-term target of 20% or better. Lastly, I want to emphasize our team has delivered better than expected performance again, despite the pandemic. Deluxe remains financially sound. We expanded margins almost 300 basis points, paid our dividend, paid our revolver down to the pre-COVID level, have the lowest net debt in more than two years, and our sales engine is working. As Barry noted, our strategy is working, and we are seeing the results. We delivered strong sequential performance in the third quarter despite the continued challenging environment. We've strengthened our financial position, while simultaneously advancing our business transformation. Q3 total revenue declined 11% or $54.1 million to $439.5 million as compared to the same period last year. This is a sequential improvement of 600 basis points from the Q2 decline rate. While we did benefit from sales-driven growth, it wasn't sufficient to overcome the impacts of the pandemic. Importantly and similarly to last quarter, we took assertive actions in the quarter to address the loss of revenue and change in mix. These expense actions improved adjusted EBITDA margins by 290 basis points sequentially to 23.3%. Some of this improvement will not repeat in Q4, but we do expect margins to remain in our long-term range of greater than 20%. The third quarter revenue decline was partially offset by new and cross-sell wins. The reduction in revenue and the change in mix did affect our results. Gross profit margin for the quarter improved 160 basis points from the prior year with the loss of lower margin revenue in our promotional and cloud segments. SG&A expense declined $14.4 million due primarily to lower commissions, personnel exits, 401(k) match suspensions and restructuring actions. Interest expense declined $3.6 million due to lower interest rates on higher borrowing levels compared to last year. All this together, increased operating income to $44.4 million, net income of $29.4 million, increased from a net loss of $318.5 million in Q3 2019. Last year's net income included non-cash asset impairment charges for goodwill and certain intangibles totaling $391 million. Our adjusted EBITDA for the period was $102.5 million, $16.8 million lower than the same period last year. The adjusted EBITDA margin declined 90 basis points to 23.3% on a year-over-year basis, but sequentially increased by 290 basis points compared to the second quarter. Now, on to segment details. Payments revenue grew compared to last year by 15.6% to $74.7 million, with Treasury Management revenue leading the growth in the quarter. As expected, we continued to experience softness in our Payroll business because of elevated unemployment levels. We expect Q4 revenue to grow sequentially and be single digit on a year-over-year basis. Adjusted EBITDA margin decreased to 22.4%, primarily due to increased costs related to last year's large client win. We anticipate adjusted EBITDA margin pressure to continue into Q4 due to lapping of one-time hardware sales and outsource deals in Q4 2019, as well as expected COVID-related client implementation delays. Cloud Solutions revenue declined 20.3% to $63.8 million from last year. Data-driven marketing solutions revenue sequentially improved from last quarter, as financial institutions slowly reactivated their marketing campaign. Web and hosted solutions experienced declines related to the loss of customers discussed last year, expected attrition from our decision to stop investing in certain product lines, plus the economic impact of the macro environment. Adjusted EBITDA margin increased to 25.7% as we benefited from mix shift in cost reductions. We expect the loss of revenue associated with Q4 2020 product exits will continue to impact the business into 2021, but we anticipate cloud margins to remain healthy in the low-to-mid 20s range. Promotional Solutions revenue declined 20.3% to $124.9 million from last year. Compared to prior quarter, revenue grew about 6% and adjusted EBITDA margin expanded 260 basis points, as the mix shifted and costs were removed. In the case of Promotional Solutions, we see the pullback most acutely in marketing and promotional solutions, where revenues are tied to events and branded merchandise. We believe the business will continue to improve, but we are not expecting a rapid recovery until COVID-19 impacts abate. Check revenue declined 8.4% from last year to $176.1 million due to the secular decline, combined with the pandemic. Adjusted EBITDA margin decreased to 48.3% as a result of higher commissions on referrals and technology investments in support of our One Deluxe strategy. Check recovery rates in Q3 likely benefited from some delayed Q2 volume and we expect revenue recovery to be slightly lower in Q4 compared to Q3, as general economic activity continues to improve. This performance is consistent with the recovery from previous economic slowdowns. Year-to-date, cash from operating activities was $166.8 million and capital expenditures were $42.7 million. Free cash flow, defined as cash provided by operating activities, less capital expenditures, was $124.1 million, a decline of $34.2 million. The primary drivers of decline were COVID-related revenue decline, cloud business losses described last year and expected secular Check declines. These were partially offset by lower taxes, integration and legal settlements. We did not repurchase common stock in Q3 and we expect to repurchase less in 2020 than previous years. We ended the quarter with strong liquidity of $413 million and our cash balance was $310.4 million. In October, we paid down another $140 million of the revolving credit facility, repaying 100% of our COVID-related March draw. This repayment is not reflected in our reported credit facility balance of $1.04 billion or cash balance at the quarter-end. I think it's important to note that we have consistently built liquidity throughout the year. In addition, net debt has continued to decrease, and in the quarter at $730 million, the lowest level in more than two years for the second consecutive quarter during a pandemic. I want to pause here. The pandemic has challenged us. But this new management team is delivering. In Q3, we expanded margins sequentially. Our year-to-date adjusted EBITDA margin is at 20.2%, within our long-term target range. As Barry noted, we remain cautious about the pace of the recovery, given the uncertainties ahead and the COVID resurgence. We expect the revenue decline to worsen on a percentage basis in Q4 versus Q3 due to COVID-related customer implementation and program delays, combined with the impacts of product exits in cloud. However, we do expect to maintain adjusted EBITDA margins within our long-term target of 20% or better. Our bold actions and winning strategy maintain the company's financial strength and position us for long-term growth. Our team and business model are highly durable, giving us the runway to complete our historic transformation. As further evidence of our strength, our Board approved a regular quarterly dividend of $0.30 per share on all outstanding shares. The dividend will be payable on December 7, 2020 to all shareholders of record on November 23, 2020. I am proud of our financial performance in light of the pandemic. Our financial position is strong, our strategy is working. We are well positioned to accelerate our transformation and deliver long-term shareholder returns. Now, back to Barry. I want to build on your comments and reiterate our remarkable Q3 achievements. We increased margin sequentially, almost 300 basis points. Net debt declined to the lowest level in more than two years. We expanded liquidity with cash from operations, while fully repaying our COVID-related draw on our revolver. We declared our regular dividend. Our Payments business grew 16% and we're confident we'll be a double-digit grower over the long term. Our One Deluxe sales strategy is working. By our estimates, we've been a sales-driven growth company for three consecutive quarter. The strength of our balance sheet and fiscal responsibility is helping us win new business and positions us well for the future. COVID may have temporarily slowed our progress, but we still believe Deluxe will be a low- to- mid-single digit revenue growth company with margins in the low- to- mid-20s over the long term. We're proud of our progress to the absolute and especially in light of COVID. Finally, I want to recognize the extraordinary contribution of my follow Deluxers. The team has risen to the unprecedented challenges of COVID and continued to deliver for our clients. Our team went to work and got the job done. We're a team living our purpose, values and ownership culture, because we are all shareholders too. Now, we'll take questions.

deluxe corp qtrly revenue $439.5 million versus $493.6 million.

On the call today, we will discuss non-GAAP financial measures, including adjusted EBITDA and free cash flow. I'm proud of the performance we delivered in 2020, particularly in the light of the unprecedented challenges we face due to COVID-19. Under the leadership of our newly expanded management team, which had been in place just 75 days before the pandemic took hold, we made significant progress on our historic transformation executing on our strategy, and operating in four new segments. We further optimized our portfolio completing targeted divestitures, and exit during the past year. We also ended 2020 with a lowest net debt in 2.5 years and paid our regular quarterly dividend demonstrating our disciplined stewardship and financial strength. Although I'm proud of how well our team has executed, the impact of COVID-19 on our financial performance was clear. We reported revenue of $1.79 billion for the full year 2020, a decline of 11% compared to 2019. You will note, at our Q1 earnings call we had forecasted 20% adjusted EBITDA margins for the full year 2020; fast-forward nine months later, I'm very pleased to report that we achieved this goal delivering adjusted EBITDA margin of 20.4% for the full year, despite the macroeconomic impact from COVID. Importantly, COVID did not change our focus strategy and one thing has become increasingly clear; our company's diverse portfolio and business model are highly durable, we have the right strategy, right segments, and right team to whether any major macroeconomic storm. We're a sales driven company now, we continue to invest the strong cash flows contracts and promotional solutions to grow payments and cloud solutions, each of which is well positioned in secular growth markets. Now, I would like to take a moment to review the 4 core pillars of our strategy. First, sales; continue to unify our go-to-market sales approach in order to drive growth, selling more of what we have to new and existing customers, breaking our previous dependence on acquisition-only growth, that also resulted in escalating debt. Second, payments and clouds; we focus on these secular growth businesses, sell what we have, build new products, and migrate to a recurring revenue model. Third, promotional solutions profitability; adjust revenue mix and distribution channels moving to a recurring revenue model. Fourth, our Checks business; gain market share, capture the share while holding margins flat by making smart investments, giving a strong set cash flow to invest in payments and cloud. The strength of this strategy and our significant progress on our transformation is compelling, and is undeniable despite COVID-19 impacts. In 2019 we promised to become a sales-driven company, and that's exactly what we did. We estimate Deluxe delivered full year sales driven growth in 2020 for the first time in more than a decade, excluding COVID impacts of course. We achieved this result by building an employee ownership and sales culture, fundamentally changing our go-to-market approach. Instead of having dozens of separate sales organization, calling on a customer selling one product at a time, we built a unified sales team with a complete review of our customers relationship with us. Complementing [Phonetic] these efforts, we have product experts ready to help close the sale. This integrated go-to-market strategy is a key part of our One Deluxe strategy, and this strategy is working. In 2020 we signed more than 3,900 deals. We added many new logos and expanded many of our existing relationships. In fact, since we began One Deluxe, we sold 6 of the Top 10 deals of the last decade, including the largest sale in the company's history. Here's just a flavor of our wins in 2020; [indecipherable] they signed a multi-year deal in our Check business, SunTrust had been a longtime customer of Deluxe, so with the merger of SunTrust and BB&T, we're pleased to have been selected as the trusted partner for the new combined entity; this deal is the single largest total contract value in the company's history. We further grew Check market share with additional strategic takeaways winning two national or super-regional banks and more. Our Checks retention rate is the highest in five years. Synovus expanded it's relationship with us to include our entire receivables as a service platform. Being selected by Synovus treasury management to be their digital transformation partner, it's clear evidence our integrated receivables as a service platform is what the market demands. Payments further added or expanded relationships with P&C and Sirius XM Radio. We also expanded our relationship with Alliance Data and Citibank. Alliance Data joined our receivables management solutions, and Citibank joined our Deluxe Payment Exchange. Promotional solutions also built on a key relationship. As you know for previous calls, we're customer of Salesforce, but importantly, now Salesforce is a customer of the Deluxe. Salesforce can now utilize our digital Deluxe brand center platform to manage their digital assets promotional products, marketing collateral, and other essential supplies. With our growing relationship with Salesforce and other opportunities in our pipeline, we're well positioned to expand our sales efforts in the technology industry in 2021 and beyond. In our telesales centers, we delivered record average order value growing 7.5% over last year, and our sales team find more than 200 cross sell deals totaling $35 million in total contract value. Cross-sell has been an allusive goal for this company for more than a decade, and we delivered in 2020. Of course, all of these wins are scheduled to onboard in 2021, timing of which will be dictated by COVID lockdowns and restrictions. But here is the bottom line; our One Deluxe approach is working, enabling us to set new sales records in the middle of a pandemic. Now, let's talk division specifics. Our top growth segment payments, which did not even exist in it's current form until January 2020, had a successful year. In addition to Synovus, SiriusXM Radio, Alliance Data and all the other newly signed clients and distribution partners; integrated receivables continues to benefit from positive secular outsourcing trends as new and long-standing customers focus on speed and efficiency. COVID has put a spotlight on an additional Deluxe competitive advantage; the strength of our balance sheet and our leadership. During the pandemic we've benefited as a number of institutions shifted volume away from our competitors to the safety of Deluxe. In cloud solutions, our other target growth area; we made important progress in adding a number of new clients. You can see we did experience significant directly related COVID impact, the financial institutions deferred marketing campaign spend impacting our data driven marketing business. Additionally, our website services also experienced weakened demand during the year. We did see encouraging signs for recovery at our corporation services, as we've previously announced. We're particularly optimistic about data driven marketing as the recovery unfolds. We're already deeply engaged in planning multiple large-scale marketing campaigns for our financial institution customers adding to our confidence for 2021 and beyond. Next, we're going to talk about promotional solutions business, and I'm going to talk about two areas. First is business essentials, where we've delivered custom forms and more that businesses consume in their routine operations. Second is branded merchandise used to promote a business. Encouragingly, we saw volume in our business essentials as the year progresses. We expect to see a rebounded branded merchandise as events and physical promotion return as COVID fades. Further, I'm extremely proud of the speed with which the promotional services team adapted to the new reality adjusting our product mix. We saw $31 million of personal protective equipment in 2020, a business we had not been in previously, where we had no source of supply, no way to book an order, and no sales training at the beginning of the pandemic; it's a great example of innovative thinking, and speed this organization can now deliver. We also find many new customers focused on our turnkey-managed brand services program giving us more confidence in our future profitable growth. Salesforce is just one of these examples. Fourth is our Check business. Consistent with previous economic slowdown, the secular decline in Checks was higher due to the impacts of COVID. We expect the business to rebound in line with historical secular trends as the economy recovers. Encouragingly, we witnessed a sequential increase in new check customers resulting from new business start-ups at 2020 unfolded; this is an important evidence of the ongoing necessity of checks. We were also encouraged to see acceleration of self-service and digital order volume acceleration throughout the year proving our digital strategy works. Our multiple check wins at expanding market share bring important new revenue providing a partial offset the secular declines. Clearly, in 2020, we have made significant and measurable progress in all four pillars of our strategy to become a sales-driven growth, trusted business technology company, which we achieved all of this in the middle of a pandemic with a new team. Next, I want to briefly outline our progress in three areas that are helping to accelerate our transformation. These three critical areas are talent, technology infrastructure, and efficient operating footprint. In 2020 we further built on our team expanding products, business development and innovation. An example of how talent is helping us succeed is our development of the Medical Payment Exchanger, MPX. MPX is the only healthcare option that digitally attaches a check payment to the explanation of payments, delivery them together electronically; this is important because it doesn't require any workflow changes for anyone. To accelerate our MPX progress, we announced our joint venture with Eco-Health in April of 2020. We also continue to foster a culture of empowerment, inclusion, diversity and equity enabling our employee-owner [Phonetic] spring their full authentic cells to work. In doing so, we're more directly reflected the diverse communities and customers we serve; all of this helped us achieve status as a 2020 Great Place To Work. Our company had never before been so recognized. We continue to execute on our previously discussed upgrade advancing optimization and efficiencies. Third, is an efficient operating footprint. We took full advantage of the work from home reality to drive efficieny and productivity. We closed an additional 24 sites during the year, reducing our location count by 60% in the last two years. We're particularly encouraged by the future operating savings and significant capital avoidance we will achieve by relocating both, our Minnesota headquarters, and Atlanta Technology facilities to more efficient spaces. I do want to discuss M&A for a moment. As you know, since I joined DLX, we have paused on acquisitions to reduce debt, strengthen the balance sheet, optimize the portfolio, get our talent and technology infrastructure in place, and importantly, expand our sales capabilities. As I've outlined today, we've now delivered on all of these fronts and are once again ready to look at opportunistic ways to augment our business through acquisition, particularly in our higher growth engines of payments and cloud solutions. In summary, we are very encouraged by our success on all four of our strategic pillars, and in our transformative talent, technology infrastructure, and operating footprint initiatives. Our solid performance in the midst of the pandemic gives us confidence in our future post-pandemic. For 2021, we look forward to closing the year as a sales-driven mid-single-digit-revenue growth company, with margins in the low-to-mid 20s, continuing to drive enhanced value for all shareholders. Now, I'll pass it to Keith for more financial details. As Barry mentioned, DLX delivered in 2020; we delivered EBITDA margin in line with our plan and guidance. We took swift action to address covert at the onset, and we sustain this focus through the year. The result, we delivered EBITDA margin in line with our commitments, reduced net debt to it's lowest level in 2.5 years, and we continue to invest for growth. Before I get into the details, I want to express my gratitude to all my fellow employee owners who worked tirelessly and overcame many challenges this year. The foundational work we began in 2019 made 2020 a successful year of transformation and continued innovation that produce measurable progress positioning us to deliver full year sales driven growth. That said, we felt the continuing effects of the COVID-19 in our financial results. Our total revenue in the quarter was $454.5 million, a decline of 12.9% as compared to the same period last year; however, an increase of 3% from the third quarter. For the full year, total revenue declined 10.8% to $1.791 billion. We reported GAAP net income of $24.7 million in the quarter, and $8.8 million for the full year. A comparison of reported 2019 and 2020 full year results is difficult given each year was impacted by asset impairment charges. Our measures of adjusted earnings and adjusted EBITDA excludes these non-cash charges along with restructuring, integration and other costs. These adjustments are detailed in the reconciliations provided in our release. Our adjusted EBITDA for the quarter was $94.9 million resulting in $364.5 million for the full year. Adjusted EBITDA margins for the quarter was 20.9% bringing full year performance 20.4%. As previously committed, our cost containment initiatives improved our adjusted EBITDA margin performance from the first quarter low by more than 300 basis points, this brought both Q4 and full year adjusted EBITDA margin into the low end of our pre-pandemic long-term adjusted EBITDA margin guidance range. A closer discussion of Q4 segment performance helps demonstrate the resiliency of our new portfolio approach. As payments continues to experience year-on-year revenue growth, cloud continue to expand EBITDA margins versus prior year. Promotional expanded revenue went to 15%, sequentially versus Q3 and Check maintained a strong EBITDA margin despite significant COVID-related headwinds to the business. Consistent with our expectations and as we had shared at the third quarter call, payments grew Q4 revenue 3% to $78 million as compared to prior year, achieving 12% growth for the year and ending at $301.9 million. We did see less one-time hardware revenue in the quarter against a tough Q4 2019 compare. Treasury management led the growth with encouraging demand for our integrated receivables. As Barry mentioned, the team expanded the number of FI partners that have moved to our full suite of capabilities. We will continue to work with these partners to onboard these services and work to expand the number of full-service clients in 2021. Adjusted EBITDA decreased in the quarter and for the full year by $4.5 million and $6.3 million respectively. For the year, adjusted EBITDA margin was 22.6%, well within the range of our pre-pandemic guide on slightly lower revenue performance. We expect to achieve double-digit revenue growth for the year with Q1 growth in low single-digits as expected while we continue to work on implementing the many new clients we signed in 2020. We continue to invest to drive growth and as such we're assuming adjusted EBITDA margins in the low 20% area through the year. Cloud solutions revenue declined 27.1% to $59.2 million in the quarter and ended the year at $252.8 million, resulting in a decline of 20.6% compared to 2019. Q4 data driven marketing solutions revenue remained flat sequentially versus Q3 but experienced a decline versus prior year consistent with pandemic induced financial industry slowdowns in marketing spend. But you can't see in the revenue performance as a number of new data driven marketing clients that signed during the quarter and will benefit us in future periods. Web and hosted solutions saw declines to loss of customers discussed last year, the economic impact of the macroeconomic environment and expected attrition from our decisions to exit certain non-strategic product lines. In Q4, cloud achieved a 160 basis point improvement in adjusted EBITDA margin versus prior year, and expanded 20 basis points to 24.4% for the full year reflecting solid performance against pre-pandemic guide on significantly less revenue. We expect the loss of revenue associated with Q4 2020 product exits will continue to impact the business into 2021, but we anticipate cloud margins to remain healthy in the low-to-mid 20% range. Promotional Solutions fourth quarter 2020 sequential revenue grew by 15.3% from Q3 to $144 million, the year-over-year rate of decline moderated to down 16.6%, reflecting the continued impact of market conditions. Adjusted EBITDA margin for the fourth quarter was 14%, down from the prior quarter peak. Full year revenue declined 17.4% to $529.6 million with an adjusted EBITDA margin of 12.6%, and was greatly impacted by macroeconomic conditions in 2020. In promotional solutions, we are seeing a modest rebound in business essentials, but continue to feel COVID-related impacts most acutely in marketing promotional products where revenues are tied to events and branded merchandise. We believe the business will continue to improve but we are not expecting a rapid recovery in 2021. We are anticipating improved adjusted EBITDA margins throughout 2021 in the low to mid-teens as a result of cost actions taken in 2020, including changes in key distribution relationships throughout 2020 and continuing in 2021. Checks fourth quarter revenue declined 10% from last year to $173.3 million due to the secular trend combined with the impact of the pandemic. Q4 adjusted EBITDA margin levels of 48.1% held largely steady versus Q3 declining only 10 basis points sequentially despite lower revenue levels, but remained lower than 2019 levels as a result of increased selling costs, new wins, and technology investments in support of our One Deluxe strategy. Full year Check revenue declined 9.4% to $706.5 million as compared to last year, and adjusted EBITDA margin decreased to 48.4%. Based on the high renewal rates and new businesses won in 2020, we do anticipate Check recovery rates in 2021 to return to mid-single digit declines, consistent with the recovery from previous economic slowdowns. Free cash flow defined as cash provided by operating activities less capital expenditures was $155 million for 2020, a decline of $65.1 million as compared to last year. The decline was primarily the result of lower earnings, partially offset by lower interest, taxes, integration and lower CapEx. We did not repurchase common stock in Q4, and we will continue to evaluate future repurchases in 2021. We ended the quarter with strong liquidity of $425 million, including $123 million in cash. During the quarter we reduced the amount drawn under the credit facility by $200 million, ending the year with $840 million drawn, a reduction of $44 million in the year resulting net debt continue to decrease through the year ending at $717 million, the lowest level in 2.5 years. Our Board approved a regular quarterly dividend of $0.30 per share on all outstanding shares. The dividend will be payable on March 1, 2021 to all shareholders of record on February 16, 2021. Our strong execution and solid financial position, give us confidence to established guidance for the full year of 2021, the specific timing for economic recovery remains uncertain. Our expectation is though for first quarter of 2021 will feel much like a continuation of the fourth quarter of 2020 as a result of the ongoing pandemic. We are poised for recovery to begin in the second quarter enabling us to exit the year a sales-driven mid-single-digit revenue growth company. All of this means, we expect to achieve full-year 2021 revenue growth of 0% to 2% with full year 2021 adjusted EBITDA margin of 20% to 21%. We expect to invest approximately $90 million in CapEx to continue with important transformation work, innovation investments in building future scale across all our product categories. Before I pass it back to Barry, I want to summarize for you; our very strong financial stewardship combined with our new leadership team, winning sales strategy, and ownership culture allowed us to not only protect but improve the company's financial strength, while simultaneously positioning us well for 2021 and beyond. COVID certainly took it's toll but our strong team delivered in the worst of times, and we proved our cash generating business model is highly durable and our transformation is real; all of this gives us much confidence in our future. Now, back to Barry. In early 2020, we could not have anticipated the year that was in front of us. But Deluxe-ers [Phonetic] have always had the grit to succeed. Our team just put our heads out and went to work. We're proud of our progress on our strategy and transformation to become a trusted business technology company. We're proud of our strengthened balance sheet and improved portfolio. We're proud to be a sales-driven revenue growth company, our cross-sell results, all-time record sales success. But what's more impressive to me, we did all of this in the middle of a global pandemic. I now have great confidence we'll be a sales-driven company growing low-to-mid single digit with margins in the low-to-mid 20s over the long-term, and expect to be that company exiting this year. We've done the work, we've completed the preparations and laid the groundwork, and now our company is well positioned for the future. I can't close without recognizing the extraordinary contribution of my follow Deluxe-ers [Phonetic]. Our team went to work and got the job done. We're team living our purpose of values and ownership culture because we are all shareholders too. Now, we'll take questions.

sees fy 2021 revenue up 0 to 2 percent. qtrly revenue $454.5 million versus $522.1 million. positioned for recovery to begin in the second quarter, enabling us to exit 2021 with revenue growth in mid-single digits. expect q1 financial performance to be a continuation of q4 2020.

On the call today, we have Dun & Bradstreet's CEO, Anthony Jabbour; and CFO, Bryan Hipsher. Our actual results may differ materially from our projections due to a number of risks and uncertainties. Today's remarks will also include references to non-GAAP financial measures. We are off to a strong start as we continue with our transformation and the execution of our near-term and long-term objectives. We finished the first quarter with solid financial results and made significant progress with the integration of Bisnode. Overall, we are pleased with the start of the year as adjusted revenues for the quarter increased 29% and adjusted EBITDA increased 37%. Organic constant-currency revenues increased 1.3% as strength in international was partially offset by the final quarter of COVID-19 headwinds and Data.com in North America. Total company revenue retention was 96.3% and we now have approximately 48% of our business under multiyear contracts. The enhancements we have made to data quality and our underlying technology are resulting in positive feedback and deeper customer relationships, allowing us to have more productive conversations about cross-sell and price opportunities of both existing and new products. As we reach the two-year anniversary of our cost savings program, we finished the quarter with $246 million of annualized run-rate cost savings. Despite COVID-19 delaying some of our planned cost savings initiatives, we exceeded our original target by 23%, which ultimately contributed to the expansion of adjusted EBITDA margins by over 800 basis points from when we took the company private. While this marks the completion of our formal cost savings program, we will continue to drive ongoing improvement in terms of operational efficiency through optimizing our geographic footprint, modernizing back-office technologies, and further integrating our solutions to reduce cost and complexity. It's important to note that the cost savings figure we just discussed is a net number, meaning that while we took a significant amount of cost out of the business, we also continue to invest a significant amount in the business, primarily by enhancing and expanding our data and technology assets. While much of the heavy lifting was completed in 2019 and 2020, our transformation is ongoing as we look to leverage the foundational enhancements we've made during that time to more rapidly and effectively deploy new and innovative solutions. Our key priorities for 2021 are to continue to grow our share of wallet with our strategic customers; approach and monetize the SMB space in new and innovative ways; launch new products domestically; localize new and existing products globally; and lastly, to integrate the Bisnode acquisition. We're pleased with the ongoing success we're having with our strategic clients as they renew near 100%, while continuing to expand their relationships with us. In North America, we signed an expanded multiyear renewal with the largest online retailer to support their third-party risk management strategy. As the client continues to expand and enhance their controls around their global supply chain, we are pleased to continue to support their growing needs. We also signed a multiyear renewal with one of the largest multinational retail corporations, expanding their use of data across their business. The client leverages our third-party risk and compliance solutions to mitigate risk throughout their extremely large and complex supply chain, and we are glad to extend and broaden this relationship with such a key customer. We renewed business with another strategic client, a global property and casualty insurance firm who needed access to timely, high-quality data on their current client base to ensure proper underwriting methodologies, ongoing monitoring, as well as access to data for new customer acquisition. The result was a multiyear deal for both core risk and marketing solutions. In our international business, there's been significant focus on rearchitecting our go-to-market efforts to better capture the large global opportunity. In the first quarter, we rolled out a Global 500 account program simultaneously with the close of Bisnode, prioritizing the most strategic accounts. I'm pleased with the early traction we are seeing from these efforts demonstrated by several wins in the first quarter. Our U.K. team is working with Generali, a Global 500 global insurance and asset management provider with a leading position in Europe and a growing presence in Asia and Latin America, to help them identify ways to improve consistency of screening across their global, corporate, and commercial businesses, as well as reduce risk. The result is a multiyear deal for the integration of D&B Data by Direct+ and our third-party risk solution into their CRM and underwriting system to provide a flexible end-to-end solution that was fully compliant with the global requirements. Another Global 500 company, Linde Region Europe North, member of Linde PLC, is a leading global industrial gas and engineering company that wanted to improve their credit checks and risk monitoring of B2B customers in a more data-driven way. We are pleased they chose D&B Finance and Risk solutions, bringing us both new business and a multiyear deal. We are pleased with the momentum we have with our growing roster of clients and expanding existing client relationships worldwide, particularly with our strategic clients. One segment that we continue to see immense opportunity in is the small and midsized business market. I'm excited to update you on the progress we have been making to enhance our SMB strategy through a mix of digital marketing and delivery efforts, as well as through innovative partnerships. After a difficult 2020, the SMB market is beginning to reemerge. As existing small businesses begin to recover from the effects of COVID-19, we are also seeing a significant rise in the formation of new businesses, especially gig economy start-ups that would benefit significantly from our self-service finance, risk, and sales and marketing solutions, along with software and services offered from our partners. This was the driving purpose behind the first-quarter launch of our improved digital platform. This includes personalized small business resources and offerings for each dnb.com user, driven by the utilization of our visitor intelligence solution, as well as the D&B marketplace, which makes it easier for small businesses to identify and purchase D&B solutions and those from our partners. The marketplace has two primary sections: a product section called D&B Product Marketplace and a dataset section called the D&B Data Marketplace. The D&B Product Marketplace includes a curated set of our solutions along with those of our partners that creates a combined set that allows a small business to operate in a much more sophisticated manner, much earlier in their stage of maturation. But we will continue to add new D&B solutions and partners in the coming quarters. We are mindful of keeping the number of partners limited as this is not a broad-based marketplace, but one that has preferred solutions that we believe will drive the best outcomes for our SMB customers. A few examples of solutions that are available in the marketplace today are funds manager integrated with Plaid, CreditSignal, Credit Monitor, Email IQ, Analytics Studio, Hoovers Essentials, and D&B Connect. We also have partner offerings such as KPMG Spark, SAP Ariba with D&B Direct+ integration, and Amazon business access with special rates. Within the D&B Data Marketplace, users can buy a broad range of data sets from alternative data providers to help them identify opportunities and mitigate risks. These data sets are already curated and matched to a DUNS number to make it easy to append to a client's existing D&B data. Today, we have 22 partner datasets, including healthcare reference data from IQVIA and commercial fleet data from IHS Markit, and we're adding more partners monthly. User feedback has been overwhelmingly positive around the power of the DUNS number and how it's the key to unlock the power of the data and it's something that meaningfully differentiates us competitively. The D&B customer portal, also launched in the first quarter, allows existing clients to log in and access their already purchased products through a single sign-on, unified digital experience. While inside the portal, we offer personalized offerings of our and our partner's solutions, which has already resulted in a 60% increase in cross-sells during the first quarter. And while we continue to grow our solution set within D&B, we're also expanding our reach outside of our core ecosystem. A great example of this is what we're doing with Bank of America. Bank of America became the first major financial institution to offer millions of small businesses the ability to get ongoing insights into their D&B business credit score directly through their Business Advantage 360 banking platform. This is exciting for D&B because it is driving net new paid subscriptions and increased engagement with our small business digital platform. We also partnered with Plaid to bring their network to our solutions. By integrating Plaid capabilities to our digital platform, small businesses can securely permission access to their bank account information for authentication purposes. This gives them instant access to update their D&B business credit profile. In addition, small businesses can share their bank transaction details, enabling us to explore new ways to establish business credit outside of traditional payment data, which many smaller businesses may lack. We're really excited as this is the first of its kind in the business credit space. In the first quarter, subscriptions to our freemium products were up 43% from the prior year. The investments into our small business and digital go-to-market strategy, products, and groundbreaking partnerships are clear evidence of our determination to make this segment a priority and deliver more innovative solutions to our small business clients. The third critical priority is launching new products and use cases. Yesterday, we announced D&B Rev. Up, a solution that simplifies and automates marketing and sales workflows by providing data, targeting, activation, and measurement in a single platform that easily integrates to a customer's existing martech or sales tech stacks through the use of open architecture integrations. Clients can purchase the full breadth of D&B Rev. Up capabilities or even start with a specific channel and build up from there. We have also collaborated with Bambora and Folloze to further extend the insights and capabilities of the D&B Rev. Up offerings by adding best-in-class intent and personalized omnichannel experiences to help increase demand generation. In addition, we've entered into an accelerate partnership with a leading data-driven martech company in support of this platform. This is a game-changer in how we approach account-based marketing through the integration of our solution sets along with complementary partnerships. We look forward to providing more updates on Rev. Up as it progresses, and it's just a great example of how we're thinking more holistically about serving clients through an integrated platform. This is the vision behind Rev. Up, as well as the late 2020 launches of D&B Finance Analytics, an integrated and powerful credit to cash platform; and D&B Risk Analytics, an integrated third-party risk, and compliance platform, both within our Finance and Risk business unit. In our international segment, we continue to focus on rolling out localized solutions across our growing territories. After 20 new product launches in 2020, we continued the momentum in the first quarter, introducing the Finance Analytics platform in the U.K., Data Vision in Greater China and India, and data blocks in three additional worldwide network partner markets. We're also launching multiple new products in D&B Europe, which is a newly created region that describes our recently acquired Bisnode markets. Leveraging our solutions in these markets is a key pillar of our playbook, which we're starting to execute. Regarding the Bisnode transformation, we're leveraging the same playbook that led to the successful transformation of D&B these past two years, and we're off to a great start coming together as one D&B. In Q1, we completed the first phase of synergy actions immediately following close, principally, senior leadership rationalization. Overall, we have actioned approximately $12 million of annualized run-rate savings and continue to see significant efficiencies through the combination of our two companies. We also established a new European operating model and expect this to be fully implemented during Q2, delivering a more streamlined and integrated business with corresponding operational synergies consistent with our business model. We developed a robust product plan for D&B Europe to accelerate sales of our modern global product solutions and support the sundown of legacy Bisnode products. Several product launches are slated for the second half, including Finance Analytics, Risk Analytics, D&B Hoovers, and data blocks, to name a few. The team is also accelerating rollouts of several solutions Bisnode had recently launched prior to the acquisition. Overall, we are really excited about the progress we are making and look to capitalize on the strong momentum we have built in our first quarter together. Overall, I'm pleased with our start to 2021, and I'm excited about the progress we continue to make in terms of increasing share of wallet with strategic clients, better serving SMBs in innovative ways, developing new products domestically, and localizing them internationally and integrating Bisnode. These, along with many other projects the teams are working on are laying the foundation for accelerated, sustainable growth throughout the remainder of 2021 and into 2022. Today, I will discuss our first-quarter 2021 results and our outlook for the remainder of the year. Turning to Slide 1. On a GAAP basis, first-quarter revenues were $505 million, an increase of 28% or 27% on a constant-currency basis compared to the prior-year quarter. This includes the net impact of a lower purchase accounting deferred revenue adjustment of $17 million. Net loss for the first quarter on a GAAP basis was $25 million or a diluted loss per share of $0.06, compared to a net income of $42 million for the prior-year quarter. This was primarily driven by a change in fair value of the make-whole derivative liability in connection with the Series A preferred stock in the prior-year quarter and a higher tax benefit recognized in the prior-year period due to the Cares Act. This was partially offset by lower interest expense, preferred dividends in the prior-year period, improvement in operating income, largely due to lower net deferred revenue purchase accounting adjustments and the net impact of the Bisnode acquisition, partially offset by higher costs related to ongoing regulatory matters. Turning to Slide 2. I'll now discuss our adjusted results for the first quarter. First-quarter adjusted revenues for the total company were $509 million, an increase of 28.6% or 27.7% on a constant-currency basis. This year-over-year increase includes 22 percentage points from the Bisnode acquisition and 4.4 percentage points from the net impact of lower deferred revenue purchase accounting adjustments. Revenues on an organic constant-currency basis were up 1.3%, driven by growth in our International segment, partially offset by the final quarter of headwinds in North America from COVID-19 and the Data.com wind down. Excluding these headwinds, the underlying business grew approximately 3%. First-quarter adjusted EBITDA for the total company was $186 million an increase of $50 million or 37%. This increase includes the net impact of lower deferred revenue purchase accounting adjustment, a 15-percentage-point impact on year-over-year growth. The remainder of the improvement is due to the net impact of the Bisnode acquisition, as well as increased revenues in international and lower net personnel expenses overall. First-quarter adjusted EBITDA margin was 36.5%. Excluding the impact of the deferred revenue adjustment and the net impact of Bisnode, EBITDA margin improved 220 basis points. First-quarter adjusted net income was $98 million or adjusted diluted earnings per share of $0.23, an increase from first quarter's 2020 adjusted net income of $50 million. Turning now to Slide 3. I'll now discuss the results for our two segments, north America and International. In North America, revenues for the first quarter were $339 million, an approximate 1% decrease from prior year. Excluding known headwinds, North America grew approximately 2%. In Finance and Risk, we continue to see strength in our government solutions and risk aversion as both private and public sector enterprises continue to need solutions to deal with a rapidly evolving global supplier landscape. The growth in these solutions was offset by approximately $3 million of lower revenues attributable to COVID-19 and $1 million of revenue elimination from the Bisnode transaction. For sales and marketing, we're excited to see double-digit growth in our digital solutions as customers continue to leverage more and more of our modern intent-enabled solutions. And while data sales also had another solid quarter, the overall growth in sales and marketing was partially offset by $5 million from the Data.com wind down. North America first-quarter adjusted EBITDA was $151 million, an increase of $7 million or 5% primarily due to lower operating costs resulting from ongoing cost management efforts. Adjusted EBITDA margin for North America was 44.5%, up 220 basis points versus prior year. Turning now to Slide 4. In our international segment, first-quarter revenues increased 137% to $179 or 131% on a constant-currency basis, primarily driven by the net impact from the acquisition of Bisnode and strong growth in our sales and marketing solutions. Excluding the impact from Bisnode, International revenues increased approximately 9%. Finance and Risk revenues were $107 million, an increase of 83% or an increase of 78% on a constant-currency basis primarily due to the Bisnode acquisition. Excluding the net impact of Bisnode, revenue grew 7% with growth across all markets, including higher worldwide network cross-border sales and higher revenues in Greater China from our risk and compliance solutions and newly introduced API offerings. Sales and marketing revenues were $63 million, an increase of 382% or an increase of 359% on a constant-currency basis, primarily attributable to the Bisnode acquisition. Excluding the net impact of Bisnode, revenue grew 18% due to new solution sales in our U.K. market and increased revenues from our worldwide network product loyalty. First-quarter international adjusted EBITDA of $52 million increased $28 million or 114% versus first-quarter 2020 primarily due to the net impact of Bisnode acquisition, as well as revenue growth across our international businesses, partially offset by higher net personnel costs. Adjusted EBITDA margin was 30.3% or 37.8%, excluding Bisnode, which is an increase of 430 basis points versus prior year. Turning now to Slide 5. I'll walk through our capital structure. At the end of March 31, 2021, we had cash and cash equivalents of $173 million, which when combined with full capacity of our $850 million revolving line of credit through 2025, represents total liquidity of approximately $1 billion. As of March 31, 2021, total debt principal was $3,674 million, and our leverage ratio was 4.8% on a gross basis and 4.6% on a net basis. The credit facility senior secured net leverage ratio was 3.6%. And finally, on March 30, we executed $1 billion floating to fixed swaps at an all-in rate of 46.7 bps. These are three-year slots and bring our fixed floating debt ratio to approximately 50-50. Turning now to Slide 6. I'll now walk through our outlook for full-year 2021. Adjusted revenues are expected to remain in the range of $2,145 million to $2,175 million, an increase of approximately 23.5% to 25% compared to full-year 2020 adjusted revenues of $1,739 million. Revenues on an organic constant-currency basis, excluding the net impact of the lower deferred revenues, are expected to increase between 3% to 4.5%. Adjusted EBITDA is expected to be in the range of $840 million to $855 million, an increase of 18% to 20%. And adjusted earnings per share is expected to be in the range of $1.02 to $1.06. Additional modeling details underlying our outlook are as follows: We expect interest expense to be $200 million to $210 million; depreciation and amortization expense of approximately $90 million, excluding incremental depreciation and amortization expense resulting from purchase accounting; an adjusted effective tax rate of approximately 24%; weighted average shares outstanding of approximately $430 million; and finally, capex, we anticipate, of around $160 million, including $7 million due to a small asset acquisition we completed in the first quarter. Overall, we continue to see the year shaping up as previously discussed, with revenue growth accelerating throughout the year as we transition from the middle of the range in Q2 to the high end of the range in the fourth quarter. And finally, as previously discussed, we continue to expect adjusted EBITDA for the second and third quarter to be below the low end of the range due to timing of certain expenses in the fourth quarter to be above the high end of the range of our guide. Overall, we are pleased with the start of 2021 and look forward to continuing the strong momentum in our building both North America and international. Operator, will you please open up the line for Q&A?

compname reports q1 loss per share $0.06. q1 loss per share $0.06. reiterating its previously provided full year 2021 outlook. q1 adjusted earnings per share $0.23.

So we're going to have a robust Q&A session. So let's move to page three. The business challenge moving into Q1 was twofold for Dover. First, we exited 2020 with a healthy backlog of business, which we needed to operationally deliver against. Second, we had to work closely with our distributors and customers to seize opportunities in the marketplace despite a complex set of challenges with raw materials, components, logistics and labor availability. We are pleased with our first quarter performance on both counts, which is reflected in a robust revenue growth and the increase in our order backlog as we move into Q2. Let's take a look at the metrics. Total revenue was up 13%, 9% organic to the comparable period. Clearly, the quarter benefited from a good order backlog position and the willingness of the channels to receive product deliveries as market demand accelerated, resulting in the highest volume quarter since 2014 and the largest first quarter volume since 2012 for the company. This performance clear indication that our product portfolio was attractive and often under-appreciated growth avenues and that the work that we have done on operational excellence is gaining traction. Order rates outpaced revenue in the quarter, posting bookings of $2.3 billion, a 27% comparable organic increase. The growth was broad-based with all five segments contributing to the increase. This resulted in the seasonally high backlog of $2.2 billion, an increase of 39%. Since our earnings are issued among the first in the industrial sector, I suppose it is upon it's -- it's on us to explain the drivers of growth and their impact on seasonality and full-year demand. I'm going to try to be careful with my choice of terms and comments not to cast unwarranted shade on a clearly positive market demand environment. There are several factors driving healthy customer activity, including pent-up demand from last year as a result of low starting channel inventories in certain sectors. Importantly, before we get all wound up trying to quantify the impact of channel inventory stocking in inflationary pre-buy, and how it impacts quarterly demand, let's not lose sight of the fact that total marketplace demand is robust, which is reflected in our backlog and which also leads us to revise our revenue growth guidance upward for the full year to 10% to 12%. So put succinctly, it's not pre-buy if we don't remove it from the full-year revenue estimates. Still early in the year and we will continue to produce to meet customer demand and watch our backlog and order patterns carefully [Phonetic]. We'll have more color on the drivers of demand and our revenue performance, including contribution of market share gains, as we progress through the year. For now, we are focused on executing operationally in demanding conditions to win in the marketplace. But we clearly believe that favorable demand conditions remain durable through the year. Let's move to profitability. Q1 was solid with consolidated adjusted segment margin of 19.1%, 320 basis points higher versus the comparable quarter. This was supported by strong volumes, favorable mix of products delivered positive pricing [Phonetic] and continued operational discipline and efficiency initiatives, which more than offset input cost headwinds. Strong profitability and continued focus on working capital management resulted in seasonally strong free cash flow, which was up $110 million compared to last year's first quarter or the comparable period. With a solid Q1 under our belt, we look at the remainder of 2020 with constructive optimism. Strong order trends and a record backlog portend a robust topline outlook and we have confidence in our team's ability to navigate the supply chain challenges. With that, we are raising our guidance for the year to 10% to 12% all in revenue growth and adjusted earnings per share of $6.75 to $6.85 per share, a substantial step up compared to our prior guidance. I will skip slide four, which provides a more detailed overview of our results for the first quarter. So let's move to slide five. Engineered Products revenue was up 2% organically as demand conditions improved modestly through a comparable period. Vehicle services entered the year with a strong order book and faced solid demand across all geographies and product lines. Industrial automation grew on automotive recovery and channel restocking, and aerospace and defense shipments were solid. The business remains booked well into the second half of the year. As expected, waste hauling was down year-over-year given a lower starting backlog entering Q1, which was further impacted by component availability issues that constrained shipments in the quarter. We have forecasted this business to be levered toward H2 and order trends and backlog reflect that. Same dynamic for industrial winches with revenue down in the quarter. But recovery in order rates, we expect a continued gradual recovery in this business over the year. Margin performance in the quarter was flat year-over-year as volume leverage and pricing offset the negative fixed cost absorption in the capital goods portion of the portfolio. And Fueling Solutions was up 3% organically in the quarter on the strength of North American retail fueling as well as our software and systems business in Europe. Activity in China remains subdued. Order backlogs are up 13%, and we expect our hanging hardware, vehicle wash and compliance driven underground product offerings to contribute positively due to an increase in miles driven and construction seasonality as we make our way through the year. The segment posted another quarter of strong margin performance on higher volumes, productivity actions of mix, which is a continuation of the trajectory that we exited in 2020. Sales in Imaging & Identification improved 4% organically. The core marking and coding business grew well on strong printer and services demand in North America and Asia, but was partially offset by a decline in consumables against the comparable quarter where customers stocked up on inks at the onset of the pandemic. We also saw a nice pickup in serialization software sales. Textile printer sales remained soft as global apparel and retail remains impacted by COVID. Ink consumable volumes were up as we significantly improved ink attachment rates, and we saw encouraging improvement in the pipeline in new printer sales as the quarter progressed. Margins improved slightly in the segment on higher volumes and we were able to offset material cost inflation with strategic pricing during the quarter. Pumps & Process Solutions posted 18% organic growth in the quarter on improved volumes across all businesses except precision components. Order rates and shipments for biopharma connectors and pumps continued to be strong. Industrial pumps had a solid quarter, driven by improved end market conditions and distributor demand. And polymer processing shipments grew year-over-year on robust demand in Asia and the U.S. Precision components was down in the quarter though demand conditions stabilized in hydrodynamic bearings and compression parts as well as broadly in China through new OEM builds remains impacted. Adjusted operating margin in the quarter expanded by 890 basis points on strong volume, favorable mix and pricing. This team has moved the segment to best-in-class topline and bottom line metrics through a dedication to operational excellence, robust product development and innovation management and proactive and purposeful inorganic actions. It's a world-class collection of assets that we will continue to invest behind. Refrigeration & Food Equipment continued its solid momentum from the second half of last year posting 18% organic growth. Revenue on new orders in beverage can making more than doubled year-over-year. Food retail saw broad-based increases across its product lines as key retailers resumed capital investment in product programs plus we've seen good demand for some of our new product introductions and customer wins. Our natural refrigerant systems business in particular experienced robust demand in Europe and in the US as customers are adopting more environmentally friendly solutions. The heat exchanger business grew on robust demand in Asia and Europe across all end markets. Foodservice equipment was down in the quarter but saw a stabilization in chain restaurant demand. Despite operational challenges in food retail due to availability issues with installation raw materials, adjusted margin performance improved by 450 basis points, supported by stronger volumes, productivity initiatives and cost actions we took in the middle of 2020, partially offset by input cost inflation. I'll pass it to Brad from here. I'm on slide six. On the top is the revenue bridge. Our topline benefited from organic growth across all five segments, with particular strength in Pumps & Process Solutions and Refrigeration & Food Equipment segments. FX benefited topline by 3% or $51 million. Acquisitions more than offset dispositions in the quarter by $15 million. We expect this number to grow in subsequent quarters. The revenue breakdown by geography reflects strong growth in North America, Europe and Asia. Our three largest geographic regions. The U.S., our largest market posted 7% organic growth in the quarter on solid order rates and retail fueling, marking and coding, biopharma connectors, food retail and can making among others and was partially offset by delayed shipments in waste hauling. Europe grew by 13% in the quarter on strong shipments in vehicle aftermarket, biopharma, industrial pumps and heat exchangers. All of Asia returned to growth and was up 20% organically driven by China, which was up 60% against the COVID impacted comparable quarter in the prior year. Moving to the bottom of the page. Bookings were up 27% organically reflecting the continued broad-based momentum we are seeing across the portfolio. In the quarter, we saw organic bookings growth across all five segments. Overall, our backlog is currently up $626 million or 39% versus this time last year, positioning us well for the remainder of the year. Let's go to the earnings bridges on slide seven. On the top of the chart, adjusted segment EBIT was up nearly $100 million. On margin improvement -- but margin improved several hundred basis points as improved volumes continued productivity initiatives and strategic pricing offset input cost inflation. Going to the bottom of the chart. The adjusted net earnings improved by $60 million, as higher segment EBIT more than offset higher taxes as well as higher corporate expenses, primarily related to compensation accruals and deal expenses. The effective tax rate excluding discrete tax benefits was approximately 21.7% [Phonetic] for the quarter compared to 21.5% [Phonetic] in the prior year. Discrete tax benefits were $6 million in the quarter or approximately $3 million lower than in 2020. Rightsizing and other costs were $4 million in the quarter or $3 million after tax. Now on slide eight. We are pleased with the cash flow performance in the first quarter with free cash flow of $146 million or $110 million increase over last year. Free cash flow conversion stands at 8% of revenue in the first quarter, which is historically our lowest cash flow quarter due to seasonality of our production. Let's go to slide nine. We expect demand in Engineered Products to improve sequentially through the remainder of the year, which is supported by a robust backlog. We continue to see strong result with strong bookings trends in vehicle services and industrial automation. Aerospace and defense have significant revenue visibility through its government programs and is booked well into the second half of the year. Order rates and waste handling improved significantly during the first quarter, though the shipment schedule will be levered toward the second half and we are watching the supply chain here closely, which is a stabilizer we expect a gradual recovery through the second half of the year. As communicated at our Investor Meeting in November, we expect Fueling Solutions to post modern organic growth for the year. There was a known headwind from EMV roll-off in the U.S. but order trends support a number of positives offsetting it, including growth in systems and software recovery in underground businesses and growth in vehicle wash. We also expect that Asia, particularly -- China in particular should stabilize and become a net positive for us in the second half. The ICS acquisition, which we closed at the end of last year is off to a very good start as vehicle wash market is recovering healthily. Imaging & ID is expected to perform well this year. Our core marking and coding business stalwart in 2020 is expected to continue to deliver low to mid single-digit growth with services and serialization products positively impacting performance. Digital textile printing remains slow, although we saw a year-over-year improvement in ink tonnage sales in Q1, as we continue executing our strategy to attach consumables to machine sales. We expect recovery here in the second half. Pumps & Process Solutions should have another solid year. Demand for biopharma and hygienic applications remains robust and trading conditions in industrial pumps rebounded quickly in the first quarter and momentum should continue. Our recent investments in biopharma capacity were prescient, and we are well positioned to continue capitalizing on the secular growth story. Plastics and polymers is expected to deliver steady performance as a global shortage of plastic and rubber, as well as petrochemical investments are driving increased investment in processing plants. Precision components are stabilized and we expect it to contribute to year-over-year growth beginning in the second half of the year. And with its large backlog and high order rates, Refrigeration & Food Equipment is expected to have a strong year. New orders in the core food retail businesses have been healthy in the last few quarters, as retailers that had paused their remodel programs last year amid the pandemic are restarting these strategic initiatives. Additionally, we are capitalizing on our leadership position in natural refrigerant systems both in Europe and also in the U.S. where we believe the recent mandate in California will foretell a trend among the other 49 states to mandate the transition to more environmentally friendly solutions. We also see good growth in our specialty product line and small format customer segment. Belvac continues to work through a record backlog and had another significant bookings quarter in Q1 they're booked for the year. Our heat exchanger business is seeing strong order rates across all verticals and geographies. We are investing in capacity and new capabilities in these two businesses and are well positioned to capture growth. Demand is stabilized in foodservice equipment at restaurant chains. And we expect the institutional business to recover in the second half as students return to schools and traffic improves at stadiums and hotels. Our revised annual guidance is on page 10, we covered the most pertinent of these items in the slides and we summarized here for your reference. Finally, on slide 11, puts expected 2021 performance in a multi-year perspective. 2020 was proof of lower topline cyclicality in a demanding environment and our ability to protect profitability. Operational excellence and operating margin expansion has been our priority over the last couple of years and we are on track to deliver more than 100 basis points of average margin expansion over that period. And we have the playbook and tools for this to continue. Dover is positioned to deliver attractive double-digit earnings per share growth in line with our long-term corporate targets communicated in 2019. So, Andrey, we can open it up for Q&A.

sees fy adjusted earnings per share $6.75 to $6.85. compname says guidance for full year 2021 revenue growth was raised to 10% to 12%.

Our second quarter results were strong across the board and we are especially pleased with the top-line performance considering the complicated operating environment. The demand environment in the quarter was robust and continued the momentum from the first quarter and despite posting a 30% organic top-line growth, we exit Q2 with a sequentially higher order backlog. I'll focus on the bigger picture here and highlight again what we believe is underappreciated aspect of our portfolio, it's organic growth potential. Our revenue in the second quarter was above the pre-pandemic comparable quarter in 2019 and resulted in the highest revenue first half of the year in recent Dover history, meaning that the majority of our markets are not simply recovering but are operating in a growth environment. New order bookings remain robust with all segments posting book-to-bill above one [Phonetic], resulting in sequential comparable growth in backlog as I mentioned earlier. Operating margin conversion was solid for the quarter as a result of good execution at the operating level on healthy mix of products delivered in the quarter. All of this is well and good, but make no mistake, the operating environment remains very challenging. It's been 90 days since the last time we were asked the question about the duration of "transitory inflation". As we've discussed after the first quarter, we had some line of sight of raw materials cost trajectory coming into the year, which allowed us to get in front from a price cost perspective. We have also proactively given our operating companies some leeway on working capital decisions to build inventories based on the backlog trajectory. What we underestimated was the -- was the total cost impacts of a strained logistics system and tight labor market that shows no signs of abating. This has had two knock-on effects on our results. First, the absolute costs of inbound and outbound freight were materially higher, and second and more important, the costs associated with production line stoppages due to lack of labor and components caused by trends and time uncertainty and overall supply chain tightness. Our teams have done a commendable job navigating these choppy waters and continue shipping products and driving robust margin conversion and strong cash flow. Overall, we believe that our operating model has been an advantage to us as we are largely a localized producer and are not overly reliant on extended supply chains. This is clearly reflected in our top-line performance in the quarter. As we look to the second half of the year, our order backlogs make us confident in our top-line trajectory. Our forecast do not incorporate much in the way of an improvement nor deterioration of the operating challenges that we've witnessed during the first half. We're just going to have to power through and work with our suppliers and customers to adapt to the prevailing conditions. We are raising our annual revenue growth guidance to 15% to 17%, and our adjusted earnings per share guidance to $7.30 a share to $7.40 a share. We also expect stronger cash flow as a result of the improved margin performance. Skip to Slide 4, which provides a more detailed overview of our results in the quarter. Engineered Products revenue was up 25% organically. Vehicle services which is strong across all geographies and product lines and had record bookings during the quarter. Industrial automation demand was strong across the automotive sector and in China. Aerospace and defense posted an all-time record revenue during the second quarter. Waste hauling was flat year-over-year as the business continues to wrestle with component and labor availability issues that are constraining product shipments. Importantly, waste handling bookings were robust and the backlog was up nearly 75% versus the prior year. Engineered Products is our most exposed segment to input and logistics cost inflation due to materials intensity, contractual pricing dynamics and relatively higher share of international sourcing in vehicle services. You can see it in the margin -- the segment's margin was flat year-over-year as strong volume leverage and pricing increases were offset by input cost and freight inflation, as well as labor and component availability challenges. Fueling Solutions was up 25% organically in the quarter on the strength of the above ground and below ground retail fueling globally, including some remaining tailwinds from the EMV opportunity in the U.S. following the April deadline. Vehicle wash has had -- has been strong this year and our recent ICS acquisition integration and performance is ahead of plan. Activity in China in fuel transport remains subdued, but there are signs of Chinese operators reopening their tendering activity. Order backlogs were up 29%, and we expect our software and service business hanging hardware, vehicle wash and compliance-driven underground product offerings to help offset the anticipated headwinds from the EMV roll-off. The segment posted another strong sequential margin performance on higher volumes, strategic pricing initiatives, productivity actions and mix. Sales in Imaging & ID improved 20% organically. The core marking & coding business grew well on strong printer demand across all geographies with China and India driving particularly strong performance. Serialization software also grew ahead of expectations. The digital textile [Phonetic] printing business was up significantly against the comparable quarter when much of their operations were locked down in Northern Italy last year, but nevertheless, the business remains impacted though we are beginning to see growth in demand for large printers, particularly in Asia and continued growth in ink consumable volumes. Margins improved by 420 basis points on volume leverage, pricing and productivity initiatives. Pumps & Process Solution posted another banner quarter at 34% organic growth on improved volumes across all businesses except Precision Components. Demand for biopharma connectors and pumps are intended to be -- to be strong driven by vaccine and non-COVID related pharmaceutical tailwinds. Industrial pumps grew by over 20% on robust end customer demand with particular strength in China. Polymer processing shipments grew year-over-year and continued strength in Asia and is gaining momentum in the U.S. market. Precision Components was slightly down in the quarter though demand conditions have stabilized and are recovering well in some end markets and geography giving us confidence in the second half trajectory. Margins in the quarter expanded by 910 basis points on strong volumes, favorable mix and pricing. Top-line growth in Refrigeration & Food Equipment continued its impressive clip posting a 44% organic growth. Revenue in the beverage can making doubled in the quarter and bookings nearly doubled as well. The business is now booked into late 2022. Food retail saw broad-based growth across its product lines, door cases are now booking into 2022, and the demand for natural refrigerants is driving outside growth in our systems business in the U.S. and in Europe. Backlog in food retail is now double where it was last year. The heat exchanger business grew on robust demand in all geographies with rebounding order rates and commercial HVAC in North America and record order intake in EMEA extending lead times for heat pumps and boilers. Foodservice equipment was up in the quarter on a tough comp, chain -- no, actually on an easy comp, and chain restaurant demand is robust, but the institutional market is still recovering. Margins in the segment improved by 580 basis points, driven by strong volumes and productivity actions partially offset by availability issues with installation raw materials and labor and food retail operations, we expect -- which we expect to subside in the second half. And I'll pass it on to Brad here. Our top-line organic revenue increased by 30% in the quarter with all five segments posting growth with particular strength in our Pumps & Process Solutions and Refrigeration & Food Equipment segments. FX benefited the top-line by about 5% or $68 million. Acquisitions added $19 million of revenue in the quarter. There were no year over impacts from dispositions. The revenue breakdown by geography reflect strong growth in North America, Europe and Asia, our three largest regions. The U.S., our largest market posted 25% organic growth in the quarter on solid trading conditions in retail fueling, marking & coding, biopharma, food retail and can making. Europe grew by 30% on strong shipments in vehicle aftermarket, biopharma and industrial pumps and heat exchangers. All of Asia was up 38% organically on growth in biopharma, marking & coding, plastics and polymers, heat exchangers and retail fueling demand outside of China. China, which represents a little over half of our business in Asia was up 33% organically in the quarter. Moving to the bottom of the page, bookings were up 61% organically, reflecting continued broad-based momentum across the portfolio. In the quarter, we saw organic growth across all five segments. Going to the earnings bridges now on Slide 7. On the top of the chart, adjusted EBIT was up $173 million and margin improved 400 basis points, as improved volumes, continued productivity initiatives and strategic pricing offset input cost inflation. Adjusted segment EBITDA was up 350 basis points. Going to the bottom of the chart. Adjusted net earnings improved by $135 million as higher segment EBIT more than offset higher taxes, as well as higher corporate expenses primarily relating to compensation accruals and deal expenses. The effective tax rate excluding discrete tax benefits was approximately 21.7% for the quarter compared to 21.6% in the prior year. Discrete tax benefits were $11 million in the quarter or $9 million higher than 2020 for approximately $0.07 of a year-over-year earnings per share impact. Rightsizing and other costs were $11 million in the quarter or $8 million after-tax. Now, on Slide 8. We are pleased with the cash performance thus far this year, with free cash flow of $364 million, a $96 million increase over last year. Free cash flow conversion stands at 9% of revenue for the first half of the year, 80 basis points higher than the comparable period last year, despite a significant investment in working capital and the impact of prior year tax deferrals that did not repeat this year. Also as we discussed last quarter, we remain focused on delivering against our customers' strong order rates and build inventory to ensure we can meet the current demand in the second half of the year. Let's try to pause here for a moment, because this is a complicated slide, but I think it's a transparent view of what we think is going to happen over the second half of the year and includes our current view of the outlook of the second half by segment provides context of how we are thinking about full-year guidance, which I'll get to shortly. Remember, the demand environment is strong across the portfolio, so let's not try to get overexcited about headwinds or mix commentary. We managed it in H1 and we will do it again in H2, but this is the reality of the situation in terms of the dynamic of the business. We expect top-line growth -- top-line in Engineered Products to remain robust through the remainder of the year based on solid backlog and good bookings trajectory. Momentum in the vehicle aftermarket, industrial automation should continue, while we expect the improved order rates and backlogs and solid waste handling and industrial winches to drive solid year-over-year growth in the second half. Aerospace and defense is expected to be modestly down largely as a result of a difficult year-over-year comparison on -- on project deliveries. Supply chain constraints and cost inflation are expected to continue to have a material impact on the segment. Waste handling and automotive aftermarket businesses are our largest business exposed to the trifecta of raw materials inflation, extended supply chains and a larger proportion of assembly labor. Our management teams are winning in the marketplace considering the headwinds which is reflected in the growth rate and order books. But we are clearly at the point of having defend our market position at the expense of the price cost dynamic, which will be detrimental to near-term margins, but not material, slightly detrimental. And we expect Fueling Solutions to provide organic growth for the full-year above our initial expectations on the back of growth in systems and software, recovering underground demand and vehicle wash. Recall that above ground business as a tough second half due to the North American EMV volumes. Margins in Fueling Solutions will be up for the full-year, though we expect modest margin compression in the second half relative to the first half on slightly lower volumes and negative product and geographic mix, which I think that we covered at the end of Q1 as with less North America volume due to EMV and more international volume that's slightly dilutive. Trading conditions in Imaging & ID are expected to continue their positive trajectory for the remainder of the year. Our core marking & coding business is expected to maintain its growth trajectory with services and serialization products positively impacting performance. Digital textile printing is recovering, and we expect the end of the year, we will well above 2020, but below its 2019 high watermark. We expect operating margins to remain stable in the second half. Pumps & Process Solutions should see a solid second half. Demand for biopharma and hygienic applications remain robust with customers now placing orders into 2022. We are strategically investing an additional clean room capacity for this platform to support its growth. Trading conditions in industrial pumps are strong and driven by robust and customer demand as opposed to channel stocking. Plastics and polymers is expected to be steady though this business faces a difficult comparable period due to a strong performance last year. Precision Components will return to growth in the second half as OEM new-builds will supplant increased activities at refineries and petrochemical plants. We expect margins to remain strong in the segment, but we may see some minor dilution due to mix on the back half as our Precision Components business recovers, but the absolute profit trajectory of this segment is in very good shape. With its large backlog and high sustained order rates, Refrigeration & Food Equipment will finish the year strong, with double-digit growth expected for all operating businesses. New orders in core food retail business have been healthy across the product segments and the tailwinds from our leadership position and natural refrigerants are driving outside growth for our systems business. We expect to begin to significantly ramp up shipments of our new digital door product. Belvac continues to work through its record backlogs. They are now taking orders for late 2022 and even into 2023. Heat exchanger business is positioned well as they are seeing strong order rates across all verticals and geographies. We have been investing in capacity and new capabilities in these two businesses and are well positioned to capture the growth. Foodservice equipment demand is normalized and returned to growth at restaurant chains and institutional business continues to improve. We expect this business to post solid growth in the second half albeit against a low comparable. We expect margins to continue their seasonally adjusted upward trajectory for the remainder of the year. Improved volume leverage, productivity gains and positive product mix and business mix should more than offset operational challenges related to component and labor shortages, increased logistics costs and input cost inflation. Moving to Slide 10. We remain on the front foot investing behind our business to support the growth, productivity and long-term portfolio enhancement. Organic high return on investment projects remain our top priority for capital allocation. On the left hand, you can see a sample of the current growth and productivity capex projects that we are working on, that add up to $75 million of spend. The project mix is balanced between growth and productivity with a skew toward new capacity and supporting long-term growth in key priority portions of our portfolio. Our next priority in capital allocation is strategic bolt-on acquisitions and enhance the long-term growth profile and attractiveness of our portfolio. You can see that with that all four of our recent acquisitions were in either digital or high growth single use pumps markets. These are small additions, but we are very excited about scaling up these highly innovative technologies as part of our G&A [Phonetic] portfolio. We remain on the hunt for acquisitions, have a solid M&A pipeline as we enter the second half. Our current dry powder on a full-year '21 basis is approximately $3.3 billion. Our revised annual guidance is on Page 11. We are increasing our top-line forecast to reflect the durability and demand trends that we are seeing. We now expect to achieve 15% to 17% all-in revenue growth this year. On the bottom of the page, we show our expected '21 performance in a multi-year perspective. We remain on track to deliver strong returns through a combination of robust organic revenue growth, strong margin expansion and disciplined capital allocation. And with that Andrey, we'll open it up to Q&A.

sees fy adjusted earnings per share $7.30 to $7.40. guidance for full year 2021 revenue growth was raised to 15% to 17%.

Let's begin with the summary of results on Page 3. As we guided back in September. July August trends were positive and we are exceeding our internal forecast. This dynamic continued through September. In addition to the improving demand environment, we are very encouraged by our manufacturing operations and supply chain performance in the quarter. This solid operation execution had two tangible benefits in Q3. First, it increased our capacity to deliver a higher volume than expected from the backlog in our long cycle businesses, and as you see the positive impact to the top line. And second, through a combination of mixed and fixed cost absorption, it drove a robust margin performance for the quarter. Demand trends continued to improve sequentially across most of the portfolio. The trajectory continues to vary by market, and I'll talk more about that, but our diverse end market and geographic exposure is clearly an asset to us in the downturn. Revenue declined 5% organically and bookings were flat, with a third of our operating companies posting positive year-over-year bookings for the quarter, and more than half posting positive comparable growth in the month of September. We are not out of the woods yet, but the trajectory is encouraging and we continue to carry a healthy backlog going into the fourth quarter and into next year. We delivered strong margin performance in the quarter and year-to-date. We achieved margin improvement in the quarter despite lower revenue, driven by our operational multiyear efficiency initiatives gaining further traction and by improved business mix, some of which we highlighted at our recent Investment Day, focused on the Pumps & Process Solutions segment and biopharma business in particular. With the strong results to date, we expected to over deliver on our full-year conversion margin target and are now driving toward achieving a flat consolidated adjusted operating margin for the year. Cash flow in the quarter was strong at 17% of revenue and 127% of adjusted net earnings. Year-to-date, we have generated $117 million more in free cash flow over the comparable period last year, owing to a robust conversion management and capital discipline. As a result of our performance in the first three quarters of the year and a solid order backlog, we are raising our annual adjusted earnings per share guidance to $5.40 to $5.45 per share. We are not in the clear on the macro backdrop and performance remains uneven between markets, but we believe that our performance to date and the levers we have in our possession will enable us to absorb any possible dislocations in the fourth quarter should they materialize. Let's move to Slide 4. General industrial capital spending remains subdued in Q3, resulting in a 10% organic decline for an Engineered Products, driven by softness in capex levered industrial automation, industrial winches and waste handling. Additionally, our waste handling business had the largest quarter ever in the comparable period last year, making it a challenging benchmark. On the positive side, aerospace and defense grew double digits on shipments from a strong backlog and we've seen robust recovery in our vehicle aftermarket business after a difficult couple of quarters. Productivity actions, cost actions and favorable mix minimize margin erosion in the quarter, nearly offsetting the impact of materially lower volumes. And Fueling Solutions saw continued albeit sequentially slower growth in above-ground equipment in North America on EMV compliance and regulatory activity, whereas national oil companies in China continued to defer capital spending amid ongoing uncertainty. Demand for below-ground equipment has improved sequentially as construction activity restarted, but remain subdued globally. And in China, we are still weathering the roll off of the double-wall replacement mandate. Margin performance in the segment was very good and a testament to the operational focus and capability of the management team and was achieved through productivity improvements, cost controls and favorable regional mix, more than offsetting volume under-absorption. Sales in Imaging & Identification declined 8% organically due to continued weakness in digital textile printing. We've seen improving demand for textile printing consumables, reflecting recovering in printing volumes, however, has been insufficient to prompt fabric printers to invest in new machinery. We expect conditions to remain challenged for the balance of the year. Marking and coding was flat on strong demand for consumables and overall, healthy activity in the US and Asia despite lingering difficulties with customer site access and service delivery. Despite segment margins being down relative to the comparable quarter driven by digital printing volume and fixed cost absorption, margin improved in marking and coding on flat revenue was a result of the mix of effect on consumables and operational initiatives undertaken in prior periods, which also provide a solid base for incremental margins in 2021 as textiles recover. Pumps & Process Solutions continued to demonstrate the resilience of its product portfolio, some of which we highlighted in last month's Analyst and Investor Day. Strong growth continued in biopharma, medical and hygienic applications. Plastics and polymers shipped several large orders from its backlog, which were initially slated to ship in Q4, getting it to a slightly positive revenue performance year-to-date. Compression, components and aftermarket continue to be slow on weaker activity in US upstream and midstream. Industrial pumps activity remained below last year's volumes, but has improved sequentially. This was another quarter of exemplary margin performance in the segment, with more than 300 basis points of margin expansion driven by broad based productivity efforts, cost controlled and impacted businesses, favorable mix and pricing, which more than offset lower volume and some of the portfolio. Moreover, the recovery was broad based. Our food retail business, the largest in the segment, grew organically and restarted remodeling activity in supermarkets. Belvac, our can making business began shipping against its record backlog, which we believe is in the early innings of a secular growth trend. Heat exchangers were approximately flat with continued weakness in HVAC, offset by strength in residential and industrial applications, including semiconductor server and medical cooling. Commercial food service improved, but margins remain impacted due to continued weakness and institutional demand from schools and similar venues, while activity and large chains have slowly recovered. Cost actions taken earlier this year, as well as improved efficiency in volume more than offset the demand headwinds in food equipment, resulting at appreciable margin accretion. We expect to continue delivering improved comparable profits in the segment in line with our longer term turnaround plan. I'll pass it to Brad from here. Let's go to Slide 5. On the top is the revenue bridge. Several of our businesses, including plastics & polymers, beverage can making and food retail returned to positive organic growth in the third quarter, while biopharma continued its strong growth trajectory from prior quarters. FX, which had been a net revenue headwind for us since mid-2018, flipped in the quarter and benefited top line by 1% or $12 million, driven principally by strengthening of the euro against the dollar. Acquisitions more than offset dispositions in the quarter by $3 million. We expect this number to grow in subsequent quarters. The revenue breakdown by geographic area reflects sequential improvement in each major geography, but particularly encouraging is the trajectory in North America and Europe. The US, our largest market, declined by 4% organically due to softness in waste handling industrial winches and precision components, partially offset by a strong quarter in our above-ground retail fueling, marking and coding, beverage can making, and food retail businesses among others. Europe declined by 4% organically, a material improvement compared to a 19% decline in Q2, driven by constructive activity in our pumps, biopharma and hygienic, and plastics and polymer businesses. All of Asia declined 10% organically, while China representing approximately half of our business in Asia, posted an 8% year-over-year decline. We continue to face headwinds in China in retail fueling due to the expiration of the underground equipment replacement mandate and slower demand from the local national companies [Phonetic]. Outside of retail fueling, we saw a solid growth in China. Moving to the bottom of the page. Bookings were nearly flat, down 1% organically year-over-year, compared to a 21% decline in Q2, reflecting continued momentum across our businesses. In the quarter, we saw organic declines across four segments, but sequential improvement across all segments, and a particularly strong booking quarter for our Refrigeration & Food Equipment segment, driven primarily by record order intake in our can making business. These orders relate to large projects that are mostly projected to ship in 2021 and 2022. Overall, our backlog is currently approximately $200 million or 14% higher compared to this time last year, positioning us well for the remainder of the year and into 2021. Note that, a material portion of the backlog increase was driven by orders in our can making business, which I mentioned above. Let's go to the earnings bridges on Slide 6. On the top of the chart, despite a $77 million revenue decline in the quarter, we were able to keep our adjusted segment earnings approximately flat year-over-year, a testament to our proactive cost containment and productivity initiatives that help drive 100 basis points of adjusted EBITDA margin improvement. Some of the recent initiatives will continue supporting margins into 2021. Going to the bottom chart. Adjusted net earnings declined by $3 million, principally driven by higher corporate costs related to deal fees and expense accruals, partially offset by lower interest expense and lower taxes on lower earnings. The effective tax rate excluding discrete tax benefits is approximately 21.5% for the quarter, substantially the same as the prior year. Discrete tax benefits quarter-over-quarter were approximately $2 million lower in 2020. Right sizing and other costs were $6 million in the quarter relating to several new permanent cost containment initiatives that we pulled forward into this year. Now on Slide 7. We are pleased with the cash performance, with year-to-date free cash flow of $563 million, a $117 million or [Indecipherable] over last year. Our teams have done a good job managing capital more actively in this uncertain environment, and with the improving sequential revenue trajectory in the third quarter, we rebuilt some working capital to support the businesses and our customers. Free cash flow now stands at 11.5% of revenue year-to-date, going into the fourth quarter, which traditionally has been our strongest cash flow quarter of the year. I'm on Page 8. Let's go segment by segment. In Engineered Products, we expect similar performance as the third quarter. Vehicle aftermarket had a very good Q3, as the business is able to deliver on pent up demand. Notably, we have a tough comp in Q4 due to some promotional campaigns, but this is a business which has excellent prospects for 2021. Activity in waste handling is picking up with private haulers, but orders placed are mostly for 2021. We expect municipal volume to remain subdued for the balance of the year. Demand is reaccelerating for digital solutions in the space and overall, we are constructive on the outlook for this business into 2021. We are seeing some encouraging signs in industrial automation and automotive OEM markets, in particular, in October. Aerospace and defense continues to be steady, most of what we plan to deliver in the next quarter is in the segment's backlogs. We don't expect material upside and/or downside from our forecasts. We expect margin to be modestly impacted by volume and negative mix relative to Q3, largely due to demand seasonality. Fueling Solutions remain constructive finishing the year and into 2021. As we've been guiding all year, we have a tough comp in Q4 due to record volumes in the comparable period. Despite the top line headwinds, we expect to hold year-over-year absolute adjusted operating profit as a result of our efforts done on product line harmonization, productivity and pricing discipline. We expect 2021 to be a good year as demand trends remain constructive for our above-ground and software solution businesses and we turn the corner on below-ground, fluid transfer and vehicle wash. Imaging & ID should remain steady. We saw robust activity in marking and coding exiting the third quarter and the backlog in the business is higher than last year. Activity in serialization software space is also picking up nicely. In digital print, demand for inks has picked up, which is a sign of improving printing volumes. We are seeing a pickup in quotations for new machines, but we expect a few more quarters before we return to normal levels in this market. In Pumps & Process Solutions, we expect current trends to continue for biopharma, plastics and processing, continuing the robust trajectory in pumps recovering to more normal levels, particularly in defense and select industrial applications. Compression product lines within the precision components exposed to mid-and-downstream are likely to see continued weaknesses in Q4 as projects and maintenance continue to be deferred. Overall, the Pumps & Process Solutions outlook is supported by segment backlog that is aligned with what we had at this point last year. Let's get on to the last segment, Refrigeration & Food Equipment. First, as I said, we were in the early innings of what we believe to be a multi-year secular build-out of can making capacity, as evidenced by our backlog, driven by the transition from plastic to aluminum containers and also the spike in demand for cans at home consumption of food and beverages. In food retail, we delivered low teens margin for Q3, converting on our backlog, providing us a baseline to reach our 2021 margin aspirations. Our backlog is beginning to build moving into 2021. As you all know, this is a seasonal business, so Q4 volume and fixed cost absorption declines in Q4. And frankly, it's all about 2021 from here and Q3 was a sign of good progress. We have a robust backlog in heat exchanges and are constructive in this market. Our capacity expansion projects are being completed and we have some interesting new products in the pipe. Finally, in commercial food service, large chain should continue to support activity, but will not fully offset weakness on the institutional side. Overall, for the segment, comparable profits and margins for the segment are forecasted to be up in Q4 to the comparable period. With strong margin performance to date, we intend to deliver approximately flat year-over-year adjusted margin this year, despite a lower revenue base. As you may recall, we entered the year with a program entailing $50 million in structural cost reductions as part of our multi-year program highlighted at our 2019 Investor Day. We actioned more structural initiatives, which resulted in approximately $75 million of permanent cost reduction in 2020, leaving a $25 million annualized carryover benefit into 2021. We view this as a down payment on the 2021 portion of our multi-year margin improvement journey. And we'll update that with more to come on 2021 when we report the fourth quarter. We expect robust cash flow this year on the back of solid year-to-date cash flow generation and target free cash flow margin at the upper end of our guidance between 11% and 12%. Capital expenditures should tally up to approximately $159 for the year, with most of the larger outlays behind us. In summation, we're raising our adjusted earnings per share guidance to $5.40 per share to $5.45 per share for the full year, above the top end range of our prior guidance. We remain on the front foot in capital deployment posture with several bolt-ons closed last quarter. We have multiple opportunities in the hopper, and we hope to report on those soon. And with that, Andrey, let's go to the Q&A.

sees fy 2020 non gaap earnings per share $5.40 to $5.45. trajectory of new orders continued to improve through q3 resulting in approximately flat bookings. cautiously optimistic about balance of year and set-up for 2021.

Let's go to Page 3. Dover Corporation and its operating companies had a solid quarter. The performance stats indicate that our product strategies, coupled with our ongoing productivity initiatives, continued to deliver top line growth, margin accretion and attractive cash flow to our investors. Our revenue and bookings growth continued to outpace our pre-pandemic levels and we exited the quarter with a record high and sequentially increased backlog while posting top line growth of 15% over the comparable period. Demand strength was broad based as each segment posted year-over-year growth in bookings and a book to bill above 1. Revenue growth, product -- positive product mix and ongoing productivity initiatives drove comparable operating margins up resulting in a 31% increase in US GAAP diluted earnings per share [Technical Issues]. Our free cash flow performance was strong with an 18% year-over-year increase despite significant investments we've made in inventory as we begin to reap the benefits of investments in the centralization of financial processing activities. We continued to enhance and improved our portfolio with several acquisitions completed in the last three months and the divestiture of our commercial foodservice business announced last week. Our organic investments in capacity expansions and productivity projects are on track, providing us the building blocks for the future top line growth and margin expansion. As one of the first multi-industrials to report each quarter and because of our wide end market exposures, we have the pleasure to be the operating environment bellwether. So let's get on the front foot here by providing some color on inflationary inputs, labor and supply chain challenges so that we have time to discuss the constructive demand environment for 2022 in the Q&A. Let me start by saying that we're particularly concerned that there have been no discernible policy changes, particularly in the US to deal with these headwinds. And in fact, many proposed policies run the risk of extending their duration. We take no satisfaction in the fact that we've been telegraphing these issues all year and incorporating them into our forecast of the businesses that bear the brunt of these challenges, which I'll expand upon during the segment review. We have taken the appropriate actions to offset these headwinds, moving into 2022 and we are comforted by the fact that we've been given the opportunity to demonstrate the resilience of our business model and the strength of the breadth of our product and geographic market exposures that are ultimately reflected in these quarterly results. To be clear, we are very constructive about 2022 demand for our products and services and remain optimistic that there will be a recognition that protecting the duration of the current strong economic demand environment needs proactive policy decisions. We are raising our full year earnings per share guidance as the result of our strong year-to-date performance. Our updated forecast do not incorporate any material improvement nor deterioration of the challenging operating environment in the fourth quarter. Our priorities remain the same, supporting our customers with products and services for the long term and the health and welfare of our employees. I'll skip to Slide 4, which provides a more detailed review of our results for the third quarter. So let's move to Slide 5. Engineered Products revenue was up 14% organically with a significant portion of the growth from pricing actions. Vehicle services posted a strong top line quarter and market indicators remain positive with vehicle miles driven recovering and average vehicle age continuing to increase. Industrial automation demand was up double digits with strong activity in Americas and China. Environmental Services Group revenue was up year-over-year and its backlog remains strong moving into 2022. Aerospace and defense posted a decline year-over-year largely a result to changes in programmed shipment timing. The margin performance in the quarter was unfortunately what we expected to occur as we progressed through the year. Our Engineered Products segment, as we've discussed previously, has the largest exposure to raw materials, assembly labor as a percentage of cost of goods and supply chain complexity. As such, it is more than just a price cost issue where even in equilibrium drives negative margin performance. It is exasperated by numerous component supply issues that necessitated us to intermittently curtail production to stabilize the manufacturing system in the quarter. Our management team is doing exactly what we would expect of them to protect profitability in the short term while managing the relationships with our strategically important customers. I have absolute confidence that the profit margin of the segment will bounce back as we move into '22 as a result of actions already taken in price and as raw materials and supply chain constraints moderate as can be seen in the raw materials futures and stabilizing container shipping rates. Fueling Solutions was up 3% organically in the quarter on solid demand in North America for above ground and below ground retail fueling. We believe our production schedule and delivery times are driving share gains, particularly in the above ground category. Vehicle wash posted another strong quarter with some encouraging customer conversion and cross-selling benefits from our recent ICS acquisition. Activity in China remains subdued driven by the lasting impacts of COVID and near-term uncertainty related to energy supply. Fuel transport components were negative for the quarter, but we believe that this is expected to [Phonetic] improve moving forward. Margins in the segment declined 150 basis points in the quarter as productivity headwinds from supply chain constraints in sub components and negative mix more than offset higher volumes and pricing. We have taken the appropriate actions on pricing to counter these headwinds going forward. Sales in Imaging & Identification grew 7% organically. The core marking and coding business grew well on good demand for printers and consumables. Serialization software also grew ahead of expectations and we are working to add additional resources here as we integrate the recently acquired Blue Bite brand management software into our solutions. The digital textile printing business was up significantly year-over-year against a low bar comparable quarter and is continuing its gradual recovery. Margins in Imaging & ID improved by 250 basis points as volume leverage, pricing and productivity initiatives more than offset input cost inflation. Pumps & Process Solutions posted another solid quarter of 25% organic growth. Demand for biopharma connectors and pumps continued to be strong. We continue to expand clean room capacity for our biopharma connectors and single use pumps in the period and we are encouraged by specification wins in Em-tec biopharma flow meters, which we acquired last year. Industrial pumps were up based on broad based end customer demand with particular strength in China. Precision Components was up year-over-year as compression OEM and aftermarket businesses continued their recovery. Polymer processing was down in the quarter due to a combination of shipment timing and a very strong third quarter from the prior year, though new order rates remained strong and outlook is positive moving into 2022. Margins in the quarter expanded by a robust 630 basis points on strong volume, fixed cost absorption, favorable product mix and pricing. Top line results in Refrigeration & Food Equipment remained strong posting 16% organic growth. Revenue in beverage can making equipment doubled during the quarter. The business is booked into late '22 and is taking orders for '23. The heat exchanger business grew on robust demand in all geographies led by residential heating and industrial end markets and a recovery in the global commercial HVAC demand. Order intakes continue to exceed our ability to ship. So we are adding additional capacity in two geographies to ensure that we can meet forecasted demand in 2022. Demand in food retail remains robust with elevated bookings and backlogs across all our product lines. However, much like our Engineered Products business, we have a difficult time with labor constraints and, in particular, sub component supply which has necessitated significant operational costs in logistics, intermittent production curtailments and, in one case, the deferment of a delivery into 2022. Again management is straddling cost recovery actions and meeting demands of our customers, but it clearly comes with a cost. Margins were largely flat in the quarter as excellent operating performance in SWEP and Belvac offset refrigeration headwinds despite their smaller revenue base. I'll pass it to Brad here. Let's go to Slide 6. On the top is the revenue bridge. Our top line organic revenue increased by 13% in the quarter with all five segments posting growth with strong demand in our Engineered Products, Pumps & Process Solutions and Refrigeration & Food Equipment segments. FX benefited the top line by about 1% or $21 million. Acquisitions added $18 million of revenue in the quarter. There was no year-over-year impacts from dispositions. The revenue breakdown by geography reflects strong growth in North America and Europe, our two largest regions, and modest growth across Asia and the rest of the world. The US, our largest market, posted 16% organic growth in the quarter on solid trading conditions in retail fueling, industrial automation, biopharma and can making. Europe grew by 16% in the quarter on strong shipments in marking, coding, biopharma and industrial pumps, can making and heat exchangers. All of Asia was up 5% organically on growth in biopharma and industrial pumps and heat exchangers, partially offset by year-over-year declines in polymer processing, below ground retail fueling and fuel transport. China, which represents approximately half of our business in Asia, was up 8% organically in the quarter. Moving to the bottom of the page. Bookings were up 25% organically, reflecting the continued broad based momentum across the portfolio. In the quarter we saw organic growth across all five segments. Let's go to the earnings bridges on Slide 7. On the top of the chart, adjusted segment EBIT was up $64 million and adjusted EBIT margin improved 80 basis points as improved volumes, continued productivity initiatives and strategic pricing offset cost inflation and production stoppages. Going to the bottom of chart, adjusted net earnings improved by $57 million as higher segment EBIT and lower corporate expenses more than offset higher taxes. Deal expenses in the quarter were $3 million. The effective tax rate for the third quarter, excluding tax discrete benefits, was approximately 21.8% compared to 21.5% in the prior year. And our effective tax rate estimate pre-discrete for Q4 and the full year remains unchanged at 21% to 22%. Discrete tax benefits were $8 million for the quarter or $4 million higher than in 2020 for approximately $0.03 of year-over-year earnings per share impact. Rightsizing and other costs were a $2 million reduction to adjusted earnings in the quarter as a one-time recovery related to a cancellation settlement more than offset our ongoing productivity and rightsizing initiatives. Now on Slide 8. We are pleased with the cash performance thus far this year with cash -- with free cash flow of $667 million, a $104 million increase over last year. Free cash flow conversion stands at 11% of revenue year-to-date despite a nearly $250 million investment in working capital. As we discussed last quarter, we remain focused on delivering against our customers' strong order rates and we are carrying high inventory levels to ensure we can meet current demand for the rest of the year and into next year. I'm on Slide 9, which is a familiar format we used during the Investor Day in 2019 to describe our inorganic growth priorities. I'm pleased to report that our activity since then has aligned well with those priorities and we remain busy adding logical synergistic bolt-ons that will support the long-term growth of our core businesses. As you can see there we are investing in the highest-priority platforms with an emphasis on high growth, high gross margin products and solutions. We remain disciplined in our approach to acquisitions. And despite the challenging asset prices in today's environment, we have acquired seven bolt-on acquisitions year-to-date that meet our investment return criteria, including two in the third quarter and one that closed last week. The most recent deals highlighted in green were CDS, an industrial 3D visualization software, which we expect to grow in third party revenues and also adopt across the Dover portfolio in our journey toward digitizing the front end of our businesses, lowering our transaction costs, Espy which complements our aerospace and defense business, the software-driven signal intelligence solutions, and LIQAL, which is an emerging leader in LNG and hydrogen dispensing solutions. Each transaction is modest addition to our aggregate portfolio. We are very excited about scaling up these innovative and strategic technologies over time and the positive impact to earnings per share as these investments mature. We remain on the hunt for acquisitions and have a solid M&A pipeline that aligns well with our portfolio of priorities. We also took advantage of recent market activity in the food equipment sector to sell Unified Brands, our professional cooking equipment business for commercial foodservice operators. The deal was announced in early October and is expected to close in the fourth quarter. Unified Brands represents less than 2% of our overall revenue and its sale will have negligible impact on our '21 adjusted EPS. As we look to the end of the year demand outlook remains favorable across the majority of the portfolio, backlogs and bookings remain robust and we expect to post strong organic growth in Q4. Overall, we remain on track to deliver strong returns this year through a combination of robust growth in revenue, operating profit and cash flow, coupled with disciplined capital allocation. We also look forward to closing out this year and laying the foundation for what we believe to be a positive demand environment in 2022. We have clarity about the nature of the inflationary input and supply disruption costs that we have incurred in Q3 and expect to queue [Phonetic] in Q4 due to the challenging operating environment. And we have conviction that we can turn them into profitability tailwinds as conditions improve and the calendar progresses from here. And with that let's turn to Q&A.

dover corp - do not anticipate challenges from q3 to abate and therefore remain focused on operational execution to deliver against robust demand.

Let's begin on Slide 3. Order trends remain positive across the majority of our portfolios in September, and we had a strong finish to the year. Our year-over-year backlog is up 21% as a result of general recovery trends across the portfolio, a meaningful increase in the DFRE segment backlog and some recognition from our customers that raw material costs and supply chain constraints are becoming more challenging into 2021 driving preorders in some markets. Revenue of 1.8 billion was flat versus the comparable period. Adjusted segment operating margin at 7.1% was flat despite unfavorable revenue mix during the quarter. For the full year, revenue was down 6% and adjusted segment margins up to 16.7% as a result of structural cost savings centered around strategic initiatives, tight cost controls, offsetting the impact of fixed cost under-absorption[Phonetic]. As we discussed at length in Q3, we are driving toward a strong cash flow performance in the 4th quarter, and we got it with full year free cash flow increasing 24% over 2019 achieving 14% of revenue. This is what we would expect to happen as we liquidate working capital in excess of loss profits impact and as a result of efficiency gains from our back office consolidation program. With that backdrop, we look into 2021 with conservative optimism. Our order book is solid, albeit with a different mix as compared to last year with DFRE having a material positive impact to the top and bottom line in '21. With that, we are initiating full year guidance of 5% to 6% organic revenue growth and adjusted earnings per share of $6.25 to $6.45. I will not spend a lot of time on slide 4, which is a more detailed overview of the results of the 4th quarter, so let's move to slide 5. Engineered Products revenue declined to lower shipments and CapEx levered markets such as industrial winches, waste handling equipment, and vehicle services. ESG had a tough Q4 comparable to overcome and VSG was coming off a strong Q3, so the performance was largely expected. Both have strong backlogs into 2021. The aerospace and defense business had a strong quarter that ended a record year for the business, and demand in industrial automation has shown robust recovery contributing to our backlog as global auto sequentially ramps production. In fueling solutions, as we discussed at the end of Q3, the comparable benchmark for Q4 was tough. Despite the topline pressure, the segment posted another quarter of strong margin performance and lower volume as our, as our productivity actions remain durable. We are beginning to see the mix benefits from our Helix and Anthem dispenser products which we believe are winning in the marketplace. We completed the acquisition of Innovation Control Systems in the 4th quarter, which is a great addition to our vehicle launch platform. ICS is a leading supplier of access, payment, and site management solutions and software, which fits into our strategy of driving long-term value from the large installed base of retail fuel sites which we presented in October. Sales and imaging and identification declined 3% organically. The core market in coating business grew on continued healthy demand for consumables and improvement in demand for printing equipment with particularly healthy activity in the United States. Digital textile printing CapEx remained slow, but it will begin seeing recovery in demand for consumables and small format machines which are likely [Technical Issue] of conditions normalizing in 2021. Imaging and identifications is our highest gross margin segment. The marking and coating business has delivered commendable margin performance this year, holding the profit line virtually unchanged; however, decrementals in textile printing on lower volumes weighed on the segment margins in Q4 and during the full year, we expect this to begin reversing progressively into 2021. Pumps and process solutions returned to top line growth in the 4th quarter on strong growth in biopharma, medical, and hygienic applications. We also began seeing cyclical recovery in industrial pumps, which posted growth after several soft quarters. Compression components and aftermarket continued to be slow, but recent trends in natural gas and LNG markets gives us grounds for optimism going forward. The 4th quarter closed off a solid margin performance in this segment with margins expanding a 150 basis points in Q4 and 220 basis points for the full year. This was driven by broad based productivity efforts, cost controls, favorable mix, and well-timed capacity expansion in biopharma and medical which we highlighted earlier in the year. Refrigeration and food equipment posted 13% organic growth with all businesses except food service equipment delivering the increase. A significant, a significant portion of the growth came from the well advertised strength in can making. We are also very encouraged by activity in core food retail market, which grew organic top line at high single-digits in the quarter driven by the continued strength in the door case product line where we saw double-digit growth for the full year. The heat exchanger business grew on robust demand in heat pumps and residential applications as well as refrigerated transport and industrial applications like semiconductors and data centers. Margin performance expectedly improved supported by volume and actions we took in the middle of 2020. Absolute earnings increased 71% in the quarter of the comparable period. This margin performance coupled with the upcoming ramp-up of automated case line in food retail positions us to deliver material margin expansion in 2021. I'll pass it to Brad here. Let's go to slide 6. On the top is the revenue bridge. Our top line continued its recovery with sequential improvement in organic revenue over Q3. Several of our businesses including short cycle industrial pumps and heat exchangers returned to positive growth in the quarter. While biopharma, aerospace, and defense, marketing and coding, food retail, and can making continued their positive growth trajectory from prior quarters. FX benefited the topline by 2% or 34 million, driven principally by strengthening of the Euro against the Dollar. Acquisitions, more than offset[Phonetic] dispositions in the quarter by 12 million. We expect this number to grow in subsequent quarters. The revenue breakdown by geography reflects sequential improvement in each major geographies except with the exception of Asia. The US, our largest market, posted a 1% organic decline in the quarter, an improvement over the 4% decline in Q3 and progressively improving order rates and a strong quarter in biopharma, marking and coding, food retail, and can making among others. Europe declined 3% organically driven by retail fueling and a difficult comparable quarter in vehicle services, though partially offset by continued strength in several of our pumps and process solutions businesses. All of Asia was down 11% organically driven principally by China, which was down 16% organically. This result in China was not unexpected, as we continue to face headwinds in retail fueling due to the expiration of the underground equipment replacement mandate. Moving to the bottom of the page. Bookings were up 2% organically, reflecting the continued momentum we see across our businesses. In the quarter, we saw organic growth in four out of our five segments. The fifth segment fueling solutions faced a difficult comparable quarter in the prior year as previously discussed. Overall, our backlog is currently up approximately 300 million or 21% higher compared to this time last year, positioning us well as we enter 2021. Let's go to the earnings bridges on slide 7. We delivered improved sequential results in the quarter after a significant decline in Q2 and recovery in Q3. On the top chart, adjusted segment EBIT and margin were both essentially flat year-over-year as continued productivity initiatives offset negative organic growth and diluted impact of FX on margins. Going to the bottom chart, the adjusted net earnings declined 1 million, as higher taxes in corporate expense offset improved segment EBIT. The effective tax rate excluding discrete tax benefit was approximately 21.4% for the year compared to 21.5% in the prior year. Discrete tax benefits were 8 million in the quarter and 22 million for the year or approximately 4 million lower than in 20 -- than in 2019. As we move into 2021, excluding the impact of discrete taxes, we expect the effective tax rate remain essentially the same as 2020 at about 21.5% rightsizing and other costs were 21 million in the quarter or 17 million after tax relating to several new permanent cost containment initiatives and other items that we executed at the end of 2020. Now on slide 8. We are pleased with the cash performance in 2020 with full year free cash flow of 939 million, a 181 million or 24% increase over last year. Free cash flow conversion stands at 21% of revenue for the 4th quarter, historically our highest cash flow quarter and 14% for the full year, a significant increase over the prior year. Recall, last quarters -- last quarter's earnings call, we decided to prioritize prudent working capital management over fixed course -- fixed cost absorption to close out the year, and you can see the value delivered in our year-over-year working capital comparison. We have strong revenue visibility into Q1 and confidence in our team's ability to match industrial production with improved customer demand. I'm on page 9. Let me take a few moments to give you an update on our center led initiatives that we outlined in our strategic plan in September of 2019. While we could have not expected what transpired in 2020, we positive at the time that our portfolio had through cycle durability and that there were opportunities to drive synergies from our diverse portfolio to improve profitability over time. Despite this, we often hear a notion that Dover is a cost out story likely because we give measurable structural cost saving goals each year, implying a finite nature to such endeavor. There is a lot more than cost reductions to our improvement journey, and we continue to reinvest a portion of the savings. So, I will give you a short update on where we are in these strategic initiatives. Through in 2019, we began with the right sizing of our SG&A base after a significant portfolio change. This was necessary and required immediate intervention. Since then, the improvements have been driven by steady productivity and structural cost actions by our operating units and from our investments in four core enterprise capabilities that generate very attractive return on investment and can be leveraged across the portfolio. The investments are substantial. By the end of this coming year. , the head count involved a center led enterprise capabilities will have increased by over 50%. These are transformational initiatives touching every corner of our global portfolio and delivering real results that you can see in our bottom line, and there is significant runway to drive value. We are investing in the following four enterprise capabilities, and I'll highlight a few results, but I would encourage you to review the stats in the slides. First, Dover Digital on slide 10. This work began in 2017 and accelerated in 2018 with the opening of our Dover Digital Center in Boston. We have over 100 e-commerce connected product and software experts dedicated to this endeavor. This team helps our business to lever each commerce at scale and improve the customer journey with ease of doing business as well as back end efficiency for sales and order entry. For example, this year we target to reach a run rate of $1 billion of revenue processed through digital channels, much of which is service parts and catalog items compared to 100 million in 2019. This is a multi-year journey, value creation journey, and we are very excited about what lies ahead for our digital team. Moving to slide 11. Our operation center of excellence is a central team of domain knowledge experts that delivers health and safety, supply chain management, lean operations, and advanced manufacturing and automation. This team is instrumental in driving value through rooftop consolidation and automation projects. As you know, we have a number of these in the works. We are also excited about the results of the early lean initiatives this spearheading. This is another multi-year journey that we continue -- will continue to deliver results. Moving on to slide 12 is our central back office system, which we call Dover Business Services. We've been at this for several years, and we're still in the early innings of expanding the scale and scope of this capability. By centralizing and offshoring transactional back office facilities, we multiply efficiency through scale, technology leverage, and unit cost arbitrage. DBS is and will remain an integral part of our margin enhancement story. And lastly moving to slide 3, the India Innovation Center is more than 600 person strong team that our operating companies can leverage for product engineering, digital solutions development, data information management, research and development, and intellectual property services. The scale and expertise of this team allows our operating companies to tap resources that would have been unaffordable to them as stand-alone companies and allows for concurrent engineering on time sensitive projects. So, let's sum this up on slide 14. We laid out four pillars of our strategy in 2019 and have been delivering through cycle. We have maintained our focus on margin improvement and continue to invest despite the economic difficulties of 2020. Our end market exposure, coupled with the strategic R&D investments, we are delivering attractive growth profile. We are committed to reinvesting in our businesses as a top priority and capital allocation to maintain competitive competitiveness, fuel growth, and improve productivity. We are making good strides on the inorganic front. Finally, we're staying disciplined in our capital allocation by returning excess capital to our shareholders, buying[Phonetic] growing dividends and share repurchases. Moving to 15, where does this leave this going into 2021. We believe that our playbook offers us a significant runway to continue delivering attractive through cycle returns through mid single-digit topline growth, steady margin expansion, healthy cash conversion, and disciplined capital allocation and shareholder-friendly capital return posture. I'll step off the soapbox and let's move on to 16, we expect demand in engineered products to rebound in 2021. We have seen strong bookings recently in vehicle services and Industrial automation with relevant automotive and vehicle usage statistics trending in the right direction. Bookings have also improved recently waste handling, and we are nearly fully booked for the first quarter. Municipal demand remains uncertain, but we see strong trends in the parts and digital business. As we previewed in November, we expect fueling solutions to have a modest organic growth year, there is known headwind from EMV roll-off in the US, but there are a number of positive [Technical Issue]. We are encouraged by the prospects of our new Anthem user interface solution offering. We expect robust growth in our systems and software business where we will be launching the industry first cloud platform developed. We also see good setup for vehicle wash and are excited about having ICS in our portfolio. We expect imaging and identification to perform well this year. Marking and coding saw limited downside in 2020, and we've been on a good trajectory in recent quarters, despite the tough comp in Q1 due to COVID-driven consumable stocking. We expect further improvement in services as travel restrictions subside and activity and serialization software is also firming up. The biggest factor in the segment is of course the digital textile printing unit. Our initial read is for the recovery to take place in the second half of the year when printers will be ramping up production for 2020 apparel collections. Pumps and process solutions expected to have another solid year. We expect robust growth in biopharma and hygienic applications and a continued recovery trend in industrial pump. Plastics and polymers is expected to deliver steady performance with a comparable basis to the second half bias to the second half. Precision components is likely to experience a slower start to the year, and we are still comping versus last year's first quarter. That's our robust upstream and downstream activity. And finally, we expect a very strong year in refrigeration and food equipment. The core food retail business is operating with a strong backlog, and the order trajectory has been healthy in the last few quarters. We expect retailers that had paused their remodel programs last year amid the pandemic to restart these strategic initiatives, and we are well positioned to participate in that activity. Additionally, we see a good outlook for natural refrigerant systems, both in Europe and also in the US where California was the first state to recently mandate transition to natural refrigerant systems. We were the pioneers in this space, and we are very well positioned to capitalize on this sustainability trends in the industry. Belvac as you know, is working through a record backlog and is booked for the year. Our heat exchanger business also exited 2020 with a record backlog and a constructive order trajectory across multiple verticals. This will result in material margin improvement in this segment on the back of the case production automation project, higher volume positive business mix. We covered most of the items on the earlier slides but summarize, but I summarize them here in the slide for your reference. The Dover team has delivered strong results in it's difficult conditions, and I commend all of our employees for doing their part and Andre with that, let's move on to Q&A.

sees fy 2021 adjusted earnings per share $6.25 to $6.45.

Today's call will feature commentary from Chief Executive Officer, Ritch Allison; and Chief Financial Officer, Stu Levy. Both of those documents are available on our website. Actual results or trends could differ materially from our forecasts. We're excited to share our strong first-quarter results with you today. Overall, Domino's team members and franchisees around the world generated impressive operating results, leading to a diluted earnings per share of $3 for the first quarter. Global retail sales grew 16.7% in Q1 as compared to Q1 2020. As a reminder, global retail sales growth includes both comp growth and unit growth, which I'll break down for you in a moment. When excluding the positive impact of foreign currency, global retail sales grew 14%. Breaking down that global retail sales growth, our US retail sales grew 15.3% and our international retail sales grew 18%. When excluding the positive impact of foreign currency, international retail sales grew 12.8%. We continued to see positive momentum in both our US and international businesses in Q1, leading to both strong same-store sales performance and net unit growth. During Q1, we continued to lead the broader restaurant industry with 40 straight quarters of positive US comparable sales and 109 consecutive quarters of positive international comps. Same-store sales in the US grew 13.4% in the quarter, lapping a prior year increase of 1.6%. Same-store sales for our international business grew 11.8%, rolling over a prior year increase of 1.5%. Breaking down the US comp a bit further. Our franchise business was up 13.9% in the quarter, while our Company owned stores were up 6.3%. We observed a larger spread than we've historically seen between the top line performance of our franchise stores and our company-owned stores, which we believe was primarily a result of the heavily urban and higher income footprint of our company-owned stores relative to a more diverse mix across our franchise base. The corporate store comp was also disproportionately impacted by store splits resulting from our fortressing efforts as we opened more new corporate stores as a percent of the total corporate store base than we did franchise stores in 2020. The US comp this quarter included a healthy mix of both ticket and order growth. The ticket growth was driven by both an increase in items per order and a higher delivery mix, which also includes a transparent delivery fee. The 11.8% international comp was driven by ticket growth. Similar to our US business, that ticket growth was driven by a higher delivery mix and an increase in items per order. Shifting to unit count. We and our franchisees added 36 net stores in the [Technical Issues] US during the first quarter, consisting of 37 store openings and the closure of one of our corporate stores. Our international business added 139 net stores, comprised of 160 store openings and 21 closures. We're very pleased with our net unit growth during Q1, which was an increase over the prior year quarter. Turning to revenues and operating margins. Total revenues for the first quarter were approximately $984 million and were up approximately $111 million or 12.7% over the prior year quarter. The increase was driven by higher global retail sales, which generated higher revenues across all areas of our business. Changes in foreign currency exchange rates positively impacted our international royalty revenues by $2.1 million in Q1 2021 as compared to prior year. Our consolidated operating margin as a percent of revenue increased to 39.6% in Q1 2021 from 39% in the prior year, due primarily to higher revenues from our US franchise business. Company-owned store margin as a percent of revenues increased to 23.9% from 22.4%, primarily as a result of strong sales leverage. This was also up sequentially from 21.9% in Q4 2020, driven by lower labor cost as a percent of revenue in Q1 2021. Supply chain operating margin as a percent of revenues decreased to 10.5% from 11.5% in the prior year quarter. As a reminder, in 2020, we opened two new supply chain centers in South Carolina and Texas, respectively, as well as a new press product line in New Jersey, which increased our overall fixed operating costs as a percent of revenue. G&A expenses increased approximately $2.8 million in Q1 as compared to Q1 2020 resulting from a combination of higher advertising expenses and labor costs, partially offset by travel. Net interest expense increased approximately $0.9 million in the quarter, primarily the result of lower interest income. As previously disclosed, in Q1 2021, we invested an additional $40 million in Dash brands, our master franchisee in China, following their achievement of previously established performance conditions. Accordingly, we remeasured the original $40 million investment we made in Q2 of last year due to the observable change in price from the valuation of the additional investment. This $2.5 million gain was recorded in other income in the first quarter of 2021. Our effective tax rate was 21.3% for the quarter as compared to a negative 3.7% in Q1 2020. The effective tax rate in Q1 2021 includes a 0.6 percentage point positive impact from tax benefits on equity-based compensation as compared to a 26 percentage point positive impact in Q1 2020. This decrease was due to significantly fewer stock option exercises in Q1 of this year and we expect to see continued volatility in our effective tax rate related to these equity-based compensation tax benefits. Combining all of these elements, our first quarter net income was down $3.8 million or 3.2% versus Q1 2020. On a pre-tax basis, income before provision for income taxes was up $32.3 million or 27.6%. Our diluted earnings per share in Q1 was $3 versus $3.07 in the prior year, a decrease of 2.3%. Breaking down that $0.07 decrease, most notably, our improved operating results benefited us by $0.61. The gain on the Dash brands investment benefited us by $0.05. Net interest expense negatively impacted us by $0.02. A lower diluted share count driven by share repurchases over the trailing 12 months benefited us by $0.03. And finally, our higher effective tax rate resulting from lower tax benefits on equity-based compensation, as I mentioned previously, negatively impacted us by $0.74. Our economic model continued to generate significant cash flow throughout the quarter. During Q1, we generated net cash provided by operating activities of approximately $153 million. After deducting for capex, we generated free cash flow of approximately $136 million. Regarding our capital expenditures, we spent approximately $17 million on CapEx in Q1, primarily on our technology initiatives. As previously disclosed, during Q1, we also repurchased and retired approximately 66,000 shares for $25 million. As a reminder, in February, our Board approved a new $1 billion authorization for future share repurchases. We also paid a $0.94 quarterly dividend on March 30. Subsequent to the end of the quarter, our Board of Directors declared a quarterly dividend of $0.94 per share to be paid on June 30. As it relates to our capital structure, on April 16, we refinanced our debt to keep pace with our growing business. We're very pleased with our gross issuance of $1.85 billion, which includes $850 million of seven-and-a-half-year to 2.662% fixed-rate notes and $1 billion of 10-year 3.151% fixed-rate notes. We used a portion of the proceeds to retire our 2017 floating rate notes in our 2017 five-year fixed-rate notes to pre-fund certain interest payable and to pay transaction fees and expenses. We expect to use the remaining proceeds for general corporate purposes, which may include distributions to holders of our common stock, other equivalent payments, and/or stock repurchases. This recapitalization will reduce our weighted average borrowing rate from 3.9% as of the end of the first quarter to approximately 3.7%. And it will return our leverage to approximately 6 times EBITDA, consistent with our leverage model following previous recapitalizations. Since the onset of the pandemic, in previous earnings calls, we've provided updates on the impact of Covid19-related expenses, including safety and cleaning equipment, enhanced sick pay, and other compensation for our team members, and support for our franchisees, and our communities. The estimated impact of these items in the first quarter of 2021 was not material. In closing, our business continued its strong performance during the first quarter. And while we continue to closely monitor all aspects of our operations in these ever-changing times, we're confident in the strength and resilience of the Domino's brand, and of the Domino's franchisees, their team members, and our corporate teams worldwide. Our results would not be possible without their tireless efforts each and every day and we sincerely appreciate them. Overall, I am very pleased with our results this quarter and our strong start to 2021. We are now more than one year into the Covid pandemic, the most challenging operating environment we've ever experienced as a Brand. I continue to be extremely proud of our global franchisees and their extraordinary efforts around product, service, image, and day-to-day execution. We remain focused on providing outstanding food through safe and reliable delivery and carryout experiences. And as a brand, we are also proud to continue our position as an industry leader on value at a time when our customers need it the most. Today, I'll keep my comments rather brief as I highlight the first quarter results for our US and our international businesses. Let's start with the US business. Our US business performed extremely well during the quarter, highlighted by 15.3% retail sales growth and a 13.4% comp. This marked our 40th consecutive quarter of positive US same-store sales growth. We continue to see strong growth across our business in the first quarter and we did not witness any material differences between those markets that have largely reopened versus those that have remained more restricted. We certainly saw some sales benefits from the federal government stimulus at the beginning and at the end of Q1, which were partially offset by the negative impact of the significant winter storms in February that impacted such a large portion of the country. Due to the positive sales impacts from the stimulus, we elected not to run any of our aggressive boost week promotions during the quarter, but instead, we remain focused on providing great service and offering great value to our customers every day. Now, like many of you, we are also watching the two-year stack on US same-store sales. At 15% for the first quarter, we saw a slight sequential improvement of the two-year stack when compared to the fourth quarter of 2020. Given the Covid overlaps, we will continue to look at the business through both the one-and-two-year lenses as we report to you throughout 2021. Now, beyond the comps, when you look at the absolute dollars, our first quarter same-store average weekly unit sales in the US exceeded $26,000. I am also quite pleased with our performance in the first quarter on the other critical component of our retail sales growth that's new store openings. Our addition of 36 net stores was a nice improvement over Q1 of 2020 and we anticipate a strong pipeline of future openings. I want to highlight that we had only one corporate store closure in the US during Q1, and we had zero-zero US franchise store closures, an impressive testament to the continued health of our US system. On many occasions, you've heard me say that net unit growth and by extension store closures are one of the most important ways to measure a brand's health within our industry. A single store closure in the quarter, on a base of over 6,000 units, demonstrates the elite economic proposition that we offer to our franchisees. And on that note, I'm thrilled to report yet another record-setting year of franchisee profitability, with our final 2020 estimated average EBITDA number for US franchise stores coming in at just over $177,000; the highest in our history. While this result was certainly aided by the Covid demand tailwind, it clearly demonstrates not only the power of the Brand, but also the incredible work of our US franchisees and operators, and their relentless efforts throughout an incredibly busy 2020. Our fortressing strategy continues to build best-practice case study showcasing franchisee enterprise growth and ROI, which is a big part of the momentum and excitement behind the strategy. But equally, as important, it sets us up extremely well to compete in 2021 and beyond, as we continue to drive lower relative costs, better service, higher runs per hour, and therefore, better economics for drivers, along with meaningful, incremental carry-out within our stores in fortress territories. While our carry-out order count remained pressured in Q1 as it was throughout the last year, we continue to grow awareness of Domino's car-side delivery. This has created a new option to serve our customers effectively during Covid and will remain an important part of our strategy as we continue to evolve the carry-out experience; not only to enhance the loyalty of our current carry-out customers, but also to reach a new, different, and largely untapped drive-through oriented customer, going forward. On the advertising front, I'm excited about the national TV campaign we launched this week, highlighting our very exciting partnership with Nuro. We are delivering a true autonomous pizza delivery experience to select customers in Houston today, demonstrating our forward-thinking approach to innovation as we build and evolve the brand for the future. We also brought back our old nemesis, the NOID, in this ad campaign, and it is already generating some incredible buzz around the Domino's Brand. The combination of Covid, strong sales, the broader economy reopening, and the high level of government stimulus, it's creating one of the most difficult staffing environments that we've seen in a long time. This puts pressure on our operators to meet demand while continuing to deliver great service to their customers. As we close out our discussion on the US business, I would simply highlight that the Domino's brand is as strong as it has ever been and I remain confident in our ability to drive long-term growth. Let's move on now to the international business. It was an outstanding quarter of performance for our international business. Our 12.8% retail sales growth was supported by a very strong 11.8% comp, continuing the momentum we saw toward the end of last year. Q1 also marked our 109th consecutive quarter of positive same-store sales and international; a tremendous accomplishment by our international franchise partners. And, in fact, the Q1 comp was the strongest result we've seen in more than a decade in that business. As I discussed earlier with our US business, we are also watching the two-year comp stacks for international and we'll continue to do so throughout 2021. Q1 represented a 13.3% two-year stack, which was a 430 basis point improvement versus the fourth quarter of 2020. We also continue to build momentum on store growth in our international business. Our 139 net stores in Q1 was a 100-store improvement versus the first quarter of 2020. We expect that Covid will continue to have a significant impact on many of our international markets for some time to come and will bring ongoing challenges to new store openings. But this acceleration in growth speaks to our outstanding unit-level economics and to the perseverance and commitment of our international master franchisees. We continue to have temporary store closures around the world, but those have come down dramatically over the last few quarters and were below 100 at the end of the first quarter. Now, I'd like to highlight a few markets that drove terrific growth during the quarter. India, China, and Japan, once again, led our system in net unit growth. And I'd like to highlight another market, Guatemala, that also delivered terrific store growth. China, Japan, Turkey, Colombia, Germany, and France, all drove impressive retail sales growth during the quarter. So, once again, I am very proud of our master franchisees and their operators for a great start to 2021. They are the best in the business and that's why I continue to be bullish about our international retail sales growth opportunity over the long term. So, in closing, I'm very pleased with our quarter one results. Our incredible base of franchisees and operators, combined with outstanding unit-level economics place us in an enviable position of strength within our industry. Q1 reinforced our position as the global leader in QSR pizza, but there is still so much opportunity ahead of us to drive global retail sales growth and to capture additional meaningful share within the category. As we look ahead to the rest of 2021 and beyond, we will, as always, stay focused on winning the long game. And we remain confident in our two-year to three-year outlook of 6% to 8% annual net store growth and 6% to 10% annual global retail sales growth.

qtrly u.s. same store sales growth of 13.4%. qtrly international same store sales growth of 11.8%. revenues increased $110.6 million, or 12.7%, in q1 of 2021. global retail sales increased 16.7% in q1.

Today's call will feature commentary from Chief Executive Officer, Ritch Allison and from the office of the CFO, Jessica Parrish. Both of these documents are available on our website. Actual results or trends could differ materially from our forecast. I'll request to our coverage analysts, we would like to accommodate as many of you as time permits. With that, I'd like to turn over the call to our CEO, Ritch Allison. Overall, I am very pleased with our results this quarter, which once again demonstrated the strength of the Domino's brand around the world. We are still navigating through the COVID pandemic across the globe. Throughout the last 18 months, our franchisees have continued to step up to the challenge in service to their customers, their communities and their team members. I continue to be extremely proud of our global franchisees and their extraordinary efforts to provide outstanding food through safe and reliable delivery and carryout experiences. You've heard me speak often about the importance of global retail sales growth and how that drives our business model. During the second quarter, we delivered 17.1% global retail sales growth, excluding foreign currency impact, driven by a powerful combination of growth in US same-store sales, international same-store sales and global store counts. The second quarter marked our 41st consecutive quarter of US same-store sales growth and our 110th consecutive quarter of international same-store sales growth. We also reinforced our leadership position in the pizza category with a very strong quarter of global store growth, highlighted by the opening of our 18,000th store. We celebrated this terrific milestone with the opening of a beautiful store in La Junta, Colorado. The pace of net store growth has accelerated significantly during the first half of this year. When you look at it on a trailing four-quarter basis, our pace of net store growth is increased from 624 in Q4 2020 to 884 in Q2 2021. During the quarter, we also completed our $1.85 billion refinancing transaction, lowering the cost of our debt and giving us the capacity to return $1 billion to our shareholders through our recently completed accelerated share repurchase transaction. Overall, the Domino's brand continues to deliver, as our strong same-store sales, store growth and resulting retail sales growth deliver great returns to our franchisees and our shareholders. She will take you through the details of the quarter and then after that, I'll come back and share some additional observations about the quarter and some thoughts around how we are approaching the business going forward. Jessica, over to you. We are excited to share our strong second quarter results with you today. Overall, Domino's team members and franchisees around the world generated impressive operating results, leading to a diluted earnings per share of $3.06 for Q2. Our diluted earnings per share as adjusted for certain items related to our recapitalization transaction completed during the quarter with $3.12. In Q2, we continued to see positive momentum in both the US and international businesses in both same-store sales performance and net unit growth, leading to strong global retail sales growth. Global retail sales grew 21.6% in Q2, as compared to Q2 2020. When excluding the positive impact of foreign currency, global retail sales grew 17.1%. Breaking down total global retail sales growth, US retail sales grew 7.4% and international retail sales grew 39.7%. When excluding the positive impact of foreign currency, international retail sales grew 29.5% rolling over a prior year decrease of 3.4%. The prior year decrease in international retail sales, excluding foreign currency resulted primarily from temporary store closures, changes in store hours and service method disruptions in certain international markets as a result of the COVID-19 pandemic. Turning to comps, during Q2, we continue to lead the broader restaurant industry with 41 straight quarters of positive US comparable sales and 110 consecutive quarters of positive international comps. Same-store sales in the US grew 3.5% in the quarter lapping a prior-year increase of 16.1%. Same-store sales for our international business grew 13.9% rolling over a prior year increase of 1.3%. Breaking down the US comp, our franchise business was up 3.9% in the quarter, while our company-owned stores were down 2.6%. As we noted on our Q1 call, we continue to observe a larger spread between the top line performance of our franchise stores and our company-owned stores than we have historically seen. We believe this is primarily a function of the heavily urban and higher income footprint of our company-owned store markets relative to the more diverse mix across our franchise space. The US comp this quarter was driven by ticket growth due to increases in items per order in our transparent delivery fee as well as the mix of products we sell. Order count on a same store basis were consistent with Q2 2020 levels, which were higher than Q2 2019 levels, as a result of customer ordering behavior during the pandemic. The international comp was driven by order growth due to the return of non-delivery service methods, the resumption of normal store hours and the reopening of stores that were temporarily closed in certain of our international markets in Q2 2020. Shifting to unit count, we and our franchisees added 35 net stores in the US during the second quarter, consisting of 39 store openings and foreclosures. Our international business added 203 net stores comprised of 217 store openings and 14 closures. Turning to revenues and operating margins. Total revenues for the second quarter were up approximately $112.4 million or 12.2% over the prior year quarter. The increase was driven by higher global retail sales, which generated higher revenues across all areas of our business. Changes in foreign currency exchange rates positively impacted our international royalty revenues by $4 million in Q2 2021 as compared to the prior year quarter. Our consolidated operating margin as a percentage of revenues increased to 39.5% in Q2 2021 from 38.8% in the prior year, due primarily to higher revenues from our US franchise business. Company-owned store margin as a percentage of revenues increased to 24.5% from 23.1% primarily as a result of lower labor costs, partially offset by higher food costs. Recall that we incurred additional bonus pay in the second quarter of last year for team members on the front lines during the COVID-19 pandemic. Supply chain operating margin as a percentage of revenues decreased to 11% from 11.9% in the prior year quarter, resulting primarily from higher insurance and food costs, as well as higher fixed operating costs driven by depreciation and our new supply chain facilities opened last year. These increases were partially offset by lower labor costs. G&A expenses increased approximately $12.3 million in Q2 as compared to Q2 2020, resulting from higher labor costs, including higher variable performance-based compensation and non-cash compensation expense, partially offset by lower professional fees. Additionally, as we discussed on our Q1 call, we completed our most recent recapitalization transaction during the second quarter in April. Net interest expense increased approximately $6.7 million in the quarter, driven by a higher average debt balance. Our weighted average borrowing rate for Q2 2021 was 3.8%, down from 3.9% in Q2 2020. Our effective tax rate was 19.6% for the quarter as compared to 4.7% in Q2 2020. The effective tax rate in Q2 2021 includes a 2.3 percentage point positive impact from tax benefits on equity-based compensation. This compares to an 18.5 percentage point positive impact in Q2 2020. This decrease was due to significantly fewer stock option exercises in Q2 of this year. We expect to see continued volatility in our effective tax rate related to these equity-based compensation tax benefits. Combining all of these elements, our second quarter net income was down $2 million or 1.7% versus Q2 2020. On a pre-tax basis, we were up $20.6 million or 16.5% over the prior year. Our diluted earnings per share in Q2 was $3.06 versus $2.99 in the prior year. Our diluted earnings per share as adjusted for the impact of the recapitalization transaction was $3.12, an increase of $0.13 or 4.3% over the prior year. Breaking down that $0.13 increase in our diluted earnings per share as adjusted, most notably, our improved operating results benefited us by $0.53, net interest expense adjusted for the impact of the items affecting comparability I discussed previously negatively impacted us by $0.08, a lower diluted share count driven by share repurchases over the trailing 12 months benefited us by $0.12, and finally our higher effective tax rate, resulting from a lower tax benefits on equity based compensation negatively impacted us by $0.44. Shifting to cash, our strong financial model continue to generate significant cash flow throughout the second quarter. During Q2, we generated net cash provided by operating activities of approximately $143 million. After deducting for capex, we generated free cash flow of approximately $126 million. Regarding our capital expenditures, we spent approximately $17 million on capex in Q2, primarily on our technology initiatives, including our next-generation point-of-sale system. As previously disclosed, during Q2, we also entered into an accelerated share repurchase transaction for $1 billion. We received and retired approximately 2 million shares at the beginning of the ASR. The ASR settled yesterday and we received a retired an additional 238,000 shares in connection with this transaction. In total, the average repurchase price throughout the ASR program was $444.29 per share. We also paid a $0.94 quarterly dividend on June 30. Subsequent to the end of the quarter, our Board of Directors declared a quarterly dividend of $0.94 per share to be paid on September 30. In closing, our business continued its strong performance during the second quarter and we are very pleased with the results our franchisees and team members around the world delivered. And I'll begin my comments with a look at our US business. For months now, many of you have been asking how we would lap the tough comparisons from Q2 of last year. My answer has always been that we're not focused on managing to a 12-week quarter. We are focused on building the business for the long term and that long-term focus on great product, service, image and technology is precisely why we were able to deliver a terrific quarter, highlighted by 7.4% US retail sales growth, lapping 19.9% from Q2 2020. Turning to same-store sales, perhaps the thing I'm most pleased about when I look at the 3.5% US comp is the fact that we were able to hold orders flat while overlapping the big gains from Q2 2020. I'm also pleased that our ticket growth was driven by a very healthy balance of more items per order and modest menu price and delivery fee increases. We achieved positive comps in both our delivery and carryout businesses, with delivery driven by ticket and carryout driven by a balance of order count and ticket growth. We continue to see strong growth across our business in the quarter. You've often asked, if our sales growth might be weaker in markets that had more fully reopened, but to the contrary, the opposite trend emerged through the second quarter where we saw higher levels of sales growth in the second quarter in the markets with fewer COVID-related restrictions. Similar to Q1, we saw the comp growth in rural areas outperformed urban areas, and less affluent areas outperformed more affluent areas. These differences, combined with the impact of more aggressive fortressing, accounted for much of the same-store sales gap between our corporate store and franchise store businesses. We saw sales benefits during the quarter from the federal government stimulus, particularly the checks that we delivered back in March. It's difficult to quantify the magnitude of the impact of the one-time distributions and the ongoing unemployment and other government payments to consumers, but we believe that they do continue to have some positive sales impact on our business. Due to the strong sales throughout the quarter, we once again elected not to run any of our aggressive boost week promotions, but instead remain focused on providing great service and offering great value to our customers every day. As we continue to experience COVID overlaps, we believe it will be instructive to continue to look at the cumulative stack of comparable US same-store sales anchored back to 2019 as a pre-COVID baseline. At 19.6% for Q2, we saw a material sequential improvement of the two-year stack when compared to the first quarter. Beyond the comps, when you look at the absolute dollars, our second quarter same store average weekly unit sales in the US exceeded $27,000, another sequential uptick from the levels seen in the first quarter. Now turning to the other critical component of our retail sales growth, new store openings, our addition of 35 net stores was softer than we expected. We have a very strong pipeline of future openings, but had a number of stores delayed due to store level staffing challenges and construction, permitting or equipment delays. We hope to accelerate the pace of openings during the second half of the year as some of the delays in unit growth may subside. I'll turn and speak now about the carryout and the delivery businesses. We saw the return of carryout order growth in Q2 and we continue to build awareness of Domino's car-side delivery. We ran a brief 49% off car-side delivery awareness campaign during the quarter and just recently launched a campaign highlighting our Car Side Delivery 2-Minute Guarantee. This campaign hits on two key elements of the Domino's brand, service and value. Our franchisees and operators have fully embraced car side delivery and we are consistently averaging below 2 minutes out the door and on our way to the customer's cars. This is a great technology enabled way to serve our customers and will remain an important part of our strategy as we continue to evolve the carryout experience, not only to enhance the loyalty of our current carryout customers, but also to reach a new different and largely untapped drive-through oriented customer going forward. For the delivery business, I was also very pleased to see positive delivery same-store sales growth during Q2, while facing very difficult overlaps. We brought back the noise to highlight our partnership with Nuro for autonomous delivery. This campaign hits on our technology and innovation leadership, while having a little bit of fun with our old nemesis, The Noid. We continue to learn as we pilot a true autonomous pizza delivery experience to select customers in the Houston market. Now turning to staffing, I'll reiterate something I said back in April. We continue to operate in a very difficult staffing environment for our stores and our supply chain centers. The combination of COVID, strong sales, the accelerating economic growth across the country and the ongoing government stimulus continue to result in one of the most difficult staffing environments that we've seen in a long time. And frankly, this led to higher margins in our corporate store business than we would like to see. The reality is that we were operating during the quarter with fewer team members than we would like to have in many of our stores. This puts pressure on our operators to meet demand, while continuing to deliver great service. In the back half of the year, we expect to implement additional wage increases across certain corporate store markets and positions. And as we look forward in the US business, we will continue to make the necessary investments to drive retail sales growth into the future. We recently announced our plans to build another supply chain center in Indiana, which we expect to complete by the end of 2022. We are making solid progress on the rewrite of our POS point-of-sale system and we'll continue that multiyear investment, along with additional investment in our enterprise systems to support the business. We will continue to invest in technology, operations and product innovation to support our carryout and our delivery businesses. We are continuing to raise wages and invest in our hourly team members and of course as always we will remain focused on value for our customers. So I'll close out our discussion of the US business by simply saying that the Domino's brand has never been stronger and I remain confident in our ability to drive sustainable long-term growth. Now let's move on to international. It was an outstanding quarter of performance for our international business. Our 29.5% international retail sales growth, excluding foreign currency impact was supported by an exceptional 13.9% comp, continuing the momentum we had in the first quarter. As I discussed earlier with our US business, we're also watching the two-year comp stacks for international, anchoring back to pre-COVID 2019 and we'll continue to do so throughout 2021. Q2 represented a 15.2% two-year stack, a sequential improvement over the first quarter. I'm particularly pleased with our strong momentum on store growth as international provides a significant push toward our two to three-year outlook of 6% to 8% global net unit growth. Our 203 net stores in Q2 increased our trailing four quarter pace of international store growth to 653 net stores. Our accelerated store growth continues to be driven by our outstanding unit level economics and the strong commitment of our international master franchise partners. During the quarter, COVID continue to have a significant impact on many of our international markets and we expect COVID to remain a challenge in many parts of the world for some time to come. At the end of the quarter, we had fewer than 175 temporary store closures, with many of those located in India, which has been hit particularly hard by COVID. The company mounted a series of initiatives to support their employees and families through this unprecedented crisis. This included a cross-functional team that provided employee assistance 24/7 as well as several COVID isolation centers with oxygen concentrator banks. Jubilant mounted a massive vaccination drive for all of their employees and dependent family members. Challenging times always bring out the best in Domino's franchisees and I could not be more proud of our leaders in India and how they have responded to this crisis. I'd also like to highlight a few international markets that drove terrific growth during the quarter. China passed the 400 store milestone during Q2 and once again Dash, our master franchise partner delivered outstanding retail sales growth for the brand. China is without question, one of the most exciting businesses in the Domino's system with significant long-term runway for growth. Japan reached the 800 store milestone in the weeks following the close of our second quarter and continued the outstanding performance under master franchisee Domino's Pizza Enterprises ownership. The UK, Germany, Mexico and Turkey were also large market highlights in a strong quarter of performance across our international business. I am proud of our master franchisees and their operators for their great work thus far in 2021, and I remain optimistic about our international retail sales growth opportunity over the long term. So in closing, I'm very happy with our Q2 results. Great franchisees and operators, combined with outstanding unit level economics place us in an enviable position within our industry and give us a strong foundation for future growth. There is absolutely no question that Domino's is the global leader in QSR pizza, but there is still so much opportunity ahead of us to drive global retail sales growth and to grow market share around the world in both our delivery and carryout businesses. As we look to the back half of the year and beyond, you can be confident that we will remain focused on winning the long game.

compname reports q2 earnings per share of $3.06. q2 adjusted earnings per share $3.12. q2 earnings per share $3.06. qtrly international same store sales growth of 13.9%. qtrly u.s. same store sales growth of 3.5%.completed $1.0 billion accelerated share repurchase transaction in july 2021. given our current operating environment, we are watching our two-year sales trends anchored to pre-covid fiscal 2019 results.

Today's call will feature commentary from Chief Executive Officer. Ritch Allison and from the office of CFO, Jessica Parrish. I ask that members of the media and others to be in a listen-only mode. Both of these documents are available on our website. Actual results or trends could differ materially from our forecast. I'll request to our coverage analysts, we would like for you to accommodate that -- we would like to accommodate as many of you as time permits. So we encourage you to ask only one one-part question on the call if you could, please. Overall, I'm happy with our results this quarter, which once again demonstrated the powerful growth potential of the Domino's brand around the world. The third quarter presented significant challenges related to COVID and specifically the rise in the Delta variant across the U.S. and around the world. Our system had to pivot yet again in response to the resulting changes in public health guidance and requirements. As this pandemic extends deep into its second year, I'm proud to say that our franchisees have continued to step up to meet the ongoing challenge in service to their customers, their communities and their team members. Throughout the Domino's system, we'll remain committed to serving our customers with outstanding food through safe and reliable delivery and carryout experiences. Now, you've heard me say it many times. Global retail sales growth is the engine that drives our business model. During the third quarter, we delivered 8.5% global retail sales growth, excluding foreign currency impact, driven by a combination of store growth and same store sales. That 8.5% result was lapping a 14.8% from the third quarter of 2020. The third quarter extended our unmatched streak of international same store sales growth to 111 consecutive quarters. While our 41 quarter streak of positive same store sales in the U.S. ended during the quarter, I'm pleased that we still grew our U.S. retail sales during the quarter, while rolling over 21.3% retail sales growth in Q3 2020. During the quarter, we also accelerated our pace of global store growth on a trailing four-quarter basis, we have opened 1124 net new stores, that's an increase of 500 relative to where we were in Q4 2020. Over the last four quarters, we've averaged just a touch above three net new stores every day. So, overall the Domino's brand continues to deliver. She will take you through the details of the quarter and then I'll come back to share some additional thoughts about the business. Jessica, over to you. We are pleased to share our third quarter results with you today. Overall, Domino's team members and franchisees around the world continue to generate healthy operating results, leading to a diluted earnings per share of $3.24 for Q3. In Q3, we sustain our positive momentum in both our U.S. and international businesses, resulting in year-over-year global retail sales growth. Global retail sales excluding the positive impact of foreign currency grew 8.5% in Q3 as compared to Q3 2020. Breaking down total global retail sales growth, U.S. retail sales grew 1.1% rolling over a prior year increase of 21.3%. International retail sales excluding the positive impact of foreign currency grew 16.5% rolling over a prior year increase of 8.5%. During Q3, we continued our streak of 111 consecutive quarters of positive international comps. Same store sales for our international business grew 8.8% rolling over a prior year increase of 6.2%. The U.S. comp was negative in Q3 following 41 straight quarters of positive same store sales growth. Same store sales in the U.S. declined 1.9% in the quarter rolling over a 17.5% increase in same store sales in Q3 of 2020, the highest quarterly U.S. comp we have ever achieved since becoming a publicly traded company in 2004. Breaking down the U.S. comp, our franchise business was down 1.5% in the quarter, while our company-owned stores were down 8.9%. We continue to observe a larger spread between the top line performance of our franchise stores and our company-owned stores than we historically observed, which we believe is a function of the heavily urban and higher income footprint of our company-owned store markets relative to a more diverse mix across our franchise base. More aggressive purchasing in our company-owned store markets also contributed to the same store sales gap between our corporate store and franchise store businesses. The decline in U.S. same store sales this quarter was driven by lower order counts. Our U.S. order counts during Q3 were pressured by a very challenging staffing environment, which had certain operational impacts such as shortened store hours or customer service challenges in many of our stores. Additionally, since the onset of the pandemic, our comps had also benefited from significant economic stimulus activity in the U.S., the effects of which largely tapered off in the third quarter, which we believe pressured our order counts as compared to Q3 2020. Ticket growth partially offset the decline in order counts as we continue to see consumers or there are more items per transaction during Q3. The ticket comp also benefited from increases to our transparent delivery fee as well as the mix of products we sell. The international comp was primarily driven by order growth due to the return of non-delivery service methods across a number of international markets as well as the resumption of normal store hours in the reopening of stores that were temporarily closed in certain of our international markets in Q3 2020 due to the COVID-19 pandemic. Shifting to unit count, we and our franchisees added 45 net stores in the U.S. during the third quarter, consisting of 46 store openings and only one closure. Our international business added 278 net stores comprised of 287 store openings and 9 closures. Turning to revenues and operating margins. Total revenues for the third quarter were up approximately $30.3 million or 3.1% over the prior year quarter. The increase was driven by higher retail sales, which generated higher international royalty, supply chain and U.S. franchise revenues. Changes in foreign currency exchange rates positively impacted our international royalty revenues by $1.3 million in Q3. Our consolidated operating margin as a percentage of revenues increased to 38.6% in Q3 2021 from 37.4% in the prior year, due primarily to higher revenues from our global franchise businesses. Company-owned store margin as a percentage of revenues was flat year-over-year at 19.8%. As a percentage of revenues, food and occupancy costs were higher year-over-year, offset by lower labor costs. Recall that we incurred additional bonus pay in the third quarter of last year for frontline team members and although we did make investments in frontline team member wage rates during Q3, we continue to experience staffing shortages in certain of our company-owned stores. Supply chain operating margin as a percentage of revenues increased to 10.7% from 10.2% in the prior year quarter. While the market basket increased 2.1% year-over-year, higher product and supplies expenses related to certain COVID related safety and sanitizing equipment negatively affected the supply chain operating margin in Q3 2020, which did not recur in the current quarter. This year-over-year decrease in product costs was partially offset by higher labor costs. G&A expenses increased approximately $4.7 million in Q3 as compared to Q3 2020 resulting from higher travel and labor costs, including higher non-cash compensation expense, partially offset by lower professional fees. Net interest expense increased approximately $7.1 million in the quarter, driven by a higher average debt balance due to our recent recapitalization transaction completed in Q2. Our weighted average borrowing rate for Q3 decreased to 3.8% from 3.9% in Q3 2020 due to lower interest rates on our outstanding debt as a result of this recapitalization transaction. Our effective tax rate was 10.7% for the quarter as compared to 19.9% in Q3 2020. The effective tax rate in Q3 2021 included a 10.4 percentage point positive impact from tax benefits on equity-based compensation. This compares to a 2.8 percentage point positive impact in Q3 2020. This increase was due to more stock option exercises in Q3 of this year. We expect to see continued volatility in our effective tax rate related to these tax benefits from equity-based compensation. Combining all of these elements, our third quarter net income was up $21.3 million or 21.5% versus Q3 2020. Our diluted earnings per share in Q3 was $3.24 versus $2.49 in the prior year quarter. Breaking down that $0.75 increase in our diluted EPS, most notably, our improved operating results benefited us by $0.36. Our lower effective tax rate, primarily due to higher tax benefits on equity based compensation positively impacted us by $0.34. A lower diluted share count driven by share repurchases over the trailing 12 months benefited us by $0.19 and higher net interest expense negatively impacted us by $0.14. Shifting to cash, our strong financial model continues to generate significant cash flows. During Q3, we generated net cash provided by operating activities of approximately $189 million. After deducting for capex, we generated free cash flow of approximately $172 million. Regarding our capital expenditures, we spent approximately $17 million on capex in Q3, primarily on our technology initiatives, including our next-generation point-of-sale system and our new supply chain center. Our strong free cash flow generation allowed us to continue our long-term commitment to returning cash to shareholders. As we discussed on the Q2 earnings call, we completed our $1 billion accelerated share repurchase transaction during Q3. Subsequent to the settlement of the ASR, during Q3, we repurchased and retired approximately 153,000 shares for $80 million or an average price of $521 per share. As of the end of Q3, we had approximately $920 million remaining under our current Board authorization for share repurchases. We have continued to repurchase and retire shares subsequent to the end of the quarter and through October 12, we had repurchased and retired an additional 205,000 shares for approximately $100 million or an average price of $488 per share. We also returned $35 million to our shareholders during Q3 in the form of a $0.94 per share quarterly dividend. Shifting gears, as we look toward our fourth quarter, we wanted to provide an update on our annual guidance measures for full year 2021 provided earlier this year. We previously provided guidance that our store food basket pricing in our U.S. system would increase approximately 2.5% to 3.5% over 2020 levels. We previously provided guidance that foreign currency could have a $4 million to $8 million positive impact on royalty revenues as compared to 2020. We previously provided guidance of $415 million to $425 million for G&A expense. Based on our current outlook, we expect each of these three measures to come in at the high end of these current estimates. We continue to expect that our full year capex investments will be approximately $100 million. Keep in mind that these metrics can change based on economic and other factors outside of our control. Our G&A expense is also affected by our own performance versus our plan, which affects variable performance-based compensation expense. These estimates also reflect our normal 16-week Q4, which will be rolling over the 17-week Q4 we had in 2020 due to the inclusion of a 53rd week in our fiscal year. Recall that the 53rd week last year contributed an incremental $0.39 to our earnings per share in Q4 2020 due to the additional week of revenues and the costs attributable to the 53rd week. In closing, our business continued its solid performance during the third quarter and we are proud of the results our franchisees and team members around the world delivered. I'll begin my comments with a look at our U.S. business. Retail sales grew 1.1% in the third quarter, lapping a 21.3% increase from Q3 2020. Our 1.9% same store sales declined during the quarter, was offset by the positive impact of 232 net new stores that we have opened over the trailing four quarters. Now let's take a few minutes to further break down the U.S. retail sales growth into it's two components: store growth and same store sales. Our 45 net new stores in Q3 was a sequential improvement over Q2, but still came in softer than we would like to see. While cash on cash returns remain very strong and we continue to see a robust pipeline of future openings, we and our franchisees had a number of store openings delayed due to a variety of factors. We and our franchisees saw delays in construction, equipment, utility hookups and inspections. In addition, franchisee staffing challenges also resulted in some delays. We remain very bullish on the unit growth potential in the U.S., but believe that we may continue to see some of these challenges in the months ahead. Now let's turn to same store sales. As we continue to experience COVID overlaps, we believe it's instructive to look at the cumulative stack of comparable U.S. same store sales anchored back to 2019 as a pre-COVID baseline and we'll continue to do so for as long as we believe it is useful in understanding our business performance. At 15.6% for Q3, we saw a sequential decline of the two-year stack when compared to the second quarter, bringing us back more in line with the two-year stack we saw in Q1 of this year. So what changed from Q2 to Q3. Jessica highlighted several key drivers that I'll expand on here. First, we believe that government stimulus had an impact on our sales in Q2 that waned in the third quarter as we moved further away from the spring one-time payments and as other enhanced benefits tapered off. Second, we saw more pronounced staffing challenges across the country, resulting in reduced operating hours and service challenges in a number of stores across the network. We believe these challenges posed a more significant headwind on orders and sales during the third quarter than they did during the first half of this year. We and our franchisees are taking a number of actions to address the staffing issues. A new applicant tracking system rolled out a few weeks ago that will make it easier for candidates to apply for openings and to be onboarded at both corporate and franchise locations across our U.S. system. We are also sharing operational best practices to eliminate unnecessary time-consuming tasks in the operation of stores, like pre-folding boxes, for example. They can drive both team member and customer satisfaction. In our corporate stores, we have recently implemented meaningful increases in team member compensation and are also piloting new approaches to team member onboarding, training and development. While I'm optimistic about the efforts that we and our franchisees have underway, we believe that staffing may remain a significant challenge in the near term as the labor market continues to evolve. Now I'll share a few thoughts specifically about the carryout and delivery businesses. We saw a positive carryout same store sales growth during Q3, as we continue to build awareness of Domino's car side delivery. We are on air for several months with a fun campaign highlighting our car side delivery two-minute guarantee. This campaign hits on two key elements of the Domino's brand. I'm very pleased with our car side delivery performance as our franchisees and operators have enthusiastically embraced this new service method. It's also bringing in new customers. We have consistently averaged below two minutes out the door and on our way to the customer's cars. In fact, we have many stores across the country that are consistently below 1 minute. It's a great technology enabled way to serve our customers and will remain an important part of our long-term strategy to serve our existing carryout customers and to attract new QSR drive through oriented customers going forward. I'm also excited to talk about our latest menu innovations. Just this past Monday, we went on air to launch three great new products to support our signature $7.99 carryout offer. We call them dips and twists and they hit the mark for great taste and consumer appeal with terrific economics for our franchisees. I'm excited about the impact these can have on sales and on store level profitability. I really hope you'll get out and try them. We have one sweet and two savory dip options in this new product line. Baked apple, five Cheese and my personal favorite cheesy marinara. Turning to our delivery business. Q3 saw a same store sales decline relative to 2020, but delivery sales remain significantly above 2019 levels. During the quarter, we believe that the stimulus wind down and the staffing challenges that I referenced earlier, had a disproportionate impact on our delivery business. Just a few weeks ago, we launched a new ad campaign to support the delivery business. It plays on a key tension that consumers have with third-party delivery apps, the surprise fees that are often charged for service, for small orders or simply because you live in a certain zip code. Consumers also tell us that they hate the fact that these charges are often confusing, hidden or buried in the receipt. Domino's and our franchisees never charge surprise fees. We charge one transparent delivery fee. So, we decided to give our customers surprise frees instead of surprise fees. During this campaign, one out of every 14 digital delivery orders receives a free item. That item could be a pizza, stuffed cheesy bread, lava cakes or any one of a number of other great items. Over the course of the campaign, Domino's and our franchisees will give away $50 million worth of surprise frees to delivery customers. Now this campaign supports two of our key brand attributes: value and transparency. I'll also share a few important milestones that occurred in the U.S. during the quarter. First, we broke ground. Just a few weeks ago on a new supply chain center in Indiana, which we expect to complete and open by the end of 2022. And second, we are now running a pilot version of our new Pulse point-of-sale system in a live store environment and we will continue to invest in that multi-year project going forward. So, as we look forward in the U.S. business, I remain optimistic about our ability to continue driving long-term growth. We'll manage through the staffing and other challenges in the short term. Frankly, that's what Domino's franchisees and operators do and have always done and will continue to leave the brand with a clear focus on long-term profitable growth for our franchisees and DPZ. Now moving on to international. It was another outstanding quarter of performance for our international business. Our 16.5% international retail sales growth, excluding foreign currency impact, was supported by a very strong 8.8% comp. When you look at it on a trailing four-quarter basis, excluding the impact of foreign currency and the 53rd week of 2020, Domino's International retail sales grew by 16.2%. As I discussed earlier with our U.S. business, we are also watching the two-year comp stacks for international, anchoring back to pre-COVID 2019. Q3 represented a 15% two-year stack, which was very consistent with the second quarter. International store growth was a highlight during the quarter. Our international master franchisees opened 278 net new stores during the quarter, which increased the trailing four-quarter pace to 892 stores for the international business. This acceleration and international store growth combined with our U.S. store growth has driven the global pace of store growth back into our two to three-year outlook range of 6% to 8% global net unit growth. I was also very pleased to see that we had only nine closures in international and only 10 closures on a global basis during the quarter. This low level of store closures is driven by two factors. First, our outstanding unit level economics and second and very importantly, the strong commitment of our franchisees across the globe. During the quarter, COVID continue to have a significant impact on many of our international markets and we expect COVID to remain a challenge in many parts of the world for some time to come. At the end of the quarter, we estimate Domino's had fewer than 175 temporary store closures, with many of those located in India and New Zealand. I'll highlight a few of the international markets that contributed significantly to our growth during the quarter. We successfully converted 52 stores in Poland as Dominion pizza rebranded to become part of the Domino's family. This provides important scale for us in Poland, fast-forwarding us to 119 total stores in the market at the end of the third quarter. We now have 24 international markets with 100 or more Domino's stores. We opened our 93rd international market during the quarter, officially welcoming Lithuania to the Domino's family. We're off to a great start there with the first store opening and we have a second one coming very soon. India resumed an impressive pace of store growth, while becoming the first Domino's market outside the U.S. to reach 1400 stores. I could not be more proud of Jubilant, our master franchise partner, and the efforts they have made to fight through COVID, taking care of their people, while still growing their business. Japan had another outstanding quarter, passing the 800-store milestone and continuing its impressive streak of growth. The transformation of the market by master franchisee Domino's Pizza Enterprises has been remarkable. China delivered double-digit same store sales growth, while continuing its strong pace of store growth. With each passing quarter, we become even more confident about the long-term growth potential for the Domino's brand in China. In addition to those markets, the U.K., Mexico, the Netherlands, Turkey and Colombia were additional large market highlights in a strong quarter of performance across our international business. And along with those markets, we also saw robust regional growth across the Middle East and Northern Africa during the quarter. I have long been convinced that we have the best international franchise partners in the restaurant business and they certainly prove me right during the third quarter. So in closing, I'm pleased with our third quarter results. Our outstanding franchisees and operators continue to battle through a challenging set of circumstances, while delivering strong growth for the Domino's brand around the world. These passionate Dominoids combined with our outstanding unit level economics, position us incredibly well for the future. There is no doubt that we will continue to experience challenges with COVID, with staffing, and other factors. We also expect inflationary headwinds to continue impacting Domino's and the broader restaurant industry over the coming quarters. But we will face all of these challenges and headwinds from a position of strength and with the unwavering commitment of our franchisees and team members who proudly wear the Domino's logo. My team and I are proud to serve them each and every day.

q3 earnings per share $3.24. qtrly u.s. same store sales decline of 1.9%. qtrly diluted earnings per share up 30.1% to $3.24. qtrly international same store sales growth of 8.8%.

As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from those implied by our comments today. We made excellent progress in the quarter, reducing our cash burn rate, improving our total liquidity and reopening hotels for the eventual recovery. The second quarter, however, was unlike any in the history of the hotel industry. When we last spoke in May, we were in the midst of the largest contraction in GDP ever experienced in the U.S. as government restrictions were imposed to curtail the spread of COVID-19 in order to protect the general public. While some communities were able to reduce the spread of the virus, other locations experienced sudden increases in the transmission of this terrible virus. Contemporaneously, the concerns over systematic bias in our society led to demonstrations across the United States involving an estimated 15 million to 25 million people. The overall environment experience in 2020 is the very definition of unprecedented. Before going any further, I want to recognize the hard work of our hotel operating teams and their dedication to the health and safety of our guests. I also want to recognize our corporate employees for their agility, creativity and perseverance to ensure that DiamondRock is secure and well positioned for a profitable future. Let me recap those for you. One, the second quarter is expected to be the worst period in the year. The demand recovery will come in stages with leisure demand from drive to resorts coming back first, followed slowly by emerging business transient customers and, finally, by the return of large group meetings likely in 2021. Supply is going to be constrained going forward as new construction starts to evaporate and obsolete hotels shut their doors for good. According to F.W. Dodge, rolling three-month hotel construction starts were down 56% in June as compared to the prior year. Moreover, last quarter, we suggested as much as 10% of the existing supply in Midtown East, New York, may not reopen. There's reason to believe that our early estimate may be conservative. Fourth and finally, this is an opportunity to reinvent the operating model by identifying lasting opportunities to increase efficiencies through new best practices, promoting technology adoption like digital check-in and supporting emerging customer priorities such as the green room initiative. We are optimistic that this could lead to increased profit margins once we return to pre-COVID-19 levels of demand. Let's talk specifically about the second quarter. In response to travel demand declining by over 90%, we suspended operations at 20 of our 30 operating hotels, leaving just 10 hotels open at one point in April. The quick action taken by the team allowed us to realize a 72% reduction in hotel-level expenses excluding wage of benefit accruals. Impressively, compared to the prior year, second quarter man hours decreased 83% at open hotels and 99% at hotels with suspended operations. The decision to reopen hotels has been and continues to be dynamic and data driven. As we articulated in the past, our plan is to reopen hotels if we can lose less money doing so. Accordingly, starting in May, we prioritized our drive to resorts based on returning demand visible through various channels. And ultimately, we reopened a total of 12 additional hotels in the second quarter. The 22 hotels we had opened at the end of the quarter represent 58% of our hotel rooms. But since the openings were staggered, the math works such that just 43% of our rooms were available in the quarter. Demand got a little better as the quarter progressed. Weekly occupancy for our operating hotels, which had bottomed at 6.8% at the end of March, rose steadily to 27.8% by the last week in June. This trend has continued beyond Q2 with occupancy for operating hotels in July over 200 basis points higher than the full month of June. Over the course of the quarter, we saw a growing number of hotels achieve breakeven profitability, and we expect that this trend continued in July. In April, five hotels achieved breakeven profitability on a GOP basis, and this figure grew to seven hotels in May and 10 hotels in June. On a hotel EBITDA basis, two hotels generated profits in April and account increased to four hotels in May and six hotels in June. The consistent theme is nearly is that nearly every one of these hotels is among our collection of drive to resorts. Leisure was clearly the brightest segment during the quarter and certainly a source of strength in DiamondRock's portfolio. As you might have guessed, weekends were the strongest. From early May to the end of June, weekend occupancy at our resorts increased from 11% to nearly 56%, with healthy gains in ADR for the majority of the weeks. For the second quarter, leisure transient ADR was 1.6% higher than in the second quarter of 2019. The resilience of rate in the leisure category tells us that price is not a gating issue for those customers. Trends at our resorts in July were encouraging. The Shorebreak in Surf City Huntington Beach averaged nearly 50% occupancy in July. Our L'Auberge de Sedona, Orchards Inn and Havana Cabana Key West, each ran occupancy over 60%. L'Auberge actually had an average rate in July of $553, which was a 14% increase over the prior year. But our little star of the month was Landing in Lake Tahoe, which had 80% occupancy in July with average rate up nearly $100 a night to over $519. As for business transient, we are not expecting a significant recovery after this summer. In fact, we do not expect a true recovery in business transient demand until folks return to the office, which appears drifting toward early 2021 for many major employers. Nevertheless, there are individuals traveling for business, and we did see a gradual improvement in our room and total revenue activity each month over the course of the quarter. In April, the weakest month of the quarter, we saw less than $400,000 of revenue from business transient channels, but this grew to $1 million in May and $2.5 million in June. These are meager beginnings. But longer term, we are optimistic that as a consequence of more office personnel working from home, there may be increase in hotel meeting activity to plan strategy, conduct training and foster corporate culture. The group segment has certainly experienced an enormous deferral of business. Globally, C-Band had two billion RFPs passed through their system in the second quarter of 2020 as compared to six billion in the second quarter of 2019. Group trends are challenging, and we expect this segment will be the final one to recover. While DiamondRock does not have the depth of exposure to group, particularly large group as some of our peers, we thought that the limited data points we were seeing could be of value. Since the start of the COVID impact and through the second quarter, our portfolio experienced approximately $117 million of canceled group revenue. Over 80% of these cancellations occurred in March and April. The pace of cancellations was initially as high as $20 million per week in March, but has since slowed to just $2 million to $3 million per week. We expect cancellations will persist as we move throughout the year. However, it was encouraging to see 250,000 to 350,000 room nights of group leads generated each month during the second quarter. Some of the early lead volume was rebooking activity. Short term, group bookings are increasingly weighted toward SMERF association and wedding events. We're seeing larger pieces of group business, which are typically corporate, look at dates in 2021 and 2022. Overall, rate expectations are consistent with pre-COVID levels. While there have been short-term opportunistic groups booked in 2020, rate parameters for the 2021 and 2022 periods have been normal. Instead, the main request is around terms for cancellations and rebookings, highlighting that groups do want to meet, but desire flexibility until there is greater visibility. I want to touch on a few financial items in Q2, address our capital markets activity in the quarter and I'll conclude with an update on our liquidity and cash burn rate. Total revenue decreased 92.1% in second quarter 2020 as a result of a 92.8% decline in RevPAR. Total revenues were $3.3 million in April with 10 hotels open, $5.7 million in May with 12 hotels open and $10.9 million in June with 22 hotels open. Excluding the Sonoma Renaissance, which opened July 1, the same 22 hotels are on pace for nearly $13 million of revenue in July. As Mark mentioned, we decreased hotel-level operating expenses 72% from $170 million to approximately $48 million, excluding nearly $3 million of accrued benefits for furloughed employees. We were able to slash variable expenses by 80%. It is critical to understand that we achieved this level of cost reduction despite over 70% of our hotels partially open during the quarter. Hotel adjusted EBITDA in the quarter was negative $30.4 million. Corporate adjusted EBITDA in the quarter was negative $37 million. Finally, second quarter adjusted FFO per share was negative $0.20. For CapEx, we have canceled or delayed over 65% of our original capital expenditure plans. In the second quarter, we restricted capex spending to only $20.7 million, including $8.5 million for Frenchman's Reef to put the project in a position where we could pause work. Our primary focus remains conserving capital, so we are prioritizing only those expenditures where we have high confidence that they can produce a near-term earnings benefit and high return on investment at minimal cost and complexity. In this regard, we spent $4.5 million to complete the F&B repositioning initiatives at our Renaissance hotels in Sonoma, Worthington and Charleston as well as the JW Marriott Cherry Creek. We expect these investments will be earnings contributors in 2021, and the average IRR is forecast to be over 30%. We remain in a strong liquidity position. At the end of the quarter, we have $364 million of total liquidity between corporate and hotel level cash and undrawn revolver availability. I'm also pleased to report that through hard work, we are able to meet our initial expectations for our overall cash burn rate. At the hotel operating level, we averaged a $10.1 million monthly loss in the quarter, surpassing our initial forecast by 16%. Including corporate G&A, the average monthly loss was approximately $12 million or 12% ahead of our expectation. Finally, our total burn rate, including debt service, was approximately $17 million. Compared to our average pace in second quarter 2020, we expect our burn rate will improve slightly in July, mainly because we had 58% of our rooms open at the end of June as compared to only 43% during the quarter. Our preliminary estimate for our hotel-level cash burn in July is approximately $9 million to $10 million, which is potentially $1 million or 10% lower than the average monthly pace seen in the second quarter. Including cash, G&A and debt service, this works out to an overall burn rate of $16 million to $17 million and provides a runway before capex of up to 23 months based upon our total liquidity of $364 million at the end of the quarter. I want to make a few additional comments on the balance sheet. The erosion in EBITDA obscures the strong balance sheet DiamondRock wielded before going into the pandemic. For example, net debt to undepreciated book value as of second quarter 2020 was just 26%. We ended the second quarter with net debt of only $106,000 per key on a portfolio with a replacement cost in the range of $450,000 per key. This implies a net debt to replacement cost of less than 24%. Importantly, DiamondRock's debt is well structured. It is diversified between nonrecourse CMBS and bank mortgage debt as well as unsecured bank debt. At the end of the quarter, we had $605 million of nonrecourse mortgage debt at a weighted average interest rate of 4.1%. We had $550 million of bank debt, comprised of $400 million in unsecured term loans and just under $149 million on our unsecured revolving credit facility. We finalized an amendment to our credit facility in the quarter. We had several objectives in this process, but there are three I'd like to highlight. First, secure a waiver through the end of the first quarter of 2021 and relaxed covenants through year-end 2021. Covenant tests restart in the second quarter of 2021 using annualized results to wash out 2020 from our financial results. Second, flexibility for investment. Collectively, we have $110 million for capital investment, which has proved to be one of the largest capital investment allowances relative to assets or pre-COVID EBITDA. Third, flexibility for acquisition. We have no limitation on our ability to pursue equity funded unencumbered acquisitions, and our $300 million limitation on encumbered acquisitions is proportionately larger than the limitation many peers have on total acquisitions. I think a key competitive advantage that will come into sharper focus in the next year is our maturity schedule. We have no debt maturities for the balance of 2020. We have no maturities in 2021, and we have only one loan for $48 million due in 2022 and even that can be extended to 2023 under certain conditions. Our first significant maturity is our revolver which matures in 2023, but this too can be extended one year into 2024. The combination of a conservatively leveraged balance sheet, a diversified source of debt capital and one of the best maturity schedule in the sector is a measurable competitive advantage for DiamondRock. In closing, I want to point out, we've expanded our disclosure to provide monthly detail on hotels open the entire quarter, hotels partially open during the quarter and hotels that remain closed. It is here that you can see how the hotels progressed as we move through this most difficult period. Moreover, we provided the number of days each hotel was open to give you context to revenue, expense and EBITDA that each hotel produced. And on that note, I'll hand the call back to Mark for final comments. I want to make a few comments about the future. Although we saw improvement in the second quarter, we expect uncertainty will persist until there is an effective vaccine, improved patient outcomes, broad acceptance of safety protocols such as social distancing and wearing mask or some combination of the above. Encouragingly, there are already 30 vaccines in human trial. Because of the wide array in variables related to the resolution of the healthcare crisis, we are not in a position today to provide you with company guidance. We do expect the balance of 2020 to be difficult, with drive to resorts doing best, only very modest increases in BT business and large group business not meaningfully returning until 2021. We did want to provide you with some of the ways in which we are positioning DiamondRock for the future. Let me highlight a few. One, we have a great portfolio that is increasingly weighted toward drive to resorts. We have 13 of 31 hotels that are leisure oriented. This has been a multiyear strategic initiative as seven or last eight hotel acquisitions fit into this category. We were early to recognize the trend here and remain committed believers. Two, small hotels have been outperforming. According to STR, hotels under 300 rooms have shown the best relative performance. Due to our focus on boutiques and drive to resorts, the median hotel in DiamondRock's portfolio is just 265 rooms. Three, the portfolio has numerous ROI projects, many with 30% plus IRRs. These include the just completed rebranding of the Sheraton Key West to the Barbary Beach House resort as well as the upcoming luxury upbranding of our Vail Resort. Four, while we pause the reconstruction of Frenchman's Reef, we remain excited about its long-term prospects. Essentially, this is a nugget of future value for our shareholders. And finally, we have a solid balance sheet to allow us to withstand a substantial downturn and then position us to be offensive at the right time. We are already seeing some interesting opportunities in the market. We have great assets, a solid balance sheet, strong industry relationships and an experienced management team that has weathered numerous prior downturns over the last 30 years.

q2 adjusted ffo loss per share $0.20. not providing updated guidance at this time.

Joining me on the call today are Gene Lee, Darden's CEO; and Rick Cardenas, CFO. We plan to release fiscal 2021 second quarter earnings on December 18 before the market opens followed by a conference call. And then Rick will provide more detail on our financial results and share our outlook for the second quarter. As a reminder, all references to the industry benchmark during today's call refer to estimated Knapp-Track, excluding Darden, specifically, Olive Garden and LongHorn Steakhouse. During our first fiscal quarter, industry same restaurant sales decreased 26%. Given the ever-changing environment we continue to operate in, I am very pleased with what we accomplished during the quarter. We are focused on four key priorities. The health and safety of our team members and guests, in restaurant execution in a complex operating environment, investing in and deploying technology to improve the guest experience and transforming our business model. The progress we made in these areas combined with our operating results, gave us the confidence to repay the $270 million term loan and reinstate a quarterly dividend. Let me provide more detail on the four priorities. First, the health and safety of our team members and guests remains our top priority. Following CDC guidelines and local requirements, our teams continue to practice our enhanced safety protocols, including daily team member health monitoring. We also continue to configure our dining rooms with social distancing that create a safe, welcoming environment, while maximizing allowable capacity. A key part of this work is installing booth partitions to enable us to safely increase capacity where permissible. At the end of August, we had completed installation in just over 500 restaurants in our total portfolio. Operating in this environment adds another layer of complexity to an already complex operation, and I'm proud of the commitment our teams make every day to keep our guests and each others safe. Second, we are laser focused on our back to basics operating philosophy to drive restaurant-level execution that creates guest experience, whether that's in our dining rooms, outdoors on our patios or in their homes, but it's not easy. Executing at a high level is more complex today due to COVID-19 restrictions that vary by market. Additionally, the constantly changing mix between on-premise and off-premise, plus expanded outdoor dining that is weather-dependent, leads to unpredictability in sales. This is why the work we continue to do to streamline our menus and improve our processes and procedures is so important. Moving complexity from our operations has allowed our restaurant teams to execute more consistently in this unique environment. Our operators continued to deliver great guest experiences by displaying a high level of flexibility, creativity and passion every day, and I'm thrilled to see that reflected in our guest satisfaction metrics. Third, we are continuing to invest in and implement technology to remove friction from the guest experience. This includes providing multiple ways for our guests to order inside and outside the restaurant across our digital storefronts. Additionally, we are deploying mobile solutions to make it easy for our guests to let us know when they have arrived to dine or pickup curbside order to go. We are also expanding mobile payment options providing additional convenience for our guests. For our three largest brands combined, more than 50% of our off-premise sales during the quarter were fully digital transactions where guest ordered and paid online. Finally and most importantly, we transformed our business model. Even with the sales declines we are experiencing, our restaurants continue to produce high absolute sales volumes. Therefore, we made the strategic decision to focus on adjusting our cost structure in order to generate strong cash flows, while making the appropriate investments in our businesses. This provides us a stronger foundation for us to build on sales as build on sales -- build upon as sales trends improve. The first step in this process was to reimagine our offerings. This resulted in simplified menus across the platform driving significant efficiencies in food waste and direct labor productivity. Additionally, due to capacity restrictions, we significantly reduced marketing promotional spending along with other incentives we have historically used to drive sales. We will continue to evaluate our marketing promotional activity as the operating environment evolves. Finally, we have further optimized our support structure which is driving G&A efficiencies. The results of all these efforts to transform our business model can be seen in the fact that we generated adjusted EBITDA of $185 million for the quarter. Turning to our business segments. Olive Garden delivered strong average weekly sales per restaurant of $70,000 while significantly strengthening our business model, resulting in higher segment profit margin than last year. They were able to capitalize on simplification initiatives that strengthen the business model while making additional investments in abundance and value. This work was critical to position Olive Garden to drive future profitable top-line sales as capacity restrictions ease. Olive Garden same-restaurant sales for the quarter declined 28.2%, 220 basis points below the industry benchmark. Overall, capacity restrictions continue to limit their top-line sales, particularly in key high volume markets like California and New Jersey where dining rooms were closed for the majority of the quarter. In fact, restaurants that had some level of dining room capacity for the entire quarter averaged more than $75,000 in weekly sales, retaining nearly 80% of their last year's sales. Given the limited capacity environment during the quarter, Olive Garden made a strategic decision to reduce their marketing spend as well as incentives and eliminate their promotional activity. They will continue to evaluate their level of marketing activity as capacity restrictions ease. Additionally, off-premise continue to see strong growth with off-premise sales increasing 123% in the quarter, representing 45% of total sales. Finally, Olive Garden successfully opened three new restaurants in the quarter, which are exceeding expectations. LongHorn had a very strong quarter. Same-restaurant sales declined 18.1%, outperforming the industry benchmark by 790 basis points. Their strong guest loyalty and operational execution helped drive their outperformance, while they also benefited from their geographic footprint. In fact, same-restaurant sales were positive for the quarter in Georgia and Mississippi. Additionally, the LongHorn team made significant investments in food quality and operational simplicity, which led to improve productivity and better execution. They also took a number of steps to improve the overall guest -- the overall digital guest experience. Off-premise sales grew by more than 240%, representing 28% of total sales. Finally, LongHorn successfully opened two restaurants during the quarter. The brands in our Fine Dining segment are performing better than anticipated. While weekday sales continued to be impacted by a reduction in business travel, conventions and sporting events, we saw strong guest traffic on the weekends, and believe there will be additional demand as capacity restrictions begin to ease. And lastly, our other business segment also delivered strong operational improvement with segment profit margin of 12.8%. This was only 130 basis points below last year despite a 39% decline in same-restaurant sales. Yard House's footprint in California is impacting same-restaurant sales in this segment. Finally, I continue to be impressed by how our team members are responding to take care of our guests and each other. The encouraging trends and performance we experienced toward the end of the fourth quarter continued into the first quarter of fiscal '21. Furthermore, the actions we took in response to COVID-19 to solidify our cash position, transform the business model, simplify operations and strengthen the commitment of our team members helped build a solid foundation for the future. These actions and our continued focus on pursuing profitable sales have resulted in strong first quarter performance that significantly exceeded our expectations. For the quarter, total sales were $1.5 billion, a decrease of 28.4%. Same-restaurant sales decreased 29%. Adjusted EBITDA was $185 million. And adjusted diluted net earnings per share were $0.56. Turning to the P&L. looking at the food and beverage line, favorability from menu simplifications more than offset increased To Go packaging costs. However, beef inflation of over 7%, primarily impacting LongHorn, drove food and beverage expense 20 basis points higher than last year for the company. Restaurant labor was 20 basis points lower than last year, with hourly labor as a percent of sales improving by over 350 basis points, driven by operational simplifications. This was mostly offset by deleveraging management labor. Restaurant expense, including $10 million of business interruption insurance proceeds related to COVID-19 claims submitted in the fourth quarter of fiscal 2020. Excluding this benefit, we reduced restaurant expense per operating week by over 20% this quarter. For marketing, we lowered absolute spending by over $40 million, bringing marketing as a percent of sales to 1.9%, 130 basis points less than last year. As a result, restaurant-level EBITDA margin was 17.8%, 20 basis points below last year, but particularly strong given the sales decline of 28%. General and administrative expenses were $10 million lower than last year as we effectively reduced expenses and rightsized our support structure. Interest was $5 million higher than last year, mostly related to the term loan that was outstanding for the majority of the quarter. And finally, our first quarter adjusted effective tax rate was 9%. All of this culminated in adjusted earnings after-tax of $73 million, which excludes $48 million of performance-adjusted expenses. These expenses were related to the voluntary early retirement incentive program and corporate restructuring completed in the first quarter of fiscal '21. Approximately $10 million of this expense is non-cash and the remaining will be cash outflows through Q2 of fiscal 2022. This restructuring resulted in a net 11% reduction in our workforce in the restaurant support center and field operations leadership positions. It is expected to save between $25 million and $30 million annually. We expect to see approximately three quarters of these savings throughout the remainder of fiscal '21. Looking at our segment performance this quarter. Despite a sales decline of 28%, Olive Garden increased segment profit margin by 110 basis points to 22.1%. This strong profitability was driven by simplified operations, which reduced food and direct labor costs as well as reduced marketing spending. LongHorn Steakhouse, Fine Dining and the other business segment delivered strong positive segment profit margins of 15.1%, 11.9% and 12.8% respectively despite a significant sales decline experienced in the quarter. These brands also benefited from simplified operations, keeping segment profit margin at these levels. In the first quarter, 68% of our restaurants operated with at least partial dining room capacity for the entire quarter. These restaurants had average weekly sales per restaurant of $69,000 and the same-restaurant sales decline of 21.9%. And while Olive Garden and the Fine Dining segment had fewer dining rooms opened than our average, these restaurants had the highest average weekly sales per restaurant of almost $76,000 and $90,000 respectively. At the start of the second quarter, we had approximately 91% of our restaurants with dining rooms opened operating in at least limited capacity. Now turning to our liquidity and other matters. During the quarter, as we saw steadily improving weekly cash flows, we gained confidence in our estimated cash flow ranges. We fully repaid the $270 million term loan we took out in April. We ended the first quarter with $655 million in cash and another $750 million available in our untapped credit facility, giving us over $1.4 million of available liquidity. We generated over $160 million of free cash flow in the quarter and improved our adjusted debt to adjusted capital to 59% at the end of the quarter, well within our debt covenant of below 75%. Given our strong liquidity position, improvements in our business model and better visibility into cash flow projections, our board reinstated a quarterly dividend. The board declared a quarterly cash dividend of $0.30 per share. This dividend represents 53% of our first quarter adjusted earnings after-tax within our long-term framework for value creation. We will continue to have regular discussions with the board on our future dividend policy. Our first quarter results were significantly better than we anticipated. The actions we took to simplify menus and operating procedures and capture other cost savings, along with our choice to pursue profitable sales, have yielded strong results. And now, with a full quarter operating under this environment, we have even better visibility into our business model. We anticipate EBITDA between $200 million and $215 million and diluted net earnings per share between $0.65 and $0.75 on a diluted share base of 131 million shares. In this environment, we continue to focus on building absolute sales volumes week-to-week and quarter-to-quarter. This may result in variability in sales comparisons to last year as capacity constraints lead to less seasonality than we would have experienced historically. Said another way, if capacity and social distancing restrictions remained similar to where they are today, it will be challenging to dramatically increase our on-premise average unit volumes. Our second quarter is typically our lowest average unit volume quarter and our third quarter is typically our highest. Additionally, as capacity restrictions ease and sales normalized, we will be able to reinvest to drive the top-line and a better overall guest experience. Based on our strong business model enhancements, we now think we can get to our pre-COVID EBITDA dollars at approximately 90% of pre-COVID sales, while still making appropriate investments in our business.

sees q2 earnings per share $0.65 to $0.75 from continuing operations. q1 adjusted earnings per share $0.56 from continuing operations excluding items. qtrly same-restaurant sales down 28.2% for olive garden. darden restaurants -reiterated full year outlook for 35-40 net new restaurants and total capital spending of $250 to $300 million.

Joining me on the call today are Gene Lee, Darden's Chairman and CEO; Rick Cardenas, President and COO; and Raj Vennam, CFO. Any reference to pre-COVID when discussing first quarter performance is a comparison of the first quarter of fiscal 2020. This is because last year's results are not meaningful due to the pandemic's impact on the business and the limited capacity environment that we operated in during the first quarter of fiscal '21. We plan to release fiscal 2022 second quarter earnings on Friday, December 17 before the market opens, followed by a conference call. Rick will give an update on our operating performance, and Raj will provide more detail on our financial results and an update of our fiscal '22 financial outlook. Our teams continue to operate effectively in a challenging environment. And I'm proud of their focus and ability to deliver another quarter of strong sales and profitability. All of our segments delivered record first quarter profit. Our ability to drive profitable sales growth is a testament to the strength of our business model and our continued to adherence this strategy we implemented six years ago. Our brands remain laser focused on executing our back-to-basics operating philosophy anchored in food, service and atmosphere, while at the Darden level, we concentrate on strengthening and leveraging our four competitive advantages of significant scale, extensive data and insights, rigorous strategic planning, and our results-oriented culture. Our first quarter sales trends started strong. This momentum carried over from the fourth quarter, and they further strengthened and peaked in July. However, in August, sales slowed due to the impact of the Delta variant, but remained positive relative to pre-COVID levels. For the first quarter, sales per operating week were up 4.8% relative to pre-COVID. And through the first three weeks in September, sales per operating week were up approximately 7% relative to pre-COVID. Regardless of the operating environment, our unwavering commitment to our strategy ensures we will stay focused on what we do best, providing exceptional guest experiences. Throughout this unique period, our operators have shown tremendous flexibility, while remaining locked in on the fundamentals of running great restaurants. At the same time, our focus helps us continue to find ways to make our competitive advantages work even harder for us. One of the ways we do this is by leveraging our ability to open value-creating new restaurants. We opened seven new restaurants during the quarter, all of which are exceeding our expectations. And we remain on track to open approximately 35 to 40 new restaurants this fiscal year. A long-term framework calls for 2% to 3% sales growth from new restaurants. Given our stronger unit economics, our development team is working hard to build out a pipeline of locations for fiscal '23 and beyond that would put us at or above the higher end of our framework. As I visit our restaurants and talk with our teams, I'm constantly reminded why our people are our greatest competitive advantage. Their passion for being of service to our guests and each other fuels our success. Our success this quarter was driven by the work we have done to simplify our processes and our menus to drive execution at the highest level. We also paused any new initiatives in order to further eliminate distractions for our restaurant teams and allow them to focus on what it takes to run 14 great shifts a week. In addition, To-Go sales continue to benefit from the ongoing evolution of our digital platform. This platform makes it simpler for our guests to visit, order, pay and pick up, all while making it easier for our teams to execute at the highest level, both in the dining room and off-premise. This served our teams well, as To-Go sales remained high through the quarter. For the quarter, off-premise sales accounted for 27% of total sales at Olive Garden and 15% of total sales at LongHorn Steakhouse. Digital transactions accounted for 60% of all off-premise sales during the quarter, and guest satisfaction metrics for off-premise experiences remained strong. As we navigate short-term external pressures, our focus is simple. We must continue to win when it comes to our people and product. From a people perspective, the employment environment is challenging. That's why our top priority during the quarter was staffing our restaurants. Our operators and HR teams have done a great job sourcing talent. We recently launched a new talent acquisition system that helps increase our pool of candidates by allowing applicants to apply and schedule an interview in five minutes or less. Additionally, our brands are successfully utilizing their digital platforms, including social media to promote our employment proposition and drive applications. As a result, we are netting more than 1,000 new team members per week, and our team member count is approximately 90% of our pre-COVID levels. The biggest operational challenge we've been dealing with is a temporary exclusion of team members identified through contact tracing. Given our commitment to health and safety, we are diligent about exclusions, but they create sudden staffing disruptions for our operators. Despite being appropriately staffed in the majority of our restaurants, these exclusions reduce the number of available team members with little notice for our operators to prepare. This volatility can negatively impact sales in these restaurants for the duration of the exclusion period. Getting and staying staffed also requires a strong focus on training. As we continue to hire, it is critical that we have the right training in place to ensure we continue to execute at a high level. That's why our operations leaders are validating the quality of our training during their restaurant visits, ensuring new team members receive the appropriate amount of training and successfully complete the required assessments. Our team members are the heart and soul of our business, and we are constantly focused on our employment proposition. The investments we have made and continue to make in our people are helping us retain and attract top talent, and I'm confident in our ability to address our staffing needs. When it comes to product, our significant scale, including our dedicated distribution capabilities, enables us to manage through the challenges affecting the global supply chain and maintain continuity for our restaurants. Our supply chain team continues to work hard to ensure we successfully manage through any spot outages we encounter, and our restaurants have the key products they need to serve our guests. During the quarter, we had to secure more product than usual on the spot market, because our brands exceeded sales expectations and some of our suppliers experienced capacity challenges. Raj will share more details in a moment, but these higher sales volumes, as well as freight costs have contributed to higher-than-expected inflation. Our scale advantage provides the opportunity for us to price below our competition and inflation, which is a strategy we have executed successfully. Our competitive advantage of extensive data and insights allows us to be surgical in our pricing approach, positioning us well to deal with these higher costs and maintain our value leadership. The rich insights we gather from our analytics help us find the right opportunities to price in ways that minimize impact to traffic over time. We still expect pricing to be well below the rate of inflation for the year, further strengthening our value proposition. Ensuring our restaurants are appropriately staffed and our supply chain continues to avoid significant disruptions, will be the most important factors of our continued success in the short term. To wrap up, I also want to recognize our outstanding team. I'm inspired by the dedication and winning spirit that our leaders and team members, both in our restaurants and in our support center continue to demonstrate. Total sales for the first quarter were $2.3 billion, 51% higher than last year, driven by 47.5% same restaurant sales growth and the addition of 34 net new restaurants. Diluted net earnings per share from continuing operations were $1.76. We returned approximately $330 million to our shareholders this quarter, paying $144 million in dividends and repurchasing $186 million in shares. We had strong performance this quarter, despite increased inflationary pressures with EBITDA of $370 million and EBITDA margin of 16%, 250 basis points higher than pre-COVID. Our sales results were better than expected requiring us to go out and purchase more product on the spot market, in particular, proteins, as our LongHorn and Fine Dining segments had the largest sales outperformance versus our expectations. The market for proteins this quarter was very strong with spot premiums as high as 30% above our contracted rates. This resulted in higher average cost per pound for our proteins contributing to total commodities' inflation for the quarter of approximately 5.5%. Given the heightened attention on inflation, I want to clarify that we use a conventional approach to calculating the rate of inflation. We're only measuring change in average price holding product mix and usage constant. We follow the same approach for calculating wage inflation rate, in which we keep the hour and job mix constant and only look at change in wage. While we expect higher rates of inflation to persist for the remainder of the year versus what we initially planned, we believe our scale and recent enhancements to our business model enable us to deliver significant margin expansion, while still adhering to our strategy of pricing below inflation. Now looking at the P&L for the first quarter of 2022, we're providing a comparison against pre-COVID results in the first quarter of 2020, which we believe is a more comparable to normal business operations and with how we've been talking about our margin expansion. For the first quarter, food and beverage expenses were 150 basis points higher, driven by investments in both food quality and pricing significantly below inflation. Restaurant labor was 110 basis points lower, driven primarily by hourly labor improvement, due to efficiencies gained from operational simplifications and was partially offset by elevated wage pressures. Restaurant expenses were also 110 basis points lower due to sales leverage. Marketing spend was $45 million lower, resulting in 220 basis points of favorability. As a result, restaurant-level EBITDA margin for Darden was 20.9%, 290 basis points better than pre-COVID levels. G&A expense was 30 basis points higher, driven primarily by approximately $10 million of stock compensation expenses related to the immediate expensing of equity awards for retirement eligible employees. Additionally, we had approximately $5 million of expense related to mark-to-market on our deferred compensation. As a reminder, due to the way we hedge this expense, it's largely offset on the tax line. Our effective tax rate for the quarter was 12.6%, which benefited from the deferred compensation hedge I just mentioned. Excluding this benefit, our effective tax rate would have been closer to the top end of our guidance range for the year. Turning to our segment performance. First quarter sales at Olive Garden were flat to pre-COVID, while segment profit margin increased 220 basis points. This was strong performance despite elevated inflation and two-year check growth of only 2.4%. LongHorn had the best sales performance across our segments with sales increasing by 26% versus pre-COVID, while growing segment profit margin by 250 basis points. Sales at our Fine Dining segment increased 24% versus pre-COVID in what's traditionally their slowest quarter from a seasonal perspective. Segment profit margin grew by 490 basis points, driven by strong sales leverage and operational efficiencies, which more than offset double-digit commodity inflation. Our Other segment grew sales by nearly 5% and segment profit margin by 360 basis points. We continue to be excited about the long-term prospects of this segment, as it's driving the strongest underlying business model improvement of all our segments. Finally, turning to our financial outlook for fiscal 2022. Based on our performance this quarter and expected performance for the remainder of the year, we increased our outlook for the full year. We now expect total sales of $9.4 billion to $9.6 billion, representing growth of 7% to 9% from pre-COVID levels; same restaurant sales growth of 27% to 30% and 35 to 40 new restaurants; capital spending of $375 million to $425 million; total inflation of approximately 4% with commodities inflation of 4.5% and total restaurant labor inflation of 5.5%, which includes hourly wage inflation of about 7%; EBITDA of $1.54 billion to $1.60 billion; and annual effective tax rate of 13% to 14% and approximately 131 million diluted average shares outstanding for the year, all resulting in diluted net earnings per share between $7.25 and $7.60. This outlook implies EBITDA margin growth versus pre-COVID, in line with our previous outlook as higher sales are helping offset elevated inflation. This will be a net negative to second quarter from a sales perspective.

darden restaurants q1 earnings per share $1.76 from continuing operations. q1 earnings per share $1.76 from continuing operations. sees fiscal 2022 same-restaurant sales versus. fiscal 2021 of 27% to 30%. sees 2022 total sales of approximately $9.4 to $9.6 billion. sees 2022 diluted net earnings per share from continuing operations of $7.25 to $7.60.

Joining me on the call today are Gene Lee, Darden's CEO; and Rick Cardenas, CFO. We plan to release fiscal 2021 third quarter earnings on March 25 before the market opens followed by a conference call. Rick will then provide more detail on our financial results and share our outlook for the third quarter. And then Gene will share some closing comments. As -- we continue to operate in a very fluid environment, and I was pleased with our ability to once again deliver strong profitability in an unpredictable sales environment. Total sales from continuing operations were $1.7 billion, a decrease of 19.4%, same-restaurant sales decreased 20.6% and diluted net earnings per share from continuing operations were $0.74. The last two weeks of the quarter negatively impacted our same-restaurant sales by approximately 200 basis points as we quickly went from 97% of our dining rooms being opened in the middle of the quarter to only 80% being open at the end of the quarter. During the quarter, we remain focused on four key priorities. The health and safety of our team members and guests, in restaurant execution in the complex operating environment, deploying technology to improve the guest experience and transforming our business model. The health and safety of our team members and guest has always been our top priority. We continue to follow latest guidance from the CDC as well as our own enhanced safety protocols to create a safe environment for everyone. This includes daily team member health monitoring, requiring mask for every team member, enhanced cleaning procedures and social distancing protocols. I'm proud of the commitment our teams make every day to keep our guests and each other safe. Second, our restaurant teams remain focused on our Back-to-Basics operating philosophy to drive restaurant level execution that results in great guest experiences whether our guests are dining with us or ordering curbside to-go. Our teams have been operating in this environment for 10 months, and they have become very adept at adjusting to the ever-changing COVID restrictions, but it's still not easy. That's why we remain committed to our simplified operations, including streamline menus, processes and procedures which continue to strengthen our execution and our guest satisfaction metrics confirm that our restaurant teams are doing a great job delivering exceptional guest experience in this challenging environment. Third, we continue to deploy technology to improve the guest experience. Our brands benefit from the technology platform Darden provides, allowing each of them to compete more effectively by harnessing the power of our digital tools, including the 25 million email addresses in our marketing database. During the quarter, Olive Garden LongHorn Steakhouse launched refresh websites and all our brands continue to use their digital storefronts effectively. More than 55% of our off-premise sales during the quarter were fully digital transactions where guest ordered and paid online. And at Olive Garden, 20% of our total sales for the quarter were digital. During the quarter, we also rolled out Curbside I'm Here, which allows our guests to easily notify the restaurant that they've arrived to pick up their curbside to-go order by simply tapping on a link embedded in a text message. As a result, our operators are spending less time on the phone and more time focused on ensuring orders are accurate and on-time, which is leading to improved guest satisfaction scores. We also introduced Wait List Visibility, allowing guest to see their place on the waiting list using their phone regardless of whether they've checked in online or in person. And we're working on several other initiatives, including streamlining our online checkout process and adding additional mobile payment options to provide even more convenience for our guest. We continue to accelerate our digital journey, and I'm encouraged by the progress we are making. Finally, we continue to view this environment as a rare opportunity to transform our business model for long-term growth. We continue to make investments in our team members, product quality and portion sizes to ensure we emerge even stronger and better positioned to grow share. Olive Garden same-restaurant sales declined 19.9% as capacity restrictions continue to limit their top-line sales. Olive Garden began November with 56 dining rooms closed, and that number accelerated to 208 by the end of the month. However, they were able to deliver strong average weekly sales during the quarter of more than 73,000 per restaurant, retaining 80% of last year's sales. Olive Garden also continue to realize operational efficiencies and strengthened margin as a result of their simplified menu and the elimination of promotional activity, including discounts. In the current limited capacity environment, their reduced marketing spend was focused on showcasing the convenience of their off-premise experience, while featuring compelling core menu items rather than limited time promotions. This led to increased segment profit margin, while making additional investments in abundance and value. Additionally, off-premise sales grew 83% in the quarter, representing 39% of total sales. Enabled by the technology investments I mentioned earlier, Olive Garden improved their to-go experience and achieved another all-time high in guest satisfaction for having orders ready to pick up at the time promised. Finally, Olive Garden successfully opened three new restaurants in the quarter. LongHorn Steakhouse had another solid quarter. Same-restaurant sales declined 11.1%. Almost 20% of their restaurants grew same-restaurant sales in the quarter. They also successfully opened three new restaurants during the quarter. The LongHorn team remains laser focused on their strategy of increasing the quality of their guest experience, simplifying operations to drive execution and leveraging their unique culture to increase team member engagement. During the quarter, the team did a great job of managing controllable costs while their simplified menu drove improved labor productivity. Finally, LongHorn grew off-premise sales by more than 175%, representing 22% of total sales. For the second quarter, total sales were $1.7 billion, a decrease of 19.4%. Same-restaurant sales declined 20.6%, EBITDA was $206 million and diluted net earnings per share from continuing operations were $0.74. Our second quarter start was encouraging with weekly sales building on results from the first quarter. However, as COVID-19 cases began increasing in November and many state and local governments reimposed dining room restrictions, the last two weeks of the quarter trended down significantly. We estimate that this downward shift in sales over the last two weeks negatively impacted operating income by approximately $15 million. Turning to the P&L. Food and beverage expense was 30 basis points higher than last year, primarily driven by investments in food quality and increased to-go packaging. Restaurant labor was 140 basis points lower than last year with hourly labor improving by over 310 basis points, driven by operational simplification. This was partially offset by deleverage and management labor due to sales declines and $3 million of emergency pay net of retention credits as we reinstated our emergency pay program for our team members impacted by dining room closures. Restaurant expense per operating week was 13% lower than last year, driven by lower repairs, maintenance and utilities expenses. However, sales deleverage resulted in restaurant expense as a percent of sales coming in 170 basis points higher than last year. We reduced marketing spend by almost $50 million this quarter with total marketing 210 basis points favorable to last year. Restaurant level EBITDA margin was 17.9%, 140 basis points above last year despite the sales decline of 19%. General and administrative expenses were negatively impacted by $8 million of mark-to-market expense on our deferred compensation. This is related to significant appreciation in both the Darden share price and equity markets this quarter. As a reminder, due to the way we hedge this expense, it is mostly offset in the tax line. Our hedge reduced income tax expense by $6.4 million, resulting in a net mark-to-market reduction to earnings after-tax this quarter of $1.7 million. The effective tax rate of 8.3% this quarter was lower by 5.1 percentage points due to the tax benefits from the deferred compensation hedge I just mentioned. After adjusting for this, the normalized effective tax rate for the second quarter would have been 13.4%. Looking at our segment performance this quarter. Olive Garden, LongHorn Steakhouse and our Other segment, all saw a segment profit margin increase despite sales declines. This was driven by our continued focus on simplified operations, which significantly reduced direct labor and lower marketing expenses. Our Fine Dining segment profit margin of 18.8% was impressive, although below last year, driven by a 30% sales decline. We ended the second quarter with $770 million in cash and another $750 million available in our untapped credit facility, giving us over $1.5 billion of available liquidity. We generated over $150 million of free cash flow in the quarter and improved our adjusted debt to adjusted capital to 58% at the end of the quarter, well within our debt covenant of 75%. The board declared a quarterly cash dividend of $0.37 per share, 50% of our Q2 diluted earnings per share within our long-term framework for value creation. We will continue to have regular discussions with the board on our future dividends. As I mentioned earlier, the quarter started with sales building upon first quarter results. As dining room closures increased, these improving sales trends reversed. As of today, we have approximately 77% of our restaurants operating with at least partial dining room capacity versus a peak of 97% in the middle of the second quarter. Moving forward, we may experience further dining room closures and increasing capacity restrictions in the third quarter. As you may recall, in our last earnings call, we mentioned that the third quarter is historically our peak seasonal sales quarter, driven by the Christmas, New Year's and Valentine's Day holidays as well as travel time during this time of year. At that time, we also stated that it will be more difficult to increase on-premise average unit volumes if capacity restrictions do not ease. Current dining room closures, capacity restrictions and reductions in travel will exacerbate our same-restaurant sales comparison to last year due to the higher sales -- seasonal sales from last year. Additionally, there are still uncertainties surrounding further capacity limitations and dining room closures and the duration of these impacts. Given all these factors, we are providing a broad range of expectations for the third quarter. We expect total sales to be between 65% and 70% of prior year levels, resulting in total sales of between $1.53 billion and $1.65 billion, EBITDA between $170 million and $210 million and diluted net earnings per share from continuing operations between $0.50 and $0.75 on a diluted share base of 132 million shares. With dining rooms closures increasing, we are focusing on our playbook of expense management and off-premise sales. While there is encouraging news on the broad distribution of COVID-19 vaccine in the spring, we currently don't anticipate meaningful sales trend improvements until some time in the fourth quarter of fiscal 2021. Despite the short-term headwinds we faced with sales trends, operational complexity and impacts to our team members, I'm confident we are making the right decisions for the long-term to create a better guest experience and strengthen our business. And consistent with our messaging last quarter, we continue to believe we can achieve 100% of our pre-COVID EBITDA dollars at approximately 90% of pre-COVID EBITDA -- pre-COVID sales, while continuing to make appropriate investments in our business. Rick's career represents what our industry is all about. He joined Darden as a Buster at Red Lobster 1984 and has worked extremely hard mastering many functions. On January 4, he will become the President of the world's largest full service restaurant company. He's been a great partner to me over the last five years, and I look forward to working side-by-side with him in his new role. Additionally, we announced that Raj Vennam will become our Chief Financial Officer. Raj began his career at Darden in 2003, and has done an exceptional job in every role he has held. His promotion recognizes the significant contributions he has made to our individual brands as well as the greater organization. With a brilliant mind and a keen understanding of our industry, Raj is the perfect person to take over for Rick. I'm excited to see him expand his role in the company as CFO. Rick and Raj are here with me in the room today, and I want to take this opportunity to congratulate both of them. I want to close by recognizing our team members in the restaurants and at the support center. I can't say enough about the dedication they've demonstrated throughout the year. Their focus, commitment and determination is exceptional. With multiple jurisdictions implementing dining room closures, we know many team members will not get the hours they needed during this holiday season. That is why we have reintroduced our emergency pay program that will provide three weeks of emergency pay to team members who are furloughed from their restaurant when dining rooms are closed. Our [Technical Issue] our greatest competitive advantage, and we are committed to taking care of them. I wish you all a safe and a happy holiday season.

sees q3 earnings per share $0.50 to $0.75 from continuing operations. qtrly negative blended same-restaurant sales of 20.6%. qtrly diluted net earnings per share from continuing operations were $0.74. sees fiscal 2021 q3 total sales between 65% to 70% of prior year. sees fiscal 2021 q3 ebitda of $170 to $210 million. qtrly same-restaurant sales down 19.9% for olive garden.

Joining me on the call today are Gene Lee, Darden's Chairman and CEO; Rick Cardenas, COO; and Raj Vennam, CFO. We plan to release fiscal 2021 fourth quarter earnings on June 24 before the market opens, followed by a conference call. It's hard to believe it's been a year since the pandemic began to significantly impact our business. When I reflect back on everything that has transpired, it is clear to me the strategy we developed six years ago provided a strong foundation to help us navigate this period of unprecedented change and uncertainty. Our portfolio of iconic brands has been focused on executing our Back to Basics operating philosophy while leveraging our four competitive advantages of significant scale, extensive data and insights, rigorous strategic planning and our results oriented culture. And while our four competitive advantages were critical to our business and operational success this past year, our significant scale and results oriented culture have played an outsized role in our ability to emerge stronger. Our significant scale enabled us to quickly react to the turbulent operating environment. The depth and breadth of our supply chain relationships ensured that we could adjust our product supply as needed without experiencing any significant interruptions. We have our own dedicated distribution network, and the assurance of an uninterrupted supply chain provided consistency and a high level of certainty for our operators. Our scale also enabled us to significantly accelerate the development of online ordering and several other digital initiatives and cascade them across our brands quickly and effectively. The robust expansion of our digital platform over the past year has provided us a richer set of first-party data on new and existing guest. Finally, our scale provided us with multiple levers to pull to ensure we have the liquidity we needed during the early days of COVID-19. As soon as our liquidity needs were solved for, our brands were able to focus on strengthening their value propositions and transforming their business models. As our Founder Bill Darden said, the greatest competitive advantage our Company has is the quality of our employees, evidenced by the excellent job they do every day. Throughout this past year, Darden and our brands have emerged stronger and our success is a direct result of our team members and their relentless commitment to delivering safe and exceptional guest experiences. That is why we've continued to invest in our team members throughout the past year. Since March of 2020, we have invested more than $200 million in our people through programs such as paid sick leave, COVID-19 emergency pay and covering insurance payments and benefit deductions for team members who were furloughed. These investments also include our recent decision to provide all hourly restaurant team members up to four hours of paid time off for the purpose of receiving the COVID-19 vaccine. In addition, these investments include the one-time bonus we announced today, totaling approximately $17 million, which will impact nearly 90,000 hourly team members. Beginning Monday, every hourly team member, tipped and non-tipped, will earn at least $10 per hour, inclusive of tip income. Additionally, we are committed to raising that amount to $11 per hour in January 2022 and to $12 per hour in January 2023. These investments further strengthen our industry-leading employment proposition. Lastly, I continue to be impressed and inspired by our team members who have shown extraordinary resilience and passion during the past year. You are the heart and soul of our Company and on behalf of the management team, we're extremely grateful to you. As Gene said, it's hard to believe we've been operating in this environment for a year. In addition to executing our Back to Basics operating philosophy, our restaurant teams have continued to successfully manage through this situation by remaining focused on the four key priorities we established at the onset of the pandemic: one, ensuring the health and safety of our team members and guests; two, simplifying operations and strengthening execution; three, deploying technology to improve the guest experience; and four, transforming our business model. The health and safety of our team members and guests remains our top priority. Throughout the past year, our team members have done a fantastic job of upholding our safety protocols while taking great care of our guests. Today, even as restrictions are easing in some parts of the country, we continue to follow our enhanced safety measures. This includes daily team member health monitoring, requiring masks for every team member, enhanced cleaning procedures and social distancing protocols. Our second priority has been to continue finding ways to simplify our operations and drive in-restaurant execution at each of our brands. This environment gave us a once in a lifetime opportunity to evaluate every aspect of how we operate and make decisions we would not have been able to do in a normal operating environment. A good example of this work all of our brands have done to streamline menus and remove low preference or low satisfaction items. This focus makes it easier for our restaurant teams to consistently execute our highest preference items which means we are serving our most popular dishes to more guests. In fact, a year ago, the top 10 entrees at Olive Garden accounted for about 48% of guest preference, and today they account for approximately 55%. Reducing the bottom selling items eliminates distractions and allows us to execute at a high level. We have dramatically reduced low volume items which reduces the need to prepare them, saving time and reducing food waste. For example, at LongHorn Steakhouse, the number of total items with less than 1% preference is down to eight from more than 25 pre-COVID. Third, we continue to deploy technology to improve the guest experience and build on the progress we have made over the last 12 months. When the pandemic began and our dining rooms were closed, we were able to quickly roll out online ordering at our brands that had yet to deploy it. We also streamlined the curbside to-go pickup process by rolling out the Curbside I'm Here text message notification feature so guests can easily alert us when they arrive. These technology enhancements and other process improvements helped Olive Garden achieve new all-time high guest satisfaction ratings for delivering on time and accurate off-premise experiences during a quarter that included three busy off-premise days: Christmas Eve, New Year's Eve and Valentine's Day. In fact, Valentine's Day was our highest sales day since the start of the pandemic. Also during the quarter, several brands, including Olive Garden LongHorn implemented enhancements to their websites to streamline the online checkout process. This resulted in a meaningful reduction in order abandonment rates. Our continuous digital transformation is resonating with our guests. In fact, during the quarter, nearly 19% of total sales were digital transactions. Further, 50% of all guest checks were settled digitally, either online or on our tabletop tablets or via mobile pay. We have made great strides in our digital journey over the past year and we will continue to strengthen our digital platform and provide our brands with the tools to compete more effectively. And finally, the investments we've made to simplify our business through menu and process simplification have resulted in significant transformation of our business model. For example, across Darden, our hourly labor productivity has improved by over 20%, with some brands improving by well over 30% such as Cheddar's. We thought it would be helpful to provide a bit more insight into what the business model transformation has done to Cheddar's P&L. Year-to-date through the third quarter, Cheddar's has grown the restaurant level margins by over 300 basis points on a year-to-date sales retention of 75%. When Cheddar's reaches 100% of the pre-COVID sales, we expect their restaurant level margins to be well in the high teens. While we don't intend to continue to provide this level of detail in the future, this illustration helps to highlight the business model improvements our brands are making. As we have mentioned previously, the simplifications across all of our businesses are expected to result in a 150 basis points of margin improvement with 90% of pre-COVID sales. Our business model transformation also strengthens our belief in our ability to open value creating new restaurants across all of our brands. Due to this transformation, the sales required to exceed our return expectations are much lower today. In fact, we opened six new restaurants during the quarter and each is exceeding our expectations. As Gene said, our success is a direct result of their hard work. Being of service is at the heart of our business and our team members demonstrate that every day through their commitment to our guests and each other. For the third quarter, total sales were $1.73 billion, a decrease of 26.1%. Same restaurant sales decreased 26.7%. EBITDA was $236 million, and diluted net earnings per share from continuing operations were $0.98. Turning to this quarter's P&L. Food and beverage expenses were 80 basis points higher than last year, primarily driven by investments in food quality and mix. Restaurant labor was 20 basis points higher. As Gene mentioned, we invested approximately $17 million in team member bonuses this quarter. Excluding the team member bonuses, restaurant labor would have been 80 basis points favorable to last year. The favorability to last year was driven by hourly labor improvement of 280 basis points due to efficiencies gained from operational simplifications Rick discussed. The hourly labor improvement was partially offset by deleverage in management labor due to sales declines. Restaurant expense per operating week was 16% lower than last year, driven by lower workers' compensation, utilities, repairs and maintenance expense. Restaurant expense as a percent of sales was 250 basis points higher than last year due to sales deleverage. Marketing spend was $52 million lower than last year, with total marketing 200 basis points favorable to last year. This all resulted in restaurant level EBITDA margin of 18.4%, only 150 basis points below last year. Excluding the one-time hourly team member bonus, restaurant level EBITDA margin would have been even stronger at 19.4%. We impaired one Yard House restaurant this quarter, resulting in a non-cash impairment charge of $3 million. This location was in Portland, Oregon, and had been temporarily closed since April. We finalized the legal recovery during the quarter, resulting in favorability of $16 million. This favorability was partially offset by $8.8 million of mark-to-market expense on our deferred compensation. Excluding these two items, G&A would have been $86 million this quarter. As a reminder, the mark-to-market expense is related to significant appreciation in both the Darden share price and equity market this quarter, and due to the way we hedge this expense, it is mostly offset on an after-tax basis. Our hedge reduced income tax expense by $7.2 million, resulting in a net reduction to earnings after-tax this quarter of $1.6 million. Our effective tax rate of 2.3% this quarter was unusually low due to two factors. First, the tax benefit from the deferred compensation hedge I just mentioned reduced the tax rate by 5 percentage points. Second, the stock option exercises this quarter drove approximately $7 million of excess tax benefit, reducing the tax rate by 4.8 percentage points. After adjusting for these factors, our normalized effective tax rate for the third quarter would have been 12.1%. Looking at our segment performance this quarter, Olive Garden saw segment profit margin increase versus last year despite sales declines. Our continued focus on simplified operations, which significantly reduced direct labor, combined with lower marketing expenses, drove this margin improvement. Segment profit margin declined for LongHorn as higher than average beef inflation and other investments drove higher food and beverage expense. In addition, both labor and restaurant expenses were higher as a percent of sales due to sales deleverage. Segment profit margin declined for Fine Dining and Other segments due to deleverage across the P&L from the significant sales decline year-over-year. We generated over $240 million of free cash flow this quarter, ending the third quarter with over $990 million in cash. Our recent performance has given us better visibility into the durability of our cash flows. Therefore, we will return to our 50% to 60% dividend payout target applied to future earnings to determine our dividend. To that end, the Board declared a quarterly cash dividend of $0.88 per share, matching our pre-COVID dividend level. The ability to resume pre-COVID dividend levels just 12 months after suspending it is a testament to the strength of our business model and the durability of our cash flows. And finally, today we announced a new share repurchase authorization of $500 million which replaces all previous authorizations. Turning to the fourth quarter. As of today we have 99% of our dining rooms open with some capacity. Taking that all into consideration, we currently expect, for the fourth quarter, total sales of approximately $2.1 billion, EBITDA between $345 million and $360 million and diluted net earnings per share from continuing operations between $1.60 and $1.70 on a diluted share base of 132 million shares. We've also updated our full year outlook for capital expenditures to be between $285 million and $295 million, and we anticipate opening 33 net new restaurants for the year. We continue to believe we can achieve pre-COVID EBITDA dollars on 90% of pre-COVID sales, resulting in 150 basis points of EBITDA margin growth, and our Q4 outlook falls within this framework. As we move beyond the fourth quarter, there are additional costs such as training, travel, growth cost, incremental marketing and other investments that we expect will need to come back into the P&L. And while it's too early to provide insights into fiscal '22 sales and earnings, we did want to provide some preliminary guidance for a few items. We expect total capital spending between $350 million and $400 million and open approximately 35 new restaurants in fiscal '22. We also anticipate an effective tax rate in the range of 12% to 13% for fiscal '22.

compname reports q3 revenue $1.73 bln. compname reports fiscal 2021 third quarter results; announces team member investments; declares quarterly dividend; authorizes new $500 million share repurchase program; and provides fiscal 2021 fourth quarter outlook. sees q4 earnings per share $1.60 to $1.70 from continuing operations. q3 revenue $1.73 billion versus refinitiv ibes estimate of $1.61 billion. qtrly reported diluted net earnings per share from continuing operations were $0.98. sees q4 2021 total sales of approximately $2.1 billion. anticipates opening 33 net new restaurants and total capital spending between $285 and $295 million for full fiscal year.

Joining me on the call today are Gene Lee, Darden's Chairman and CEO; Rick Cardenas, President and COO; and Raj Vennam, CFO. Any reference to the pre-COVID when discussing fourth quarter performance is a comparison to our fourth quarter of fiscal '19. And anyone -- annual reference to pre-COVID is the trailing 12 months -- ending February of fiscal '20. This is because last year's results are not meaningful due to the pandemic's impact on the business as dining rooms closed and we pivoted to go-only model during the fourth quarter of fiscal '20. We plan to release fiscal '22 first quarter earnings on September 23 before the market opens followed by a conference call. During our call a year ago, I talked about the resiliency of the full-service dining segment and the confidence we had in the industry's ability to bounce back from the impacts of the pandemic. And we've begun to see demand come back at strong levels. As we think about the industry, our consumer insights team has done a lot of good work to better understand the size of the full-service dining segment. There are multiple sources of data that offers sales estimates for the restaurant industry and the size of the industry and the full service industry specifically varies considerably across these sources. This year we are adopting Technomic as our data source, which we believe better reflects the sales contribution from independent operators, provides a broader view of the restaurant industry and aligns more closely with the census data. Going forward, we will be referencing industry data provided by Technomic which sizes the casual dining and fine dining categories for fiscal 2020 at $189 billion and for fiscal 2019 at $222 billion. Given the strong demand we're seeing in the financial health of the consumer, we believe the categories will return to that size or greater, it's quite having approximately 10% fewer units than before the onset of the pandemic. Over the last 15 months, we have made numerous strategic investments. At the restaurant level, we've invested in food quality and portion size that will help strengthen the long-term value perceptions for each brand. We also made considerable investments in our team members to ensure our employment proposition remains a competitive advantage. And we invest in technology, particularly within our To Go capabilities, I mean our guest growing need for convenience and desire for the off-premise experience. Our business model has evolved and is much stronger today. As we begin our new fiscal year, we will remain disciplined in our approach to growing sales. More specifically, our focus is on driving profitable sales growth. Given the business transformation work we have done and the demand we are seeing from the consumer, we are well positioned to thrive in this operating environment. This was without a doubt the most challenging year in our company's history. Our results this quarter are a combination of the business model transformation work that Gene referenced as well as a simplification efforts we implemented throughout the year. Significant process in menu simplification at each brand has enabled us to drive high levels of execution and strengthen margins, further positioning our brands for long-term success. As we began the quarter, our restaurant teams remain disciplined, while continuing to operate in a difficult and unpredictable environment. This enabled us to deliver record setting results. For example Olive Garden broke its all-time single day sales record on Mother's Day. Additionally, both Olive Garden and LongHorn Steakhouse achieved the highest quarterly segment profit in their history. Even as capacity restrictions eased and we were able to utilize more of our dining rooms, off-premise sales remained strong during the quarter. Off-premise sales accounted for 33% of total sales at Olive Garden, 19% at LongHorn and 16% at Cheddar's Scratch Kitchen. Guest demand for off-premise has been stickier than we originally thought, and this is driven by the focus of our restaurant teams and the investments we made to improve our digital platform throughout the year. Technology enhancements to online ordering and the introduction of new capabilities such as To Go capacity management and Curbside I'm Here notification improved the experience for our guests, while making it easier for our operators to execute. As a result, during the quarter, 64% of Olive Garden's To Go orders were placed online, and 14% of Darden's total sales were digital transactions. Nearly half of our guest checks were settled digitally, either online on our tabletop tablets or via mobile pay. The business model improvements we have made also reinforce our ability to open value creating new restaurants across all of our brands. During the quarter, we opened 14 new restaurants and these restaurants are outperforming our expectations. While, Raj will discuss specific new restaurant targets for fiscal '22, we are working to develop a pipeline of restaurants and future leaders that would put us at the higher end of our long-term framework of 2 %to 3% sales growth from new units as we enter fiscal 2023. Finally, the strength of the Darden platform has helped our brands navigate near term external challenges. The employment environment has been an issue for the industry. However, the power of our employment proposition strengthened by the investments we have made in our people continue to pay off as we retain our best talent and recruit new team members to more fully staff our restaurants. So, while there are staffing challenges in some areas, we are not experiencing systematic issues. Additionally, the strength of our platform has helped us avoid significant supply chain interruptions. Our supply chain team continues to leverage our scale to ensure our restaurant teams have the key products they need to serve our guests. Notably, the few spot outages we have experienced are related to warehouse staffing and driver shortages, not product availability. To wrap up, I also want to recognize our outstanding team members. During my restaurant visits, I'm inspired by the positive attitude and flexibility you demonstrate every day. Total sales for the fourth quarter were $2.3 billion, 79.5% higher than last year, driven by 90.4% same restaurant sales growth and the addition of 30 net new restaurants, partially offset by one less week of operations this year. The improvements we made to our business model combined with fourth quarter sales accelerating faster than cost grows strong profitability, resulting in adjusted diluted net earnings per share from continuing operations of $2.03. Our reported earnings were $0.76 higher due to a non-recurring tax benefit of $99.7 million. This benefit primarily relates to our estimated federal net operating loss for fiscal year 2021, which we will carry back in the preceding five years. Looking at our performance throughout the quarter, we saw same restaurant sales versus pre-COVID improving from negative 4.1% in March, positive 2.4% in May. And same restaurant sales for the first three weeks of June were positive 2.5% compared to two years ago. To Go sales for Olive Garden and LongHorn continue to be significantly higher than pre-COVID levels. We have seen a gradual decline in weekly To Go sales, however that decline is being more than offset by an increasing dining sales. Turning to the fourth quarter P&L, compared to pre-COVID results, food and beverage expenses were 90 basis points higher, driven by investments in both food quality and pricing below inflation. For reference, food inflation in Q4 was 4.3% versus last year. Restaurant labor was 190 basis points lower driven by hourly labor improvement of 320 basis points due to efficiencies gained from the operational simplification and was partially offset by continued wage pressures. Marketing spend was $44 million lower, resulting in 200 basis points of favorability. G&A expense was 30 basis points lower driven primarily by savings from the corporate restructuring earlier in the year. As a result, we achieved record restaurant level EBITDA margin for Darden of 22.6%, 310 basis points above pre-COVID levels and record quarterly EBITDA of $412 million. We had $5 million in impairments due to the write-off of multiple restaurant-related assets and our effective tax rate for the quarter was 12% excluding the impact of the non-recurring tax benefit I previously mentioned. Looking at our segments. We achieved record segment profit dollars and margins at Olive Garden, LongHorn, and the other business segment this quarter. Fine dining improved segment profit margins versus pre-COVID despite sales declines. These results were driven by reduced labor and marketing expenses as we continue to focus on simplified operations while also continuing to invest in food quality and pricing below inflation. Fiscal 2021 was a year like no other and despite the challenges of constantly shifting capacity restrictions and an uncertain guest demand, we delivered $7.2 billion in total sales. The actions we took in response to COVID-19 to solidify our cash position and transform our business model help build a solid foundation for recovery and resulted in over $1 billion in adjusted EBITDA and over $920 million of free cash flow. As a result, we repaid our term loan, reinstated our pre-COVID dividend and quickly built up our cash position. Our disciplined approach to simplifying operations and driving profitable sales growth positions us well for the future. This results in a yield of 3.2% based on yesterday's closing share price. Finally, turning to our financial outlook for fiscal 2022, we assume full operating capacity for essentially all restaurants and we do not anticipate any significant business interruptions related to COVID-19. Based on these assumptions, we expect total sales of $9.2 billion to $9.5 billion, representing growth of 5% to 8% from pre-COVID levels, same restaurant sales growth of 25% to 29% and 35 to 40 new restaurants. Capital spending of $375 million to $425 million, total inflation of approximately 3% with commodities inflation of approximately 2.5%, and hourly labor inflation of approximately 6%. EBITDA of $1.5 billion to $1.59 billion, and annual effective tax rate of 13% to 14% and approximately 131 million diluted average shares outstanding for the year. All resulting in a diluted net earnings per share between $7 and $7.50.

qtrly adjusted diluted net earnings per share was $2.03. sees fiscal 2022 total sales of about $9.2 to $9.5 billion. sees fiscal 2022 same-restaurant sales versus. fiscal 2021 of 25% to 29%. sees fiscal 2022 diluted net earnings per share from continuing operations of $7.00 to $7.50. qtrly same-restaurant sales (open 16 months or greater) for consolidated darden up 90.4%. darden restaurants - qtrly same-restaurant sales (open 16 months or greater) for olive garden up 61.9%.

I'll begin with a high-level review of our 2020 results and highlight the many accomplishments that we were able to deliver during the year. These accomplishments were achieved despite the tremendous challenges presented by the global pandemic. I will then provide some closing comments and open the call to questions. The pandemic brought immense challenges to our industry customers and our employees and their family. Whether their jobs were performed in our manufacturing facilities, on a rig servicing our customers, or working remotely, all of our employees adjusted their lives for the good of the organization and in service to our customers. I am grateful for all their contributions. Although our 2020 results were challenged by the pandemic and associated oil and gas demand destruction, it was not a year without significant progress and accomplishments for Dril-Quip. The transformation and productivity journey we started in 2019 positioned us well for this challenging environment. We were able to conclude 2020 with $365 million of revenue and $32 million of adjusted EBITDA. Although a decrease from our 2019 results, we successfully responded to the challenging environment by mitigating the impact of the pandemic as seen in our operating and financial results and continued delivering products and services to our customers. We also celebrated many accomplishments in our research and development efforts during 2020. In May, we were presented with our fifth spotlight on new technology award by the Offshore Technology Conference for our VXTe Subsea Tree System. The VXTe system is a disruptive technology in the subsea production system space. VXTe provides significant cost and time savings for our customers, which improves their IRR by reducing capital and time to first oil, with the added benefit of reducing their carbon footprint. The VXTe offers the operator the ability to drill the well to completion and land the tubing hanger in the wellhead as part of their normal drilling operations without regard to its orientation. This eliminates the traditional development well scenario, whereby the operator will cease drilling operations, pull the BOP stack and run the horizontal tree or tubing spool and then rerun the BOP stack to drill the well to completion. We estimate that this, combined with our other e-Series technology products, will save operators approximately $5 million per well and five days of rig time. We have seen incredibly positive response from our customers about the potential to improve their operations with this technology. Our R&D and manufacturing teams worked hard through the pandemic to complete all qualification tests and maintain the production schedule of the first VXTe tree. With the tree now in final assembly, we expect to make delivery in the first quarter and hopefully, installing the first VXTe this year. While we are aware that consolidation is needed in our sector, we also know the difficulties in quickly executing that strategy. Accordingly, we embarked on a strategy of consolidation through collaboration. In 2020, we entered into a strategic collaboration agreement with Proserv for the manufacture and supply of subsea control systems. This nonexclusive collaboration achieved two main priorities. First, it allowed us to offer our customers the latest subsea controls technology without having to make the significant research and development investment of $8 million to $10 million per year over the next three years, as well as eliminated the associated operating costs of maintaining that product line. Second, this win-win scenario allows us to bundle our award-winning subsea trees with Proserv's state-of-the-art control systems and offer our customers significant value. The collaboration with Proserv was part of a larger strategy to continue down our transformation path to align our business with market activity. Allowing us to refocus our engineering and manufacturing resources toward solutions that set us apart from our peers and offer the highest return on invested capital. This strategy led us to the difficult decision to transition and consolidate our subsea tree manufacturing from Aberdeen to Houston as we saw the subsea tree market decline from close to 300 subsea trees to a little over 100 tree awards in 2020. Aberdeen is a critical location for our operations, and therefore, we still have a significant presence there. This includes sales, project management, fabrication, final assembly and aftermarket operations serving our customers. In total, the productivity initiatives executed in 2020 reduced our costs by approximately $20 million on an annualized basis and helps us to continue on maintaining profitability and a strong balance sheet. As we view the market today, it seems probable that a longer, more gradual post-pandemic recovery is likely. This means it could take several years to return to 2019 activity levels. The recovery is also likely to vary by geography and customer profile. Low-cost areas of offshore development, like the Caribbean, or with the support from subsidies and parts of the North Sea, are expected to see activity levels remain steady. The same can be said for national oil companies that typically drill for domestic energy consumption. In contrast, the most recent developments in the U.S. regulatory environment through executive order has created uncertainty around future projects in the U.S. Gulf of Mexico. Overall, our outlook on the market takes into account multiple factors, including demand recovery, supply control from OPEC, and increased emphasis by government regulators on transitioning toward less consumption of fossil fuels in favor of alternative energy sources. The energy transition is a process we believe should be guided by market forces and approached rationally with regulatory consistency. We recognize the transition is under way, but will take time and resources to accomplish. Furthermore, we believe hydrocarbons will continue to play an important role in this transition, continuing to provide affordable, reliable and often cleaner energy to help lift developing nations out of poverty, while developed nations move more toward alternative energy sources. Dril-Quip has a role to play in both parts of the transition solution. As part of our commitment to this transition, we have always prioritized helping our customers efficiently produce hydrocarbons and our latest e-Series suite of products continues that legacy. Many of our customers have made pledges to reduce emissions or become carbon neutral in the coming years. A large part of these commitments, in some cases, as high as 70% reduction in carbon emissions, will come from the vendors who supply these companies. Dril-Quip's innovative line of products are green by design, offering significant reductions in material or equipment that must be installed. This design methodology, which has always been part of Dril-Quip's DNA, eliminated the carbon associated with manufacturing equipment as well as reducing the offshore installation days. These products are thoroughly tested to improve reliability, which leads to better well integrity and fewer workovers. For example, the combination of our e-Series technologies can help reduce roughly 40 tons of steel from traditional operations. The elimination of this component alone reduces carbon emissions by approximately 70 tons as the process needed to produce the steel is no longer required. We look forward to continuing to lead in the technologies and products that help our customers achieve their operational objectives. However, as we make the energy transition together, we do not lose sight of the very important role the industry currently plays today in providing reliable, affordable energy, and we take great pride in being part of that solution as well. I'm going to walk through Q4 performance and also provide a review for the full year of 2020. We executed well, given the challenges we saw in the overall market. Revenue for the fourth quarter fell slightly from the prior quarter to $87 million. This decline was mainly due to lower manufacturing production hours related to increasing levels of quarantines from rising COVID-19 cases, seen mainly in the U.S. Adjusted EBITDA for the fourth quarter was $9 million, a decrease of $1 million from the prior quarter. The same factors impacting our revenue fell through to the bottom line. We also saw regional government subsidies implemented as a result of the pandemic being reduced during the quarter. For the full year 2020, our revenues were $365 million, a decrease of $50 million versus 2019. This was driven by the impacts of the pandemic on overall oil and gas demand. Adjusted EBITDA for the full year 2020 was $32 million, a decrease of $22 million from the previous year. We were successful in addressing this market decline by swiftly taking steps to reduce costs and optimize our global footprint. As a result of this execution, we saw our margin profile improve significantly in the second half of 2020 as we realize the benefit of these cost actions. We met our $20 million cost reduction target in 2020. These are always difficult decisions, but were necessary in this environment. We expect these cost reductions to be sustainable going forward. While most of our regions saw headwinds to product and leasing revenues during the year, our service revenue saw an increase year-over-year. This was primarily due to an increase in installations from orders booked in previous years, coupled with the growth in our downhole tools business. Our downhole tools business was able to outpace the market by gaining share in key markets in the Middle East and Latin America as a result of service quality and execution. I'll now move on to margins. Gross margins were under pressure. But given the environment, it held up falling by only 3%. Our decision to take actions early in the year helped to support margins as the year progressed. We saw EBITDA margins improve 3% from the first half to the second half 2020 after normalizing for mix and the impact of disruptions related to COVID-19. Moving to SG&A expenses. For the fourth quarter of 2020, SG&A was $26 million, an increase of $5 million compared to the third quarter. This increase was mainly due to short-term legal expenses. We expect these legal expenses to continue into the first half of 2021, mostly in connection with the trial currently scheduled for April. For the full year 2020, SG&A expenses decreased by $8 million to $90 million after excluding these short-term legal expenses. These improvements in SG&A stem from our 2020 cost out initiatives. On the engineering R&D side, we saw a modest increase in 2020 to $19 million as we work to bring the VXTe to market. Now looking at bookings for the year. Product bookings were negatively impacted by the difficult market conditions in 2020. After approximately $388 million in bookings during 2019, the uncertainty surrounding the pandemic and its impact on commodity prices led to customers holding off or delaying decisions to book orders for their upcoming projects. We saw smaller orders with less predictable timing. We now see one or two orders being the difference between a $40 million or a $60 million bookings quarter. We expect the effects of the pandemic to persist into the first half of 2021, but are cautiously optimistic that things will gradually recover as the year progresses. We believe there is some upside if operators see increased stability in prices and confidence in the global economic recovery returns with the recent rollout of COVID-19 vaccines. We expect the road to recovery to be more gradual. We are taking actions related to our productivity initiatives driven by our LEAN management philosophy and are targeting a $10 million cost improvement on an annualized basis. These savings will come primarily from changes in our manufacturing and supply chain functions, including an increase in outsourcing for our downhole tools business. The timing of these productivity actions will take place over the course of the year and is expected to deliver roughly $5 million of realized benefit in 2021. Moving on to capital expenditure or capex. In the fourth quarter of 2020, our capex totaled just under $2 million. And for the full year, it was around $12 million. This represents a minimum maintenance level of capex that we have seen over the past two years. We are, however, anticipating an increase in capex to range in between $15 million to $17 million in 2021. The increase is partly related to growth in our downhole tools business. We are also investing in manufacturing safety and equipment and our information technology infrastructure. We will monitor conditions to adjust our capex if necessary, but we believe these investments will support growth and improve our long-term efficiency and profitability. Now let me turn to the balance sheet. We continue to maintain a strong balance sheet and remain focused on protecting our cash position with no debt. At year-end, we had cash on hand of $346 million and a further $40 million of availability in our ABL facility. This results in approximately $386 million of available liquidity. Our balance sheet and liquidity position are critical for us. It gives our customers confidence in our ability to execute on our commitments and provides financial flexibility. Moving on to free cash flow. Free cash flow for the fourth quarter was a negative $18 million. For the full year, it was negative $33 million. Both the quarter and full year free cash flow was slowed by several headwinds, many of which were related to the pandemic. Firstly, we saw a number of large customers whole payments that were due at year-end until early in January. While we are accustomed to disturb our balance sheet management by our customers, this amount was beyond our normal experience. Secondly, we saw inventory build in 2020, driven by customers requesting delays in shipments and our need to continue to procure materials for upcoming projects. We also strategically added inventory for our expanding downhole tools business and subsea trees for stocking programs. Both these factors led to an increase in inventory. These working capital increases were partially offset by a federal tax refund. We believe we have laid the foundation for a strong recovery. We executed in improving billing turnaround and worked to improve our collection efforts and expand payment terms with vendors. We expect we will see benefits of these efforts more clearly in 2021. Free cash flow is a primary focus for us as a management team. We have tied all annual incentives for our entire leadership team to free cash flow. We are focused on all aspects of working capital. We have dedicated a cross-functional team working on inventory reduction in a more gradual recovery environment. Our auditor cash teams are gaining traction on reducing time to bill. And we are continuing to leverage our supply base by moving to a more vendor-managed inventory program. In the current environment and given the initiatives I just mentioned, we expect to be able to generate 5% free cash flow yield. The bottom line is that free cash flow is a key metric for the management team. Prior to turning the call back over to Blake for closing comments, I will give some color on what we expect to see in 2021. Based on the current view and the conversations with customers, we expect 2021 bookings to be around $200 million for the year. At these product booking levels and with the anticipated growth in our downhole tools business, we expect to see revenue to come in flat to slightly down from 2020. We are forecasting 40% decremental margins for any given decline in revenue as we hold costs critical to address a recovery. As I mentioned earlier, we are forecasting a free cash flow yield around 5% in 2021. We are well positioned to achieve this goal and have aligned management objectives and incentives toward meeting this target. To sum up, while we see near-term headwinds from the hangover of the pandemic, we see a gradual recovery in sight. We have a proven track record of executing and meet these near-term challenges head on as we prepare for the recovery and focus on our strategic initiatives. We have a strong financial position and a strong management team to execute in this market environment. As we enter 2021, we believe there are signs to be optimistic that a recovery, even a more gradual one, is beginning to take form. We have established several strategic initiatives, which will position Dril-Quip to thrive in the years ahead. First, we are continuing to progress our consolidation through collaboration strategy through peer-to-peer collaborations that help to expand market access for our technology. We see these collaborations through several lenses. With respect to VXTe, we believe via conversations and significant pull from both customers and peers in the market that VXTe monetization remains a midterm opportunity via Dril-Quip providing the IP kit to our peers for delivery to end customers. With wellheads, as a best-in-class wellhead provider, we believe both our superior technology and qualification lend themselves to partnering with multiple peers in integrated offerings. Finally, with our connectors, we believe that real opportunity exists to partner with pipe providers around the world to build out better supply chains to improve delivery to our customers. The common theme of these strategies is to expand share while reducing overall industry capacity. Second, we have a downhole tool business that we believe has not fulfilled its potential. We would expect to have a business here that has a market share similar to our wellhead franchises in most markets. Quite frankly, we've struggled over the last few years with that business. But we've laid the foundation in 2020 for significant growth in 2021. We have a new leader. We've shuttered underperforming bases. We place smart bets with stock and added business development resources in key regions. Further, we are only beginning to capitalize on our technology as outlined via our XPak DE technology. Finally, as I'm sure you followed, we've moved from an organization of transformation to an organization that demands real annual productivity improvements. These productivity initiatives span our organization and will make us nimble in difficult times while allowing us to scale up when the market returns. Productivity and LEAN are now the way we do business and will serve us well in good and bad times. As we look to the market increasingly focused on energy transition, we are continuing to be green by design, delivering lower carbon options for our customers, continuing to drive R&D that reduces the carbon footprint for our customers and following our customers in their transition. While we are in the early stages of our R&D, rest assured that you can expect us to bring the same level of innovation to energy transition that we have to our customers over the last several decades. In conclusion, the culmination of all these efforts leads to increasing market share by using technology and execution as a differentiator. We will be keenly focused on free cash flow generation in a competitive free cash flow yield to attract investment and ultimately benefit our shareholders. As Raj indicated, we are continuing several key working capital reduction initiatives in 2021. We take these commitments seriously and have tied our annual performance compensation toward meeting these goals. I look forward to providing further updates on the progress we are making across all our strategic areas in the coming quarters and sharing the benefits of success with our employees, customers and shareholders.

anticipate that orders could continue to be lumpy and remain in a $40 to $60 million range per quarter for 2021.

I hope everyone is staying healthy and safe. Let's start on slide four. We are making great progress this year at DTE for our team, our customers and our communities positioning us to deliver for our investors. This progress has produced a strong second quarter and positions us well for continued growth. Our company celebrated Juneteenth together last month with a series of virtual meetings, we pay tribute to this important day with global community partners. A number of employees offered reflections on what the day means to them personally. Overall, it was a great way to come together and honoured a significant holiday. We continue to focus on service excellence for our customers and delivering clean, safe and reliable energy as we continue our clean energy transformation. DTE Electric received approval from the MPSC to further expand the voluntary renewable program MIGreenPower, while also making it even more affordable, including increased access for low-income customers. Additionally, we partnered with Ford Motor Company to install new rooftop solar and battery storage technology at the Ford Research and Engineering Center. The array includes an integrated battery storage system and will be used to power newly installed electric vehicle chargers. This can generate over 1,100 megawatt hours of clean energy. We also continue to support the communities where we live and serve. We were also recognized by Points of Light for the fourth consecutive year as one of the Civic 50. This award highlights DTE as one of the top 50 community-minded companies nationwide and corporate citizenship. We also launched a Tree Trim Academy to create 200 high-paying jobs in Detroit. DTE has a need for Tree Trimmers, and the community has a need for good high-quality jobs. It will also help us continue to improve electric liability as Trees account for over 70% of our customer outages. On the investor front, we completed the spin of the midstream business. Now DTE Midstream is a stand-alone company and DTE Energy is a predominantly pure-play utility with 90% of operating earnings coming from our utilities. The transaction went very smoothly and was well received by all stakeholders. We didn't miss a beat on a very strategic transaction and many said, we made it look easy. We delivered a strong second quarter with earnings of $1.70 per share and we are raising our 2021 operating earnings guidance and continue to pay a strong dividend. DTE is continuing to deliver successful operating results. At DTE Electric, we made another significant step toward our goal of reducing carbon emissions as we retired River Rouge Power Plant in the second quarter. For over 60 years, the River Rouge Power Plant delivered safe, reliable and affordable energy for community throughout, Southeast Michigan. River Rouge is one of the three coal-fired power plants, DTE is retiring by the end of 2022, which is an integral part of our company's clean energy transformation. We continue to look at ways to accelerate our coal fleet retirements and potentially file our updated IRP before September of 2023. We continue to expand on our voluntary renewable program, which is exceeding our high expectations. In the first quarter, we announced the commitment of new customers to MIGreenPower, including the State of Michigan, Bedrock and Trinity Health. During the second quarter, we signed up a number of new large customers, including Detroit Diesel, which is now one of our largest voluntary renewable customers. The program continues to grow at an impressive rate. So far, we've reached 950 megawatts of voluntary renewable commitments with large business customers and approximately 35,000 residential customers. We have an additional 400 megawatts in the very advanced stages of discussion for future customers. MIGreenPower is one of the largest voluntary renewable programs in the nation and helps advance our work toward our net 0 carbon emission goal while helping our customers meet their decarbonization goals. We have made progress with our expedited tree trimming program, which is greatly improving reliability for our customers and have received Michigan Public Service Commission approval to securitize the tree trimming costs along with costs associated with the River Rouge Power Plant retirement. At DTE Gas, we are on track to achieve net 0 greenhouse gas emissions by 2050. We began the second phase of construction on our major transmission renewal project in Northern Michigan in June. The project includes the installation of a new pipeline as well as facility modification work which will reduce the risk of significant customer outages. Project is on track to be in service by the first quarter of next year. Last quarter, we announced our New CleanVision Natural Gas Balance program. This program provides the opportunity for customers to purchase both carbon offsets and renewable natural gas. We enable them to reduce their carbon footprint. We are proud of how fast the program is growing. Finally, we have over 3,000 customers subscribed, and we are looking forward to seeing it become as successful as our voluntary renewable program at DTE Electric. On our Power and Industrial business, we continue to add new projects as we began construction on a new RNG facility, our large dairy farm in South Dakota. This will be P&I's largest dairy RNG project to date. Project will directly inject RNG into the Northern Natural Gas system for sale into the California transportation fuels market. Facility is expected to be in service in the third quarter of 2022. We are also in advanced discussions on several new industrial energy and RNG projects and we'll provide updates on these as they progress. P&I was also recognized by the Association of Union Contractors with the 2020 Project of the Year Award for the Ford Dearborn cogeneration project. Overall, I am extremely proud of the team's accomplishments year-to-date, and I'm looking forward to more successes in 2021 and beyond. Now moving on to slide six. As I said, we've had a very strong start to 2021. We are raising our operating earnings guidance midpoint from $5.51 per share to $5.77 per share, moving our year-over-year growth and operating earnings per share guidance from 7.4% to a robust 12.5%. We are able to use some of this favorability to position the company to continue to deliver in future years. We mentioned in Q1, we were deep into planning for 2022 in a great level of detail. With all of this work, we feel great about achieving a smooth 5% to 7% growth trajectory into 2022 and through the five-year plan. You are not going to see any surprises from us in our growth rate in 2022 in spite of the area roll off [Phonetic] and the converts coming due. 90% of our future operating earnings will be from our two regulated utilities, where we have a large investment agenda with $17 billion of capital investment in our five-year plan, focused on clean energy and customer reliability. Overall, we feel very confident with our performance in 2021 and our future operational and financial performance. Dave, over to you. Let me start on slide seven to review our second quarter financial results. Total operating earnings for the quarter were $329 million. This translates into $1.70 per share. You can find a detailed breakdown of earnings per share by segment, including our reconciliation to GAAP reported earnings in the appendix. I'll start the review at the top of the page with our utilities. The second quarter was a really warm quarter for us here in Michigan. In fact, it was the seventh warmest on record. DTE Electric earnings were $238 million for the quarter, which was $19 million higher than the second quarter of 2020, primarily due to higher commercial sales, rate implementation and warmer weather offset by nonqualified benefit plan gains that we had in 2020. As we mentioned in the first quarter call, we've taken steps to reduce the variability of these investments going forward. Moving on to DTE Gas. Operating earnings were $7 million, $4 million lower than the second quarter of last year. The earnings decrease was driven primarily by the warmer weather in 2021, offset by new rates. Let's keep moving to the Gas Storage and Pipelines business on the third row. Operating earnings for GSP were $86 million. This was $16 million higher than the second quarter of 2020, driven primarily by the LEAP pipeline going into service and strong earnings across the pipeline segment. On the next row, you can see our Power and Industrial segment operating earnings were $34 million. This is a $9 million increase from second quarter last year due to new RNG projects beginning operation. On the next one, you can see our operating earnings at our Energy Trading business were $21 million, which is $16 million higher than second quarter earnings last year due primarily to strong performance in the gas portfolio. Year-to-date through the second quarter, this positions us positive to our expectation and our original guidance for the year. Finally, Corporate and Other was unfavorable $22 million quarter-over-quarter, primarily due to the timing of taxes and higher interest expense. Overall, DTE earned $1.70 per share in the second quarter of 2021, which is $0.17 per share higher than 2020. Moving on to slide eight. Given the strong start to the year, we were able to use this favorability to position ourselves to continue to deliver for our customers and investors in future years. And we are also increasing our 2021 operating earnings per share guidance midpoint $5.51 per share to $5.77 per share. The increase in guidance is due primarily to warmer-than-normal weather, sustained continuous improvement, and uncollectible expense variability at DTE Electric, higher REF volumes at P&I, and stronger performance of energy trading due to the realization of gains from a small, long physical storage position during the extreme cold weather event in Texas in the first quarter. In the third quarter, we are seeing additional sales upside for Electric compared to our plan and higher than planned REF volumes at P&I. We are continuing to explore opportunities to support future years through our invest strategy and to support future customer affordability. As you can see on the slide, there is no Gas Storage and Pipeline segment in our operating guidance for this year. The GSP segment will be classified as discontinued operations starting in the third quarter. We continue to focus on maintaining solid balance sheet metrics. Due to our continued strong cash flows, DTE is targeting no equity issuances in 2021 and has minimal equity needs in our plan beyond the convertible equity units in 2022. We have a strong investment-grade rating and targeted an FFO-to-debt ratio of 16%. With the proceeds from the spin-off of DTM, we are retiring long-term parent debt of approximately $2.6 billion after debt breakage costs. These were NPV-positive transaction and immediately earnings per share accretive as we were able to retire a higher interest rate debt to support our current plan and to deliver our 5% to 7% operating earnings per share growth rate. We feel great about our second quarter accomplishments, and we are confident in achieving our increased 2021 guidance and continuing to deliver on our long-term 5% to 7% operating earnings per share growth rate. Our utilities continue to focus on our infrastructure investment agenda specifically investments in clean generation and investments to improve reliability and the customer experience. We continue to focus on maintaining solid balance sheet metrics and are targeting no equity issuances in 2021. In closing, after executing a successful spin of our midstream business, DTE continues to be well positioned to deliver the premium, total shareholder returns that our investors have come to expect over the past decade with strong utility growth and a growing dividend.

compname says operating earnings for q2 were $329 million, or $1.70 per diluted share. operating earnings for q2 were $329 million, or $1.70 per diluted share.

We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President of Investor Relations. Over the last several months, we have made incredible progress in our efforts to combat the COVID-19 pandemic. And it's with continued optimism that I provide several updates today, starting with vaccination followed by a summary of the first quarter performance then an update on our improved outlook for the year and finally, an overview of our ongoing commitment to ESG. Q1 brought a lot of smiles as the Kidney Care community administered hundreds of thousands of vaccines to its patients. Providers worked closely with the Biden Administration, the CDC and state government so that dialysis patients could be vaccinated in a trusted and convenient side of care. We knew that this would help our patients overcome transportation and other access challenges getting to third-party sites. And we had confidence that the hesitancy rate would decline when they received education from a trusted caretaker. We also saw an opportunity to positively impact health equity by administering COVID vaccine in our clinics. Similar to the early results in the broader U.S. population, in the first few weeks of the vaccine rollout, we saw the vaccination rate for Black and Hispanic were approximately 40% below that of White and Asian American. This did not sit well with us. We've got to work and mobilized our care teams, including social workers, dietitians and medical directors to have one-on-one conversations with patients to address common causes of hesitancy. Our Hispanic patients have now been vaccinated at nearly the same rate as white patients and the gap for our black patients has been reduced to 10%. We are not done. Our pursuit for health equity continues. On to our first quarter financial results. We delivered solid performance in Q1 as our operating margins returned to 15.7% in the quarter, while we continue to lead through the continued challenges presented by the pandemic. As we covered on our last call, treatment volumes declined in Q1. Our treatments per day hit a low point in mid-February, including the impact of approximately 25,000 missed treatments from the winter storm. Since then, our daily treatment trends have steadily improved. As these trends continue, absent any further infection surges, we believe that our sequential patient census growth through the end of the year could return to pre-COVID levels, which is what we incorporated in our guidance ranges we provided last quarter. Let me provide a bit more detail on volume that supports our outlook. First, since our update in Q1, COVID case counts and new infections within our dialysis population have continued to decline. As of last Friday, the number of active cases among our patients across the country decreased approximately 85% from peak prevalence on January 6, 2021, and the last seven-day incidence rate for new cases decreased approximately 91% from the week ending January 9, 2021. Second, we're grateful that we're seeing a dramatic decline in the mortality rates associated with COVID. We've previously shared that the unfortunate incremental mortality associated with COVID was approximately 7,000 in 2020. In 2021, both our patient mortality count and mortality count in the general population peaked in January. In the first quarter, incremental mortality associated with COVID was approximately 3,300 lives, with more than half of that number occurring in January, decreasing to approximately 600 in March. It is too early to provide an estimate for April, but we expect the results will improve versus March. Shifting to full year outlook, our view of core operation performance for the year remains largely unchanged from our original guidance. However, now that the likelihood of some downside scenarios have decreased due to the trends I've previously mentioned, we are increasing our adjusted earnings per share guidance range to $8.20 to $9 per share and our adjusted operating income guidance range to $1.75 billion to $1.875 billion. At the midpoint of our revised adjusted operating income guidance, this would represent approximately a 4% growth year-over-year. These revised ranges assume no further major disruption from the virus strain. My final topic is our ongoing commitment to environmental, social and governance matters or ESG. ESG has become a more significant topic of conversation in the investment community over the last couple of years, but these are not new areas of focus for us at DaVita. Our beliefs are incorporated into our stated vision of social responsibility that has three components: caring for our patients, caring for each other and caring for the world around us, including both our communities and our environment. DaVita continues to execute against this vision, providing top quality clinical care for our patients is at the core of what we do and because I've already spoken at length about our patients care and our efforts to vaccinate our patients, I would like to highlight a few of our achievements in caring for our teammates and caring for the world around us. I believe that fostering an environment rich in diversity and where we all feel that we belong is imperative to our culture and how we connect with each other and how we connect with our patients every day. And our commitment to cultivating diversity is evident throughout the organization. It starts with the Board of Directors, currently made up of nine leaders, of whom 67% are diverse, including four women and three people of color. The diversity of our team extends to the leaders who run the core operations in our clinics of whom 52% are female and 27% are people of color. These results have been achieved through thoughtful and deliberate practices to create a diverse pipeline of talent. In 2021, we published our first report on diversity and belonging, disclosing many of our company's diverse metrics and our ongoing efforts to cultivate a diverse organization in which everyone feels that he or she belongs. We also recently published our 14th Annual Corporate Social Responsibility Report and our first ESG Report. These reports disclose the progress we made in 2020 and lay out our ambitious ESG goals for 2025, including goals to reduce carbon emissions by 50% and to have vendors representing 70% of emissions set by climate change goals and to achieve engagement scores of 84% or higher among our teammate population. We are pleased with our progress to date on diversity and ESG. And as you can see by our goal, we have a lot more we hope to accomplish. Q1 was a strong start to the year with solid financial performance. For the quarter, we recorded revenue of approximately $2.8 billion, operating income of $443 million and earnings per share of $2.09. As Javier referenced, treatment volume was a large headwind and our nonacquired growth was negative 2.2% compared to negative 0.3% in Q4. While COVID presented the main challenge to NAG in Q1, winter storms, particularly Uri, were responsible for about 30 basis points of the NAG decline. Treatments per day bottomed out during the first quarter, so we expect to start seeing quarter-over-quarter growth in Q2. We continue to expect that NAG will be negative for the year, although we expect to see an acceleration of NAG in 2022 and 2023 as mortality rates may be lower than the pre-COVID levels for a few years. U.S. dialysis revenue per treatment grew sequentially by almost $3 this quarter as a result of the Medicare rate increase, higher enrollment in MA plans, a slight improvement in commercial mix and higher volume from our hospital services business, partially offset by the seasonal impact of coinsurance and deductible. U.S. dialysis patient care costs declined sequentially by approximately $6 per treatment. Although we continue to experience elevated costs due to the pandemic, such as higher PPE and certain clinical level expenses from continued infection control protocols, our Q1 patient care costs included a nearly $2 per treatment benefit from our power purchase agreement, a benefit that we do not expect to persist through the rest of the year. For the quarter, the net headwind related to COVID was approximately $35 million, consisting primarily of higher PPE costs and the compounding effect of patient mortality associated with COVID, partially offset by the benefit from the sequestration suspension with a number of other items that largely offset each other. For fiscal year 2021, we now estimate the net negative impact from COVID to be approximately $50 million lower than our guidance last quarter. This is the result of lower COVID impact in Q1, the recently passed extension of the Medicare sequestration relief through the end of the year and lower other offsets, including T&E in the back half of the year. At the middle of our guidance range, this would equate to $150 million negative impact from COVID in 2021. Our DSO increased by approximately seven days in Q1 versus Q4, primarily due to temporary billing holds related to the winter storm and the changes in calcimimetics reimbursement. In certain circumstances, we hold claims to make sure we have complete and accurate charge information for payments. This quarter, we had more of these holes and the single largest driver was related to winter storm Uri, which impacted more than 600 of our centers until right in the middle of the quarter. This has the effect of pushing a significant amount of cash flow from this quarter to the next and caused the corresponding DSO increase in the interim. While claim holds shift cash flow between quarters, they have no negative impact on what we ultimately expect to collect. We've already seen a significant increase in cash collections in April and expect a corresponding positive impact on both cash flow and DSOs over the next two quarters. A couple of final points. In the first quarter, we repurchased 2.9 million shares of our common stock. And to date, in April, we repurchased approximately one million additional shares. Debt expense was $67 million for the quarter. We expect quarterly debt expenses to increase to approximately $75 million beginning next quarter as a result of the $1 billion of notes issued in late February. Before we open up the line for Q&A, let me share some reflections. Over the past year, our teams and our business experienced unusual volatility and challenges due to the pandemic. We have weathered this very difficult period because of our dedication of our people, our scale, our innovation and our holistic platform and approach to patient care. As I look forward, our organization is stronger, our relationships with patients have deepened and I have even more resolve that our comprehensive Kidney Care platform is well positioned to deliver a best-in-class value proposition to our patients, physicians in hospitals and payer partners. Now let's open it up for Q&A.

1st quarter 2021 results. q1 earnings per share $2.09 from continuing operations. now sees fy 2021 adjusted net income from continuing operations per share $8.20 - $9.00.

We appreciate your continued interest in our company. We are excited to talk to you today about our strong Q2 performance. Our 2021 financial outlook and recent development on our effort to transform kidney care. First, let me start the conversation with the clinical highlights. Kidney transplant is the best treatment option for eligible patients with kidney failure. DaVita has worked hard over the years to help our patients gain access to transplant through education and direct support for patients to get on and stay on the transplantation waitlist. The cumulative impact is meaningful. Last December, we announced a milestone of 100,000 DaVita patients who have received transplant since the year 2000. Further advance the cause of transplantation are collaborating on a yearlong pilot aim at improving health equity in kidney transplantation with a focus on living donors. Increasing living donor transplant expands access to transplantation by increasing the availability of organ, which has been the limiting factor in the number of transplants performed annually. This pilot provides high touch and customized information to patients and families seeking a kidney transplantation from a living donor. We look forward to learning more from this pilot, improving the health equity of kidney transplant and continuing to be the leader in supporting our patients to receive kidney transplant. Shifting to the latest update on COVID, we have made incredible progress in our efforts to combat the COVID 19 pandemic over the past several months. New COVID infections among our patients continue to drop significantly through the last week of June down more than 90% from the peak in early January. However, similar to the rest of the country, we have started to see an uptick over the last few weeks. As of last week on a rolling seven day average basis new infection, they're still down more than 90% from the peak. Thus far, mortality continues to remain low on an absolute basis as we believe that are vaccinated patient are more protected from severe cases of COVID. We continue to educate our patients about the benefits of vaccine to reduce vaccine hesitancy and we remain confident in our policies and procedures designed to keep our patients and our teammates safe while they're in our care. Now let me turn to our financial performance in the second quarter, we delivered strong results in both operating income and earnings per share, our margin expanded as we continue to manage cost while delivering quality care. As a result, we delivered 6% year-over-year growth in adjusted operating income and 35% year-over-year growth in our adjusted earnings per share. Our free cash flow was particularly strong this quarter, we continue to return cash to our shareholders through our stock buyback. With the first half of the year behind us. We are now increasing the midpoint of guidance for the full year. Let me transition to update our progress in our integrated Kidney Care efforts, otherwise known as by IKC. Value-based care for our patients with kidney disease is gaining momentum and appears to have reached an inflection point. We have always believed the core name dialysis care with the broader healthcare needs of KB and SKG patients with simultaneously improve outcomes and reduce total healthcare costs. For years, we've been participating in a variety of small programs and pilots to build our integrated care capability and better understand the economics we believe we are at that point now where we are ready to shift to the next stage of the evolution of integrated care. You might be wondering why now, the trend toward value-based care is not new either in kidney care or other segments of healthcare so what's changed to make the development of scale business viable today. There's a couple of reasons. First with the growth of Medicare Advantage payers are looking for innovative ways to manage the increasing number of ESKs patients choosing MA plans these patients tend to be more complex and most of them MA patient and should benefit from tailored care management. Second, CMS recently initiated the payment models and kidney modern in kidney care. We are preparing to partner with nephrologists and up to 12 markets beginning in January of next year to participate in CKCC voluntary program. Our participation and CKPKC model will also provide us with operational scale in more geographies to enter into other value based arrangements, we've increased our confidence in our capabilities to deliver clinical and economic value at scale and have lean in on our willingness to take risk. We believe we're well positioned to win an integrated care because of our strong partnership with nephrologists, our regular and consistent interactions with patients, a broad Kidney Care platform that spans various modalities and care setting. And a clinical data set and analytics that we used to create develop clinical interventions to support our patients holistically. We have a demonstrated track record of improving patient outcome care, and lowering costs for patients in risk arrangement for example, in our FCOS [Phonetic], we were able to generate non-dialysis cost savings in the high single digits which translated into more than double the average savings rates compared to the rest of the industry over the life of the program. With our special needs plan we have been able to lower mortality by 23% relative to other patients within the same-center and county. To give you a better sense of the scale of the business. As of today, approximately 10% of our US dialysis patients are in value-based care arrangements in which Tervita is responsible for managing the total cost of care. This represents almost $2 billion of annual medical cost under management. In addition, we have various other forms of value based care arrangements with payers in. We have economic incentives for improving quality and lowering costs. In 2022, we expect our integrated Kidney Care business to double inside both the number of patients in risk arrangement and the dollars under management. We also expect to see a dramatic increase in the number of CKB Live we have under risk in 2022. To prepare for this growth. We are currently scaling up our clinical team and furthering building out our support. Because of the investment as well as the delays and cost savings impact of our model of care and revenue recognition. We expect to incur a net operating loss of $120 million in 2021 in our US ancillary segment this outcome is consistent with the OII headwinds from ITC growth, we called out at the beginning of the year and is of course included in our full year guidance. The doubling of the business next year could result and an incremental operating loss in our ancillary segment of $50 million in 2022. We expect significant improvement in our financial performance beginning in 2023 as we begin to recognize savings from the new contracts that we entered in 2021 and 2022. Over the five-plus-year horizon, we believe that our IKC business could become a sustainable driver of significant operating income growth. Currently we serve approximately 200,000 dialysis patients across the country, we utilize over $12 billion in health services outside of the dialysis facility, including the cost of hospitalization, our patient procedures and physician services. In addition, we see an opportunity to manage the care of up streams CKD patients who currently do not dialyzed in our centers. Assuming that we are managing the total cost of care for more than half of our dialysis patients as well as others CKD patients at low-to-single digit margin, we believe that this could be meaningful financial opportunity. In summary all of healthcare has been talking about value based for years. We are excited for DaVita to lead the way. We had a strong quarter despite the continuing operational challenges presented by COVID primarily as a result of strong RPT performance and continued discipline on cost. For the quarter, operating income was $490 million and earnings per share were $2.64. Our Q2 results include a net COVID headwind of approximately $35 million similar to what we saw in Q1. Primarily the impact of excess mortality on volume and elevated PPE costs partially offset by sequestration relief and reduced travel and meeting expenses. In Q2 treatments per day increased by 0.4% compared to Q1. Excess mortality declined significantly in Q2 from approximately 3,000 in Q1 to fewer than 500 in Q2. At this point, we are cautiously optimistic that the worst is behind us. But we're closely monitoring the potential impact of the delta Varian especially within pockets of the country that have lower vaccination rates. Longer term, we continue to believe that we will return to pre-pandemic treatment growth levels with an additional tailwind from lower than normal mortality rate. Our US dialysis revenue per treatment grew sequentially by almost $6 this quarter, primarily due to normal seasonal improvements from patients meeting their co-insurance and deductible obligations. We also saw favorable changes in government rate and mix including the continued growth in the percentage of patients enrolled in Medicare Advantage. Patient care costs and G&A expense per treatment in total were relatively flat quarter-over-quarter. Our patient care costs decreased sequentially primarily due to reductions in labor costs. Our G&A increased slightly, primarily due to charitable contributions and increases in personnel costs. As expected, our US dialysis and lab DSO decreased by approximately six days in Q2 versus Q1. Primarily due to collections on the temporary billing holds related to the winter storms in the first quarter. The majority of the impact of the storms on DSO and cash flow, we reversed in Q2. But we may see an ongoing smaller benefit through the balance of the year. During the second quarter, we generated a gain of approximately $9 million on one of our DaVita Venture Group investments which hit the other income line on our P&L. We have a small investment in medical that recently went public. The value of this investment at quarter end was $23 million going forward market-to-market every quarter. Now turning to some updates on the rest of this year and some initial thoughts on 2022. As Javier mentioned, we are raising our guidance ranges for 2021 as follows. Adjusted earnings per share of $8.80 to $9.40. Adjusted operating income of $1.8 billion to $1.875 billion and free cash flow of $1 billion to $1.2 billion. Also we now expect our 2021 effective tax rate on income attributable to DaVita to be between 24% and 26% lower than the 26% to 28% range that we had communicated at the beginning of the year. These new guidance ranges exclude the potential impact of a significant fourth COVID surge later this year. I'll call out two notable potential headwind during the second half of the year. First is COVID we continue to expect the impact of excess mortality will be higher in the back half of the year than in the first half of the year due to the compounding impact of mortality through 2021. We're also expecting an uptick on costs related to testing, vaccinations and teammate support as a result of the delta variant. As a result, we are increasing the middle of the range of COVID impact for the full year to $170 million from $150 million. That implies a $30 million headwind from COVID in the second half of the year compared to the first half of the year. As a reminder, this is the middle of what is a wide range of possible impacts depending on the impact of the delta or other variance and any additional COVID mandate. Second, we expect to experience losses in our US ancillary segment of approximately $70 million in the second half of the year compared to $50 million in the first half of the year. This incremental loss is due primarily to new value based care arrangements and start-up costs associated with the CKCC program that launches in 2022. Looking forward to 2022 we do not expect anything unusual among the primary drivers of the business, including RPT, cost per treatment or capital expenditures. However we expect pressure on OI growth from the increased spend on growing our IKC business, the possibility of union activity in 2022 that we did not face in 2021 and the first year of depreciation expense associated with our new clinical IT platform that we have been developing for the past several years. We will provide more specific 2022 guidance on a future earnings call.

2nd quarter 2021 results. q2 earnings per share $2.64 from continuing operations. sees fy 2021 adjusted diluted net income from continuing operations per share attributable to davita $8.80 - $9.40.

We appreciate your continued interest in our company. Q3 was another strong quarter for DaVita in the face of a challenging operating environment. Despite another rise in COVID case counts across the United States and an increasingly challenging labor market, we continue to provide quality care to our patients and execute on our strategic objectives. I want to begin my remarks by highlighting an exciting milestone, we took past 15% of our patients dialyzing at home. This means that approximately 30,000 of our patients receive the clinical and lifestyle benefits of home dialysis. As we've explained before, to be sustainable provider home dialysis, it requires a comprehensive infrastructure, including convenient and easy access to a home center for training sessions, and recurring visits with our care team. Our current network of centers provides that easy access such that 80% of our dialysis patients live within 10 miles of a DaVita home center. In addition, we continue to innovate on our platform to help make home dialysis, an easier choice for patients and their physicians and to extend the duration on home dialysis once patients have made that choice. A few highlights of note. First, we recently rolled out an enhanced education program along with supporting technology for our new patients to ensure that they receive timely and comprehensive modality education, which is tailored to each patient's individual needs. We also continue to work on additional enhancements and customization to our education process for different communities, such as black and Hispanic patients to improve their chance of selecting this modality and therefore improve health equity. Second, we developed a patient portal and telemedicine platform that supports remote monitoring and communications between DaVita caregivers, our nephrologist partners, and our home patients. Third, we developed a team of industry-leading home physicians to create an expert network, which works closely with practicing physicians and practice leaders to help them understand the benefits of home modalities, troubleshooting complex clinical issues and elevate their home clinical skill. Last, we're testing out our AI and other technologies to optimize PD prescription, alerting physicians in real time when an update prescription might be needed. We will discuss the strategic advantage of our platform in greater detail on November 16 on our Virtual Capital Markets Day. On to our Q3 results. Our business model continues to prove resilient in face of operating challenges. Q3 operating income grew approximately 9% year-over-year, and adjusted earnings per share grew by more than 31% over the same period However, the ongoing COVID pandemic continues to take its toll on too many human lives in the world at large, and among our patients. Across the broad US population, the current surge driven by the Delta variant appears to have peaked in early September, with new case accounts reaching approximately two-thirds of the peak during the past winner. Fortunately, within our dialysis patient population, the new case count peaked approximately one-third of the winner peak and mortality rates were relatively lower, likely due to the vaccination rates among our patients. Incremental mortality increased from fewer than 500 in Q2 to approximately 2000 in Q3. After quarter end, COVID infections continue to decline, with our new case count during the week ending October 16 down by approximately 60%, relative to the recent Delta peak. Switching to vaccines, approximately 73% of our patients have now been vaccinated. In addition, we've started the rollout of vaccine boosters for eligible patients in accordance with CDC guidelines. We're hopeful that any future COVID surges and breakthrough infections will be more limited relative to what we saw in the peak of last winter. Cost management continued to be strong in the quarter, although we are facing the same competitive dynamics in the market for healthcare workers, as other companies have mentioned. Despite these challenges, I am pleased with how our frontline leadership team has been responding. It has long been a key part of our mission to be the employer of choice. How we live this aspect of our mission has been evident throughout the pandemic, as our team has retained relentless focus on the safety and care of our patients, as well as one another. As we have discussed in past calls, we continue to offer a safe and fulfilling work environment and have provided incremental pay and benefits to help our frontline caregivers during this challenging time. These efforts are ongoing. Given the current environment, we expect to provide our teammates with higher annual compensation increases than in typical years. This will put additional pressures on our cost structure but we believe this will help us attract and retain the talent needed to achieve our long-term objective. Just as critical, it aligns with our mission and builds on our history of investing in our people. Finally, I would like to say a few words about Integrated Kidney Care or IKC. Last quarter, we shared details on our planned investment in IKS and long-term opportunity this creates for patients, payers and our shareholders. At the end of Q3, we now have over 22,000 patients in some form of integrated care arrangements, representing 1.7 billion of value-based care contracts. Next year, we expect to approximately double the size of our IKC business driven primarily by our participation in the federal government's news cheap KCC program. While it is still early and contingent on successful execution, we believe that investing in IKC represents a new and potentially meaningful earnings opportunity for us in the coming years. This is another area we plan to discuss in detail at our upcoming Virtual Capital Markets Day. Despite the operating challenges Javier referenced, we delivered another quarter of strong results. Operating income was $475 million and earnings per share was $2.36. Our Q3 results include a net COVID headwind of approximately $55 million, an increase relative to the quarterly impact that we experienced in the first half of the year. As Javier mentioned, the latest COVID surge resulted in excess mortality in the quarter of approximately 2000 compared to fewer than 500 in Q2. We're also anticipating the mortality in Q4 to be higher than it was in Q2, although we've seen a decrease in the last few weeks that we hope continues. Our current view of the OI impact of COVID for the year is worse by approximately $40 million compared to our expectations from last quarter. For 2021, we now expect a total net COVID impact of approximately $210 million. Treatments per day were down by 536 or 0.6% in Q3 compared to q2. The primary headwind was the increase in our estimated excess mortalities and higher mistreatment as a result of the COVID surge. In addition, the quarter had a higher ratio of Tuesdays, Thursdays and Saturdays, which lowered treatments per day for the quarter by approximately 300. In light of the current Delta surge, and the compounding impact of mortalities on our year-over-year growth, we believe that the timing of a return to positive nag will now be delayed into 2022. Revenue per treatment was essentially flat quarter-over-quarter, patient care cost per treatment was up approximately $5 quarter-over-quarter, primarily due to higher teammate compensation and benefit expenses. This is the result of higher wages, additional training costs associated with an increase in our new hires and seasonality in healthcare benefit expenses, which we expect to continue into Q4. Our Integrated Kidney Care business saw an improvement in its operating loss in the quarter, which is due primarily to positive prior period development in our special needs plan. We continue to expect increased costs in Q4, especially in our projected CKCC markets, as we ramp up staffing in preparation for 2022. DSOs for our US dialysis and lab business increased by approximately three days quarter-over-quarter, primarily due to fluctuations in the timing of billing and collections. Other loss for the quarter was 7.6 million, primarily due to a $9 million decline in the mark to market of our investment in Miromatrix. The value of this investment at quarter end was $14 million. Now turning to some updates for the rest of the year and beyond. As I mentioned on the Q2 earnings call, we excluded any impact of a significant surge in COVID from the Delta variant in our revised guidance, but noted that a wider range of outcomes was possible depending in part on how a fourth surge would develop. Now that we've seen the impact of the Delta surge, we are increasing our estimate of COVID impact for the year by $40 million. Given where we are in the year, we are now incorporating this COVID impact into our revised adjusted OI guidance of $1.76 billion to $1.81 billion. We are also narrowing our guidance for adjusted earnings per share to $8.80 to $9.15 per share. And we are maintaining our free cash flow guidance of $1 billion to $1.2 billion, although there is some chance that our free cash flow may fall below the bottom end of the range, depending on the timing of our DSO recovery. Our revised OI guidance implies a decline in our Q4 financial performance relative to Q3. This is partially explained by the incremental COVID mortality impact, and by expected higher salaries and wages for existing frontline teammates. Our guidance anticipates Q4 operating income to be negatively impacted by approximately $75 million of seasonally high or one-time items, including certain compensation expenses, elevated training costs, higher health benefit expenses, and G&A. Looking ahead to 2022, the three expected headwinds I talked about on the Q2 earnings call remain. As a reminder, we expect to have added expense related to the greatest portion of the industry effort to counter the ballot initiative in California. We anticipate a year-over-year incremental investment in the range of $15 million as we continue to grow our ITC business. And we will also begin depreciating our new clinical IP platform, which we expect to be approximately $40 million. A few additional things to help you with our thinking about 2022. COVID remains a big uncertainty. We are anticipating the end of the temporary sequestration suspension, which would be a $70 million headwind for the full year. We also expect that some of the costs that spiked during COVID, in particular PPE, may not return as quickly to pre-COVID levels due to the challenges of the global supply chain. Finally, COVID impact on mortality next year remains a large swing factor. Another winter surge would negatively impact treatment volume and could delay the timing of achieving positive NAG. However, if the recent surge proves to be the last significant COVID search, then we would expect a tailwind from lower than typical mortality, which could result in treatment growth higher than pre-COVID level. In 2022, we expect net labor costs will increase more than in typical years as a result of market pressures. Our current estimate is a net headwind of $50 million to $75 million. We expect to offset a significant amount of these incremental costs, with continuing MA penetration growth above historical level, and strong management of non-labor patient care costs. From an operating income growth perspective, we expect 2022 will be a transition year with some significant but largely temporary headwinds to get through, after which we expect our platform to continue to support strong profit growth. While the range of potential outcomes for 2022 is broad, a reasonable scenario could result in an OI decline of $150 million from our 2021 guidance. This includes the impact from the expected ballot initiative, IKC and the increased depreciation. This scenario also includes a modest headwind from COVID, although there are scenarios where the impact of COVID could be significantly worse. Looking forward to 2023, we anticipate a reversal of the net impact of these 2022 headwinds, plus incremental operating income growth, such that we expect 2023 operating income to show a low-to-mid single digit CAGR from the midpoint of our updated 2021 guidance, which would be in line with the multi-year outlook we have shared historically. We expect this to be the result of the lack of ballot initiative-related costs, the recognition of savings in IKC, an improved COVID situation, and continued growth of the core business. We'll have more to say about long term guidance at our Capital Markets Day in a couple of weeks. Finally, during the third quarter, we repurchase 2.7 million shares of our stock and in October to date, we repurchased an additional 1.2 million shares. Operator, please open the call for Q&A.

compname reports q3 earnings per share of $2.36 from continuing operations. 3rd quarter 2021 results. q3 earnings per share $2.36 from continuing operations. sees 2021 adjusted diluted net income from continuing operations per share attributable to davita inc. $8.80 to $9.15.

We appreciate your continued interest in the company. I'm Jim Gustafson, vice president of investor relations. Each quarter, for the last two years, I hope it's the last time that the pandemic is the start of my discussions with you, yet COVID continues to evolve and have a direct impact on our world, especially on our healthcare system. Similar to what's been seen in the general population, COVID infections within our patient population spiked significantly in late December through January. At a peak during the second week of January, the new case count was more than twice as high as a peak from last winter. Gratefully, the mortality rate to date with the latest surge has been lower than in prior surges. For the fourth quarter, we estimate that the incremental mortality due to COVID was approximately 1,100, compared to approximately 1,600 during the third quarter. Despite the challenges associated with COVID, I continue to be in awe at the resilience and dedication of our teammates across the DaVita Village. From our direct patient caregivers to our corporate teammates, all are unrelenting in their commitment to provide high-quality care, respond to quickly changing environment, and show incredible compassion and support for our patients. For the balance of my remarks, I will cover five topics: transplant; labor market; our supply chain; Integrated Kidney Care, IKC; and then I will wrap up with our fourth-quarter results and our outlook. Transplant is a preferred treatment option for most of our patients and during 2021, despite the challenges posed by the COVID pandemic, we celebrated that nearly 8,000 DaVita patients received a transplant, exceeding our pre-pandemic level. With that said, the transplant process is long and complicated with an average wait time of between four and five years for an organ. Staying active on the waitlist for such a long time is difficult. As a result, patients sometimes miss their window or a transplant. We've been working to address some of these challenges through our industry-leading transplant smart education program and our partnership with The NKF to help more patients find living donors. In early January, we announced the acquisition of MedSleuth, whose software enables closer partnerships and better coordination between transplant centers, nephrologists, and kidney care providers, with all three working together to support our patient transplant journey. These efforts can also benefit another meaningful goal of ours, to improve health equity. Many process and outcome results in transplant are quite inequitable, different by race and ethnicity, economic means, and insurance coverage. We believe it doesn't have to be this way, removing barriers to access, making process as easy as possible, and providing strong care coordination and support through the transplant journey can all contribute to making transplant not just more available, but also more equitable for our patients. Now let me shift to an update on the labor markets. I've been fortunate enough to be part of DaVita Village for over 20 years and in all that time across my many roles, I've never experienced the labor market as challenging as we face today. To help deal with the challenge, we have provided incremental pay-in benefits to help our frontline caregivers during COVID. We've also accelerated wage increases with a particular focus on our teammates in the clinic. As previously communicated, we expect higher-than-usual wage increases in 2022, which will put some additional pressure on our cost structure going forward. We believe this investment in our people will contribute to our ability to track and retain the talent needed to achieve our long-term objective. That said, the labor markets remain highly dynamic and will continue to be a swing factor for the year. Over the years, in particular, during the pandemic and natural disasters, we have navigated many supply chain challenges. To date, our supply chain has proven very resilient. Currently, we're working through a supply shortage primarily related to dialysis, which is a fluid solution used in hemodialysis to filter toxins and fluid from the blood. The shortage has rippled through the entire kidney care community and as a community, we have once again come together in support of our dialysis patients and thus far, have been able to provide uninterrupted life-sustaining care. We expect that these challenges related to dialysis will remain with us until the second quarter. We now have confirmation on the markets where we will partner with physicians under the federal government's new five-year CKCC demonstration. These programs added approximately 12,000 ESKD patients and an additional 12,000 CKD patients across 11 value-based programs in different markets. We're engaging with our nephrologist partners to develop personalized care plans for each covered patient and identify opportunities to improve clinical outcomes and lower cost for each patient. Participating in these and other programs will more than double the number of patients we serve in value-based care arrangements. In light of our upfront cost of these programs and the lag of shared savings payment, as we discussed in November, we continue to expect that our operating loss in 2022 in our U.S. ancillary segment will increase by approximately $50 million, although this could increase or decrease depending on the number of new arrangements we enter into during the year. We believe that we are well-positioned for the future and in particular, to deliver positive clinical and financial results in our IKC business over the long term. Now, let me finish with fourth-quarter results and our updated outlook. Despite the negative impact of the omicron surge, our fourth-quarter results were slightly above the midpoint of our revised guidance. This resulted in a full-year adjusted operating income increase of approximately 3% over 2020. Adjusted earnings per share from continuing operations grew by approximately 26% year over year, and we generated more than $1.1 billion of free cash flow, which we largely deployed to return capital to our shareholders. For 2022, we expect adjusted operating income guidance of $1.525 billion to $1.675 billion. The midpoint of this guidance range is $35 million below our expectations from Capital Markets Day last November, which is primarily driven by our updated views on COVID and labor costs. As we said previously, while 2022 will be a transition year due to some near-term investment and challenges that we're facing, we continue to believe that we're well-positioned to perform across the kidney care continuum in the years to come. We still believe we can deliver the long-term compounded annual growth of adjusted operating income of 3% to 7% that we discussed at Capital Markets Day. As Javier mentioned, our fourth-quarter results were slightly above the midpoint of our revised guidance. Q4 results included a net COVID headwind of approximately $80 million, an increase relative to the quarterly impact that we experienced in the first three quarters of the year primarily due to the impact of the incremental mortality from the delta surge in Q3 and some temporary labor cost increases. For the year, we experienced a net COVID headwind of approximately $200 million. As Javier said, the incremental mortality due to COVID in the fourth quarter was approximately 1,100, compared to approximately 1,600 in Q3. While it's too early to accurately forecast incremental mortality in 2022, given the significant uptick in infections in January, we expect COVID-driven mortality in the first quarter to be at or above what we experienced in Q4. U.S. dialysis treatments per day were down 135 or 0.1% in Q4 compared to Q3. The primary headwind was the increase in mortality and higher missed treatments as a result of the ongoing COVID pandemic. U.S. dialysis patient care cost per treatment were up approximately $6 quarter over quarter, primarily due to the increased wage rates and health benefit expenses. Our Integrated Kidney Care business saw an increase in its operating loss in Q4, which is due primarily to positive prior-period development in our special needs plans recognized in the third quarter and increased costs incurred in Q4, including preparation for new value-based care arrangements effective in 2022. Our adjusted effective tax rate attributable to DaVita was 16% for the fourth quarter and approximately 22% for the full year. The adjusted effective tax rate was lower quarter over quarter, primarily due to a favorable resolution of a state tax issue during Q4. Finally, in 2021, we repurchased 13.9 million shares of our stock, reducing our shares outstanding by 11.5% during the year. We have repurchased to date an additional 1.4 million shares in 2022. Now looking ahead to 2022, our adjusted OI guidance is a range of $1.525 billion to $1.675 billion, and our adjusted earnings per share guidance is $7.50 to $8.50 per share. The midpoint of the OI guidance range is $37 million below the $1.635 billion that we discussed during our recent Capital Markets Day due to offsetting puts and takes. First, we have a tailwind from both higher final Medicare rate update, as well as a partial extension of Medicare sequestration relief. However, this is more than offset by headwinds due to the recent COVID surge, as well as incremental wage rate pressure. At the midpoint of our guidance range, we have incorporated the following assumptions related to COVID: excess patient mortality due to COVID of 6,000. This, along with our normal growth drivers, would result in a total treatment growth range of approximately 1.5% to 1%. A year-over-year improvement to COVID-driven costs such as PPE, which will be largely offset by the loss of revenue from Medicare sequestration relief beyond Q2 2022. As you would expect, the high and low end of our guidance incorporates a range of COVID scenarios for 2022. There are scenarios could lead us to performance above or below this range. In addition to COVID, the expected headwinds I talked about on the Q3 earnings call and at our Capital Markets Day remain. As a reminder, we expect to incur expenses related to the biggest portion of the industry effort to counter the expected ballot initiative in California. Our guidance assumes an incremental increase of between $100 million and $125 million in labor costs above a typical year's increase, which is $50 million higher than what we communicated at Capital Markets Day. Third, we anticipate a year-over-year incremental operating loss in the range of $50 million as we continue to invest to grow our IKC business; and fourth, we will also begin to depreciate our new clinical IT platform, which we expect to be approximately $35 million in 2022 and will begin in Q2. A few additional things to help you with our current thinking about 2022. We expect to offset a significant amount of these incremental costs with continuing MA penetration growth above historical levels and strong management of nonlabor patient care costs. We are forecasting our tax rate at 25% to 27% due to nondeductibility of valid expense. Regarding seasonality, remember that Q1 had seasonally higher payroll taxes and seasonal impact of copayments and deductibles. The vast majority of our ballot-related expenses will fall in Q3. We have historically experienced higher G&A in Q4. Looking past 2022, we continue to expect compounded annual OI growth relative to 2021 of 3% to 7% and compounded annual adjusted earnings per share growth relative to 2021 of 8% to 14%. Finally, we expect free cash flow of $850 million to $1.1 billion in 2022. As we communicated at Capital Markets Day, we expect free cash flow to remain above adjusted net income with that difference contracting over time. Operator, please open the call for Q&A.

davita fourth quarter 2021 results. 4th quarter 2021 results. sees 2022 adjusted diluted net income from continuing operations per share attributable to davita inc. $7.50 to $ 8.50. sees 2022 free cash flow from continuing operations $850 million to $1,100 million.

Also joining me on the call today are Rick Muncrief, our president and CEO; Clay Gaspar, our chief operating officer; Jeff Ritenour, our chief financial officer and a few other members of our senior management team. Devon's second quarter can best be defined as one of comprehensive execution across every element of our disciplined strategy that resulted in expanded margins, growth and free cash flow and the return of significant value to our shareholders through higher dividends and the reduction of debt. Following our transformative merger that closed earlier this year, I'm very pleased with the progress the team has made and our second-quarter results demonstrate the impressive momentum our business has quickly established. Even today, as we celebrate Devon's 50th anniversary as a company this year, we're only getting started and our talented team is eager, energized and extremely motivated to win. As investors seek exposure to commodity-oriented names, it is important to recognize that Devon is a premier energy company and a must-own name in this space. We have the right mix of assets, proven management, financial strength and a shareholder-friendly business model designed to lead the energy industry in capital discipline and dividends. Now, turning to Slide 4. The power of Devon's portfolio was showcased by our second-quarter results as we continue to deliver on exactly what we promised to do both operationally and financially. Efficiencies drove capital spending 9% below guidance. Strong well productivity resulted in production volumes above our midpoint. The capture of merger-related synergies drove sharp declines in corporate cost. These efforts translated into a sixfold increase in free cash flow from just a quarter ago. And with this excess cash, we increased our dividend payout by 44% and we retired $710 million of low premium debt in the quarter. Now, Jeff will cover the return of capital to shareholders in more detail later, but investors should take note, this systematic return of value to shareholders is a clear differentiator for Devon. Now, moving to Slide 5. While I'm very pleased with the results our team that delivered year-to-date, the setup for the second half of the year is even better with our operations scale that generate increasing amounts of free cash flow. This improved outlook is summarized in the white box at the top left of this slide. With the trifecta of an improving production profile, lower capital and reduced corporate cost, Devon is positioned to deliver an annualized free cash flow yield in the second half of the year of approximately 20% at today's pricing. I believe it is of utmost importance to reiterate that even with this outstanding free cash flow outlook, there is no change to our capital plan this year. Turning your attention to Slide 7. Now with this powerful stream of free cash flow, our dividend policy provides us the flexibility to return even more cash to shareholders than any company in the entire S&P 500 Index. To demonstrate this point, we've included a simple comparison of our annualized dividend yield in the second half of 2021, assuming a 50% variable dividend payout. Now as you can see, Devon's implied dividend yield is not only best-in-class in the E&P space, but we also possess the top rank yield in the entire S&P 500 Index by a wide margin. In fact, at today's pricing, our yield is more than seven times higher than the average company that is represented in the S&P 500 Index. Furthermore, our dividend is comfortably funded within free cash flow and is accompanied by a strong balance sheet that is projected to have a leverage ratio of less than one turn by year-end. Investors need to take notice, Devon offers a truly unique investment opportunity for the near 0 interest rate world that we live in today. Now, looking beyond Devon to the broader E&P space, I'm also encouraged this earnings season by the announcement from Pioneer on their variable dividend implementation as well as a growing number of other peers who have elected to prioritize higher dividend payouts. These disciplined actions will further enhance the investment thesis for our industry, paving the way for higher fund flows as investors rediscover the attractive value proposition of the E&P space. Now, moving to Slide 10. While the remainder of 2021 is going to be outstanding for Devon, simply put, the investment thesis only gets stronger as I look ahead to next year. We should have one of the most advantaged cash flow growth outlooks in the industry as we capture the full benefit of merger-related cost synergies, restructuring expenses roll-off and our hedge book vastly improves. At today's prices, these structural tailwinds could result in more than $1 billion of incremental cash flow in 2022. To put it in perspective, this incremental cash flow would represent cash flow per share growth of more than 20% year over year, if you held all other constants -- all other factors constant. Now while it's still too early to provide formal production and capital targets for next year, there will be no shift to our strategy. We will continue to execute on our financially driven model that prioritizes free cash flow generation. Given the transparent framework that underpins our capital allocation, our behavior will be very predictable as we continue to limit reinvestment rates and drive per share growth through margin expansion and cost reductions. We have no intention of adding incremental barrels into the market until demand side fundamentals sustainably recover and it becomes evident that OPEC+ spare oil capacity is effectively absorbed by the world markets. The bottom line is we are unwavering in our commitment to lead the industry with disciplined capital allocation and higher dividends. As Rick touched on from our operations perspective, Devon continues to deliver outstanding results. Our Q2 results demonstrate the impressive operational momentum we've established in our business, the power of Devon's asset portfolio and the quality of our people delivering these results. I want to pause and congratulate the entire Devon team for the impressive work of overcoming the challenges of the pandemic and the merger while not only keeping the wheels on but requestioning everything we do and ultimately building better processes along the way. We've come a long way on building the go-forward strategy, execution plan and culture and I see many more significant wins on the path ahead. Turning your attention to Slide 12. My key message here is that we're well on our way to meeting all of our capital objectives for 2021. At the bottom left of this slide, you can see that my confidence in the '21 program is underpinned by our strong operational accomplishments in the second quarter. With activity focused on low-risk development, we delivered capital spending results that were 9% below plan, well productivity in the Delaware drove oil volumes above guidance and field level synergies improved operating costs. While the operating results year-to-date have been great, the remainder of the year looks equally strong, a true test of asset quality, execution and corporate cost structure proves out in sustainably low reinvestment rates, steady production and significant free cash flow. This is exactly what we're delivering at Devon. We plan to continue to operate 16 rigs for the balance of the year and deliver approximately 150 new wells to production in the second half of 2021. During the quarter, our capital program consisted of 13 operated rigs and four dedicated frac crews, resulting in 88 new wells that commenced first production. This level of capital activity was concentrated around the border of New Mexico and Texas and accounted for roughly 80% of our total companywide capital investment in the quarter. As a result of this investment, Delaware Basin's high-margin oil production continue to rapidly advance, growing 22% on a year-over-year basis. While we had great results across our acreage position, a top contributor to the strong volume were several large pads within our Stateline and Cotton Draw areas that accounted for more than 30 new wells in the quarter. This activity was weighted toward development work in the Upper Wolfcamp, but we also had success co-developing multiple targets in the Bone Spring within our Stateline area. The initial 30-day rates from activity at Stateline and Cotton Draw average north of 3,300 BOE per day and recoveries are on track to exceed 1.5 million barrels of oil equivalent. With drilling and completion costs coming in at nearly $1 million below predrill expectations, our rates of return at Cotton Draw and Stateline are projected to approach 200% at today's strip pricing. While we've all grown weary of quoted well returns, this is the best way that I can provide insight to you on what we're seeing in real time and what will be flowing through the cash flow statements in the coming quarters. While we lack precision in these early estimates, I can tell you, these are phenomenal investments and will yield significant value to the bottom line of Devon and ultimately, to the shareholders through our cash return model. And lastly, on this slide, I want to cover the recent Bone Spring appraisal success that we had in the Potato Basin with our three well Yukon Gold project. Historically, we focused our efforts in the Wolfcamp formation in this region and Yukon was our first operated test of the second Bone Spring interval in this area. Given the strong results from Yukon plus additional well control from nonoperated activity, this will be a new landing zone that works its way into the Delaware Basin capital allocation mix going forward. This is another example of how the Delaware Basin continues to give. This new landing zone required no additional land investment, very little incremental infrastructure and as a result, the well returns have a direct path to the bottom line of Devon. Moving to Slide 14. Another highlight associated with the Delaware Basin activity was the improvement in operational efficiencies and the margin expansion we delivered in the quarter. Beginning on the left-hand side, our D&C costs have improved to $543 per lateral foot in the quarter, a decline of more than 40% from just a few years ago. To deliver on this positive rate of change, the team achieved record-setting drill times in both Bone Spring and Wolfcamp formations with spud to release times and our best wells improving to less than 12 days. Our completions work improved to an average of nearly 2,000 feet per day in the quarter. I want to congratulate the team and I fully expect that these improved cycle times will be a tailwind to our results for the second half of the year. Shifting to the middle of the slide, we continue to make progress capturing operational cost synergies in the field. With solid results we delivered in the second quarter, LOE and GP&T costs improved 7% year over year. To achieve this positive result, we adopted the best and most economic practices from both legacy companies and leveraged our enhanced purchasing power in the Delaware to meaningfully reduce costs associated with several categories, including chemicals, water disposal, compression and contract labor. Importantly, these results were delivered by doing business in the right way with our strong safety performance in the quarter and combined with company delivered some of the meaningful environmental improvements over a year-over-year basis. And my final comment on this slide -- on the chart to the far right, the cumulative impact of Devon's strong operational performance resulted in significant margin expansion compared to both last quarter and on a year-over-year basis. Importantly, our Delaware Basin operations are geared for this trend to continue over the remainder of the year and beyond. Moving to Slide 15. While the Delaware Basin is clearly the growth engine of our company, we have several high-quality assets in the oil fairway of the U.S. that generate substantial amounts of free cash flow. These assets may not capture many headlines but they underpin the success of our sustainable free cash flow-generating strategy. In the Delaware Basin, cash flow nearly doubled in the quarter on the strength of natural gas and NGLs. Our Dow joint venture activity is progressing quite well and we're bringing on the first pad of new wells this quarter. The Williston continues to provide phenomenal returns and at today's pricing, this asset is on track to generate nearly $700 million of free cash flow for the year. In the Eagle Ford, we have reestablished momentum with 21 wells brought online year-to-date, resulting in second-quarter volumes advancing 20%. And in the Powder River, we're encouraged with continued industry activity and how -- in evaluating how we create the most value from this asset. We have a creative and commercially focused team working with this asset, many of which bring fresh set of eyes on how we approach this very substantial oil-rich acreage position. Overall, another strong quarter of execution and each of these asset teams did a great job delivering within our diversified portfolio. The team here at Devon takes great personal pride in delivering affordable and reliable energy that powers every other industry out there as well as the incredible quantity and quality of life we appreciate today. We absolutely believe that in addition to meeting the world's growing energy demand, we must also deliver our products in an environmentally and commercially sustainable way. As you can see with the goals outlined on this slide, we're committing to taking a leadership role by targeting to reduce greenhouse gas emissions by 50% by 2030 and achieving net zero emissions for Scope 1 and 2 by 2050. A critically important component of this carbon reduction strategy is to improve our methane emissions intensity by 65% by 2030 from a baseline in 2019. This emissions reduction target involves a range of innovations, including advanced remote leak detection technologies and breakthrough designs like our latest low-e facilities in the Delaware Basin. We also plan to constructively engage with upstream and downstream partners to improve our environmental performance across the value chain. While it's a journey, not a destination, environmental excellence is foundational to Devon. My comments today will be focused on our financial results for the quarter and the next steps in the execution of our financial strategy. A great place to start today is with a review of Devon's strong financial performance in the second quarter, where we achieved significant growth in both operating cash flow and free cash flow. Operating cash flow reached $1.1 billion, an 85% increase compared to the first quarter of this year. This level of cash flow generation comfortably exceeded our capital spending requirements, resulting in free cash flow of $589 million for the quarter. As described earlier by Rick and Clay, our improving capital efficiency and cost control drove these outstanding results, along with the improved commodity prices realized in the second quarter. Overall, it was a great quarter for Devon and these results showcased the power of our financially driven business model. Turning your attention to Slide 6. With the free cash flow generated in the quarter, we're proud to deliver on our commitment to higher cash returns through our fixed plus variable dividend framework. Our dividend framework is foundational to our capital allocation process, providing us the flexibility to return cash to shareholders across a variety of market conditions. With this differentiated framework, we've returned more than $400 million of cash to our shareholders in the first half of the year, which exceeds the entire payout from all of last year. The second half of this year is shaping up to be even more impressive. This is evidenced by the announcement last night that our dividend payable on September 30 was raised for the third consecutive quarter to $0.49 per share. This dividend represents a 44% increase versus last quarter and is more than a fourfold increase compared to the period a year ago. On Slide 8, in addition to higher dividends, another way we have returned value to shareholders is through our recent efforts to reduce debt and enhance our investment-grade financial strength. In the second quarter, we retired $710 million of debt, bringing our total debt retired year-to-date to over $1.2 billion. With this disciplined management of our balance sheet, we're well on our way to reaching our net debt-to-EBITDA leverage target of one turn or less by year-end. Our low leverage is also complemented by a liquidity position of $4.5 billion and a debt profile with no near-term maturities. This balance sheet strength is absolutely a competitive advantage for Devon that lowers our cost of capital and optimizes our financial flexibility through the commodity cycle. Looking ahead to the second half of the year, with the increasing amounts of free cash flow our business is projected to generate, we'll continue to systematically return value to our shareholders through both higher dividend payouts and by further deleveraging our investment-grade balance sheet. As always, the first call in our free cash flow is to fully fund our fixed dividend of $0.11 per share. After funding the fixed dividend, up to 50% of the excess free cash flow in any given quarter will be allocated to our variable dividend. The other half of our excess free cash flow will be allocated to improving our balance sheet and reducing our net debt. Once we achieve our leverage target later this year, this tranche of excess free cash flow that was previously reserved for balance sheet improvement has the potential to be reallocated to higher dividend payouts or opportunistic share buybacks should our shares remain undervalued relative to peers in the broader market. So in summary, our financial strategy is working well. We have excellent liquidity and our business is generating substantial free cash flow. The go-forward business will have an ultra-low leverage ratio of a turn or less by year-end and we're positioned to substantially grow our dividend payout over the rest of the year. I would like to close today by reiterating a few key thoughts. Devon is a premier energy company and we are proving this with our consistent results. Our unique business model is designed to reward shareholders with higher dividend payouts. This is resulting in a dividend yield that's the highest in the entire S&P 500 Index. Our generous payout is funded entirely from free cash flow and backstopped by an investment-grade balance sheet. And our financial outlook only improves as I look to the remainder of this year and into 2022. With the increasing amounts of free cash flow generated, we're committed to doing exactly what we promised and that is to lead the industry in capital discipline and dividends. We'll now open the call to Q&A. Please limit yourself to one question and follow up. With that, operator, we'll take our first question.

fixed-plus-variable dividend increased by 44 percent to $0.49 per share.

Also joining me on the call today are Rick Muncrief, our president and CEO; Clay Gaspar, our chief operating officer; Jeff Ritenour, our chief financial officer; and a few members of our senior management team. We appreciate everyone taking the time to join us on the call today. Devon's third quarter results were outstanding. Once again showcasing the power of our Delaware focused asset portfolio and then the benefits of our financially driven business model. Our team's unwavering focus on operations excellence has established impressive momentum that has allowed us to capture efficiencies, accelerate free cash flow, reduce leverage, and return of market-leading amount of cash to shareholders. Simply put, we are delivering on exactly what our shareholder-friendly business model was really designed for, and that is to lead the energy industry in capital discipline and cash returns. Now moving to Slide 4. While our strategy is a clear differentiator for Devon, the success of this approach is underpinned by our high-quality asset portfolio that is headlined by our world-class acreage position in the Delaware Basin. So with this advantaged portfolio, we possess a multi-decade resource opportunity in the best position plays on the U.S. cost curve. And with this sustainable resource base, we are positioned to win multiple ways with our balanced commodity exposure. While our production is leveraged to oil, nearly half our volumes come from natural gas and NGLs, providing us with meaningful revenue exposure to these valuable products. This balance and diversification are critically important to Devon's long-term success. As you can see on Slide 5, the strength of our operations and the financial benefits of our strategy were on full display with our third quarter results. This is evidenced by several noteworthy accomplishments, so including: we completed another batch of excellent wells in Delaware Basin that drove volumes 5% above our guidance. We maintained our capital allocation in a very disciplined way by limiting our reinvestment rates to only 30% of our cash flow. We're continuing to then the capture synergies and drive per unit cost lower. We are also achieving a more than eightfold increase in our free cash flow. We're increasing our fixed and variable dividend payout by 71%. We're also improving our financial strength by reducing net debt 16% in the quarter. Overall, it was another tremendous quarter for Devon, and I especially want to congratulate our employees and our investors for these special results. Now moving to Slide 6. While 2021 is wrapping up to be a great year for Devon, the investment thesis only gets stronger and as I look ahead to next year. Although we're now still working to finalize the details of our 2022 plan, I want to emphasize that our strategic framework remains unchanged, and we will continue to prioritize free cash flow generation over the pursuit of volume growth. As we have stated many times in the past, we have no intention of adding incremental barrels into the market until demand side fundamentals sustainably recover and it becomes evident that OPEC+ spare oil capacity that's effectively absorbed by the world markets. With this disciplined approach and to sustain our production profile in 2022, we are directionally planning on an upstream capital program in the range of $1.9 billion to $2.2 billion. Importantly, with the operating efficiency gains and improved economies of scale, we can fund this program at a WTI breakeven price of around $30. This low breakeven funding level is a testament to the great work the team has done over the past few years to streamline our cost structure and to really optimize capital efficiency. Being positioned as a low-cost producer provides us with a wide margin of safety to continue to execute on all facets of our cash return model. With our 2022 outlook, Devon will have one of the most advantaged cash flow growth outlooks in the industry. At today's prices, with the full benefit of the merger synergies and an improved hedge book, we're positioned for cash flow growth of more than 40% compared to 2021. And as you can see on the graph, this strong outlook translates into a free cash flow yield of 18% at an $80 WTI price. The key takeaway here is that 2022 is shaping up to be an excellent year for Devon shareholders. Now jumping ahead to Slide 8, the top priority of our free cash flow is then fund our fixed plus variable dividend. This unique dividend policy is specifically designed for our commodity-driven business and provides us the flexibility to return more cash to shareholders than virtually any other opportunity in the markets today. Now to demonstrate this point, so we've included a simple comparison of our estimated dividend yield in 2022 based on our preliminary guidance. As you can see, Devon's implied dividend is not only more than double that of the energy sector, but this yield is vastly superior to us in every sector in the S&P 500 index. In fact, at today's pricing, Devon's yield is more than seven times higher than the average company that is represented in the S&P 500 Index. Now that's truly something to think about in the yield-starved world we currently live in. And moving on to Slide 9. With our improving free cash flow outlook and strong financial position, I'm excited to announce the next step in our cash return strategy with the authorization of a $1 billion share repurchase program. This program is an equivalent to approximately 4% of Devon's current market capitalization and is authorized through year-end 2022. Jeff will cover this topic in greater detail later in the call, but this opportunistic buyback is a great complement to our dividend strategy and provides us with another capital allocation tool to enhance per share results for the shareholders. Beginning on the far left chart of our business is positioned to generate cash flow growth of more than 20 -- 40% in 2022, which is vastly superior to most other opportunities in the market. As you can see in the middle chart, this strong growth translates into an 18% free cash flow yield that will be deployed to dividends, buybacks, and the continued improvement of our balance sheet. And lastly, on the far right chart, and even with all of these outstanding financial attributes, we still trade at a very attractive valuation, especially compared to the broader market indices. We believe this to be another catalyst for our share price appreciation as more and more of the investors discover Devon's unique investment proposition. In summary, Devon's third quarter impressive results were the result of tremendous execution across nearly every aspect of our business. We had wins in environmental and safety performance. operational improvements, continued cultural alignment, strong well productivity, cost control, significant margin expansion and ultimately, excellent returns on the invested capital. This recurring trend in our operational excellence while managing significant organizational change and macro stress has now been established over multiple quarters and is a testament to the Devon employees and strong leadership throughout the organization. As I look forward to '22 and beyond, I believe we're positioned to continue delivering but also take our performance to an even higher level of cohesion and productivity. Providing the energy to fuel today's modern world is critically important work. I'm very proud of what we do and how we do it. As I look forward to Devon's near and also long-term goals, I'm confident in our ability to deliver on society's ever-increasing expectations. Devon's operational performance in the quarter is once again driven by our world-class Delaware Basin assets, where roughly 80% of our capital was deployed. With this capital investment, we continue to maintain steady activity levels by running 13 operated rigs and four frac crews, bringing on 52 wells during the quarter. As you can see in the bottom left of the slide, this is just focused development program translated into another quarter of robust volume growth, and our continued cost performance allowed us to capture the full impact of the higher commodity prices. Turning your attention to the map on the right side, our well productivity across the basin continue to be outstanding in the quarter with the results headlined by our Boundary Raider project. Some may recall that this is not the first time we've delivered on impressive results from this well pad. Back in 2018, our original Boundary Raider project that's developed a good package of Bone Spring wells that set a record for the highest rate wells ever brought online in the Delaware Basin. Fast forward to today, this addition of the Boundary Raider went further downhole to develop an overpressured section in the Upper Wolfcamp. This project also delivered exceptionally high rates with our best well delivering an initial 30-day production rates of 7,300 BOE per day, of which more than that -- more than 60% of that was oil. I call that pretty good for a secondary target. Moving a bit east into Lea County, another result for this quarter was the Cobra project, where the team executed on a 3 mile Wolfcamp development. This pad outperformed our predrill expectations by more than 10% with the top well achieving 30-day rates as high as 6,300 BOE per day. In addition to the strong flow rates, this activity helped us prove the economics of the Wolfcamp inventory in this area to further deepening the resource-rich opportunity we hold in the Delaware. Turning to Slide 14. With the strong operating results we delivered this quarter, high-margin oil production in the Delaware Basin continue to expand and rapidly advance, growing 39% year over year. Importantly, the returns on invested capital to deliver this growth were some of the highest I have seen in my career, bolstered by rising strip prices and our capital efficiency improvements we have delivered this year. These efficiencies are evidenced on the right-hand chart, where our average D&C costs improved to $554 per lateral foot in the third quarter, a decrease of 41% from just a few years ago. While we have likely found the bottom of this cycle earlier this year, the team continues to be able to make operational breakthroughs that have thus far fought back most of the inflationary pressure. We continue to win from a fresh perspective, blending teams and also still relatively -- we're still working to know each other pretty early on. These accomplishments are clearly demonstrated and the great work our team has done to drive improvements across the entire planning and execution of our resource. To maintain this high level of performance into 2022, and we are focused on staying out ahead of the inflationary pressures that are impacting not just our industry, but all aspects of the broader society. While our consistency and scale in the Delaware are a huge advantage, the supply chain team is working hard to anticipate issues, mitigate bottlenecks, and work with the asset teams to adjust plans to optimize our cost structure and future capital activity. Turning to Slide 15. Another asset I'd like to put in the spotlight today is our position in the Anadarko Basin, where we have a concentrated 300,000 net acre position in the liquids-rich window of the play. As you may know, Rick and I both have a historical tie to this basin, and we're thrilled to get to see the great work that our teams are doing to unlock this value for investors. A key objective for us this year in the Anadarko Basin is to reestablish operational continuity by leveraging the drilling carry from our joint venture agreement with Dow. By way of background, in late 2019, we formed a partnership with Dow in a promoted deal, where Dow earns half of our interest on 133 undrilled locations in exchange for $100 million drilling carry. With the benefits of this drilling carry, we're drilling around 30 wells this year, and our initial wells from this activity were brought on during the quarter. The four-well Miller/Miller project is an up-spaced Woodford development in Canadian counter -- County and is off to a great start with both our D&C costs and well productivity outperforming pre-drill expectations. Initial 30-day rates averaged 2,700 BOE per day, and completed well costs came in under budget at around $8 million per well. While I'm proud of how well the team hit the ground running now as we get into our processes lined out and efficiencies dialed in, I foresee material improvements in well costs ahead. The leverage returns from this carried activity will complete -- will compete effectively for capital with any asset in our portfolio. In fact, the strength of natural gas and NGL pricing, the performance we're also seeing that in the Anadarko Basin will likely command relatively more capital than it did in '21. Moving to Slide 16. While the Delaware Basin is clearly the growth engine of our company and we're excited about the upside for the Anadarko, we also have several high-quality assets in the oil fairway of the U.S. that generates substantial free cash flow. While these assets don't typically grab the headlines, their strong performance is central to this continued success of our strategy. These teams are doing great work to improve our environmental footprint, drive the capital program, optimize base production, and hopefully, keeping our cost structure low. As an example, Williston will generate over $700 million of 2021 free cash flow. Collectively, these assets are on pace to generate nearly $1.5 billion of free cash flow this year. Lastly, on Slide 17, with our diversified portfolio concentrated in the very best U.S. resource plays, we have a deep inventory of opportunities that underpin the long-term sustainability of our business model. So, as you may have heard me talk about in prior quarters, we have a brutal capital allocation process in regards to the competitiveness of how we seek the best investment mix for the company. This is the first step of this process is to make sure that all the teams are working from the same assumptions and inputs. Since the close of our merger earlier this year, we have undertaken a very disciplined and rigorous approach to characterize risk, force rank the opportunity set across our portfolio. This inventory disclosure is the result of our detailed subsurface work and evaluation across our portfolio that we converted into a single consolidated platform to ensure consistency. Turning your attention to the middle bar on the chart. At the current pace of activity, we possess more than a decade of low-risk and high-return inventory of what we believe to be in a mid-cycle price deck. As you would expect, about 70% of our inventory resides in the Delaware Basin, providing the depth of inventory to sustain our strong capital efficiency for many years to come. Let me be clear. And this exercise, we are focused on compiling a very important slice of our total inventory. This summary is not meant to convey the full extent of the possible with these incredible resources. These are really operated, essentially all long lateral up-spaced wells that deliver competitive returns in a $55 oil environment. Moving to the bar on the far right of the chart, we also expect inventory depth to continue to expand as we capture additional efficiencies, optimize spacing, and further delineate the rich geologic column across our very acreage footprint. Expect -- we expect a significant portion of the upside opportunities to convert into our derisked inventory over time. So the examples of this upside include the massive resource potential in the lower Wolfcamp intervals, continued appraisal success in the Powder River Basin and the significant liquids-rich opportunity we possess in the Anadarko Basin. The bottom line here is that we have that in abundance of high economic opportunity to not only sustain but grow our cash flow per share for many years to come. I'd like to spend my time today discussing the substantial progress we've made advancing our financial strategy and highlight the next steps we plan to take to increase cash returns to shareholders. A good place to start is with the review of Devon's financial performance in the third quarter, where Devon's earnings and our cash flow per share growth rapidly expanded and comfortably exceeded consensus estimates. Operating cash flow for the third quarter totaled $1.6 billion, an impressive increase of 46% compared to last quarter. This level of cash flow generation comfortably funded our capital spending requirements and generated $1.1 billion of free cash flow in the quarter. This result represents the highest amount of free cash flow generation Devon has ever delivered in a single quarter and is a powerful example of the financial results in our cash return and that the business model can deliver. Turning your attention to Slide 7. With this significant stream of free cash flow, a differentiating component of our financial strategy is our ability and willingness to accelerate the return of cash to shareholders through our fixed plus variable dividend framework. This dividend strategy has been uniquely designed to provide us the flexibility to optimize the return of cash to shareholders across a variety of market conditions through the cycle. Under our framework, we pay a fixed dividend every quarter and evaluate a variable distribution of up to 50% of the remaining free cash flow. So, with the strong financial results we delivered this quarter, the board approved a 71% increase in our dividend payout versus last quarter to $0.84 per share. This is the fourth quarter in a row we have increased the dividend and is by far the highest quarterly dividend payout in Devon's 50-year history. As you can see on the chart to the left, at current market prices, we expect our dividend growth story to only strengthen in 2022. In fact, at today's pricing, we are on pace to nearly double our dividend next year. Moving to Slide 10. In addition to higher dividends, we've also returned value to shareholders through our efforts to reduce debt and improve our balance sheet. So far this year, we've made significant progress toward this initiative by retiring over $1.2 billion of outstanding notes. In conjunction with this absolute debt reduction, we've also added to our liquidity, building a $2.3 billion cash balance at quarter end. With this substantial cash build and reduction in debt, we've reached this debt-to-EBITDA leverage target of one turn or less. Even with this advantaged balance sheet, we're not done making improvements. We have identified additional opportunities to improve our financial strength by retiring approximately $1.0 billion of premium -- excuse me, low-premium debt in 2022 and 2023. Importantly, Devon has the flexibility to then execute on this debt reduction with cash already accumulated on the balance sheet. While the top priority for free cash flow remains the funding of our market-leading dividend yield, we also believe that this buyback authorization provides us another excellent capital allocation tool to enhance per share results for shareholders. Given the cyclical nature of our business, we'll be very disciplined with this authorization, only transacting when our equity trades at a discounted valuation to historical multiples and in multiple levels of our highest quality peers. We believe the double-digit free cash flow yield our equity delivers, as outlined on Slide 6, represents a unique buying opportunity. The reduction in outstanding shares further improves our impressive cash flow per share growth and adds to the variable dividend per share for our shareholders. With these disciplined criteria, guiding our decision making, we'll look to opportunistically repurchase our equity in the open market once our corporate blackout expires later this week. So in summary, the financial strategy is working well. We have excellent liquidity and our business is generating substantial free cash flow. We're positioned to significantly grow our dividend payout to over the next year. The go-forward business will have an ultra low leverage ratio of a turn or less, and we'll look to boost per share results is really opportunistically repurchasing our shares. In closing today, I'd like to highlight a few things. Number one, Devon is meeting the demands of investors with our capital discipline, earnings and cash flow growth, market-leading dividend payout, debt reduction, and now a share buyback program. Number two, Devon is also meeting the demands of our market with strong oil production results, great exposure to natural gas and NGLs, along with our consistent execution. And number three, lastly, Devon is also meeting the demands of society by providing a reliable energy before this pandemic, during the pandemic, and as we emerge from the pandemic. And so our people throughout the five states where we operate continue to show up for work and work safely. We didn't overreact with our capital program during the pandemic like many others did. We actually strengthened the company with a merger. And finally, we're laser-focused on then achieving the stated short-term, midterm, and long-term ESG targets. We're proud of the work we've done and look forward to continuing meeting the needs of investors, the market, and society for the foreseeable future. Devon is a premier energy company, and we're excited about the value we'll be able to consistently provide to our important stakeholders. We'll now open the call to Q&A. [Operator instructions] With that, operator, we'll take our first question.

now expects its production and capital spending to be at the high end of its 2021 guidance range. in 2022, devon will continue to prioritize free cash flow generation over the pursuit of volume growth.

And our actual results could differ materially. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Also, during the call today, we will be referring to the slide deck posted on our website. I'm excited to share this update with all of you today, which continues to expand on our themes of exceptional growth and market-leading innovation. First, as a quick snapshot of our recent growth, in the fourth quarter of 2021, we delivered $106 million of revenue and 38% adjusted EBITDA margins, ending a year of exceptionally strong execution on a high note. In 2021, we measured 4.5 trillion ad impressions, resulting in record revenue of $333 million, an increase of 36% compared with a year ago. We grew faster than the digital advertising industry and significantly outperformed the industry's programmatic, social, and CTV growth trajectories, while generating 33% adjusted EBITDA margins. We completed strategic acquisitions of Meetrics and OpenSlate and successfully continue to evolve our customer value proposition from protection to performance with the launch of two new identity independent performance solutions that do not rely on third-party cookies or persistent identifiers, custom contextual and DV authentic attention. Building on the update we provided at our investor day on February 25, I will discuss the current and future scaling of our business within the context of our five key growth drivers, which are product evolution, channel extension, international expansion, current client upsell and cross-sell, and new client acquisition and strategic M&A. Nicola will then discuss our fourth quarter and 2021 results, as well as our outlook for 2022. Beginning with product evolution. Our expansion of pre-campaign activation solutions that drive performance continued to be led by authentic brand suitability, or ABS. ABS was the largest driver of revenue growth for our advertiser programmatic business. ABS revenue grew 77% in 2021 and contributed approximately $85 million to our top line. For most of last year, ABS revenue was fueled by continued customer adoption and volume expansion on major buying platforms, most notably Google's DV360 and The Trade Desk, where it was launched in 2020. Considerable ABS growth also came from upgrading current clients to ABS, as well as selling ABS to new clients at the outset of their relationship with DV. While a significant majority of our top 100 clients are now using ABS in some applications, their usage of the product tends to be in North America where programmatic buying is dominant. There is a substantial and growing opportunity to upsell ABS to our biggest clients in their international markets, where adoption of this premium performance product has just begun. In the fourth quarter, for example, we activated ABS with Disney in Latin America, Colgate in EMEA, and Nike in 21 global markets. We have just started to scratch the surface of ABS growth with current clients in markets outside of North America. Beyond our top 100 customers, approximately 40% of our top 500 clients still do not use ABS in any market, representing a solid expansion opportunity among this established customer base. We are focused on making ABS and all of our performance solutions an integral component of an unmatched suite of independently accredited pre-campaign activation and post-campaign measurement tools that drive better outcomes for advertisers. While we're discussing DV's programmatic activation products, I'd like to highlight our MRC pre-bid accreditation announcement made last week, establishing DV as the only provider currently accredited for predicted viewability targeting, as well as property-level ad verification, inclusive of brand suitability and contextual targeting within programmatic media campaigns. To put it simply, we have the only fully accredited programmatic suite in the market today. We expect this unique differentiator of DV's programmatic solutions, including ABS and DV custom contextual to further drive our programmatic sales momentum and support DV's overall RFP win rate, which was 80% in 2021. Beyond our core Programmatic solutions, we're excited about the growth opportunities with our newest performance products, authentic attention, custom contextual, OpenSlate's pre-campaign social targeting tools and our audience verification solution with Comscore. Today, let's dig deeper into two of them, authentic attention and audience verification. DV authentic attention, which you'll be hearing a lot about over the next few quarters, builds upon the baseline quality and safety metrics established by the DV authentic ad. For ad impressions that meet the standards of the authentic ad, attention measurement provides a real-time impression level view of engagement and exposure, which allows advertisers to optimize media based on what's resonating most with audience. As traditional performance metrics like reach and frequency lose their efficacy due to privacy and policy changes, we believe that attention will be the next currency that advertisers rely on to drive outcomes. Our go-to-market strategy for authentic attention leverages DV's established customer base of over 1,000 leading brands to drive ubiquitous uptake of these new data sets. We essentially have a built-in pool of trial customers. In Q2, we will provide a preview of attention metrics through our software platform, Pinnacle, to all customers that use the DV authentic ad, exposing the biggest brands on the planet to the performance solution of the future. Today, we are the only leading verification company to have built and launched a comprehensive attention solution. We've already secured accreditation for fully on-screen measurement and attention metrics specific to CTV and we'll continue to expand our lead in accreditations of all our attention metrics over time. Turning to our upcoming audience verification solution. We are excited to launch a market-leading product in partnership with Comscore. By using audience verification, advertisers will be assured that the cross-platform audiences they are measuring are free of invalid traffic, delivered in view into the right geography and in the right brand environment. This is an industry-first measurement solution that combines media quality verification data with audience data to help advertisers maximize campaign performance and drive real business outcomes. We expect to launch the first iterations of this evolving joint offering for a select group of customers as early as the second quarter of 2022. Moving on to our second growth driver, channel extension. We are excited about our continued growth in Social and CTV. Social revenue grew by nearly 50% in 2021 with strong performance across Facebook, YouTube, Twitter, Snapchat, and Pinterest as more than 300 new advertisers activated DV's social media verification solutions last year. We believe the prospects for social growth in 2022 and beyond are exceptional for two key reasons. First, we are expanding our solutions and coverage on both emerging and leading social platforms, including TikTok, Twitter and several others. And second, we have accelerated our product road map in social through the successful integration of OpenSlate's pre-campaign social activation solutions into our sales process, providing an expansion opportunity with all existing DV customers and prospects. Beginning with TikTok, we continue to expand coverage of our viewability solution, which is now available in 67 countries. Our solution has been used by nearly 30 advertisers, resulting in average monetized impression growth of approximately 220% over the last six months. On brand safety and TikTok, DV's advertiser activated brand safety controls continue to expand and have now been rolled out in North America, the U.K., Australia and the Middle East, with 82 advertisers using the solution. In addition, we continue to develop end-to-end in-feed solutions in conjunction with TikTok. With coverage of viewability, fraud and in-geo, as well as our brand safety controls, DV offers the most comprehensive measurement and activation product offering across TikTok today. On Twitter, we're developing a brand safety and suitability measurement solution for Twitter's news feed, known as timeline, and expect to launch this in the first half of 2022. Moving on to pre-campaign social solutions that we are integrating into our platform via the OpenSlate acquisition, we're actively working to capitalize on both immediate and long-term revenue opportunities. We have begun cross-selling our combined pre-campaign activation solution to DV's expansive global customer base. Our research demonstrates that when our pre-campaign activation and social solutions are paired with our post-bid measurement products, we can deliver significantly improved outcomes for our customers. On YouTube, we saw that when our pre-campaign activation solutions are applied to campaigns, brand suitability incidents are reduced by up to 50%. We expect to be able to drive even better advertising outcomes for advertisers as the operational integration progresses. On CTV, our impression volumes grew 57% in 2021. And by the fourth quarter, 25% of our tag-based advertiser video impressions were CTV. So in essence, one of every four of DV's open internet video impressions are attributable to CTV, over-indexing relative to CTV share of the digital video across the industry and underscoring the growing importance of verification in this fast-growing sector. Our CTV products are becoming essential to advertisers because fraud and viewability are emerging as real challenges to advertiser and media investment confidence. Fraud continues to violate unprotected digital transactions with increasing incidences of counterfeit SSAI servers generating fake CTV inventory across countless apps, IPs and devices. As recently as last month, DV discovered a new scheme that we've dubbed ViperBot, which strips the code that verifies ad impressions and then conceals and redirect this code through real devices to hide the fraudulent activity and attempt to go undetected. DV customers are fully protected from this scheme, which continues to scoop more than 5 million devices and over 80 million ad requests per day, undercutting ad investments and underlining performance. In addition to fraud, viewability, which has generally been assumed by CTV advertisers is also being challenged in CTV. In a recent study, DV discovered that one in four analyzed CTV environments continue to play programming content, including recording ad impressions after the television was turned off. The ad was delivered, but certainly was not viewed, rendering performance measurement invalid and diverting media investment. To combat this latest viewability challenge, last month, DV launched fully on-screen prebid targeting, enabling connected advertisers to target inventory from sources that are tested and evaluated by DV to ensure ads are only displayed 100% on screen and when the TV screen is turned on. Through this first-of-a-kind solution, DV complements our post-bid measurement capabilities with pre-bid targeting, empowering programmatic advertisers to address CTV's viewability challenges across the media transaction. DV fully on-screen prebid segments are available on Amobee, MediaMath and Microsoft Xandr with more media buying platforms coming. In addition to these CTV solutions, DV is the first and only verification provider to provide effective brand suitability controls in CTV environments. We currently offer CTV app inclusion and exclusion lists and app level controls that are utilized in both monitoring and active prebid avoidance. And we will be launching content level classification in CTV in 2022. Shifting to international expansion. International revenue grew by almost 70% last year with APAC revenue growing by 84% and EMEA by 61%, all outpacing the industry and our competitors. International now contributes 26% of our overall direct revenue. We currently generate revenue in 93 countries and from our expanding base of 20 locations outside the United States, we will leverage our exceptional RFP win rate to take advantage of the expansion opportunity that exists in markets around the world. In 2021, 55% of our headcount growth was driven by international hires as we continue to invest in expanding our global presence. Turning to client upsells and new client acquisition. We signed 176 new advertising customers in 2021, including brands such as Target, GEICO, Diageo, BMW, Bumble and Apple services. 61% of our new logo wins were greenfield, while 39% were competitive wins. In addition, on the supply side of the business, we added numerous new platform clients such as Amazon, Taboola, AdTheorent, Smartclip, and Verve, as well as 19 new publishers to the fold. The platform and publisher businesses are additional great examples of how we can extend our core data assets into entirely new revenue lines. With regard to our final growth lever, strategic M&A, the integrations of Meetrics and OpenSlate are progressing well, and we have received client and partner endorsement of the additional global breadth and product depth that they have delivered to DV. With a strong and growing cash position and zero debt, we are exceptionally well-positioned to take advantage of global market expansion, product acceleration and solution extension opportunities that exist in the market. Wrapping up with a quick take on our innovation story, DV continues to lead the industry with unique value-driving solutions that set us apart from our competitors, paving the road for additional growth ahead. In the last 12 months, DV has launched or expanded the only widely available attention solution, the only comprehensively accredited programmatic suite, the only solution for measuring and filtering fully on-screen CTV impressions, the only certified CTV fraud program for programmatic partners, and we are the only leading verification company to root out and publicize the numerous new fraud attacks that shake the confidence of digital advertisers around the globe. And soon, we will launch the only verified audience solution along with Comscore. And now we are the only independent leading verification company that is not in the conflicted business of selling digital ads. We lead and differentiate with innovation and earn our customers' trust through independence. Let me begin with a review of our fourth quarter and full year 2021 performance before discussing our 2022 outlook. Growth and profitability accelerated in the fourth quarter. We generated $106 million of revenue, representing year-over-year growth of $27 million or 34%. We grew fourth quarter adjusted EBITDA to $40 million or 46% year over year, representing a 38% adjusted EBITDA margin. For context, DV generated more revenue and more adjusted EBITDA in the fourth quarter of 2021 than it did in all of 2018. Fourth quarter results were ahead of our expectations as the impact of supply chain disruption on CPG and auto ad spend was lower than we had anticipated going into the quarter. Stronger-than-expected growth from verticals such as financial services, retail and entertainment more than offset the slight weakness in CPG and auto, demonstrating the benefits of our well-diversified customer base. The acquisition of OpenSlate completed at the end of November did not have a material impact on fourth quarter results. And as previously mentioned, we anticipate the integration of OpenSlate solution to generate between $15 million and $18 million in 2022. Revenue growth was broad-based across advertisers, platforms and publishers and each revenue type grew sequentially from the third to the fourth quarter, which is our seasonally strongest quarter. For the full year 2021, we delivered $333 million in revenue, up 36% year over year and adjusted EBITDA of $110 million, up 50% year over year and representing a 33% adjusted EBITDA margin. In 2021, advertiser programmatic grew 45%, driven by ABS, which grew 77% and represented 50% of advertiser programmatic revenue. Advertiser direct revenue grew 27%, driven by social revenue growth of 47%. Social represented 33% of our advertiser direct revenue, up from 29% in 2020. Finally, supply side revenue grew 38% in 2021, driven by new deals with large platforms such as Yahoo! Japan and Amazon, as well as the 19 new publishers we signed on during the year. The basis for our strong advertiser revenue performance is an attractive set of KPIs, which drive the recurring nature of our business. Our 2021 net revenue retention rate was 126% and while gross revenue retention was 98%. Our customer tenure was 6.9 years for our top 75 customers. For our top 100 customers, we grew average revenue per customer from $1.8 million in 2020 to $2.2 million in 2021. And finally, we increased the number of customers generating more than $1 million in revenue by 42% in 2021. Our cost of revenue increased by $19 million year-on-year in 2021, primarily due to an increase in costs from revenue sharing arrangements with our Programmatic partners as Programmatic revenue grew as a percentage of total revenue. In addition, we continue and intend to accelerate our investments in cloud-based hosting solutions to provide the scale and flexibility necessary to support our geographic expansion. GAAP product development and sales and marketing expenses, which include stock-based compensation, increased at a rate below our top line growth reflecting the operating efficiency of our business model. In 2021, we expanded adjusted EBITDA margins to 33% while continuing to invest in the business. We added over 200 employees during 2021, including approximately 100 from our two acquisitions. In terms of cash flow and balance sheet, we generated $83 million in cash from operating activities in 2021, a nearly fourfold increase from the $21 million generated in 2020. We had approximately $222 million of cash at the end of the year and zero debt on the balance sheet. Turning to 2022 guidance. We expect to continue to deliver high revenue growth and high profitability in 2022. We expect full year 2022 revenue in the range of $429 million to $437 million, a year-over-year increase of 30% at the midpoint. And we expect full year 2022 adjusted EBITDA in the range of $126 million to $134 million, representing a 30% adjusted EBITDA margin at the midpoint. We expect a quarterly share of full year revenue to be similar to the seasonal patterns that we achieved in 2021. For the first quarter of 2022, we expect revenue in the range of $89 million to $91 million, which implies a 33% growth at the midpoint. And we expect first quarter adjusted EBITDA in the range of $21 million to $23 million, which represents a 24% adjusted EBITDA margin at the midpoint. While we anticipate realizing synergies from the acquisitions of OpenSlate and Meetrics by eliminating duplicative costs over time, we expect operating expenses to trend higher in the first half of 2022 and this is reflected in our first quarter EBITDA guidance. Stock-based compensation expense for the first quarter of 2022 is expected in the range of $9 million to $10 million. For the full year, stock-based compensation expense is expected in the range of $44 million to $49 million and shares outstanding for the first quarter are expected in the range of 170 million to 173 million. As mentioned during investor day, starting with first quarter 2022, advertiser programmatic will be renamed Activation Revenue and will include programmatic revenue in addition to pre-campaign social revenue, including revenue contribution expected from selling OpenSlate solutions. advertiser direct will be renamed Measurement Revenue and will continue to include DV's post-campaign measurement business on social, CTV and the open web.

qtrly total revenue of $105.5 million, an increase of 34%. sees q1 revenue of $89 to $91 million, a year-over-year increase of 33% at midpoint. sees q1 adjusted ebitda in range of $21 to $23 million, representing a 24% margin at midpoint. sees 2022 revenue of $429 to $437 million, a year-over-year increase of 30% at midpoint. sees 2022 adjusted ebitda in range of $126 to $134 million, representing a 30% margin at midpoint.

I'm pleased that you're joining us for DXC Technology's first-quarter 2022 earnings call. Our speakers on the call today will be Mike Salvino, our president and CEO; and Ken Sharp, our executive vice president and CFO. In accordance with SEC rules, we provided a reconciliation of these measures to their respective and most comparable GAAP measures. A discussion of these risks and uncertainties is included in our annual report on Form 10-K and other SEC filings. Today's agenda will begin with a quick update on our solid Q1 performance, which continues to show that revenue, adjusted EBIT margin, book-to-bill and non-GAAP earnings per share all have a positive trajectory compared to past quarters. During our Investor Day in June, we gave you additional insights into the steps of our transformation journey, and those steps are: inspire and take care of our colleagues, focus on our customers, optimize costs, seize the market and build a strong financial foundation. I will give updates on each step, and then hand the call over to Ken to share our Q1 financial results, guidance and more details on how we are building a strong financial foundation. Regarding our Q1 performance, our revenues were $4.14 billion, and our adjusted EBIT margin was 8%. This represents the fourth straight quarter of both revenue stabilization and sequential margin expansion, and we expect both trends to continue in Q2. Book-to-bill for the quarter was 1.12. This is the fifth straight quarter that we delivered a 1.0 or better book-to-bill, and we expect our success of winning in the market to continue in Q2. Our non-GAAP earnings per share was $0.84 in the quarter, which is up 300%, as compared to $0.21 that we delivered in Q1 of FY '21. The positive trajectory of all four of these numbers gives us confidence that our playbook is working. As a refresher, our playbook has three phases. The stabilization phase was completed in FY '21. This phase enabled us to make great progress with our colleagues, customers, on revenue, margin, book-to-bill and reducing our debt. We are now focused on the foundation phase. This phase focuses on the steps that will allow us to deliver growth. The goals of this phase are: first, continue to increase our employee engagement, all while we attract and retain highly talented colleagues; second, stabilize year-on-year organic revenue; third, expand adjusted EBIT margins; fourth, consistently deliver a book-to-bill number of 1.0 or greater, with a nice mix of new work and renewals; and finally, under Ken's leadership, deliver a financial foundation that increases discipline and improves our cash flow and earnings power. Now I will discuss the good progress we are making on each step of our transformation journey, beginning with inspire and take care of our colleagues. We are executing a people-first strategy. Attracting and retaining talent is fundamental to enable our growth. Our refreshed leadership team has deep industry experience and is delivering. Brenda, who is our chief marketing officer, is our newest addition. Brenda is a strategic results-oriented leader who brings deep marketing experience to DXC. 75% of our leadership team is now new to DXC and bringing in talent based on their personal credibility as talent follows talent. What the team is finding is that the new DXC story is resonating in the market, and new-hires are wanting to join DXC because they see the opportunity to progress their careers with a company that's on the right trajectory. We mentioned during our investor call that nearly 50% of our vice presidents across the company are new to DXC within the last 22 months. Also, we are investing in our people. This quarter, we rewarded high performance by paying annual bonuses that benefited roughly 45,000 of our colleagues. In Q2, we are planning merit increases that will benefit roughly 77,000 of our colleagues. In addition to these investments, we are doing a great job of taking care of our colleagues and their families during the pandemic. This focus on our colleagues is unique and builds trust with them, increases employee engagement, allows us to compete for talent and enables us to deliver for our customers. Focus on our customers is the second step of our transformation journey. Our investment in our customers is the primary driver of revenue stabilization. It was clear from their comments that the new DXC story is resonating with them because we are delivering. These are all large global companies, and they are saying that their IT estates are important. In fact, they use the word critical. Our strategy of delivering ITO services builds customer intimacy and develops trust that when our customers want to further transform their business, they turn to us, and allows us to move them up the enterprise technology stack. Additional evidence that our strategy is working is the nice progress we have made on our GBS business, along with the cloud and security layer of our GIS business. All of this gives us confidence that we will deliver on our financial commitments. Now let me turn to our cost optimization program. We continue to do well, optimizing our costs and delivering for our customers without disruption. These levers have helped us expand our margin going from 7.5% last quarter to 8% this quarter. You will hear from Ken that we expect to continue to expand margins in Q2. Next, seize the market is where we are focused on cross-selling to our existing customers and winning new work. The 1.12 book-to-bill that we delivered this quarter is evidence that our plan is working. In Q1, 57% of our bookings were new work and 43% were renewals. You will see that we are running specific sales campaigns. An example of these campaigns is ITO modernization, which is focused on improving the performance of our customers' IT estates. Another example is our campaign to show our customers how to think about cloud, which combines on-prem, private cloud and public cloud technology. Our ability to deliver a consistent book-to-bill of 1.0 in each of the last five quarters is evidence that these sales campaigns are working and that we can win in the IT services industry. This momentum and success in the market gives us confidence that we will deliver another book-to-bill of 1.0 or greater in Q2. Turning to our financial performance on Slide 12. For the quarter, DXC exceeded the top end of our revenue, margin and earnings guidance, and continued to deliver a strong book-to-bill. GAAP revenue was $4.14 billion, $10 million higher than the top end of our guidance range. Adjusted EBIT margin was 8% in the quarter, an improvement of 380 basis points as compared to the prior quarter. In Q1, bookings were $4.6 billion for a book-to-bill of 1.12, the fifth straight quarter of a book-to-bill greater than one. Moving on to Slide 13. Our Q1 non-GAAP earnings per share was $0.84 or $0.08 higher than the top end of our guidance, benefiting $0.05 from a lower tax rate. Restructuring and TSI expenses were $76 million, down 58% from prior year. Free cash flow was a use of cash of $304 million, as compared to a use of cash of $106 million in the prior year. We expect free cash flow to improve significantly as the year progresses. As the next slide shows, our Q1 FY '22 performance continues our trajectory as we deliver on our transformation journey. Starting with organic growth progression, we went from approximately 10% decline in the first three quarters of FY '21 to down 6.5% in the fourth quarter and now down to a decline of 3.7%. This is a 40% improvement from the prior quarter. Our previous organic revenue growth calculation was not performed in this manner. As a result, we have revised the organic growth rates for the prior-year periods in our earnings deck and have further supplemented our organic calculation to include all the information to support the calculation, providing you complete transparency. This change does not yield a meaningful difference to our historically reported organic revenue growth rates, trajectory or guidance. Adjusted EBIT margin expanded 380 basis points. Excluding the impact of dispositions, margin expanded almost 600 basis points. We continue to market with five consecutive quarters of a book-to-bill greater than one, and lastly, non-GAAP earnings per share quadrupled. Now moving to our GBS business, composed of analytics and engineering, applications and business process services. Revenue was $1.9 billion in the quarter. Organic revenue growth was positive 2% as compared to prior year. In terms of quarterly progression, organic revenues declined about 6% to 7% in the first three quarters of FY '21, declined 3.4% in the fourth quarter and turned to positive 2% this quarter. GBS segment profit was $272 million with a 14.4% profit rate, up 450 basis points from the prior year. GBS bookings for the quarter were $2.4 billion for a book-to-bill of 1.29. As you have seen for a number of quarters, the demand for our GBS offerings, the top half of our technology stack have been quite robust and now yielding positive organic revenue growth. Turning to our GIS segment, consisting of IT outsourcing, cloud and security, and modern workplace. Revenue was $2.3 billion, down 9.1% year over year on an organic basis. We are seeing the rate of decline moderate this quarter despite the headwinds from our modern workplace business. GIS segment profit was $131 million with a profit margin of 5.8%, a 480-basis-point margin improvement over the prior-year quarter. GIS bookings were $2.2 billion for a book-to-bill of 0.97, compared to 0.77 in the prior year. It is safe to say revenues continue to stabilize and demonstrate that with improved customer intimacy and delivery, our revenue is not running away, allowing us to build our growth foundation. Now I will break down our segment results, GBS and GIS, into the layers of our enterprise technology stack, starting with GBS. Analytics and engineering revenues were $482 million, up 12.9% as compared to prior year. We continue to see high demand for our offerings with a book-to-bill of 1.32 in the quarter. Applications also continued to demonstrate solid progress with revenue of $1.246 billion, growing organically almost 1%. Applications also continues its strong book-to-bill at 1.32. Business process services revenues were $118 million, down 13% compared to the prior-year quarter with a book-to-bill of 1.13. Cloud and security revenue was $549 million, up 4.9% as compared to the prior year. The cloud business is benefiting from increased demand associated with our hybrid cloud offerings. Book-to-bill was 0.85 the quarter. IT outsourcing revenue was $1.13 billion, down 9% as compared to prior year. To put this decline in perspective, last year, this business declined almost 20% year over year. We expect this momentum to continue and organic declines to further abate as the year progresses. Modern workplace revenues were $577 million, down 19.7% as compared to prior year. Book-to-bill was 1.0 in the quarter. As you may recall, modern workplace was part of our strategic alternatives and was not part of our transformation journey until recently. As a result, we previously disclosed that the performance would be uneven as we invest in the business, enhancing our offerings and innovating the end-user experience. As our transformation journey takes hold, we expect modern workplace performance to improve similar to the trend we have seen with our ITO business. One of our key initiatives to drive cash flow and improve earnings power is to wind down restructuring in TSI costs. We expect to reduce this from an average of $900 million per year over the last four years to $550 million in FY '22 and about $100 million in FY '24. On Slide 19, we detail our efforts to strengthen our balance sheet. We are proud of what we achieved on this front, reducing our debt by $7 billion, while improving our net debt leverage ratio to 0.9 times. Further, we have reached our targeted debt level of $5 billion with relatively low maturities through FY '24. From our improved balance sheet, let's move to cash flow for the quarter. First-quarter cash flow from operations totaled an outflow of $29 million. Free cash flow for the quarter was negative $304 million. As you likely realize, with Mike's leadership, we will continue to make decisions to better position the company for the longer term, creating a sustainable business. Certain of these decisions impacted cash flow this quarter. As our guidance anticipated, we plan to take certain actions that impacted the Q1 cash flow. We remain on track to deliver our full-year free cash flow guidance of $500 million. Let's now turn to our financial priorities on Slide 21. We are working to build a stronger financial foundation and use that base to drive the company forward in a disciplined and rigorous fashion, unleashing DXC's true earnings power. Our second priority is to have a strong balance sheet. We achieved our targeted debt level. We are encouraged by our almost 50% year-over-year interest expense reduction. We continue to focus on reducing interest expense and are evaluating refinancing options given the advantageous interest rate environment. Third, we will focus on improving cash flow. During the quarter, we paid $88 million to draw to conclusion a long-standing $3 billion take-or-pay contract for IT hardware. These types of contracts are not efficient, and we are reducing our exposure. Additionally, we paid down $300 million of capital leases and asset financing in order to allow us to dispose of IP hardware purchased under the previously mentioned take-or-pay arrangement and realizing tax deduction once we dispose of the unutilized assets. Given our relatively low borrowing cost, it makes less sense to enter into capital leases as the borrowing costs are higher and creates other complexities. We continue to reduce capital lease and asset financing origination from approximately $1.1 billion in FY '20 to $450 million in FY '21 and believe that we will remain at that level or lower for FY '22. As we continue to curtail capital lease origination, our average quarterly lease payment will reduce from about $230 million a quarter in FY '21 to about $170 million near term. Our efforts to limit capital leases does create upward pressure on capital expenditures. Though, on balance, we expect to reduce cash outflows for both capital leases and capital expenditures over time. Lastly, we terminated our German AR securitization program, negatively impacting cash flow by $114 million for the quarter. Going forward, this will result in interest savings, strengthen our balance sheet, but more importantly, it will bring us closer to our customers as cash collections is tied to their success. Fourth, we will reduce restructuring and TSI expense, improving our cash flow. Fifth, as we generate free cash flow, we will appropriately deploy capital to invest in our business and return capital to our shareholders, all the while continuing to maintain our investment-grade credit profile. During the quarter, we executed $67 million of stock buybacks to offset dilution, taking advantage of what we believe was an attractive valuation in the market. I should note, we continue to make progress with our efforts to optimize our portfolio, unlocking value as we divest noncore assets, including both businesses and facilities. We expect to continue these efforts. Our results today include the benefit from the sale of assets, partially offset by other discrete items, and the headwind of 30 basis points of margin associated with the disposition of our healthcare provider software business. Moving on to second-quarter guidance on Slide 22. Revenues between $4.08 billion and $4.13 billion. This translates into organic revenue declines of down 1% to down 3%. Adjusted EBIT margins of 8% to 8.4%. Non-GAAP diluted earnings per share in the range of $0.80 to $0.84. As we look forward to the rest of the year, I would note that we expect $175 million of tax payments in Q2 related to the gains on dispositions. We also updated our FY '22 interest guidance to approximately $180 million, a $20 million improvement; and reduced our full-year non-GAAP tax rate by 200 basis points to 26%. As noted on Slides 23 and 24, we are reaffirming our FY '22 and longer-term guidance. Lastly, we expect to see further improvement in the quarterly year-over-year organic revenue growth rates as we move through the year. Let me leave you with three key takeaways. First, I couldn't be more pleased with the trajectory of the business. Our improvement in revenue, margins and earnings per share is evident, and we expect this success to continue. Second, we have momentum and continue to win in the market. We expect our progress in driving a book-to-bill of over 1.0 to continue. Third, our financial foundation is coming together nicely under Ken's leadership. We have made great progress on debt reduction, reducing our restructuring and TSI expense, and delivering on our capital allocation priorities. These three key takeaways show that we have good momentum, we are building the foundation for growth, and we are confident that we will deliver on our financial commitments.

q1 non-gaap earnings per share $0.84. q1 revenue $4.14 billion versus refinitiv ibes estimate of $4.11 billion. bookings of $4.6 billion and book-to-bill ratio of 1.12x in q1 fy22.

I'm pleased that you are joining us for DXC Technology's third-quarter fiscal 2021 earnings call. After the call, we will post these slides to the investor relations section of our website. In accordance with SEC rules, we have provided a reconciliation of these measures to their respective and most directly comparable GAAP measures. A discussion of these risks and uncertainties is included in our annual report on Form 10-K and other SEC filings. I will walk through today's agenda in a moment. As we announced last month, we received an unsolicited and nonbinding proposal from Atos to purchase DXC. Our Board reviewed the proposal carefully with our financial and legal advisors and found it to be inadequate and lacking certainty, given the value our Board believes we can create on a stand-alone basis by executing on our transformation journey. After sharing some high-level information with Atos to help them understand why their proposal undervalue DXC, Atos and DXC agreed to discontinue further discussions. We are confident in our transformation journey, and our Q3 results show strong evidence that our team is executing. We are flattered that Atos saw the value we are creating and clearly has taken notice of our new leadership team and how we are delivering for our customers and winning in the market. I was pleased with how we managed the proposal. As it did not linger, we stayed focused on our business and it helped highlight some areas where we can accelerate our transformation journey and create additional value. With the new leadership team in place, I'm looking forward to sharing the details of our FY '22 full year plan and longer-term expectations on our Q4 earnings call. We're also planning an Investor Day to discuss in more detail our plans and introduce you to our leadership team. Now let me turn to today's agenda. I will start by giving you a quick update on our strong Q3 performance. Next, I will highlight the progress we're making on our transformation journey. Our strong Q3 results were driven by executing against the three key areas of our transformation journey, which are focused on customers, optimize cost and seize the market. I will then hand the call over to our new CFO, Ken Sharp, to share our detailed Q3 financial results and guidance for Q4. Regarding our Q3 performance, our revenues were $4.29 billion, approximately $90 million above the top end of our guidance. This is the second straight quarter of revenue stabilization, and we expect this trend to continue in Q4. Our sequential revenue stabilization is positive evidence that we will achieve year-on-year revenue stability. Concerning adjusted EBIT margin, we delivered 7%, also higher than the top end of our guidance. Like revenue, we expect margins to continue to expand in Q4. Book-to-bill for the quarter was 1.13, underscoring the success of bringing the new DXC, which focuses on our customers and people to the market. This is the third straight quarter that we've delivered a 1.0 or better book-to-bill, and we also expect this trend to continue in Q4. I'm pleased about the level of stability and momentum we are achieving. We have done well attracting talent, improving the environment for our people, strengthening our customer relationships, taking out cost without disruption and continuing to win in the market. Now before I go through the progress of our transformation journey, I would like to comment on two recent hires that have allowed me to finalize our new leadership team. We completed our CFO search and hired Ken Sharp. Ken returns to DXC after being the CFO of Northrop Grumman's Defense Systems business. Prior to that, Ken was SVP of finance at Orbital ATK and has over a decade of experience in our industry. Ken has a strong operational focus and has led large-scale finance transformations. These skills are important to us as we continue executing on our transformation journey. We also added Michael Corocoran to our team. Michael has joined us as chief strategy officer and has a track record of transforming and growing businesses. Michael joins us from WPP, where he led strategy and operations. Prior to WPP, Michael was at Accenture, where he spent a number of years with me and created the strategy for Accenture operations. The amount of transformation and industry experience of this team is substantial, and they are the main reason for our strong execution and results. You will hear in a moment why Ken joined DXC and his comments concerning the opportunity to create value do a really nice job capturing why talent joins DXC. Now I will cover the good progress we are making on our transformation journey, starting with our customers. Our focus on customers continues to be the primary driver of revenue stabilization. As I've said time and time again, when we deliver for our customers and are seen as a trusted partner, customers are more likely to renew existing work and consider us for new work. Let me give you two good examples that have happened in Q3. Molson Coors renewed two pieces of work with us this quarter. The first is in application management, and the second is across multiple layers of the enterprise technology stack, including ITO, Modern Workplace, cloud and security. Next, our strong relationship and flexible delivery model led to an expanded agreement with Pacific Life insurance, which includes application development and support for its retirement and life divisions, enabling them to reduce cost and improve efficiency. These are two perfect examples of the great job we're doing, strengthening our customer relationships and gives us confidence that we can continue to stabilize revenue. Now let me turn to our cost optimization program. We will achieve our goal of $550 million of cost savings this year. Our cost optimization program was responsible for our strong adjusted EBIT margin of 7% in Q3. We were able to expand margins despite a 200 basis point headwind from the sale of the U.S. state and local health and human services business. We have done well optimizing our costs and continuing to deliver for our customers without disruption. Seize the market is the final area of our transformation journey. In this area, we are focused on cross-selling to our existing accounts and winning work with new customers. The 1.13 book-to-bill number that we delivered this quarter is consistent evidence that our plan is working. In Q3, 55% of our bookings were new work and 45% were renewals. Let me give you a good example of new work with a new customer. We signed a three-year deal with Ferrari, where we will modernize their IT platforms with services, including security and modern workplace. Our ability to deliver a consistent book-to-bill number of over 1.0 in the first three quarters of FY '21 is clear evidence that our transformation journey is not only working but we can absolutely win in the IT services market. Turning now to our healthcare provider software business. We are on track to complete the sale of this business and use the roughly $450 million of net proceeds to pay down debt, further strengthening our balance sheet. Let me begin by saying how excited I am to join DXC and be part of the team that Mike has assembled. Let me provide you some insight into my thought process on why I joined, which came down to three main factors: the team Mike assembled; the transformation journey; and third, the investment thesis of how DXC would create value. After spending time with Mike and the team, I'm convinced that DXC can execute on the investment thesis I was contemplating. This includes stabilizing revenue, expanding margins and delivering free cash flow. When we achieve this thesis, I believe DXC will be successful in unlocking significant value. Now let me talk about the team Mike assembled. Companies with the best people win. The strength of the team delivering on the transformation journey is clearly visible in our Q3 results. At DXC, there are three main areas that our finance team will focus on. First, we will work hard to demonstrate the true earnings power of DXC. We will focus on cash flow, paying particular attention to reducing outflows. We intend to continue investing in our people and delivering for our customers. At the same time, we will be disciplined in reducing spend in areas such as restructuring, transaction and integration, capital expenditures, excess facilities and our outsized overhead. We believe we will create the most value by growing the underlying business. That means organic growth and at the same time improving cash flow. Second, we are committed to putting in place a disciplined capital deployment program that will maximize the value creation of our cash flow engine. Based on rigorous analysis, we will carefully evaluate the returns associated with capital deployment options. Now that we've strengthened our balance sheet, we are turning to solidify our cash flow. With a strong balance sheet and a cash flow outlook, we will be in a position to execute a disciplined capital allocation program. Third, we will improve our financial visibility. We are committed to providing annual guidance and our longer-term expectations on our next earnings call. We are also planning an Investor Day to discuss in more detail our longer-term plans and introduce you to our leadership. Moving on to our Q3 results. In the quarter, DXC exceeded the top end of our revenue, adjusted EBIT and non-GAAP earnings per share guidance. GAAP revenue was $4.29 billion and $88 million better than the top of our guidance range. Currency was a tailwind of $58 million sequentially and $118 million year over year. On an organic basis, revenue increased 1.7% sequentially. Organic revenue declined 10.5% year over year due to previously disclosed runoffs and terminations. We expect this to be the high watermark for organic year-over-year revenue declines. As you will see from our Q4 guidance, we expect to continue delivering stable sequential revenue. And during fiscal year '22, we expect this to translate into year-over-year revenue stability. Adjusted EBIT was $300 million. Our adjusted EBIT margin was 7%, a sequential improvement of 80 basis points despite an approximate 200 basis point headwind from the HHS sale. Non-GAAP income before taxes was $246 million. Non-GAAP diluted earnings per share was $0.84 due to a lower-than-expected tax rate of 10.2%. Using our guidance tax rate of 30%, non-GAAP earnings per share was $0.65. This was $0.10 higher than the top end of our guidance range. Our Q3 tax rate primarily benefited from the reversal of certain tax reserves related to tax audits, the expectation of higher utilization of foreign net operating losses and the ability to utilize state tax credits related to the HHS sale. In Q3, bookings were $4.9 billion for a book-to-bill of 1.13. Like Mike mentioned earlier, we are encouraged to see three consecutive quarters with a book-to-bill greater than 1.0. Turning now to our segment results. The GBS segment, the top of our technology stack, includes analytics and engineering, applications and the horizontal BPS business. The GBS segment previously included the HHS business, which we sold on October 1 and includes the healthcare provider software business, which we are in the process of selling. GBS revenue was $1.92 billion or 45% of our total Q3 revenue. Organic revenues increased 2.2% sequentially, primarily reflecting the strength of our analytics and engineering business. Year over year, GBS revenue was down 7% on an organic basis. GBS segment profit was $273 million and profit margin was 14.2%. Margins improved 10 basis points sequentially despite a headwind of about 300 basis points from the HHS sale. GBS bookings for the quarter were $2.7 billion for a book-to-bill of 1.35. Now turning to our GIS segment, which consists of IT outsourcing, cloud and security and the modern workplace layers of our enterprise technology stack. Revenue was $2.37 billion, up 1.3% sequentially and down 13.2% year over year on an organic basis. GIS segment profit was $88 million with a profit margin of 3.7%, a 210 basis points margin expansion over Q2. GIS bookings were $2.2 billion for a book-to-bill of 0.95. Now before I discuss the details of the enterprise technology stack on Slide 13, I wanted to point out that there is no better slide that drives home the positive impact of our transformation journey. The proof points on the slide include continued revenue stabilization and strengthening of our book-to-bill for each layer of our stack that has been part of the transformation journey since Q1. As you can see in Q1, all four layers of our stack had negative sequential growth, whereas we are now reporting sequential growth improvement for all layers in Q3. Also, it is positive to see the revenue mix beginning to change in shifting up the stack. Now let me drill down one level to comment on the performance of the layers of our enterprise technology stack. IT outsourcing revenue was down 1.8% sequentially, an improvement as compared to Q2 where it was down 4.7%. ITO revenues declined 17.7% year over year due to the previously disclosed runoffs and terminations. Book-to-bill was 0.96 in the quarter. We believe building strong relationships with our ITO customers and delivering effective solutions will improve revenue performance. Cloud and security revenue was up 4.7% sequentially and down 1% year over year. Book-to-bill was 1.0 in the quarter. Moving up the stack, the applications layer posted 2.6% sequential revenue growth and was down 9.3% year over year. Analytics and engineering was up 4.6% on a sequential basis and flat compared to the prior year. Analytics and engineering book-to-bill was 1.2 in the quarter. The modern workplace and BPS businesses increased 2.6% sequentially and was down 12.6% compared to the prior year. I should note that Q3 positively benefited from increased volume of resales. As you may recall, these two businesses were part of the strategic alternatives initiative and are just beginning their transformation journey. As a result, you should expect some unevenness in performance. Moving on to cash flows on Slide 14. Our cash flow from operations totaled an outflow of $187 million, and adjusted free cash flow for the quarter came in at negative $318 million. As discussed on our prior earnings call, we had cash disbursements of $332 million that impacted free cash flow related to the HHS sale. In addition, during the quarter, we normalized payments to our suppliers and partners. Our effort to normalize our supplier and partner payments is not expected to reoccur and had an approximate $400 million negative cash flow impact in the quarter and $500 million negative cash flow impact through the first three quarters of our fiscal year. We believe treating our partners appropriately will allow us to further leverage the partner ecosystem. If these two items had not occurred, our free cash flow would have been more than $700 million higher in the quarter. The company has traditionally reported adjusted free cash flow that adjusts for capital expenditures, restructuring, transaction, separation and integration costs. On Slide 15, we detail the efforts we have undertaken to strengthen our balance sheet. As we previously disclosed, we utilized $3.5 billion of net proceeds from our HHS sale to reduce debt. Additionally, we continue to make progress on our plan to sell our healthcare provider software business, and we will use the proceeds to pay down debt and further strengthen our balance sheet. Cash at the end of the quarter was $3.9 billion. Total debt, including capitalized leases, was $6.2 billion for a net debt of $2.3 billion. We expect to make tax payments of approximately $900 million in Q4 related to our divestitures. I would like to emphasize our commitment to an investment-grade credit rating. As you can see, our net debt to EBITDA improved more than one full turn from 2.4 times at the end of September 2020 to 1.2 times at the end of December. We fully expect our leverage ratio to continue to improve. Moving on to guidance on Slide 16. We are targeting Q4 revenues of $4.25 billion to $4.3 billion, adjusted EBIT margins of 7% to 7.4%, non-GAAP diluted earnings per share of $0.65 to $0.70, net interest expense of $60 million and an effective non-GAAP tax rate of about 28%. And let me share three key takeaways on our progress we are making at DXC. First, we're bringing the new DXC to the market and have demonstrated solid momentum in executing on our transformation journey. This is translating into consistent quarter-on-quarter revenue stability, sequential margin expansion and a book-to-bill number of one or greater. Second is we are on track to complete the sale of the healthcare provider software business and use the proceeds to pay down debt, further strengthening our balance sheet. Third, with the additions of Ken and Michael, we have built and finalized the new leadership team that is executing on our transformation journey and producing strong results. In closing, I am pleased with the level of stability and momentum we are achieving. We have done well attracting talent, improving the environment for our people, strengthening our customer relationships, taking out costs without disruption and continuing to win in the market. We expect all of this positive momentum to continue in Q4.

compname reports q3 non-gaap earnings per share of $0.84. q3 non-gaap earnings per share $0.84. q3 earnings per share $4.29. q3 revenue $4.3 billion versus refinitiv ibes estimate of $4.2 billion.

I'm pleased that you're joining us for DXC Technology's third quarter 2022 earnings call. Our speakers on the call today will be Mike Salvino, our president and CEO; and Ken Sharp, our EVP and CFO. In accordance with SEC rules, we provide a reconciliation of these measures to their respective and most directly comparable GAAP measures. A discussion of these risks and uncertainties is included in our annual report on Form 10-K and other SEC filings. And I hope you and your families are doing well. Today's agenda will begin with an update on Q3, which was another strong quarter of operational execution for DXC. Next, I will cover how we are consistently delivering on our transformation journey. As a result of this execution, organic revenue, margin, and earnings per share all continue to improve. In addition, you will see the outstanding results for book-to-bill and free cash flow. The best part about this performance is we expect it to be sustainable. And then I will hand the call over to Ken to share our Q3 results along with our Q4 and full year guidance. Regarding our Q3 performance, our revenues were $4.09 billion compared to $4.03 billion in Q2. Organic revenue continued to improve as we progressed from minus 2.4% in Q2 to minus 1.4% in Q3. I see this as a significant improvement as only a year ago, our organic revenues were minus 9.7%. I was also very pleased to see the organic revenue growth in GBS accelerate, from positive 3.4% in Q2, to positive 7% in Q3. Our strategy to grow DXC relies on GBS consistently growing, and we are clearly delivering against this piece of our growth strategy. Our adjusted EBIT margin was 8.7%, up 170 basis points as compared to last year driven by our operational work that we are doing to optimize our business. Our non-GAAP diluted earnings per share was $0.92 in the quarter, which is up 10% as compared to $0.84 last year. While the quarter was strong across the board, the 2 strongest financial results were book-to-bill and free cash flow generation. We delivered $5 billion in bookings for a book-to-bill of 1.23 times. This gets us to a book-to-bill of 1.08 times on a trailing 12-month basis. And in Q3, we delivered $550 million in free cash flow. Now let me turn to the progress we are making on our transformation journey. The first step of the journey is to inspire and take care of our colleagues. Hiring was a major focus of ours. And we ramped up our hiring engine to meet the high level of demand and to activate more project work. In the quarter, we increased our headcount by 3% and increased project work by 13%. We continue to see our people-first strategy and our virtual-first model is resonating in the market and helping us in our recruiting efforts. We recently hired Kristie Grinnell as our new CIO. And she specifically called out our virtual-first model as one of the key items that drew her to DXC. In addition, I am pleased with how we continue to deliver for our people through the COVID pandemic. It is due to all these points that our attrition at DXC has stabilized and it remains below industry average. Focus on the customer is the next step of our transformation journey and continues to be the primary driver of our success in improving organic revenue. A key metric that we measure is our Net Promoter Score, and I'm happy to report that we continue to see improvement. Currently, our 12-month rolling NPS score is at the upper end of the industry best practice range of 20 to 30. Another piece of our growth strategy is to run our customers' mission-critical systems, which mainly make up our GIS business, and ultimately have these customers award us new work. Running these mission-critical systems builds trust with our customers. This strategy is being successful because we are winning more work from our customers in both GIS and GBS, and our revenues are clearly not going backwards. A great example of this strategy working is the new agreement with Lloyd's. When I started DXC a little over two years ago, Lloyd's was contemplating a significant reorganization without DXC, which would have caused a negative impact to our revenue. Running Lloyd's' mission-critical systems well has built trust that enabled us to be chosen to build the future at Lloyd's, which will be the most advanced insurance marketplace in the world. DXC will rearchitect and develop a cloud-native platform running on AWS to replace their legacy mainframe platform. Simply put, leveraging the trust we have built with our customers by running their mission-critical systems is how we are stabilizing our revenues and setting ourselves up for growth. Now let me turn to our cost optimization program. We continue to make progress in optimizing our cost and delivering for our customers without disruption. Managing our cost includes executing portfolio-shaping initiatives. We have identified businesses with roughly $500 million in revenues that are not strategic and will not help us grow. Selling these businesses will improve our organic revenue growth and our overall margin. We expect the sale of these businesses to result in an additional $500 million in proceeds within the next 12 months. At the same time, we are focused on prudently investing in assets that will enable us to grow. A great example of this is our recently announced relationship with ServiceNow. Here, we are leveraging our proprietary technology called Platform X, which is a data-driven intelligent automation platform that helps us detect, prevent and address issues before they happen within our customers' cloud and on-prem IT estates. NelsonHall named DXC's Platform X as a leader in cognitive and self-healing IT infrastructure management, reflecting DXC's ability to deliver immediate results through automation. Next, seize the market is where we are focused on, cross-selling to our existing customers and winning new work. We had a strong quarter of bookings, totaling $5 billion and a book-to-bill of 1.23 times. 58% of the bookings were new work and 42% were renewals. We are winning in the ITO market. And this is helping us with our organic revenue growth, significantly limiting the declines from double-digit to low single-digit negative declines. Modern Workplace is following a very similar path. Our strong 12-month book-to-bill of 1.1 times gives us confidence that, like ITO, we can take this business from double-digit to low single-digit decline in the next 12 months. Analytics and Engineering is a great story as we are converting our strong book-to-bill of 1.29 times on a 12-month basis and growing this business 18.7% in Q3, which is helping us consistently grow our GBS business. We are seeing increased opportunities in the market. We have shown the ability to win, and the investment we have made in execution is paying off, with good deals turning into good revenue as you can see in ITO and Analytics and Engineering. Turning to Slide 11. Our transformation journey remains on track, with strong progress across all four key metrics. Organic revenue improved 100 basis points from Q2 to a decline of 1.4%. Adjusted EBIT margin is up to 8.7%. Year-over-year, our adjusted EBIT margin expanded 170 basis points, while we substantially reduced our restructuring and TSI expense. Q3 book-to-bill was 1.23 times and 1.08 times on a trailing four quarters. From our perspective, looking at book-to-bill over a trailing four quarters is more meaningful than looking at one quarter in isolation. Non-GAAP diluted earnings per share was $0.92, up $0.08 compared to the prior year. Our earnings per share expanded despite $0.23 of headwinds from taxes. The tax rate headwinds were more than offset by increased margins and lower interest expense. Moving to our segment results on Slide 12. GBS continued its strong performance, accelerating organic revenue growth to 7%, our third consecutive quarter of organic revenue growth. GBS is benefiting as we leverage our relationships with our platinum customers. Our GBS business has higher margins and lower capital intensity. So as we grow this business, it has a disproportionately positive impact on margins and cash flow. Our GBS profit margin was 16.2%, up 200 basis points compared to the prior year. GIS organic revenue declined 8.3%. GIS profit margin was 4.8%, an improvement of 110 basis points compared to prior year. Our focus with GIS heretofore has been on improving delivery, to deliver for our customers while stabilizing the margins. As we set up for next year, we are putting in place a program to drive cost out of GIS to move the margins forward. Turning to our enterprise technology stack. Analytics and Engineering revenue was $545 million and organic revenue was up 18.7%. We continue to see high demand in this area. Of note is the success we are seeing with our platinum customer channel. Applications organic revenue increased 4.8%, also accelerating. BPS, our smallest layer of the enterprise technology stack, generated $116 million of revenue, and organic revenue was down 8.3%. We expect the declines in this business to moderate as we move forward and put our new strategy in place. For our GBS layers of our technology stack, our book-to-bill was 1.28 times and 1.17 times on a trailing 12-month basis. Cloud and Security revenue was $471 million and organic revenue was down 12.2%. IT Outsourcing revenue was $1.11 billion and organic revenue was down 1.9%. Let me remind you that this business declined 19% in Q3 FY '21. This is a significant improvement that we indicated last quarter. We expect IT Outsourcing to continue to decline in low single digits, ideally 5% or better. Lastly, Modern Workplace revenue was $561 million, and organic revenue was down 16% as compared to prior year. We remain positive about our prospects. And our strong book-to-bill of 1.11 times over the trailing 12 months is expected to stabilize Modern Workplace as we move through FY '23. For our GIS layers of the technology stack, our book-to-bill was 1.18 times and 1.01 times on a trailing 12-month basis. As you think about organic revenue growth prospects for GIS, our focus on improving the quality of revenue by expanding margins, reducing capital intensity and driving cash flow may create headwinds for organic revenue growth. For example, using our capital to buy laptops, bearing the risk and ultimately recovering our cash over three to four years with relatively low returns does not feel like a great economic model. At the end of the day, we would prefer to provide our offerings and services and forego the revenue associated with buying the assets to improve the underlying economics. Next up, let me touch on our efforts to build our financial foundation. This quarter, we made particularly strong progress with cash generation and continued reduction of restructuring and TSI expense. With regard to financial discipline, remediating our material weakness is a top priority. We are in the late stage of our efforts to remediate the material weakness, and we have fully implemented our 11-point remediation plan. As a result, we expect to remediate our material weakness in Q4. I should note, as it relates to the material weakness in governance more holistically, we are clear-eyed on how we think about governance. We do not find our current governance score to be acceptable. We are working hard to ensure we improve its trajectory like many things at DXC. We are finishing the unfinished homework, creating a sustainable business brick by brick. In addition to our material weakness remediation, we are committed to improving our pay practices. As part of good governance, our board members and management are continuing to engage with our shareholders to proactively take their feedback as we work together to design and set our short-term and long-term incentive structure. Our focus is to set metrics and targets that are highly aligned to what our shareholders want, all the while incentivizing management to improve the company's performance, creating an enduring and sustainable business. The execution of the transformation journey has made measurable improvement, allowing us to put the business on a firmer financial foundation, expanding margins, and generating and keeping more cash. Slide 15 shows the results of the structural improvements we have made. We reduced our debt from $12 billion to $4.9 billion and are now below our targeted debt level. We have reduced our quarterly net interest expense to $23 million, a $31 million reduction as compared to prior year. As you recall, we were able to term out a significant portion of our debt last quarter with principally all of our outstanding borrowings at fixed rates. We expect to continue the lower interest expense at approximately $25 million per quarter. We also continue to make progress on reducing restructuring and TSI expense. This reduction contributed $195 million to cash flow during the quarter as compared to the prior year. Further, this also achieves one of our goals of narrowing the difference between GAAP and non-GAAP earnings. I should note that while we have been reducing restructuring and TSI expense, we have also been able to expand margins. Lastly, as you can see, we have also reduced operating lease cash payments from $156 million in the third quarter of the prior year to $117 million in the third quarter of FY '22. Moving to Chart 16. Let's talk about the focus we've brought to capital expenditures, including capital leases. Our capital expenditures were reduced from $219 million in Q3 FY '21 to $146 million in Q3 FY '22. We are closely managing our capital lease originations, which ultimately means our capital lease debt and associated payments continues to decline. In FY '20, we had a $270 million quarterly run rate for originations while our last two quarters averaged less than $60 million. We made $207 million of capital lease payments in Q3 last year, which is now down to $184 million in the current quarter. For Q4, we expect a further reduction of capital lease payments to approximately $140 million. A metric we like to look at to gauge capital efficiency is capital expenditures and capital lease originations as a percentage of revenue. We are now tracking at 5.2% for two consecutive quarters, down from roughly 10% in FY '20. Clearly, our focus has been on improving our cash flow. Specific to new business, we have been focused on structuring our transactions to have lower capital intensity, potentially trading off revenue in favor of cash flow. As you can see, from my prior comments, our focus on driving structural changes has improved our ability to generate and hold on to more cash. Cash flow from operations totaled an inflow of $696 million. Free cash flow for the quarter was $550 million, an increase of $956 million as compared to prior year and moves our year-to-date free cash flow to $650 million or $150 million above our full year guidance. Further, cash in the quarter was negatively impacted by two previously disclosed payments, totaling approximately $130 million. These payments were offset by much stronger performance due to improvements in the business and benefits from timing on payments and receipts in the quarter. We expect this timing to create some headwinds in Q4 cash flow. Slide 18 shows our trended cash flow profile. Our progress in Q2 and Q3 gives us confidence as we work toward delivering our longer-term FY '24 guidance of $1.5 billion in free cash flow. Moving to Slide 19. Let's revisit our relatively simple capital allocation formula. We are targeting a debt level of approximately $5 billion and a cash level of $2.5 billion. With debt at our target debt level, cash over $2.5 billion is excess cash, which we expect to deploy. Based on this formula, we expect to self-fund stock repurchases of $1 billion over the next 12 months. The $1 billion in repurchases will be funded from a combination of cash generated from operating our business as well as proceeds from our portfolio-shaping efforts. We recently executed a number of sale agreements and expect to divest businesses and assets with approximately $500 million of revenue and will generate $500 million of proceeds in the next 12 months. These businesses are not synergistic and cannot be leveraged more broadly in our platinum channel. As you will see in our 10-Q, we entered into an agreement to sell our German financial service subsidiary that includes both of our banks for approximately $340 million. As noted in the liquidity section of our previously filed financials, the German financial services business has cash held on deposit for the bank's customers. The current cash balance related to these deposits is $670 million. We also announced an agreement for the sale of our Israeli business for $65 million. The valuation for these assets are accretive to our valuation. Further, we do not expect these divestitures to create headwinds related to achieving our FY '24 longer-term guidance for organic revenue growth, adjusted EBIT margin, and free cash flow. We continue to assess our portfolio to ensure we have businesses that are aligned to our strategy and not a distraction for our management team. Now let me cover our progress on share repurchases. In Q3, we repurchased $213 million of common stock, bringing our FY '22 year-to-date repurchases to $363 million or 10.6 million shares. Our share repurchases are self-funded. As noted, we expect to repurchase $1 billion of our common stock over the next 12 months as we firmly believe our stock is undervalued. Turning to the fourth quarter guidance. Revenues between $4.11 billion and $4.15 billion. If exchange rates were at the same level as when we gave guidance last quarter, our fourth quarter revenue guidance range would be $20 million higher. Organic revenue declined, minus 1.2% to minus 1.7%. Adjusted EBIT margin in the range of 8.7% to 9%. Non-GAAP diluted earnings per share of $0.98 to $1.03 per share. For Q4, we expect a tax rate of approximately 26%. As we look to the end of FY '22, I would like to update our current fiscal year guidance. Based on the strengthening U.S. dollar, our revenues are expected to be negatively impacted by approximately $40 million. We now expect to come in at approximately $16.4 billion. Organic revenue growth range of minus 2.2% to minus 2.3%, which is slightly lower than our previous range. Adjusted EBIT margin, 8.5% to 8.6%. We continue to expand margins while significantly lowering restructuring and TSI expense and are now guiding to $400 million for FY '22. To put this all in context, we expect to spend $500 million less on restructuring and TSI spend than last year, while expanding margins by over 200 basis points. Our focus is to embed these types of expenses over time into the normal performance of the business and believe we have taken significant strides in doing so. Non-GAAP diluted earnings per share of $3.64 to $3.69. Lastly, we are increasing free cash flow guidance to over $650 million, $150 million improvement to our prior FY '22 guidance. Fourth quarter cash flow is expected to be impacted by timing, which boosted Q3 cash flow and in addition, a $100 million payment in Q4 to terminate a financial structure put in place a number of years ago. We are reaffirming our guidance for FY '24. This reflects our strong execution and driving forward on our transformation journey. Overall, we are making great progress driving efficiency in the business and generating strong free cash flow. We are utilizing those cash flows to drive significant value for our shareholders through our stock repurchase program. Let me leave you now with a few key takeaways. As I think about finishing out FY '22, we are making great progress. During our June investor day, we committed to making progress on all nine of these points, and let me quickly give you an update on each. Win in the market and a book-to-bill of greater than 1x. Our trailing 12-month average is now 1.08 times. This year, we produced relatively stable revenues in Q2, Q3, and we expect this to continue in Q4. Strengthening the balance sheet. Our debt is now at $4.9 billion, and our refinancing has significantly lowered our interest expense. Achieved organic revenue growth of minus 1% to minus 2% in FY '22. This is where we're coming up a little short, anticipating negative 2.2% to negative 2.3% organic revenue growth. Remediate material weakness and improve governance score. As Ken indicated, we will remediate the material weakness in Q4, and we have plans to continue to improve our governance score. Reduce restructuring and TSI. We have taken it from over $900 million to roughly $400 million in FY '22. We have expanded margins every quarter throughout FY '22. Improve free cash flow. We exceeded the $500 million guidance for FY '22. And finally, resume capital deployment to shareholders. We have repurchased $363 million and plan to do another $1 billion over the next 12 months. In addition to this progress, we are also committed to portfolio-shaping. What this means is we are making the right bets and investments like what we are doing with Platform X and ServiceNow and divesting assets that are not core to our strategy and will not help us grow. Our portfolio-shaping is anticipated to drive $500 million in excess cash in the next year. In closing, I am confident that by staying focused on our transformation journey, we will continue to deliver on our commitments both in the short term and the long term.

dxc technology - q3 non-gaap earnings per share $0.92. dxc technology - q3 revenue fell 4.6 percent to $4.09 billion. dxc technology - sees fy 2022 non gaap diluted earnings per share $3.64 to $3.69. intends to self-fund $1 billion of additional share repurchases over next twelve months.

I'm pleased that you're joining us for DXC Technology's fourth-quarter fiscal 2021 earnings call. Our speakers on the call today will be Mike Salvino, our president and CEO; and Ken Sharp, our executive vice president and CFO. In accordance with SEC rules, we've provided a reconciliation of these measures to their respective and most directly comparable GAAP measures. A discussion of these risks and uncertainties is included in our annual report on Form 10-K and other SEC filings. Today's agenda will start by giving you a quick update on our strong Q4 performance. Next, I will highlight the progress we are making on our transformation journey. Our strong Q4 results were driven by executing on the three key areas of our transformation journey, which are focused on our customers, optimize cost, and seize the market. I will then hand the call over to Ken to share our detailed Q4 financial results, guidance for FY '22, and longer-term outlook. Regarding our Q4 performance, our revenues were $4.39 billion, approximately $85 million above the top end of our guidance. This is the third straight quarter of revenue stabilization and we expect this trend to continue in FY '22. Concerning adjusted EBIT margin, we delivered 7.5%, also higher than the top end of our guidance. This, too, is the third straight quarter of sequential margin expansion and is driven by our cost optimization program. We expect margins to continue to expand in Q1 of FY '22. Book-to-bill for the quarter was 1.08, underscoring the success of bringing the new DXC, which focuses on our customers and colleagues to the market. This is the fourth straight quarter that we've delivered a 1.0 or better book-to-bill. We expect our success of winning in the market to continue in Q1 of FY '22. I am pleased with the momentum we have achieved. All the work in FY '21 to inspire our people, invest in our customers, take costs out without disruption and win in the market has positioned us very well for financial success in FY '22 and longer term. Now, I will cover the good progress we are making on our transformation journey, starting with our customers. Our investment in our customers continues to be the primary driver of revenue stabilization. When we deliver for our customers and are seen as a trusted partner, customers are more likely to renew existing work and consider us for new work. Let me give you an example. We recently signed a five-year expansion with Zurich Insurance Group. We'll provide IT outsourcing and security services as part of their global IT transformation, focused on improving the customer and employee experience. This is a perfect example of delivering for a customer, strengthening the relationship and then a customer wanting to work with DXC in the future. This is strong evidence that our investment in our customers is paying off, which gives us confidence that we can flatten organic revenue during FY '22. Now, let me turn to our cost optimization program. We have achieved our goal of $550 million of cost savings in FY '21. Our cost optimization program was responsible for the strong adjusted EBIT margin of 7.5% in Q4. We have done well optimizing our costs and continuing to deliver for our customers without disruption. You will hear from Ken that we expect to continue to expand margins in FY '22. Seize the market is the final area of our transformation journey. In this area, we are focused on cross-selling to our existing accounts and winning new work. So the 1.08 book-to-bill that we delivered this quarter is consistent evidence that our plan is working. In Q4, 53% of our bookings were new work and 47% were renewals. Ahold Delhaize is a great example of an existing customer who has renewed work with DXC and given us new work. We will be providing infrastructure services, application outsourcing, cloud migration, and workplace services in a hybrid cloud environment for the retail business services group, to reduce costs and support their business-critical systems that enable each of their local brands to stock their shelves. Our ability to deliver a consistent book-to-bill of over 1.0 in each of the four quarters of FY '21 is clear evidence that we can win in the IT services industry. This is translating into improving quarterly organic revenue growth, which we expect will flatten during FY '22. As we are witnessing the ongoing impact of COVID-19, our focus continues to be on our people. Currently, we are focused on the more severely impacted areas of India and the Philippines. The dedication of our team is a source of great pride for us at DXC as our people continue to take care of themselves, their families and to deliver for our customers. In the past three quarters, we have stabilized our revenue on a sequential basis and guided to the fourth quarter of revenue stability. This is a significant accomplishment by my DXC colleagues. It is not lost on Mike and me that investors look at revenue growth on a year-over-year basis. However, when a company has a period of significant decline and change to its business, strategy, and leadership, you first have to stabilize revenue sequentially. As we all know, once you achieve four quarters of sequential revenue stability, you achieve year-over-year revenue stability. Going forward, we will pivot our narrative accordingly. Turning on to our financial priorities on Slide 10. We are working to build a stronger financial foundation and drive the company in a disciplined and rigorous fashion to unleash the true earnings power. To that end, remediating our material weakness and the impact it has on our corporate governance is a key focus. Our second priority is to have a strong balance sheet. We paid down $6.5 billion of debt in the past nine months and subsequent to year-end, retired an additional $500 million. We are now approaching a far more manageable $5 billion debt level. Further, we have relatively low maturities over the next three years. We remain committed to an investment-grade credit profile, and I believe our actions more than demonstrate our commitment. Third, we will focus on improving cash flow. We expect this will improve our focus on our true earnings power and will allow you to better understand our performance. As part of our focus on the business and cash optimization, we will continue our portfolio-shaping efforts to increase the focus on our core business. Fourth, we will reduce restructuring and TSI expense to approximately $550 million in FY '22 to under $100 million in FY '24, ultimately improving cash flow. Fifth, have a thoughtful and disciplined approach to capital allocation. As we generate free cash flow, we will appropriately deploy capital to invest in our business and return capital to our shareholders, all the while staying focused on maintaining our investment-grade credit rating. For the quarter, DXC exceeded the top end of our revenue, adjusted EBIT margin, and non-GAAP diluted earnings per share guidance. GAAP revenue was $4.39 billion, $85 million higher than the top end of our guidance. On an organic basis, revenue increased 0.4% sequentially. Organic revenue declined 7% year over year due to the previously disclosed runoffs and terminations. As we mentioned on our third-quarter earnings call, our Q3 10.5% year-over-year decline would be the high watermark. GAAP EBIT margins were negative 16.8% in the fourth quarter, impacted by approximately $1.1 billion of costs, including pension mark-to-market, asset impairments, restructuring TSI, loss on disposals, and debt extinguishment costs. Excluding these items, adjusted EBIT margin was 7.5% in the fourth quarter, an improvement of 50 basis points from the third quarter. Non-GAAP diluted earnings per share was $0.74 and was negatively impacted by $0.04 due to a higher-than-expected tax rate of 32%. In Q4, bookings were $4.7 billion for a book-to-bill of 1.08, the fourth straight quarter of a book-to-bill greater than one. For the full year, this takes our book-to-bill to 1.12, compared to 0.9 in FY '20. Turning now to our segment results. The GBS segment, the top half of our technology stack, includes analytics and engineering, applications in the horizontal BPS business. GBS was $2 billion or 46% of our total Q4 revenue. Organic revenues increased 2% sequentially, primarily reflecting the strength of our applications and analytics and engineering business. Year over year, GBS revenue was down 4% on an organic basis. GBS segment profit was $315 million with a 15.8% profit rate, up 160 basis points from Q3. GBS bookings for the quarter were $2.39 billion for a book-to-bill of 1.2 and a full-year book-to-bill of 1.32, compared to 0.99 in the prior year. Now, turning to our GIS segment, which consists of IT outsourcing, cloud and security, and the modern workplace. Revenue was $2.39 billion, down 0.9% sequentially and down 9.3% year over year on an organic basis due to the previously disclosed terminations and runoffs. Our ITO business had positive sequential revenue growth in the quarter. The ITO business benefited from approximately $100 million of resale revenue, resulting from a typical Q4 increase of customer demand due to their fiscal year-end. GIS segment profit was $98 million with a profit margin of 4.1%, a 40-basis-point margin improvement over the third quarter. GIS bookings were $2.3 billion for a book-to-bill of 0.98. Book-to-bill for FY '21 was 0.94, compared to 0.83 in the prior year. Now, turning to one of my favorite slides, our enterprise technology stack. This slide demonstrates how winning in the market for four consecutive quarters translates into revenue stability and the progression that our team has been able to achieve by focusing on our customers. Before I get into the details, I want to provide you the three changes to the stack you can expect for next year. First, as we think about next year, you will see our sequential-quarter comparison give way to a year-over-year comparison. Second, we delivered on the sale of the healthcare provider software business. Therefore, this will no longer be included. Third, the modern workplace and horizontal BPS businesses will be integrated into the enterprise technology stack above. Once again, we had three layers of the stack achieve a book-to-bill greater than one and sequential growth. Now, let me drill down one level. IT outsourcing revenue was $1.19 billion in the quarter, up 1.4%, the first positive sequential growth since we began tracking in this manner. ITO book-to-bill was 0.98 in the quarter. Cloud and security revenue was $524 million, declined 1.6% sequentially, and was down 5.7% year over year. The cloud and security business had a difficult compare as the third quarter grew 4.7% sequentially. Book-to-bill was 1.08 in the quarter. Moving up the stack, the applications layer posted a 1.9% sequential growth and was down 7.2% year over year. Analytics and engineering revenues were $478 million, up 2% on a sequential basis and up 8.4% compared to prior year. Analytics and engineering book-to-bill was 1.46 in the quarter. The modern workplace and BPS revenues were $795 million, down 3.3% sequentially and down 10.5% compared to the prior year. As we previously mentioned to you, these two businesses just began their transformation journey so you should expect some unevenness in performance. Moving on to cash flows on Slide 15. Fourth-quarter cash flow from operations totaled an outflow of $280 million. Free cash flow for the year was negative $652 million, impacted primarily by four nonrecurring items. Q4 tax payments of $531 million related to the business sale. As you may recall, we planned $900 million of tax payments, so this result surpassed our expectation. As we told you before, in Q3, $832 million related to readying the U.S. state and local Health and Human Services business for sale and normalizing payables and $200 million related to deferrals of certain tax payments due to COVID relief legislation that will be paid during FY '22. One of our key initiatives we are employing to drive cash flow and improve earnings power is to wind down restructuring and TSI costs. Since DXC was formed four years ago, we had significant cash outflows with approximately $900 million in expense per year on average. In FY '22, this will be reduced to approximately $550 million, with a larger portion being allocated to facilities restructuring efforts to improve the work experience for our people as we reshape our portfolio for our virtual model. We have heard from many of our analysts and investors that our cash flow is hard to understand. We believe this will allow investors to better understand our performance. As part of our effort to build a sustainable business, we will continue to evaluate these historical practices of using capital leases to a much greater level, long-term purchase commitments, and selling our receivables. Unwinding these historical practices may have an impact on short-term cash flow. We will also focus our efforts to build the necessary rigor associated with capital budgeting to better control our outsized capital spend. On Slide 17, we detail our efforts we have undertaken to strengthen our balance sheet. As you can see, we have achieved a lot in this area, reducing our net debt leverage ratio by more than one turn from the high watermark of 2.4 to one at the end of March. Another goal we gave you was to improve financial visibility, and we are committed to providing annual and longer-term three-year guidance. Starting with our first-quarter guidance on Slide 18. Organic revenues declines are expected to moderate, down 2% to down 4% in the first quarter year over year. This translates into reported revenues between $4.08 billion and $4.13 billion. Our sequential revenue is lower for two reasons: first, previously mentioned lumpiness of resale revenue that occurs in Q4; second, our portfolio-shaping efforts reduced revenue by about $100 million. EBIT margin 7.4% to 7.8% includes 20 basis points of margin headwinds due to the sale of our healthcare provider software business. Non-GAAP diluted earnings per share in the range of $0.72 to $0.76. Moving on to our FY '22 guidance on Slide 19. Organic revenue growth of minus 1% to minus 2%. On a year-over-year basis, divestitures will account for $1.2 billion of the revenue decline. Our previously disclosed terminations and runoffs wind down in the first half of FY '22. We expect to see further improvement in the quarterly year-over-year organic revenue growth rates as we move through the year. This translates into revenue of $16.6 billion to $16.8 billion; EBIT margin, 8.2% to 8.7%; non-GAAP diluted earnings per share of $3.45 to $3.65, an increase of 42% to 50% year over year; free cash flow of $500 million. Now, moving on to our longer-term expectations on Slide 20. Organic revenue growth of 1% to 3%; adjusted EBIT margin of approximately 10% to 11%; non-GAAP diluted earnings per share of $5 to $5.25; free cash flow of approximately $1.5 billion. I should note our guidance does not anticipate additional portfolio shaping. Let me share three key takeaways on the progress we are making at DXC. First, as I reflect on FY '21, we delivered on our commitments, and here's how. With regard to our people, we moved from a workforce that was not engaged to one that is now engaged and inspired. Concerning our customers, we went from challenged accounts to building a level of customer intimacy where we are delivering, building strong partnerships, and being proactive with our customers. Customers are clearly seeing the new DXC. We changed the direction of our revenues and margin from declining to improving. In the market, we went from losing to winning, and we repaid over $6 billion in debt, taking our balance sheet from highly leveraged to strengthened. The next key takeaway is that FY '22 will be the year we build the foundation for growth. What that means is we will retain and continue to attract talent. We will build off our customer intimacy to deliver revenue stability and continue to win in the market all while we expand margins and deliver increased free cash flow. Finally, we expect to deliver positive organic revenue growth longer term. In closing, we are confident that the momentum we created in FY '21 will continue in FY '22. We hope that you will join us on June 17 for our Analyst Day as we're excited to showcase the strength and depth of our new leadership team and discuss our business in more detail.

compname reports q4 non-gaap earnings per share $0.74. sees fy 2024 adjusted earnings per share $5.00 to $5.25. q4 non-gaap earnings per share $0.74. sees q1 revenues $4.08 billion to $4.13 billion. sees q1 adjusted earnings per share $0.72 - $0.76. sees fy 2022 revenues $16.6 billion to $16.8 billion. sees fy 2022 adjusted earnings per share $3.45 - $3.65.

We appreciate you joining us. Joining me on the call is Byron Boston, Chief Executive Officer, and Chief Investment Officer and co-Chief Investment Officer; Smriti Popenoe, President and co-Chief Investment Officer, and Steve Benedetti, Executive Vice President, Chief Financial Officer, and Chief Operating Officer. 2021 continues to be a good environment for Dynex to deploy capital. Our financing costs remain pegged at very low levels and has resulted in steady earnings in a wider net interest spread as shown on Slide 25. We began this year believing we will get multiple opportunities to invest at attractive returns that the yield curve steepens or spreads widen. As such we have raised capital, maintain lower leverage, and methodically deployed capital at attractive return levels. As of mid-year, we are sticking with our strategy. Nonetheless, we're in an evolving health and economic environment, and the capital markets have reflected this uncertainty. As such, our book value has fluctuated this year from being up 5.2% in the first quarter, to declining 6.6% in the second quarter. Our year-to-date performance remained solid as our total economic return deposited 2.4%. Our tactical deployment of capital at attractive levels and our ability to out-earn our dividend has helped cushion our book value during this period of volatility. Let me remind you that we managed Dynex Capital for the long term. Our goal is to generate a cash return between 8% to 10%. While maintaining book value at steady levels over time. We will continue to create value for our shareholders by using a very disciplined top-down research-driven approach to develop strategies for multiple future scenarios in the short, medium, and long term. This has been especially important since the global market environment changed in January 2020. Most importantly, since this new era in history began last year, we have outperformed our industry and other income-oriented vehicles with a 28% total shareholder return as noted on Slide 5. I will emphasize the fact that we have an experienced team and experience will be a major factor for creating value through these transitional times in the global capital markets and economies. We will continue to emphasize liquidity with a balance sheet of high-quality assets. For the second quarter, we reported a comprehensive loss of $0.98 per common share, and a total economic return of minus $0.93 per common share or a minus 4.6%. We also reported core net operating income of $0.51 per common share, an increase of 10% over last quarter's $0.46 per common share, and well exceeding our $0.39 quarterly common stock dividend. Book value per share declined $1.32 or minus 6.6%, principally from economic losses on the investment portfolio of $48 million or $1.49 per common share, driven in part by mortgage spread widening and in part due to the lower rate environment during the quarter versus our hedge position. In terms of specific performance, TBAs and dollar roll specialness continue to be important contributors to results for the quarter, adding an incremental $0.06 per common share to core net operating income, which was partially offset by lower earnings from a smaller pass-through portfolio. In addition, G&A expenses were lower by $0.02 on a per-share basis and preferred stock dividend on core earnings per share was lower by $0.04 per share. Both reflecting the benefit of our capital management activities year-to-date. As Smriti will discuss later, with the ongoing favorable conditions in the funding and TBA dollar roll markets, we expect continued sequential core net operating income growth in the third quarter. Average interest-earning assets, including TBAs increased to $4.8 billion versus $4.3 billion, as we deploy the capital raised over the first half of the year. At quarter end, interest-earning assets, including TBAs, were $5.4 billion versus $5.2 billion at the end of last quarter and leverage including TBA dollar rolls, was 6.7 times versus 6.9 times last quarter. The lower overall leverage quarter-to-quarter primarily is due to the capital growth of the company and portfolio adjustments during the second quarter. Adjusted net interest income was higher on an absolute dollar basis, given the growth in the investment portfolio during the quarter, inclusive of TBA securities, but was lower on a per-share basis, however, reflecting the new shares issued in the first half of the year and the conservative leverage posture of the company. The increase in adjusted net interest income on an absolute dollar basis was due to the continued decline in repo borrowing cost and the increase in TBA dollar roll positions during the quarter, as previously noted. Adjusted net interest spread increased eight basis points this quarter to 195 basis points, driven largely by the company's TBA position and a modest decline in repo borrowing cost. The company's implied funding cost for its TBA dollar roll transactions was approximately 49 basis points lower than its repurchase agreement financing rate during the second quarter of 2021, an increase of 10 basis points in specialness relative to the prior quarter. As a result, TBA dollar roll transactions contributed in eight basis point increase to adjusted net interest spread during the quarter. Regarding Agency RMBS prepayment speeds, they were essentially unchanged at 19% CPR for the quarter versus 18.6% EPR for quarter 1. Overall, total shareholders' capital grew approximately $25 million during the quarter. This includes $68 million in new common equity raised through at the market offerings in the quarter. Market conditions were favorable to issue equity and continue to unlock the operating leverage of the company. Our capital issuances added $0.07 per common share to book value for the quarter. I want to start by building on Byron's comments by describing the principles that have been consistent throughout our portfolio management history here at Dynex. The first is a sound macroeconomic process and framework to assess the environment. The second is a flexible mindset to be able to pivot when the environment shifts. And finally, the right amount of patience in decision-making. The environment we have been in since January 2020 has required all three of these principles in real-time, especially now, as the markets are still seeking a direction and level. The most important principle for what we are in right now is patients. While we continuously assess the environment because the passage of time, is what is now needed for the data and the market direction to become clear. Even so, this remains a very favorable environment in which to generate long-term returns. As shown on Slide 25, our repo financing cost declined seven basis points over the quarter. Financing in the TBA market has continued to be strong, contributing 1% to 3% excess core ROE versus pools. Since year-end, as Byron mentioned, we have used bouts of volatility to invest capital, and we did that late in the second quarter, and have done so into the third. As spreads tightened in late April, we reduced our leverage by a full turn. And as returns are now in the 10% to 12% core ROE range, we have reinvested a portion of that capital, growing the balance sheet from a low point of $4.5 billion in the second quarter to $5.6 billion thus far in the third quarter. We allocated out of TBAs into specified pools as pay-ups declined substantially in May, and we added outright marginal investments in Fannie 2.5 specified pools as well as Fannie two TBAs with wider spreads in June and July. Our total economic return year-to-date is 2.4%, with book value on June 30 at $18.75, relatively unchanged versus year-end. In the third quarter thus far, MBS spreads are wider and as the yield curve has flattened dramatically in July, book value has fluctuated with yields in a range of flat to down about 5% versus quarter end. To put the book value move in context, about half the book value decline in the second quarter was due to MBS spread widening, and the remaining half is attributable to our hedge position that is concentrated in the back end of the yield curve. Post quarter end, MBS spreads are modestly wider, but the book value decline is directly attributable to our hedge exposure to the long end of the yield curve. We have chosen to maintain a position with a portfolio structure hedged with the long end of the yield curve because we believe that the risk of a whipsaw in rates is substantial. The catalyst for that whipsaw could be a turn in sentiment, realize fundamental data, or an easing of the technical nature of the recent move. Any of which can happen rapidly. We expect the book value to recapture much of the decline in these resteepening scenarios. I will cover more on our thinking shortly when discussing the macroeconomic environment. Leverage at the end of the quarter stood at 6.7 times, and we have the potential for two more turns from here. At today's higher level of earning assets, which were added at wider spreads, we expect core earnings to continue to exceed the current level of the dividend. We are on track for an 8% dividend yield on beginning book value for the year, with the excess core earnings providing a cushion to capital. Shifting now to recent market moves, our macro opinion, and outlook. The global economy is still evolving through the health crisis and corresponding economic situation from the pandemic, and the recovery is proceeding in fits and starts. It will take time for the economic picture to become clearer. In the absence of real data, technical factors like short-covering, overseas demand, and central bank activity have dominated recent market action. This is leading many participants to arrive at conclusions on long-term fundamentals like inflation and growth, for which the data has been difficult to parse out and even to predict, but we expect that this will become clearer in the coming months. In such an environment, our discipline, process, and framework play a key role in the management of our position. We expect that front-end rates will remain low, close to 0 through 2022, providing a solid base from which to generate returns. The long end of the yield curve, 10-year, 30-year will move based on the evolving economic situation. The Fed's decision on tapering is a key event in our focus as is the fall reopening of schools as well as the debt ceiling. In the short term, we expect choppy action in the markets to continue, and our current thinking is that 10-year yields will trade in a range between 1% and 1.5%. In the medium term, there is room for 10-year yields to move to a higher range, 1.5% to 1.75%. And this is as we transition globally to a more fully reopened economy, a higher percentage of vaccinated populations, more effective and available medication to treat Covid, stable or rising inflation, a rising supply of global sovereign bonds, both from tapering as well as deficit spending and fiscal stimulus. Once again, this picture will evolve and become clearer over the summer and into the fall. We are very respectful of a near-term scenario, resulting in yields remaining at the lower end of the 1% to 1.5% in the 10-year rate, as I mentioned earlier. Agency RMBS are, of course, very much impacted by these factors. In the near term, the fundamentals for agency RMBS point to greater levels of refinancing. Mortgage rates are below 3%, originators are fully staffed and government policies favor broader access to refinancing and modifications. This leaves higher coupons vulnerable to increasing prepayments and lower coupons susceptible to supply. In the near term, the supply is balanced by powerful technicals. Lower coupon MBS are still benefiting from strong demand from the Fed and banks. Banks are investing in MBS because of the absence of loan demand. And as MBS have widened, money managers are finding value there relative to corporates. Tapering is also a key focus of the MBS market. The recent spread widening, we believe, reflects some of this risk and spreads could widen further at the taper becomes more of a reality. For Dynex, the tighter spreads in April represented a chance to reduce leverage and wider MBS spreads from here will continue to represent an opportunity to add assets at attractive long-term returns. This is where the patience comes in. And as we've shown, we have managed our leverage and our capital actively. Ultimately though, we believe the Fed's balance sheet will create a powerful stock effect to limit spread widening. Demand from money managers as mortgages become a high-quality alternative to corporate bonds and lower net supply from potentially higher rates will also provide a buffer against much wider spreads. By holding a flexible, liquid, high credit quality position even as spreads widen, we can manage both sides of our balance sheet to position for solid long-term return generation. As the markets are still seeking a direction and level, the most important principle for what we are in right now is patients. While we continuously assess the environment as it will take time for the economic picture to become clearer. Our macroeconomic view supports our current positioning, and we remain flexible and open to adjusting it as we see the facts change. While booked value is lower due to spread widening and the curve positioning of our hedges, it is cushioned with our ability to continue to outearn the dividend at current levels of the balance sheet. The investment environment is favorable. Financing costs are fixed at low levels, providing us a strong foundation for returns and the TBA market continues to offer attractive returns. We're entering a period where we anticipate having more opportunities to invest capital at wider spreads. We're well-positioned for this. We have relatively low starting leverage, over $400 million in liquidity and dry powder of two turns of leverage to drive future earnings power and total economic return generation well in excess of our cost of capital. I want to leave you with three words: opportunities, patience and trust. First, we continue to be in an evolving global environment that will give us opportunities to invest our capital at attractive long-term returns. Our portfolio continues to be structured for a steeper curve and wider spreads. We continue to operate with lower leverage and higher levels of liquidity, which will allow us to take advantage of these opportunities as they develop. Second, our decades of experience in the business leads us to be very patient as the world and the capital markets continues to adjust to this evolving global environment. Since this new era in history began in January of 2020, we have maintained patience in managing our balance sheet, effectively increasing our capital base and methodically investing money into wider mortgage spreads and higher yields. We will continue with this mindset. At Dynex Capital, we offer you two products to gain access to above-average dividend yield. Our common stock offers a great monthly dividend yield with a book value that will fluctuate as the market environment continues to evolve. On the other hand, our preferred stock offers less price fluctuations with a lower dividend yield than the common. Finally, we want you to continue to trust us with your money. Dynex Capital, our number 1 purpose is to make lives better by being good stewards of individual savings. Over the past 14 years, since I joined Dynex, we have earned your trust as we have managed our business with an ethical focus, remained patient and looking for the right opportunities to invest your savings at attractive long-term returns. We are consistent, and we will remain patient as we let the global environment evolve. And we will continue to make wise decisions on behalf of our shareholders. Please take a note, look at our long-term chart on Slide 13. I love this chart. Dynex continues to offer a great alternative to many larger financial institutions.

compname reports q2 loss per share of $0.98. q2 non-gaap core operating earnings per share $0.51. q2 loss per share $0.98.

Going to Slide 2. Today, we have on the call, Drew DeFerrari, our Chief Financial Officer; and Ryan Urness, our General Counsel. Now moving to Slide 4, and a review of our first quarter results. As we review our results, please note that in our comments today and in the accompanying slides, we reference certain non-GAAP measures. We refer you to the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures. Now, for the quarter. Revenue was $727.5 million, a decrease of 10.7%. Organic revenue excluding $3.9 million of storm restoration services in the quarter declined 11.1%. As we deployed 1 gigabit wireline networks, wireless/wireline converged networks and wireless networks this quarter reflected an increase in demand from two of our top five customers. Gross margins were 14.8% of revenue, reflecting the continued impacts of the complexity of a large customer program. Revenue declined year-over-year with other large customers and the effects of winter weather in the first half of the quarter. General and administrative expenses were 9.2% and all of these factors produced adjusted EBITDA of $44.1 million or 6.1% of revenue. And adjusted loss per share of $0.04 compared to earnings per share of $0.36 in the year ago quarter. Liquidity was strong at $477.4 million and operating cash flow was $41.5 million. Finally, during the quarter we issued $500 million in 4.5% senior notes due in April 2029, and resized and extended our credit facility through April of 2026. These two transactions leave the company solidly financed as we look forward to better performance. Now going to Slide 5. Today, major industry participants are constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision 1 gigabit network speeds to individual consumers and businesses, either directly or wirelessly using 5G technologies. Industry participants have stated their belief that a single high capacity fiber network can most cost-effectively deliver services to both consumers and businesses, enabling multiple revenue streams from a single investment. This view is increasing the appetite for fiber deployments and we believe that the industry effort to deploy high capacity fiber networks continues to meaningfully broaden our set of opportunities. Increasing access to high capacity telecommunications continues to be crucial to society, especially in rural America. The wide and active participation in the completed FCC RDOF auction augurs well for dramatically increased rural network investment, supported by private capital that in the case of at least some of the participants is expected to be significantly more than the FCC subsidy. We are providing program management planning, engineering and design, aerial and underground and wireless construction and fulfillment services for 1 gigabit deployments. These services are being provided across the country in numerous geographic areas to multiple customers, including customers who have initiated broad fiber deployments, as well as customers who have resumed broad deployments. These deployments include networks consisting entirely of wired network elements as well as converged wireless/wireline multi-use networks. Fiber network deployment opportunities are increasing in rural America, as new industry participants respond to emerging societal incentives. We continue to provide integrated planning, engineering and design, procurement and construction and maintenance services to several industry participants. Macroeconomic effects and potential supply constraints may influence the near-term execution of some customer plans. Broad increases in demand for fiber optic cable and related equipment may impact delivery lead times in the short-to-intermediate term. In addition, the market for labor is tightening in some regions of the country, particularly for unskilled, semi-skilled new hires. It remains to be seen how geographically broad these conditions will be and how long they will persist. Despite these factors, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers. Moving to Slide 6. During the quarter, organic revenue decreased 11.1%. Our top five customers combined produced 68.2% of revenue, decreasing 23% organically. Demand increased for two of our top five customers. All other customers increased 31.9% organically. AT&T was our largest customer at 21.4% of total revenue or $155.6 million. AT&T grew 0.9% organically. This was our first quarterly organic growth with AT&T since our July of 2019 quarter. Revenue from Comcast was $131.1 million or 18% of revenue. Comcast was Dycom's second largest customer and grew organically 10.7%. Verizon was our third largest customer at 12.6% of revenue or $91.5 million. Lumen was our fourth largest customer at 485.8 million or 11.8% of revenue. And finally, revenue from Windstream was $32.1 million or 4.4% of revenue. Windstream was our fifth largest customer. This is the ninth consecutive quarter where all of our other customers in aggregate, excluding the top five customers, have grown organically. In fact, the 31.9% organic growth rate with these customers is the highest growth rate in at least nine years. Of note, fiber construction revenue from electric utilities was $47 million in the quarter or 6.5% of total revenue. This activity increased organically 92.1% year-over-year. We have extended our geographic reach and expanded our program management network planning services. In fact, over the last several years, we have meaningfully increased the long-term value of our maintenance and operations business, a trend which we believe will parallel our deployment of 1 gigabit wireline direct and wireless/wireline converged networks, as those deployments dramatically increase the amount of outside plant network that must be extended and maintained. Despite this overall industry trend, we were recently notified by customer representing less than 5% of our revenue that it had decided to in-source a portion of the construction and maintenance services that are currently provided for them by us as well as a number of other suppliers. They expect to implement this decision during the fourth calendar quarter of 2021. After this initiative is fully implemented, we expect to continue working for this customer in several markets under new contracts and perform other work on an ongoing basis. Although it currently appears at lower levels of activity. Now, going to Slide 7. Backlog at the end of the first quarter was $6.528 billion versus $6.81 billion at the end of the January 2021 quarter, decreasing approximately $282 million. Of this backlog, approximately $2.746 billion is expected to be completed in the next 12 months. Backlog activity during the first quarter reflects solid performance as we booked new work and renewed existing work. We continue to anticipate substantial future opportunities across a broad array of our customers. From various electric utilities, fiber construction agreements in Arizona, Oklahoma, Missouri, Arkansas, Mississippi, Indiana, Kentucky, Tennessee, Georgia, and North Carolina. For Ziply fiber, construction and maintenance agreements in Washington, Oregon, and Idaho. For Charter, a fulfillment agreement covering Washington, Nevada, Montana, Wisconsin, Massachusetts, Connecticut, New York, North Carolina, South Carolina, Alabama, and Georgia. From Frontier, locating services agreement in California. And for Consolidated Communications, a construction services agreement in New Hampshire. headcount increased during the quarter to 14,331. Going to Slide 8. Contract revenues for Q1 were $727.5 million and organic revenue declined 11.1%. Adjusted EBITDA was $44.1 million or 6.1% of revenue. Gross margins were 14.8% in Q1 and decreased 169 basis points from Q1 '21. This decrease resulted from the impact of a large customer program as well as margin pressure from revenue declines for other large customers compared to Q1 '21. Margins were also impacted by the adverse winter weather conditions experienced in many regions of the country during the first half of the quarter. G&A expense increased 112 basis points, reflecting higher stock-based compensation and administrative and other costs. Non-GAAP adjusted net loss was $0.04 per share in Q1 '22, compared to net income of $0.36 per share in Q1 '21. The variance resulted from the after-tax decline in adjusted EBITDA, offset by lower depreciation, lower interest expense, and higher gains on asset sales. Now going to Slide 9. Our financial position remains strong. Over the past four quarters, we have reduced notional net debt by $185.2 million. During Q1, we issued $500 million of 4.5% senior unsecured eight-year notes due April 2029. We repaid $105 million of revolver borrowings and $71.9 million of term loan borrowings, and we resized and extended our senior credit facility through April 2026. Cash and equivalents were $330.6 million at the end of Q1. $58.3 million is expected to be used to repay our convertible notes due September 2021. We ended the quarter with $500 million of senior unsecured notes, $350 million of term loan, no revolver borrowings, and $58.3 million principal amount of convertible notes. Our capital allocation prioritizes organic growth followed by opportunistic share repurchases and M&A within the context of our historical range of net leverage. As of Q1, our liquidity was strong at $477.4 million, and we continue to maintain a strong balance sheet. Going to Slide 10. Operating cash flows have remained strong and totaled $41.5 million in the quarter. The combined DSOs of accounts receivable and net contract assets were at 128 days, an improvement of eight days sequentially from Q4 '21. Capital expenditures were $28.6 million during Q1 net of disposal proceeds, and gross capex was $31.6 million. Capital expenditures net of disposals for fiscal 2022 are expected to range from $105 to million to $125 million, a reduction of $40 million when the midpoint as compared to the midpoint of the prior outlook. This deferral reflect short-to-medium term manufacturer supply constraints. Going to Slide 11. For Q2 2022, the company expects contract revenues to range from in-line to modestly lower as compared to Q2 2021, and expects non-GAAP adjusted EBITDA as a percentage of contract revenues to decrease compared to Q2 2021. We expect the year-over-year gross margin pressure of approximately 200 basis points from the impact of a large customer program and from revenue declines for other large customers that are expected to have lower spending in the first half of this calendar year. We expect approximately $8.7 million of non-GAAP adjusted interest expense for the components listed as well as $0.7 million for the amortization of the debt discount on convertible notes for total interest expense of approximately $9.4 million during Q2. We expect the non-GAAP effective income tax rate of approximately 27% and diluted shares of $31.3 million. Moving to Slide 12. Within a recovering economy, we experienced solid activity and capitalized on our significant strengths. First and foremost, we maintained significant customer presence throughout our markets. We are encouraged with the emerging breadth in our business. Our extensive market presence has allowed us to be at the forefront of evolving industry opportunities. Telephone companies are deploying fiber to the home to enable 1 gigabit high speed connections, increasingly rural electric utilities are doing the same. Cable operators are deploying fiber to small and medium businesses and enterprises. A portion of these deployments are in anticipation of the customer sales process. Deployments to expand capacity as well as new build opportunities are under way. Dramatically increased speeds to consumers are being provisioned and consumer data usage is growing, particularly upstream. Fiber deployments enabling new wireless technologies are under way in many regions of the country. Customers are consolidating supply chains, creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business. As our nation and industry recover from the COVID-19 pandemic, we remain encouraged that a growing number of our customers are committed to multi-year capital spending initiatives. We are confident in our strategies, the prospects for our company, the capabilities of our dedicated employees and the experience of our management team.

q1 adjusted non-gaap loss per share $0.04. for quarter ending july 31, 2021, expects contract revenues to range from in-line to modestly lower versus last year. for quarter ending july 31, sees non-gaap adjusted ebitda as a percentage of contract revenues to decrease versus last year.

Going to Slide two. Today we have on the call, Drew DeFerrari, our Chief Financial Officer and Ryan Urness, our General Counsel. Now moving to Slide four, and a review of our third quarter results. As we review our results, please note that in our comments today and in the accompanying slides we reference certain non-GAAP measures, we refer you to the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures. Now for the quarter, revenue was $854 million, an organic increase of 6.6%. As we deployed 1-gigabit wireline networks wireless/wireline converged networks and wireless networks, this quarter reflected an increase in demand from two of our top five customers. Gross margins were 17.34% of revenue, reflecting the continued impacts of the complexity of a large customer program. Revenue declined year-over-year with other large customers and fuel costs. General and administrative expenses were 7.8% of revenue and all of these factors produced adjusted EBITDA of $83.1 million or 9.7% of revenue and adjusted earnings per share of $0.95, compared to earnings per share of $1.6 in the year ago quarter, included in adjusted earnings per share our incremental tax benefits of $0.10 per share for credits related to tax filings for prior periods. Liquidity was solid at $314.7 million and operating cash flow was strong at $104.3 million, reflecting a sequential DSO decline of 12 days. During the quarter we repaid our remaining 2021 convertible notes in full and subsequent to the end of the third quarter, we received three-year awards for construction services in a number of states valued in excess of $500 million in total. Now going to Slide five. Today, major industry participants are constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision 1-gigabit network speeds to individual consumers and businesses, either directly or wirelessly using 5G technologies. Industry participants have stated their belief that a single high capacity fiber network can most cost-effectively deliver services to vote consumers and businesses, enabling multiple revenue streams from a single investment. This view is increasing the appetite for fiber deployments and we believe that the industry effort to deploy high capacity fiber networks continues to meaningfully broaden our industry set of opportunities. Increasing access to high capacity telecommunications continues to be crucial to society, especially in rural America. The recently enacted infrastructure investment and Jobs Act includes over $40 billion for the construction of rural communications networks in unserved and underserved areas across the country. This represents an unprecedented level of support. In addition, an increasing number of states are commencing initiatives that will provide funding for telecommunications networks even prior to the initiation of funding under the Infrastructure Act. We are providing program management, planning, engineering and design, aerial underground, and wireless construction and fulfillment services for 1-gigabit deployments. These services are being provided across the country in numerous geographic areas to multiple customers. These deployments include networks consisting entirely of wired network elements, as well as converged wireless/wireline multi-use networks. Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal initiatives. We continue to provide integrated planning, engineering and design, procurement and construction and maintenance services to several industry participants. Macroeconomic effects and potential supply constraints may influence the near-term execution of some customer plans. Broad increases in demand for fiber optic cable and related equipment may impact delivery lead times in the short to intermediate term. In addition, the market for labor continues to tighten and regions around the country. It remains to be seen how extensive these conditions will be and how long they may persist. Furthermore, the automotive supply chain is currently challenge, particularly for the large truck chassis required for specialty equipment. As we contend with these factors, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers. Moving to Slide six. During the quarter, organic revenue increased 6.6%, our top five customers combined produced 65.4% of revenue, decreasing 3.5% organically, demand increased for two of our top five customers all other customers increased 32.5% organically. AT&T was our largest customer at 23.4% of total revenue or $199.5 million. AT&T grew 68% organically this was our third consecutive quarter of organic growth with AT&T. Revenue from Comcast was $121 million or 14.2% of revenue, Comcast was Dycom's second largest customer. Lumen was our third largest customer at 12.1% of revenue or $103 million. Verizon was our fourth largest customer at $93.4 million or 10.9% of revenue. And finally revenue from Frontier was $41.3 million or 4.8% of revenue. Frontier grew 118.6% organically. This is the 11th consecutive quarter where all of our other customers in aggregate, excluding the top five customers have grown organically. Of note, fiber construction revenue from electric utilities was $53.7 million in the quarter and increased organically 75.3% year-over-year. We have extended our geographic reach and expanded our program management network planning services. In fact, over the last several years, we believe we have meaningfully increased the long-term value of our maintenance and operations business a trend, which we believe will parallel our deployment of 1-gigabit wireline direct and wireless/wireline converged networks. As those deployments dramatically increase the amount of outside plant network that must be extended and maintained. Now going to Slide seven. Backlog at the end of the third quarter was $5.896 billion versus $5.895 billion at the end of the July '21 quarter, essentially flat. Of this backlog approximately $2.938 billion is expected to be completed in the next 12 months. We continue to anticipate substantial future opportunities across a broad array of our customers. During the quarter, we received from Frontier fiber construction agreements in California, Texas, Indiana, New York, Connecticut and Florida, for Consolidated Communications, a construction and maintenance agreement for New Hampshire. From Windstream construction agreements for Ohio, Pennsylvania and New York, Kentucky and Alabama. From Lumen construction and maintenance agreements in Oregon, Minnesota and Iowa and various rural fiber deployments in Arizona, Colorado, Missouri, Indiana, Arkansas, Mississippi, Tennessee and Georgia. Headcount increased during the quarter to 14,905. Going to Slide eight. Contract revenues were $854 million and organic revenue increased 6.6% for the quarter. Storm work performed in Q3 of last year was $8.9 million, compared to none in Q3 '22. Adjusted EBITDA was $83.1 million or 9.7% of revenue, gross margins of 17.3%, decreased 140 basis points from the year ago period. As expected this decrease reflected higher fuel costs of approximately 50 basis points, as well as the impact from revenue declines from several large customers. G&A expense was at 7.8% of revenue and came in approximately 40 basis points better than our expectations from improved operating leverage. Non-GAAP adjusted net income was $0.95 per share, compared to $1.6 per share in the year ago period. Q3 '22, included approximately $3 million or $0.10 per share of incremental tax benefits for credits related to tax filings for prior periods. The total variance in net income resulted from the after-tax decline in adjusted EBITDA, higher interest expense and lower gains on asset sales, offset by lower stock-based compensation, depreciation and amortization and income taxes. Now going to Slide nine. Our financial position and balance sheet remain strong. In September, we repaid the final balance of $58.3 million of the convertible notes at maturity. We ended the quarter with $500 million of senior notes, $350 million of term loan and no revolver borrowings. Cash and equivalents were $263.7 million and liquidity was solid at $314.7 million. Our capital allocation prioritizes organic growth followed by opportunistic share repurchases and M&A within the context of our historical range of net leverage. Going to Slide 10. Operating cash flows were strong at $104.3 million in the quarter, capital expenditures were $44.1 million net of disposal proceeds and gross capex was $45.1 million. For the full-year of fiscal 2022, capital expenditures, net of disposals are now expected to range from $135 million to $150 million, an increase of $10 million to $25 million, compared to the high end of approximately $125 million in the prior outlook provided in Q2 '22. The combined DSOs of accounts receivable and net contract assets were at 113 days, an improvement of 12 days sequentially from Q2 '22, as we made substantial progress on a large customer program. Now going to Slide 11. Each year our January quarterly results are impacted by seasonality, including inclement weather, fewer available work days due to the holidays, reduced daylight work hours and the restart of calendar payroll taxes. These and other factors may have a pronounced impact on our actual results for the January quarter, compared to our expectations. Q4 of last fiscal year included 14-weeks of operations, due to the company's 52, 53-week fiscal year and also included $5.7 million of revenues from storm restoration services. Non-GAAP contract revenues adjusted for these amounts in Q4 '21 was $691.8 million. For Q4 of fiscal '22, there will be 13-weeks of operations and the Company expects contract revenues to increase modestly, as compared to the non-GAAP organic contract revenues of $691.8 million in Q4 '21. The Company expects non-GAAP adjusted EBITDA to range from in-line to modestly higher, as a percentage of contract revenues, as compared to Q4 '21. Total interest expense is expected at approximately $8.8 million during Q4, and we expect a non-GAAP effective income tax rate of approximately 27%. Moving to Slide 12. Within a recovering economy, we experienced solid activity and capitalized on our significant strengths. First and foremost, we maintained significant customer presence throughout our markets. We are encouraged by the breadth in our business. Our extensive market presence has allowed us to be at the forefront of the evolving industry opportunities. Telephone companies are deploying fiber-to-the-home to enable 1-gigabit high speed connections, increasingly rural electric utilities are doing the same, dramatically increased speeds to consumers are being provisioned and consumer data usage is growing particularly upstream. Wireless construction activity in support of newly available spectrum bands is beginning and expected to increase next year. Federal and state support for rural deployments of communications networks is dramatically increasing in scale and duration. Cable operators are deploying fiber to small and medium businesses and enterprises, a portion of these deployments are in anticipation of the customer sales process. Deployments to expand capacity, as well as new build opportunities are underway. Customers are consolidating supply chains, creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business. As our nation and industry continue to contend with the COVID-19 pandemic, we remain encouraged that a growing number of our customers are committed to multi-year capital spending initiatives. We are confident in our strategies, the prospects for our company, the capabilities of our dedicated employees and the experience of our management team.

qtrly adjusted earnings per share $0.95. expects contract revenues for quarter ending in jan to increase modestly from non-gaap organic contract revenues of $691.8 million.

Going to Slide two. Today we have on the call, Drew DeFerrari, our Chief Financial Officer and Ryan Urness, our General Counsel. Now moving to Slide four, and a review of our fourth quarter results. As we review our results, please note that in our comments today and in the accompanying slides, we reference a certain non-GAAP measures, specifically in accordance with our 52/53 week calendar. This quarter included a 14th week. All references to organic revenue and organic growth, exclude the effect of this additional week. We refer you to the quarterly report section of our website for a reconciliation of these non-GAAP measures to their corresponding GAAP measures. We are living in truly unprecedented and trying times for our country. I could not be prouder of our employees as they continue to serve our customers with real fortitude in difficult times. Now, for the quarter. Revenue was $750.7 million, an increase of 1.8%. Organic revenue excluding $5.7 million of storm restoration services in the quarter declined 6.2%. As we deployed 1 gigabit wireline networks, wireless/wireline converged networks and wireless networks, this quarter reflected an increase in demand from one of our top five customers. Adjusted gross margins were 14.3% of revenue, reflecting the continued impacts of the complexity of a large customer program. Adjusted general and administrative expenses were 8.5%, and all of these factors produced adjusted EBITDA of $45.7 million or 6.1% of revenue, an adjusted diluted loss per share of $0.07, compared to a loss of $0.23 in the year ago quarter. Liquidity was strong as cash and availability under our credit facility was $570.5 million. Finally, during the quarter, we repurchased 1.32 million shares of our common stock for $100 million, representing just over 4.15% of common stock outstanding. Even after the substantial repurchase, notional net debt only increased by $14.6 million during the quarter. In sum, over the last four quarters, we have reduced notional net debt by over $275 million, increased availability under our credit facility by a similar amount and meaningfully reduced shares outstanding. As our most recent share repurchase authorization has been exhausted, our Board has newly authorized $150 million in share repurchases. Now going to Slide five. Today, major industry participants are constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision 1 gigabit network speeds to individual consumers and businesses, either directly or wirelessly using 5G technologies. Industry participants have stated their belief that a single, high capacity fiber network can most cost-effectively deliver services to both consumers and businesses, enabling multiple revenue streams from a single investment. This view appears to be increasingly appetite for fiber deployments and we believe that the industry effort to deploy high capacity fiber networks continues to meaningfully broaden our set of opportunities. Access to high capacity telecommunications has become increasingly crucial to society in the time of the COVID-19 pandemic, especially in rural America. The wide and active participation in the recently completed FCC RDOF auction augurs well for dramatically increased rural network investment supported by private capital that in case -- that in the case of at least some of the participants is expected to be significantly more than the FCC subsidy. We are providing program management, planning, engineering and design, aerial, underground and wireless construction, and fulfillment services for 1 gigabit deployments. These services are being deployed -- being provided across the country in numerous geographical areas to multiple customers, including customers who have initiated broad fiber deployments, as well as customers who will shortly resume broad deployments and with whom order flow has recently increased markedly. These deployments include networks consisting entirely of wired network elements, as well as converged wireless/wireline multiuse networks. Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal incentives. We continue to provide integrated planning, engineering and design, procurement and construction and maintenance services to several industry participants. Near-term, macroeconomic effects and uncertainty may influence the execution of some customer plans. Customers continue to be focused on the possible macroeconomic effects of the pandemic on their business with particular focus on SMB dislocations and overall consumer confidence and creditworthiness. We see some uncertainty in the overall municipal environment as authorities continue to manage the general effects of the pandemic on permitting and inspection processes. Overall, we remain confident that our scale and financial strength position us well to deliver valuable service to our customers. Moving to Slide six. During the quarter, we experienced increased demand from one of our top five customers, organic revenue decreased 6.2%. Our top five customers combined produced 69.4% of revenue, decreasing 15.5% organically, while all other customers increased 25.3% organically. Comcast was our largest customer at 18.8% of total revenue or $140.9 million. Comcast grew 28.8% organically. Revenue from AT&T was $126.2 million or 16.8% of revenue. AT&T was Dycom's second largest customer. Verizon was our third largest customer at 15.7% of revenue or $117.8 million. Lumen was our fourth largest customer at $100.5 million or 13.4% of revenue. And finally revenue from Windstream was $36 million or 4.8% of revenue. Windstream was our fifth largest customer. This is the eighth consecutive quarter where all of our other customers in aggregate, excluding the top five customers have grown organically. In fact, our business with these customers has grown organically by double digits each of the last two quarters. Of note, fiber construction revenue from electrical utilities was $44.1 million in the quarter or 5.9% of total revenue. This activity increased organically 125% year-over-year. We have extended our geographic reach and expanded our program management and network planning services. In fact, over the last several years, we have meaningfully increased the long-term value of our maintenance and operations business, a trend which we believe will parallel our deployment of 1 gigabit wireline direct and wireless/wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be extended and maintained. Now going to Slide seven. Backlog at the end of the fourth quarter was $6.81 billion versus $5.412 billion at the end of the October 2020 quarter, increasing approximately $1.4 billion. Of this backlog, approximately $2.787 billion is expected to be completed in the next 12 months. The increase in backlog reflects renewals and new awards across a significant number of customers, offset in part by adjustments resulting from further communications regarding the reprioritization and rescoping of the components of a large program and our assessment of the expected pace of another component of the same program. From AT&T, we received extensions as well as awards, expanding our covered services across a significant majority of our business. First, construction expansions in Kentucky, Tennessee, North Carolina, South Carolina, Alabama, Georgia and Florida. Second, extensions for construction and maintenance services agreements in Kentucky, Tennessee, North Carolina, South Carolina, Alabama, Georgia and Florida. Third, an extension and scope expansion for wireless services in Kentucky, South Carolina, Alabama and Georgia. And finally, a five-year extension for locating services in California. For Comcast, Engineering agreements in Michigan, Massachusetts, Pennsylvania, Maryland, Delaware and Georgia. For Charter, Construction & Maintenance agreements in New York and Ohio. From Frontier, Construction agreements in Connecticut and Florida, and a Construction & Maintenance agreement in Florida. For Verizon, a construction agreement in Texas and renewal in Maryland and Virginia. And locating agreements for various customers in Maryland and New Jersey. Headcount increased during the quarter to 14,276. Going to Slide eight. Contract revenues for Q4 were $750.7 million and organic revenue declined 6.2%. Q4 '21 included an additional week of operations due to the company's 52/53 week fiscal year. Adjusted EBITDA was $45.7 million or 6.1% of revenue compared to $44.5 million or 6% of revenue in Q4 '20. Non-GAAP adjusted gross margins were at 14.3% in Q4 and increased 10 basis points from Q4 '20. Gross margins were within our range of expectations for the quarter, but approximately 80 basis points below the midpoint of our expectations. This variance reflected approximately 100 basis points of pressure from a large customer program offset in part by approximately 20 basis points of improved performance for several other customers. G&A expense increased 25 basis points, reflecting higher performance-based compensation offset in part by lower administrative costs, compared to Q4 '20. The Q4 '21 non-GAAP effective income tax rate was 30%, including incremental tax benefits related to recent tax filings. For planning purposes for fiscal 2022, we estimate the non-GAAP effective income tax rate will be approximately 27%. Non-GAAP adjusted net loss was $0.07 per share in Q4 '21, compared to a net loss of $0.23 per share in Q4 '20. The improvement resulted from the after-tax benefits of higher adjusted EBITDA, lower depreciation and lower interest expense. Now going to Slide nine, our balance sheet and financial position remains strong. During Q4, we repurchased 1,324,381 shares of our common stock at an average price per share of $75.51 in the open market for $100 million. Our Board of Directors has approved a new authorization of $150 million for share repurchases through August 2022. Over the past four quarters, we have reduced notional net debt by $276.4 million. We ended the quarter with $11.8 million of cash and equivalents, $105 million of revolver borrowings, $421.9 million of term loans and $58.3 million principal amount of convertible notes outstanding. As of Q4, our liquidity was strong at $570.5 million, cash flows from operations were robust at $102.4 million, bringing our year-to-date operating cash flow to $381.8 million from strong conversion of earnings to cash and prudent working capital management. The combined DSOs of accounts receivable and net contract assets was at 136 days, reflecting the impact of a large customer program. We expect improvement in the DSO metric in fiscal 2022 as the impact of this large customer program declines. Capital expenditures were $20.4 million during Q4 net of disposal proceeds, and gross capex was $21.9 million. Looking ahead to fiscal year 2022, we expect net capex to range from $150 million to $160 million. In summary, we continue to maintain a strong balance sheet and strong liquidity. Going to Slide 10. As we look ahead to the first quarter of fiscal 2022, we expect our results to be impacted by the adverse winter weather conditions experienced in many regions of the country. For the quarter ending May 1st, 2021, as compared sequentially to the quarter ended January 30th, 2021, the company expects contract revenues to range from in-line to modestly lower and non-GAAP adjusted EBITDA as a percentage of contract revenues to range from in-line to modestly higher. The company believes the impact of the COVID-19 pandemic on its operating results, cash flows and financial condition is uncertain, unpredictable and could affect its ability to achieve these expected financial results. Moving to Slide 11. Within a challenged economy, we experienced strong award activity and capitalized on our significant strengths. First and foremost, we maintained significant customer presence throughout our markets. We are encouraged with the emerging breadth in our business. Our extensive market presence has allowed us to be at the forefront of evolving industry opportunities. Fiber deployments enabling new wireless technologies are under way in many regions of the country. Telephone companies are deploying fiber-to-the-home to enable 1 gigabit high speed connections, increasingly, rural electric utilities are doing the same. Cable operators are deploying fiber to small and medium businesses and enterprises, a portion of these deployments are in anticipation of the customer sales process. Deployments to expand capacity, as well as new build opportunities are under way. Dramatically increased speeds to consumers are being provisioned and consumer data usage is growing, particularly upstream. Customers are consolidating supply chains creating opportunities for market share growth and increasing the long-term value of our maintenance and operations business. As our nation and industry continues to contend with the COVID-19 pandemic, we remain encouraged that our major customers are committed to multiyear capital spending initiatives. We are confident in our strategies, the prospects for our company, the capabilities of our dedicated employees and the experience of our management team as we navigate challenging times.

compname reports q4 adjusted non-gaap loss per share $0.07. q4 adjusted non-gaap loss per share $0.07.

Joining today's call are Bob Blue, chairman, president, and chief executive officer; Jim Chapman, executive vice president, chief financial officer, and treasurer; and other members of the executive management team. Before we provide our business update, I'd like to take a moment to remember our friend, Tom Farrell. Tom's passing on April 2 was heartbreaking to those of us who loved, admired, and respected him. We've heard from so many people, including many of you, about Tom's impact on the industry and the people who work in and around it. It's quite clear that while Tom's list of professional accomplishments was long, the list of people whose lives he touched was much, much longer. But much more often, we experienced his generosity, his loyalty, his dry sense of humor, and his focus on improving our company, our community, and our industry. We should all seek to emulate his example, a consistent commitment to ethics and integrity, to excellence, and perhaps most of all, to the safety of our colleagues. He cherished his friends and family, most of all. We can't think of a better example of a leader, and we will miss him dearly. As Bob said, we will very much miss Tom. Let me now turn to our business update. We are very focused on overall execution, including extending our track record of meeting or exceeding our quarterly guidance midpoints as we did again this quarter. I'll start my review on Slide 4, with a reminder of Dominion Energy's compelling total shareholder return proposition. We expect to grow our earnings per share by 6.5% per year through at least 2025, supported by our updated $32 billion five-year growth capital plan. Keep in mind that over 80% of that capital investment is emissions reduction enabling and that over 70% is rider eligible. We offer an attractive dividend yield of approximately 3.2%, reflecting a target payout ratio of 65% and an expected long-term dividend per share growth rate of 6%. This resulting approximately 10% total shareholder return proposition is combined with an attractive pure-play, state-regulated utility profile characterized by industry-leading ESG credentials and the largest regulated decarbonization investment opportunity in the country, as shown on the next slide. Our 15-year opportunity is estimated to be over $70 billion, with multiple programs that extend well beyond our five-year plan and skew meaningfully toward rider-style regulated cost of service recovery. We believe we offer the largest, the broadest in scope, the longest in duration, and the most visible regulated decarbonization opportunity among U.S. utilities. The successful execution of this plan will benefit our customers, communities, employees, and the environment. Turning now to earnings. Our first-quarter 2021 operating earnings, as shown on Slide 6, were $1.09 per share, which included a $0.01 hurt from worse than normal weather in our utility service territories. This represents our 21st consecutive quarter, so over five years now, of delivering weather-normal quarterly results that meet or exceed the midpoint of our quarterly guidance range. GAAP earnings for the quarter were $1.23 per share. The difference between GAAP and operating earnings for the three months ended March 31 was primarily attributable to a net benefit associated with nuclear decommissioning trusts and economic hedging activities, partially offset by other charges. Turning on to guidance on Slide 7. As usual, we're providing a quarterly guidance range, which is designed primarily to account for variations from normal weather. For the second quarter of 2021, we expect operating earnings to be between $0.70 and $0.80 per share. We are affirming our existing full-year and long-term operating earnings and dividend guidance, as well. No changes here from prior guidance. Turning to Slide 8 and briefly on financing. Since January, we've issued $1.3 billion of long-term debt, consistent with our 2021 financing plan guidance at a weighted average cost of 2.4%. For avoiding some doubt, there's no change to our prior common equity issuance guidance. Wrapping up my remarks, let me touch briefly on potential changes to the Federal Tax Code. Obviously, it's still early days with a lot of unknowns. But at a high level, we see an increase in the corporate tax rate as being close to neutral on operating earnings based on, as is the case for all regulated entities, the assumed pass-through for cost of service operations, an increase in parent level interest tax shield and the extension and expansion of clean or green tax credits, all of which will be offset by higher taxes on our contracted assets segment earnings. We also expect modest improvement in credit metrics. We're monitoring the contemplated minimum tax rules closely and we'd note the administration's support for renewable development suggests the ability to use renewable credits to offset any such minimum tax rule. More to come over time on that front. I'll begin with safety. As shown on Slide 9, through the first three months of 2021, we're tracking closely to the record-setting OSHA rate that we achieved in 2020. In addition, we're seeing record low levels of lost time and restricted duty cases, which measure more severe incidents. Of course, the only acceptable number of safety incidents is zero, and we will continue to work toward that critical goal. Let me provide a few updates around our execution across the strategy. We're pleased that the 2.6-gigawatt Coastal Virginia offshore wind project has been declared a covered project under Title 41 of the Fixing America's Surface Transportation Act program, also known as FAST 41. The federal permitting targets now published under that program are consistent with the project schedule that we shared on the fourth-quarter call in February. Key schedule milestones are shown side by side on Slide 10. We continue to be encouraged by the current administration's efforts to provide a pathway to timely processing of offshore wind projects. In the meantime, we're advancing the project as follows: we're processing competitive solicitations for equipment and services to achieve the best possible value for customers and in accordance with the prudency requirements of the VCEA. Interest in those RFPs has been robust. We're analyzing performance data from our test turbines, which have been operational for several months now and are, to date, generating at capacity factors that are higher than our initial expectations. Recall, we had assumed a lifetime capacity factor of around 41% for the full-scale deployment. Further evaluation of turbine design and wind resource, in addition to the data we're gathering in real time, suggest that our original assumption is too low. Higher generation would result in lower energy costs for customers. We're monitoring raw material costs, and it seems to be the case across a number of industries right now, we're observing higher prices. In the case of steel, for example, the return of pandemic-idled steelmaking capacity hasn't yet caught up to global demand. We'll continue to monitor raw material cost trends as we move toward procurement later in the project timeline. We're moving into the detailed design phase for onshore transmission. As we observed within the industry recently, utility systems are only as good as they are resilient, which is one of the reasons that we made the decision in 2019 to go the extra distance to connect to our 500 kV transmission system to ensure that the project's power will be available when our customers need it most. We believe that decisions we're making around the onshore engineering configurations will ultimately result in the best value for customers. And finally, our Jones Act-compliant wind turbine installation vessel is being constructed and is on track for delivery in late 2023. We expect to announce further details on nonaffiliate vessel charters in the near term. In summary, lots of very exciting progress, which will continue through the summer, including our expected notice of intent from BOEM in June. As is typical for a project of this size at this phase of development, there will be some puts and takes as work continues. Taken as a whole, there's no change to our confidence around the project's expected LCOE range of $80 to $90 per megawatt-hour. Near the end of the year, we'll file our CPCN and rider applications with the Virginia State Corporation Commission and we'll be in a position at that time to provide additional details around contractor selection and terms, project components, transmission routing, project costs, capacity factors and permitting. Turning to updates around other select emissions reduction programs. On solar, on Friday, the Virginia State Corporation Commission approved our most recent clean energy filing, which included 500 megawatts of solar capacity across nine projects, including over 80 megawatts of utility-owned solar, the fourth consecutive such approval. We also recently issued an RFP for an additional 1,000 megawatts of solar and onshore wind, as well as 100 megawatts of energy storage and 100 megawatts of small-scale solar projects, and eight megawatts of solar to support our community solar program. Our next clean energy filing, which we expect to include solar and battery storage projects, will take place later this year. Since our last call, we've continued to derisk our plan to meet the VCEA solar milestone by putting another 30,000 acres of land under option, bringing the total to nearly 100,000 acres of options or exclusive land agreements, which is enough to support the approximately 10 gigawatts of utility-owned solar as called for by the Virginia Clean Economy Act. The Surry station provides around 15% of the state's total electricity and around 45% of the state's zero-carbon generation. This authorization is a critical step in ensuring the plant will continue to provide significant environmental and economic benefits for many years to come. We expect to file with the SEC for rider recovery of relicensing spend late this year for both Surry and North Anna stations. Our gas distribution business, as we've discussed in the past, our gas utility operations are enhancing sustainability and working to reduce scope on and three emissions, with focused efforts around energy efficiency, renewable natural gas and hydrogen blending, operational modifications, and potential changes around procurement practices. For example, as part of our recently filed natural gas rate case in North Carolina, we asked the North Carolina Utilities Commission to approve five new sustainability-oriented programs: hydrogen blending pilot, that's part of our goal to be able to blend hydrogen across our entire gas utility footprint by 2030; a new option to allow our customers to purchase RNG attributes; and three new energy efficiency programs. Finally, in South Carolina. The South Carolina Office of Regulatory Staff recently filed a report finding that our revised IRP met the requirements of the law and the Public Service Commission's order requiring the modified filing. As a reminder, the preferred plan and the revised filing calls for the retirement of all coal-fired generation in our South Carolina system by the end of the decade, which helps to drive a projected carbon reduction of nearly 60% by 2030 as compared to 2005. While the IRP is an informational filing, it does not provide approval or disapproval for any specific capital project. We look forward to continuing to talk with stakeholders, including the commission, about an increasingly low-carbon future. An order is expected from the Public Service Commission by June 18. Turning to the regulatory landscape, let me provide a brief update on our Virginia triennial review filing, which we submitted at the end of March. As shown on Slide 12, the filing highlights Dominion Energy Virginia's exceptionally reliable and affordable service. The state's careful and thoughtful approach to utility regulation has resulted in a model that prioritizes long-term planning that protects customers from service disruptions and bill shocks. Consider these facts, 99.9% average reliability delivered at rates that are between 8% and 35% lower than comparable peer groups. We're proud of our record and the work we do to serve customers every single day. Our filing also reflects over $200 million of customer arrears forgiveness as directed by the general assembly, relief that is helping our most vulnerable customers address the financial impacts of COVID-19. The filing also identifies nearly $5 billion of investment in rate base on behalf of our customers over the four-year review period, including $300 million of capital investment in renewable energy and grid transformation projects that we believe meet the eligibility criteria for reinvestment credits for customers. The commission's procedural schedule is shown here. We've included additional details regarding the case as filed in the appendix for your review and look forward to engaging with stakeholders in coming months. It's clear to us that the existing regulatory model is working exceptionally well for customers, communities, and the environment in Virginia. We're delivering increasingly clean energy while protecting reliability and safeguarding affordability. In South Carolina, we continue to engage in settlement discussions with the other parties as highlighted in our monthly filings before the commission. We aren't able to discuss specifics of that process but can report that all parties appear committed to working toward a mutually agreeable resolution. Finally, let me highlight noteworthy developments in the legislative landscape for our company. In Virginia, during the now adjourned session, the Virginia General Assembly passed House Bill 1965, which adopts low and zero-emissions vehicle programs that mirror vehicle emission standards in California. The law, which has been signed by the governor, ensures that more electric vehicles are manufactured and sold in Virginia. It will likely take a few years before we see the significant and inevitable ramp-up in electric vehicle adoption in our service territory, but we're taking steps today to be prepared for the incremental electric demand and associated infrastructure. That includes regional coordination with other utilities to ensure highway corridors that ensure seamless charging networks, support for in-territory EV charging infrastructure, which includes a significant investment in a variety of grid transformation projects, as well as the rollout of time-of-use programs. At the federal level, we're encouraged by the support we're seeing for our offshore wind project. We applaud efforts to increase funding for the research and development of technologies that will allow the utility industry to drive further carbon emissions reductions. We're philosophically aligned with the current administration in wanting to accelerate decarbonization across the utility value chain, while also recognizing that the energy we deliver must remain reliable and affordable. It's still early, but we're engaging in the process of policy formation and monitoring developments closely and continue to believe we are well-positioned to succeed in an increasingly decarbonized world. I'll conclude the call with the summary on Slide 13. Our safety performance year to date is tracking closely to our record-setting achievement from last year. We reported our 21st consecutive quarterly result that normalized for weather, meets or exceeds the midpoint of our guidance range. We affirmed our existing long-term earnings and dividend guidance. We're focused on executing across the largest regulated decarbonization investment opportunity in the nation for the benefit of our customers. And we're aggressively pursuing our vision to be the most sustainable energy company in America.

compname announces q1 earnings per share of $1.23. sees q2 operating earnings per share $0.70 to $0.80. q1 operating earnings per share $1.09. q1 gaap earnings per share $1.23. also affirms its long-term earnings and dividend growth guidance.

Joining today's call are Bob Blue, chair, president, and chief executive officer; Jim Chapman, executive vice president, chief financial officer, and treasurer; and other members of the executive management team. Before I report on our strong quarterly financial results, I'm going to start with a recap of our compelling investment proposition and highlight our focus on the consistent execution of our repositioned strategy. We expect to grow earnings per share 6.5% per year through at least 2025 supported by a $32 billion five-year growth capital plan. As outlined on our fourth-quarter call in February, over 80% of that capital investment is emissions reduction enabling and over 70% is rider recovery eligible. We offer a nearly 3.5% yield and expect dividends per share to grow 6% per year based on a target payout ratio of 65%. Taken together, Dominion Energy offers an approximately 10% total return premised on a pure-play, state-regulated utility profile, operating in premier regions of the country. More on that lasting in a minute. Turning now to earnings. Our second-quarter 2021 operating earnings, as shown on Slide 4, were $0.76 per share, which included $0.01 hurt from worse than normal weather in our utility service territories. Both actual results and weather-normalized results of $0.77 were above the midpoint of our quarterly guidance range. So this is our 22nd consecutive quarter, so 5.5 years now, of delivering weather-normal quarterly results that meet or exceed the midpoint of our quarterly guidance range. Note that our second quarter and year-to-date GAAP and operating earnings, together with comparative periods, are adjusted to account for discontinued operations, including those associated with our gas transmission and storage assets. Second-quarter GAAP earnings were $0.33 per share and reflect the mark-to-market impact of economic hedging activities, unrealized changes in the value of our nuclear decommissioning trust funds, the contribution from Questar pipeline, which will continue to be accounted for as discontinued operations until divested and other adjustments. A summary of all adjustments between operating and reported results is, as usual, included in Schedule 2 of our earnings-release kit. Turning now to guidance on Slide 5. As usual, we're providing a quarterly guidance range which is designed primarily to account for variations from normal weather. For the third quarter of 2021, we expect operating earnings to be between $0.95 and $1.10 per share. We are affirming our existing full-year and long-term operating earnings and dividend-growth guidance as well. No changes here from prior communications. For the first half of the year, weather-normal operating earnings per share of $1.86 represents approximately half of our full-year guidance midpoint. So we are tracking nicely in line with our expectations. We'll provide our formal fourth-quarter earnings guidance, as is typical, on our next earnings call, but let me provide some commentary on the implied cadence of our earnings over the second half of the year. While Q3 guidance is roughly in line with weather-normal results from a year ago, we will see a multitude of small year over year helps in Q4, such as normal course regulated rider growth, the impact of the South Carolina electric rate settlement, strengthening sales, modest margin help, including -- from Millstone, continued expense management and tax timing that combined will help us to deliver solid second-half results. We continue to be very focused on extending our track record of achieving weather-normal results, at least equal to the midpoint of our guidance on both a quarterly and annual basis. Turning now to our couple of macro items. First, overall electric sales trends. In Virginia, weather-normalized sales increased 1.2% year over year in the second quarter and 3.2% in South Carolina. In both states, increased usage from commercial and industrial segments overcame declines among residential users, as the stay-at-home impact of COVID waned, some context on that. You'll recall that demand in DOM zone last year was despite the pandemic pretty resilient due to robust residential and data center demand. So it's not surprising to see South Carolina's relatively higher growth in Q2, given the larger toll COVID had on sales there last year. We're encouraged by the strong return of commercial and industrial volumes in South Carolina in the second quarter. And looking ahead, we expect electric sales growth in our Virginia and South Carolina service territories to continue to a run rate of 1% to 1.5% per year, so similar to what we were observing pre pandemic. Next, let me discuss what we're seeing around input prices. As discussed on last quarter's call, we're continuing to monitor raw material costs. And it seems to be the case across a number of industries right now, we're observing higher prices, although we have seen a moderation in the upward pressure over the last few months, especially in steel. Despite these cost pressures, as it relates to offshore wind, in particular, we remain confident in our ability to deliver that project in line with our previously guided levelized cost of energy range of $80 to $90 per megawatt hour. On the solar side, we're seeing, again, what others seem to be seeing, supply is tight, and prices for steel, poly and glass are up, but our 2021 projects remain on track with most material now already on site. We're beginning to see moderation in pricing and relief from modest shipping constraints, which bodes well, we expect, for our post-2021 projects. So again, we're watching but no material financial impacts at this time. Let me address a few additional topics on Slide 6. Last month, Dominion Energy and Berkshire Hathaway Energy mutually agreed to terminate our planned sale of Questar pipeline as a result of ongoing uncertainty associated with the timing and the likelihood of ultimately achieving Hart-Scott-Rodino clearance. A few thoughts here. First, though we obviously felt that a timely clearance of closing was the logical outcome given the facts and circumstances surrounding that transaction, we did build into the original Berkshire sale contract, the flexibility to easily accommodate a termination if needed. Second, we are already at a reasonably advanced stage of an alternate competitive sale process for Questar Pipeline with expected closing by the end of this year. Third, its termination has no impact on the sale of the gas transmission storage assets to Berkshire, which we successfully completed back in November of last year and which represented approximately 80% of the originally announced transaction value. And finally, this termination nor the outcome of the ongoing sale process impacts Dominion Energy's existing financial guidance. As mentioned, Questar pipeline will continue to be accounted for as discontinued operations excluded from the company's calculation of operating earnings. Briefly, on credit, we've continued to deliberately enhance our qualitative and quantitative credit measures. Last month, we were pleased to see Fitch upgrade Dominion Energy South Carolina's credit rating from BBB+ to A-. Fitch cited both improved regulatory relationships, including the unanimous approval of the General Electric rate settlement, which Bob will discuss in some more detail, as well as good balance sheet management. So let me turn now to a couple of ESG-related topics. In June, we announced the successful syndication of sustainability-linked credit facilities totaling $6.9 billion, and we very much appreciate the efforts and support of all the banks who work with us on what we view as a very interesting new type of financing. The $6 billion master credit facility links pricing to achievement of annual renewable electric generation and diversity and inclusion milestones. And the $900 million supplemental facility presents a first-of-its-kind structure where pricing benefits accrue for draws related to qualified environmental and social spending programs. So in other words, going forward, if we meet or exceed our quantifiable goals in these areas, our borrowing costs decline. And of course, the opposite is also true. If we fail to meet our goals, we pay more. But through this financing, we're very much putting our money where our mouth is when it comes to ESG performance. And we're looking for more ways to deploy green capital raises as we execute on our fixed income financing plan during the balance of the year. In July, we issued an updated and comprehensive climate report, which reflects the task force on climate-related financial disclosures, or TCFD, methodology. We are just one of six U.S. electric utilities that have pledged formal support for TCFD. As described in the report, which is available on our website, we have modeled several potential pathways to achieve net zero emissions across our electric and gas business that reflect 1.5-degree scenario and are consistent with the Paris Agreement on climate change. The climate report shows we are a leader in both greenhouse gas emission reductions over the last 15 years and in our commitment to transparent progress toward our goal of net zero emissions. As shown on Slide 7, I'm very pleased that our results over the first two quarters of this year surpassed even our record-setting results from last year. Our safety performance matters immensely to our more than 17,000 employees, to their families and to the communities we serve, which is why it matters so much to us and why it's our first core value. Turning to Slide 8. I often describe our pure-play state-regulated strategy as centering around five premier states, all of which share the philosophy that a common sense approach to energy policy and regulation puts a priority on safety, reliability, affordability and, increasingly, sustainability. We were pleased that CNBC's list of America's Top States for Business ranked Virginia, North Carolina and Utah as 1, 2 and 3, respectively, a podium sweep for three of our five primary jurisdictions with a fourth major service territory, Ohio, also ranking in the top 10. This is the second consecutive No. 1 ranking for Virginia. Obviously, an assessment of this variety is just one of several possible ways to evaluate state-specific business environments, but we're pleased with the independent confirmation of what we observe every day working on the ground in all of our regions. We've strategically repositioned our business around the state-regulated utility model in order to offer investors increased stability, which is further enhanced by our concentration in these fast-growing, constructive and business-friendly states. Next, I'd like to highlight the outstanding work done across our operating segments by the women and men of Dominion Energy, who exemplify our core values of safety, ethics, excellence, embracing change and One Dominion Energy. At Gas Distribution, our colleagues have collaborated across our national footprint to share best practices, resulting in a nearly 20% reduction of third-party excavation damage to our underground infrastructure as compared to 2019. Each instance of damage prevention enhances the safety and reliability of our system while also reducing the emissions profile of our operations. At Dominion Energy South Carolina, our ability to work in close partnership with state and local officials, combined with our commitment to meet an aggressive time line for electric and gas service delivery, were key to attracting a new $400 million brewery to the state last year. The facility is expected to create 300 local jobs and is one of the largest breweries built in the United States in the last 25 years. Being on time, however, wasn't good enough for our South Carolina colleagues, who safely completed the infrastructure upgrades and installation ahead of an already ambitious schedule. We take pride in examples like this that demonstrate how DESC plays a key role in supporting South Carolina's economic and job growth. And in Virginia, despite several days of near-record peak demand in June, our generation colleagues delivered exceptional performance as evidenced by the absence during those periods of any forced outages across our fleet. Our transmission and distribution team members kept the grid operating flawlessly under demanding load conditions while also keeping pace with robust residential connects and remarkable data center demand growth, which continues the trend of robust growth over the last several years with no end in sight. I'll now turn to updates around the execution of our growth plan. The 2.6 gigawatt Coastal Virginia offshore wind project received its notice of intent, or NOI, from the Bureau of Ocean Energy Management in early July, consistent with the time line we had previously communicated. The issuance of an NOI formally commenced the federal permitting review, which, based on our previously disclosed time line, is expected to take about two years. Key schedule milestones are shown on Slide 10. Later this year, we'll file our CPCN and rider applications with the Virginia State Corporation Commission. In June, we announced an agreement with Orsted and Eversource, under which they will charter our Jones Act-compliant wind turbine installation vessel for the construction of two offshore wind farms in the Northeast. Turning to Slide 11. The Virginia triennial review is currently in discovery phase, and the company is providing timely responses to requests for information, all of which generally conform with what we would reasonably expect during a rate proceeding of this size and complexity. As a reminder, the earnings review applies only to the Virginia base portion of our rate base, which becomes smaller as a percentage of DEV and Dominion Energy during our forecast period. Virginia rider investments like offshore wind, solar, battery storage, nuclear life extension and electric transmission, which are outside the scope of the proceeding, represent the vast majority of the growth at DEV. We've provided a summary of our filing position, as well as key milestones in the procedural schedule. A few items to reiterate here. First, our filing highlights the compelling value we've provided to customers during the review period of 2017 through 2020. We've delivered safe and reliable service at affordable rates that are well below regional, RGGI and national averages, all while taking aggressive steps to accelerate decarbonization by pursuing early retirement of fossil fuel and power generation units. Second, at the direction of the general assembly, we've provided over $200 million of customer arrears forgiveness to assist families and businesses in overcoming financial difficulties caused by the pandemic. Third, we've invested over $300 million in CCRO-eligible projects, including our offshore wind test project, which is the first operational wind turbines built in federal waters in the United States. Finally, our filing reports a regulatory return that aligns closely to our authorized ROE plus the 70-basis-point collar. Inclusive of arrears forgiveness, this financial result warrants neither refund nor a change to revenues. While offshore wind and the triennial review are understandably areas of focus, we'd be remiss if we didn't also highlight the blocking and tackling we're doing to advance other very material growth investments and their associated regulatory processes for the benefit of our customers, communities and the environment. Since our last update, we received our fourth consecutive regulatory approval for investments in utility-owned rider recoverable solar projects. We've now surpassed 1,000 megawatts of Dominion Energy-owned solar generation in service in Virginia, and there is a lot more to come. In fact, our pipeline of company-owned solar projects in Virginia under various stages of development currently totals nearly 4,000 megawatts, which gives us great confidence in our ability to achieve the solar capacity targets set forth in Virginia law and which support our long-term growth capital plans. In the very near term, about 25 days to be specific, we'll make our next and largest to date clean energy submission. We expect the filing to include as many as 1,100 megawatts of utility-owned and PPA solar, roughly consistent with the 65-35 split identified in the Virginia Clean Economy Act. It will also include around 100 megawatts of battery storage, including 70 megawatts of utility-owned projects. Taken together, the filing will represent as much as $1.5 billion of utility-owned and rider-eligible investment, further derisking our growth capital guidance provided on our fourth-quarter 2020 earnings call. Next, the State Corporation Commission approved our inaugural renewable portfolio standard development plan and rider filings. This annual accounting is mandated under the VCEA and provide a status update on the company's progress toward meeting both near- and long-term requirements under the state's RPS targets. We received commission approval for our Regional Greenhouse Gas Initiative, or RGGI, rider filing. Under state law, Virginia has joined with other RGGI states to promote a marketplace for emissions credits with the goal of significantly reducing greenhouse gases over time, and this approval allows for timely recovery of our cost of compliance. Next, we received authorization from the Nuclear Regulatory Commission to extend the life of our two nuclear units at the Surry power station for an additional 20 years. These units currently provide around 45% of the state's zero carbon generation and under this authorization will be upgraded to continue providing significant environmental and economic benefits for many years to come. We expect to file for rider cost recovery associated with license renewal capital investment later this year. And last but not least, progress on our grid's transformation plans. Our first phase covering 2019 through 2021 is well underway, and we recently filed our phase 2 plan with Virginia regulators covering the years 2022 and '23. The second phase includes approximately $669 million in capital investment, which is needed to facilitate and optimize the integration of distributed energy resources while continuing to address the reality that reliability and security are vital to our company and its customers. We expect the final CPCN order around the end of the year. Our customers and our policymakers have made it abundantly clear. They want cleaner energy, and they want it delivered safely, reliably and affordably. We're therefore very pleased to be executing on that vision on multiple fronts while extending the track record of constructive regulatory outcomes to the benefit of all stakeholders. Turning now to our gas distribution business. We're leading the industry in initiatives to reduce the carbon footprint of our essential natural gas distribution services. Our efforts include modifications to our operating and maintenance procedures, systemic pipeline and other aging infrastructure replacement, third-party damage prevention, piloting applications for hydrogen blending, producing and promoting the use of carbon-beneficial renewable natural gas and offering innovative customer programs. For example, in Utah, we're seeking approval for a program that would enable customers to purchase voluntary carbon offsets. For around $5 per month on a typical residential bill, customers that opt into the program will offset the carbon impact of their gas distribution use. This program, which like our existing GreenTherm program, allows customers to make choices about how to manage and lower their individual carbon profiles is just one way we're reimagining how gas distribution service intersects with an increasingly sustainable energy future. Along those lines, our hydrogen blending pilot in Utah is performing in line with expectations, and we're in the planning stages of expanding the pilot to test communities. We filed for a similar blending pilot in North Carolina and are evaluating appropriate next steps for blending in our Ohio system. And as it relates to our already industry-leading renewable natural gas platform, we're pleased to announce an expansion of our strategic alliance with Vanguard Renewables. As a result, we expect to grow our dairy RNG portfolio from six projects in five states to 22 projects in seven states through the second half of the decade and enhance our development pipeline with specific projects toward our aspirational goal of investing up to $2 billion by 2035. Our current pipeline of projects will result in an estimated annual reduction of 5.5 million metric tons of CO2e, which is the equivalent to removing 1.2 million cars from the road. Turning now to South Carolina. On July 21, the South Carolina Public Service Commission with the support of all parties unanimously approved the proposed comprehensive settlement in the pending General Electric rate case. We appreciate the collaborative approach among the parties over the last six months, which allowed us to produce this agreement that provides significant customer benefits, as shown on Slide 14; supports our ability to continue providing safe, reliable, affordable and increasingly sustainable energy; and aligns with our existing consolidated financial earnings guidance. Further, the approval allows all parties to turn the page and focus on South Carolina's bright energy future. It's also worth noting that the commission also recently approved our modified IRP, which favors a plan that would result in the retirement of all coal-fired generation in our South Carolina system by the end of the decade. While the IRP is an informational filing and does not provide approval or disapproval for any specific capital project, we look forward to continuing to work with stakeholders, including the commission, to drive toward an increasingly low carbon future. First, Senior Vice President, Craig Wagstaff, who's provided over 10 years of exemplary leadership for our gas utility operations in Utah, Idaho and Wyoming, will be retiring early next year. And I can say definitively on behalf of all of our colleagues, he will be sorely missed. Craig joined Questar Corp. in 1984, and we have benefited greatly from his contributions since the Dominion Energy-Questar merger in 2016. Best wishes to Craig and his family on his retirement. We ask Steven Ridge, our current vice president of investor relations, to relocate to Salt Lake City and, effective October 1, assume the role of vice president and general manager for our Western natural gas distribution operations. Steven has been a valuable member of our IR efforts over the last nearly four years. And I think he's got to know most of you pretty well. We have every confidence in his ability to follow Craig's long-standing example of serving our Utah, Wyoming and Idaho customers and communities well. And finally, David McFarland, who's been working on our investor relations team since October of last year, will assume responsibility for our IR efforts as Steven transitions into his new role later this year. We congratulate David on this new opportunity. Our investors should expect no change to our aim to provide consistently a high level of responsiveness and accuracy they've grown to expect from our current IR team. With that, let me summarize our remarks on Slide 15. Our safety performance year to date is on track to improve upon last year's record-setting achievement. We reported our 22nd consecutive quarterly result, normalized for weather, meets or exceeds the midpoint of our guidance range. We affirmed our existing annual and long-term earnings guidance and our dividend-growth guidance. We're focused on executing across project construction and achieving regulatory outcomes that serve our customers well, and we're aggressively pursuing our vision to become the most sustainable regulated energy company in America.

compname posts q2 gaap earnings per share $0.33. sees q3 operating earnings per share $0.95 to $1.10. q2 operating earnings per share $0.76. q2 gaap earnings per share $0.33. affirms its long-term earnings and dividend growth guidance.

Joining today's call, our Bob Blue, chair, president, and chief executive officer; Jim Chapman, executive vice president, chief financial officer, and treasurer; and other members of the executive management team. I'll start by outlining Dominion Energy's compelling shareholder return proposition. We expect to grow our earnings per share by 6.5% per year through at least 2026, supported by our updated $37 billion five-year growth capital program, resulting in an approximately 10% total return. Our strategy is anchored on a pure play, state-regulated utility operating profile that centers around five premier states, as shown on Slide 4. All share the philosophy that a common sense approach to energy policy and regulation puts a priority on safety, reliability, affordability, and sustainability. Next, I want to highlight what a successful year 2021 was in the continuing execution of our strategy. For example, we continue to provide safe, reliable service to our customers, ensuring that safety remains our top priority when it comes to our employees, our customers, and our communities. We reported our 24th consecutive quarterly financial result that normalized for weather meets or exceeds the midpoint of our guidance range, a reflection of our focus on continuing to provide consistent and predictable financial results. We successfully concluded substantial rate cases in Virginia, South Carolina, and North Carolina, in each case, demonstrating our ability to deliver constructive regulatory results for both our customers and our shareholders in these fast-growing premiere and business friendly states. And we significantly advanced our clean energy growth plans on a number of fronts. For instance, we received our Notice of Intent from BOEM for our regulated offshore wind project in July as planned and filed our rider application with the Virginia State Corporation Commission on schedule in November. And we propose new solar and energy storage projects in our second annual clean energy filing in Virginia, the largest such group ever proposed. Looking ahead, we've rolled forward our five-year growth capital plan to capture the years 2022 through 2026. We now expect to invest $37 billion on behalf of our customers. The investment programs are highlighted on Slide 5, with over 85% focus on decarbonization. As meaningful as these near-term plans are, consider, on Slide 6, how they compare to the long-term scope and duration of our overall decarbonization opportunity. Our initiatives extend well beyond our five-year plan. We now project $73 billion of green investment opportunity through 2035, nearly all of which will qualify for regulated cost of service recovery. This is as far as we can tell, the largest regulated decarbonization investment opportunity in the industry. Our fourth quarter 2021 operating earnings, as shown on Slide 7, were $0.90 per share, which included a $0.03 hurt from worse-than-normal weather in our utility service territories for the quarter. Weather-normalized results were again above the midpoint of our quarterly guidance range. Positive factors as compared to last year include growth from regulated investment across electric and gas utility programs, higher electric sales due to increased usage from commercial and industrial segments, and higher margins that contracted assets. Other factors as compared to the prior year include a slight catch-up in COVID-deferred O&M and weather. As Bob mentioned, this is our 24th consecutive quarter. So six years now of delivering weather-normal quarterly results that meet or exceed the midpoint of our guidance ranges. We believe this historic consistency across our results is worth highlighting and is a track record we're proud of and one which we're absolutely focused on extending. Full year 2021 operating earnings per share were $3.86 above the midpoint of our guidance range even in the face of a $0.05 from weather for the year. Turning now to guidance on Slide 9. As usual, we're providing an annual guidance range, which is designed primarily to account for variations from normal weather. We're initiating 2022 operating earnings per share guidance of $3.95 to $4.25 per share. The midpoint of this range is in line with prior annual earnings per share growth guidance of 6.5% in 2022, when measured midpoint to midpoint. As I think it's been expected as part of our roll forward to a new five-year forecast period, we are once again extending our long-term growth rate by one more year. We now expect operating earnings per share to grow at 6.5% per year through at least 2026. Finally, we expect first quarter 2022 operating earnings per share to be between $1.10 and $1.25. Positive drivers for the quarter as compared to last year are expected to be normal course regulated rider growth continued, modest strengthening of sales, and return to normal weather. Other drivers, as compared to last year, are expected to be O&M and tax timing. We expect our 2020 full year dividend to be $2.67, reflecting our target payout ratio of approximately 65%. We're also extending the long-term dividend per share growth rate of 6% per year through 2026. Slide 10 provides a breakdown of five-year growth capital plan, which Bob introduced. For more detail on all of this, I would point to the very comprehensive appendix materials, but just a couple of items I'll note here. We continue to forecast a total five-year rate base CAGR 9% broken out here by segment, a major driver; and over 75% of its planned growth capex is eligible for rider recovery. Of course, capital invested in underwriters allows for timely recovery of prudently incurred investment and costs. Turning to Slide 11, we've updated our financing plan, which reflects a combination of internally generated cash flow and debt issuances to fund the majority of our growth and maintenance capex. Our plan assumes we issue programmatic equity of just 1% to 1.5% of our current market cap annually through our existing DRIP and ATM equity programs in line with prior guidance. No change to our 2022 equity issuance plans and no block or marketed equity is contemplated. We view this level of steady equity issuance under existing programs as prudent, earnings per share accretive, and in the context of our sizable growth capital spending program, appropriate to keep our consolidated credit metrics within the guidelines for our strong credit ratings category. To that point, as shown on Slide 12, our consolidated credit metrics have remained steady and our pension plans have increased their funded status. We're very proud of these results. We continue to target high BBB range credit ratings for our parent company and A range ratings for our regulated operating company. Our long-standing focus on achieving and maintaining these ratings is important for our ability to continue to secure low-cost capital for our customers. As is the norm, our financing plan reflects our ongoing efforts to efficiently redeploy capital toward our robust, regulated growth programs. As I've mentioned in the past, as part of our capital allocation process, we undertake constant analysis to find the most efficient sources of capital to fund our attractive utility growth programs in our key states, all while maintaining our operating earnings per share growth and credit profiles. The transaction is expected to close late this year, subject to customary closing conditions, including clearance under HSR, and approval from the West Virginia Public Service Commission. Proceeds will be used to reduce parent-level debt. The transaction value achieved through a competitive sale process represents approximately 26 times 2021 net income and two times rate based. As a reminder, Hope Gas operates only in West Virginia and serves about 110,000 customers. Bob will address this transaction a bit more in a moment. Turning now to electric sales trends, fourth quarter weather-normalized sales increased 1.4% year over year in Virginia and 2.3% in South Carolina. In both states, consistent with the trends seen last quarter, we've observed increased usage from commercial and industrial segments, overcoming declines among residential users as the stay-at-home impact of COVID wanes. Full year 2021 weather-normalized sales increased 1.4% year over year in Virginia and 1.6% year over year in South Carolina. Looking ahead, we expect electric sales growth in our Virginia and South Carolina service territories to continue at a run rate of 1% to 1.5% per year. No changes from our prior communications. Next, let me discuss what we're seeing around input prices. As discussed on prior calls, we're continuing to monitor raw material costs, and it seems to be the case across a number of industries right now. We're observing higher prices, although we've seen a moderation in the upward pressure over the last few quarters. As it relates to our regulated offshore wind project, we remain confident in our ability to deliver the project in line with our budget, as outlined in our filing to the SEC in November. Also, no changes here from prior communications. As was disclosed at that time in November, we've entered into five major fixed cost agreements, which collectively represent around $7 billion of the total capital budget. Within those contracts, only about $800 million remain subject to commodity indexing, most of it steel. And this component of the budget already reflects commodity cost increases we all observed in 2021 leading up to our filing date in November. And our capital budget, of course, includes contingency. On the solar side, we're seeing what others seem to be seeing. Supplies tight, prices for certain components are up, but our 2021 projects were completed with no material impacts to cost or schedule, and our '22 projects remain on track. Beyond '22, we've been generally successful in contracting, etc. , but it's still early. So again, we're watching but no material financial impacts to share at this time. So to summarize, we reported fourth quarter and full year 2021 operating EPS, which is above the midpoint of our guidance ranges, extending our track record to six years of meeting or exceeding the quarterly midpoint on a weather-normal basis. We initiated 2022 full year operating earnings per share guidance that represents a 6.5% annual increase midpoint to midpoint. We affirmed the same 6.5% operating earnings per share growth guidance through 2026. We introduced a $37 billion high quality decarbonization-focused, five-year growth capex plan that drives an approximately 9% rate based growth. We continue to expect the vast majority of our spending across our segments to be in rider form. And finally, our balance sheet and credit profile remain in very good health. Starting with safety, Dominion Energy finished 2021 with its second best performance ever. Additionally, the company was the top performer in the 2021 Southeastern Electric Exchange ranking. We take pride in our relentless focus on safety, and it's the first of our company's core values. While our safety performance relative to industry is very good, our goal has been and continues to be that none of our colleagues get hurt ever. Our customers highest priority is reliability. They expect their power will come on when they need it, period. In the past year, our customers in our electric service areas in Virginia, South Carolina, and North Carolina had power 99.9% of the time, excluding major storms. Where major storms approach, we stage equipment and people to be ready so crews can spring into action as soon as it is safe to do so. As we did for the first winter storm of 2022, the damp, wet, heavy snow on most of the northern, central and western regions of Virginia, interrupting service to over 400,000 customers. Over 87% of those customers had service restored after two days of restoration and 96% within four days. Our crews worked around the clock in frigid temperatures and treacherous icy travel conditions to safely restore service to our communities. Our gas distribution business knows that safe and reliable service is the priority, especially when exigent circumstances exist. When an emergency notification is received, we typically have a crew on site twice as quickly as the industry expected response time. Last month, we had the highest ever flow of gas at our Utah system and the highest ever daily throughput across our Ohio system, higher even than the polar vortex in 2019. And in both cases, our service never missed a beat and our customers would never have known we were setting all time records. I'm proud they're not surprised at the way in which our Dominion Energy team members have responded on behalf of our customers. Now, I'll turn to updates around the execution of our growth plan. In Virginia, the SEC approved the Comprehensive Settlement Agreement for our first triennial review in November. We're very pleased to be extending our track record of constructive regulatory outcomes. On top of that, we are incredibly excited about what Dominion Energy is working to accomplish, specifically our green capital investment programs on behalf of our customers in Virginia, which I will touch on in a few minutes, nearly all of which will grow earnings under regulated rider mechanisms. Since the Virginia rider investment programs are reviewed and trued up annually, they are not included in the Virginia Triennial review process. Based on these trends, the Virginia-based investment balance as a percentage of total Dominion Energy declined to about 13% by 2026 and is expected to continue to decline as a percentage in the future. Turning to offshore wind, the country's only fully regulated offshore wind project is very much on track. As it relates to the SEC rider application, we're currently in the discovery phase. And to date, this process very much conforms with what we typically expect during a rider proceeding of this type. Major project milestones are listed on Slide 15. We expect to receive a final order from the SEC in August this year. A few items to reiterate here. First, this project will provide a boost to Virginia's growing green economy by creating hundreds of jobs, hundreds of millions of dollars of economic output, and millions of dollars of tax revenue for the state and localities. It will also propel Virginia closer to achieving its goal to become a major hub for the burgeoning offshore wind value chain up and down the country's East Coast. Second, unlike any other such project in North America, this investment is 100% regulated and eligible for rider recovery in Virginia. Finally, the VCA provides very specific requirements on the presumption of prudency for investment in the project, which we are confident that we have already met. Our Jones Act compliant wind turbine installation vessel is being constructed and is on track for delivery in late 2023 as originally scheduled. The project is currently about 43% complete. We expect the vessel will be in a central resource city EV, as well as to the overall domestic offshore wind industry, and will be entering service with plenty of time to support the 2024 turbine installation season. Our other clean energy filings in Virginia are also progressing well. Last month, we were very pleased to see the SEC approve phase two of our grid transformation plan for projects that we plan to deploy in 2022 and 2023. These projects will facilitate the expected increase in distributed energy resources like small scale solar and expand electric vehicle infrastructure, as well as enhance grid resiliency and security. Our clean energy and nuclear or rider filings remain on track. Final orders are expected later this year, as outlined on Page 18. Through 2020, we have successfully reduced our enterprisewide CO2 equivalent emissions by 42%. That's great progress, but it's not enough. By 2035, we expect to improve that reduction to between 70% and 80% versus baseline on our way to meet net zero by 2050. As shown on the right side of Slide 19, the transition to a clean energy future means reduced reliance on coal-fired generation. Back in 2005, more than half of our company's power production was from coal-fired generation. By 2035, we project that to be less than 1%. We show our timeline for transitioning out of coal on Slide 20. By the end of the decade as part of our ongoing resource planning, we expect to be coal free in South Carolina and have only two remaining facilities at Dominion Energy Virginia for reliability and energy security considerations. While our IRP is our informational filings and do not provide approval or disapproval for any specific capital project, we look forward to continuing to work with stakeholders, including the Commission, to drive toward an increasingly low-carbon future. From an investment from an investment-based perspective, which is a rough approximation of earnings contribution, you can see on Slide 21 the diminished role coal-fired generation plays in our financial performance, driven by facility retirements and non-coal investment. We're mindful that this shift has the potential to be disruptive to employees and communities, and we were being purposeful in our efforts to ameliorate any such negative consequences. We believe in a just transition. We have and will continue to consider the needs of impacted communities and our entire workforce during this clean energy transition. You'll also note that zero carbon generation grows significantly, such that by 2026, over 65% of our investment base will consist of electric wires and zero carbon generation. Moving on to South Carolina. As part of our ongoing resource planning, Dominion Energy South Carolina is planning to replace several of our older generation peaking turbines with modern, more efficient units. These peaking units, which often operate seasonally during certain times of day when the demand for energy is at its highest, play an important role in our generation fleet with their ability to go from idle to producing energy quickly. Modernizing this equipment will lower fuel cost to customers, improve environmental performance, and provide reliability and efficiency benefits. These will become even more important as additional intermittent fluctuating resources, such as solar, are added to our system. Last quarter, the Public Service Commission of South Carolina approved a settlement, allowing the company to move forward with two of the proposed sites, and we'll hold an RFP for a third. Turning to gas distribution. In North Carolina, the commission approved a comprehensive settlement last month for our gas operations with rates based on a 9.6% ROE. As a reminder, the agreement included three new clean energy programs, a new hydrogen blending pilot, a new option to allow our customers to purchase RNG attributes, and a new and expanded energy efficiency programs. This is a prime example of the role that supportive regulation can play in meeting our decarbonization objectives. Hope Gas is a valuable business with tremendous people. At the same time, compared to the other larger state-regulated utilities across our five premier states, Hope Gas is relatively a small stand-alone operation. Our talented employees have consistently delivered safe, reliable, and affordable energy to Hope's customers. We're pleased that these best-in-class employees are now joining another excellent organization in the form of Ullico, who has agreed to provide significant protections for employees and honor existing union commitments. Ullico is operating expertise and financial resources will also ensure that Hope's customers will continue to receive the high level of service to which they have grown accustomed. Slide 24 provides a summary of several important steps we took in 2021 that enhanced our industry leading ESG profile. Just a couple of items I'll highlight here. In July, we published our updated climate report, which included disclosure of scope one, two, and three emissions, an important step as it relates to our net zero commitment as I will expand on in a minute. In November, we issued our inaugural Diversity Equity and Inclusion Report, which highlights our progress toward building a more diverse and inclusive workforce. As part of that report, we also published our EEO 1 data. This enhanced external reporting builds upon our commitment to increase our total workforce diversity by 1% each year with the goal of reaching at least 40% by year end 2026. We're very much on track to meet that goal. These and other ESG-oriented efforts have been recognized by leading third-party assessment services, as shown on Slide 25. By each measure, our performance exceeds the sector average. We've been recognized as part of the leadership band by CDP for our climate and water disclosure for the second year in a row as Trendsetters, the highest categorization for the fourth consecutive year by the CPA-Zicklin report on political accountability and transparency. And most recently, MSCI increased our rating from A to AA, which designates us a leader in the field. Turning to Slide 26, I'm pleased to announce an expansion of our net zero commitments. In addition to our current commitment to achieve enterprisewide net zero scope one carbon and methane emissions by 2050, we now aim to achieve net zero by 2050 for all Scope 2 emissions and for Scope 3 emissions associated with three major sources, LDC customer end-use emissions, upstream fuel, and purchase power. These new commitments formalize our continued focus on helping our customers and suppliers decarbonize. Reducing emissions as fast as possible and achieving net zero emissions companywide requires immediate and direct action. That's why the company continues to take meaningful steps to address Scope 3 emissions. We formalized our support for federal methane regulation, and we're working toward procurement practices that encourage enhanced disclosures by upstream counterparties on their emissions and methane reduction programs. Further, we encourage suppliers to adopt a net zero commitment, and we were started to receive quotes for responsibly sourced gas, which are evaluated consistent with our reliability, service, and cost criteria for natural gas supply. For downstream emissions, we expect to increase our annual spend on energy efficiency over the next five years at our LDCs by nearly 50%, and to provide our customers with access to a carbon calculator and carbon offsets. For example, in both Utah and North Carolina, we offer GreenTherm, a voluntary program that provides customers with access to renewable natural gas. While initially being offered on a voluntary basis, we are working with policymakers and regulators to increase access to RNG for our customers. And finally, we continue to pursue innovative hydrogen use cases, including our blending pilot in Utah, which based on early assessment, confirms the ability to blend at least 5% and potentially up to 10% without adverse impacts to appliance performance, leak survey, system safety, or secondary emissions. Over the long term, achieving these goals will require supportive legislative and regulatory policies and broader investments across the economy. This includes support for the testing and deployment of technologies. For example, we support efforts to research and develop new technologies through collaborations such as the Low Carbon Resource Initiative, of which we're a founding sponsor. And we will never lose sight of our fundamental responsibility to the customers providing safe, reliable, affordable, and sustainable energy. With that, let me summarize our remarks on Slide 27. Our safety performance was our second best ever. We reported our 24th consecutive quarterly result that normalized for weather meets or exceeds the midpoint of our guidance range. We affirm the same 6.5% operating earnings per share growth guidance through 2026 and affirmed our existing dividend growth guidance through 2026. We're focused on executing project construction and achieving regulatory outcomes that serve our customers well, and we're aggressively pursuing our vision to be the most sustainable, regulated energy company in the country.

sees q1 operating earnings per share $1.10 to $1.25. q4 operating earnings per share $0.90. initiates 2022 operating earnings guidance of $3.95 to $4.25 per share.

As usual, Wyman and Joe will first make prepared comments related to our operating performance and strategic initiatives. During our call, management may discuss certain items, which are not based entirely on historical facts. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business, and believes will provide insight into the company's ongoing operations. Looking broadly at the quarter, we're encouraged by the continued improvement in the environment, the consumers increasing engagement with the category, and we hope to see those trends continue. We know there are still challenges out there, especially with independents, yet Brinker continues its strong recovery, posting a better-than-expected first quarter and also delivering earnings of $0.28 a share. Both brands increased their progression from last quarter with Chili's reporting comp sales of negative 7.2% and Maggiano's negative 38.6%. And both brands delivered solid sequential improvement throughout the quarter, with Chili's ending September down just 1.4% and Maggiano's down 32.5%. Plus casual is obviously a more challenged segment that's facing greater headwinds, but the Maggiano's team is doing a great job managing their cost structure and flow through. We feel good about where Maggiano's is from a very relative perspective, and we're excited about the bold strategy Steve Provost and the team are putting in place to build the business. The Chili's brand continues to exceed expectations from both a relative and an absolute perspective. The month of September marked our return to positive traffic, and that's pretty impressive given there are still major states like California and New Jersey, not yet near full dining room capacity. This brand continued its nearly three-year streak of outperforming other casual dining chains in KNAPP-TRACK, driving a 16-point gap in sales and 23 points in traffic this quarter. When we broaden our view of the category to include independents, our GAAP widened significantly. Current credit card data shows a whole category down 30%, which reflects our ongoing impact of this pandemic and the reality of what is likely to be a meaningful shift in the competitive landscape. In this tough environment, I couldn't be prouder of the resilience and agility of our operations team. For the quarter, they improved restaurant operating margin 60 basis points year over year. When the pandemic hit back in March, the market really drove us all to dramatically cut costs. Since then, we've judiciously evaluated every cost within our P&L, and we've been diligent about reestablishing our media -- our spending levels. In many cases, we're comfortable maintaining a level of spend below pre-pandemic levels. One of the biggest changes we made was to rethink our marketing spend. We significantly reduced traditional television advertising so we could invest more aggressively in digital and direct channels that work harder for us, like My Chili's Rewards. And with the increased desire for convenience, we're shifting to support all our brands more aggressively with delivery resulting in higher third-party delivery fees and promotional expenses. Based on where we're tracking with sales and the efficiency of our P&L, we feel really good about these decisions. Our top priority has been and remains the safety of our team members and guests. We're committed to supporting our team that's working so hard to take care of our guests. We've now brought back most of our hourly team members, and that we've been able to help them maintain their hourly wage levels. We've also kept our management structure intact. We know how critical their leadership is to our guests and our business and we're proud that we've been able to bonus our managers close to target. Instead, we leaned into the same strategies that have been helping us take share from the last three years, and they've been even more effective since the pandemic. But even before that, our challenge was to prove to ourselves and to you that we could create a growth model out of a legacy business in a category that's seen meaningful declines in traffic over the years. We have always believed growth is available in this category if you do the right things. By delivering a better guest experience, a strong value proposition and more effective marketing, we unlocked sustainable organic growth within our base business. Our results demonstrate we're doing the right things. Our improvements to the base enables us to introduce our first virtual brand, It's Just Wings, an incremental growth vehicle that offers convenience and value in a way no one else is positioned to do. Now there's been a lot of discussion about what a virtual brand is. It's Just Wings is not a disposable vehicle. We're committed to this brand for the long haul. There are barriers to entry in doing virtual brands well, and Brinker is uniquely positioned to do it right. We have the scale, the asset ownership that's available capacity in our well-equipped kitchens, the right technology and unbelievably strong operators who can focus and deliver consistently. When we rolled out It's Just Wings overnight to more than 1,000 restaurants. Now that's easy to say, but tremendously hard to do. So I know everyone is curious about how it's going so far. We're excited with how the brand is already performing, and we're well on track to meet our first year target of more than $150 million in sales. We're encouraged by what DoorDash sees with regard to our consumer data. The brand is really generating high satisfaction scores and strong repeat usage. It's really resonating with consumers, which we know is critical to the health and long-term success of any brand. Going forward, our focus is to ensure we're executing at the highest level possible, and we're maximizing the brand's growth potential. It's Just Wings started as a virtual brand, but as we wire in the execution and accelerate growth, it may take different trajectories. We're evaluating internal and external opportunities to increase awareness levels and expand access to consumers. This is just phase I for It's Just Wings. We also believe we have capacity to expand our virtual brand portfolio. We're testing a few ideas to better understand consumer demand and ensure that we can execute at a high level. We'll have more to say on that in the not-too-distant future. Obviously, we see a lot of upside for virtual brands. Listen, with the uncertainty surrounding COVID and the economy, we anticipate some volatility ahead. And like the rest of our country and the world, we are hoping and planning for a vaccine and an end to the sickness and deaths from this virus. We are hoping and planning for economic stability and continued recovery in the post-election environment. But despite the things no one can know, here's what we do know. We will keep running our own race and working our strategy. We will stay flexible and agile, and we'll take care of each other and our guests. We will also continue to manage our P&L and our balance sheet with discipline to create an even more stable model for our shareholders. And we will boldly grow these brands so we can continue to be a great place for our team members to work and our shareholders to invest. And with that, I'll turn now it over to Joe. As you just heard, we begin our fiscal year 2021 with momentum on the top and bottom line. We continued our recovery by delivering adjusted diluted earnings per share of positive $0.28, marking the return to profitability after just a one quarter hiatus. Now for the quarter, Brinker's total revenues were $740 million and consolidated reported net comp sales were negative 10.9%. Importantly, comp sales materially improved as the quarter progressed, with September consolidated comp sales down only 5.2%. Chili's has continued to lead the casual dining sector, ranking as the #1 brand in the KNAPP-TRACK index each month in this quarter. And as Wyman indicated, beat by significant margins in both sales and traffic. In September, Chili's achieved another important milestone in its recovery, posting positive traffic for the brand of 2.2%. Another way to see Chili's impressive progression is to look at our net comp sales results, excluding those restaurants and markets not fully open for our indoor dining during the quarter, such as California and New Jersey. These restaurants represent approximately 86% of the Chili's system, and they were only negative 1.3% for the quarter and positive 3.6% for September. Now turning to margins. Restaurant operating margin for the first quarter was 11.6%, a noteworthy 60 basis points improvement versus prior year. Food and beverage expenses were favorable 10 basis points versus prior year due to the favorable menu mix, offset by low level of commodity inflation. Labor was also favorable 120 basis points versus prior year. Now several items contributed to this improved performance. First, labor expense relative to prior year benefited from the shift in sales from dine-in to off-premise in the quarter. Second, favorability was also buoyed by the fact some of our higher labor cost states reopened at a slower pace during the recovery, a benefit that will diminish as we move forward. Of course, naturally, we'll take the sales that go with adding that labor back into the equation. And finally, labor expense benefited from the ability to seamlessly integrate our It's Just Wings brand into the existing labor model, a point of leverage and we plan to sustain. The labor favorability was partially offset by the increase in restaurant expenses, which was up 70 basis points for the first quarter versus prior year. Sales to leverage, higher delivery related fees and packaging expense were the primary increases, while lower advertising and repairs and maintenance expenses helped mitigate the overall increase. Generating positive cash flow is an important part of our recovery process. With the business improving, we generated operating cash flow of $83 million. After capital expenditures of the approximately $14 million, our free cash flow for the quarter totaled more than $69 million. Our first priority for cash generation is to invest back in the business. And as such, we have resumed both restaurant reimages and new restaurant development. We have increased our capex budget for the year and now expect to spend approximately $100 million during this fiscal year. As Wyman reiterated, strengthening the balance sheet is also a key area of focus for us. As such, our second cash priority is to pay down debt, and we executed against this strategy during the quarter, reducing our long-term debt by approximately $50 million. We will continue to lower leverage as we move forward from here targeting an adjusted debt level of about 3.5 times EBITDAR. Now turning to our current second quarter. Let me provide some color as to our expectations for the quarter and then some specific guidance metrics for the quarter. Today marks the end of our October period, and it appears we will continue the positive progression of comp sales established during the first quarter. We expect Chili's to further build its positive traffic performance this period, getting the second quarter off to a very fine start. While we anticipate year over year improvements in Chile's operating performance in the second quarter, our consolidated performance will likely reflect a more difficult holiday environment for the Maggiano's brand. With that being said, let me provide some specifics for Brinker's performance in the second quarter. We expect consolidated comp store sales to be down in the mid single-digit range. We believe Brinker's restaurant operating margins will be relatively similar to prior year. Adjusted earnings per diluted share are estimated to be in the range of $0.40 to $0.60 and weighted average diluted shares are estimated to be in the 45 million to 46 million share range. I would also note we have the holiday flip in the second quarter with Christmas Eve and Christmas Day moving into the third quarter. This holiday shift will have a positive impact to second quarter comp sales that will be offset in the first period of Q3. Despite the ongoing challenges in our operating environment, we continue to demonstrate strength and resilience. So, our first quarter performance is a testament to our ability to deliver results. While operating in a pandemic environment comes with some uncertainties, there is no doubt we will continue to execute our share gaining strategy, take care of our guests and team members and be a leader in the restaurant industry for the short and long term.

brinker international inc - qtrly net income per diluted share, excluding special items $0.28. brinker international inc - chilis total comparable restaurant sales decreased 7.2% in q1 21. brinker international inc - maggiano's total comparable restaurant sales decreased 38.6% in q1 21. brinker international inc - for q2 21 net income per diluted share, excluding special items, expected to be $0.40 to $0.60.

As many of you know, we pre-released limited results for the first quarter, ahead of our investor day hosted here in Dallas on October 20. During our call, management may discuss certain items which are not based entirely on historical facts. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. It's good to be back with you all again. It was great seeing some of you in Dallas and many of you virtually during our investor day a couple of weeks ago. What you should have taken away from that was this, we're very optimistic about where the business is going. We're managing for long-term success and we're confident in the strength of our brands and the levers we have yet to pull to continue to grow the business. From a top-line perspective, we're sitting in a good spot. Sales numbers are solid and traffic numbers are extremely good. Our near-term challenge is not creating demand but rather it's working through the latest pandemic-driven staffing and supply chain issues that are impacting our cost structure. As you know, there are -- these are the same challenges impacting the industry as well as much as the economy. But after 40 years in this business, I'll take managing costs over searching for sales and traffic any day. Those are good problems to solve because they're largely within our control. Our operators are working extremely hard every day to train our new team members, deliver great guest experiences and tying up the middle of the P&L. We've taken some additional price during the quarter to help offset our structural labor and cost of sales increases. As I mentioned during investor day, we're not going to price to buy a quarter. But as we closely monitor the issues, we've layered in incremental pricing to offset what we believe are the structural labor and cost of sales increases. And Joe will give you more detail on that. Moving forward, if we discover that what we thought was transitory, it turns out to be more structural, we'll deal with that from a pricing perspective with a disciplined approach that protects our traffic performance and keeps our brands strong. We know we have pricing power if we need it, particularly in the delivery in virtual brand channels and we're committed to maintaining our margins and our business model. And that's what we wanted you to hear. We're also working hard to remove transitory costs from the system with full recognition that the headwinds are notable and persistent, especially around labor. And while it takes some time, we're confident with the progress we're making and we will significantly reduce these costs by the back half of the year. The spike in turnover we experienced during the quarter created short-term pressure on the business as we trained our new team members to run our systems. The good news is we are quickly building staff and have as many team members now as we did pre-COVID, though there are markets that are still not fully staffed, which is limiting their capacity. This is particularly true in the Midwest, where it's taking longer to reach these optimum levels. The impact of these staffing challenges cost us 3% to 4% in first quarter in sales, which we view as upside as we -- as we get those restaurants staffed and trained over the coming months. Our top talent is engaged in these markets to solve these issues as quickly as possible. Meanwhile, the base business is strong, especially where dining rooms are fully open. When we look at the totality of the business, Chili's is running positive sales and traffic and maintaining a sizable traffic gap to the industry, most recently at 9% on a two-year look as measured by NAFTrack. And we've got sales leverage around virtual brands and deliveries that we're holding in reserve until our operations teams are stabilized and fully trained. And while the last quarter was more challenging than we expected, we're making great progress and my expectation is we will end the year strong. And as we shared with you during investor day, we've got exciting initiatives and innovation we're working on and we're confident in our future growth opportunities. Let me continue our prepared comments by providing some additional insight to the first quarter results and then share some guidance on our current expectations for the balance of fiscal year 2022. During first quarter, top-line sales performed well and outpaced pre-COVID levels by a very respectable amount despite COVID-related constraints. For the first quarter, Brinker reported total revenues of $860 million with consolidated comp sales of 17%. Keeping with our ongoing strategy, the majority of these sales were driven by traffic up 11% for the quarter, a 9% beat versus the industry on a two year look. The top-line increase resulted in an adjusted earnings per share of $0.34, up from $0.28 in the previous fiscal year. It will come as no surprise, our most significant challenge during the quarter came in the form of industrywide headwinds from both commodity costs and labor-related spend, which negatively impacted our margins and bottom-line flow through. We experienced commodity inflation in the mid-single-digit range, with significant price from pork and chicken driving the increase. As Wyman mentioned, with a greater-than-normal influx of new team members, we experienced outsized costs in training and overtime. We do consider the portion of these costs above our normal operating levels to be transitory, approximately 130 basis points in the quarter, 60 of which are incremental training and overtime costs. I Anticipate these costs working their way out of the system over the course of the next couple of quarters. In the near term, I expect a significant portion of these transitory costs to remain in the system for the second quarter. We are taking thoughtful incremental price increases to help offset these higher costs. Our third price action of this fiscal year is scheduled with our next Chili's menu update in two weeks. Following this increase, Chili's will be carrying a total of 3% of incremental price compared to last year. Of course, the mid-quarter price action will not fully impact the total price reported for the quarter. Due to the timing of price actions and the fact that Maggiano's will evaluate its menu pricing after the holiday season, we expect the second quarter blended Brinker price to be closer to 2%. Our cash flow for the first quarter remained strong, with cash from operating activities of $40 million and EBITDA of $69 million. When compared to first quarter last year, our strength in operating performance and lower level of outstanding debt have combined to improve our balance sheet and leverage position. Our total funded debt leverage was 2.6 times and our lease-adjusted leverage ended the quarter at 3.7 times. As indicated during our recent investor day, we are targeting to move these leverage ratios below two times and three times respectively over the course of the next two years. Now, turning to our outlook for fiscal year '22. We provided some guidance metrics for certain items during our last call and we are reiterating those levels as of this report. Specifically, annual revenues between $3.75 billion and $3.85 billion and annual adjusted earnings per share between $3.50 and $3.80. This incorporates our current view of the casual dining operating environment, which assumes continuing challenges in the near term, especially related to supply chain and labor issues. This guidance, both reiterated and new, assumes no additional meaningful top-line COVID-related disruptions. While guidance is for our fiscal year performance, I can provide some directional thoughts related to the second quarter. With the exception of banquet sales at Maggiano's, we expect sales to exhibit closer to normal holiday seasonality, although impacted by labor shortage constraints in certain markets. As mentioned earlier in my comments, restaurant operating margins for the second quarter will again be impacted by higher food and beverage and labor costs. We do expect restaurant operating margin to improve when compared to both the recently completed first quarter as well as the second quarter of last year, ending the quarter at a level comparable to the pre-COVID second quarter of fiscal year '20. Clearly, these are unique times for our industry, creating a variety of short-term challenges to work through. Challenges we can and will solve. We firmly believe our strategic initiatives focused on driving traffic in organic top-line growth will differentiate our performance over time with the overall benefit to our team members, our guests, and importantly, our shareholders.

sees fy earnings per share $3.50 to $3.80 excluding items. q1 earnings per share $0.34 excluding items. q1 gaap earnings per share $0.28. sees fy revenue about $3.75 billion to $3.85 billion. sees fy total revenues approximately $3.75 billion to $3.85 billion. sees fy net income per diluted share excluding special items, in range of $3.50 and $3.80.

As usual, Wyman and Joe will first make prepared comments related to our operating performance and strategic initiatives. During our call, management may discuss certain items which are not based entirely on historical facts. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. Q2 was a dynamic quarter, and Joe is going to walk you through the details. You know, as we think about all the craziness 2020 brought across our industry and our world, we're also appreciative of the invaluable lessons we gained. We learned we have the right team in the field and here at the restaurant support center. Our operators are working tirelessly every day to deliver great experiences for our guests and team members as we aggressively pursue opportunities to grow our business organically. We learned that we can drive our business and increase market share despite the hurdles brought on by a global pandemic and widespread civil and political interest. In the second quarter, Chili's increased its two-year trend of taking share and leading the category with an 18% beat in sales and a 25% beat in traffic according to KNAPP-TRACK. We learned that our strategies work. The ways we leveraged our scale and our ownership model and the investments we continue to make in technology and improving our operational systems, they were working well for us prior to the pandemic and continued to work even more effectively throughout the year. Leveraging those competitive advantages, open up opportunities for us to grow our business in unique and innovative ways, like elevating our digital guest experience at both brands and leaning into virtual brands. Those things are hard to execute and even harder to replicate. So we're taking those lessons into 2021 as we prepare to accelerate organic growth in a post-vaccine environment. We believe like most others that a widespread vaccine will indeed release pent-up dining room demand, and our operators are excited to return to full capacity and deliver more great guest experiences in person. But we don't expect a return to the old normal. 2020 fundamentally changed us as consumers. We were forced to use technology to enjoy our favorite restaurants in new ways like third-party delivery. Crop side takeout, QR code menus, and mobile payment. And now that we've experienced greater convenience and control over our experience, we're not likely to give it all back. The Brinker team knew that convenience was a big opportunity even before the pandemic. 2020 just accelerated our commitment to embrace consumers' gravitation toward digital interaction and meet them where they are. We believe digital sales and traffic will continue to be a strategic driver of our results in both the near and long term. So in preparation for fiscal '22, we're dedicating even more time, effort, and capital to accelerate in our competitive advantage as a digital leader in the category and aggressively pursuing opportunities to drive our top and bottom line. At Chili's, we're testing a fully integrated digital experience that gives our guests control over the pace of their experience and level of interaction with our team, whether they're dining in or off-premise. It's still early, but the team is making tremendous progress, and the guests and our test restaurants are responding really well. We anticipate a rollout beginning fourth quarter. We've also spent a great deal of time and effort systematizing what goes out the side door at both our brands. We got really good at takeout and delivery during the height of quarantine. So while our dining rooms are still at limited capacity, we're ensuring we have strong systems in place to support our operators and execute a robust off-premise business even as our dining rooms returned to full capacity. Delivering a best-in-class off-premise experience also supports virtual brands, which is a key component of our growth strategy. Our scale and our ownership model, coupled with our ability to mine data and develop systems, is proving very effective in this new world of virtual brands. It's Just Wings is on track and performing well. We believe there's significant upside. So we're focused on building it into a strong, sustainable brand. Some of the biggest brands in the world right now are virtual. So we know the model resonates with consumers as long as you deliver a great product. Right now, we have a one-channel solution. We're working to optimize that channel through incremental marketing opportunities and expanded consumer touchpoints. We're also going to grow the brand through additional channels like takeout. We're ensuring we have the right systems in place that will best support our operator's ability to execute at a high level, especially as dining rooms reopen. Once we know we're consistently delivering a great guest experience and our operator at -- from our operators at full volumes, we'll move strategically to launch another virtual brand. I anticipate that by the end of this fiscal year, we'll have a clear line of sight and be able to share more details with you. Listing 2020 was a crazy year, but through it, we confirm that our strategies are working and that we have an outstanding team in the field and at the restaurant support center. Every day, they demonstrate their ability to adapt for severe and win. As vaccines roll out and our country begins to leave their homes once again, I firmly believe we'll continue to win. Let me finish our prepared comments by providing some detail and context to our second-quarter results, as well as offer a few insights for our January's period's sales performance. The second-quarter fiscal 2021, Brinker delivered adjusted diluted earnings per share of $0.35. Brinker's total revenues were $761 million, and consolidated reported net comp sales were negative 12.1%. A couple of items to note for the quarter. First, let me highlight impacts to the consolidated quarter resulting from Maggiano's performance, which was highly constrained by COVID restrictions and appropriate consumer reactions to the pandemic. As a reminder, the second quarter is traditionally their highest performing quarter. However, this year, COVID eliminated most of their typically robust banquet and corporate catering channels, both of which tend to overdeliver to results for their second quarter. The brand's operating profit was $22 million below last year, constituting virtually all of the reduction in consolidated operating profit for Brinker. The impact on consolidated comp sales and restaurant operating margin were also outsized with the brand reporting net comp sales of negative 47% and a restaurant operating margin of 5.5%, down more than 11% from prior year. With the second quarter now behind us, we expect the impact from Maggiano's to the consolidated performance of Brinker to be more muted as we head into the rest of the fiscal year, particularly as the brand recovers from both an improved operating environment and the implementation of performance driving initiatives. Now, moving on to Chili's. The brand continued its relative strong performance, although also impacted by COVID restrictions during the latter half of the quarter. Operating income for the brand was relatively close to last year and only $1.6 million. Chili's reported net comp sales for the second quarter of negative 6.3%. This result does contain a holiday flip, which benefited the brand by approximately 100 basis points as Christmas moved out of Q2 and into Q3. The brand continues to meaningfully outperform the Casual-Dining sector with our gap strengthening in both sales and traffic through the second quarter. Traffic gaps in the KNAPP index exceeded 20% throughout the quarter. Performance relative to the competition was strong throughout the country, with double-digit sales gaps recorded in regions from East to West Coast. Included in the consolidated adjusted net income for the quarter with a tax benefit of approximately $2.4 million, primarily driven by employment tax credits. Part of this benefit is a $1.8 million catch-up related to Q1, which was over accrued relative to our current expectations for our annual tax liability. The consolidated restaurant operating margin for the second quarter was 10.7%. Most of the variance to prior year is the result of the lower-than-normal contribution from Maggiano's, which impacted the consolidated margin by 130 basis points. The leverage due to top-line softening in November and December was the secondary influence. A food and beverage expense was unfavorable year over year by 40 basis points primarily a result of menu mix, some higher costs from items such as cheese and produce. Labor costs were favorable 10 basis points with savings in hourly expenses, offset by deleverage. Included in this performance is a consistent level of manager bonus compared to last year's second quarter. We remain committed to retaining our restaurant leadership teams as they are critical to our success, both in the short term and as the operating environment returns to more normal conditions. Restaurant expense was unfavorable year over year by 170 basis points, driven by top-line deleverage, increased delivery, and packaging, partially offset by lower advertising and restaurant maintenance expenses. Even with the volatile operating environment, Brinker has delivered solid cash flow, generating $130 million of operating cash flow year to date. After capital expenditures of $37 million, our free cash flow for the first six months totaled nearly $93 million. As I mentioned last quarter, we first used our cash to invest in the business. Unit expansion is progressing with six new or relocated restaurants opened year to date. We also continue to invest in restaurant reimages, technology, and equipment to further enhance our guest experience and allow for better execution as our sales volumes, both on and off-premise grow. Our second priority is to pay down debt. So far, during this fiscal year, we have retired over $66 million of revolving credit borrowings, and plan for further meaningful reductions as we progress through the second half of the year. As I've indicated during prior earnings calls, we are strengthening our balance sheet by deleveraging to below 3.5 times lease-adjusted debt, which we anticipate achieving next fiscal year. From a total liquidity perspective, we ended the quarter with $64 million of cash and total liquidity of just under $658 million. While we are not providing specific guidance for the third quarter due to the ongoing operational environment, I do want to offer some perspective on January. While the first week of January was negatively impacted by the holiday flip of Christmas moving to our third quarter, top-line results for Chile's strengthened as we move through the remaining four weeks of the period. Underlying this performance is improvement in the net comp sales to a range of negative 5% to negative 6% for the last four weeks combined. These results obviously included the impact of ongoing COVID-related restrictions, particularly dining room closures in our No. 3 and 4 markets of California and Illinois. Factoring out these two markets, the rest of the brand during the last four weeks of the January period should record net comp sales of approximately positive 2%, again, clearly indicating the brand's ability to perform in a strong positive sales manner with dining rooms open. Also supporting the January results is the performance of It's Just Wings. As you might expect, the brand does well in conjunction with sports, and our ability to market on the delivery platform around major events allowed highly incremental sales and set a number of sales records during the period. Overall, we are hopeful for an improved operating environment as we move through the quarter with the opportunity to return to recovery level performance we delivered in the early fall. In March, we start to lap at the initial pandemic outbreak, which we anticipate will create meaningful year-over-year positive net comp sales comparisons. Looking beyond the short-term volatility caused by the ways of COVID restrictions to the solid long-term strategy being executed by our operators, I'm confident as to what this company can deliver for our shareholders. Our focus and execution will enable our continued performance as a leader for the Casual-Dining sector for the rest of this fiscal year and the years ahead.

qtrly adjusted earnings per share $0.35. qtrly brinker company owned comparable restaurant sales down 12.1%. brinker international qtrly total revenue declined due to capacity limitations,personal safety preferences,partially offset by increased off-premise sales. qtrly chili's company-owned comparable restaurant sales decreased 6.3%.

During our call, management may discuss certain items which are not based entirely on historical facts. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. I'm pleased with Brinker second quarter performance in the progression throughout the quarter. It was great to see the effects of the delta spike dissipate. Our momentum come back and flow through improve. Take-out and delivery remain strong in the mid-thirties, while dining room demand was on the rise. All our brands had impressive holiday results as guests got more comfortable coming together in groups, which helped us deliver a better than expected quarter with positive sales of 17.7% and adjusted earnings per share of $0.71 cents. These results demonstrate that would diminish COVID interference our business model continues to perform well, particularly at volume. Now we, along with the restaurant, the rest of the restaurant industry are not without our headwinds. Obviously, there are cost pressures, with inflation at the highest levels we've seen in years. We've responded with appropriate pricing actions and with our most recent price increase, our menu price is now up over 4%. We've been deliberate about taking incremental price increases throughout the year to ensure that with every step, we protect our traffic advantage, and we've done exactly that. Chili's continued its trend of beating the industry, marking the 16th consecutive quarter of traffic outperformance. This trend has continued into January, despite being on the current spike. Our fundamental belief is that the key to healthy, sustainable growth is to have an increasing number of guests choosing us, so we will maintain a disciplined approach to determining the timing and amount of future pricing actions. To ensure we deliver a great guest experience, and continue to grow the base business, we're focused on making sure Chili's is staffed with stable, well-trained teams and smooth operational systems. The staffing situation across the country has been the most unique I've seen in my career, but we're pleased with the hiring progress we've made. We have more team members on a per restaurant basis today than we did pre-COVID. Just last week, when I was out in restaurants, managers were saying that they're where they used to see only two or three applicants for a job and now getting 10 or more. So we're devoting increased time and attention on providing high quality training and improving retention for our new hourly team members and managers. And with the added pressure that COVID has put on our operations team, retention today is about more than just a paycheck. It's also about improving quality of life and creating a sense of belonging. We found new ways to leverage our technology to accomplish these goals. We're implementing a virtual learning platform that allows us to train both hourly team members and managers from the Restaurant Support Center. This is a live, interactive experience that improves the speed, quality and consistency of our training while reducing costs and the burden on our restaurant managers. With this system, we're experiencing a 20 percent retention improvement for new hourly team members. For managers, we're also focused on increasing career progression and diversity that's so important to our business. We're doubling down on leadership development programs for both new and tenured managers like our highly successful women, Take the Lead program. We see much higher retention levels among those who've engaged in these programs. Our rehire rates also demonstrate further evidence of the positive impact of these efforts. Historically, the rehire rate for managers who, for whatever reason, chose to leave Chili's and then come back to us has been in the low to mid-single digit range. Today, that rate is more than double, and it's even higher at the hourly level, which speaks to the power of our culture and the strength of our business. We know how crucial it is to support our teams with efficient, effective systems that enable smooth operational execution, improve the guest experience, and strengthen our base business. This is another area where our technology, expertise gives us a big advantage. At Chili's, we recently completed the implementation of two major technology systems. The first, is our handheld system, which redefines how we serve our guests. With this system, our servers cover more tables and earn more money. We're already seeing an average of 15% higher server earnings and significant improvements in guest metrics. We've been testing this in restaurants for years now so we know the potential once it's fully up and running. We're also capitalizing on the consumer's increased demand to dine off premise with a new curbside system that provides a more seamless guest experience. The operators are getting comfortable with it now, and restaurants that have fully adopted are generating 15 to 20 point improvements in guest metrics. These efforts to strengthen our base set us up to accelerate additional growth vehicles. We've ramped up Chili's development plans and currently have in excess of 20 new full size restaurants in the pipeline. We're also testing small footprint off premise centric designs for densely populated markets that don't make sense for a full size prototype. We've opened our first Urban kitchen in Manhattan, offering both Chili's and It's Just Wings. And I never thought I'd see the day when I'd see a Chili's in Manhattan, but it's been up and running for a month, and we're encouraged by its early performance. We plan to open two small footprint locations and trade areas adjacent to college campuses in the near future, and virtual brands continue to be an important growth vehicle for us. We remain fully committed to this strategy. Our size and scale are uniquely suited to enable growth through this vehicle. It's Just Wings continues to perform well, and as of this week, Maggiano's Italian Classics is up and running in over 700 restaurants. We're actively working to expand sales channels, build brand awareness and accelerate this part of our business. Second quarter proved that when our business operates with minimal COVID impact, guest demand is high and the model is strong. We generated solid cash flow and good earnings. As we continue to navigate the inflationary pressures and respond prudently for the long term health of our business, we want you to know we're committed to keeping our business model strong and we still have growth ahead of us. We see a lot of opportunity to leverage our scale, our ownership model, to grow the brands in our portfolio and move the business forward and deliver a great return for our shareholders. And this is only possible because of our amazing teams working tirelessly in the restaurants, and in the support center. Let me continue the overview of our second quarter by providing additional insight into our operating results, as well as briefly touching on the initial post-holiday operating environment as we move into the back half of our fiscal year. For the second quarter of fiscal 2022, Brinker reported $0.71 of adjusted diluted earnings per share, up from $0.35 in last year's second quarter. Brinker's total revenues were $926 million for the quarter, and our comparable restaurant sales were positive 17.7%. For some context around this performance, our sales trends improved steadily as we move through the quarter as guests resume their routines with the waning of the delta wave of COVID. Our restaurant staffing improve through the quarter, and by the holidays, we experienced some of the highest level of dining room capacity recovery since the beginning of the fiscal year in July. We ended the quarter on a high note with a strong December, driven by the several weeks leading up to Christmas. Chili's comparable restaurant sales were 12.1% for the second quarter. Their comp sales were negatively impacted approximately 1.5% by Christmas, shifting back into the quarter from Q3 prior year, and close to 0.5% from closing early on Christmas Eve. We chose this year to invest back into the well-being of our teammates in the restaurants and sent them home at four o'clock to spend time with family and friends. This reaction reduced company sales by approximately $4 million. Maggiano's reported net comp sales for the quarter of a positive 78.1%. The much improved performance resulted from a higher pace of dining room recovery and importantly, improved banquet sales. The team has also done a nice job maintaining their elevated carry-out business, which appears to have stickiness in the mid 20% range, even as the other business channels improve. Still recovery to go but the top line performance coupled with an improved business model, allowed Maggiano's to deliver an above expectations quarter. A nice step forward for the brand. During the quarter, Chili's inclusive of the virtual brands took several incremental price increases and exited the quarter carrying approximately 3% menu price compared to the prior year. In addition, as Wyman mentioned, we have taken further pricing actions in January, resulting in Chili's now carrying price of over 4% and Maggiano's adding 5% price with their latest menu rollout. We do anticipate maintaining price at these historically higher levels for the foreseeable future. Brinker increased its consolidated restaurant operating margin to 11% in the second quarter versus 10.7% a year ago. We continue to be very encouraged in periods of low COVID impact, as it allows us to realize the power of the business model and the ability to leverage margins with more normalized top line performance. Food and beverage costs were unfavorable, 120 basis points driven by commodity inflation, partially offset by price. We are seeing stabilization in our supply chain and have a good line of sight into the balance of the fiscal year, with a large majority of our contracts locked for the next six months. We are expecting high single digit inflation for the third and fourth quarter. Labor for the quarter was then favorable 60 basis points versus prior year. Our recruiting and training efforts a good progress throughout the quarter, and the higher sales volumes in the latter part of the quarter work to effectively leverage the six components of these costs. Wage rates at the manager, an hourly level remained elevated in the high single digits, and we expect to see this trend continue as we work through the remainder of the fiscal year. As the teams continue to stabilize outside of COVID spikes, we should make incremental progress in reducing costs such as training and overtime utilization. The crept into the system during times of higher turnover and lack of labor availability. Restaurant expense was favorable 210 basis points year-over-year, as the improved sales performance effectively leverage the fixed cost included in this category. As we work to further build our sales channels, we should see this leverage dynamic continue, and how balanced the inflationary aspects, and other parts of [Inaudible] Our cash flow for the second quarter remain strong with cash from operating activities of $67 million and EBITDA of $88 million. Our total funded debt leverage was 2.6 times and our lease adjusted leverage was 3.6 times. Both down slightly from the first quarter, but down significantly from prior year. Let me finish my prepared comments with some perspective related to our January periods operating performance that closes today. This has been widely reported. The Omicron variant spiked rapidly just after the Christmas holiday, and played havoc throughout the industry with staffing and sales capacity, particularly with dining rooms. We have not been immune to that impact. After a challenging first couple of weeks, we have seen the spike dissipate in many markets and are seeing improvements in our sales week-to-week as team member exclusions come down almost as fast as they rose. While it's good to see what appears to be a much quicker resolution of this COVID wave, the January period will be a setback to our overall operating results. It's important that we quickly move back to a more normalized operating environment in order to meet our expectations for the fiscal year. Taking a step back from the volatility in the current environment, and looking past the veil of COVID, we remain confident in our ability to drive improved business results across our brands. We see good growth ahead as we invest in our strategic initiatives, open an increasing number of restaurants, and leverage our technological advantages. We also remain very appreciative of our restaurant leaders and teams, and the efforts they are making each and every day to deliver the results, we simply report.

q2 earnings per share $0.71 excluding items. qtrly brinker comp sales up 17.7 %. qtrly chili's comp sales up 12.1 %.

During our call, management may discuss certain items which are not based entirely on historical facts. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. With the rollout of vaccines in full swing and restrictions lifting across the country, our guests' pent-up demand for a dine-in experience is being released as well. People are finally starting to feel safer to venture out and spend more -- spend some of the money they've been saving over the past year. We're excited about the positive momentum in our economy and the resurgence in our dining rooms. When we last talked at the end of January, we were already seeing progress in the business, even as we were navigating a COVID spike that drove another wave of capacity restrictions in our dining rooms. Just as we started to see numbers of cases come back down, we were hit with the winter storm of the century that impacted our restaurants across Texas and the southeast at levels we haven't experienced before. But despite the challenges at the start of the third quarter, we ended strong, delivering an adjusted earnings per share of $0.78 with Chili's sales returning to positive territory from an absolute perspective. And we've seen those sales trends continue into April. When we look at our more normalized performance of fiscal '19, Chili's sales are up 10%, and nearly three-quarters of our restaurants are generating meaningful positive results, even though we're still social distancing and wearing masks in all of our restaurants and we're still operating under capacity restraints across the country. We believe, all along, the consumers' increased demand for convenience would continue post-pandemic, and it's playing out that way. As our dining room traffic increases, our off-premise business continues to hold strong. We expect that when things normalize, we'll see stronger dining rooms and a takeout and delivery business stronger than it was pre-pandemic. As you think about Maggiano's in the context of this recovery, upscale casual is playing itself out a little differently. We're pleased with the significant improvements in the Maggiano's business, especially in their dining rooms. Now, it's just a matter of how quickly banquets come back. We know there's significant pent-up demand and we're well-positioned to meet it. We're already seeing signs of social occasions returning, and we feel good about building our corporate business back in time for the important holiday season. Staying focused on our strategy throughout the extraordinary events of the past year has served us well as we consistently outperformed the industry. We have good line of sight to hit the targets we were expecting post-pandemic at both Chili's and Maggiano's. Navigating the past year taught us we can run this business even more efficiently than in the past, and we're committed to keeping our cost structure in line. We think our category leadership -- driven by the multiyear investments in our infrastructure and digital capabilities will help us continue to outpace the industry. We still have a lot of heart for our restructured marketing approach, and we'll continue to leverage our digital expertise to connect with consumers and drive traffic. The subject of labor is clearly top of mind across our industry. Today's labor market is one of the toughest ones we've experienced, but we have the tools to navigate through it successfully. While our performance throughout the pandemic enabled us to keep higher levels of staffing in our restaurants, we are hiring more team members than usual to support our increased volumes. We're also benefiting from our decision to keep our managers on board throughout the pandemic as they provide the operational leadership to staff our teams and take care of our guests. We're fortunate to be able to leverage our scale, the digital expertise we built, and our PeopleWorks team to recruit talent in creative ways to keep our cost structure intact and our guests coming back. We know the best way to maintain profit margins in this business is through volume, so we leaned into virtual brands as a way to leverage our assets and tap unused capacity. It's Just Wings continues to perform well, and we're on track to hit that $150 million target we set at the beginning of the year. Almost all of our domestic franchise partners jumped on the opportunity and globally, several of our partners have already picked it up. Wings is now in nine countries and 160 locations outside the U.S., making it a formidable brand in just its first year. It's a real testament to our methodical and disciplined virtual brand strategy, how we've executed it and the leverage it brings to our P&L and to our franchise partners' business. We have the system up and running and we're executing it well, especially during high volumes. Now, we're focused on building the brand and leveraging the growth opportunities ahead. We believe takeout holds a lot of potential for us. And now that we've invested in the technology and infrastructure to support it, we're working to increase awareness levels outside the delivery channel. We've learned a lot this year with the launch of It's Just Wings that will leverage when we're ready for our next virtual brand. We're pleased with the current results from the expanded test of Maggiano's classics, and we're working through the timing to ensure we're able to support our operators and deliver a great guest experience. So this has been an exceptional year of learning for us, not just with virtual brands but in many ways. We've learned the restaurant industry in general, and specifically, our team is full of unbelievably resilient amazing human beings. I'm so impressed by how this team has risen to every challenge that's come our way. We're stronger for it, and we're prepared for the growth opportunities ahead as vaccinations spread across the country and dining rooms fill up. As we look forward, our ability to navigate through any short-term cost headwinds is solid. Our scale affords us advantages in terms of forward contracting, keeping our employment base intact, and delivering one of the strongest value propositions in the industry. Longer term, we see a lot of organic growth potential for Brinker. Obviously, we'll continue to execute our multiyear virtual brand strategy and protect our improved business model. And with higher volumes, we'll capture new development opportunities and keep the brand fresh through our remodel program. I'm proud of our progress on our results, the strength of our brands, and our line of sight to future earnings performance. While the quarter definitely had its unique issues, I'm most pleased with the momentum we are generating as we move closer to a more normal operating environment, setting up further success both this quarter and next fiscal year. For the third quarter of fiscal 2021, Brinker reported total revenues of $820 million with consolidated comp sales of negative 3.3%. Our adjusted diluted earnings per share for the quarter was $0.78. Chili's recorded flat comp sales and positive 4% traffic for the quarter, with the year-over-year performance improving throughout the quarter. Regional performance is strong nationwide with a broad range of state markets rebuilding their dining room sales back to higher levels, above 75%, let's say when compared to pre-COVID performance. We do still have a smaller set of state markets such as California and Illinois, which are important markets for us, that are earlier in their dining room reopening process. We anticipate they will follow similar growth patterns as we move through the next several months. A couple of items to note related to the third quarter. First, we had a holiday flip the first week, with Christmas moving into the quarter, resulting in a negative 1% comp sales impact. In February, we experienced Uri, a most unique winter storm that hit with historic subzero temperatures and power outages for more than a week, affecting approximately 30% of our restaurants. The material impact of the storm resulted in an estimated $10.5 million in lost revenues, a negative impact to consolidated comp sales of 1.2%, and reduced adjusted earnings per share of approximately $0.06. Once things thawed out, our positive progression returned, with average weekly sales volume hitting record highs in March. As we started to lap the beginning of the pandemic in mid-March, as one would expect, comp sales moved significantly positive and are likely to remain elevated for the foreseeable future. While pleased with this progression, we believe a two-year comp comparison is a more insightful view of our performance. In this regard, the consolidated two-year comp results for Brinker for the first four weeks of April was a positive 6.3%, driven by Chili's results of a positive 10.1% for the same time frame. I would note that Chili's is lapping off of a positive 2.9% in the third quarter of F '19. Increasing sales volumes also favorably impacted margins, resulting in a consolidated restaurant operating margin for the third quarter of 13.9% compared to 12.8% for the third quarter of fiscal '20. Again, the winter storms had a negative impact on ROM, reducing the margin by an estimated 30 basis points. Food and beverage expense as a percent of company sales was 70 basis points favorable to prior year, primarily driven by menu mix as we featured steak on three for $10 in the prior year. Pricing was slightly favorable, and commodities were flat. Labor expense, again as a percent of company sales, was favorable 70 basis points as compared to the prior year. During the quarter, lower dining room capacity year over year resulted in a reduced hourly labor cost. We do anticipate hourly labor to increase, importantly along with sales volumes as capacity restrictions lift in certain states. During the quarter, we meaningfully increased our manager bonus payout, impacting margins by approximately 60 basis points as we move to reward this critical leadership level for outstanding performance. By leveraging our scale, our well-established people, practices, and benefits and utilizing our digital connectivity know-how, we are confident in our ability to effectively manage through the current labor market environment. Restaurant expense was unfavorable year over year by 30 basis points, a reflection of increased off-premise costs such as packaging and fees, driven by our successful off-premise sales channels. Advertising expense continues in a favorable year-over-year position as we lean into our digital and loyalty-driven marketing strategy. Brinker continues to deliver strong operating cash flow. Year to date, we have generated $268 million in operating cash flow. During the third quarter, we used a portion of that cash flow to repay $115 million in revolver borrowings, bringing the outstanding balance to under $300 million. We anticipate further borrowing reduction in the fourth quarter. Additionally, we are investing significantly into the growth of our brands. Capital expenditures year-to-date totaled approximately $62 million. We opened two new Chili's during the third quarter and two additional locations in April, bringing our total for this fiscal year to 10. We are moving aggressively to further build our development resources and increase the NRO pipeline. We continue to target expanding new restaurant development to a range of 18 to 22 restaurants a year. We also are investing in reimages of our existing fleet, with a particular focus on the Midwest restaurants acquired in early fiscal '20. Brinker has continually proven to be a leader in utilizing technology to enhance the guest experience and improve operational performance. In fiscal 2021, we will invest approximately $20 million of capital and technology that enhances our digital guest connectivity, supports our virtual brand growth, and improves our in-restaurant dining experience. Now, turning to our expectations for the final quarter of this fiscal year. We expect both Chili's and Maggiano's to maintain their current favorable sales trends throughout the quarter, assuming COVID cases continue to decline and state and local restrictions continue to ease. Let me provide some additional specifics for the fourth quarter. Total revenue is estimated to be in the $950 million to $1 billion range. Adjusted earnings per diluted share are estimated in the $1.55 to $1.70 range. Weighted average diluted shares are estimated to be in the 47 million to 48 million share range. Also, as we have previously noted, fiscal 2021 includes a 53rd week at the end of this fourth quarter. As we settle into the last quarter of the fiscal year, we are excited about the momentum we have built from the uncertainty that surrounded the restaurant industry a year ago. During the past year, the members of our support teams here in Dallas stepped up and provided innovative solutions to any number of issues since the pandemic changed how we all approach our work. And our frontline team members in the restaurants have continually delivered for our guests in ways none of us would have contemplated not too long ago. We are grateful to both these groups of team members who combined to lead the casual dining sector throughout this past year. They are all committed to finishing strong this fiscal year and then carrying the success forward.

estimated impact of winter storm uri during q3 of fiscal 2021 was a decrease in company sales of $10.5 million. estimated impact of winter storm uri during q3 was a decrease comparable restaurant sales of 1.2%. brinker international - estimated impact of winter storm uri during q3 was decrease in net income per diluted share, excluding special items, of $0.06. q4 2021 revenues are expected to be in range of $950 million to $1.0 billion. q4 2021 net income per diluted share, excluding special items, is expected to be in range of $1.55 to $1.70. excluding special items net income per diluted share in q3 of fiscal 2021 was $0.78.

As is customary, today's call is open to all participants and the call is being recorded and is copyrighted by Emergent BioSolutions. Turning to Slides 3 and 4. During today's call, we may also refer to certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding Emergent's operating performance. Turning to Slide 5. The agenda for today's call will include Bob Kramer, President and Chief Executive Officer, who will comment on the current state of the company; and Rich Lindahl, Chief Financial Officer, who will speak to the financials for 2Q 2021 and as well as the forecast for full year 2021, including guidance on 3Q 2021 total revenue. This will be followed by a Q&A session where additional members of the executive leadership team are present and available as needed. Since then, Emergent may have made announcements related to topics discussed during today's call. Today, I'd like to spend some time talking about the progress we've made at our Bayview and then talk more broadly about the health of the overall business and our continuing dedication and focus on public health threats. Our second quarter performance reinforces the strength of our strategy and we are maintaining our overall guidance for 2021. Rich will go over in more detail those numbers in a few minutes. My comments are summarized across Slide 6 and 7 in the deck accompanying the call. Turning first to our efforts to produce COVID 19 vaccines. There's been a great deal of attention paid to Emergent's history as a public health risk company with a leadership role in working with the U.S. government on biodefense. When the pandemic struck, America turned to Emergent because of our history and unique capabilities, while millions of COVID-19 vaccine doses that we manufactured are currently protecting people around the world. We faced serious challenges along the way. We didn't always live up to expectations, including those that we set for ourselves. However, we have learned some important lessons which are allowing us to improve our operations and at the same time strengthening America's public health response for the future. The FDA inspection of Bayview earlier this year identified a number of areas for improvement. Along with Johnson & Johnson, we established a comprehensive, robust quality improvement plan, which includes facility improvements, capability building and deployment of enhanced tools and controls. We reviewed this plan with the agency and immediately began its implementation. We also made additional investments during the quarter in quality, compliance and operations. All of this work is in order to satisfy both ourselves as well as J&J and demonstrate to the FDA that we've achieved a level of sustainable compliance that will allow us to resume production. We've made significant progress toward this goal and as we announced earlier today, we received the green light from the FDA to resume production at the site, which will continue to be the subject of routine inspections by the FDA. They know at the end of the day, that's what matters most. I also want to recognize our strategic partners and particularly the strong collaboration with our J&J colleagues. We continue to work closely with them and the FDA as previously manufactured batches of COVID-19 drug substance are released and added to J&J's emergency use authorization, helping protect tens of millions of lives around the globe. We're awfully proud of both of these accomplishments. The hard work and investments that we've made in Bayview over the last decade, in particular the last few months are starting to pay off. In addition, we continue to work collaboratively with AstraZeneca to complete all documents related to their drug substance. So they and the U.S. government can make decisions regarding the disposition of this material. Moving more broadly to our overall business. We're in year two of our 2020 through 2024 strategic plan and continue to make meaningful progress against that plan. So let's start with our core medical countermeasure business. Our work supporting the U.S. government's priorities to protect the American public against smallpox, anthrax and other category aid biologic agents remained stable. With respect to our smallpox franchise, in the second quarter, the U.S. government has exercised and funded the next term extension for ACAM2000 under our tenure contract. This option exercise is valued at approximately $182 million and requires all doses to be delivered by the end of this calendar year. This quarter, we also secured the next option exercise for our smallpox therapeutic VIGIV product valued at approximately $56 million. For our next generation anthrax vaccine candidate, AV7909, we continue to engage with the government regarding exercising the final option under the existing contract to procure additional doses for inclusion into the strategic national stockpile. The current procurement contract for AV7909 was put in place in 2016 and facilitated procurement by the SNS starting in 2019, while we seek full approval by the FDA. We continue to make good progress toward our target of submitting our AV7909 BLA later this year. In addition, we recently secured a procurement contract to supply doses of Anthrasil, our polyclonal antibiotic therapeutic for treating inhalational anthrax to the Canadian government as part of their anthrax preparedness strategy. On the R&D front, in addition to our anticipated BLA filing for AV7909, we advanced the number of our medical countermeasure programs, and I'd like to highlight two of them. Specifically, we continue work on our COVID-HIG candidate, which is being developed in collaboration with NIAID, BARDA and the U.S. Department of Defense as an early treatment option to address at risk COVID-19 populations. COVID-HIG leverages our polyclonal hyperimmune platform and continues to show neutralizing activity against variants of SARS-CoV-2 virus in, in vitro models. We anticipate in the near-term, the initiation of a Phase 3 study led by NIAID assessing the effect of hyperimmunes on patient populations that have not yet progressed to severe disease to determine the progression can be impacted. In addition, we recently obtained approval for our Trobigard auto-injector from the Belgian Regulatory Authority. Several years ago, through interactions with various governments around the world, we identified their need to have auto-injectors available in case of nerve agent attacks. And as a result we invested in building that capability. Achieving this first approval from our auto-injector platform is a key milestone in the maturity of our auto-injector platform. Moving next to our contract development and manufacturing business, or CDMO. When we first laid out in our last strategic plan, the goal was to leverage further our drug manufacturing network of nine sites to provide development services, drug substance and drug product services, to a diverse customer base. We obviously have seen significant growth related to the pandemic, which was unanticipated at the time, but beyond COVID-19, we continue to see strong interest from current and potential clients and are winning new clients and projects in all three service pillars, those being development services, drug substance and drug product and drug packaging. Interest is coming from small, mid and large companies, as well as governments and other organizations. Rich will provide detailed information on new business, the backlog and our rolling opportunity funnel. But I like to emphasize that even though we expect variation quarter-to-quarter as we grow the business, the growth over the 2019 baseline in our strategic plan is considerable. Overall, the key takeaways that our CDMO business unit remains strong as the industry's demand for biologics manufacturing services continues to grow, while we pursue becoming an increasingly important service provider in support of pharma and biotech innovation. Finally, a third pillar of our 2024 strategy was to continue our focus on public health threats, while diversifying our customer base beyond the U.S. government. And I'm pleased to report the continued progress on that front as well. As you know, the opioid crisis has been a public health threat, and it's claimed far too many lives and made even worse by the pandemic. As announced earlier this week, we're very proud to be working with several nonprofits to help raise awareness of the risk of accidental opioid overdose through a month long public awareness campaign called Reverse the Silence. In addition, as we have previously discussed, the U.S. circuit court of appeals has scheduled the oral argument for NARCAN U.S. appeal for August 2 on the ongoing Patent Infringement Litigation. Based on this timing, we believe a decision is likely by the end of the year. Regardless of the outcome of the appellate court's ruling, we continue to focus on the public health threat and our role as a provider of solutions to address the opioid epidemic. Continuing with the diversification theme, while the travel space-travel health space has been understandably challenging, we continue to make good progress with building our development stage vaccine candidates. We still expect to initiate a Phase 3 trial for Chikungunya virus VLP vaccine in 2021. In addition, and then supported this important development program, we recently announced positive two-year persistence data from a Phase 2 clinical study that indicated that our vaccine candidate appears to generate a rapid and durable immune response. We intend to publish the results of this study in the near term. We also plan to initiate a Phase 1 study in late 2021 and early 2022, related to a number of vaccine candidates in the pipeline, including our Shigella, Lassa and universal flu vaccine candidates. As you can see, we expect that the remainder of 2021 will be busy for our product development teams, including clinical regulatory and quality as our pipeline continues to mature. That wraps up my comments regarding the business overall. On the personnel front, we recently issued an 8-K announcing the reorganization of my direct reports, Rich Lindahl, our Chief Financial Officer; Karen Smith, our Chief Medical Officer and Katy Strei, our Chief Human Resources Officer continued to report directly to me. In addition, rounding out my direct reports, Adam Havey's role has been expanded to include overall responsibility for all of our business units, as well as global manufacturing operations. Mary Oates role has been expanded to include a focus on operational excellence in addition to current responsibility for global quality. And finally, Nina DeLorenzo role has been expanded to include the management of the Global Communications and Public Affairs function, as well as the Global Government Affairs team. As part of this reorganization, the role of Executive Vice President for Manufacturing and Technical Operations that has been held by Sean Kirk has been eliminated and consequently Sean is leaving the company. We have a deep appreciation for Sean's 18 years of service at Emergent and wish him the very best for him and his family going forward. We believe this organization and reorganization of our management team allows us to best position for the long-term success of the strategic plan. To conclude, as you'll hear from Rich, our second quarter results demonstrate that Emergent's business remains durable, resilient, employees for growth. We're on track with our 2024 strategy and Emergent is well positioned to play a meaningful role in strengthening our national public health threat preparedness. And I continued to be proud of each member of the Emergent team who come into work every day, focused on a mission to protect and enhance life. I'll start on Slide 9. Despite recent challenges, we have continued to execute across all aspects of the business, vaccines, therapeutics, devices, and CDMO. Our financial condition remained strong with the liquidity and financial flexibility to fund our operations and pursue opportunistic investments. And we remain steadfast in our unwavering commitment to supporting global preparedness and response to public health threats. Today's announcement that we are clear to resume manufacturing at Bayview is a Testament, not only to that commitment, but also to the strong teamwork and organizational discipline that had been hallmarks of this company throughout it's nearly 23-year history. A quick run through of key highlights include, total revenues of $398 million, an increase of $3 million versus the prior year and in line with our guidance and adjusted EBITDA $50 million and adjusted net income of $18 million both decreases versus the prior year due to a variety of one time and other expenses, which we will discuss in a moment. Breaking down quarterly revenue into its components, anthrax vaccine sales were $52 million lower than the prior year due to timing of deliveries. NARCAN nasal spray sales were $106 million, an increase over the prior year, driven by continued strong demand for this critical drug device combination product for opioid overdose reversal across both the retail and public interest channels in the U.S., as well as increased Canadian sales. Other products sales were $24 million consistent with the prior year and CDMO services revenue came in at $191 million, an increase over the prior year and reflecting contributions from all three service pillars, primarily for our government and innovator partners response to the COVID-19 pandemic. As Bob noted in his remarks, earlier in July, the U.S. government exercised the next ACAM2000 contract option that is valued at $182 million. Accordingly, we now expect sales of ACAM2000 to resume in the third quarter and to complete all related deliveries by the end of 2021. Looking beyond revenue, the quarterly results also include cost of goods sold of $228 million, a $98 million increase over the prior year. And reflecting the increased costs associated with a substantial increase in CDMO services revenues, as well as $42 million of inventory write-offs, which I will return to in a moment. Gross R&D expense of $49 million consistent with the prior year, reflecting our continued commitment to investing in our pipeline of development programs across our three product focused business units. Net R&D expense of $24 million or 6% of adjusted revenue consistent with the prior year, SG&A spend of $91 million or 23% of total revenues, an increase over the primary prior year, and primarily reflecting the impact of higher costs to support and defend our corporate reputation and combined product and CDMO gross margin of $144 million or 39% of adjusted revenue, a decline of $97 million and reflecting the impact of $42 million of inventory write-offs due to raw materials and in-process batches at the Bayview facility that the company plans to discard as they were deemed unusable. $43 million associated with the product and service revenue mix, which was weighted more heavily to lower margin products and services and $12 million associated with costs incurred to remediate and strengthen manufacturing processes at our Bayview facility, many of which are temporary in nature. Turning to Slide 11, we will now review our key CDMO metrics. In the second quarter, we continue to obtain incremental contract awards resulting in secured new business of $53 million. However, this outcome was significantly offset by $108 million of negative contract modifications. As of June 30, the backlog is $1.1 billion. And lastly, as of June 30, the opportunity funnel was $672 million down from $807 million at March 31. While the CDMO teams ongoing business prospecting and marketing initiatives continue to generate new opportunities. For now, we are removing potential opportunities at Bayview as all manufacturing activities at that facility are currently prioritized to support the J&J COVID 19 vaccine. As a reminder, the opportunity the funnel does not include any value associated with an extension of the commercial supply agreement with Johnson and Johnson into years three to five of the existing contract. On Slide 12, you can see the sequential trends in these metrics over the last four reporting periods. We remain committed to serving our existing customers and continue to execute on our marketing initiatives with pharma/biotech innovators across all three of our service pillars. We look forward to making further progress in this important part of our business as we move forward from here. Moving onto Slide 13 for a review of our balance sheet and cash flow, we ended the second quarter in a strong liquidity position with $448 million in cash and $262 million of accounts receivable resulting in aggregate current liquid assets of nearly $710 million. This compares with approximately $732 million of aggregate current liquid assets as of the end of the first quarter. We also still have undrawn revolver capacity of just under $600 million. Finally, at the end of the second quarter, our net debt position was $416 million. And our ratio of net debt to trailing 12 month adjusted EBITDA remained below one times. These considerations include No Raxibacumab revenue until 2022. The Naloxone market remains competitive with at least one new entrant this year, but no generic entrance prior to the resolution of our patent litigation case and the successful manufacturing of J&J's COVID-19 vaccine at Bayview. On that last point, the FDA's green light to restart production at the site, which we confirmed earlier today is a key milestone toward that end. One consideration that has been revised is that our expectation for gross margin for the full year is now approximately 61% to 63% on a GAAP basis, a reduction of 200 basis points from the prior range of 63% to 65%. This change reflects the impact of the Q2 2021 performance as well as expectations for the remainder of the year. We anticipate that this lower margin will be offset by cost savings related to R&D and SG&A. Lastly, we are providing third quarter total revenue guidance of $400 million to $500 million. In the second quarter 2021, we continue to deliver solid financial results that keep us on track with our full year outlook. On a year-to-date basis, our revenues of $741 million represent approximately 41% of our full year 2021 forecasted total revenues at the midpoint, a similar waiting between first half and second half total revenues as has occurred in each of the last four years. We remain confident in the strength of the business, which continues to be robust and resilient with the capabilities, capacity and financial strength needed to deliver preparedness and response solutions to a wide range of public health threats.

sees q3 revenue $400 million to $500 million. reaffirms 2021 full year forecast for revenues and profit. emergent biosolutions - in quarter, inventory write-offs related to raw materials, in-process batches manufactured at bayview facility. emergent biosolutions - fy other product sales, expected to be impacted on assumption that a new raxibacumab contract to be awarded later than planned.

This is Bob Burrows, Investor Relations Officer for the company. As is customary, today's call is open to all participants and the call is being recorded and is copyrighted by Emergent BioSolutions. Turning to slides three and four. During today's call, we may also refer to certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding Emergent's operating performance. Turning to slide five. The agenda for today's call will include Bob Kramer, President and Chief Executive Officer, who will comment on the current state of the company and Rich Lindahl, Chief Financial Officer who will speak to the financials for 3Q 2021 as well as the forecast for full year 2021. This will be followed by a Q&A session where additional members of the executive leadership team are present and available as needed. Since then, Emergent may have made announcements related to topics discussed during today's call. Today, I'll provide an update on the progress that we've made at our Bayview site and then talk a little bit about our recent accomplishments and milestones and further talk about the business enhancements we've implemented to better focus on our customers. I'll also discuss our revised full year guidance and our decision to end our involvement in the Center for Innovation in Advanced Development and Manufacturing or CIADM program with the US government. My comments are summarized across slides seven and eight in the deck accompanying the call. So let's get started. As you've seen this year, our Emergent team and our business have shown their strength and resilience as we've made substantial progress in the quarter. Some of the recent highlights include the following. First, we've made significant progress in Bayview resuming operations and production for Johnson & Johnson at the end of July and more recently completing all remaining work on behalf of AstraZeneca. As of the end of the quarter, we've contributed over 100 million dose equivalents of COVID-19 vaccine for global distribution. Importantly, we look forward to continuing to support J&J's ongoing vaccine production in the months ahead, while continuing to support their regulatory path for their vaccine. Next we secured key ongoing commitments from the US government on two core medical countermeasure products. First, we received the contract modification exercising and funding the second of nine annual options to supply ACAM2000 to the Strategic National Stockpile valued at approximately $182 million. Secondly, we received a contract modification exercising and funding the procurement of additional doses of AV7909 for the SNS valued at approximately $399 million over the next 18 months. Also our NARCAN Nasal Spray team continues to perform well above expectations in the midst of a worsening opioid crisis helping ensure this critical product gets in the hands of the patients and caregivers who need it. We also launched our pivotal Phase III trial for our chikungunya vaccine CHIKV VLP, a key milestone for us because it's the first Phase III drug development program that Emergent has funded on its own. More importantly, it underscores our commitment to progressing our pipeline programs in pursuit of critical public health threats and expanding our travel health vaccines franchise. And finally, we continue to grow our CDMO operations securing a new multiyear contract to produce Providence Therapeutics' mRNA COVID-19 vaccine candidate at our site in Winnipeg. As these highlights demonstrate, our core strategy and diversified business model remains strong. In addition, today we're announcing that the Department of Health and Human Services and Emergent have mutually agreed to end our partnership in the CIADM program. The agreement will close out all open obligations and task orders issued under CIADM base contract including the task order related to COVID-19 response. We're proud of the work all of our employees have done over the last nine years to honor our CIADM commitments. And you'll recall that the program was initiated in 2012 in recognition of the shortage of domestic manufacturing capability needed to respond to an unforeseen widespread public health threat following the H1N1 influenza pandemic. While an innovative idea execution of the CIADM program and the necessary operational investments by all administrations fell short of what was needed to maintain capability in case of an emergency. In fact, when the COVID pandemic struck, Emergent was just one of two original partners remaining in the program. Despite the issues, we responded swiftly engaging several of our facilities to meet the government's needs and made incredible progress in a time frame never before attempted under very challenging conditions. Our COVID-19 work with BARDA under the CIADM program included a number of activities. These included: a reservation of capacity at our Bayview, Camden and Rockville sites; a direct capital investment by the government in additional fill/finish capacity at our Camden and Rockville sites; both drug substance manufacturing for AstraZeneca in the reserved space at Bayview; and finally, drug product manufacturing for various COVID-19 therapeutic candidates in the reserved space in Camden. As a reminder, the COVID-19 work under the CIADM program was always expected to end this year and importantly our decision does not affect our work with Johnson & Johnson as it was never part of our CIADM contracting. We will continue to produce their COVID-19 vaccine drug substance at our Bayview facility. And as I mentioned at the top of the call, we're extremely proud that our collaboration with J&J and in addition to AstraZeneca has contributed over 100 million dose equivalents of COVID-19 vaccine for global distribution. So while we conclude our involvement in the CIADM program and bring to closure this important chapter in our business, it needs to be said that the work we accomplished under the program and related task order contracts with the US government served a critically important purpose one that our entire organization is immensely proud of. Despite the setbacks we had earlier in the year the team's been committed to our mission of protecting and enhancing life and steadfast in learning from our past to be even better. I'm proud of the team's resilience and the positive impact on millions of lives across the globe and importantly we're not done yet. As we look forward, we're encouraged and optimistic about the opportunities we see ahead across our entire business. Let me now pivot to recent business changes we've implemented in support of our strategy. During the quarter we've shifted our operating structure to now have three business lines each focused on distinct customer or market types. They are: the newly created government or medical countermeasure business; the commercial business; as well as the services or CDMO business, which remains essentially unchanged. To be clear, all three of these report to our Chief Operating Officer, Adam Havey. The government or MCM business will be led by Paul Williams who was previously running the vaccines business unit. This new structure will better serve our customers by sharing their breadth and depth of experience as one team and reduces the complexity with multiple touch points going into the government on different business units. The commercial business will be led by Doug White, who previously ran the devices business unit. He will now drive our core commercial capabilities and seek new investment opportunities. Doug's portfolio includes NARCAN Nasal Spray, travel vaccines and other similar customer facing products. This organizational change provides an opportunity to put the strategic and operational pieces of this business under one umbrella that were previously across multiple business units, positioning us to expand into new markets and efficiently integrate newly acquired products in the future. The services or CDMO business, the head of which we're continuing to accurately recruit for will continue to service our pharma and biotech innovator customers providing development, drug substance, and drug product manufacturing services that capitalize on our core skills and capabilities. As for our R&D programs, we established a centralized and cross-functional product development committee that will govern the R&D portfolio. We're also creating a science and innovation team led by Dr. Laura Saward, who previously ran the therapeutics business unit. Overall this new structure positions us to execute effectively on our strategic plan and deliver long-term success, strengthening our foundation and providing new opportunities for growth. So getting back to the operational highlights. As I mentioned we resumed production of J&J's COVID-19 vaccine at our Bayview facility in late July, following the implementation of rigorous and comprehensive quality enhancements and the FDA's permission to restart. Over the last five months, we've invested millions of dollars to overhaul cleaning procedures, upgrade our facilities, implement additional quality control and oversight practices, and make significant improvements to the processes for batch record keeping, personnel training, data integrity and lab testing. Emergent teams along with support from our J&J colleagues oversee all operations and materials transfer. We took the added step to bring in a recognized independent consultancy, who is expert in quality control and who are now reviewing and performing certifications prior to release of any batches. We continue to work closely with the FDA and J&J toward increasing our production level consistent with these new procedures. Finally, I want to commend our team whose around the work efforts over the last 18 months that accelerated the transformation of our Bayview facility from a clinical stage facility to one that is poised to support much larger scale production. Now moving to our core government or medical countermeasures business. Our work helping the US government protect Americans against smallpox, anthrax and other Category A biologic agents remains a top priority for the company. Recall that we previously announced the US government exercised and funded, the next term extension for ACAM2000 under our 10-year contract and we also secured the next option exercise for our smallpox therapeutic, VIGIV. We recently filed that up with the US government exercising the final option under the existing contract to supply doses of our next-generation anthrax vaccine candidate, AV7909 to the Strategic National Stockpile valued at approximately $399 million over the next 18 months. As a reminder, the current contract for AV7909 facilitates procurement by the SNS, while we seek full FDA approval. And to that end I'm pleased to announce two important updates today on the ongoing regulatory path for AV7909. First, the FDA has agreed to our request for a rolling review of the AV7909 BLA. The rolling review allows us to submit sections of the application to the FDA as they're completed rather than waiting until the entire BLA package is compiled. We anticipate initiating the BLA submission in mid-December. Based on this timing, we anticipate BLA approval by the FDA in late 2022 or early 2023. Second, the FDA has granted orphan drug designation for AV7909. This designation provides development incentives including a waiver of the BLA filing fee as well as potential seven-year marketing exclusivity upon regulatory approval. On the R&D front we recently initiated our pivotal Phase three safety and immunogenicity study for our single dose chikungunya vaccine candidate. CHIKV VLP is the only virus-like particle based vaccine candidate currently in development for active immunization against chikungunya disease. The study expects to enroll 3,150 participants in 50 US sites in the coming months. I'd like to congratulate the teams across our organization, who've made this significant milestone possible and who are advancing the development pipeline that will help fuel the long-term growth of the company. We look forward to updating you on this program as we make progress. Finally, with the launch -- the potential launch of a few other Phase I studies anticipated over the next year, as well as continued progress across our auto-injector platform programs focused on chemical threats, I remain encouraged by the contribution of our R&D programs and the effect they could have on our growth in the coming years. Moving next to our CDMO business. I want to highlight that we continue to see growth in this area both related to the pandemic and beyond. We continue to receive interest from both existing clients, and new prospects from small, mid and large-sized companies as well as governments and other organizations. Importantly, we're winning new business across all three service pillars of development services, drug substance and drug product including drug packaging. For example, during the quarter we signed a new five-year agreement with Providence Therapeutics to support its mRNA vaccine development out of our Gaithersburg and Winnipeg facilities. Building off an existing agreement this new baseline agreement is valued at $90 million and uses portions of all three of our integrated service capabilities, demonstrating the value of our integrated molecule-to-market model for customers. We will continue to cultivate growth, expansion and maturation of this core business. With respect to NARCAN Nasal Spray, our focus on the public health threat posed by the opioid epidemic is as strong as ever. Our NARCAN team has worked tirelessly to ensure that NARCAN Nasal Spray is available and affordable as overdoses continue to devastate families and communities nationwide. We remain committed to combating this crisis, not only through our work on NARCAN, but also through outreach efforts and public campaigns to elevate awareness of the dangers of opioids. On the ongoing patent infringement litigation front, recall that the US Circuit Court of Appeals held final oral arguments on August two of this year. While timing is up to the appellate court we continue to believe a decision could come by the end of this year. Importantly, in the event of a generic entry we are prepared to launch an authorized generic product in partnership with a large generics company, and are confident in our ability to maintain significant market share. Longer term we see Narcan and more broadly our opioid-related portfolio a core component of our portfolio of solutions impacting public health. Finally, let me update two important corporate updates. First, I'm pleased to announce that we intend to publish our inaugural ESG or sustainability report later this month. The report will provide insight into our environmental, social and governance practices. These include: product quality and patient safety standards; our human capital and employee-focused programs; our existing charitable and volunteer programs; our work to safeguard the environment and health of our communities and employees; as well as our corporate governance and business ethics principles and practices. I also wanted to note that on a personnel front Mary Oates, previously our Head of Global Quality has decided to pursue a new career opportunity and has left Emergent. We're conducting an external search for a new Head of Global Quality. In the meantime, I'm confident, that our team of talented dedicated professionals will continue the important quality advancements made in the last several months. To conclude our third quarter operational results demonstrate, that our business remains resilient and poised for growth, in line with our strategy. We continue on our path of both organic opportunities and potential M&A informed by prudent capital deployment all aimed at generating enhanced shareholder value. I'll start on slide 10 and open my remarks with some summary thoughts to put today's earnings report into context. As you just heard from Bob, solid execution in the third quarter continues to illustrate the strength and durability of our differentiated business. Our medical countermeasures platform was further reinforced by the ACAM2000 option exercise in July and the AV7909 contract modification on September 30. We have restarted operations at Bayview and are helping J&J deliver on commitments related to their COVID-19 vaccine candidate. The NARCAN Nasal Spray franchise is gaining momentum as we support the battle against the continuing public health crisis in opioids. We are making steady progress building our CDMO business as evidenced by recent contract awards. And we are advancing our R&D programs, most notably with the recent launch of the chikungunya Phase III trial. Having said that, there are clearly several topics that merit further explanation, starting with the primary drivers of our revised 2021 financial guidance as laid out on slide 11. The biggest influence relates to our mutual agreement with the US government to terminate the CIADM contract and associated task orders. This change will be partially offset by the recognition of $60 million in deferred revenue and other final payments related to the CIADM base agreement. You'll also note that given continued strong momentum in NARCAN Nasal Spray, we increased the full year forecast range of that product by $95 million. After taking into account various other puts and takes, we have tightened the range of our total revenues which lowered the midpoint by $50 million. During the third quarter, following a review of our revenue recognition policy, we determined that it was appropriate to reclassify certain suite reservation fees from stand-ready obligations to leases and therefore to apply lease accounting guidance. You will note that our income statement now has separate line items for CDMO services and CDMO leases. This change should also allow you to better understand the underlying fundamentals of our CDMO service-related revenue. Under the lease accounting guidance, based on uncertainty regarding collectability of the full contracted amount, we converted to a cash basis of accounting for the BARDA task order. Accordingly, in the third quarter we adjusted our revenue to align with the $315 million of cumulative cash collected under the BARDA task order from May 2020 through September 2021. Looking ahead to the fourth quarter, pursuant to the termination of the CIADM agreement, we expect to recognize $215 million of revenue, comprised of $155 million of task order closeout payments and the $60 million of deferred revenue and other I just discussed. Termination of the CIADM agreement also results in asset write-downs of approximately $38 million. So we expect the net addition to pre-tax income in the fourth quarter related to this event to be approximately $177 million. During the quarter, our new business wins were $118 million, a very strong performance for the organization, primarily reflecting the impact of the Providence Therapeutics contract for COVID-related work. As for backlog, the sequential change reflects the impact of the termination of the BARDA task order. Regarding the opportunity funnel, the period-to-period decrease reflects both the conversion of opportunities into secured business as well as two large contract opportunities that we did not win. One is a company that decided to take the work in-house and the other is one that decided to defer the work to a future time. That said, we continue to identify new leads and secure new business and this period-to-period fluctuation is not surprising as we pursue opportunities. Lastly, gross margins and profitability. As we have previously discussed, our gross margins are primarily driven by revenue mix across several dimensions: product sales proportion of products versus services and the types of services delivered. The adjusted gross margins on our products continue to remain stable and consistent with historical patterns. On the CDMO services side however, we are currently seeing several trends which are applying pressure to margins. These include: lower capacity utilization for drug substance production at Bayview while it is solely dedicated to J&J's COVID-19 vaccine candidate; the additional investments we are making at Bayview in support of our quality enhancement plan; and higher raw material costs than originally anticipated. While these factors are currently producing CDMO gross margins below our expectations over time we anticipate that CDMO profitability will improve as we continue to grow our CDMO revenue base, increase network utilization drive a higher mix of drug substance manufacturing, realize scale efficiencies and improve productivity. With that let's turn to the third quarter numbers. As indicated on slide 12 highlights include total revenues of $329 million below the prior year period and our guidance principally due to the $86 million reversal of revenue for the BARDA task order I mentioned earlier. And adjusted negative -- adjusted EBITDA of negative $3 million and adjusted net loss of $19 million both significantly below the prior year period and due to a variety of factors which we will discuss in a moment. Other key items in the quarter include: NARCAN Nasal Spray sales were $133 million an increase over the prior year reflecting a clear continuation of this franchise's robust performance and driven by continued strong demand for this critical drug device combination product for opioid overdose reversal across both the retail and public interest channels in the United States as well as increased Canadian sales. ACAM2000 sales were $81 million higher than the prior year due to timing of deliveries following our announcement in July of the US government's exercise of the second option under the existing 10-year procurement contract. As we have stated previously we expect to complete all related deliveries under this option exercise by the end of 2021. Anthrax vaccine sales were $16 million lower than the prior year due to timing of deliveries as the modifications of the BARDA contract for AV7909 was not made until the last day of the quarter. Other product sales were $41 million consistent with the prior year. And CDMO revenues came in at $42 million lower than the prior year period due primarily to our move to cash basis revenue accounting for the BARDA task order and partially offset by $38 million in out-of-period adjustments related to our change in CDMO services revenue recognition policy which will be detailed in our 10-Q filing. Looking beyond revenue we are now breaking out cost of goods sold between product and CDMO services. Product cost of goods sold in the quarter were $103 million a $17 million decrease from the prior year largely due to one-time charges in the prior year offset by increases in the current year due to higher product sales. CDMO cost of goods sold were $114 million an $86 million increase over the prior year reflecting the impact of out-of-period adjustments of $37 million as well as incremental costs at our Bayview facility as mentioned previously. Gross R&D expense of $50 million lower than the prior year primarily reflecting a non-recurring $29 million impairment charge in the prior year. Net R&D expense of $33 million or 10% of adjusted revenue in line with the prior year. SG&A spend of $82 million or 25% of total revenues an increase over the prior year reflecting growth in headcount and professional services. And gross margin was 30% in the quarter. As I mentioned earlier we are now providing two additional gross margin metrics. Adjusted product gross margin was 62% of product sales consistent with the prior period. And adjusted CDMO services gross margin was 10% lower than the prior period primarily reflecting the impact of increased operating costs at our Bayview facility and the implementation of our quality enhancement plan. Turning to slide 13 we will now review our key CDMO metrics. In the third quarter we secured new business of $118 million reflecting robust demand for our services. As of September 30 the rolling backlog was just over $1 billion a 9% decline from the second quarter reflecting the impact of the BARDA task order termination. And lastly as of September 30 the opportunity funnel was $284 million down from $672 million at June 30 as I said before primarily reflecting a significant new business win in the current quarter as well as the loss of two large opportunities. On slide 14 you can see the sequential trends in these metrics over the last five reporting periods. We look forward to making further progress in this important part of our business as we move forward from here. Moving on to slide 15, I'll touch on select balance sheet and cash flow highlights. We ended the third quarter in a strong liquidity position, with $404 million in cash and undrawn revolver capacity of just under $600 million. Our net debt position was $454 million, and our ratio of net debt to trailing 12 month adjusted EBITDA was one times. Our year-to-date operating cash flow was negative $8 million, primarily reflecting timing of cash collections and increases in inventory balances. Additionally, we reported cumulative year-to-date capital expenditures of $178 million. Total revenue of $1.70 billion to $1.8 billion; NARCAN Nasal Spray sales of $400 million to $420 million; anthrax vaccine sales of $250 million to $260 million; ACAM2000 sales of $200 million to $220 million; and for the CDMO business we now anticipate a range of $600 million to $650 million. Our profitability guidance includes adjusted EBITDA of $500 million to $550 million and adjusted net income of $315 million to $350 million. These include: no raxibacumab revenue this year; the naloxone market remains competitive with at least one new entrant this year, which we actually saw with a branded competitor coming on market in Q3; no generic entrant prior to the resolution of our patent litigation case, and the continued manufacturing of J&J's COVID-19 vaccine at Bayview. The considerations that have been revised are as follows. We have incorporated the financial implications of our mutual agreement to terminate the CIADM agreement and related task orders, including the expected payment in Q4 of the relevant agreed upon amounts. And the expected range of adjusted gross margin is now 54% to 56% taking into account both year-to-date performance and anticipated performance in the fourth quarter. On a different note given the changes, we have seen in our business during the pandemic we've received a number of questions about what to expect from the business going forward. As you know, our custom has been to provide a first look at annual guidance at the beginning of each calendar year once our budgeting process is complete. We expect to maintain that practice for 2022, but I would like to offer a few thoughts on directional trends, so you can better understand the shape of the underlying business. In terms of top line revenue, we haven't finished our budgeting process for 2022, but the current analyst consensus for total 2022 revenue directionally seems to be in line with our thinking. More specifically, we anticipate that our medical countermeasures business will remain steady with high visibility provided by the long-term contracts, we currently have in place. The opioid crisis has been worse than we anticipated when we acquired the program and as a result NARCAN Nasal Spray revenue has continued to exceed expectations. Of course, the question on everyone's mind is what will happen, if a generic competitor enters the market. More than half of our market is in the public interest space and so not necessarily subject to the usual automatic switch for AB rated products. And for the remaining product markets as Bob said, we are prepared to launch an authorized generic in partnership with a large generics company. All-in-all, we are confident that, it will continue to be a meaningful contributor to both our top and bottom line going forward. On the travel health front, we are monitoring and calibrating our expenses to international travel conditions and do not anticipate meaningful revenue from our travel vaccines next year, although we are expecting upticks in travel following that. For CDMO, we expect we will continue to support J&J out of our Bayview site, and build on the opportunities we see to serve customers from several of our other revenue-generating sites. In terms of profitability, we are making investments in our manufacturing and quality systems that are putting pressure on our CDMO gross margins, but we expect these will continue to gradually improve over time. And we are taking a disciplined approach to managing our SG&A expenses, as we prepare for a return to stronger top line growth in 2023 and 2024. With respect to R&D, we continue to invest in long-term value drivers as well as programs with non-dilutive funding, but we are balancing those investments with some anticipated portfolio rationalization. As a result, we currently anticipate that these trends may constrain adjusted EBITDA margins to a level that is at or below, the ranges we saw in 2018 and 2019. We will refine these views, and expect to provide more definitive information early in the New year. In the third quarter of 2021 we continued to deliver solid performance in certain key aspects of our business. Anthrax vaccines, ACAM2000 and the rest of the core medical countermeasure products, the Narcan, Nasal Spray franchise as well as the new business wins in CDMO services. We also experienced continued forward progress at scaling up the production capabilities at the Bayview site in support of J&J. And we realized an important pipeline milestone with the CHIK vaccine Phase three trial launch last month. While our guidance for this year has been revised a bit to reflect the termination of the CIADM agreement as well as current profitability trends in our CDMO business bringing the CIADM agreement to a conclusion was a clarifying step forward for the company. Finally, our conviction in the long-term growth potential of our business is as strong as it has ever been.

qtrly total revenue $329 million versus $385.2 million. sees 2021 total adjusted net income of $315 million to $350 million.

The fourth quarter showed once again that the global environment remains very dynamic, presenting new challenges that we've learned to turn into long-term opportunities. Our top line momentum reached 10% or 9% organic in a constrained environment. Institutional and specialty grew 19%; pest elimination 10%; and industrial remained strong, growing 8% in the quarter, and our new business and innovation pipelines remain really strong. At the same time, COVID came back during the fall, especially in North America and in Europe. As we all know, inflation kept rising substantially and still, top line gain momentum, including pricing, which accelerated to 4% as we exited the quarter. This was required to compensate for significant incremental costs from supply constraints and much high inflation pressure on our raw material and freight costs, discussed by close to 20% in the fourth quarter, nearly double the rate we saw in the third. And just being close to a total of $1 per share unfavorable impact for the full year with almost half of that in Q4 alone. So once again, our team demonstrated our commitment to protect our customers' operations at all time and in any condition to ensure food, power, water, and healthcare supply are protected while we also keep enhancing our margins for the long run. We now enter 2022 with confidence and well aware that the environment might change, but we will keep doing our very best to stay ahead. We expect the global economy to remain strong even if not as a perfect straight line. The exact timing for the end of COVID impact remains hard to predict, but we expect it to be mostly behind us by the middle of this year. We also expect inflation to remain at a high level, at least for the first half of the year, while we expect it to ease during the second half, and we're getting ready for this, too. We will keep driving growth by fueling the institutional recovery, which is going really well by generating strong new business by investing in our new growth engines like life sciences, data centers, or microelectronics. And by making sure we remain one of the very best places to work for the most promising and diverse global talent. We'll keep addressing inflation by further enhancing our productivity through digital automation as we've done over the past few years by leveraging high-margin innovation and naturally by accelerating our value pricing. For the full year '22, we expect raw materials and freight costs to further increase with inflation remaining high before it eased during the second half of the year. Our full year pricing expectation for '22 is expected to be in the 5 to 6% range, which combined with our steady productivity work is expected to get ahead of inflation dollar in the first half and enhanced margins in the second half of the year and certainly beyond as the Ecolab model has proven many times. All these actions should lead to a strong '22 with strong top line and adjusted earnings growth in the low teens for the full year and a first quarter with very healthy sales growth and a flattish earnings per share as pricing keeps building fast. Finally, as we've done throughout the pandemic and against major market disruptions, we will remain focused on the future. For us, it's all about delivering long-term value to our customers and to our shareholders, while managing the short term. Our mission of protecting people and the resources better to life is as important as it's ever been. Our opportunity has never been larger as we chase a global market that's today greater than $150 billion and growing fast. We have the confidence that we will look back on this period and truly feel we did the right things the right way by protecting our teams and our customers when they needed us the most and by protecting our company in ways that made Ecolab even stronger and more relevant. As the infection prevention company, helping customers protect their customers and their businesses with Ecolab Science Certified. And as the sustainability company, helping our customers progress on the net zero journey, all of which leading to strong top line and consistent, reliable double-digit earnings per share growth. And ultimately, getting us back on our pre-COVID earnings trajectory. That concludes our formal remarks. As a final note, before we begin Q&A, we plan to hold our annual tour of our booth at the National Restaurant Association show in Chicago on Monday, May 23. If you have any questions, please contact my office. Operator, would you please begin the question-and-answer period?

expect covid impacts to remain significant during first half of year. qtrly net sales $3,364.6 million versus $3,065.3 million. expect inflation to remain high before it progressively eases during second half of year. expect these cost impacts to remain especially strong in q1 of 2022, even slightly higher than those experienced in q4. ecolab - look for q1 to show healthy sales growth and flattish yoy earnings per share comparison impacted by continued high raw material and freight costs. ecolab - for 2022, believe cost efficiency actions will enable to deliver continued strong sales gains with adjusted earnings per share growth reaching low-teens levels.

The purpose of the call is to provide you with information regarding our third quarter 2021 performance in addition to our financial outlook for the balance of the year. Our commentary today will also include non-GAAP financial measures, which we believe provide an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. With that, I'll hand it over to Ari. Continuing our positive momentum from last quarter, we once again surpassed our quarterly revenue and adjusted EBITDA targets. Given the outperformance and our positive outlook for the balance of the year, we have also raised our full year outlook, which Jason will discuss in more detail shortly. Before he does, I want to discuss three important things; UFC record performance year to date, the continuation of pent-up demand for entertainment, and the attractive prospects of sports betting. UFC posted its best nine-month year-to-date period in the 28-year history in terms of revenue and adjusted EBITDA, and this despite lower event output in the third quarter versus third quarter 2020. During the third quarter, UFC sold out all three Pay-Per-View events and UFC 264 became the third highest-grossing event in UFC history. Gate revenues at all events were enhanced by our own VIP experience offering from our location that puts fans in the center of the action. Meanwhile, commercial Pay-Per-View saw the highest worldwide grossing revenue quarter since the pandemic began, driven in large part by the many US restaurants and bars starting to open in full capacity. We also saw strong performances across our consumer products and licensing and sponsorship categories. UFC's sponsorship revenue is up 59% compared to third quarter 2019, the last non-COVID impacted year. We're seeing similar sponsorship increases across the balance of our owned and operated sports and events portfolio. In terms of international media rights, we've closed nine new deals throughout Asia Pacific during the period. If you combine these nine with the prior five international rights deals we discussed last quarter, the aggregate average annual value is more than 80% over the prior deals. Beyond UFC, our businesses continue to benefit from the pent-up demand for entertainment created by the pandemic. While reopening rates continue to vary geographically, we are seeing increased activity across all lines of our business. Linear and digital platforms are in a race for more content, creating an uptick in television and film productions. And we have room for more optimism as Broadway recently reopened and music artists commencing multi-year tours in large venues. On the sports side, fans are filling stadiums and sponsors are eager to spend dollars to reach those fans and make up for lost time. If you look at Super Bowl 56, ticket sales from our location, they are pacing meaningfully ahead of 2019 sales for Super Bowl 54. The average ticket price is up over 50% on a like-for-like basis. Now turning to sports betting, a fast-growing complement to sports media rights and live events. The combination of the pandemic's role as a catalyst for online sports betting, the increased betting legalization among US states, and the opening of new territories globally has laid the foundation for further growth of our IMG Arena and soon to include OpenBet sports betting business. As it currently stands, IMG Arena is part of our events, experiences, and rights segment, upon closing of our OpenBet acquisition, which we announced at the end of the third quarter, and which is expected to close in the first half of '22. IMG Arena and OpenBet will combine to form a fourth operating segment. This will create greater transparency and enable us to better focus on this growing business. IMG Arena is already a major global player in the sports betting market, serving more than 470 sportsbook brands by supplying data and video feeds from rights holders including PGA Tour, UFC, ATP, and MLS. Layering in OpenBet's betting engine, which processed nearly 3 billion bets in 2020, and its modular suite of content offerings with IMG Arena's feeds and virtual products will create a unique end-to-end solution for sportsbooks and rights holders. It's a fully integrated tech solution combined with a fan-first approach to content, a complete turnkey solution that we can take to existing rights holders within our broader media business is also making us more attractive to prospective clients. We expect this integrated offering will help rights holders drive increased fan engagement and new modernization opportunities in turn increasing the sports betting handle. As I mentioned, while we don't anticipate the acquisition to close until sometime in the first half of 2022, we've already received a high level of interest from sportsbooks and rights holders around the combined entity. And we are extremely encouraged by the growth opportunity ahead. Before we get to our revised guidance, I'll start by walking you through our financial results for the quarter and providing you with some additional color around what we're seeing in each of our segments. Any comparisons I give will be in reference to last year, which was impacted by COVID. For the quarter ended September 30, 2021, we generated approximately 1.4 billion in consolidated revenue, up 526.8 million or 60.9% over the prior-year period. Adjusted EBITDA for the quarter was approximately 283.3 million, up 105 million or 58.9%. Our own sports property segment generated revenue of 288.5 million in the quarter. The segment is down 10.6 million in revenue in comparison to the prior-year quarter. This is attributable in part to a 25 million contract termination fee recognized in the third quarter of 2020 that did not recur in 2021. It is also due to more events being held in Q3 2020 as a result of events shifting from Q2 due to COVID-19. The revenue decline was partially offset by UFC's continued strong growth across live events, residential and commercial Pay-Per-View, consumer products, licensing, and sponsorship, as well as additional PBR events held in the quarter. The segment's adjusted EBITDA was 134.7 million. UFC posted its best nine-month year-to-date period in history in terms of revenue and adjusted EBITDA. Outside of its strong live event and Pay-Per-View performance, we signed several new licensing and sponsorship deals. These included a partnership with Icon Meals, a healthy ready-made meals company, and multi-year sponsorships with Battle Motors and ZipRecruiter. Internationally, as Ari mentioned, we also secured nine new media rights deals in Asia Pacific, significantly increasing our distribution throughout the region. Meanwhile, live events on ESPN and ESPN+ continue to perform well with viewership across platforms. The Return of The Ultimate Fighter also approved the tremendous success. Viewership on ESPN+ indicates the season performed better than the last three seasons that aired on FOX Sports 1. On the fan engagement front, where UFC continues to have one of the most engaged follower bases among all major US sports, social followers grew over 40% and YouTube subscribers grew over 30% year over year. Lastly in this segment, PBR also continued its positive momentum, taking us right past streaming service to Pluto TV, bringing its linear and streaming content all under the ViacomCBS umbrella. The company also signed several new national partnerships and licensing deals in the quarter and launched its first NFTs last month. Now turning to events, experiences, and rights. This segment recorded revenue of 446.3 3 million, an increase of 62.1 million or 16.2% year over year. The increase was primarily driven by greater events and production revenue attributable to the return of live events in 2021, as well as the addition of the recently acquired NCSA. This was partially offset by a decrease in media rights revenues, primarily due to the return to a normal schedule of European soccer matches in the quarter and the expiration of two European soccer contracts in the second quarter of 2021. Adjusted EBITDA improved 94.6 million to 85 million compared to the third quarter of 2020. This was primarily driven by the growth in revenue and a decrease in direct operating costs. To give you a little color on the activity we're seeing in this segment, there were several major sporting events during the quarter in which the Endeavor flywheel was on full display. The first was Wimbledon, a relationship that dates back over 50 years. IMG produced the events' official TV and radio channels, showed the tournament in flight on its Sport 24 channel, secured 80% of its official partnerships and brokered a deal to launch a commemorative NFT. At The Open Golf Championship, IMG served as a host broadcaster and the official commercial representative for the event showed the event on Sport 24 and ran hospitality. Meanwhile, our experiential marketing agency 160over90 created the tournament's Spectator Village. And lastly, at September's Ryder Cup, our location handled all consumer travel and ticket exchange program for the event, while 160over90 operated consumer experiences and hospitality programs across the event footprint. IMG Arena packaged and delivered all official event data for sportsbook operators via its Golf Event Center and Sport 24 carried the event in flight. Meanwhile, dozens of clients competed across all three events including Novak Djokovic, who played the men's single title at Wimbledon, while Patrick Cantlay and Jordan Spieth helped power the US to win at the Ryder Cup. Across the rest of our event portfolio, we held one of the largest New York Fashion Week ever and several of our European festivals hit milestones. The big [Inaudible] celebrated its 10th anniversary with 50,000 attendees. And Taste of Paris saw record 32,000 guests attend the biggest food festival in France. And lastly, Frieze London returned with its first in-person event since 2019. We saw most productions and touring events come to a halt due to COVID. Growth in this segment was primarily attributed to a significant increase in Endeavor Content project deliveries, agency-client commissions, and marketing and experiential activations. Endeavor Content deliveries included See Season Two to Apple TV, Nine Perfect Strangers to Hulu in the US, and Amazon internationally. The final four episodes each of Truth Be Told to Apple TV and The Wall Season Four to NBC, as well as docuseries McCartney 3,2,1 to Hulu. Last quarter, we referenced that Endeavor Content revenues were impacted by a shift in content deliveries into Q3, which subsequently had a positive impact on this quarter. Adjusted EBITDA for the quarter was 141.8 million, an increase of 100.1 million, primarily driven by the growth in revenue. As mentioned last quarter, we continue to pace ahead on WME bookings for the second half of the year. As concerts resumed in the quarter, WME have five of the six top tours and seven headliners at the Lollapalooza and Bonnaroo festivals. On the film front, the agency was behind summer blockbusters such as Cruella, Jungle Cruise, A Quiet Place two, and Shang-Chi, the latter of which became the top-grossing film of the pandemic era in North America. On the sports side, more than 50 clients competed in the Tokyo Olympics and nearly 20 broadcast clients covered it, while the men's, women's, and juniors' US Open singles titles were all won by clients. On the brand side, IMG Licensing was named best licensing agency for its work with Goodyear and also launched a number of new product lines on behalf of talent and brands, including Shinola, Dolly Parton, Fortnite, Bugatti, Jeep, and Aston Martin. Meanwhile, 160over90 continued gaining steam with its brand clients looking to activate at major sporting events with increased fan capacities. At the summer's Olympic Games, the agency worked with several official partners, including managing the athlete relationships for Team Visa and Team Coca-Cola. Finally, in this segment, we shared last quarter that we had initiated the sales process for a portion of Endeavor Content. As a reminder, our plan is to divest the required portion of the WGA restricted business and retain the non-restricted businesses. We continue to have positive conversations and are very bullish. We've narrowed it down to a shortlist of potential buyers and we'll let you know when we have more to share on that front. The updated guidance I'll share shortly assumes Endeavor Content is status quo for the balance of the year. Now before I discuss guidance, I do want to briefly touch on our capital structure. In Q2, we paid down a portion of debt under WME, IMG, and UFC credit facilities. And in October, we raised 600 million of debt under our UFC facility. We remain focused on strengthening our balance sheet and are on track to achieve or sub four times leverage target. Now on to our updated guidance for the full year 2021. As we've said before and will continue to say, we believe looking at our business on an annual basis is the best way to view it given the quarterly fluctuations related to timing of events, timing of business transactions on behalf of our clients, and timing of content deliveries. As Ari mentioned earlier, we've been pleased with the pace of reopening, which has led to an uptick in productions and increase in attendance at events. We, of course, continue to monitor vaccination rates and variants globally and plan for any potential impact. As it currently stands, we remain generally positive on our outlook for the remainder of the year and into next. We are, therefore, once again raising our revenue guidance from a prior range of between 4.8 billion and 4.85 billion to now between 4.89 billion and 4.95 billion. And on adjusted EBITDA, we have raised the range from 765 million to 775 million to between 835 million and 845 million. As a midpoint, this implies an over 17% margin, also in excess of our previous expectations. Chris, can we take the first question, please?

endeavor releases third quarter 2021 results. q3 revenue $1.4 billion. increased 2021 revenue guidance to between $4.89 billion and $4.95 billion. increased 2021 adjusted ebitda guidance to between $835 million and $845 million.

I am Dorian Hare. Today's call is being recorded. An archive of the recording will be available later today in the Investor Relations section in the About Equifax tab on our website at www. Certain risk factors that may impact our business are set forth in our filings with the SEC under our 2020 Form 10-K and subsequent filings. Also, we will be referring to certain non-GAAP financial measures, including adjusted earnings per share attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. We continue to make the health and safety of our employees a top priority, and I hope that you and those close to you remain safe. Turning to Slide 4, and as I will cover in a moment, Equifax delivered an outstanding first quarter with record revenue and strong sequential growth versus fourth quarter. The tremendous progress we have made, executing against our strategic priorities and building out our Equifax Cloud capabilities is allowing us to outperform our underlying markets and deliver outstanding revenue growth and margin expansion. In U.S., where the economy is still recovering from the COVID pandemic more rapidly than we anticipated, we continue to outperform the overall mortgage market, which remains strong in the first quarter. We're also seeing a real recovery and strong growth across our core banking, auto, insurance, government and talent business segments. First quarter was a great start to 2021. We are energized by our strong momentum in pivoting to our next chapter of growth with the launch of EFX2023, our new strategic growth framework that will serve as our companywide compass over the next three years. With our new Equifax Cloud foundation increasingly in place, we're focused on leveraging our new Equifax Cloud data in technology infrastructure to accelerate innovation, new products and growth. Innovation in new products will fuel our growth in 2021 and beyond as we leverage our new EFX cloud capabilities to bring new products and solutions and multidata insights to customers faster, more securely and more reliably. As you know, we ramped our investments in product and innovation resources over the past 12 months to accelerate our new product roll outs, leveraging the new Equifax Cloud. Our highly unique and diverse data assets are at the heart of what creates Equifax's differentiation in the marketplace. We have data assets at scale that our competitors do not have, including TWN, NCTUE, DataX, IXI and more, and we are committed to expanding and deepening these differentiated data assets through organic actions, partnerships and M&A. We are also relentlessly focused on a customer first mentality, which moves us closer to our customers, with a focus on delivering solutions to help their -- help solve their problems and drive their growth. Another critical lever of our strategy is to reinvest our accelerating free cash flow in smart, strategic and accretive bolt-on acquisitions, that both, expand and strengthen our capabilities with a goal of increasing our revenue growth by 1% to 2% annually from M&A. And data security is deeply embedded in our culture. We have clearly established Equifax as an industry leader in data security. Working together as one aligned global Equifax team, where we leverage our commercial strengths, our new products, and our capabilities across our EFX cloud global platform, will allow us to deliver solutions that only Equifax can bring to the marketplace. We're energized around our new EFX2023 strategic priorities that will serve as our guide post over the next three years and support our new long-term growth framework that we plan to put in place later this year. Turning now to Slide 5, Equifax performance in the first quarter was very strong. Revenue at $1.2 billion was the strongest quarterly revenue in our history. In first quarter, constant currency revenue growth was a very strong 25% with our organic growth at 23%, which was also an Equifax record. As a reminder, we're coming off a solid 13% growth in first quarter last year. All business units performed -- outperformed our expectations and we are seeing positive signs of a COVID recovery beginning to accelerate, particularly in the U.S. Our growth was again powered by our two U.S. B2B businesses, Workforce Solutions and USIS, with combined revenue up a very strong 38%. Mortgage-related revenue remained robust, and importantly, our non-mortgage-related verticals grew organically by a very strong 16%. The adjusted EBITDA margins of our U.S. B2B businesses were 52%, up 400 basis points with EWS delivering close to 60% margins. As a reminder, Workforce Solutions and USIS are over 70% of Equifax revenue and 80% of Equifax business unit EBITDA. First quarter Equifax adjusted EBITDA totaled $431 million, up 36% with over 250 basis points of expansion in our margins to 35.6%. This margin expansion was delivered while including all cloud technology transformation costs in our adjusted results, which negatively impacted first quarter adjusted EBITDA margins by over 300 basis points. Excluding cloud transformation costs, our margins would have been up over 500 basis points. We are clearly getting strong leverage out of our revenue growth. Adjusted EBITDA -- adjusted earnings per share at a $1.97 per share was up a very strong 37% from last year, which was also impacted by the inclusion of cloud transformation costs. Adjusted earnings per share would have been $2.20 and up 54%, excluding these costs. We continue to accelerate our EFX Cloud data and technology transformation in the quarter, including migrating an additional 2,000 customers to the cloud in the U.S. and approximately 1,000 customers Internationally. Leveraging our new EFX cloud infrastructure, we also continue to accelerate new product innovation. In the first quarter, we released 39 new products, which is up from 35 launched a year ago in the first quarter, continuing the momentum from 2020 where we launched a record 134 new products. And we're seeing increased revenue generation from these new products, leveraging our new EFX Cloud. For 2021, we expect our vitality index defined as revenue from new products introduced in the last three years to exceed 8%. This is a 100 basis point improvement from the 7% guidance we provided on our vitality index back in February. And in that first quarter, we completed five strategic bolt-on acquisitions with a focus on identity and product capability through our acquisition of Kount and accelerating growth in Workforce Solutions with the acquisitions of HIREtech and i2Verify. Acquisitions that will broaden strength in Equifax are a strong lever for continuing to accelerate our growth and a big focus. We're energized by our fast start to '21 and are clearly seeing the momentum of our only Equifax model leveraging our new EFX Cloud capabilities. Our first quarter results were substantially stronger than the guidance we provided in February with over 90% of the revenue outperformance delivered in our two U.S. B2B businesses, Workforce Solutions and USIS. Importantly, as we'll discuss in more detail shortly, over 60% of this outperformance in the U.S. B2B revenue was in our non-mortgage segments in both USIS and Workforce Solutions. Non-mortgage revenue strengthened consistently during the first quarter with March revenue up significantly versus February in both USIS and EWS. This broad-based strength was above our expectations and gives us confidence about further strengthening in the second quarter and second half as the COVID recovery unfolds. Mortgage revenue was also stronger than we expected despite the growth in U.S. mortgage market at 21% being slightly below our expectations from a slowing -- from slowing mortgage inquiries in late March, which have continued into April. Our continued strong mortgage results and outperformance was driven by Workforce Solutions with stronger market penetration, record growth and positive impact from new products. USIS mortgage revenue also exceeded expectations slightly. This stronger revenue delivered strong operating leverage with substantial improvement in our EBITDA margins and adjusted EPS. The strength of our first quarter results in Workforce Solutions and in U.S. non-mortgage revenue across USIS and Workforce Solutions broadly gave us the confidence to substantially raise our 2021 guidance for both revenue and adjusted EPS. We're increasing our revenue guidance by $225 million to a midpoint of $4.625 billion and increasing our adjusted earnings per share guidance by $0.55 a share to a midpoint of $6.90 per share. This includes our expectation that the U.S. mortgage market for 2021 as measured by credit inquiries will decline more in our February guidance of down 5% to a decline of approximately 8%. Our framework assumes that the mortgage market slows primarily in the third and fourth quarter, which is consistent with our prior guidance. And John will discuss our mortgage assumptions in more detail in a few minutes. Turning to Slide 6, our outstanding first quarter results were broad-based and reflect better than expected performance from all four business units. Workforce Solutions had another exceptional quarter, delivering 59% revenue growth and almost 60% adjusted EBITDA margins. Workforce Solutions is now our largest business, representing almost 40% of total Equifax revenue in the fourth quarter and is clearly powering our results. Verification Services revenue of $385 million was up a strong 75%. Verification Service mortgage revenue again more than doubled for the fourth consecutive quarter, growing almost a 100 percentage points faster than the 20% underlying growth we saw in the mortgage market credit inquiries in the first quarter. Importantly, Verification Services non-mortgage revenue was up over 25% in the quarter. This segment of Verification Services continues to expand its market coverage and benefit from NPIs, new records, new use cases and is a long-term growth lever for Workforce Solutions. Talent Solutions, which represents over 30% of verifier non-mortgage revenue almost doubled, driven by both new products and a recovery in U.S. hiring. Government solutions, which represents almost 40% of verifier non-mortgage revenue also returned to growth driven by greater usage in multiple states of our differentiated data. As a reminder, we continue to work closely with a social security administration on our new contract that we expect to go live in the second half and ramp to $40 million to $50 million of incremental revenue at run rate in 2022. Our non-mortgage consumer business, principally in banking and auto, also showed strong growth in the quarter as well, both from deepening penetration with new lenders and from some recovery in those markets that I'll cover more fully in the discussion of USIS. Debt management, which now represents under 10% of verifier non-mortgage revenue was, as we expected, down versus last year, but is stabilized and we expect to see growth in that vertical as we move through 2021. Employer Services revenue of $96 million increased 17% in the quarter, driven again by our unemployment claims business which add revenue of $47 million, up around 47% compared to last year. In the first quarter, Workforce Solution processed about $2.8 million UC claims, which is up from $2.6 million in the fourth quarter. EWS processed roughly one in three U.S. initial unemployment claims in the quarter, which was up from one in five that they had been processing in recent periods, reflecting the growth in Workforce Solutions UC market position. As a reminder, we continue to expect UC claims revenue to decline sequentially in the second quarter and throughout the balance of 2021 as the U.S. economy recovers and job losses dissipate. We currently expect a decline in the second quarter UC revenue of about 45% versus last year and a full year 2021 decline in UC claims revenue of just under 30%. Employer Services non-UC businesses had revenue down slightly in the quarter. Our I-9 business driven by our new I-9 Anywhere solution continued to show very strong growth with revenue up 15%. Our I-9 business is expected to continue to grow substantially to become our largest Employer Services business in 2021 and represent about 40% of non-UC revenue. Reflecting the growth in I-9 and the return to growth of workforce analytics, we expect Employer Services non-UC businesses to deliver organic growth of over 20% in 2021. The HIREtech and i2Verify acquisitions that we closed in March had a de minimis impact on revenue in the quarter, but will add -- will further add to Workforce Solutions growth during the rest of '21. I'll discuss both HIREtech and i2Verify a little bit later. Reflecting the power and uniqueness of TWN data, strong verifier revenue growth and operating leverage resulted in adjusted EBITDA margins of 59.3% and almost 800 basis point expansion from last year in Workforce Solutions. Rudy Ploder and the Workforce Solutions team delivered another outstanding quarter and are position to deliver a strong 2021. Workforce Solutions is clearly Equifax' largest and fastest growing business. USIS revenue was up a very strong 19% in the quarter with organic growth also a strong 17%. Total USIS mortgage revenue growth of $177 million was up 25% in the quarter, while mortgage credit inquiry growth up 21%, was slightly below the 24% expectation we shared in February. As I mentioned, John will cover our updated view of the mortgage market for 2021 in a few minutes. USIS mortgage revenue outgrew the market by 500 basis points in the quarter, driven by growth in marketing and new debt monitoring products. Non-mortgage revenue performance was very strong with growth of 15% and organic growth of 11%, which is a record for USIS, and off a fairly strong first quarter last year. We view this outperformance by U.S. as meaningful and a reflection of the competitiveness and commercial focus of the USIS team. Importantly, non-mortgage online revenue grew a very strong 16% in the quarter with organic growth of almost 11%. We saw non-mortgage revenue growth accelerate in February and March as vaccine rollouts increased and financial institutions gain confidence in the consumer and the economy. Banking, auto, ID and fraud, insurance and direct to consumer all showed growth in the quarter which is encouraging as move into second quarter and the rest of 2021. Commercial was about flat, while only telco was down in the quarter as we expected. Financial Marketing Services revenue, which is broadly speaking our offline or batch business was $53 million in the quarter, up almost 12%, which is also very positive. The performance was driven by marketing related revenue, which was up over 20% and ID and fraud revenue growth of just under 10% as consumer marketing and originations ramped up. In 2021, marketing-related revenue is expected to represent about 45% of FMS revenue with identity and fraud about 20% and risk decisioning about 30%. This strong growth across our non-mortgage businesses, including strong growth in marketing-specific offline revenue is very encouraging for both the recovery of our underlying markets and our non-mortgage performance as we move into second quarter and the rest of 2021. The USIS team continues to drive growth in their new deal pipeline with first quarter pipeline up 30% over last year, driven by growth in both the volume and the size of new opportunities and NPI roll outs. First quarter win rates were also higher than levels seen in 2020. Sid Singh and as USIS team continue to be on offense and are competitive in winning in their marketplace. In addition to driving core business growth in the first quarter, USIS achieved an important strategic milestone in closing the acquisition of Kount, an industry leader in providing AI-driven fraud prevention and digital identity solutions. Integration efforts are now under way with a key focus on technology and product, leveraging the joint Equifax and Kount data and capabilities. Kount's technology platform will migrate to the Equifax Cloud in the next 12 to 18 months, which will allow for the full integration of Kount and Equifax capabilities for new solutions, new products and market expansion in the fast growing identity and fraud marketplace. USIS adjusted EBITDA margins of 42.9% in the first quarter were down about 180 basis points from last year. About two-thirds of the decline was due to the inclusion of tech transformation costs in our adjusted EBITDA in 2021. The remainder of the decline was principally driven by the higher mix of mortgage products and redundant system costs from our cloud transformation. Moving now to International, their revenue was up 3% on a constant currency basis in the quarter, which is the second consecutive quarter of growth in our global markets, but are still very challenged by COVID lockdowns and slow vaccine roll outs. Revenue growth improved significantly in Canada, Asia Pacific, which is our Australian business and Latin America. This was partially offset by revenue declines in the U.K., principally due to continued U.K. lockdowns in response to the COVID pandemic. Asia-Pacific, which is principally our Australia business had a very good performance in the first quarter with revenue of $87 million, up 7% in local currency. Australia consumer revenue continues to improve relative to prior quarters and was down only about 2% versus last year compared to down 5% in the fourth quarter. Our Commercial business combined online and offline revenue was up a strong 9% in the quarter, a solid improvement from fourth quarter. And fraud and identity was up 15% in the quarter following strong performance in the fourth quarter. European revenues of $69 billion were down 5% in local currency in the first quarter. Our European credit business was down about 5% in local currency. Spain revenue was down about 1%, while the U.K. was down about 6% in local currency similar to the fourth quarter from continued challenging COVID environments. Our European debt management business revenue declined by about 4% in local currency in the quarter. Both, the CRA and debt management businesses were impacted in the quarter by actions taken by the U.K. government to curtail debt placements in response to the pandemic resurgence in the United Kingdom. As the lockdown and other actions lift in April and May, we anticipate improvements in U.K. CRA revenue in the second quarter and improvements in debt management revenue in the second half of 2021 as collection activity restarts in the latter part of the second quarter. Latin American revenues of $42 million grew about 1% in the quarter in local currency, which was an improvement from the down 1% we saw in the fourth quarter. These markets also continue to be heavily impacted negatively by continued COVID lockdowns and slow vaccine rollouts. We continue to see the benefit in LatAm of strong new product introductions over the past three years, which is benefiting their top line. Canada delivered record revenue of $44 million in the quarter, up about 13% in local currency. Consumer online was up about 3% in the quarter, an improvement from the fourth quarter. Improving growth in commercial, analytical and decision solutions and ID and fraud also drove growth in Canadian revenue in the first quarter. International adjusted EBITDA margins at 28.2% were down 30 basis points from last year. Excluding the impact of the tech transformation cost that we've included in adjusted EBITDA, margins were up about 200 basis points. This improvement was principally due to revenue growth and operating leverage, partially offset by redundant system costs from our cloud transformation. Global Consumer Solutions revenue was down 16% on a reported basis and 17% on a local currency basis in the quarter and slightly better than our expectations. We saw better than expected performance in our global consumer direct business, which sells directly to consumers through equifax.com and myEquifax and which represents about half of total GCS revenue. Direct-to-consumer revenue was up a strong 11% in the quarter, the third consecutive quarter of growth. Decline in overall GC revenue in the quarter was again driven by our U.S. lead generation partner business, which has been significantly impacted from COVID beginning in mid-2020. As we discussed, we expect a decline in total GCS revenue from our partner vertical to moderate substantially as we move into the second quarter and return to growth in the fourth quarter of 2021. GCS adjusted EBITDA margins of 24.6% were up about 150 basis points. We expect margins to be pressured to around 20% in the second quarter, reflecting planned cost to complete the migration of our consumer direct business, cloud transformations in the U.S., U.K. and Canada through our new Equifax cloud platform. Moving to Slide 7, this chart provides updated view of Equifax core revenue growth. As a reminder, core revenue growth is defined as Equifax revenue growth excluding number one, the extra revenue growth in our UC claims business in '20 and '21, and number two, the impact on revenue from U.S. mortgage market activity as measured by changes in total U.S. mortgage market credit inquiries. Core revenue growth is our attempt to provide a more normalized view of Equifax revenue growth excluding these unusual UC and U.S. mortgage market factors. In the first quarter, Equifax core revenue growth, the green section of the bars on Slide 7, was up a very strong 20%, reflecting the broad-based growth across Equifax and this is up significantly from the 11% core revenue growth we delivered in the fourth quarter and well above our historic core growth rates. Workforce Solutions and USIS have continue to strongly outperform the mortgage market. The 16% organic growth in U.S. B2B non-mortgage revenue also drove our core revenue growth. Importantly, our core revenue growth has accelerated over the past five quarters from 5% in first quarter of 2020 to 11% in the fourth quarter of last year and to 20% this quarter, reflecting the strength and resiliency of our broad-based business model, power of Workforce Solutions, the market competitiveness of USIS and benefits from our cloud Equifax -- our cloud data and technology investments and our increasing focus on leveraging the cloud for innovation in new products. As you know, the strong growth is in the midst of a global market that is still recovering from the COVID pandemic. Turning to Slide 8, Workforce Solutions continues to power Equifax and clearly is our strongest and more valuable and largest business. Workforce Solutions revenue grew a very strong 59% in the first quarter with core revenue growth accelerating to 46%. As a reminder, the 59% growth is of 32% growth in first quarter of 2020. The strong outperformance and sequential improvement reflects the power of the unique TWN database and Workforce Solutions business model. At the end of the first quarter, the TWN database reached 115 million active users and 90 million unique records, an increase of 9% or 10 million active records from a year ago. And as a reminder, over 60% of our records are contributed directly by employers that Workforce Solution provides employer services like, UC claims, W-2 management, I-9, WOTC, and other solutions too. And we've built these relationships over -- with these -- with our customers and contributors over the past decade. The Remaining 35% are contributed through partnerships, most of which were exclusive. The major payroll processor agreement that we announced on our February call is still on track to go live later this year, which will add to our TWN database. And we have a dedicated team, as you know, focused on growing our TWN database, with an active pipeline of record additions to continue to expand our TWN database. The Workforce Solution team continues to focus on expanding the number of mortgage companies and financial institutions with which we have real time, system- to-system integrations, which, as you know, drives increased usage of our TWN data. The team is also focused on extending our offerings into card and auto verticals, as well as across our growing government vertical. And as I mentioned earlier, we continue to work closely with the SSA, and expect to go live with our new solution in the second half of this year, which will deliver $40 million to $50 million of incremental revenue and run rate in 2022. The Workforce Solutions new product pipeline is also rapidly expanding as our teams leverage the power of our new Equifax Cloud infrastructure. We are anticipating new products in mortgage, talent solutions, government, and I-9 in 2021. New product revenue will increase in '21 and '22, as we begin to reap the benefits of our new products introduced to the market during last year and in 2021. Rudy Ploder and the Workforce Solutions team have multiple levers for growth in '21, '22 and beyond. Workforce Solutions are most -- Workforce Solutions is our most valuable business and will continue to power our results in the future. Slide 9 highlights the ongoing exceptional core growth performance in mortgage for our U.S. B2B business -- mortgage businesses Workforce Solutions and USIS. Workforce and USIS outgrew the underlying U.S. mortgage market again in first quarter, with combined core growth of 48%, up from 37% in 2020, and in line with the 49% growth they delivered in the fourth quarter -- 49% core growth. This outperformance was driven strongly by Workforce Solutions with core mortgage growth of 99%. Consistent with past quarters, Workforce Solutions outperformance was driven by new records, increased market penetration, larger fulfillment rates, and new products, proof that lenders are increasingly becoming reliant on the unique TWN income and employment data when making credit decisions. USIS delivered 5% core mortgage revenue growth in the quarter, driven primarily by new debt monitoring solutions with further support from marketing. Our ability to substantially outgrow all of our underlying markets is core to our business model and core to our future growth. As Mark referenced earlier, U.S. mortgage market inquiries remained very strong in 1Q '21 and up 21%, but that growth was slightly lower than the 24% we had expected when we provided guidance in early February. As shown in the left side of Slide 10, as mortgage rates increased over the past few months and refinancing activity continues, the number of U.S. mortgages that could benefit from a refinancing has declined to about $30 million. Although, still very strong by historic standards, this is down from the levels we saw in 4Q '20 and early 1Q '21. Based upon our most recent data from 4Q 2020, mortgage refinancings were continuing at about $1 million per month. As shown on the right side of Slide 10, the pace of existing home purchases continues at historically very high levels. This strong purchase market is expected to continue throughout '21 and into '22. Based on these trends and specifically the reduction in the pool of mortgages that would benefit from refinancing, we are reducing our expectation for the mortgage market financing activity in 2021. As shown on Slide 11, we now expect mortgage credit inquiries to be about flat in 2Q '21 versus 2Q '20, and to be down about 25% in the second half of '21 as compared to the second half of '20. Overall, for 2021, we expect mortgage market credit inquiries to be down approximately 8%. This compares to the down approximately 5% we discussed with you in February. Slide 12 provides our guidance for 2Q '21. We expect revenue in the range of -- revenue in the range of $1.14 billion to $1.16 billion, reflecting revenue growth of about 16% to 18%, including a 2.1% benefit from FX. Acquisitions are positively impacting revenue by 2%. We are expecting adjusted earnings per share in 2Q '21 to be $1.60 to $1.70 per share compared to 2Q '20 adjusted earnings per share of $1.63 per share. In 2Q '21, technology transformation costs are expected to be around $44 million or $0.27 per share. Excluding these costs that were excluded from 2Q '20 adjusted EPS, 2Q '21 adjusted earnings per share would be $1.87 to $1.97 per share, up 15% to 21% from 2Q '20. This performance was being delivered in the context of the U.S. mortgage market, which is expected to be flat versus 2Q '20. Slide 13 provides the specifics on our 2021 full year guidance. We are increasing guidance substantially, despite the expectation of a weaker U.S. mortgage market. 2021 revenue of between $4.575 billion and $4.675 billion reflects revenue growth of about 11% to 13% versus 2020, including a 1.4% benefit from FX. Acquisitions are positively impacting revenue by 1.7%. EWS is expected to deliver over 20% revenue growth with continued very strong growth in Verification Services. USIS revenue is expected to be up mid to high single-digits, driven by growth in non-mortgage. International revenue is expected to deliver constant currency growth in the upper single-digits and GCS revenue is expected to be down mid-single-digits in 2021. 2Q '21 revenue was also expected to be down mid-single-digits for GCS. As a reminder, in 2021, Equifax is including all cloud technology transformation costs and adjusted operating income, adjusted EBITDA and adjusted EPS. These one time costs were excluded from adjusted operating income, adjusted EBITDA and adjusted earnings per share through 2020. In 2021, Equifax expects to incur one-time cloud technology transformation costs of approximately $145 million, a reduction of about 60% from the $358 million incurred in 2020. The inclusion in 2021 of this about $145 million in one-time costs would reduce adjusted earnings per share by $0.91 per share. This is consistent with our guidance for 2021 that we gave in February. 2021 adjusted earnings per share of $6.75 to $7.05 per share which includes these tech transformation costs is down approximately 3% to up 1% from 2020. Excluding the impact of tech transformation costs of $0.91 per share, adjusted earnings per share in 2021 which show growth of about 10% to 14% versus 2020. 2021 is also negatively impacted by redundant system costs of about -- of over $65 million relative to 2020. These redundant system costs are expected to negatively impact adjusted earnings per share by approximately $0.40 a share. Slide 14 provides a view of Equifax total and core revenue growth from 2019 through 2021. Core revenue growth excludes the impact of movements in the mortgage market on Equifax revenue as well as the impact of changes in our UC claims business within our EWS Employer Services business, and also the employee retention credit revenue from our recently acquired HIREtech business. Employee retention credits are specific U.S. government incentives for companies to retain their employees in response to COVID-19 and the associated revenue is not expected to continue into 2022. The data shown for 2Q '21 and full year 2021 reflects the midpoint of guidance ranges we provided. In 1Q '21, we delivered very strong core revenue growth of 20% and expect to continue to deliver strong core revenue growth in 2Q '21 of about 20%,and 16% for all of 2021. This very strong performance, we believe, positions us well entering 2022 and beyond. And now I'd like to hand it back over to Mark. Turning to Slide 15, this highlights our continued focus on new product innovation, which is a critical component of our next chapter of growth as we leverage the Equifax Cloud for innovation in new products and growth. We continue to focus on transforming Equifax into a product-led organization, leveraging our best-in-class Equifax Cloud Native Data and Technology to fuel top-line growth. In the first quarter, we delivered 39 new products, which is up from the 35 we delivered last year. We are encouraged by this continued strong performance, especially following the record 135 new products we delivered last year. We wanted to highlight some of these new products, which we expect to drive revenue in '21 and beyond. First, Insight Score for credit card launched by USIS provides the credit card industry with a specific credit risk score created using credit and alternative data that predicts a likelihood of a consumer becoming 90 days past due or more within 24 months of origination. USIS also launched a new commercial real estate tenant risk assessment product suite, which provides real time and unmatched data analytics and risk assessment or tenants buildings in portfolio strength delivered through an interactive Ignite Marketplace app or as a stand-alone report. And Workforce Solutions continues to expand its suite of products focused on the government vertical. Their government enhanced solutions social, Social Services Verification product gives the ability for the customer to choose the desired period of employment history with options ranging from three months, six months, one year or three years or the full employment history. These products help government agencies quickly and efficiently administer federally -- federal supplement -- supplementary nutrition, child health insurance, medicaid, Medicare benefits, many child support and ensure program integrity. In the first quarter, over two-thirds of our new products launched or in development leveraged our new Equifax cloud-based global product platforms. This enables significant synergies and efficiencies in how we build the new products, our speed to bring the products to market and our ability to move the new products easily to our global markets. Our new cloud-based Luminate platform for fraud management is a great example which is launching in Canada and the U.S. simultaneously and will soon launch in the United Kingdom, Australia and India. This would have taken much longer and been much more expensive in a legacy environment. We're also rolling out our Equifax cloud-based Interconnect and Ignite platforms for marketing and risk and decisioning and management products throughout Latin America, Europe, Canada as well as the United States. As we discussed on our call in February, we're focused on leveraging our new cloud capabilities to increase NPI rollouts and new product revenue growth in '21 and beyond. As a reminder, our NPI revenue is defined as the revenue delivered by new products launched over the past three years and our vitality index is defined as the percentage of current year revenue delivered by NPI revenue. As I mentioned earlier, we've increased our 2021 vitality index guidance from 7% by a 100 basis points to 8% as you can see from the left side of the slide is significant is a significant increase from about 500 basis points in 2020. NPIs are a big priority for me and the team as we leverage the Equifax Cloud for innovation, new products and growth. Turning to Slide 16, M&A plays an important role in our growth strategy and will be central to our long-term growth framework. Our team is focused on building an active pipeline of bolt-on targets that will both broaden and strengthen Equifax. Our M&A strategy centers on acquiring accretive and strategic companies that add unique data assets, new capabilities, deliver expansion into identity and fraud or expand our geographic footprint. In the first quarter, we closed five acquisitions totaling $866 million across strategic focus areas of identity and fraud, Workforce Solutions, open data and SME. We discussed three of these transactions with you in February which were the acquisitions of Kount, AccountScore and Creditworks. As I just discussed earlier, we're excited excited about expanding opportunities we see from the combined Kount and Equifax in the fast growing identity and fraud marketplace. In March, we closed two Workforce Solutions bolt-on transactions HIREtech and i2verify, which will further broaden and strengthen our Workforce Solutions business. HIREtech is a Houston-based company that provides employee-related tax credit services as well as verification services. HIREtech also has unique channel relationships to provide these services through payroll providers, consulting firms and CPA firms. I2verify is a Newburyport Massachusetts-based company that provides secure digital verifications of income and employment services. The company has a unique nationwide set of record contributing employers with concentrations in the healthcare and education sectors. i2verify also brings unique records to the TWN database, which are contributed by direct relationships. You should expect Equifax to continue to make acquisitions in these strategic growth areas that offer unique data and analytics to our customers with the goal of increasing our top line by 100 to 200 basis points annually from M&A. Before wrapping up, I want to speak to you about an area of significant focus at Equifax and importance to me personally. Slide 17 provides an overview of Equifax's ESG strategy and how it helps position us for long-term sustainability. I hope you saw and had a chance to read our annual report letter that highlighted our increased focus on ESG. First, Equifax plays an important role in helping consumers live their financial best. A primary example of this is that our alternative data assets such as utility and phone payment data provide lenders with a better picture of the approximately 30 million U.S. individuals who do not have traditional credit files or access to the formal financial system. I've also made advancing, inclusion and diversity, a personal priority since I joined Equifax. Believing that diversity of thought leads to better decisions, we're taking clear steps to broaden diversity at Equifax, including the last three directors added to our Board are diverse and all seven individuals who have added to my senior leadership team since I joined three years ago have also been diverse. We're carrying out this focus on inclusion and diversity across Equifax. We're also focused on environment -- on our environmental impact in our greenhouse gas print. Our cloud transformation will move our existing legacy technology infrastructure to the cloud which will dramatically reduce our environmental impact as we leverage the efficiencies and carbon-neutral infrastructure at our cloud service providers. Over the course of this year we -- over the course of last year we decommissioned six data centers, over 6,800 legacy data assets and over 1,000 legacy applications. We have a detailed program under way to baseline our energy usage and benefits from our cloud transformation as we work toward a commitment regarding carbon emissions and a net-zero footprint. We're also committed to be an industry leaders regarding security. With the leadership of our CSO, Jamil Farshchi, our culture puts security first. All employees are required to take a mandatory security focused training sessions every year. And all of our 4,000 bonus eligible employees have a security goal in their annual MBOs. We believe -- we also believe in sharing our security protocols and strategies with our partners, customers and competitors to collaborate to keep us all safe. In 2020, we hosted our inaugural Customer Security Summit where we detailed our progress on security transformation and discussed advancements in supply chain and security. As threats continue to involve, we remain highly focused on continuing to advance our security efforts. Wrapping up on Slide 18, Equifax delivered a record setting first quarter and we have a strong momentum as we move into second quarter in 2021. Our 27% overall and 20% core growth in first quarter reflects the strength and resiliency of our business model, while still operating in a challenging COVID environment. We've now delivered five consecutive quarters of sequentially improving double-digit growth. We're confident in our outlook for 2021. And as John described, are raising our full year midpoint revenue by 500 basis points to $4.625 billion and our earnings per share midpoint by 9% to $6.90 a share. Our revised revenue estimate of 12% growth in 2021 at the midpoint of the range off a very strong 17% in 2020, reflects the resiliency, strength and momentum of the EFX business model. Our increased 2021 growth framework incorporated our expectation as John discussed that the U.S. mortgage market will decline about 8% in 2021 and while operating in a still recovering COVID economy. Our expectation for core revenue growth of 16% in 2021 reflects how our EFX 2023 strategic priorities are delivering. Workforce Solutions had another outstanding quarter of 59% growth and will continue to power Equifax operating performance throughout 2021 and beyond. The Work Number is our most differentiated data assets and Workforce Solutions is our most valuable business. Rudy Ploder and his team are driving outsized growth by focusing on their key levers, new records, new products, penetration and expansion in the new verticals with our differentiated TWN database. USIS also delivered an outstanding quarter of 19% growth, highlighted by non-mortgage revenue growth of 15% and 11% organic non-mortgage growth. We expect our non-mortgage growth to accelerate as the U.S. economy recovers. The acquisition of Kount is providing new opportunities and products in the rapidly expanding identity and fraud marketplace and USIS continues to outperform the mortgage market from new products, pricing and increased penetration. USIS is clearly competitive and winning in the marketplace and will continue to deliver in '21 and beyond. International grew in the first quarter for the second consecutive quarter, overcoming economic headwinds from significant COVID lockdowns and slower vaccine rollouts in our global markets. Our expectations are high for ongoing sequential improvement in International during 2021 and for accelerating growth as their underlying markets recover from the COVID pandemic. We're also making strong progress rolling out our new EFX Cloud technology and data infrastructure and remain confident as John described in the significant top line cost and cash benefits of our new EFX Cloud capabilities. These financial benefits will ramp as we move through 2021 and continue to grow in 2022 and are enabled by our always on stability, speed to market and ability to rapidly build new products around the globe. Our strong performance -- operating performance is allowing us to continue to accelerate investments in new products, leveraging our new Equifax Cloud capabilities. And we're off to a strong start in 2021 with 39 NPIs in the first quarter, on top of the record 134 we launched in 2020. And our strong outperformance is fueling our cash generation, which is allowing us to reinvest in accretive and strategic bolt-on acquisitions. As discussed earlier, we closed five acquisitions in strategic growth areas in the first quarter and we have an active M&A pipeline. We look for bolt-on acquisitions that will strengthen our technology and data assets and that are financially accretive with the goal of adding 100 to 200 basis points to our top line growth rate in the future. I'm energized about what the future holds for Equifax. We have strong momentum across all of our businesses as we move in the second quarter. We're on offense and positioned to bring new and unique solutions to our customers that only Equifax can deliver, leveraging our new EFX Cloud capabilities and our strong results and the increased guidance that we provided reflect that.

compname posts q1 adjusted earnings per share $1.97. q1 adjusted earnings per share $1.97. reported revenue of $1,213.0 million in q1 of 2021, up 27 percent compared to q1 of 2020. sees q2 2021 adjusted earnings per share $1.60 -$1.70. sees fy 2021 adjusted earnings per share $6.75 to $7.05. sees fy 2021 revenue $4.575 billion to $4.675 billion.

I am Dorian Hare. Today's call is being recorded. An archive of the recording will be available later today on the IR Calendar Section of the News & Events tab at our IR website www. These materials are labeled Q2 2021 earnings conference call. Certain risk factors that may impact our business are set forth in our filings with the SEC including our 2020 Form 10-K and subsequent filings. Also, we will be referring to certain non-GAAP financial measures, including adjusted earnings per share attributable to Equifax and adjusted EBITDA, which will be adjusted for certain items that affect the comparability of our underlying operational performance. Before I address Equifax's strong second quarter results, I want to recognize our 11,000 associates around the globe for their continued hard work and dedication in these challenging times. Our team members are our most important asset and they play a vital role in helping millions of consumers around the world to get access to credit. On July one, we opened all of our U.S. offices fully, and rolled out our new Equifax Flex program, a hybrid working environment that gives our team the opportunity to work-from-home one day per week. Our full one program recognizes our learnings from the past year around remote work during COVID, but maintains the core of our Equifax culture of collaboration and teamwork that is optimized by an in-person work environment. We've also resumed in-person meetings with our customers, and I've been energized with the conversations that have taken place so far. It's great to be moving back to a new normal. We had a very strong second quarter and first half, which built off our strong outperformance in 2020. Our team has executed extremely well against the critical priorities of our new Equifax 2023 strategy, which has shown on Slide 4. We are accelerating new product introductions, beginning to leverage our expanding Equifax Cloud capabilities and our highly differentiated data assets. We continue to expand our differentiated data assets, both organically and through acquisitions and partnerships. While still in the early days, our new Equifax Cloud Data and Technology capabilities are providing competitive advantages and capabilities that only Equifax can provide. And our Customer First initiatives are deepening our relationships with customers and delivering new products and solutions along with above-market Equifax growth. And as always, we remain focused on extending our leadership in security. Our EFX2023 growth strategy is our compass for the future and drives all of our growth initiatives as we move through the second half and into '22 and beyond. We expect this focus to drive our top-line and bottom-line in the future. Turning now to Slide 5. Equifax's financial performance in the second quarter was very strong and outperformed our underlying markets. Revenue at $1.235 billion was the highest quarterly revenue in our history, breaking the record from last quarter. Local currency revenue growth of 23% and organic local currency growth of 20% were both very strong in some of the highest growth rates in our history. Our U.S. B2B businesses, our Workforce Solutions and USIS, which together represent over 70% of our revenue, again drove our overall growth delivering very strong 25% total and 22% organic revenue growth despite the headwinds from the mortgage market that declined about 5%. The 5% decline in the mortgage market was about 500 basis points more than our flat expectation we shared with you in April. U.S. B2B organic non-mortgage growth of 20% accelerated sequentially from the 16% we delivered in the first quarter. The 20% organic growth is also a record and reflects the underlying strength of Workforce Solutions and USIS has returned to a competitive position. I'll cover the business performance rather performance in detail in a moment. But at a high level, Workforce Solutions again led Equifax growth with revenue up a strong 40%. And as a reminder, this is off growth of 53% in second quarter last year and the mortgage market that declined 5% in the quarter. USIS delivered another strong quarter with revenue up 11%, driven by non-mortgage total revenue growth of over 20% and strong organic revenue growth of 14%. International delivered a very strong quarter of COVID recovery with revenue growth of 25% in local currency and importantly all regions internationally delivered growth about 20%. Slightly better than expected GCS revenue was down 3% in local currency. However, our consumer-direct revenue delivered 11% growth in the quarter, its second consecutive quarter in double-digits. Second quarter Equifax adjusted EBITDA totaled $431 million, up 20% with margins of 34.9%. Margins were down a 160 basis points versus last year due to the inclusion of the cloud technology transformation costs in our adjusted results in 2021, which were excluded last year. This negatively impacted second quarter adjusted EBITDA margins by 310 basis points. Adjusting for cloud transformation costs of $38 million in the quarter, our margins would have been up a strong 150 basis points. We are getting strong leverage out of our above market revenue growth. Adjusted earnings per share of $1.98 per share was up a strong 21% from last year. Again, adjusting for the cloud transformation costs, adjusted earnings per share would have been up a very strong 36%, reflecting the strong performance in operating leverage of Equifax. During the quarter, we continue to make significant progress with the Equifax Cloud Data and Technology transformation, including an additional 7,700 customer migrations to the Cloud in the United States and more than 900 migrations internationally. We remain on track with our Cloud transformation and are confident in our plan. We continue to expect the North American transformation to be principally complete in early 2022 with the remaining customer migrations completed by the end of next year. International transformation will follow North America being principally completed by the end of 2023. And as you know, last year, we started to ramp-up our focus and resources on new products, leveraging the new Equifax Cloud Data and Capabilities. In the second quarter, we released 46 new products, which is up almost 2x from the 24 products we released a year ago in the quarter. These new products are increasingly leveraging the new Equifax Cloud to deliver better data and decisioning for our customers. Driving NPIs leveraging the new Equifax Cloud is central to our EFX2023 growth strategy. And we continue to expect our vitality index defined as revenue from new products introduced in the last three years to exceed 8%, a big step-up from the 5% last year and a reflection of the strong product focus across EFX. Our first half performance exceeded our expectations and we are clearly seeing continued strong momentum as we move into the second half. Based on our strong first half results and confidence in the future, we increased our full year revenue guidance by a $155 million to a midpoint of $4.78 billion, which is up 400 basis points to 16% growth. We also increased our full year adjusted earnings per share guidance by $0.45 per share to a midpoint of $7.35 per share which adjusting for the technology transformation costs is up 700 basis points to 19% growth. This includes our expectation that the U.S. mortgage market as measured by credit inquiries will decline approximately 8% in the year, which is consistent with the guidance we provided in April. In the second quarter, Equifax core revenue growth, the green section of the bars on Slide 6 accelerated to 29%. This is up significantly from the 20% core revenue contribution we delivered in the first quarter and 11% in the fourth quarter and well above our historical core growth rates. While our outperformance in the mortgage market continues to drive significant core growth, the contribution from U.S. non-mortgage in International increased significantly in the quarter, reflecting approximately 50% of core revenue growth in the quarter, excluding acquisitions and FX favorability. Turning now to Slide 7. Our strong second quarter results were broad-based and reflect better than expected performance for all four Equifax business units. Workforce Solutions, our largest business had another exceptional quarter, delivering 40% revenue growth and 58% adjusted EBITDA margins. Again as a reminder, the 40% revenue growth is on top of 53% growth last year in the second quarter. EWS is cementing itself is our largest and most valuable business and is powering our results, representing 40% of total Equifax revenue in the quarter. EWS Verification Services revenue of $395 million was up a strong 57%. Verification Services mortgage revenue grew 52% in the quarter, despite the 5% decline in the mortgage market from increased records, penetration and new products. Importantly, Verification Services non-mortgage revenue was up over 60% in the quarter and up over 15% sequentially from the first quarter. Our government vertical, which provide solutions to federal and state governments in support of assistance programs including food and rental support grew over 10% in the quarter. Government remains one of our largest non-mortgage segments, representing about a third of non-mortgage verification revenue. We continue to expand our products and solutions in the government vertical and expect our new Social Security Administration contract to go live this quarter with revenue ramping to a $40 million to $50 million run-rate in 2022. Talent Solutions, which arise income and employment verifications as well as other information for the hiring and on-boarding process through our EWS Data Hub had another outstanding quarter from customer expansion and NPIs, growing over 200%. Talent Solutions now represents almost 30% of non-mortgage verification revenue. Building out the EWS Data Hub that leverages the work history in our TWN database with other unique data elements used in the hiring process is a priority for us. Over 75 million people changed jobs in the U.S. annually, with the vast majority having some level of screening as a part of that hiring process. Our non-mortgage consumer business, principally in Banking and Auto showed strong growth of about 50% in the quarter as well, though from deepening penetration with lenders and some recovery in these markets. Debt management also returned to growth in the quarter. Employer Services revenue of a $101 million was about flat in the quarter as expected. Combined, our unemployment claims and employee retention credit businesses had revenue of about $64 million, down over 15% from last year. Substantial declines in UC revenue in the second quarter were partially offset by new ERC revenue that began in the quarter as we support businesses and obtaining federal employee retention credit payments. Employer Services non-UC and ERC businesses had revenue up over 50% in the quarter. Our I-9 business driven by our new I-9 Anywhere product, continue to show very strong growth, up over 50%. Our I-9 business is now almost half of Employer Services non-UC and ERC revenue. Reflecting on the growth in I-9 and the return to growth of workforce analytics, we expect Employer Services non-UC and ERC businesses to deliver organic growth of over 20% for the year. Reflecting the power and uniqueness of between dataset, strong verified revenue growth and operating leverage resulted in adjusted EWS EBITDA margins of 58%, a 160 basis point expansion from last year. Excluding Technology Transformation expenses, EWS margins would have been up over 240 basis points. Rudy Ploder and EWS team delivered another outstanding quarter and are position to deliver a very strong 2021. Workforce Solutions is our most powerful and unique business and is powering Equifax results would grow substantially above the rest of the company. Turning now to USIS. They had another strong quarter with revenue up 11%, driven by strong performance across the business. Total USIS mortgage revenue of a $160 million was down about 2% in the quarter, while mortgage inquiries were down 5%, a little bit flat expectation we shared in April. John will cover our updated view of the mortgage market shortly. USIS mortgage revenue outgrew the market by over 300 basis points, driven by growth in marketing and debt monitoring products. Importantly, non-mortgage revenue performance was up 21% with strong organic growth of 14%. This performance reflects the commercial focus of Sid Singh and his team and their competitive position in the marketplace. Importantly, organic non-mortgage revenue also delivered strong sequential growth, acceleration of 250 basis points from the first quarter's 11%, an important indicator of the continued strengthening of the USIS business. Banking and Insurance both grew over 20% in the quarter. Auto and Direct-to-Consumer were both up over 10% and Telecom and Commercial were just about flat in the quarter. Financial Marketing Services revenue, which is broadly speaking, our offline or batch business was $59 million in the quarter and up about 14%. The strong performance was driven by marketing related revenue, which was up over 20% and ID and fraud revenue growth of over 15% as consumer marketing and originations ramped up coming out of COVID. In 2021, marketing related revenue is expected to represent about 40% of FMS revenue, identity and fraud about 20% and risk decisioning about 35%. This strong growth across our non-mortgage business is encouraging as we move into the third quarter and the rest of 2021. The USIS new deal pipeline remains very strong and comparable to the strong levels we've seen so far in 2021. We have seen the highest growth in auto, financial services and mortgage. USIS adjusted EBITDA margins were 40.3% in the quarter, the decline of 380 basis points from second quarter last year was principally due to the costs related with Cloud transformation. Both the cost of redundant systems and the inclusion in our adjusted results of the technology transformation costs, which were being excluded in 2020. Sales and marketing expenses also increased in the quarter and sequentially to leverage both the stronger U.S. markets and increased NPI rollouts to drive growth. Shifting now to International. Their revenue was up a strong 25% on a local currency basis, which is a third consecutive quarter of growth in our global markets. Revenue growth was up over 20% in all of our markets in Canada, Asia Pacific, Latin America and Europe. Asia-Pacific, which is principally our Australia business had a very strong quarter with revenue up $91 million or up about 21% in local currency. Australia consumer revenue turned positive and was up 23% versus last year and up about 2% sequentially. Our Commercial business combined online and offline, revenue was up a very strong 26% in the quarter and almost 18%, up almost 18% sequentially. Fraud and identity was up 30% in the quarter, following 15% growth in the first quarter. European revenues of $68 million were up 27% in local currency in the quarter. Our European credit reporting business was up about 20% with strong growth in both the UK and Spain. In UK, which is our largest European market, we saw growth of over 25% in consumer, data analytics and scores and over 40% growth in commercial. Our European debt management business revenue increased about 30% in local currency off the lows we saw in the second quarter last year during the COVID recession. Canada delivered record setting revenue of $47 million in the quarter, up about 26% in local currency. Consumer online was up about 26% in the quarter, an improvement of 12 percentage points from the first quarter. Double-digit growth in commercial, analytical and decision solutions and ID and fraud also drove growth in the Canadian revenue in the quarter. Latin American revenues of $44 million, grew 30% in the quarter in local currency, which was the second consecutive quarter of growth coming out of COVID. We continue to see the benefits in Latin America of the strong new product introductions, the team has rolled out over the past three years. International adjusted EBITDA margins of 27.3% were up 540 basis points from last year, driven by leverage on revenue growth and continued very good cost control by the international team. Excluding the impact of the inclusion of the technology transformation costs in adjusted EBITDA, margins were up over 750 basis points. Global Consumer Solutions revenue was down 2% on a reported basis and 3% on a local currency basis in the quarter and slightly above our expectations. We again saw strong double-digit growth in our global consumer direct business, which sells direct-to-consumers through equifax.com and which represents a little over half of GCS revenue. Direct-to-Consumer revenue was up a strong 11% in the quarter, their fourth consecutive quarter of growth. The decline in overall GCS revenue in the second quarter was again driven by our U.S. lead generation partner business. We expect the GCS partner business and GCS business overall to return to growth in the fourth quarter. GCS adjusted EBITDA margins of 22.5% were up just about a 170 basis points, which was better than our expectations. Turning now to Slide 8. Workforce Solutions continues to power Equifax and is clearly our strongest fastest growing and most valuable business. Workforce Solutions revenue grew a very strong 40% in the quarter, with core revenue growth of 46%. And again the 40% growth in the quarter was on top of 53% growth in the second quarter last year. This above market performance is driven by the uniqueness of the TWN income and employment data, the scale of the TWN database and the consistent execution by Rudy and his team. At the end of the second quarter, TWN reached a 119 million active records, an increase of 13% or 14 million records from a year ago and included 91 million unique records. At 91 million unique, we now have over 60% of non-farm payrolls, which makes our TWN dataset we're valuable to our customers by delivering higher hit rates. Beyond focusing on adding the over 50 million non-farm payroll records not in the TWN database yet, we're also focused on adding data records from the 40 million to 50 million gig workers and around 30 million pension recipients in the United States marketplace to further broaden the TWN database. We have plenty of room to grow. We are now receiving contributions from 1.2 million companies across the U.S., up from 27,000 employers a short two plus years ago. And as a reminder, over 60% of our records are contributed directly by employers that EWS provides comprehensive employer services to like unemployment claims, W-2 management, I-9, WOTC, Employee Retention Credit, HSA and other HR in compliance-related solutions. These relationships have been built up over the past decade by the Workforce Solutions team. The remaining 35% are contributed through partnerships with payroll providers in HR software companies, most of which are exclusive. The exclusive arrangement with a major payroll processor that we announced on our February call is still on track to become active later this year. We have a dedicated team with an active pipeline of record additions to continue to expand our TWN database in the future. And as you know, as we add records to the dataset, they're monetized almost instantly with our customer system-to-system integrations interacting with our TWN database. Workforce Solutions continues to grow, penetration in key existing markets while expanding into new markets. We continue to increase our penetration in the mortgage market. As of the most recent data available at the end of 2020, Workforce Solutions received an inquiry in almost 60% of completed U.S. mortgages, which is up from 55% in 2019. This 500 basis point increase shows a continuation of growth in TWN mortgage penetration as well as the substantial opportunity for continued growth at existed mortgage with only 60% of mortgages using TWN data today. We're also seeing substantial growth in TWN in the non-credit markets of government and Talent Solutions as well as increased TWN usage within the card and auto verticals. As we discussed in the past, growing system-to-system integrations is a key lever in driving both increased penetration and the increased number of polls per transaction for Workforce Solutions. During the quarter, about 75% of TWN mortgage transactions were fulfilled system-to-system, which was up 2x from the 32% in 2019. The Workforce Solutions new product pipeline is also rapidly expanding, as our teams leveraged the power of our new Equifax Cloud infrastructure. We plan to roll-out new products in mortgage Talent Solutions government and I-9 in the second half of the year. New product revenue will increase in '21 and '22 as we begin to reap the benefits of our new products introduced in the market by Workforce Solutions in the past 18 months. Rudy in the Workforce Solutions team had multiple levers for growth in '21, '22 and beyond. Workforce is clearly our largest and most valuable business and will continue to power our results in the future. Workforce Solutions growth rates and margins are highly accretive to Equifax now and in the future. Slide 9 provides perspective on the tremendous growth Workforce has delivered since 2017 and the increasing impact of the business has on Equifax with its highly accretive revenue growth rates and margins. In 2017, Workforce Solutions revenue and EBITDA made up 23% of Equifax revenue and 27% of business unit EBITDA. For the first half of '21, Workforce Solutions revenue and EBITDA have increased to 40% of Equifax revenue and over half of Equifax business unit EBITDA. In a short four years, Workforce Solutions has more than doubled in size and is now almost 50% in the first half versus the same period last year. It is up almost 50% in the first half versus same period last year. Our unique TWN employment in income assets and the continued expansion of employment-related assets within the Equifax Data Hub provides opportunities for both ongoing outsized growth in Equifax's traditional financial markets of mortgage, banking, auto as well as a substantial growth in new verticals in government talent solution others to come. We expect that Workforce Solutions will continue to be an increasingly large part of Equifax and power our top and bottom-line with the above-market growth in margins. Turning to Slide 10. This provides a perspective on the return to growth USIS delivered since 2018. USIS has delivered strong double-digit revenue growth over the past six quarters. The strong mortgage market has advantage USIS as shown in the bottom left of the slide, USIS has driven consistent sequential improvement in non-mortgage growth in second quarter last year, with the overall growth in USIS being driven by 18% non-mortgage growth in the first half of 2021. USIS team is also increasingly leveraging the Equifax Cloud to design and implement new NPIs for customers. The Equifax Cloud new products in our unique data assets are making USIS teams more competitive in the marketplace. And the USIS team is focused on integrating count in the new Equifax Cloud, we're seeing increased used cases in opportunities with our ID and fraud vertical from the count acquisition. We expect ID and fraud to play a large role in USIS growth in 2021 and beyond. Turning to Slide 11. This highlights the core growth performance in our mortgage for our U.S. B2B businesses, Workforce Solutions and USIS. Our U.S. B2B businesses delivered a combined 25% revenue growth in mortgage in the second quarter, which was 30 point stronger than the 5% mortgage decline we saw in overall mortgage market. The strong outperformance was again primarily driven by Workforce Solutions with core mortgage growth of 57%. Consistent with past quarters, EWS's outperformance was driven by new records, increased market penetration, larger fulfillment rates and new products. Proof that lenders are increasingly becoming reliant on the unique TWN income and employment data on making credit decisions in the mortgage space. USIS delivered 4% core mortgage revenue growth in the second quarter, driven primarily by new debt monitoring solutions and further support from marketing. Our ability to substantially outgrow underlying markets is core to our business model and core to our future growth. As Mark discussed, our Q2 results were very much stronger than we discussed with you in April, with revenue about $85 million higher than the midpoint of the expectations we shared. For perspective, all we used performed well relative to the expectations we shared. Performance in non-mortgage in our U.S. businesses Workforce and USIS was very strong in absolute terms, and relative to the expectations we shared. Our unemployment claims and employee retention credit businesses in Workforce Solutions declined in the quarter, but much less than expected. International revenue performance was also very strong, again both in absolute terms, and relative to our expectations. And although the mortgage market was down 5% versus our expectation of flat, our mortgage revenue principally in Workforce was not impacted to the same degree. This strong revenue drove the upside in adjusted earnings per share relative to the expectations we shared. Now, turning to mortgage. As shown on Slide 12, U.S. mortgage market credit increase declined 5% in 2Q'21, weaker than the about flat we had included in our guidance. Our financial guidance for 2021 assumes that the trend in mortgage credit increase we saw in late June and July continues in 3Q'21 resulting in a decline of mortgage market credit increase of about 23% in 3Q'21 versus 3Q'20. Although our second half '21 market credit inquiry assumptions are down significantly from the second half of '20, they remained above the average as we saw prior to 2020. As shown in the left side of Slide 13, mortgage market indicators remain above the peak seen in previous mortgage cycles. Despite the substantial refinance activity that has occurred over the past year, the number of U.S. mortgages that could benefit from a refinancing remains at a relatively strong level of about $12 million. Refinance activity continues to benefit from low and recently declining mortgage rates and a substantial appreciation in home prices over the past year. Based upon our most recent data from January, mortgage refinancings continue to run just under 1 million per month. As shown on the right side of Slide 13, the pace of existing home purchases continues at historically very high levels. The strong new purchase market is expected to continue throughout 2021 and into 2022. Slide 14 provides our guidance for 3Q'21. We expect revenue in the range of $1.160 billion to $1.180 billion, reflecting revenue growth of about 9% to 11%, including a 1% benefit from FX. Acquisitions are positively impacting revenue by 1.8%. We're expecting adjusted earnings per share in 3Q'21 to be $1.62 to $1.72 per share compared to 3Q'20 adjusted earnings per share of $1.91 per share. In 3Q'21, technology transformation costs are expected to be around $40 million or $0.25 a share. Excluding these costs, which were excluded from 3Q'20 adjusted EPS, 3Q'21 adjusted earnings per share would be $1.87 to $1.97 per share. This performance is being delivered in the context of the U.S. mortgage market, which is expected to be down 23% versus 3Q' 20. Comparing the midpoint of our 3Q'21 guidance sequentially to our very strong 2Q'21 performance, revenue is down about $65 million. The drivers of this decline are two main factors. The largest factor is a decline in mortgage revenue driven by the impact of the expectation we shared regarding the decline in the U.S. mortgage market. The other significant factor is our expectation that we'll see a significant sequential decline in unemployment claims revenue. Our guidance for adjusted earnings per share declines about $0.30 per share sequentially. The bulk of this decline is driven by lower gross profit and the revenue expectation I just discussed. In addition, we are increasing investment sequentially in sales and marketing, particularly in the U.S. as well as increasing investment in product and technology. Slide 15 provides the specifics on our 2021 full-year guidance. We are increasing guidance substantially, reflecting our very strong 2Q'21 performance. In the second half of 2021, we expect strong growth in our U.S. non-mortgage business and international and a return to growth in GCS. We also expect our U.S. mortgage business to grow about 15% in 2021 over 20 points faster than we expected approximately 8% decline in the U.S. mortgage market. 2021 revenue of between $4.76 billion and $4.8 billion reflects revenue growth of about 15% to 16% versus 2020, including the 1.5% benefit from FX. Acquisitions are positively impacting revenue by 1.9%. EWS is expected to deliver about 30% revenue growth with continued very strong growth in Verification Services. USIS revenue is expected to be up mid to high single-digits, driven by growth in non-mortgage. International revenue is expected to deliver constant currency growth of about 10% and GCS revenue is expected to be down mid single-digits in 2021. 3Q'21 revenue is also expected to be down mid single-digits, with 4Q'21 revenue returning to growth. As a reminder, in 2021, Equifax is including all technology transformation costs in adjusted operating income, adjusted EBITDA and adjusted EPS. These one-time costs were excluded from adjusted operating income, adjusted EBITDA and adjusted earnings per share in 2017 through 2020. In 2021, Equifax expects to incur one-time Cloud technology transformation costs of approximately a $155 million, a reduction of over 55% from the $358 million incurred in 2020. The inclusion in 2021 of this about a $155 million and one-time costs would reduce adjusted earnings per share by about $0.97 per share. This estimate of one-time technology transformation costs is up $10 million from a $145 million we guided in April. Given our very strong performance in 2021, we are investing to accelerate our tech transformation globally. 2021 adjusted earnings per share of $7.25 to $7.45 per share which includes these tech transformation costs is up 4% to 7% from 2020. Excluding the impact of the tech transformation cost of $0.97 per share, adjusted earnings per share in 2021 which show growth of about 18% to 21% versus 2020. 2021 is also negatively impacted by the redundant system costs of $79 million related to 2020. These redundant system costs are expected to negatively impact adjusted earnings per share by about $0.49 per share and negatively impact adjusted earnings per share growth by about 7 percentage points. Slide 16 provides a view of Equifax total and core revenue growth that is included in our current guidance. Core revenue growth excludes the impact of movements in the mortgage market and Equifax revenue as well as the impact of changes in our UC claims and employee retention credit businesses within our Employer Services business. Employee retention credits are specific U.S. government incentives for companies to retain their employees in response to COVID-19 and the associated revenue is not expected to continue into 2022. The data shown for 3Q'21 and full year 2021 reflects the midpoint of the guidance ranges we provided. In 1Q'21 and 2Q'21, we delivered very strong core revenue growth of 20% and 29% respectively. We continue to deliver strong core revenue growth in 3Q'21 of 17% and 19% for all of 2021 in our expectations. As Mark mentioned earlier, the composition of our core revenue growth is becoming more balanced, reflecting substantially increasing contributions from U.S. non-mortgage, international and as we enter 4Q'21 GCS. And we continue to expect our mortgage business to grow at that rates faster than the overall mortgage market. This very strong performance we believe positions us well entering 2022 and beyond. And now, I'd like to hand it back to Mark. Turning now to Slide 17. As I referenced earlier, pricing in our technology teams continue to make very strong progress on our new Equifax Cloud Data and Technology Transformation, with the North American technology transformation expected to be principally complete in early '22 and the remainder of North America transformation and customer migrations completing by the end of next year. And our international transformation following North America being principally complete by the end of 2023. Equifax's transformation to a Cloud native environment delivers a host of capabilities that only Equifax can provide as the only cloud native data and technology company. The Equifax Cloud will deliver always on stability, accelerate response time and built in industry-leading security. It will provide our customers with real-time access to data and insights that they can rely on to make decisions. The Equifax Cloud through our Ignite analytics platform, where our customers and Equifax data scientists to work together utilizing EFX unique data assets and customer proprietary assets to define attributes and models to improve customer outcomes. And we will continue to accelerate the time from analytics to production to bring new products and solutions to market faster and more efficiently enhancing customer benefits and Equifax revenue. Already the Equifax Cloud is enabled us to produce new products designed and delivered on our Cloud infrastructure four times faster in the past. We began to leverage these cloud benefits in 2020, as we more effectively developed new products and delivered them to market leveraging the new EFX cloud, growing new product introductions by 44% last year, in 2020. These new improvements have been further accelerated in 2021 as we are delivering the highest number of new products in our history and we are realizing higher revenue from new product introductions. Slide 18 provides an update on NPIs, a key driver of our current and future revenue growth. As we just discussed, the new cloud transformation is significantly strengthened our NPI capabilities, allowing us to increase both the number of NPIs and the revenue generated from new products. We continue to expand our product resources and focus on transforming Equifax into a product led organization, leveraging our best-in-class Equifax cloud native data and technology to fuel top-line growth. As I discussed earlier in the second quarter, we delivered 46 new products, which is up about almost 2x from the 24 we delivered last year. Year-to-date, we've rolled out 85 new products, which is up 44% from the 59 that we delivered in the first half last year. We're energized as we continue to grow off an NPI record-setting 2020. We want to highlight some of these products rolled out during the quarter, which we expect to drive revenue growth over the second half and the next few years. Our new payment Insights products launched by USIS in April was delivered in partnership with Urjanet and uses consumer permission utility in telco data to improve use of customers, consumers' financial picture and help credit invisibles. The cloud-based solution promotes greater financial inclusion regardless of the consumers' traditional credit score by empowering consumers to show utility in telco payment history with banks or lenders when applying for loans or other services. The product also allows lenders to seamlessly integrate data into review processes while meeting industry leading standards for protection of consumer data security, confidentiality and integrity. Workforce Solution launched a new mortgage 36 product in May. This solution addresses income verification needs by enabling mortgage lenders to pull an extended set of both active and inactive income in employment data for a more complex income mortgage applicants were additional history may be needed in the underwriting process. EWS also launched a new talent report employment staffing product in April. This solution provides flexibility on the number of past employers pulled to meet the employment verification needs of the employer. Staffing agencies leveraged VOE as a reference check was often looking to verify only to employers, which this product helps deliver. In the United Kingdom, we launched the credit vitality view app. This Ignite-based app visualizes key credit data trends across the UK versus a company's own performance. It uses a range of macroeconomic measures and includes filtering capability, so our customers can focus on the performance of their own portfolio and product lines such as mortgages or credit cards. The app also can illustrate these company and market trends over multiple years. Lastly, we introduced the Equifax Affordability Solutions in Australia New Zealand. These solutions deliver automated categorized income and expense verification in a way that delivers meaningful and actionable insights for our customers. Our customers can easily digest and act on these insights through the delivery of comprehensive consumer affordability reports, which are now required from a regulatory standpoint in these markets. This new solution will reduce loan application processing timing cost, improve conversion rates and maximize efficiency while fulfilling responsible lending regulatory requirements, delivering overall improvements to the consumer experience. These are just some examples of the new solutions we launched during the quarter. We're focused on leveraging our new cloud capabilities to increase NPI rollouts and new product revenue in 2021 and beyond. Growing NPIs is central to our EFX2023 growth strategy. And as a reminder, our vitality index is defined as the percentage of revenue delivered by NPIs launched during the past three years. In April, we increased our vitality index outlook for 2021 from 7% to 8% and we remain confident in this framework for 2021. As you can see from the left of the slide, our 8% vitality outlook for 2021 is a big step forward from the 5% vitality we delivered last year. NPIs are a big priority for me and the team as we leverage the Equifax Cloud for innovation new products and growth. Slide 19 showcases the capabilities we've been building over the past three years that only Equifax can bring to the marketplace. We have unique market-leading differentiated data at scale that includes our 228 million ACRO credit records, 119 million TWN income and employment records and additional data at scale that comes from our alternative datasets, including Kount and CTUE, PayNet, IXI and others. Our advanced analytics allow us to build and test attributes faster, leverage artificial intelligence and machine learning, and developing models in days and weeks where used to take months. Our team of 320 data scientists located around the world are leveraging our advanced analytics in Equifax Cloud native infrastructure to define and deploy cloud native products and solutions. And our cloud native data fabric is allowing us to key EnLink our unique data asset in ways that we could never do before. Our data fabric scratches across the globe and we are in the early innings of leveraging its global capabilities. Only Equifax can provide these capabilities, and we are on offense as we deploy these into the marketplace. Wrapping up on Slide 20. Equifax delivered a record-setting second quarter. We have strong momentum as we move into the second half. Our 26% overall and 29% core revenue growth in the quarter reflects the strength and breadth of our business model and early benefits from our Equifax Cloud investments and of course it's enhanced focus on new products. We delivered six consecutive quarters of strong above market double-digit growth. Our strong performance reflects the execution against our EFX2023 strategic priorities Equifax's on offense. As we discussed earlier, we're confident in our outlook for 2021 and we raised our full year midpoint revenue guidance to $4.78 billion, increasing our 2021 growth rate by over 370 basis points, almost 16%. We also raised our midpoint earnings per share guidance to $7.35, increasing the growth rate by over 640 basis points. As we discussed earlier, Workforce Solutions had another outstanding quarter, delivering 40% revenue growth and 58% EBITDA margins. EWS is our largest fastest growing and most valuable business. During the quarter, Workforce Solutions delivered 40% of Equifax revenue and we expect EWS to continue to drive Equifax's operating performance throughout 2021 and beyond, as consumers recognize the value of our growing TWN database. Rudy and his team remain focused on driving outsized growth by focusing on their key growth drivers of adding new records, rolling out new products, driving penetration, driving their new Talent Solutions Data Hub, expansion in new verticals and leveraging their new EFX cloud capabilities. USIS also delivered another strong quarter of 11% growth, driven by their 14% non-mortgage organic growth. We expect USIS non-mortgage growth to continue to be strong due to the economic recovery, the commercial focus of the team, new products and our unique alternative data assets. Sydney USIS teams are competitive and winning in the marketplace and will continue to deliver in '21 and beyond. International grew for the third consecutive quarter, accelerating to 25% in local currency in the second quarter as economies reopened and business activity resumes. Our new international leader Lisa Nelson has high expectations for our team and we expect continued strong growth through the rest of 2021. We are beginning to realize the benefits of our EFX Cloud Data and Technology transformation as we accelerate new product innovation with products designed and built off of our new EFX Cloud infrastructure. We spent the last three years building the Equifax Cloud and we're now starting to leverage our new cloud capabilities. As we move through the rest of the year and into 2022, we'll be increasingly realize the topline, cost and cash benefits from these new cloud capabilities. Accelerate new products, leveraging our differentiated data and the new EFX cloud capabilities is central to our EFX2023 growth strategy. We're beginning to see the benefits of our new product focus and resources leveraging the EFX cloud with the 85 NPIs completed in the first half, pacing well ahead of the record 134 we delivered last year. As we discussed in the past, bolt-on acquisitions that expand our differentiated data assets, strengthening Workforce Solutions and broadening our ID and fraud capabilities are integral to our future growth framework. We have reinvested our strong cash flow in five bolt-on acquisitions so far this year, that will add a 170 basis points to our revenue in the second half. We will continue to focus on accretive bolt-on acquisitions that strengthen Workforce Solutions. I'm more energized now than when I joined Equifax three years ago. What the future holds as we move from building the cloud through our next chapter of growth, leveraging the new Equifax cloud for innovation, growth and new products. We have strong momentum across our business as we move into the second half and we're beginning to deliver on the benefits of the significant Cloud Data and Technology investments we made over the past three years. Equifax's on offense in position to bring new and unique solutions for our customers, then only Equifax can deliver, leveraging our new EFX cloud capabilities.

equifax q2 adjusted earnings per share $1.98. q2 adjusted earnings per share $1.98. q2 revenue rose 26 percent to $1.235 billion. increasing full-year revenue and earnings per share guidance. qtrly adjusted earnings per share attributable to equifax was $1.98. sees fy adjusted earnings per share $7.25 to $7.45. sees q3 adjusted earnings per share $1.62 - $1.72.

As always, we appreciate your interest. Brent Wood, our CFO, is also participating on the call. We refer to certain of these risks in our SEC filings. We hope everyone and their families remain well and out of harm's way. They've done a great job transitioning our operating strategy quickly and doing so while working remotely. Our second quarter results were strong and demonstrate the resiliency of our portfolio and of the industrial market. The team had a solid quarter, producing such stats as funds from operations came in above guidance, up 9% compared to second quarter last year. This marks 29 consecutive quarters of higher FFO per share as compared to the prior year quarter, truly a long-term trend. And for the year, FFO per share is up 9.5%. Our quarterly occupancy was high, averaging 96.6%, leaving us 97.5% leased and 97% occupied at quarter end, ahead of our projections. Our occupancy is benefiting from a healthy market with accelerating e-commerce and last-mile delivery trends, also benefiting our occupancy as a high year-to-date retention rate of 84%. Re-leasing spreads were strong for the quarter at 13.8% GAAP and 7.9% cash. Year-to-date leasing spreads are higher at 20.1% GAAP and 11.5% cash. Finally, same-store NOI was up 4.1% for the quarter and 3.9% year-to-date. In sum, during an extremely choppy environment, I'm proud of our team's results. Our strategy remains one of maintaining occupancy and cash flow with an eye on liquidity. I'm hopeful our strategy will shift again later in 2020 to focus on growth. Brent will give you color or commentary about our upcoming debt placement, further improves our liquidity while lowering our cost of capital. I'm grateful we ended the quarter generally full at 97.5% leased, while Houston, our largest market at 13.8% of rents, is 97.9% leased, has roughly a 4% square footage roll through year-end and a five-month average collection rate on rents of over 99%. My five months used being the length of this pandemic to date. Company level rent collections remain resilient. For July thus far, we've collected 95% of rents. The unknown is when the economy truly reopens, how fast it will reopen, in which cities and are there any shutdowns remaining. We and everyone else simply have less clarity than normal even several months into this. Brent will speak to our budget assumptions, but I'm pleased that with our second quarter results and a realistic plan, we can reach $5.28 per share in FFO. We are only $0.02 shy of our original pre-pandemic expectations. As we've stated before, our development starts are pulled by market demand. With the shutdown, we reduced projected 2020 starts to reflect first quarter actual starts as well as some level of pre-lease conversations under way. In other words, we're not forecasting new spec developments at this time. We're also looking at acquisitions and value-add investments in the same light. Given the positive long-term distribution trends we foresee, we're working on several land sites which we view as valuable development parcels when the economy stabilizes. And in the meantime, we view operations, working with our tenants and maximizing liquidity as the key goals until we reach the next market phase. And now Brent will review a variety of financial topics, including our updated 2020 guidance. Our second quarter results reflect the resiliency of our team and strong overall performance of our portfolio amid unprecedented conditions. FFO per share for the second quarter exceeded our guidance range at $1.33 per share and, compared to second quarter 2019 of $1.22, represented an increase of 9%. The outperformance was primarily driven by our operating portfolio, maintaining occupancy and collections better than we had estimated in April, which was the initial onset of the pandemic. I will center my comments around our capital status, rent collections and deferment requests and assumption changes that increased the midpoint of our FFO per share estimate. During the second quarter, we raised $30 million of equity at an average price of $123 per share. And earlier this month, we agreed to terms on two senior unsecured private placement notes totaling $175 million. The $100 million note has a 10-year term with a fixed interest rate of 2.61%. The second note is $75 million on a 12-year term with a fixed interest rate of 2.71%. We anticipate closing on both notes in October. That activity, combined with our already strong and conservative balance sheet, has kept us in a position of financial strength, which is serving us well during this time of uncertainty. Our debt-to-total market capitalization is 21%, debt-to-EBITDA ratio is 5.1 times, and our interest and fixed charge coverage ratios are over 7.2 times. Our rent collections have been equally strong. We have collected 98.1% of our second quarter revenue and entered into deferral agreements for an additional 0.8%, bringing our total collected and deferred to 99% for the second quarter. As for July, we have collected 95.5% of rents thus far and have entered into deferral agreements on an additional 0.7%, bringing the total of collected and deferred for the month to 96.2%. That is slightly ahead of June's pace. Last April, we reported that 26% of our tenants have requested some form of rent deferment. In the three subsequent months, that has only risen to 29%. We have denied 79% of the request, are in various stages of consideration on 8% and have entered into some form of deferral agreement with 13% of the request. The rent deferred this far totals $1.5 million, which only represents approximately 0.4% of our estimated 2020 revenues. As we stated last quarter, the depth and duration of the pandemic and its impact on the economy is undeterminable. However, the menacy and degree of potential tenant financial stress and loss of occupancy we had budgeted for in April did not occur in the second quarter. As a result, our actual performance and revised assumptions for the remainder of the year increased our FFO earnings guidance by 2.1% from a midpoint of $5.17 per share to $5.28 per share or a 6% increase over 2019. Among the changes were an increase in average occupancy from 95.2% to 96% and a decrease in reserves for uncollectible rent from $3.8 million to $3.6 million. Note that the reserve for potential bad debt for the third and fourth quarter of $2.4 million is not attributable to specific tenants. Rather, it is a general assumption that there will be some companies who succumb to the disruption in the economy caused by the pandemic. Other notable revisions include a lower average interest rate on new debt and the increase of equity issuances by $95 million. In summary, we were very pleased with our second quarter results. We will continue to rely on our financial strength, the experience of our team and the quality of our portfolio to navigate us through the remainder of the year. Now Marshall will make some final comments. In closing, I'm proud of our second quarter results. We said the past few years, our fear wasn't shallow bay oversupply as much as a black swan economic event. We don't want either, but now we have just that. Our company and our team have worked through these before and while different, we're working through this one, too. As the economy stabilizes, it's the future that makes me the most excited for EastGroup. Our strategy, which has worked well the past few years, will come out of this pandemic with trends that we're hearing of, including companies carrying additional safety stock inventory, shopping habits that have changed accelerating the consumer to e-commerce, new industrial users as a result of these shopping habits and increased U.S. manufacturing or nearshoring in Mexico. Meanwhile, our bread and butter traditional tenants will remain and continue needing last-mile distribution space in fast-growing Sunbelt markets. All of these, along with the combination of our team, our markets and our properties, have me optimistic about our future.

q2 ffo per share $1.33. during q2 did not begin construction of any new development projects.

As always, we appreciate your interest. Brent Wood, our CFO is also participating on the call. We refer to certain of these risks in our SEC filings. We hope everyone is enjoying their summer. They continue performing at a high level and reaping the rewards of a very positive environment. Our second quarter results were strong and demonstrate the resiliency of our portfolio and of the industrial market. Some of the results the team produced include, funds from operations, coming in above guidance, up 10.5% compared to second quarter last year and $0.03 ahead of our guidance midpoint. This marks 33 consecutive quarters of higher FFO per share, as compared to the prior year quarter, truly a long-term trend. Our second quarter occupancy averaged 96.8%, up 20 basis points from second quarter 2020. And at quarter end, we're ahead of projections at 98.3% leased and 96.8% occupied. Our occupancy is benefiting from a healthy market, with accelerating e-commerce and last-mile delivery trends. Quarterly releasing spreads were among the best in our history at 31.2% GAAP and 16.2% cash. And year-to-date, those results are 28% GAAP and 16% cash. Finally, cash same-store NOI rose by 5.6% for the quarter and 5.8% year-to-date. In summary, I'm proud of our team's results, putting up one of the best quarters in our history. Today, we're responding to the strength in the market and demand for industrial product, both by users and investors by focusing on value creation via development and value-add investments. I'm grateful, we ended the quarter at 98.3% leased, matching our highest quarter on record. To demonstrate the market strength, our last three quarters were the highest three quarterly rates in the company's history. Looking at Houston, we're 96.5% leased, with it representing 12.3% of rents, down 150 basis points from a year ago and is projected to continue shrinking. Brent will speak to our budget assumptions, but I'm pleased that we finished the quarter at $1.47 per share in FFO and are raising our 2021 forecast by $0.09 to $5.88 per share. As we've stated before, our development starts are pulled by market demand. Based on the market strength we're seeing today, we're raising our forecasted starts to $275 million for 2021. This represents a record annual level of starts for the company. And to position us following the pandemic, we've acquired several new sites with more in our pipeline along with value-add and direct investments. More details to follow as we close on each of these opportunities. And Brent will now review a variety of financial topics, including our 2021 guidance. FFO per share for the second quarter exceeded our guidance range at $1.47 per share and compared to second quarter 2020 of $1.33, represented an increase of 10.5%. The outperformance continues to be driven by our operating portfolio performing better than anticipated, particularly the quick releasing of vacated space during the quarter. From a capital perspective, during the second quarter we issued $60 million of equity at an average price over $162 per share, and we issued and sold $125 million of senior unsecured notes, with a fixed interest rate of 2.74% in a 10-year term. In June, we amended and restated our unsecured credit facilities, which now mature July 2025. The capacity was increased from $395 million to $475 million, while the interest rate spread was reduced to 22.5 basis points, and our ongoing efforts to bolster our ESG efforts we incorporated a sustainability-linked metric into the renewal. That activity combined with our already strong and conservative balance sheet has kept us in a position of financial strength and flexibility. Our debt-to-total market capitalization was 17%, debt-to-EBITDA ratio at 4.9 times, and our interest and fixed charge coverage ratio increased to over eight times. Our rent collections have been equally strong. Bad debt for the first half of the year is a net positive $90,000, because of tenants whose balance was previously reserved that brought current exceeding new tenant reserves. Looking forward FFO guidance for the third quarter of 2021 is estimated to be in the range of $1.46 to $1.50 per share and $5.83 to $5.93 for the year, a $0.09 per share increase over our prior guidance. The 2021 FFO per share midpoint represents a 9.3% increase over 2020. Among the notable assumption changes that comprise our revised 2021 guidance, include: increasing the cash same-property midpoint by 18% to 5.2%, increasing projected development starts by over 30% to $275 million and increasing equity issuance from $140 million to $185 million. In summary, we were very pleased with our second quarter results. We will continue to rely on our financial strength, the experience of our team, and the quality and location of our portfolio, to carry our momentum through the year. Now, Marshall will make some final comments. In closing, I'm excited about our first half of the year. We're ahead of our forecast and are carrying that momentum into the back half of the year. Our company, our team, and our strategy are working well as evidenced by our quarterly statistics, and it's the future that makes me the most excited for EastGroup. Our strategy has worked the past few years, and we're seeing an acceleration, and a number of positive trends for our properties, and within our markets. Meanwhile, our bread and butter traditional tenants remain and will continue needing last-mile distribution space in fast-growing Sunbelt markets. These along with the mix of our team, our operating strategy and our market has us optimistic about the future. And we'll now open up the call for any questions.

compname announces q2 ffo per share $1.47. q2 ffo per share $1.47.

As always, we appreciate your interest. Brent Wood, our CFO, is also participating on the call. We refer to certain of these risks in our SEC filings. We hope everyone and their families remain well and out of harm's way. Our third quarter results were strong and demonstrated the resiliency of our portfolio and of the industrial market. The team produced another solid quarter with statistics such as funds from operations came in above guidance, up 6.3% compared to last quarter -- third quarter last year. This marks 30 consecutive quarters of higher FFO per share as compared to the prior year quarter, truly a long-term trend. Year-to-date FFO per share is up 7.8%. Our quarterly occupancy, while below prior year, was high averaging 96.6% and at quarter end were ahead of projections at 97.8% leased and 96.4% occupied. Our occupancy is benefiting from a healthy market with accelerating e-commerce and last mile delivery trends, also benefiting occupancy as a high 83% year-to-date retention rate. Re-leasing spreads set a quarterly record at 28% GAAP and 16.1% cash. Year-to-date leasing spreads were solid at 23.1% GAAP and 13.3% cash. And finally, same-store NOI was up 3% for the quarter and 3.6% year-to-date. In summary, during a choppy environment, I'm proud of our team's results. Our strategy is evolving to not only include maintaining occupancy, cash flow and liquidity, as has been the case since March. Today, we're responding to the strength in the market and restarting development. Looking at each of our goals, I'm grateful we ended the quarter generally fall at 97.8% leased, our second highest quarter on record. Houston, our largest market, at 13.5% of rents is 96.2% leased, with an eight-month average collection rate over 99%. Companywide rent collections remain resilient. For October, thus far, we've collected 97.6% of monthly rents. There's still many unknowns about how fast and when the economy truly reopens and recovers. We all, as a result, simply have less clarity than normal. Brent will speak to our budget assumptions, but I'm pleased that in spite of the uncertainty, we're tracking toward $5.35 per share in FFO. This represents a $0.07 per share increase to our July forecast and $0.05 per share above our pre pandemic expectations. As we've stated before, our development starts are pulled by market demand. So with the shutdown, we halted new starts. Given the strength we're seeing in select submarkets, we're planning a few fourth quarter starts and pending permitting timing, these will continue into first quarter of 2021. And to position us following the pandemic, we've also been working on several new land sites and park expansion. More details to follow as we close on these investments. Other strategic transitions -- transactions we've worked on include our 162,000 square foot value-add acquisition in Rancho Cucamonga, near the Ontario airport and dispositions, which hopefully continue toward closing in Houston and on our last property in Santa Barbara. And now Brent will review a variety of financial topics, including our updated 2020 guidance. Our third quarter results reflect the resiliency of our team and strong overall performance of our portfolio amid a very challenging year. FFO per share for the third quarter exceeded our guidance range at $1.36 per share and compared to third quarter 2019 of $1.28 represented an increase of 6.3%. The outperformance continues to be driven by our operating portfolio performing better-than-anticipated namely higher occupancy and strong rent collections. From a capital perspective, during the third quarter, we issued $32 million of equity at an average price of $133 per share and earlier this month we closed on two senior unsecured private placement notes totaling $175 million. The $100 million note was a 10-year -- has a 10-year term with a fixed interest rate of 2.61%. The second note is $75 million on a 12-year term with a fixed interest rate of 2.71%. That activity, combined with our already strong and conservative balance sheet, has kept us in a position of financial strength and flexibility, including the complete availability of our $395 million revolver as of today. Our debt to total market capitalization is 19%, debt-to-EBITDA ratio is 4.9 times, and our interest and fixed charge coverage ratios are over 7.4 times. Our rent collections have been equally strong. We have collected 99% of our third quarter revenue and entered into deferral agreements for an additional 0.5%, bringing our total collected and deferred to 99.5% for the third quarter. Last April, we reported that 26% of our tenants have requested some form of rent deferment. In the six subsequent months, that only rose to 28% and deferral requests have basically ceased. The agreed-upon rent deferrals thus far totaled $1.7 million, an increase of only $200,000 since our report in July. That represents just 0.5% of our estimated 2020 revenues. We have consistently stated the depth and duration of the pandemic and its impact on the economy is undeterminable. However, the immediacy and degree of potential tenant financial stress and loss of occupancy we had budgeted for has not materialized. As a result, our actual performance and revised assumptions for the fourth quarter increased our FFO earnings guidance from a midpoint of $5.28 per share to $5.35 per share or a 7.4% increase over 2019. The revised midpoint exceeds our original pre-COVID guidance at the beginning of the year. Among the budget changes were an increase in average occupancy from 96% to 96.5% and a decrease in reserves for uncollectible rent from $3.6 million to $2.3 million. Note that the reserve for potential bad debt for fourth quarter of $600,000 is not attributable to specific tenants. Our continued earnings growth directly contributed to increasing our quarterly dividend by 5.3% to $0.79 per share. Our third quarter dividend was the 163rd consecutive quarterly distribution to EastGroup shareholders and represents an annualized dividend rate of $3.16 per share. In summary, we were very pleased with our third quarter results. We will continue to rely on our financial strength, the experience of our team and the quality and location of our portfolio to carry our momentum into next year. Now Marshall will make some final comments. In closing, I'm also proud of our third quarter results. Our company and our team has worked through numerous downturns and, while different, will work through this one, too. As the economy stabilizes, it's the future that makes me the most excited for EastGroup. Our strategy has worked well the past few years. And coming out of this pandemic, we foresee an acceleration and a number of positive trends for our properties and within our markets. Meanwhile, our bread and butter traditional tenants remain and will continue needing last-mile distribution space in fast-growing Sun Belt markets. These, along with the mix of our team, our operating strategy and our markets, has us optimistic about the future.

q3 ffo per share $1.36.

As always, we appreciate your interest. Brent Wood, our CFO, is also participating on the call. We hope everyone is enjoying their fall. They continue performing at a high level and reaping the rewards of a very positive environment. Our third quarter results were strong and demonstrate the resiliency of our portfolio and of the industrial market. Some of the results the team produced include, funds from operations coming in above guidance up 14% compared to third quarter last year and ahead of our forecast. This marks 34 consecutive quarters of higher FFO per share as compared to the prior year quarter, truly a long-term trend. Our quarterly occupancy averaged 97.1%, up 50 basis points from third quarter 2020 and at quarter end, we're ahead of projections at 98.8% lease and 97.6% occupied. Our occupancy is benefiting from a healthy market with accelerating e-commerce and last mile delivery trends. Quarterly releasing spreads were at record levels at 37.4% GAAP and 23.9% cash and year-to-date, those results are 31% GAAP and 18.5% cash. Finally, cash same-store NOI rose 5.2% for the quarter and 5.6% year-to-date. In summary, I'm proud of our team's results, putting up one of the best quarters in our history. Today, we're responding to the strength in the market and demand for industrial product by both users and investors by focusing on value creation via development and value-add investments. I'm grateful we ended the quarter at 98.8% leased, our highest quarter on record and to demonstrate the market strength, our last four quarters marked the highest four quarterly rates in our company's history. Looking at Houston, we're 96.7% leased. It now represents 12% of rents, down 140 basis points from a year ago and is projected to continue shrinking. As we've stated before, our development starts are pulled by market demand. Based on the market strength we're seeing today, we're raising our forecasted starts to $340 million for 2021. This represents an annual record level of starts for our company. To position us for this market demand, we've acquired several new sites with more in our pipeline along with value-add and direct investments. More details to follow as we close on each of these opportunities. And Brent will now review a variety of financial topics, including our 2021 guidance. Our third quarter results reflect the terrific execution of our team, strong overall performance of our portfolio and the continued success of our time-tested strategy. FFO per share for the third quarter exceeded our guidance range at $1.55 per share and compared to third quarter 2020 of $1.36 represented an increase of 14%. The outperformance continues to be driven by our operating portfolio performing better than anticipated, particularly occupancy and rental rate growth. From a capital perspective, during the third quarter, we issued $49 million of equity at an average price over $176 per share. In July, we repaid a maturing $40 million senior unsecured term loan. And in September, we closed on the refinance of $100 million unsecured term loan that reduced the effective fixed interest rate from 2.75% to 2.1%, with five years of term remaining. In our ongoing efforts to bolster our ESG efforts, we incorporated a sustainability-linked metric into the amended terms. That activity combined with our already strong and conservative balance sheet, kept us in a position of financial strength and flexibility. Our debt to total market capitalization was below 17%, debt-to-EBITDA ratio at 4.7 times and our interest and fixed charge coverage ratio increased to over 8.5 times. Our rent collections have been equally strong. Bad debt for the first three quarters of the year is a net positive $346,000 because of tenants whose balance was previously reserved but brought current, exceeding new tenant reserves. This trend continues to exemplify the stability, credit strength and diversity of our tenant base. Looking forward, FFO guidance for the fourth quarter of 2021 is estimated to be in the range of $1.54 to $1.58 per share and $6.01 to $6.05 for the year, a $0.15 per share increase over our prior guidance. The 2021 FFO per share midpoint represents a 12.1% increase over 2020. Among the notable assumption changes that comprise our revised 2021 guidance include: increasing the cash same-property midpoint by 8% to 5.6%, decreasing reserves for uncollectible rent by $900,000, increasing projected development starts by 24% to $340 million and increasing equity and debt issuance by combined $95 million. In summary, we were very pleased with our third quarter results. We will continue to rely on our financial strength, the experience of our team and the quality and location of our portfolio to carry our momentum through the year. Now Marshall will make some final comments. In closing, I'm excited about where we stand this far into 2021. We're ahead of our initial forecast and adhering that momentum into 2022. Our company, our team and our strategy are working well, as evidenced by the quarterly results. And it's the future that makes me most excited for EastGroup. Our strategy has worked well the past few years. We're further seeing an acceleration and a number of positive trends for our properties and within our markets. Meanwhile, our bread and butter traditional tenants remain and will continue needing last-mile distribution space in fast-growing Sunbelt markets. These, along with the mix of our team, our operating strategy and our markets has us optimistic about the future.

q3 ffo per share $1.55. eastgroup - qtrly same property net operating income for same property pool excluding income from lease terminations increased 5.2% on a cash basis.

It's a pleasure to be with you today. 2020 was an exceptional year for Employers and that we achieved record levels for the number of policies in force, stockholders' equity, statutory surplus and book value per share. We also generated more submissions, quotes and binds than at any time in the history of the Company. We accomplished these feats during a pandemic while working from home and supporting agents' small businesses and their injured workers. Our fourth quarter and full-year results were very strong, especially considering the challenging macroeconomic environment. Our record number of policies in force at year-end demonstrates that our policyholders are enduring the pandemic with reduced payrolls, which directly impact workers' compensation premium. We remain optimistic that as more vaccines are delivered and state restrictions are lifted, we will be able to begin replacing the premium we lost in 2020. In support of this anticipated recovery, we have continued to pursue in advance the significant investments we have made in delivering a superior customer experience for our agents and insureds. As expected the challenging pandemic environment confirmed that ease of doing business is the critical element in producing and servicing small account business. Prior to the COVID-19 pandemic, we experienced strong new business opportunities, as evidenced by record levels of submissions, quotes and binds. But the levels began to decrease as the pandemic progressed, particularly in certain states. Later in the year as many businesses began to reopen and resume more fulsome operations, we began to experience year-over-year increases in new business submissions and new policies bound in nearly all of the states in which we operate with the notable exception of California. Unfortunately, even with the increase in new business policies that we experienced outside of California in 2020, our new business premium has fallen driven primarily by significant declines in payrolls and declines in the number of policies with annual premiums greater than $25,000. In regard to losses, we experienced a significant decline in the frequency of compensable indemnity claims in 2020 despite government mandates and legislative changes related to the COVID-19 pandemic, including the presumption of COVID-19 compensability for all or certain occupational groups in many states. We experienced this decline in nearly all states including California. As a result, we reduced our current accident year loss and LAE ratio to 64.3% during the fourth quarter from the 65.5% maintained throughout the prior 21 months. We also reduced our prior accident year loss and LAE reserves by nearly $40 million during the quarter which related to nearly every prior accident year. Our underwriting expenses for the quarter and the year were each down and we have recently taken actions that will further reduce our underwriting expenses in 2021. Our plan is to achieve our targeted expense ratios as quickly as possible despite the meaningful reductions in earned premium we're currently experiencing. My primary goal as the new CEO will be to fully capitalize on the post COVID economic lift on the horizon, while continuing to maintain discipline both in terms of our underwriting and/or underwriting expenses. With that Mike will now provide a further discussion of our financial results, Steve will then discuss some of the current trends and then Doug will provide his closing remarks. For the year, we delivered a 7.6% return on adjusted equity and increased our book value per share, including the deferred gain by more than 15%. These results are impressive in just about any operating environment and particularly during a pandemic. Our fourth quarter results contributed nicely to these financial successes in 2020. Our in-force policy count ended the year at an all-time high. We experienced reductions in our current accident year loss and LAE and underwriting expense ratios. And we recognized a significant amount of favorable prior-year loss reserve development, all despite the significant declines we experienced in our premiums written and earned. Our net premiums earned were $152 million, a decrease of 11% year-over-year. Since premiums earned are primarily a function of the amount and the timing of the associated premiums written, I'll let Steve describe that increase in his remarks. Our loss and loss adjustment expenses were $48 million, a decrease of 51% year-over-year due to the current and prior-year favorable loss reserve development that Kathy spoke to previously as well as the decrease in earned premiums. Commission expenses were $19 million for the quarter, a decrease of 7% year-over-year. The decrease was largely the result of a decrease in earned premium, partially offset by a higher concentration of alternative distribution business, which is subject to a higher commission rate. Underwriting and general administrative expenses were $43 million for the quarter, a decrease of 15% year-over-year. The decrease was largely the result of reductions in employee benefit costs, professional fees and travel expenses. From a segment reporting perspective, our Employers segment had underwriting income of $45 million for the quarter versus $8 million a year ago and its combined ratios were 70% and 96% respectively. Our Cerity segment had an underwriting loss of $5 million for the quarter, consistent with its underwriting loss of a year ago. Net investment income was $18 million for the quarter, down 20%. The decrease was primarily due to lower bond yields. At quarter-end, our fixed maturities had a duration of 3.2 and an average credit quality of A+ and our equity securities and other investments represented 8% of the total investment portfolio. We were favorably impacted by $5 million of after-tax unrealized gains from fixed maturity securities, which are reflected on our balance sheet and $15 million of net after-tax unrealized gains from equity securities and other investments, which are reflected on our income statement. These net unrealized investment gains contributed to our nearly 6% increase in our book value per share including the deferred gain this quarter. During the quarter, we repurchased $17 million of our common stock at an average price of $32.50 per share and we have repurchased an additional $10 million of our common stock thus far in 2021 at an average price per share of $32.19. Our remaining share repurchase authority currently stands at $19 million. Yesterday, the Board of Directors declared a first quarter 2021 dividend of $0.25 per share, which is payable on March 17th to stockholders of record as of March 3rd. Net written premiums for the year of $575 million were down $117 million or 16.9% from the prior year. The primary drivers for this decrease are new business written and final audit pick-up. With respect to the decrease in final audit pick-up, we continue to see the impact of declining payrolls due to the pandemic and resulting shutdowns as discussed on previous calls. New business premium decreased 33.3% despite increases in submissions, quotes and bound policies. Submissions were up 3.7% year-over-year, quotes were up 7.4% and bound policies were at 0.2% growth. On a year-over-year basis, our in-force policy count increased by 4.8%. A recent workers' compensation industry report that was released with information from the Valen Data Consortium reflected decreased new business opportunity trends. New business submissions were down 10% from the comparable periods in 2019 and were down as much as 23% in some industries. The authors of the report suggested that the owners of these businesses were likely preoccupied with other matters and did not take time to shop for insurance. Despite our increase in submissions over the prior year, this is in line with some of our observations and feedback from our distribution partners relative to the pandemic's impact starting in the second quarter of 2020. We continue to experience high unit retention rates. However, renewal premium for the year decreased 3.6%. The decrease in renewal premium was driven primarily by decreased payroll related to the pandemic and continuing -- or continued declining rates in the majority of states in which we do business. In addition, we non-renewed some middle market accounts that underperformed our profitability expectations. I will be retiring in March. So this will be my last earnings call. It's been my pleasure to lead Employers for over 27 years and I believe that the Company is in the strongest financial position in its 108-year history. I will soon be handing control of the Company over to Kathy whose background and experience are ideal to move Employers forward into the future. I am very excited for Kathy and her team and for the future of the Company. In closing, I want to express my gratitude to all of you for giving me the opportunity to be the CEO of this remarkable organization. I'm very proud of what we've achieved and it's been a privilege to serve you.

employers holdings declares qtrly cash dividend of $0.25 per share. compname reports fourth quarter 2020 and year end financial results; declares quarterly cash dividend of $0.25 per share. qtrly net premiums earned of $151.5 million, down 11% year-over-year.

Also on the call are other members of the management team. Materials supporting today's call are available at www. Actual results could differ materially from current expectations. Important factors that could cause different results are set forth in our SEC filings. Please read these carefully. I hope of all you and loved ones are staying healthy safe. Edison International reported core earnings per share of $0.94 compared to $1 a year ago. However, this comparison is not meaningful because SCE did not receive a final decision in track 1 of its 2021 General Rate Case during the quarter. As many of you are aware, a proposed decision was issued on July 9th. The utility will file its opening comments later today and reply comments on August 3rd. While Maria will cover the PD in more detail, our financial performance for the quarter, and other financial topics, let me first give you a few observations, which are summarized on page 2. The PD's base rate revenue requirement of $6.9 billion is approximately 90% of SCE's request. The primary drivers of the reduction are lower funding for wildfire insurance premiums, vegetation management, and depreciation. The main reduction to SCE's 2021 capital forecast was for the Wildfire Covered Conductor Program. Excluding wildfire mitigation-related capital, the PD would approve 98% of SCE's 2021 capital request, much of which was uncontested. The PD also notes that wildfire mitigation is a high priority for the state and the Commission. The PD supports critical safety and reliability investments and provides the foundation for capital spending and rate base through 2023. We believe it is generally well-reasoned, but it has some major policy implications that are fundamentally inconsistent with where the state is headed. SCE's CEO, Kevin Payne, addressed these implications well during oral arguments earlier this week, and the utility will elaborate on them in its opening comments, which are outlined on page 3. The largest area of concern is the significant proposed cut to SCE's Wildfire Covered Conductor Program. This is SCE's paramount wildfire mitigation program and the utility's comments will focus on ensuring the program's scope is consistent with the appropriate risk analyses, state policy, and achieving the desired level of risk mitigation. The proposed reductions would deprive customers of a key risk reduction tool, so SCE is advocating strongly for a balanced final decision. We believe additional CPUC-authorized funding for SCE's covered conductor deployment is warranted to protect customers' and communities' vital interests and achieve the state's objective for minimizing wildfire risk. As noted in prior discussions, SCE has prioritized covered conductor and other wildfire mitigation activities to urgently reduce wildfire risk. A scorecard of SCE's wildfire mitigation plan progress is on page 4 of the deck. We believe that through the execution of the WMP and other efforts, SCE has made meaningful progress in reducing the risk that utility equipment will spark a catastrophic wildfire. Page 5 provides a few proof points of how SCE believes it has reduced wildfire risk for its customers. First, circuits with covered conductor have experienced 69% fewer faults than those without, which demonstrates the efficacy of this tool. In fact, on segments where we have covered the bare wire, there has not been a single CPUC-reportable ignition from contact with objects or wire-to-wire contact. Second, where SCE has expanded vegetation clearance distances and removed trees that could fall into its lines, there have been 50% fewer tree or vegetation-caused faults than the historic average. Lastly, since SCE began its high fire risk inspection program in 2019, it has found 66% fewer conditions requiring remediation on the same structures year-over-year. These serve as observable data points of the substantial risk reduction from SCE's wildfire mitigation activities. The utility will use the tools at its disposal to mitigate wildfire risk. This includes deploying covered conductor at a level informed by the Final Decision, augmented by using Public Safety Power Shutoffs, or PSPS, to achieve the risk reduction originally contemplated for the benefit of customers. The PD also included comments on the topic of affordability. We agree that affordability is always important and must be weighed against the long-term investments in public safety. I will highlight that SCE's rates have generally tracked local inflation over the last 30 years and have risen the least since 2009 relative to the other major California IOUs. Currently, SCE's system average rate is about 17% lower than PG&E's and 34% lower than SDG&E's, reflecting the emphasis SCE has placed on operational excellence over the years. While we recognize that the increases in the next few years, tied to the investments in safety for the communities SCE serves are higher than this historical average, SCE has demonstrated its ability to manage rate increases to the benefit of customers. Underfunding prudent mitigations like covered conductor is penny wise and pound foolish, as it may ultimately lead to even greater economic pain and even loss of life for communities impacted by wildfires that could have been prevented. An active wildfire season is underway right now, and I would like to emphasize SCE's substantial progress in executing its WMP. Through the first half of the year, SCE completed over 190,000 high fire risk-informed inspections of its transmission and distribution equipment, achieving over 100% of its full year targets. The utility also continues to deploy covered conductor in the highest risk areas. Year-to date, SCE installed over 540 circuit miles of covered conductor in high fire risk areas. For the full year, SCE expects to cover at least another 460 miles for a total of 1,000 miles deployed in 2021, consistent with its WMP goal. Additionally, SCE is executing its PSPS Action Plan to further reduce the risk of utility equipment igniting wildfires and to minimize the effects on customers. SCE is on target to complete its expedited grid hardening efforts on frequently impacted circuits and expects to reduce customer minutes of interruption by 78%, while not increasing risks, assuming the same weather conditions as last year. To support the most vulnerable customers living in high fire risk areas when a PSPS is called, the utility has distributed over 4,000 batteries for backup power through its Critical Care Back-Up Battery program. We believe California is also better prepared to combat this wildfire season. The Legislature has continued to allocate substantial funding to support wildfire prevention and additional firefighting resources. Just last week, the state announced that CAL FIRE had secured 12 additional firefighting aircraft for exclusive use in its statewide response efforts, augmenting the largest civil aerial firefighting fleet in the world. SCE is also supporting the readiness and response efforts of local fire agencies. In June, SCE contributed $18 million to lease three fire-suppression helicopters. This includes two CH-47 helitankers, the world's largest fire-suppression helicopters, and a Sikorsky-61 helitanker. All three aircraft have unique water and fire-retardant-dropping capabilities and can fly day and night. In addition, a Sikorsky-76 command and control helicopter, along with ground-based equipment to support rapid retardant refills and drops, will be available to assist with wildfires. The helitankers and command-and-control helicopter will be strategically stationed across SCE's service area and made available to various jurisdictions through existing partnerships and coordination agreements between the agencies through the end of the year. We also appreciate the strong efforts by President Biden, Energy Secretary Granholm, and the broader Administration. I was pleased to join the President, Vice President, cabinet members, and Western Governors including Governor Newsom for a virtual working session on Western wildfire preparedness last month. The group highlighted key areas for continued partnership among the Federal government, states, and utilities, including land and vegetation management, deploying technology from DOE's national labs and other Federal entities, and enabling response and recovery. Let me conclude my comments on SCE's wildfire preparations for this year by pointing out a resource we made available for investors. We recently posted a video to our Investor Relations website featuring SCE subject matter experts discussing the utility's operational and infrastructure mitigation efforts and an overview of state actions to meet California's 2021 drought and wildfire risk, so please go check it out. Investing to make the grid resilient to climate change-driven wildfires is a critical component of our strategy and just one element of our ESG performance. Our recently published Sustainability Report details our progress and long-term goals related to the clean energy transition and electrification. In 2020, approximately 43% of the electricity SCE delivered to customers came from carbon-free resources, and the company remains well-positioned to achieve its goal to deliver 100% carbon-free power by 2045. SCE doubled it's energy storage capacity during this year, and continues to maintain one of the largest storage portfolios in the nation. We have been engaged in Federal discussions on potential clean energy provisions and continue to support policies aligned with SCE's Pathway 2045 target of 80% carbon-free electricity by 2030. However, electric affordability and reliability must be top of mind as we push to decarbonize the economy through electrification. The dollars needed to eliminate the last molecule of CO2 from power generation will have a bigger impact when spent instead on an electric vehicle or heat pump. For example, the utility is spending over $800 million to accelerate vehicle electrification across its service area, that's a key component to achieve an economywide net zero goal most affordably. Recently, SCE opened its Charge Ready 2 program for customer enrollment. This program is going to support 38,000 new electric car chargers over the next 5 years, with an emphasis on locations with limited access to at-home charging options and disadvantaged communities. We are really proud that Edison's leadership in transportation electrification was recently recognized by our peers with EEI's Edison Award, our industry's highest honor. SCE has been able to execute on these objectives, while maintaining the lowest system average rate among California's investor owned utilities and monthly residential customer bills below the national average. As we grow our business toward a clean energy future, we are also adapting our infrastructure and operations to a new climate reality, striving for best-in-class operations, and importantly we are aiming to deliver superior value to our customers and investors. With that, let me turn over Maria for the financial report. My comments today will cover second quarter 2021 results, comments on the proposed decision in SCE's General Rate Case, our capital expenditure and rate base forecasts, and updates on other financial topics. Edison International reported core earnings of $0.94 per share for the second quarter 2021, a decrease of $0.06 per share from the same period last year. As Pedro noted earlier, this year-over-year comparison is not meaningful because SCE has not received a final decision in its 2021 General Rate Case and continues to recognize revenue from CPUC activities based on 2020 authorized levels. We will account for the 2021 GRC track 1 final decision in the quarter SCE receives it. On page 7, you can see SCE's key second quarter earnings per share drivers on the right hand side. I'll highlight the primary contributors to the variance. To begin, revenue was higher by $0.10 per share. CPUC-related revenue contributed $0.06 to this variance, however this was offset by balancing account expenses. FERC-related revenue contributed $0.04 to this variance, driven by higher rate base and a true-up associated with filing SCE's annual formula rate update. O&M had a positive variance of $0.11 and two items account for the bulk of this variance. First, cost recovery activities, which have no effect on earnings, were $0.05. This variance is largely due to costs recognized last year following the approval of costs tracked in a memo account. Second, lower wildfire mitigation-related O&M drove a $0.02 positive variance, primarily because fewer remediations were identified through the inspection process. This continues the trend we observed in first quarter. Over the past few years, SCE has accelerated and enhanced its approach to risk-informed inspections of its assets. Inspections continue to be one of the important measures for reducing the probability of ignitions. For the first half of the year, while we have maintained the pace of inspections and met our annual target, we have observed fewer findings of equipment requiring remediation. Lastly, depreciation and property taxes had a combined negative variance of $0.10, driven by higher asset base resulting from SCE's continued execution of its capital plan. As Pedro mentioned earlier, SCE received a proposed decision on track 1 of its 2021 General Rate Case on July 9. If adopted, the PD would result in base rate revenue requirements of $6.9 billion in 2021, $7.2 billion in 2022, and $7.6 billion in 2023. This is lower than SCE's request primarily related to lower authorized expenses for wildfire insurance premiums, vegetation management, employee benefits, and depreciation. For wildfire insurance, the PD would allow SCE to track premiums above authorized in a memo account for future recovery applications. The PD would also approve a vegetation management balancing account for costs above authorized. In it's opening comments, SCE will address the PD's procedural error that resulted in the exclusion of increased vegetation management labor costs driven by updated wage rates. Vegetation management costs that exceed a defined cap, including these higher labor costs, would be deferred to the vegetation management balancing account. The earliest the Commission can vote on the proposed decision is at its August 19 voting meeting. Consistent with our past practice, we will provide 2021 earnings per share guidance a few weeks after receiving a final decision. I would also like to comment on SCE's capital expenditure and rate base growth forecasts. As shown on page 8, over the track one period of 2021 through 2023, rate base growth would be approximately 7% based on SCE's request and approximately 6% based on the proposed decision. In the absence of a 2021 GRC final decision, SCE continues to execute a capital spending plan for 2021 that would result in spending in the range of $5.4 to $5.5 billion. SCE will adjust spending for what is ultimately authorized in the 2021 GRC final decision, while minimizing the risk of disallowed spending. We have updated our 2021 through 2023 rate base forecast to include the Customer Service Re-Platform project. SCE filed a cost recovery application for the project last week. I will note that this rate base forecast does not include capital spending for fire restoration related to wildfires affecting SCE's facilities and equipment in late 2020. This could add approximately $350 million to rate base by 2023. Page 9 provides a summary of the approved and pending cost recovery applications for incremental wildfire-related costs. SCE recently received a proposed decision in the CEMA proceeding for drought and 2017 fire-related costs. The PD would authorize recovery of $81 million of the requested revenue. As you can see on page 10, during the quarter, SCE requested a financing order that would allow it to issue up to $1 billion of recovery bonds to securitize the costs authorized in GRC track 2, 2020 residential uncollectibles, and additional AB 1054 capital authorized in GRC track 1. SCE expects a final decision on the financing order in the fourth quarter. Turning to page 11, SCE continues to make solid progress settling the remaining individual plaintiff claims arising from the 2017 and 2018 Wildfire and Mudslide events. During the second quarter, SCE resolved approximately $560 million of individual plaintiff claims. That leaves about $1.4 billion of claims to be resolved, or less than 23% of the best estimate of total losses. Turning to page 12, let me conclude by building on Pedro's earlier comments on sustainability. I will emphasize the strong alignment between the strategy and drivers of EIX's business, and the clean energy transition that is underway. In June, we published our sustainable financing framework, outlining our intention to continue aligning capital-raising activities with sustainability principles. We have identified several eligible project categories, both green and social, which capture a sizable portion of our capital plan, including T&D infrastructure for the interconnection and delivery of renewable generation using our grid, our EV charging infrastructure programs, grid modernization, and grid resiliency investments. Shortly after publishing the framework, SCE issued $900 million of sustainability bonds that will be allocated to eligible projects and reported on next year. Our commitment to sustainability is core to the company's values and a key element of our stakeholder engagement efforts. Importantly, our approach to sustainability drives the large capital investment plan that needs to be implemented to address the impacts of climate change and to serve our customers safely, reliably, and affordably. That concludes my remarks. As a reminder, we request you to limit yourself to one question and one follow up. So everyone in line has the opportunity to ask questions.

qtrly core earnings per share of $0.94.

We have adapted procedures with the safety of our employees and customers in mind, while also continuing to serve our residents and customers in a difficult environment. We have seamlessly transitioned to work-from-home in our corporate and regional offices. The effort and dedication that our teams have shown during these past five weeks is admirable. We have successfully navigated through new regulatory protocols and operating environments at an impressive pace, while maintaining our high quality standards. I am proud of our team. Our first quarter was strong with an NOI growth rate of 5.2%. We saw strong demand on the MH side of the business, with a 4.9% increase in rental revenue. We wrapped up our snowbird season and have a total RV revenue growth rate of 4.8%. The drivers in that revenue were a 7.4% growth rate in annual revenue, a 7% growth rate in seasonal revenue and a 7.6% decline in transient revenue. Let me first address our MH business. Since the middle of March, we have taken steps to increase social distancing, include closing the common area amenities and opening our offices by appointment only. We have been and remain focused on ensuring the health and well-being of our employees, residents, members and guests. Our customers have appreciated the importance of these steps and have followed the new guidelines. We have an occupancy rate of 95% in our core portfolio. We have often focused on the occupancy rate, but at this time, I think it's important to focus on the quality of our resident base. Our residents are homeowners who have generally paid cash for their home. Our residents are committed to their communities, they care about the community and they actively display a pride of ownership in their homes. Our overall occupancy consists of less than 6% renters. We see our renters as future owners. In 2019, 33% of all home sales were the result of a renter conversion. In April, we saw continued strength in MH platform, with 96% of our residents paying us timely. We have a deferral plan in place for April rental payments for those residents facing financial hardship due to the impact of COVID-19. Moving to our RV business, we have had an acquisition strategy over the years of buying RV resorts that are heavily focused on annual and seasonal revenue streams. 80% of our RV revenue is longer term in nature and 20% come from our Transient customers. Our properties have been impacted by local shelter and place orders which call for reduced or eliminated travel activity inside a jurisdiction. Our RV annual customer generally has developed roots at the community. The annual customer tends to own a park model, resort cottage or has an RV on the site that has add-ons that create a more permanent footprint. For the first quarter, the annual revenue grew by 7.4%, comprised of 5.8% rate and 1.6% occupancy. Our northern RV resorts generally open in April. Our annual customers at these locations pay a deposit in advance and then complete their payment when they arrive for the season. These are summer homes and weekend getaways for our customers. This year the opening of 46 of our RV resorts has been delayed until at least the end of April. While we have begun collecting the annual rent due, the delay in opening has caused a change in the normal payment pattern for these customers. Our seasonal revenue stream comes from customers who have a reservation of 30 days or more. Our seasonal revenue primarily comes from our sunbelt locations with 70% of the revenue generated between November and March. The first quarter, which represents half of the full year anticipated seasonal revenue grew by 7%. The second quarter seasonal revenue is generally our slowest quarter with approximately 15% of the overall seasonal revenue in 2019, occurring in the second quarter. Our transient business represents under 6% of our total revenue. We have always said that this piece is the most difficult to forecast. Our transient customer stays with us an average of three nights. The transient business serves an important role for us as we seek to convert that transient customer to a seasonal or annual customer. Most of our RV resorts have a small portion of their overall revenue stream focused on the transient business, which becomes a lead generator for the rest of the business. Towards the end of March, we stopped accepting transient reservations for the remainder of March and all of April. As a result, the following shelter-in-place orders, we reduced activity to protect our employees and residents from any potential risks associated with transient traffic. At this point, the shelter-in-place orders are limiting our ability to accept transient reservation. With respect to our membership business, we have seen strong demand from the members during this pandemic. As shown in our supplemental, cash receipts are similar to this year to last year at this time. We made the decision to withdraw guidance because we are operating under unprecedented conditions and thought it would be more meaningful for us to provide an outlook when there are updates to regulatory protocol. Our business has held up extremely well during these circumstances. We are seeing the best of humanity from our employees, residents, guests and members. We have often described a sense of community at our properties and we have seen these in full display over the past month. We see neighbors caring for neighbors, working together to support the greater community. The demand is high for our property that is seen by our April results. Based on feedback that we have received, our customers are very much looking forward to enjoying the outdoors lifestyle at our properties this season. The ELS team has reacted to an evolving climate in an impressive manner, and for that I'm grateful. I will provide an overview of our first quarter results, highlight operating performance in April, including the results of our recent annual property and casualty insurance renewal and discuss our balance sheet and liquidity position. For the first quarter we reported $0.59 normalized FFO per share. Our results reflect the initial impact of COVID-19, which primarily affected our transient RV business. Core MH rent growth of 4.9% includes 4.4% rate growth and approximately 50 basis points related to occupancy gains. Core RV rental income from annuals and seasonals outperformed expectations for the quarter. Our transient revenues, which were pacing ahead of guidance through February ended the quarter down 7.6% compared to last year. As Marguerite mentioned, we began closing our reservation grid to incoming customers in mid-March. First quarter membership dues revenue, as well as the net contribution from upgrade sales were higher than guidance. Dues revenues increased 6.1% as a result of rate increases and an increase in our paid member count of 4.3%. During the quarter we sold approximately 3,200 Thousand Trails camping passes. We upgraded 727 members during the quarter, 15% more than the first quarter last year. Core utility and other income was in line with guidance for the quarter and includes the year-over-year increase in real-estate tax pass-throughs resulting from the Florida reassessments we discussed in January. First quarter core property operating maintenance and real-estate tax expenses were unfavorable to forecast, mainly as a result of higher than expected R&M expenses. We incurred expenses to recover from storms in California and certain northern properties. In summary, first quarter core property operating revenues were up 5.4% and core NOI before property management increased 5.2%. Property operating income from the non-core portfolio, which includes our Marina portfolio, as well as assets acquired during 2019 was $2.8 million in the quarter. Overall, the acquisition properties continue to perform in line with expectations. Property management and corporate G&A were higher than guidance in the quarter because of the timing of expenses related to certain administrative matters. Other income and expenses generated the net contribution of $1.4 million for the quarter. Ancillary, retail and restaurant operations were impacted by COVID-19 and were lower than expected. Interest and related amortization was $26.1 million and includes the impact of the refinancing we completed during the quarter. I'll provide some detail on this transaction shortly when I discuss our balance sheet. In addition to describing our operational response to the pandemic, the update highlights cash collections and liquidity as indicators of April performance. In our MH properties, we've collected 96% of April rent. The collection rate is net of approximately $180,000 of rent deferral requests we've approved. Our largest population within the MH portfolio age qualified properties have the highest collection rate at 97% collected. Our renter population, while a very small portion of our portfolio, has the lowest rate of collection with approximately 91% collected. At this time of the year, our RV collection efforts are focused on the northern resorts, annual customers as they typically are returning to begin their season of camping. As detailed in the update, 46 of these properties have delayed openings, which has affected typical payment patterns. To-date, we have collected approximately 61% of the April and May annual RV renewals as compared to 71% collected at this time last year. Our seasonal revenue in April was impacted by cancellations as certain customers chose to leave early. However, we also saw customers extend their stays and are currently showing a revenue decline of 12% in April. Our last update relates to our recent property and casualty insurance renewal. On April 1st, we completed the renewal of our property general liability, workers comp and other ancillary insurance programs. While terms and conditions are substantially similar to the expiring policies, adverse market conditions resulted in a higher than expected premium increase of 27%. The resulting insurance expense for the remainder of the year is approximately $1.1 million higher than our expectation. Now, I'll discuss our refinancing activity in the first quarter, highlight current secured debt market conditions and provide some comments on our balance sheet, including our current liquidity position. During the quarter, we closed a $275.4 million secured facility with Fannie Mae. The loan is a fixed interest rate of 2.69%. which is the lowest coupon we've seen on a secured 10-year deal in the MH, RV space. With the proceeds, we've repaid our secured debt maturing in 2020, which carried a weighted average interest rate of 5.2% and the outstanding balance in our line of credit. The remaining proceeds funded working capital, primarily our expansion activity. As I provide an update on the secure debt market, bear in mind that the current environment is quite volatile. Conditions have been changing rapidly and we anticipate they'll continue to do so for some time. That said, current secured financing terms available for MH and RV assets range from 55% to 75% LTV, with rates from 3% to 3.75% for 10-year money. As we've seen in challenging times in the past, sponsor strength is highly valued by lenders and ELS continues to be highly regarded. High quality aged qualified MH will command preferred terms from participating lenders. In these uncertain times, we decided it was prudent to increase our available cash balance. As noted on our COVID-19 update page, we have a current available cash balance of $126 million with no debt maturing in 2020. We continue to place high importance on balance sheet flexibility and we believe we have multiple sources of capital available to us. Our debt to EBITDA and our interest coverage are both around 4.9 times. The weighted average maturity of our outstanding secured debt is almost 13 years.

withdrawing our full year 2020 guidance. qtrly normalized funds from operations $0.59 per common share.

I am pleased to report the results for the first quarter of 2021. Our performance shows the increased demand for our properties. We continued our record of strong core operations and FFO growth, with an 8.1% growth in normalized FFO per share in the quarter. New customer growth in both our RV and MH business contributed to the positive results in the quarter. Our new home sales grew by 24%, contributing to the high quality of occupancy at our MH communities. We ended the quarter with Core Portfolio occupancy of 95.4%. Home sale leads from websites increased by 37% in the quarter. Within our RV platform, we were successful in offsetting some of the loss in seasonal business with significant growth in transient business for the quarter. We ended the quarter with a 15% increase in transient revenue. Our subscription-based Thousand Trails Camping Pass showed strength this quarter. Over 5,000 new members purchased the camp pass, which was an increase of 64% over the first quarter of 2020. In the quarter, we saw an increased demand for upgrades in the Thousand Trail system. Our members we're looking for expanded access to our portfolio and we saw an increase of $5 million in sales. We now have 117,000 members with access to the Thousand Trails footprint. We are approaching our summer RV season and encouraged by the reservation pace and the feedback we have received from our customers. We recently completed a customer survey and the results support our view that our customers are looking forward to spending time outdoors and at our properties. The survey results show that 98% of respondents who were new to camping last year, plan to camp again this year. The respondents indicated that they chose to camp because it felt like a safe choice and they were able to safely travel with their family and friends. The survey indicate the plan for increased camping adventures with 65% of those responding indicating an intention to more this year. The survey also showed that 70% of those responding do not plan to travel by plane this year. In 2020, to help support the safety of our guests and members, we launched a new online check-in option for our RV guests. Since launch, over 160,000 guests completed the online checking process, allowing them to get to their site more quickly and with less direct interaction. In addition, we provided our guests an added way to communicate with our onsite teams during their visit by launching a text message program to reduce the number of in-person interaction. Our guests reported high satisfaction levels based on the experience provided by our teams at our properties. Based on the first quarter survey results, guests responded to customer experienced questions with a rating of 4.5 out of 5. We continue to protect and enhance the environments where we live, work and play, and encourage our residents, members and guests to do the same. Our annual sustainability report will provide updates on our partnerships with conservation focused organizations. We have increased our efforts through partnerships with leading organizations focused on water conservation, supporting the reforestation movement and ocean conservation. Our team members did a wonderful job ensuring the safety and well-being of our snowbird residents and guests. Our COVID response team has been instrumental in arranging 39 vaccination events at our properties that supplied vaccinations for approximately 8,700 individuals. Our operating team will now turn their attention toward the summer season properties and will focus on delivering excellent customer service to our residents, members and guests as they explore our properties this summer. I will provide an overview of our first quarter results and walk through our guidance for second quarter and full year 2021. I will also discuss our balance sheet before the operator opens the call for Q&A. For the first quarter, we reported $0.64 normalized FFO per share. The outperformance to guidance in the quarter resulted from better-than-expected transient performance, membership upgrades, and expense savings. In addition, our guidance did not assume the net contribution from our southern marinas portfolio acquisition. Core MH rent growth of 4.7% includes 4.1% rate growth and approximately 60 basis points related to occupancy gains. Core RV and marina rental income from annuals was in line with expectations for the quarter. Annual RV rental income represents 90% of the combined RV and marina rental income from annuals, and has increased 3.5% with 3.4% from rate. Within the core marina portfolio, marina rent from annuals represents approximately 99% of total marina rental income. Core RV and marina rental income from seasonal and transient customers outperformed our expectations. Included with our guidance assumptions composed in January, we estimated a $10 million decline from combined seasonal and transient revenues compared to first quarter 2020. The actual decline was approximately $6 million. The main factors driving this favorable result were increased customer confidence in travel, given declining COVID case counts and increased vaccine availability, as well as the cold weather pattern in February that increased customer demand for stays in warmer climates. Transient revenues represented approximately two thirds of the combined outperformance. First quarter membership subscriptions as well as the net contribution from upgrade sales outperformed our expectations. The main contributor to outperformance was strong demand for our upgrade products. Upgrade sales volume increased by 640 units compared to first quarter 2020. The price of upgrade sold increased approximately 10% compared to last year. In addition to strong demand for upgrades, our camping pass sales volume increased more than 60% during the quarter. First quarter core property operating maintenance and real estate tax expenses increased 2.3% compared to prior year. Utility expense payroll, real estate taxes and repairs and maintenance combined represent more than 80% of our core expenses in the quarter, and the average increase across these categories was 2.3%. In summary, first quarter core property operating revenues increased 2.8% and core NOI before property management increased 1.9%. Property operating income from the non-core portfolio, which includes assets acquired in 2020 and during the first quarter 2021, was $3.3 million. Overall, the acquisition properties performed in line with expectations. Property management and corporate G&A were $25.9 million, flat to first quarter 2020. A key contributor to the year-over-year comparison is lower travel expenses in 2021. Other income and expenses were approximately $3.1 million higher than first quarter 2020, mainly from home sale profits and ancillary income. Interest and related amortization was $26.3 million, slightly higher than prior year. The first quarter 2021 results include the interest expense resulting from debt used to fund our acquisition activity, offset by the accretive refinancings we closed in the first and third quarters of 2020. As I provide some context for the information we've provided, keep in mind, my remarks are intended to provide our current estimate of future results. A significant factor in our guidance assumptions for the remainder of 2021 is the level of demand for transient stays in our RV communities. We have developed guidance based on our current customer reservation trends. While macro indicators suggest we're heading in a favorable direction relative to the impact of COVID on daily life, our experience over the past year has shown that circumstances can change. We intend to continue to monitor the situation closely and we'll manage our business accordingly. Our full-year 2021 normalized FFO guidance is $2.38 per share, at the midpoint of our range of $2.33 to $2.43. Normalized FFO per share at the midpoint represents an estimated 9.7% growth rate compared to 2020. Core NOI is projected to increase 5.3% at the midpoint of our range of 4.8% to 5.8%. The core NOI growth rate increase from our prior guidance is mainly the result of our first quarter outperformance. Our expectation for the second through fourth quarters is consistent with our budget. As a reminder, our core portfolio changes annually. Our guidance for the full year and second quarter includes the impact of the acquisition activity we've closed in the first quarter with no assumptions for additional acquisitions during the year. We've also included the impact of the financing activity we've disclosed, including the recast of our unsecured credit facility, which I'll discuss after highlighting some of our second quarter guidance assumptions. We expect second quarter normalized FFO at the midpoint of our range of approximately $103.5 million, with a per share range of $0.51 to $0.57. We expect the second quarter to contribute 22% to 23% of full year normalized FFO. We project a core NOI growth rate range of 6.9% to 7.5%. Keep in mind, our second quarter 2020 transient RV business was significantly impacted by COVID-related travel restrictions and shelter-in-place orders. MH and RV annual rate growth assumptions for the second quarter and full year remain consistent with our prior guidance. As Marguerite mentioned, we anticipate continued strong demand across our RV platform. We've built our transient RV revenue assumptions for the second and third quarters using factors, including current reservation pace compared to both 2020 and 2019. Our guidance for the second quarter assumes a growth rate of approximately 14% compared to 2019. This represents a core transient RV revenue increase of approximately $8.8 million compared to 2020. During the quarter, we closed the previously disclosed $270 million 10-year secured loan with a fixed interest rate of 2.4%. In April, we closed on an amended unsecured credit facility, including a $500 million revolver and a $300 million fully funded term loan. The term loan proceeds were used to repay an acquisition loan we originated in early February. The revolver matures in four years and we have two six-month extension options. The term loan matures in five years and we've executed a fixed rate swap that locks in the interest rate at 1.8% for three years. Current secured debt terms available for MH and RV assets range from 55% to 75% LTV, with rates from 2.5% to 3% for 10-year maturities. High quality, age qualified MH assets will command best financing terms. RV assets with a high percentage of annual occupancy have access to financing from certain life companies as well as CMBS lenders. Life companies continue to quote competitively on longer term maturities. We continue to place high importance on balance sheet flexibility, and we believe we have multiple sources of capital available to us. Our debt to EBITDA is 5.7 times and our interest coverage is 5.2 times. The weighted average maturity of our outstanding secured debt is almost 13 years.

q1 adjusted ffo per share $0.64.

I am pleased to report the results for the second quarter of 2021. Our properties experienced unprecedented demand in the quarter. Our MH revenue, RV revenue, home sales and subscription revenue exceeded our expectations. We continued our record of strong core operations and FFO growth with a 30% growth in normalized FFO per share in the quarter. While this great -- growth rate is significantly impacted by the negative comps from 2020, it represents 28% growth from the second quarter 2019. New customer growth in both MH and RV contributed to the positive results in the quarter. Year-to-date, new home sales grew by 122% contributing to the high quality of occupancy at our MH communities. Homeowners grew by 179 in the quarter, driven by a record number of new home sales. Our residents recognize the high quality and value of homes in our communities and are especially motivated to buy given trends in the broader real estate market. We continue to focus on digital marketing and our website experience as a catalyst for growing our home sales pipeline. The unique traffic to our website has grown over 35% compared to the same time prior to the pandemic. Within our RV platform, we saw increased demand during holidays and weekends, as well as strength in weekday activity. We saw an increase in customers committing to us on an annual basis. The resort LifeStyle appeals to our customers as they choose an ELS property for their second home. We are attracting a larger number of new guests than in previous years and new customers look a lot like our pre-pandemic guests, indicating stability in our growing customer base. The number of new customers added to our database during the first half of 2021 is up 25% compared to 2019. These, first time our viewers are drawn to campaign because of an increased desire to spend time outside and the feeling that campaign is a safe activity. We see our new customers choosing to increase engagement with us. Our subscription-based Thousand Trails Camping Pass showed significant growth in the quarter. Over 8,000 new members purchase a campus, which was an increase of 40% over the second quarter of 2020. We reached a new high with almost 50% of all camp passes being sold online. With increased RV sales, we saw our RV dealer past activations increased 39%. In our customer surveys, our new customers are indicating that they intend to camp more even after returning to other vacation travel including plane travel and hotel stays. In 2020 to help support the safety of our guests and team members, we launched a new online check-in option for our RV guests. Since launch, over 250,000 reservations were completed through the online check-in process allowing them to get to their site more quickly and with less direct interaction. The 2021 TripAdvisor Traveler's Choice Awards have been announced and we are pleased that 54 of our properties won this year, 26 of those properties are Hall of Fame winners as they have maintained a Travelers' Choice Award for 5 years. Our guests reported high satisfaction levels based on the experience provided by our teams at our properties. Based on the second quarter survey results, guests responded to customer experience questions with a rating of 4.46 out of 5. In May, we released our Annual Sustainability Report, highlighting our commitments to American Forest and Marine Life as well as our ongoing project centered around energy efficiency at our properties. We have increased our efforts to bolster diversity through our CEO action pledge, expanded learning curriculum and recruitment efforts. The report highlights all the ways that we unite people, places and purpose within our communities. We are halfway through our primary camping season and the feedback we've received is a testament to the hard work of our teams in the field and in the home and regional offices. I will review our second quarter results, highlight our guidance assumptions for the third quarter and full year 2021 and discuss our balance sheet and debt market conditions. For the second quarter, we reported $0.61 normalized FFO per share, $0.07 ahead of the midpoint of our guidance range. The main drivers of outperformance compared to our guidance were core RV rent revenues and membership revenues including upgrade sales. Our core MH rent growth of 4, 7% consists of approximately 4.1% rate growth and 60 basis points related to occupancy gains. We have increased occupancy 153 sites since December with an increase in owners of 283, while renters decreased by 130. While our occupied sites increased during the second quarter, our reported occupancy percentage reflects the impact of expansion sites we've added to our portfolio. Core RV resort base rental income from annuals, increased 7.5% for the second quarter and 5.6% year-to-date compared to the same periods last year. Annual RV rate increases, continue to be in line with our expectations. Increased occupancy from annual RV residents in our Northern properties was higher than expected during the quarter. The average annual rates in these locations are lower than our Southern and Western Resorts, so the increased occupancy slightly reduced our core portfolio average rate. For the quarter, RV rent from seasonal, increased 31% and rent from transients increased 180% compared to 2020. The comparison to prior year is impacted significantly by COVID-related property closures and shelter in place orders that were in effect during the second quarter 2020. Strong demand in the quarter is evidenced by seasonal and transient growth rates of 19% and 50% respectively over 2019. Membership dues revenue increased 10.1% and 7.2% for the quarter and year-to-date respectively compared to the prior year. Year-to-date, we've sold approximately 13,000 to 500,000 Trails Camping Pass memberships, this represents a 50% increase over the same period in 2020 and an increase of 32% over the same period in 2019. The net contribution from membership upgrade sales year-to-date is $5 million higher than 2020. During the quarter, members purchase more than 1,200 upgrades at an average price of approximately $7,400. Core utility and other income was higher than expected during the quarter as a result of the receipt of insurance proceeds related to Hurricane Hanna in 2020. We recognized approximately $2.3 million of income in the quarter related to that storm event. Core property operating, maintenance and real estate tax expenses were generally in line with our expectations for the quarter, higher than expected utility expenses for offset by lower payroll expense as we faced challenges filling open positions across the portfolio. The comparison to second quarter 2020, shows an elevated expense growth rate as a result of the COVID-related limited operations conducted across our portfolio during the second quarter last year. In summary, second quarter core property operating revenues increased 14.9% and Core property operating expenses increased 13.9%, resulting in an increase in core NOI before property management of 15.6%. For reference, the second quarter core NOI growth CAGR from 2019 is 8%. Income from property operations generated by our non-core portfolio was $5.2 million in the quarter. This result was higher than our expectations in part because of the NOI contributed by Pine Haven, the RV resorts we acquired during the quarter. Revenues from annual customers at the marinas and other properties in the non-core portfolio generated more than 90% of total non-core revenues in the quarter and year-to-date periods. Property management and corporate G&A expenses were $26.8 million for the second quarter of 2021 and $52.7 million for the year-to-date period. Other income and expenses generated a net contribution of $5.7 million for the quarter. New home sales profits along with the recovery in our ancillary retail and restaurant operations contributed to an increase of $4 million in sales and ancillary NOI compared to the second quarter 2020. Interest and related loan cost amortization expense was $27.1 million for the quarter and $53.4 million for the year-to-date period. As I provide some context for the information we've provided, keep in mind my remarks are intended to provide our current estimate of future results. A significant factor in our guidance assumptions for the remainder of 2021 is the level of demand for transient stays in our RV communities. We have developed guidance based on our current customer reservation trends. Our full year 2021 normalized FFO is $2.47 per share, at the midpoint of our range of $2.42 to $2.52 per share. Normalized FFO per share at the midpoint represents an estimated 13.4% growth rate compared to 2020. Core NOI is projected to increase 7.9% at the midpoint of our range of 7.4% to 8.4%. The core NOI growth rate increased from our prior guidance is mainly the result of our second quarter outperformance. Our expectation for the third and fourth quarters has been updated to include MH occupancy gains in the second quarter, current RV reservation trends and expense adjustments based on year-to-date activity. As a reminder, we make no assumptions for storm events or other uninsured property losses we may incur. Our guidance for the full year and third quarter includes the impact of the acquisition activity we've closed in the first and second quarters with no assumptions for additional acquisitions during the year. We've also included the impact of the financing activity we've disclosed including the recast of our unsecured credit facility. We expect third quarter normalized FFO at the midpoint of our range of approximately $119.5 million with a per share range of $0.59 to $0.65. We expect the third quarter to contribute 25% of full year normalized FFO. We project a core NOI growth rate range of 8.7% to 9.3%. MH and RV annual growth -- rate growth assumptions for the third quarter and full year remained consistent with our prior guidance. We've built our transient RV revenue assumptions for the third and fourth quarters using factors including current reservation pace compared to both 2020 and 2019. Our guidance for the third quarter assumes a growth rate of approximately 23% compared to 2019, this represents a core transient RV revenue increase of approximately $3.5 million compared to 2020. Our fourth quarter assumptions include a reopening of the Canadian border and return of those customers for the upcoming winter season. Now, some comments on debt markets and our balance sheet. Current secured debt terms available for MH and RV assets range from 50% to 75% LTV with rates from 2.5% to 3.5% for 10-year maturities. High quality age-qualified MH will command best financing terms. RV assets with a high percentage of annual occupancy have access to financing from certain life companies as well as CMBS lenders. Life companies continue to quote competitively on longer term maturities. We continue to place high importance on balance sheet flexibility and we believe, we have multiple sources of capital available to us. Our debt-to-EBITDAre is 5.4 times and our interest coverage is 5.4 times. The weighted average maturity of our outstanding secured debt is approximately 12.5 years.

q2 adjusted ffo per share $0.61.

I am pleased to report the final results for 2020. Our performance shows the resiliency of our business. In 2020, our team has met each challenge with confidence and conviction. Our team is focused on providing a safe experience for residents, customers and employees. We were able to serve our residents and customers in a challenging operating environment while maintaining our impressive customer feedback scores. We continued our record of strong core operations and FFO growth with a 10% growth in normalized FFO per share in the quarter. The fundamentals of our business remain strong with demographic and economic trends creating tailwinds for future growth. In 2020, our MH portfolio increased occupancy by 293 sites. We experienced continued strength at our MH properties with full-year rent revenue growth of 4.6%. We saw fewer move-outs this year, primarily due to shelter-in-place orders. We adjusted our sales and marketing efforts and were able to access new customers and efficiently showcase our homes in a virtual environment. Throughout the fourth quarter, there were over 100 virtual home tours on our website. Website visitors looking at our listings were three times more likely to express interest in the community and share their contact information for a follow-up from our team after reviewing a virtual tour on our website. We see this as an opportunity to further grow RV base. In 2020, the demand was strong for RV sites across the country. In the quarter, we saw an increase in core transient revenue of 15%. This growth was fueled by marketing campaigns for fall and winter campaign opportunities. Our customers are interested in experiencing vacations in a safe environment. We also see an increased flexibility in customer schedules that will continue to benefit us. In 2020, our Thousand Trails membership portfolio performed in line with pre-pandemic expectations. Our dues revenue increased over 4% to $53 million. We sold over 20,000 camping passes, an increase of over 6% from 2019. Our upgrade sales increased 15% over 2019 as we saw more customers interested in increasing their commitment to the Thousand Trails system. In 2020, to help support the safety of our guests and team members, we launched a new online check-in option for our RV guests. About one-third of guests completed the online check-in process, allowing them to get to their site more quickly and with less direct interaction. In addition, in 2020, we provided our guests an added way to communicate with our on-site teams during their visit by launching a text message program to reduce the number of in-person interactions. Our guests reported high satisfaction levels, based on the experience provided by our teams at our properties. We send online service to our guests after they stay at our RV resorts and campgrounds. Based on the fourth quarter survey results, guests responding to customer experiences questions with the rating of over 4.5 out of 5. We have issued guidance of $2.31 at the midpoint, which is a 6.4% growth in normalized FFO per share. The demand for our MH communities continues to increase. Over the last five years, we have sold more than 2,200 new homes in our communities. We finished the year strong with a 30% increase in new home sales year-over-year. We see heightened demand for our locations and believe our home sales volume will reflect that demand. We have noticed rent increases for approximately 60% of our residents and anticipate a 4.2% rate growth in MH revenue. Our RV business in 2020 showed resiliency as it rebounded from pandemic-related closures. As we head into 2021, we continue to have the backdrop of COVID-related travel issues in Canada and the U.S. hampering our results for the first quarter. As we have discussed, our Canadian traffic has been significantly impacted by the border closures. Our guidance for 2021 reflects the strength in our business. Our guidance is built based on the operating climate of each property, including a robust market survey process and continuous communication with our residents. Since our last call, we have closed on over $200 million of transactions. We added approximately 2,100 RV sites to the portfolio and approximately 500 MH sites, with over 700 sites of adjacent expansion and 500 marina slips. The acquisitions were geographically diverse and complementary to our existing footprint. Additionally, we closed on four parcels of entitled land with 300 acres. We anticipate being able to build 1,000 sites in these acquired acres. In total, in 2020, we purchased eight parcels of land adjacent to our existing properties. We will continue to pursue and execute on these value add transactions. Next, I would like to update you on our 2021 dividend policy. The Board has approved setting the annual dividend rate at a $1.45 per share, a 6% increase. The Board will determine the amount of each quarterly dividend in advance of payment. The stability in growth of our cash flow, our solid balance sheet and the strong underlying trends in our business are the primary drivers of the decision to increase the dividend. Historically, we have been able to take advantage of opportunities due to the free cash flow generated by our operations. Consistent with the past, in 2021, we expect to have an excess of $90 million of discretionary capital after meeting our obligations for dividend payments, recurring capital expenditures and principal payments. We have increased our dividend significantly over the last few years. Over the past five years, we have increased our dividend 71%. 2020 was a difficult year. We have over 4,000 team members dedicated to ensuring success in our organization, and for that I am grateful. We asked a lot of our team members this year, with each new regulation or change in operating climate, we saw increased dedication to our continued success. Our team members strive to perform their best each day and the results of their efforts have been impressive. I will review our fourth quarter and full-year 2020 results, and provide an overview of our full-year 2021 guidance. Fourth quarter normalized FFO was $0.57 per share. Strong performance in our Core Portfolio generated 3.6% NOI growth for the fourth quarter. Core NOI growth of 2.9% for the full year contributed to our normalized FFO per share growth of 3.9%. As Marguerite mentioned, full-year core community base rental income growth was 4.6%. Rate increases contributed 4.1% growth while occupancy generated the additional 50 basis points. Our 2020 core occupancy increase included a gain of 345 homeowners. Our rental homes continue to represent less than 6% of our MH occupancy. Full-year core resort base rental income growth from annuals was 5.6% with 4.9% from rate increases and 70 basis points from occupancy gains. Core RV seasonal and transient revenues declined 3.7% and 8%, respectively for the year. Fourth quarter seasonal RV revenues were approximately $2 million less than last year, mainly due to the travel-related restrictions impacting Canadian and U.S. domestic customers' decisions to spend the winter season in our Southern resorts. For the full year, net contribution from our membership business was $2.9 million higher than 2019, an increase of 5.3%. Dues revenues increased 4%, mainly as a result of increased rate. Strong demand for our upgrade products is evidenced by the full-year increase in sales volume of 16%. Full-year growth in utility and other income is mainly the result of increases in real estate tax pass-throughs and utility income. The pass-through income represents recovery of 2019 tax increases, mainly in Florida, and the utility income increase reflects recovery of increased expense resulting from higher usage in our properties. Full-year core property operating, maintenance and real estate taxes increased 5% compared to 2019. This increase includes approximately $5.1 million in unplanned expenses associated with cleanup following hurricanes Hanna and Isaias, as well as expenses incurred as a result of cleaning and safety protocols and frontline employee compensation following the onset of COVID-19. Our non-core properties, including those acquired during the fourth quarter, contributed $4.4 million in the quarter and $14.4 million for the full year. Property management and corporate G&A were $97.2 million for the full year. Other income and expenses, net, which includes our sales operations, joint venture income as well as interest and other corporate income, was $10.5 million for the year. Interest and amortization expenses were $102.8 million for the full year. This includes the partial year impact of our refinancing activity in the first and third quarters, as well as the line of credit borrowings used to fund our recent acquisitions. As I provide some context for the information we provided, keep in mind, my remarks are intended to provide our current estimate of future results. Our guidance for 2021 normalized FFO is $445 million or $2.31 per share at the midpoint of our guidance range of $2.26 to $2.36 per share. We projected core NOI growth rate between 3.3% and 4.3% with 3.8% at the midpoint. Full-year guidance includes 4.2% rate growth for MH and 4.5% for annual RV rents. We assume flat occupancy in our MH properties for 2021. Our guidance assumes first quarter seasonal and transient RV revenues perform in line with our current reservation pacing. We estimate the first quarter decline in revenue from these line items compared to same period last year to be almost $10 million. Almost 50% of that shortfall is caused by our Canadian customers deciding not to visit for the season. Our customer reservation trends indicate a strong interest in returning to our properties for the 2021-'22 winter season. Current reservations for seasonal stays in the first quarter of 2022 are four times higher than last time at this year. As a reminder, in years prior to 2020, the first quarter represented approximately 50% of our seasonal RV revenues for the year. Within our transient RV business, we have two lines of revenue, one services the customers who drive their RV to our property and the other services the cottage rental customers. For the first quarter, we have seen an increase of 10% in the reservations from customers driving their RV to our resorts and a decline in our cottage rental business of almost 40%. This represents approximately $1 million less cottage rental income in 2020. While we have less visibility into the transient business for the remainder of the year, we have seen an increased reservation pace for the spring and summer season. We expect first quarter normalized FFO per share to represent approximately 24% to 25% of full-year normalized FFO per share. Our guidance model includes the impact of our recent acquisitions, including the RV property we acquired last week. The model also includes the financing activity I'll discuss shortly. The full-year guidance model makes no assumptions regarding other capital events or the use of free cash flow we expect to generate in 2021. I'll now provide some comments on the financing market and our balance sheet. The lender currently holds the mortgage on two of the properties to be financed. Those existing mortgages mature in 2022 and carry a weighted average rate of 5.1%. We intend to use the loan proceeds to repay a portion of our 2022 maturities and amounts outstanding on our line of credit. Please note, as this loan is not yet closed, we can make no assurance that it will close pursuant to these terms or at all. Current secured debt terms are 10 years at coupons between 2.5% and 3.5%, 60% to 75% loan-to-value and 1.4 times to 1.6 times debt service coverage. We continue to see strong interest from life companies, GSEs and CMBS lenders to lend at historically low rates for terms 10 years and longer. High-quality age-qualified MH assets continue to command best financing terms. We have no secured debt maturing in 2021. Our $400 million line of credit currently has approximately $297 million outstanding. Our ATM program has $200 million of available liquidity. Our weighted average secured debt maturity is approximately 13 years. Our debt-to-adjusted EBITDA is around 5.2 times and our interest coverage is 5.1 times. We continue to place high importance on balance sheet flexibility, and we believe we have multiple sources of capital available to us.

q4 revenue rose 5.1 percent to $271.9 million. sees 2021 normalized ffo/share $2.26 to $2.36. qtrly ffo available for common stock and op unit holders were $0.57 per common share. sees 2021 fy normalized ffo/share to be $2.26 to $2.36. q1 2021 normalized ffo per share is anticipated to represent 24-25% of full year normalized ffo per shar. board has approved setting annual dividend rate for 2021 at $1.45 per share of common stock, an increase of 5.8%.

I'm Patrick Burke, the company's head of investor relations. It's great to be with you today to discuss what we believe were excellent Q1 results as well as to provide some color on the outlook for the business going forward. Our Q1 results exceeded our revenue and profitability expectations in all three of our principal business segments. Our golf equipment segment continued to experience unprecedented demand, which combined with a strong performance by our supply chain team, delivered 29% revenue growth versus 2020, and 16% growth versus 2019. Our apparel and soft goods segment also overperformed our expectations, driven by positive brand momentum in both TravisMathew and Jack Wolfskin. The fact that this segment delivered positive segment profitability was, in my opinion, an exceptional performance given the headwinds faced by COVID restrictions and shutdowns in the European markets. I believe these trends bode very well for the long-term outlook of this segment. Lastly, Topgolf outperformed expectations based on a faster-than-anticipated recovery in demand as well as strong operating efficiencies. We believe it would be hard to find three better-positioned business segments both for the current environment and our expectations going forward. Like me, I'm sure our team remains highly motivated to capitalize on the strong list of opportunities in front of us. Let's now turn to Page 6 and jump into our Q1 results by segment. Our golf equipment segment continues to benefit from record demand levels. retail sales of golf equipment hard goods were up 49% compared to Q1 2019 and 72% compared to 2020, thus setting another record for Q1 just as the last two quarters delivered records for their respective time periods. Our supply chain team did a great job in Q1 chasing demand and exceeding our expectations on supply. Even with this great work, field inventory levels remain extremely low and we expect them to remain so at least through midyear, perhaps even longer. Fortunately, we also believe our supply chain is and will continue to deliver us a competitive advantage through the balance of the year, especially in custom fitting, where demand is also surging right now. Although we fully expect the current unprecedented demand to moderate at some point, we have yet to see a slowdown, and we continue to see particular strength in product aimed at women's, juniors and new entrants to the game. We are now quite confident that 2021 will be a very strong year and we also believe there will be a long-term benefit to the golf industry as we expect it will leave the pandemic period with a significantly larger total addressable market and strong momentum. Our Q1 market share was a little weaker than desired during the quarter as four major golf equipment brands launched metal wood product this year, while Q1 2020 only had two of the four launch. We never like to cede share, but at this point, we are not overly concerned. As our most recent share trends are improving, we expect this improvement to continue through Q2, and we are performing relatively stronger in key accounts that are not reporting to Datatech as well as a strategically important green grass channel. Furthermore, we've been receiving excellent feedback on the performance of our products, especially the Epic MAX Woods, the Apex Ford tires, the two-bolt tin putter as well as our entire ball lineup. We also remain comfortable with our brand strength and position. In the U.S., third-party research from Datatech showed our brand to be the No. 1 club brand in overall brand rating as well as the leader in innovation and technology. Over the last several years, we have shown resilience with these important brand positions. Turning to our soft goods and apparel segment. Given the headwinds faced by COVID restrictions and lockdowns in the European markets, the results delivered in this segment were both better than our expectations, and in my opinion, an exceptional performance. Looking at the larger individual businesses in this segment, starting with TravisMathew, we had high expectations for growth, and still, the business exceeded these expectations. Driving this performance, e-com was up 145% year over year in Q1, and company-owned stores comped up nearly 10% despite some code restrictions early in the quarter. Sell-through at wholesale was also very strong. Ryan Ellison and his team at TravisMathew are to be commended as momentum for this business is at an all-time high. Turning to Jack Wolfskin. This is the business that probably most overperformed expectations in Q1. As you probably recall, this business has started to deliver some nice year-over-year growth at the end of last year and was starting to look like we had turned the corner on brand momentum. Though the COVID resurgence and resulting third-wave shutdowns in Europe, we were naturally concerned. Although these circumstances have significantly impacted our business, how could they not? And they will continue to do so through at least Q2. Our brand momentum in our European e-com channel and key digital partners has really moderated that negative impact. Combine this with both nice growth in China and strong financial discipline, what could have been a significant drag on our business has become manageable. On top of this, the improving brand momentum should set us up for a strong second half, assuming, of course, the European markets open up as expected by then. Our sell-through momentum in this business is good, and prebooks for the full winter line have been quite strong. As a reminder, Richard Collier joined the brand in December as CEO. Richard joined us from Helly Hansen, where he held the title of global product officer and served in that capacity as well as de facto COO. We are really pleased with the leadership team we now have in place, and I'm increasingly confident in the future of this brand. Last but not least, a few comments on the Callaway branded softwood business. As mentioned last quarter, in Korea, we plan to take back the Callaway Golf apparel brand that's been licensed to a third party for several years and launched our own apparel business during the second half of this year. We remain on track for this and are investing in staffing and IT systems accordingly. The team there is energized by this opportunity as this is something, we have been considering for several years now. Taking a step back in looking at the big picture. For the last year, the hero of the soft goods and apparel segment is certainly e-com. This is a channel that was significantly strengthened by investments we made prior to the pandemic as well as those continuing to this day. These investments enable our apparel business e-com to deliver 96% year-over-year growth in Q1. E-com is now a significant portion of the channel mix of this segment, and we are confident our expanded capabilities and strength here will bolster this business' growth prospects and profitability going forward. Post-COVID, we continue to expect our apparel and soft goods segment to grow faster than our golf equipment business, and with that growth, deliver operating leverage and enhanced profitability. And although the pandemic delayed our efforts, we still believe we'll be able to deliver $15 million of synergies in this segment over the coming years. Like our company overall, this segment, with its concentration in golf and outdoor, appears to be well positioned for both the months and years ahead both during the pandemic and after. Now turning to Top Golf. This exciting new segment also outperformed expectations based on a faster-than-anticipated recovery in demand as well as strong operating efficiencies. We were pleased to close the transaction in early March, and equally pleased to onboard Artie Starrs as the new CEO in early April. Artie brings a wealth of valuable experience and talent to an already strong management team and an exciting business. Needless to say, I'm thrilled by this combination. On the venue side, all venues are now open globally. After a challenging start to the year, COVID restrictions are continuing to ease. COVID impacted, so these include the impact of venues shut or restricted during COVID during the period. Same venue sales versus 2019 was in the low 80s for the quarter, which was above our expectations and showed improving trends through the quarter. We now believe we will be either at the high end or modestly above our previous full year same venue sales expectations, which was 80 to 85%. Walk-in traffic remains stronger than events still, and both are trending well. Our financial results benefited from the same venue sales fee as well as the operating efficiencies that are higher than both historical levels and our plan. Some of this is due to the fact that in the current environment, like so many other service businesses, it's hard to keep the venues fully staffed. Fortunately, we're working through this well, and so far, it has neither meaningfully constrained us, nor has it had a negative impact on guest satisfaction measures. We see it as the manageable challenges of now. Also, with these results, we're increasingly confident that previously communicated venue economics will be achievable long term. We successfully opened five new venues so far this year, two in Q1 and three, so far, in Q2. Globally, we have 66 company-owned venues in operation. For the full year, we are on track to open at least three more venues, for a total of at least eight venues this year. We also remain confident in our pipeline for future venues. We successfully installed 1,533 bays in Q1, a new record despite the COVID challenges globally. We now have just over 10,000 bays globally, which is significantly more than our largest competitor. Demand remains strong for the product, and we are finding strong synergies between the Callaway sales team and the Toptracer team. We remain on track for 8,000 bays this year. At the end of this week, we'll be launching the next global Toptracer tournament, the 9-Shot Challenge. This time, presented by the PGA America and the PGA Championship. This is an excellent example of how we can leverage our global scale and build a digital community. Looking forward, given the unsettled market conditions globally, we're still not providing specific revenue and earnings guidance. However, we now have enough new information and visibility to provide the following color: As discussed on our previous calls, we continue to have headwinds in our supply chain, logistics and labor. As far as I'm aware, most companies do at this point. Our cost estimates for these headwinds have increased since we last spoke. However, our supply chain and HR teams are proving up to these challenges. I believe we may even have a competitive advantage here. Also, at present, the demand is high enough that positive volume variances are expected to overshadow the majority of this year's cost impacts from these challenges. We also continue to make select reinvestments back into our business. For the balance of the year, these will be marginally more than what we discussed during our last call. These include incremental new store openings at TravisMathew, investments in demand creation and digital resources for all brands, as well as the apparel business. We have a track record for making these kind of internal investments and are confident these will deliver higher returns for shareholders. Although we continue to fight COVID impacts globally,and business conditions remain unsettled, the strong demand equation and the momentum of our brands is such that it's clearly going to be a strong financial year; significantly stronger than previously thought. We now expect that revenue and adjusted EBITDA for the full 12 months of 2021 will meet or beat 2019 results. More specifically, We are now expecting our legacy business to exceed its 2019 results and the Topgolf business to meet or exceed its 2019 full-year results, as measured over the full 12-month period. It is worth noting that a couple of quarters ago, I said I thought this was not in reach. I'm happy to have to correct that previous statement. Lastly, we are increasingly confident in the future potential of this unique and powerful business. Brian, over to you. We are very pleased with our first-quarter results, with consolidated revenue increasing 47% and adjusted EBITDA increasing 113% compared to the same period in 2020. Our consolidated revenue and adjusted EBITDA for the first quarter of 2021 increased by 26% and 38%, respectively compared to the first quarter of 2019. Each of our three operating segments performed ahead of plan during the first quarter of 2021. In addition to this better-than-expected operating performance, our liquidity has also improved substantially compared to a year ago. As of March 31, 2021, our available liquidity, which is comprised of cash on-hand and availability under our credit facilities, was $713 million compared to $260 million at March 31, 2020. All in all, we are pleased with the current state of our business and are optimistic for the balance of the year. In evaluating our results for the first quarter, you should keep in mind some specific factors that affect year-over-year comparisons. First, as a result of the OGIO, TravisMathew and Jack Wolfskin acquisition, we incurred non-cash amortization expense of intangible assets in the first quarter of 2021 and 2020. The first quarter of 2021 also includes non-cash amortization of intangible assets related to the Topgolf merger as well as depreciation expense from the fair value step-up of Topgolf property, plant and equipment and expense related to the fair value adjustments to Topgolf's leases and debt. Second, we also incurred other acquisition and non-recurring charges in the first quarter of 2021, including Topgolf merger transaction and transition expenses and implementation costs related to the new Jack Wolfskin IT system. In 2020, the company incurred non-recurring integration costs related to the Jack Wolfskin acquisition and costs related to the transition to our new North American distribution center in Texas. Third, we recognized in the first quarter of 2021 a $253 million non-cash gain related to the write-off of our premerger Topgolf investment. Fourth, we incurred in the first quarter of 2021 and will continue to incur noncash amortization of the debt discount on the notes issued during the second quarter of 2020. Fifth, we recorded in the first quarter of 2021, a non-cash valuation allowance related to certain of our deferred tax assets as a result of the merger. Lastly, the Topgolf merger was completed on March 8, 2021. Topgolf generally operates in a 13-week quarter. As a result, our first-quarter 2021 financial statements include Topgolf results for our four-week period, commencing March 8, 2021 and ending April 4. This can become confusing, and we would do our best to call out when we are discussing Topgolf results for the full quarter versus the four-week stub period. But you should do care when preparing your models to ensure you are using the correct one. We have provided in the tables to this release a schedule detailing the impact of these items on first-quarter results, and these items are excluded from our non-GAAP results. With those factors in mind, I will now provide some specific financial results for the first quarter of 2021 compared to the first quarter of 2020. Turning now to Slide 11. Today, we are reporting record consolidated first-quarter 2021 net revenues of $652 million, compared to $442 million for the same period in 2020, an increase of 210 million or 47%. This increase was led by a 26% increase in the legacy Callaway business, as well as an incremental $93 million from the four weeks of the Topgolf business. Changes in foreign currency rates had a $17 million favorable impact on first-quarter 2021 net sales. We are also reporting for the first quarter of 2021 operating income of $76 million, an increase of $35 million or 85%, compared to $41 million for the same period in 2020. On a non-GAAP basis, operating income for the first quarter of 2021 was $97 million, a 54 million or 126% increase compared to 43 million for the same period in 2020. The increase in non-GAAP operating income was led by a $50 million increase in segment operating income from the legacy Callaway business as well as an incremental $4 million from the four weeks of the Topgolf business. Other income was $244 million in the first quarter of 2021 compared to other expense of $3 million in the same period of the prior year. This includes the $253 million non-cash gain related to the Topgolf merger. On a non-GAAP basis, which includes Topgolf gain, other expense was $5 million in the first quarter of 2021 compared to other expense of $3 million for the comparable period in 2020. The $2 million increase in other expense was primarily related to higher interest expense related to incremental interest from the convertible bonds issued in May 2020, plus four weeks of Topgolf interest, partially offset by a decrease in foreign currency-related losses. Pretax income was $320 million in the first quarter of 2021 compared to $38 million for the same period in 2020. Non-GAAP pre-tax income was $91 million in the first quarter of 2021 compared to non-GAAP pre-tax income of $41 million in the same period of 2020. Earnings per share was $2.19 or approximately 125 million shares in the first quarter of 2021 compared to earnings of $0.30 or approximately 96 million shares in the first quarter of 2020. Non-GAAP earnings per share was $0.62 in the first quarter of 2021 compared to earnings per share of $0.32 for the first quarter of 2020. Fully diluted shares were 125 million in the first quarter of 2021 compared to 96 million shares for the same period in 2020. The net 29 million share increase is primarily related to the issuance of additional shares in connection with the Topgolf merger. Full year estimated diluted shares is approximately 176 million shares, which represents the weighted average shares issued in connection with the merger over approximately a 10-month period. As of March 31, 2021, we had approximately 185 million shares that were issued and outstanding. Adjusted EBITDA was $128 million in the first quarter of 2021 compared to $60 million in the first quarter of 2020 and $93 million in the first quarter of 2019. Topgolf contributed adjusted EBITDA of $15 million for the four-week period. To provide some additional perspective, The Topgolf first quarter 2021 EBITDA, the full three months was $17 million. The golf equipment segment's net revenue increased $85 million or 29% to, $377 million in the first quarter of 2021, compared to $292 million in the first quarter of 2020. This increase was driven by the continued surge in golf demand and participation, our supply chain team's ability to secure a greater-than-expected supply of golf equipment components during the first quarter as well as the COVID-19 shutdowns across portions of our business in the first quarter of 2020. Both golf club and golf ball sales increased by 26% and 50%, respectively. The golf equipment segment operating income was $85 million or 22.5% of net revenues in the first quarter of 2021 compared to $59 million or 20.2% of net revenues in the first quarter of 2020, an increase of $26 million or 230 basis points. The increase was driven by the increased revenue, operating expense leverage and favorable foreign currency exchange rates, partially offset by increased freight and product mix, including lower margins on our higher technology golf club product offerings and package sets. The apparel, gear and other segment's net revenue increased $31 million or 21% to $182 million in the first quarter of 2021 compared to $151 million in the first quarter of 2020. The increase was driven by a 23% increase in apparel sales as well as an 18% increase in gear and accessories and other. Both the TravisMathew and Jack Wolfskin business had a recovery from a pandemic faster than expected, despite continued retail restrictions and other effects from COVID-19, particularly in Europe. The apparel, gear and other segment's operating income increased $24 million to $20 million compared to a loss of $4 million for the same period in the prior year. In 2021, this equated to 11% of segment revenue, a 1,360-basis-point improvement over the first quarter of 2020. The increase was driven by the increased sales, operating expense and cost of revenue leverage, favorable foreign exchange rates and increased commerce revenue, partially offset by the lower retail revenue in Jack Wolfskin due to further government-mandated retail shutdowns during the first quarter in Central Europe. The Topgolf segment net revenue was $93 million in the first quarter of 2021, which includes four weeks of the Topgolf business. The Topgolf segment's operating income was $4 million for the four-week stub period. To provide investors additional perspective, Topgolf's full first quarter net revenues were $236 million and full first quarter GAAP operating loss was $30 million and on a non-GAAP basis, Topgolf's operating loss was 15 million. Turning now to Slide 13. I will now cover certain key balance sheet and other items. As of March 31, 2021, available liquidity was $713 million compared to $260 million at the end of the first quarter. This additional liquidity reflects higher revenues in the legacy Callaway business, improved liquidity from working capital management, and proceeds from the convertible notes we issued during the second quarter. At March 31, 2020, we had total net debt of $1,160 million, including 640 million of Topgolf related net debt. The Topgolf debt includes landlord financing of $222 million related to financing the venues business. Our consolidated net accounts receivable was $329 million, an increase of 27% compared to $260 million at the end of the first quarter of 2020. Days sales outstanding decreased slightly to 61 days on March 31, 2021, compared to 62 days as of March 31, 2020. The increase in net accounts receivable primarily is attributable to the increase in first quarter revenue, but also includes an incremental $9 million of accounts receivable. We continue to remain very comfortable with the overall quality of our accounts receivable at this time. Also, this on Slide 13, our inventory balance decreased by 19% to $336 million at the end of the first quarter of 2021 compared to 413 million at the end of the first quarter of the prior year. The $77 million decrease was due to the high demand we are experiencing in the golf equipment business, recovery of our soft goods businesses, as well as inventory reduction efforts in the soft goods business. Capital expenditures for the first quarter of 2021 were $29 million. This includes $16 million related to Topgolf. From a full-year 2021 forecast perspective, the legacy Callaway forecast is increasing to approximately $65 million versus the previous forecast of 50 million due to capacity investments in our plants and warehouses, as well as increasing the number of play in TravisMathew retail stores. The full year and 12-month forecast for Callaway and Topgolf is approximately $265 million, driven primarily by the new venue openings. If you include Topgolf for only 10 months, that would be approximately $235 million. Depreciation and amortization expense was $20 million in the first quarter of 2021. Non-GAAP depreciation and amortization expense was $17 million in the first quarter of 2021 compared to $8 million in 2020. This includes $9 million of non-GAAP depreciation and amortization related to Topgolf. To help give investors additional perspective, the Topgolf full Q1 non-GAAP depreciation and amortization was $27 million. For the full year of 2021, we expect non-GAAP depreciation and amortization expense to be approximately $155 million, which includes 115 million for the Topgolf business. I'm now on Slide 14. We are not providing specific revenue and earnings guidance ranges for 2021 at this time due to the continued uncertainty surrounding the duration and impact of COVID-19. However, we would like to provide some guidance comments we previously made. First, last quarter, we provided some guidance on full year consolidated gross margins and operating expenses. Due to the merger with Topgolf, that guidance is no longer applicable. We are no longer providing specific guidance for consolidated gross margins and operating expenses, given the disparate treatment of those items from the legacy Callaway business and the Topgolf business. With that said, I would like to call out a few factors that have changed since our call in February. First, we have changed our accounting for golf advertising and our golf equipment business. For 2021, it is treated as a discount to sales as opposed to an operating expense in 2020 and 2019. This negatively impacted gross margins for the golf equipment business in the first quarter of 2021 by approximately 85 basis points and will continue to affect comparisons with prior periods for the balance of the year as prior periods were not changed. There is no change to operating income. This is only a shift between gross margin and operating expenses. We previously estimated that the freight container shortage was expected to have a negative impact of $13 million on freight costs in 2021, with a substantial majority affecting the first half. At this point, the impact of COVID-19 in our overall freight cost is expected to be greater than the 13 million, with more costs hitting the balance of the year than originally expected. We also previously estimated that operating expenses for the legacy Callaway business would be approximately $78 million higher than in 2019 due to the negative impact of foreign currency inflationary pressures and continued investment in the company's business, which included investment needed to assume the apparel business, investment in the other soft goods businesses and investment in Pro Tour. We now expect these factors along with both deferred spending from the first quarter and increased variable costs associated with the increased revenue and higher stock price will have an overall greater impact than we originally anticipated for the balance of the year. In addition, we plan to invest a little more back into our business than originally planned. These incremental investments include additional TravisMathew stores given that brand's momentum and the availability of favorable lease terms in the current environment, and incremental investments in demand creation and digital resources for all brands as well as the Korea apparel business. Lastly, we, along with most other companies are experiencing increased wage pressure due to a tight labor market, increased freight costs as I mentioned earlier, and increased commodity prices. These are impacting all aspects of our business. We're seeing increased freight costs in terms of increased container prices, but also increased air freight expense as well. We're also seeing an increase in commodity prices from steel to titanium, from rubber urethane to textiles and from cheese to chicken wings. As Chip mentioned, at present, demand is high enough the positive volume variances are expected to overshadow the majority of these increased costs. But these increased costs in the aggregate will still have some impact on balance of the year operating margins. In 2022, we will have to explore price increases if those higher costs continue. We have previously guided that due to the impact of COVID-19, the company's revenue and adjusted EBITDA would not return to 2019 levels until 2022 for either legacy Callaway business or the Topgolf business. Given the faster-than-expected recovery of both businesses, and with all three of our operating segments performing above plan in the first quarter, we now project that revenue and adjusted EBITDA from our legacy businesses will exceed 2019 levels, and then our Topgolf business for the full 12 months of 2021 will meet or exceed 2019 levels, which is a year faster than expected. As a reminder, in 2019, the Calllaway legacy business reported revenue of $1.7 billion and adjusted EBITDA of $211 million. For full year 2019, that's 12 months. The Topgolf business reported revenue of $1.06 billion and adjusted EBITDA of $59 million in 2019. Please note that Callaway's actual reported full year financial results will only include 10 months of Topgolf results in 2021, and therefore, will not include January and February results which were in the aggregate, $143 million in revenue and $2.3 million in adjusted EBITDA. Operator, over to you.

callaway golf q1 non-gaap earnings per share $0.62. q1 non-gaap earnings per share $0.62. q1 earnings per share $2.19. not providing specific net revenue and earnings guidance ranges for 2021 at this time. expects that revenue and adjusted ebitda for full year 2021 for legacy callaway business will exceed 2019 levels.

I'm Patrick Burke, the company's head of investor relations. We are pleased to be with you today to discuss our Q3 results, results that have exceeded our expectations, and strengthened our confidence in the future. With recently announced plans to merge with Topgolf, we are naturally anticipating further questions on that subject as well. Having said this, and turning to Page 6, let's now jump into our results. We were pleased with our results in virtually all markets and business segments. Our golf equipment segment has been experiencing unprecedented demand globally as interest in the sport and participation has surged. We saw strong market conditions in all markets globally. According to Golf Datatech, U.S. retail sales of golf equipment were up 42% during Q3, the highest Q3 on record. U.S. rounds were up 25% in September, and are now showing full-year growth despite the shutdowns earlier this year. We also believe there will be a long-term benefit from the increased participation as we are welcoming both new entrants and returning golfers back to our sport. Golf retail, outside of resort locations, remains very strong at present and barring a shutdown situation has not been sensitive to the upticks in COVID cases. Inventory at golf retail is at all-time lows and is likely these low inventory levels will continue into next year. Callaway's global hard goods market shares remained strong during the quarter. We estimate our U.S. market share is roughly flat year over year. Our share in Japan is up slightly, and our share in Europe is down slightly. On a global basis, I believe we remain the leading golf company in terms of market share and total revenues, and the No. In the U.S., third-party research showed our brand to once again be the #1 club brand in overall brand rating as well as the leader in innovation and technology. Over the last several years, we have shown resilience with these important brand positions. We have also started to show our 2021 product range to key customers and are receiving strong feedback. Turning to our soft goods and apparel segment, with total revenue only down 3.4% year over year, the segment also experienced a rapid recovery in demand during the quarter. The speed and magnitude of the recovery exceeded our expectations. Like our golf equipment business, this segment appears to be well-positioned for both the months and years ahead, both during the pandemic and after. Looking at individual businesses in this segment, both our TravisMathew and Callaway branded businesses experienced significant year-over-year growth during the quarter. Jack Wolfskin was down year over year but only 16% on a revenue basis with improved trends continuing into October. The hero of the soft goods and apparel segment is certainly e-com, a channel that was strengthened by investments we've made over the last several years. As a result of these investments, we were able to deliver a 108% year-over-year growth in this channel during the quarter. E-com is now a significant portion of the channel mix of this segment. We believe our expanded capabilities and strength here will bolster this business growth prospects and profitability going forward. Long term, we continue to expect our apparel and soft goods segment to grow faster than our overall business, and with that growth to deliver operating leverage and enhance profitability. And although the pandemic delayed our efforts, we still believe we'll be able to deliver $15 million of synergies in this segment over the coming years. During the quarter, we also made good progress on key initiatives, including the transition to our new 800,000 square-foot Superhub distribution center located just outside of Fort Worth, Texas. We are now completely consolidated into this new facility. We also made further progress in our Chicopee golf ball facility modernization with productivity rates in this plant ramping positively during the quarter. The primary investment phase on both of these significant projects is behind us now. Looking forward, we are in a strong financial position and are pleased with the pace of our recovery and the business trends we have seen. With the resurgence in the virus, there clearly could be some volatility over the next few months. Portions of Q4 are likely to be at least partially impacted by the increase in restrictions being put into place globally. Fortunately, for us, either low impact months for our golf equipment business, and we currently expect to continue to benefit from increased year-over-year demand. In our apparel and soft goods segment, the impact will be larger than our golf equipment business. But these businesses, too, are fortunate to be well-positioned in this environment and also benefit from strong e-com capabilities, which should offset some portion of any potential negative impacts in markets where in-store shopping might be constrained. We also benefit from global scale and diversity across all of our segments. As demonstrated by our Q3 results, we are fortunate in that our principal business segments are well-positioned for consumer needs and trends, both during the pandemic and afterward. In addition, we are confident that we have both brands, human capital, and financial strength necessary to not only weather this storm but to also perform well during it and to emerge stronger than when we entered the crisis. In closing, while we are pleased with our recent results and outlook, the safety and health of the company's employees, customers, and partners continue to be paramount in our minds. As we operate our businesses, we are careful to follow appropriate protocols for social distancing, in-office capacity management, personal protective equipment, and other safety precautions. In addition, our thoughts and prayers continue to go out to those directly impacted by the virus and those diligently working on the front line to protect, serve, and care for the rest of us. Brian, over to you. We are happy to report record net sales and earnings for the third quarter of 2020. We feel fortunate that both our golf equipment and soft goods businesses are recovering faster than expected as both businesses support healthy, active outdoor lifestyles and activities that are compatible with social distancing. This faster-than-expected recovery has placed us in a position of strength. Our available liquidity, which includes cash on hand plus availability under our credit facilities increased to $630 million on September 30, 2020, compared to $340 million on September 30, 2019. We are also excited about our prospective merger with Topgolf, which also provides a healthy, active, outdoor activity that is compatible with social distancing. And Callaway Topgolf merger is a natural fit. With the significant overlap in golf consumers, there should be significant advantages to both businesses through increased consumer engagement, marketing, and sales opportunities and faster growth than could be achieved on a stand-alone basis. And the best part is that these synergies provide upside to the financial model we provided. The financial returns of this transaction are so compelling, we did not need the synergies to justify the transaction. Growing the Topgolf Venue and Toptracer businesses alone will create significant shareholder value. We look forward to discussing the Topgolf business further during the virtual investor conference on Thursday. In evaluating our results for the third quarter, you should keep in mind some specific factors that affect year-over-year comparisons. First, as a result of the Jack Wolfskin acquisition in January 2019, we incurred nonrecurring transaction and transition-related expenses in 2019. Second, as a result of the OGIO, TravisMathew, and Jack Wolfskin acquisition, we incurred non-cash amortization in 2020 and 2019, including amortization of the Jack Wolfskin inventory step-up in the first quarter of 2019. Third, we also incurred other nonrecurring charges including costs related to the transition to our new North American distribution center in Texas. Implementation costs related to the new Jack Wolfskin IT system and severance costs related to our cost reduction initiatives. Fourth, the $174 million non-cash impairment charge in the second quarter of 2020 is nonrecurring and did not affect 2019 results. Fifth, we incurred and will continue to incur non-cash amortization of the debt discount on the notes issued during the second quarter of 2020. We have provided in the tables to this release as scheduled breaking out the impact of these items on the third quarter and the first nine months' results, and these items are excluded from our non-GAAP results. With those factors in mind, I will now provide some specific financial results. Turning now to Slide 10. Today, we are reporting record consolidated third quarter 2020 net sales of $476 million, compared to $426 million in 2019, an increase of $50 million or 12%. This increase was driven by a 27% increase in the golf equipment segment, resulting from a faster-than-expected recovery and the strength of the company's product offerings across all skill levels. The company's soft goods segment is also recovering faster than expected, with third-quarter 2020 sales decreasing only 3.4% versus the same period in 2019. Changes in foreign currency rates had an $8 million favorable impact on third-quarter 2020 net sales. Gross margin was 42.2% in the third quarter of 2020, compared to 44.9% in the third quarter of 2019, a decrease of 270 basis points. On a non-GAAP basis, gross margin was 42.7% in the third quarter, compared to 44.9% in the third quarter of 2019, a decrease of 220 basis points. This decrease is primarily attributable to a decline in gross margin in the soft goods segment due to the impact of COVID-19 on that business, including our proactive inventory reduction initiatives, partially offset by favorable changes in foreign currency exchange rates, an increase in e-commerce sales, and a slight increase in overall golf equipment gross margins. Operating expenses were $137 million in the third quarter of 2020, which is a $14 million decrease, compared to $151 million in the third quarter of 2019. Non-GAAP operating expenses for the third quarter were $135 million, a $12 million decrease compared to the third quarter of 2019. This decrease is due to decreased travel and entertainment expenses and the actions we undertook to reduce costs in response to the COVID pandemic. Other expense was $6 million in the third quarter of 2020, compared to other expense of $7 million in the same period of the prior year. On a non-GAAP basis, other expense was $3 million in the third quarter of 2020, compared to $7 million for the comparable period in 2019. The $4 million improvements were primarily related to a net increase in foreign currency-related gains period over period, partially offset by a $1 million increase in interest expense related to our convertible notes. Pretax earnings were $58 million in the third quarter of 2020, compared to pre-tax earnings of $33 million for the same period in 2019. Non-GAAP pre-tax income was $65 million in the third quarter of 2020, compared to non-GAAP pre-tax income of $37 million in the same period of 2019. Diluted earnings per share were $0.54 on 96.6 million shares in the third quarter of 2020, compared to earnings per share of $0.32 on 96.3 million shares in the third quarter of 2019. Non-GAAP fully diluted earnings per share were $0.60 in the third quarter of 2020, compared to fully diluted earnings per share of $0.36 for the third quarter of 2019. Adjusted EBITDA was $87 million in the third quarter of 2020, compared to $57 million in the third quarter of 2019, a record for Callaway Golf. Turning now to Slide 11. The first nine months of 2020 net sales are $1.2 million, compared to $1.4 million in 2019, a decrease of $174 million or 13%. The decrease was primarily driven by the COVID-19 pandemic, partially offset by an increase in our e-commerce business. The decrease in net sales reflects a decrease in both our golf equipment segment, which decreased 7%, and our soft goods segment, which decreased 21%. This decrease also reflects a decrease in all major regions and product categories period-over-period due to COVID-19. Change in the foreign currency rates positively impacted first nine months 2020 net sales by $2 million. Gross margin was 42.7% in the first nine months of 2010 compared to 45.8% in the first nine months of 2019, a decrease of 310 basis points. Gross margins in 2020 were negatively impacted by the North America warehouse consolidation and in 2019 were negatively impacted by the nonrecurring purchase price step-up associated with the Jack Wolfskin acquisition. On a non-GAAP basis, which excludes these recurring items -- excuse me, nonrecurring items, gross margin was 43.3% in the first nine months of 2020 compared to 46.6% in the first nine months of 2019, a decrease of 330 basis points. The decrease in non-GAAP gross margin is primarily attributable to the decrease in sales related to the COVID-19 pandemic, costs associated with idle facilities during the government-mandated shutdown, and the company's inventory reduction initiatives. The decrease in gross margin during the first nine months was partially offset by an increase in the company's e-commerce business. Operating expense was $592 million in the first nine months of 2020, which is a $111 million increase compared to $481 million in the first nine months of 2019. This increase is due to the $174 million non-cash impairment charge related to the Jack Wolfskin goodwill and trade name. Excluding the impairment charge and other items previously mentioned, non-GAAP operating expenses for the first nine months of 2020 were $410 million, a $58 million decrease, compared to $468 million in the first nine months of 2019. This decrease is due to our cost reduction initiatives, decreased travel and entertainment expenses as well as a reduction in variable expenses due to lower sales. Other expense was approximately $7 million in the first nine months of 2020, compared to other expense of $28 million in the same period in the prior year. On a non-GAAP basis, other expense was $3 million for the first nine months of 2020, compared to $24 million for the same period of 2019. The $21 million improvements is primarily related to a $22 million increase in foreign currency-related gains period over period, including the $11 million gain related to the settlement of the cross-currency swap arrangement. Pretax loss was $80 million in the first nine months of 2020, compared to pre-tax income of $127 million for the same period in 2019. Excluding the impairment charge and other items previously mentioned, non-GAAP pre-tax income was $113 million in the first nine months of 2020 compared to non-GAAP pre-tax income of $155 million in the same period of 2019. Loss per share was $0.92 on $94.2 million in the first nine months of 2020, compared to earnings per share of $1.13 on 96.2 million shares in the first nine months of 2019. Excluding the impairment charge and the items previously mentioned, non-GAAP fully diluted earnings per share was $0.98 in the first nine months of 2020, compared to fully diluted earnings per share of $1.35 for the first nine months of 2019. Adjusted EBITDAS was $175 million in the first nine months of 2020, compared to $216 million in the first nine months of 2019. Turning now to Slide 12. I will now cover certain key balance sheet and cash flow items. As of September 30, 2020, available liquidity, which represents additional availability under our credit facilities plus cash on hand was $637 million compared to $340 million at the end of the third quarter of 2019. This additional liquidity reflects improved liquidity from working capital management, our cost reductions, and proceeds from the convertible notes we issued during the second quarter. We had a total net debt of $498 million, including $443 million of principal outstanding under our term loan B facility that was used to purchase Jack Wolfskin. Our net accounts receivable was $240 million, an increase of 7%, compared to $223 million at the end of the third quarter of 2019, which is attributable to record sales in the quarter. Day sales outstanding decreased slightly to 55 days as of September 30, 2020, compared to 56 days as of September 30, 2019. We continue to remain very comfortable, if not pleasantly surprised with the overall quality of our accounts receivable at this time. Also displayed on Slide 12, our inventory balance decreased by 5% to $325 million at the end of the third quarter of 2020. This decrease was primarily due to the high demand we are experiencing in the golf equipment business, partially offset by higher soft goods inventory related to COVID-19. Our teams have done an excellent job being proactive with regard to managing inventory as soon as COVID hit us. They continue to be highly focused on inventory on hand as well as inventory in the field. We are very pleased with our overall inventory position and the inventory at retail, particularly on the golf side of the business, which remains low at this time. Capital expenditures for the first nine months of 2020 were $31 million, compared to $37 million for the first nine months of 2019. We expect our capital expenditures in 2020 to be approximately $35 million to $40 million, up slightly from the estimate we provided in May but down substantially from our $55 million of planned capital expenditures at the beginning of the year due to our cost reduction actions. Depreciation and amortization expense was $203 million for the first nine months of 2020. On a non-GAAP basis, depreciation and amortization expense, excluding the $174 million impairment charge, was $29 million for the first nine months of 2020 and is estimated to be $35 million for the full year of 2020. Depreciation and amortization expense was $25 million for the first nine months of 2019 and $35 million for full-year 2019. I'm now on Slide 13. As we previously reported, we are no longer providing other specific financial guidance at this time due to continued uncertainty surrounding the duration and impact of COVID-19. Although we expect some level of continued volatility due to the ongoing pandemic, third-quarter trends have thus far continued into the fourth quarter. Perhaps more importantly, all of our business segments as well as the Topgolf business support an outdoor, active, and healthy way of life that is compatible with the world of social distancing. And we now appreciate even further that all of our businesses are likely to be favored in both the realities of the current environment as well as anticipated consumer trends post-pandemic. These circumstances, along with our increased liquidity will allow us to weather the pandemic and emerge in a position of strength to the benefit of our businesses and the Topgolf business post-merger. As Chip mentioned in his remarks, due to time constraints, the primary focus of the Q&A should be the Callaway business, and we have scheduled a virtual conference on Thursday to discuss the Topgolf business further. Operator, over to you.

compname posts q3 non-gaap earnings per share $0.60. q3 non-gaap earnings per share $0.60. q3 earnings per share $0.54. q3 2020 net sales of $476 million, a 12% increase compared to q3 of 2019. is not providing financial guidance for q4 of 2020. callaway golf - golf business now experiencing unprecedented demand, soft goods business is recovering significantly more quickly than expected.

I'm Lauren Scott, the company's director of investor relations. Patrick Burke, Callaway's senior vice president of global finance; and Jennifer Thomas, our chief accounting officer, are also in the room today for Q&A. I'm pleased to report strong third quarter results that exceeded our expectations as Callaway continued to benefit from broad-based momentum across all segments. The operational headwinds we and nearly all consumer brands faced during the quarter were no match for our world-class team of professionals and the strong demand we are experiencing in golf equipment and apparel. In addition, Topgolf delivered exceptional results as increased walk-in traffic and social event bookings led to further gains in sales and productivity. Our company is on a role, and I'm very optimistic about the road ahead. I hope the No. 1 takeaway from today's call is the upside we are seeing on the long-run earnings potential of this business. At a high level, total net revenue for the third quarter increased 80% year over year to 856 million, with 39% coming from the Topgolf segment, 34% from golf equipment, and 27% from apparel, gear, and other. Profitability also increased with adjusted EBITDA up 57% to 139 million. Before providing commentary on each segment's progress during the quarter, I want to remind everyone of the transformation that has taken place here at Callaway over the past several years. Less than five years ago, we were almost exclusively a golf equipment company, but that has changed significantly with the addition of OGIO, TravisMathew, Jack Wolfskin, and now even more so with the addition of Topgolf. When you invest in Callaway, you are now investing in, what I like to call, modern golf, a combination of traditional golf with lifestyle apparel and the world's leading tech-enabled golf entertainment company. We are engaging with a wide range of consumers and meeting them where they play, whether that's on the golf course, off course that are top golf venues in Toptracer bays, out hiking a mountain, or out socializing with friends. Golf equipment is a great business with wind at its back. but is now just a portion of our business, just under 40% of this year's estimated full year revenues. Looking ahead, we expect all of our segments and business units to deliver growth and to support each other's continued success. Topgolf, in particular, has exceptional growth embedded within its portfolio, and our apparel assets have strong brand momentum that will continue to drive strong results. The combined entity has a competitive advantage in scale in the golf sector and an unmatched reach to a wide range of consumers. With that said, I'll move now to segment highlights, starting with an update on our Topgolf business. I'm pleased to report that our owned venues continued their positive trends with Q3 same venue sales at approximately 100% of 2019 levels. The overperformance in Q3 was driven by continued strong walk-in traffic and improved event sales, especially in the social event bookings. Our performance was particularly impressive considering the headwinds we faced from the increase in Delta COVID cases early in the quarter. Getting back to 2019 levels of same venue sales is a significant milestone for the Topgolf team and a strong indicator of more growth to come as the business fully recovers from COVID impacts. In addition, we're seeing very strong flow-through to the bottom line with adjusted EBITDA of 59 million for the quarter, which significantly outpaced our forecast. To put this in perspective, Topgolf earned as much in Q3 as it did for the entire year in 2019. As we look out over the remainder of the year, we continue to believe the corporate events business will be lighter than it was in 2019. However, now that we are one week into November, we are pleased to report that the number of leads for corporate events in Q4 is improving, as is the conversion rate from those leads. Overall, relative to Q3, we see total systems same venue sales stepping down in Q4, but only because corporate events are historically a larger portion of the Q4 sales mix. And we now anticipate low to mid-90 same venue sales rates for both Q4 and the full year, up nicely from our prior forecast. Like many companies, for the remainder of this year and into 2022, we anticipate above-average inflationary pressures on food, beverage, and wages, but we believe we will be able to continue to effectively mitigate the impacts of these by sustaining strong top line revenues, continued labor efficiency and selectively taking price. Venue expansion continued as planned during the quarter with the opening of Colorado Springs, a 74-bay medium-sized venue and Holtsville, Long Island, a large 102-bay venue. Year to date, we've opened a total of eight new venues, and we have our final venue for the year slated to open later this month in Fort Myers, Florida. We now also have a strong visibility into the 2022 development pipeline and are confident that we can hit our target of 10 new venues next year. Toptracer expansion continued during the quarter with year-to-date installation surpassing a full year of installs in 2020 and nearly double the full year of installs in 2019. However, COVID restriction supply chain issues led to fewer installs during the quarter than we anticipated. Now for the full year, we anticipate that our total new bay installs will be approximately 10% below our 8,000 bay target. Most importantly, though, demand for Toptracer remains very strong as is customer feedback with driver ranges reporting 25 to 60% revenue increases post installation. We are confident that in a normal operating environment, we will be able to get back to our goal of 8,000-plus installations per year. Before I continue on to our other segments, I want to take a moment to highlight the Five Iron Golf minority investment we announced last week as it aligns nicely with both our golf entertainment and our golf equipment segments. Five Iron is a privately owned indoor golf and entertainment concept predominantly located in major metropolitan cities. They offer simulated rentals, golf lessons and custom club fittings, while also providing a fun space for social events. We are excited about the Five Iron investment and partnership as it increases our exposure to the off-course golf and entertainment space, which we believe will be a key driver of the long-term growth of the industry as it introduces more new entrants to the sport. In addition, through the partnership, we have a nonexclusive marketing agreement where Five Iron members and guests will have the opportunity to demo Callaway clubs and balls increasing our reach to golfers at all levels. If you're in New York, Baltimore, Chicago, or several other major cities, we encourage you to check out one of their facilities. Moving to the golf equipment segment. Demand and interest in golf remains at all-time highs, and our supply chain team successfully navigated the Q3 supply chain challenges to capture more demand than we thought was possible when we last spoke. Digging deeper into the operational side, we're pleased with the trends we are now seeing in the supply chain. And although we expect both us and the industry at large to be supply constrained for the foreseeable future, we are also confident we'll be able to manage through in a manner that supports our growth and profitability initiatives. We are also cautiously optimistic that our efforts and scale are creating a competitive advantage for us here. Specific to the most recent Vietnam shutdowns, I'm pleased to report that our suppliers' factories in Vietnam are back open and ramping to support our 2022 product launch plans. Barring any foreseen new macro issues, we anticipate no meaningful disruption to our 2022 product launches. We've also been fielding questions as of late on the sustainability of the heightened interest in golf. And I want to go on the record saying that all signs show that the high level of interest is continuing and will do so through the foreseeable future. Hardgoods retail sell-through has continued to trend higher according to Golf Datatech, with Q3 up 1.3% year over year, and up 46.5% compared to 2019. We are not seeing demand decline, and our customers are telling us that they expect a strong year for golf in 2022. Shifting to the apparel and gear segment. Results for the quarter highlighted the strong momentum within the TravisMathew and Jack Wolfskin brands, as well as the success of our Callaway branded product in Asian markets. The TravisMathew brand continues to be on fire, gaining strong traction in newer East Coast markets while maintaining a strong following here on the West Coast. The brand is performing extremely well in all channels. Looking specifically at our own stores. comp store sales for the quarter were very strong, up 84% versus 2020, and 50% versus 2019. During the quarter, we opened two new Travis stores in Florida, one in Boca and the other in Palm Gardens, ending the quarter with a total of 26 retail locations. We expect to open another three doors in Q4 for a total of 29 doors by year-end. Needless to say, the performance of our retail doors have been outstanding on a stand-alone basis. But what makes them even more attractive as they tend to drive increased brand strength in wholesale demand in the regions and communities where they are located. E-commerce was also a strong driver of growth with normalized sales up 50% year over year. That is excluding a onetime sale we did last year. In line with the company's sustainability initiatives, we were excited to launch the TravisMathew Eco Collection in September in partnership with the Surfrider Foundation. The fabric blends in this collection use at least 98% organic cotton and at least 62% recycled polyester created from plastic bottles, with 100% of the profits going to the Surfrider Foundation, an organization dedicated to protecting the world's oceans and beaches. Jack Wolfskin experienced a strong Q3 as well, with 2022 spring/summer pre-books up significantly over 2020 and comp store sales increasing almost 10% over both 2019 and 2020. were also an issue in Hamburg, Germany, but the team did a wonderful job navigating the challenges, and we were able to successfully fulfill all orders in the quarter without cancellations. Lastly, Callaway apparel in Japan continued to be a top-performing brand in the wholesale channel, holding the No. 1 position year to date. And in Korea, the brand was off to a solid start as well with positive reception from the major department stores in the region. In conclusion, as I said at the top of the call, our business is on a roll. While we are not providing 2022 guidance at this time, based on the strong trends we're seeing across all segments, we believe that all business lines, all regions are poised for growth next year. I want to start by echoing Chip's enthusiasm about our third quarter results and positive outlook for the remainder of the year and into 2022. The record results highlight the significant growth potential embedded in our business which we are realizing more quickly than we initially anticipated. The demand for our golf equipment and apparel products, coupled with our operation team's ability to navigate successfully the COVID supply chain challenges, have resulted in stronger-than-anticipated financial results in those businesses. We also benefited from very strong Topgolf revenue, driven by increased walk-in traffic and more social events business as COVID concerns ease during the past few months. Profitability at Topgolf also exceeded our expectations due to the strong sales combined with increased operating margins. Fortunately, we have overperformed, but we would also have liked to have been more accurate. The reality is forecasting our business in this environment has been very challenging for a variety of reasons. These include the ebbs and flows of COVID cases globally, a steady diet of new and exciting supply chain challenges that we have never had to work through before, unique operating conditions that cause profitability to flow a lot differently than in the past, and the increased overall scale of our business, which is new to us. We appreciate your patience and understanding as we work through these issues. We are learning accordingly, and we will be adjusting to return to more accurate forecasts. In the guidance we are providing you today we are reflecting the more normalized spending levels, as well as sustainable operating leverage. In the meantime, we hope the forecasting challenges do not overshadow what is clearly an outstanding year, as well as higher long-term expectations. As we turn to discuss our financial results, I want to remind you that we use certain non-GAAP measures to evaluate our business performance. Moving to Slides 12 and 13. Consolidated net revenue for the quarter was $856 million, an increase of 80% or $381 million compared to Q3 2020. The increase was led by the addition of Topgolf revenue of $334 million, along with an 8.4% increase in golf equipment revenue and an 11.9% increase in apparel, gear, and other. Changes in foreign currency rates had a $4 million favorable impact on third quarter 2021 revenues. Total cost and expenses were $772 million on a non-GAAP basis in the third quarter of 2021, compared to $406 million in the third quarter of 2020. Of the 366 million increase, Topgolf added $310 million of total costs and expenses. The remaining $56 million increase includes moving spending levels back to normal levels, the start-up of the new Korean Callaway apparel business and expansion of the TravisMathew business, increase corporate structure -- increase corporate costs to support a larger organization, and increase freight costs and inflationary pressures. To date, increased sales volumes and selective price increases have balanced out the cost increases, and we believe this will continue to be the case in Q4 and into early 2022. We are also reporting for the third quarter of 2021, non-GAAP operating income of $85 million, a $15 million increase over the same period in 2020. The increase was led by a $24 million increase in segment profit due to the addition of the Topgolf business, and a $9 million increase in apparel, gear, and other operating income, partially offset by $11 million decrease in golf equipment operating income due to increased freight costs and return to more normalized spend. Non-GAAP other expense was $22 million in the third quarter compared to other expense of 3 million in Q3 2020. The $19 million increase was primarily related to a $16 million increase in interest expense related to the addition of Topgolf, as well as lower hedge gains, compared to the prior period. On a GAAP basis, the effective tax rate for the third quarter was an unusual 132%. You may recall that in the second quarter, we were required to use the discrete method for calculating our tax rate, and therefore, reversed a significant portion of the valuation allowance we had recorded during the first quarter as a result of the Topgolf merger. In the third quarter, we were required to move back to using the annual rate method and once again record the valuation allowance that was reversed in the second quarter. I have my own opinion, but we'll leave it to you to assess whether there was any value added by this round trip of the valuation allowance. On a nine-month GAAP basis, the effective tax rate was 22%. Excluding the valuation allowance we recorded again and the impact of the other nonrecurring items, our non-GAAP effective tax rate for the third quarter was 58% and for the nine months was 29%. The third quarter rate was impacted by the transition from the discrete method to the annual rate method, and both periods were impacted by the deferred benefits of certain tax items. There are a lot of moving parts with our tax rates, and the interim period rates are not always an accurate guide. For internal purposes, we are using low 20s for our planning purposes for the non-GAAP full year rate. Non-GAAP earnings per share was $0.14 or an approximately 194 million shares in the third quarter of 2021, compared to $0.61 per share on approximately 97 million shares in the third quarter of 2020. The share increase is primarily related to the issuance of additional shares in connection with the Topgolf merger. Full year estimated diluted shares is approximately 177 million shares, which includes the weighted average shares issued in connection with the merger over approximately a 10-month period. Lastly, adjusted EBITDA was $139 million in the third quarter of 2021, compared to $88 million in the third quarter of 2020. The $51 million increase was driven by a $59 million contribution for the Topgolf business, which performed exceptionally well this quarter and was partially offset by a return toward more normal spend levels in the golf equipment and soft goods businesses. Turning now to Slide 15. I will now cover certain key balance sheet and other items. As of September 30, 2021, available liquidity, which is comprised of cash on hand and availability under our credit facilities was $918 million, compared to $630 million at September 30, 2020. This additional liquidity reflects overperformance in all of our business segments. At quarter end, we had a total net debt of $1 billion, including deemed landlord financing of $311 million related to the financing of Topgolf venues. Our leverage ratios have improved significantly period over period and on a net debt basis is now 2.5 times, compared to 3.5 times at September 30, 2020. As we look forward over the next few years, we expect the leverage ratio to trend a little higher, depending on the level of top of development and deemed landlord financing. Consolidated net accounts receivable was $255 million, an increase of 6%, compared to $240 million at the end of the third quarter of 2020. This increase is primarily attributable to the increase in third quarter revenue, as well as an incremental $10 million of Topgolf accounts receivable. We continue to remain very comfortable with the overall quality of our accounts receivable at this time. Legacy days sales outstanding decreased to 53 days as of September 30, 2021, compared to 55 days as of September 30, 2020. Our inventory balance increased to $385 million at the end of the third quarter of 2021, compared to $325 million at the end of the third quarter of the prior year. This $60 million increase was due to higher golf equipment inventory, especially toward the end of the quarter, reflecting an increase in in-transit inventory and a shift to making '22 launch product. The Topgolf business also added $18 million to total inventory this quarter. Capital expenditures for the first nine months of 2021 were $149 million, net of expected REIT reimbursements. This includes $109 million related to Topgolf. From a full year 2021 forecast perspective, the golf equipment and soft goods business forecast is $60 million. The 2021 full year forecast for Callaway and Topgolf is approximately $225 million, net of REIT reimbursements, primarily related to the new venue openings. The foregoing amounts do not include approximately 33 million in capital expenditures for Topgolf in January and February, which was premerger. Non-GAAP depreciation and amortization expense was $37 million in the third quarter of 2021, compared to $8 million in 2020. This includes $28 million of non-GAAP depreciation and amortization related to Topgolf. For the full year 2021, we expect non-GAAP depreciation and amortization expense to be approximately $130 million, which includes $93 million for the Topgolf business. The foregoing does not include approximately 18 million of Topgolf non-GAAP depreciation and amortization from January and February in the aggregate. Now turning to our outlook on Slide 16. For the full year, we expect revenue to range between 3.11 and $3.12 billion. That compares to 1.59 billion in 2020 and 1.70 billion in 2019. The company's full year 2021 net sales estimate assumes continued positive demand fundamentals for our golf equipment and soft goods segments and no further business, supply chain or retail shutdowns due to COVID. It also assumes continued strong momentum in the Topgolf business, which is expected to generate 10-month segment revenue that will come in slightly above its 2019 full 12-month revenue of $1.06 billion. Full year adjusted EBITDA is projected to be between 424 and $430 million, which assumes approximately 158 million from Topgolf. For the fourth quarter, our implied revenue guidance is increasing by approximately 30 million, with about 50% of that flowing through to adjusted EBITDA. The revenue increase is driven by continued over performance in the venues, increased supply and golf equipment and spend levels continue to ramp up to normalized levels. On the operational side, as I mentioned earlier in my remarks, we are expecting continued cost pressure from increased freight costs and inflationary pressures, including labor and commodity prices, as well as negative foreign currency impacts due to a strengthening U.S. dollar for the balance of 2021 and into 2022. However, despite these headwinds, we believe strong demand sales volumes and select price increases across our business segments will balance out these pressures, and we expect all businesses to grow next year. Operator, over to you.

q3 non-gaap earnings per share $0.14. q3 2021 consolidated net revenue increased $381 million to $856 million.

I'm Patrick Burke, the company's head of investor relations. Finally, earlier today, we experienced a power outage, but we've been assured by the local power company that there will be no further outages. But we do have a backup plan to restart the call just in case we get interrupted. It's great to be with you today to discuss our 2020 full year and Q4 results, as well as to provide some color on the business going forward. Looking back on 2020, I have to start with a simple wow, what an interesting and eventful year. We started with business as usual. Survived an unforeseen global shutdown working our way through in a manner that is sure we came through in a position of strength. Then as the world opened back up, we emerged to find Golf experiencing record demand and participation levels. Finally, we finish the year announcing a transformational merger with Topgolf, signing Jon Rahm, and delivering on some key strategic initiatives. And now looking forward all things considered we could not feel more fortunate or be happier about where our business is and our future prospects. With that said, we're also mindful that many people have been significantly, negatively impacted by COVID-19, and our thoughts and prayers go out to them and their families. Looking at Q4 in isolation. The operating results in our golf equipment segment continued the strong momentum shown in Q3, while the apparel business returned to growth and showed great signs for the future. On the Topgolf side, we continue to make progress on the merger front with our shareholder vote scheduled for March 3, and hopefully closing shortly thereafter. All the while, setting us up for transformational change and growth. Like me, I'm sure our team realizes that we have a lot more opportunity in front of us and remains highly motivated. Let's not turn to Page 6 and jump into our Q4 results. We were pleased with our results in virtually all markets and business segments. Our golf equipment segment continued to experience unprecedented demand globally as interest in the sport and participation have surged. According to Golf Datatech, U.S. retail sales of golf equipment specifically hard goods were up 59% during Q4, the highest Q4 ever on record. Results that followed the highest Q3 on record as well. rounds were up 41% in Q4. And despite the shutdowns earlier in the year delivered 14% growth for the full year. We continue to believe there will be a long-term benefit from the increased participation as we are welcoming both new entrants and returning golfers back to our sport. Golf retail outside of resort location remains very strong at present, while inventory at golf retail remains at all-time lows, it is likely these low inventory levels will continue at least through Q1. Callaway's global hardwoods market shares remain strong during the quarter. We estimate our U.S. market share across all channels grew slightly during both Q4 and for the full-year 2020. Our share in Japan was also up slightly for the full-year allowing us to finish 2020 as the No. 1 hardwoods brand in that market. This is the first time that a non -Japanese brand has ever finished No. 1 for the full year in total hardwoods. Our full-year share in Europe was down slightly, but we still finished as the No. 1 hardwoods brand in this market as well. On a global basis, I believe we remain the leading club company in terms of both market share and total revenues, and the No. 2 ball company in the U.S., third-party research showed our brand to be the No. 1 club brand in overall brand rating as well as the leader in innovation and technology. Over the last several years, we have shown resilience with these important brand positions. We had a good year on tour in 2020 finishing the year with the No. 1 putter and the No. 1 driver on global tours. However, we didn't have as many wins or total brand exposure as we would have liked, as a result, we strengthened our tour position significantly during 2020 with the signing of Jon Rahm to a full equipment headwear and apparel deal. The addition of Jon, along with Xander and Phil, and our ongoing strong complement of players across global men's and women's tours leaves us well-positioned in this important area of our business. We've also started 2021 nicely with two wins already on the PGA Tour and a lot of exposure at all events. On the product front, we're thrilled with our new 2021 lineup allowing us to focus on -- our focuses on our most premium brands those being our Epic drivers and Apex Irons. For 2021, both brands are being supercharged with new technology, including a new speed frame version of our proprietary jailbreak technology in the woods, and a new version of the Apex line called DCB, which should broaden the appeal of this already highly popular line of Irons. Reaction to the lineup has been outstanding both on tour and in the marketplace. Turning to our soft goods and apparel segment, this portion of our business along with the apparel industry generally was of course more impacted by the pandemic during Q4. However, the speed magnitude of the recovery also continued to exceed our expectations. Looking at individual businesses in this segment starting with the Callaway apparel business in Asia. In Japan, we had a good quarter and finish the year as the No. 1 golf apparel brand in that market based on market share. In Korea, we plan to take back the Callaway Golf apparel brand that has been licensed to a third party for several years and launch our own apparel business in Korea during the second half of 2021. We are investing in staffing and I.T. systems for this. The team there is energized by this opportunity as this is something that they have been considering for several years now. Turning TravisMatthew, this brand and business continue to impress. Their brand momentum is extremely strong both in direct to consumer channels and at wholesale. Given their success, we are increasingly confident this can be a large and highly profitable brand presenting us with an even bigger opportunity than we originally anticipated. To enable this, we have been investing in their systems and supply chain infrastructure. This investment phase will continue through 2021 and then taper off. We are also investing in direct-to-consumer efforts both through the addition of new stores selectively taking advantage of some great opportunities and of course e-commerce. We could not be more excited about this business overall. Jack Wolfskin also had a strong quarter delivering year-over-year revenue growth. The price even more importantly we cleared some key strategic and operational hurdles during the quarter. In Europe, our new CEO, Global Jack Wolfskin, Richard Collier joined the team in December. Richard joined us from Helley Hansen where he held the title Global Product Officer and served in that capacity as well as de facto Chief Operating Officer. We're excited to have Richard on the team. The reaction to Richard and the new CFO, André who joined us a few months earlier from my move. We enter 2021 with a very strong leadership team fully in place. Equally importantly, prior to the full Europe retail shut down in mid-December, the sell-through of our fall winter lineup was excellent in both Europe and in China. This speaks to the strength of the brand in these key markets, improved channel management, and the strength of the product lineup. Noting that in China, Q4 was the first quarter to showcase the local product design by a new team that was recruited in 2019. The success of this new China for China product was a key strategic initiative for us. Across the globe, but especially in their key markets of China and Europe, we believe the combination of strong leadership and sell through momentum bodes well for this brand as markets open up and recover. Taking a step back and looking at the larger apparel and soft goods segment, for the last nine months the hero has certainly been e-com. This is a channel that was significantly strengthened by investments we made prior to the pandemic as well as those continuing to this day. These investments enabled our apparel business e-com to deliver 64% year-over-year growth in Q4. E-com is now a significant portion of the channel mix of this segment and we are confident our expanding capabilities and strength here will bolster this business growth prospects and profitability going forward. Post-COVID, we continue to expect our apparel soft goods segment to grow faster than our golf equipment business, and with that growth to deliver operating leverage enhanced profitability. And although the pandemic delayed our efforts, we still believe we'll be able to deliver 15 million synergies in the segment over the coming years. Like our company overall, this segment with its concentration in golf and outdoor appears to be well-positioned for both the months and years ahead both during the pandemic and after. Our comments here will be limited given we have not closed the transaction yet. But during late Q4 due to COVID restrictions, three of the U.S. venues were forced to shut as well as three of the U.K. venues. However, despite these headwinds, Topgolf's overall results exceeded expectations in Q4. This was driven primarily by strong walking sales. venue in Portland, Oregon are closed, and COVID restrictions appear to be gradually even. Despite 2021 starting out with more COVID restrictions than we expected, strong walk-in traffic is allowing this business to continue to perform at a level consistent with achieving our total venue full-year same venue sales target of 80% to 85% of 2019 levels. Turning to new venue development. Topgolf has opened two new domestic venues already this year; Lake Mary, Florida; and Albuquerque, New Mexico, and is on track to hit their new venue plan of eight new owned venues for this year. On the international front, our third franchise location opened earlier this year in Dubai. The sales have been getting strong reviews despite ongoing COVID complications in this market, and we expect this to be a flagship site for us internationally. Looking forward, given the uncertainties of the COVID situation globally, we're not currently providing 2021 guidance. We can however provide the following color. The golf equipment sector is likely to be slightly impacted by COVID in Q1 with the majority of European markets in portions of Asia, Tokyo for instance, in some sort of locked down or retail constraint, and with some supply constraints based on both capacity limitations and logistics. We are also experiencing higher operating costs associated with COVID. Our container shipping costs alone are estimated to be up approximately 13 million for the full year as these processes have surged, but we do not see this as a long-term issue, just a short-term anomaly associated with the pandemic. The demand situation is strong enough that we expect a very strong year in golf equipment despite these issues. A little constrained in Q1 based on capacity and logistics with increasing opportunity catch up with demand in Q2. Our soft goods and apparel segment continues to be more impacted by COVID. The Europe shutdown is especially impactful for a business there certainly for Q1. However, the key points of operating strategic progress we mentioned earlier along with the attractive long-term prospects of both golf and outdoor lifestyle apparel make me increasingly confident for this business post the COVID closures and their short-term impact. Topgolf is performing consistent with the plan, new venue openings are on track and we are increasingly confident for this business overall. We hope to close in early March, if this happens, we'll have a lot more say on this business starting on our next call. We continue to see this as a transformational opportunity. On the operating expense side and comparison 2019, which is the only meaningful comparison you're going to see some further investments in 2021. These include investments in our growth infrastructure such as the Korea apparel business, increased tour presence, and direct to consumer resources. We have a track record for making this kind of internal investments, and we're confident these will deliver high returns for shareholders. Lastly, we remain confident in the 2022 guidance we provide as part of the topped up merger process as well as the future potential of what is going to be a unique and powerful business. Brian, over to you. As Chip mentioned, 2020 was quite a year. We were pleasantly surprised with how quickly our golf business and the golf industry began recovering from COVID-19 once the governmental restrictions began to abate during the second quarter. We were also pleased with the recovery of both our TravisMatthew and Jack Wolfskin businesses, while the recovery in those businesses will not be as quick as the golf equipment business through the long supply chain lead times and seasonality. The recovery of our apparel businesses is pacing ahead of our expectations and that of comparable businesses. The stronger than expected recovery has contributed to our significantly improved liquidity position. Our available liquidity, which includes cash on hand plus availability under our credit facilities increased to $632 million on December 31, 2020, compared to $303 million on December 31, 2019. In addition to the core business recovery, we may also -- we also remain very excited about our prospective merger with Topgolf, which clearly will be transformational for Callaway. The Topgolf shareholders have already approved the transaction, we are holding a special Callaway shareholder meeting on March 3, 2021, to approve the merger. We would expect to close the merger shortly thereafter. We evaluate -- evaluating our results for the fourth quarter and full year, you should keep in mind some specific factors that affect the year-over-year comparisons; First, as a result of the Jack Wolfskin acquisition in January 2019, we incurred non-recurring transaction and transition-related expenses in 2019; Second, as a result of the OGIO TravisMatthew and Jack Wolfskin acquisitions, we incurred non-cash amortization in purchase accounting adjustments in 2020 and 2019, including the Jack Wolfskin inventory step up in the first quarter of 2019; Third, we also incurred other non-recurring charges including costs related to the transition to our North American distribution center in Texas. Implementation costs related to the new Jack Wolfskin IP system, severance costs related to our COVID-19 cost reduction initiatives, and costs related to the proposed Topgolf merger; Fourth, the $174 million non-cash impairment charge in the second quarter of 2020 is non-recurring and did not affect 2019 results. Thus, we incurred and will continue to incur non-cash amortization of the debt discount in the notes issued during the second quarter of 2020. With those factors in mind, we'll now provide some specific financial results. Turning now to Slide 11. Today, we were reporting record consolidated fourth quarter 2020 net sales of $375 million, compared to $312 million for the same period in 2019, an increase of $63 million or 20.1%. This increase was driven by a 40% increase in the golf equipment segment resulting from the high demand for golf products late into the year as well as the strength of the company's product offerings across all skill levels. The company soft goods segment continued its faster than expected recovery with fourth-quarter 2020 sales increasing 1% versus the same period 2019. Changes in foreign currency rates had a $9 million favorable impact on fourth-quarter 2020 net sales. The gross margin was 37.1% in the fourth quarter of 2020, compared to 41.7% in the fourth quarter of 2021, a decrease of 460-basis-points. On a non-GAAP basis, the gross margin was 37.2% in the fourth quarter, compared to 42.4% in the fourth quarter of 2019, a decrease of 520-basis-points. The decrease is primarily attributable to the company's proactive inventory reduction initiatives in the soft goods segment, increased operational cost due to COVID-19, increased freight costs -- freight costs associated with higher rates, and a higher mix of air shipments in order to meet demand. These decreases were partially offset by favorable changes in foreign currency exchange rates and a favorable mix created by an increase in the company's e-commerce sales. Operating expenses were $171 million in the fourth quarter of 2020, which is an $18 million increase, compared to $153 million in the fourth quarter of 2019. Non-GAAP operating expenses for the fourth quarter were $152 million, a $14 million increase compared to the fourth quarter of 2019. This increase was driven by the company's decision to pay back to employees other than executive officers to reduce our salary levels for a portion of the year, variable expenses related to the higher revenues in the quarter, continued investments in our new businesses, and an unfavorable change in foreign currency exchange rates. Other expenses were $15 million in the fourth quarter of 2020, compared to other expense of $9 million in the same period the prior year. On a non-GAAP basis, other expenses with $13 million in the fourth quarter of 2020, compared to $9 million for the comparable period in 2019. The $4 million increase in other expenses primarily related to a net decrease in foreign currency-related gains as well as interest expense related to our convertible notes. Pre-tax loss was $48 million in the fourth quarter of 2020, compared to a pre-tax loss of $32 million for the same period in 2019. Non-GAAP pre-tax loss was $35 million in the fourth quarter of 2020, compared to a non-GAAP pre-tax loss of $25 million in the same period of 2019. Loss per share was $0.43, or 94.2 million shares in the fourth quarter of 2020, compared to a loss per share of $0.31 on 94.2 million shares in the fourth quarter of 2019. Non-GAAP loss per share was $0.33 in the fourth quarter of 2020, compared to a loss per share of $0.26 for the fourth quarter of 2019. Adjusted EBITDA was negative 12 million in the fourth quarter of 2020, compared to negative 6 million in the fourth quarter of 2019. Turning now to Slide 12. Net sales for full-year 2020 were $1.589 billion, compared to $1.701 billion in 2019, a decrease of $112 million or 6.6%. All things considered, we were very pleased with the sales level given the global pandemic. The decrease in net sales reflects a decrease in our soft good segment, which decreased 15.9%t and our golf equipment segment increased slightly year over year. Changes in foreign currency rates positively impacted 2020 net sales by $11 million versus 2019. The gross margin for full-year 2020 was 41.4%, compared to 45.1% in 2019, a decrease of 370-basis-points. Gross margins in 2020 were negatively impacted by the North American warehouse consolidation, and in 2019 were negatively impacted by a non-recurring purchase price inventory step-up associated Jack Wolfskin acquisition. on a non-GAAP basis, which is good and they were not referring item, gross margin was 41.8% in 2020, compared to 45.8% in 2019, a decrease of 400-basis-points. The decrease in non-GAAP gross margin is primarily attributable to the decrease in sales related to the COVID-19 pandemic, costs associated with all facilities during the governor -- government mandated shutdown, the company's inventory reduction initiatives, and increased freight expense in the back half of the year. The decrease in gross margin was partially offset by favorable changes in currency exchange rates and an increase in the company's e-commerce business. Operating expense with $763 million in 2020, which is a $129 million increase compared to $634 million in 2019. This increase is due to the $174 million of the non-cash impairment charge, related to the Jack Wolfskin goodwill and trading, excluding the impairment charge and other items previously mentioned, non-GAAP operating expenses for 2020 were $570 million, a $47 million decrease, compared to $670 million in 2019. This decrease is due to our cost reduction initiatives, decreased travel and entertainment expenses, lower variable expenses due to the lower sales, and reduced spending in marketing tour golf events around the world was canceled. The decrease was partially offset by continued investment in our new businesses and unfavorable impacts of foreign exchange rates. Another expense was approximately $22 million in 2020, compared to other expense of $37 million in 2019. On a non-GAAP basis, other expenses $15 million for 2020, compared to $33 million for 2019. Those $18 million improvements are primarily related to a $19 million increase in foreign currency-related gains period over a period, including the $11 million gain related to the settlement of the cross-currency swap arrangement. Pre-tax loss of $127 million in 2020, compared to pre-tax income of $96 million in 2019. Excluding the impairment charge in the other non-GAAP items previously mentioned, non-GAAP pre-tax income was $79 million in 2020, compared to non-GAAP pre-tax income of $130 million in 2019. Loss per share was $1.35, or 94.2 million shares in 2020, compared to fully diluted earnings per share of $0.82, or 96.3 million shares in 2019. Excluding the impairment charge in the other non-GAAP item previously mentioned, non-GAAP full-year earnings per share were $0.67 in 2020, compared to fairly good earnings per share of $1.10 for 2019. Adjusted EBITDA was $165 million in 2020, compared to $210 million in 2019. Turning now to Slide 13. I will now cover certain key balance sheet and cash flow items. As of December 31, 2020, available liquidity, which represents additional availability under our credit facilities plus cash on hand, was $632 million, compared to $303 million at the end of the fourth quarter of 2019. This additional liquidity reflects improved liquidity from working capital management, cost reductions, and proceeds from the convertible notes we issued during the second quarter. We had total net debt of $406 million, including $442 million of principal outstanding under our term loan B facility that was used to purchase Jack Wolfskin. Our consolidated net accounts receivable was $138 million, a decrease of 1.4% compared to $140 million at the end of the fourth quarter of 2019. Days sales outstanding decreased to 45 days on December 31, 2020, compared to 53 days on December 31, 2019. We continue to remain very comfortable with the overall quality of our accounts receivable at this time. Also displayed on Slide 12, our inventory balance decreased by 22.8% to $353 million at the end of the fourth quarter of 2020. This decrease was primarily due to the high demand we are experiencing in the golf equipment business as well as inventory reduction efforts in our soft goods businesses. The teams continue to be highly focused on inventory on hand as well as inventory in the field, both of which remain relatively very low at this time. Capital expenditures for 2020 were $39 million, which is right in line with the range provided during our Q3 update. This amount is down substantially from our $55 million of planned capital expenditures at the beginning of the year due to our cost reduction actions. In 2021, we expect our capital expenditures to be approximately $50 million for the current Callaway business. Depreciation and amortization expense was $214 million in 2020. D&A expense excluding the $174 million impairment charge was $40 million in 2020, compared to $35 million in 2019. In 2021, we expect non-GAAP depreciation and amortization expense to be approximately $45 million for the current Callaway business. I am now on Slide 14. We're not providing revenue and earnings guidance for 2021 at this time due to the continued uncertainty surrounding the duration and impact of COVID-19. However, we would like to highlight certain factors that are expected to affect 2021 financial results compared to 2020. On a premerger basis, which includes only Callaway golf business and does not take into account Topgolf's business following the proposed merger, consolidated net sales for the first quarter of 2021 will exceed 2020 net sales but will continue to be negatively impacted by COVID-19. The company's soft goods business will continue to be impacted by the regulatory shutdown orders in Europe and Asia, which should then strengthen during the balance of the year as the regulatory restrictions subside. The company's golf equipment business is expected to be impacted by temporary supply constraints caused by COVID-19 during the first quarter, which could affect the company's ability to fulfill all of the robust demand in its golf equipment business. The company believes that there are opportunities for supply to catch up beginning in the second quarter. On a premerger basis, the full-year 2021 non-GAAP gross margin will also be negatively impacted by increased operational costs due to COVID-19, including higher labor costs, logistical challenges as well as increased freight expense resulting from a shortage of ocean freight containers. The freight container shortage alone is estimated to have a negative $13 million impact on freight costs in 2021, with the substantial majority of the impact occurring during the first half. The company believes that its full-year 2020 gross margin will be approximately the same as in 2019 despite these gross margin headwinds, which should be offset by increased direct-to-consumer sales and foreign currency exchange rates. On a premerger basis, full-year 2021 non-GAAP operating expenses are estimated to be approximately $70 million to $80 million higher compared to full-year 2019 non-GAAP operating expenses. In addition to the negative impact of changes in foreign currency rates estimated to be approximately $20 million and inflationary pressures, the increased operating expenses generally reflect continued investment in the company's current business. These investments include investment needed to assume the Korea apparel business, investment in the pro tour, and continued investment in the soft goods business, including the TravisMathew business related to opening new retail doors, investment in infrastructure and systems, and investments related to new market expansions for Jack Wolfskin in North America and Japan. The company believes that these investments will continue to drive growth in sales and profit but expect to incur the expenses for these investments prior to receiving the associated benefit. In 2020, the company realized gains from certain foreign currency hedges in the aggregate amount of approximately $25 million. This gain is not expected to repeat in 2021. In sum, the COVID-19 pandemic had a significant impact on our business beginning in the first quarter of 2021. After we absorb the initial -- after we absorb the initial shock of the impact of the pandemic, including the various governmental shutdown orders and restrictions, Chip challenged us to protect our business, avail ourselves of opportunities that arise during the pandemic, and take actions so that we not only survive the pandemic but also emerge in a position of relative strength. Given the recovery in our core business, our prospective merger with Topgolf, and our increased liquidity, I believe we have done that. We are cautiously optimistic as we enter 2021. All of our business segments as well as the Topgolf business support an active, outdoor, healthy way of life. It is compatible with the world of social distancing, and we believe this will continue to mitigate the impact of COVID-19. We continue to believe that 2021 will be a stepping stone to more normal conditions in 2022, and the resulting transformational growth we have projected for 2022. As Chip mentioned in his remarks, the primary focus of the Q&A should be with regard to the Callaway business as we are still pending shareholder approval on the merger. Operator, over to you.

q4 non-gaap loss per share $0.33. q4 loss per share $0.43. q4 2020 consolidated net sales of $375 million. anticipate covid-19 will continue to negatively impact business in 2021.

We're having a technical difficulty on our end, and we'll be extending the call by 15 minutes to be sure that we make up for any of the lost time. As the operator said, I'm Lauren Scott, the company's director of investor relations. Patrick Burke, Callaway's SVP of global finance; and Jennifer Thomas, our chief accounting officer, are also in the room today for Q&A. We apologize for the late start. I'm pleased to report another quarter of strong results and look forward to providing more detail around our outlook for the year ahead. 2021 was a pivotal year for Callaway marked by exceptional results significant growth and strong momentum across all our business segments. We closed on the acquisition of Topgolf in Q1, transforming our company into the unrivaled leader in the modern golf and lifestyle apparel space. Over the past five years, we've combined a traditional Golf Equipment business with select lifestyle apparel brands and the world's leading tech-enabled Golf entertainment company to deliver a truly differentiated business model. Amid continued high demand for our Golf Equipment and Lifestyle products. Our global sales and operations teams worked tirelessly delivering quarter after quarter of impressive results despite significant global COVID-related operating challenges. The team has proven itself to be an impressive and battle-hardened asset for [Audio gap]. In addition, we've increasingly made key investments in infrastructure and people to support a larger business and to set us up for continued growth and financial success. Our positive results would not be possible without your dedication and passion for this business. Our results came in better than expected, led by another quarter of exceptional results from Topgolf and continued high demand for both Golf Equipment and Lifestyle Apparel and Gear. Total net revenue was $712 million, up 90% year over year, and adjusted EBITDA was $14 million, up $27 million. Turning to Topgolf, for the quarter, both walk-in traffic and event sales surpassed our expectations, driving same venue sales to an impressive increase of 6% over 2019 levels. For the full year, same venue sales were approximately 95% of 2019 levels, meaningfully higher than projected and an encouraging and very strong result given the operating environment. A resurgence in corporate events business drove most of the same venue sales positive surprise in Q4. Walk-in sales in smaller social events have been strong for some time and continued their trends. Having said this, as one would expect, in the last week of December and continuing into January, we have seen some softness in same venue sales as the rise in omicron has resulted in a decline in group events and increased short-term staffing challenges. venues, which experienced omicron impacts approximately a month ahead of our U.S. venues bounce back very quickly and are now once again performing quite well. This is a good indicator of the resiliency we expect in the U.S. business through the remainder of Q1 and we are already starting to see some signs of this anticipated improvement. For the first quarter of 2022, we're expecting same venue sales to be down slightly compared to 2019. And for the full year, we anticipate low single-digit growth over 2019 levels. New venue openings continued on pace with our 72 Bay Fort Myers, Florida location opening strongly in mid-November. While we're on venues, I want to remind everyone on the success rate we're consistently delivering here. We had nine very successful openings in 2021, and the financial performance of this group is on track to exceed our expectations despite the challenging operating environment. I've had a ringside seat watching Topgolf open venues for nearly 10 years now. And in my opinion, we are uniquely good here. As a result of increasing brand strength, competency of our real estate team, and our operating team's expertise, this is now a proven and repeatable model, a fact I believe the financial community may not fully appreciate yet. For 2022, we are confident in our ability to deliver at least 10 new venues with the potential of adding an 11th in very late Q4. We're also extremely excited about the lineup for this year, with the first two Southern California locations opening in the Los Angeles area in Q1 and Q2: one in Ontario, which is just east of LA; and the other in El Segundo, near SoFi Stadium. The El Segundo location is particularly intriguing as is the first venue to include an on-course element. And in true Topgolf fashion, this will not be your typical golf course. It will be a 10-hole lighted course perfect for night-time rounds, incorporating elements of entertainment and our Toptracer technology to create a truly unique guest experience. Additional locations of note include Seattle and Baltimore, both of which will feature our latest premium venue enhancements, as well as Callaway fitting base. It's important to note that due to the disruption of the development activities in 2020, the timing of this year's venue openings will be heavily weighted toward the back half of the year with five expected to open in Q4. This timing will impact this year's contribution from new venues. During [Audio gap] we installed over 1,700 new bays, bringing our total for the year to just under 7,000 new bay installations. We remain encouraged by continued strong demand and expect to install 8,000 bays or more in 2022. Lastly, within the Topgolf media business, I'm pleased to announce that we are leveraging our mobile game development expertise from World Golf Tour to launch a new game later this year that caters to the younger, more traditional gamer, whereas existing game focuses more on the traditional golfer. While we expect the game to have minimal contribution to our financial results in 2022, we believe that it will provide future upside as our community of digital customers continues to grow. In addition, in due time, we'll integrate this new game into our digital offerings at both our venues and Toptracer ranges, thus driving synergies from our game development capabilities. Moving to our Golf Equipment segment. We're pleased to report that demand remains very high for our clubs and balls and trade inventory remains low across the industry. According to the National Golf Foundation's annual report, the number of on-course golfers increased by approximately 300,000 in 2021 to 25.1 million players, marking the fourth straight year of increased participation in traditional golf. Off-course participation also continued to grow, with 24.8 million people visiting nontraditional venues such as Topgolf and 5-Iron and approximately half of those playing exclusively off course. Looking out over the next 12-months and beyond, as Topgolf venues continue to expand, we expect even more new players to be introduced to the sport, both on and off course. For Q4, our Golf Equipment results were in line with our expectations. As we explained last quarter, we anticipated some softness in Q4 revenues as we made the decision to shift production to build 2022 new launch product. In addition, we launched several new products in the comparable fourth quarter of 2020, thus creating an uneven year-over-year comparison. As we look ahead to Q1 and the full year 2022, we are seeing promising momentum with the launch of our new Rogue ST family of Woods & Irons and new Chrome Soft golf balls. The reception has been very positive so far. Pre-books are up significantly and feedback on the product has been outstanding, with Rogue ST being the No. 1 driver on tour in its first week on tour at the tournament of Champions, and Callaway receiving more gold metals than any other manufacturer in Golf Digest's Recent Hot list. The new launch product will be available at retailers starting next week. For the full year, we are reiterating our Golf Equipment business will grow based on continued strong demand from consumers, price increases on our new launch product, and the opportunity for a restocking at retail. Turning to our Apparel and Gear. In our Apparel and Gear segment, revenue was up 33% year over year in Q4, led by a 40% increase in Apparel and a 19% increase in Gear. TravisMathew continued to grow at a roaring pace, with our own retail comp store sales up over 67% versus 2020. E-commerce sales were also up a healthy 30% versus 2020. The team also signed a high-profile new ambassador, actor Chris Pratt, during Q4, who helped further increase brand visibility and raise awareness for a multi-day charity flash sale benefiting the Special Olympics. The event was very successful with TravisMathew contributing over $1 million in donations to this very worthy cost. On the product side, TravisMathew expanded its product range to include women's apparel as part the His and Her Cloud Collection launched in December, as well as more cold-weather gear within their outerwear collection. Both additions performed very well with the women's product selling out predominantly in the first 48 hours, and jackets and pants accounting for 37% of direct-to-consumer sales. Jack Wolfskin sales were up in the quarter as compared to both 2020 and 2019 as the public relaunch of the brand's fresh new image was positively received by consumers. Feedback on prebooks has been outstanding, and we're excited for the year ahead. On the sustainability front, Jack Wolfskin launched a new initiative in Q4 called the Nature Counts campaign, which is dedicated to forestry, rewilding, and conservation efforts. In place of Black Friday and Cyber Monday sales discounts, the brand decided to donate 2 euros from every purchase made during the week to Peter Rowland's Forest Academy. We love to see the brand stay true to its roots and continue to be an ambassador for environmentalism. Lastly, our Callaway Apparel business in Asia continued to thrive. The Callaway Golf brand in Japan have the No. 1 share in the wholesale channel during the quarter and direct-to-consumer efforts paid off with strong sales in our owned retail stores as foot traffic in the region increased. Looking ahead to 2022 and the consolidated company, we believe revenue will increase approximately 21%, and we expect adjusted EBITDA will be between $490 million and $515 million. This strong outlook is underpinned by our belief that our Golf Equipment business will continue to grow as participation remains high and supply continues to scales up to match exceptional consumer demand. Our strong prebooks and demand trends for [Inaudible] Apparel and Gear brands and embedded growth in the Topgolf business through new venue openings and year-over-year growth in same venue sales. Longer term, we remain excited and confident about the direction of the business. While macro trends over the past two years have provided favorable tailwinds for golf, we believe there has also been a more sustainable structural shift in the market that will support all of Callaway's businesses. These structural shifts include what we believe are long-term increases in remote and hybrid work. The increase desire to get out in the nature. The momentum behind Casual Lifestyle Apparel brands, the growth of new golfers with waiting list to get into golf courses, and the growth and positive impact of off-course golf. Off-course golf experiences such as Topgolf are both growing rapidly in their own right and at the same time, changing the way people are introduced to the sport of golf, creating increased interest in more new entrants. We believe Callaway is uniquely positioned to engage with these consumers through our differentiated portfolio of brands and look forward to unlocking the embedded growth within this business for years to come. In conclusion and before handing the call off to Brian, I want to call out two additional items. First, I'm pleased to announce that we're planning to publish our first comprehensive sustainability report next month. As a company, we were [Inaudible] Callaway's view that good ethics is good business, and we continue to operate with this ethos at our core today. You will see this theme carried out through the report and through the four strategic pillars of our sustainability strategy: people, planet, product, and procurement. I encourage you to review the report and when it comes out and engage with the team to discuss the content is an important component of our long-term business strategy. Second, I'm very excited to announce our plan to hold an Investor Day in Q2, where you have the opportunity to hear more from senior executives across each of our businesses and learn more about our medium- and long-term vision for the company. More details for this event will be provided by the IR team in the coming weeks, and we hope you can participate. 2021 was an outstanding and transformational year for Callaway, which is clearly highlighted in our financial results. The Topgolf business recovered from COVID more quickly and significantly than we expected and demand for our Golf Equipment and Apparel products remain strong throughout the year and has continued so far in 2022. As Chip mentioned, we believe there has been a structural shift in the market that will benefit each of our businesses including increased interest and participation in golf, momentum behind Casual Lifestyle or Power brands, and an increased desire for leisure and entertainment, such as Topgolf, hiking, and camping. As a result, we expect continued high demand and growth across each of our businesses into 2022 and beyond. Shifting to our financial results. As shown on Slides 10 and 11, consolidated net revenue for the full year 2021 was $3.1 billion, a 97% increase, compared to full year 2020 revenue of $1.6 billion. Full year 2021 adjusted EBITDA was $445 million, an increase of 170% over full year 2020 adjusted EBITDA of $165 million. The outperformance versus our guidance was related to Topgolf and resurgence in corporate events during the quarter, as Chip mentioned earlier. The Golf Equipment and soft goods businesses were in line with our guidance. When you look at a breakdown of our 2021 revenue, Golf Equipment represented 39% of total revenue. Topgolf was 35%, and Apparel, Gear, and Other represented 26%. We believe Golf Equipment continued to grow at a steady pace and be an important component of our strategy moving forward. But as Topgolf venues continue to expand at the rate of 10-plus new openings per year, and the strong momentum of TravisMathew and Jack Wolfskin continues, we see a larger portion of our revenue more toward these high-growth segments. For the fourth quarter, consolidated net revenue was $712 million, an increase of 90% compared to Q4 2020. Topgolf was the largest contributor by segment, generating $336 million. Our strong social events, strengthening corporate events, and continued robust demand from walking guests collectively delivered 6% same venue sales growth over 2019. Apparel, Gear, and Other also performed very well during the quarter with revenue up 33% year over year as strong brand momentum, recovery from COVID, and well-positioned products translated to strong sales growth in the quarter. Consistent with our guidance, and as Chip highlighted earlier, the Golf Equipment segment was down year over year due to third-quarter supply chain disruptions and a shift to prioritizing 2022 new launch inventory over fourth quarter 2021 sales. We also launched several new products in Q4 2020, thus creating an uneven year-over-year comparison. Changes in foreign currency rates had a $6 million negative impact on fourth quarter 2021 revenues. Total costs and expenses were $755 million on a non-GAAP basis in the fourth quarter of 2021, compared to $397 million in the fourth quarter of 2020. Of the $358 million increase, Topgolf added an incremental $330 million of total costs and expenses. The remaining $28 million increase includes moving spending levels back toward normal levels, increased corporate costs to support a larger organization, investments in growth initiatives, including TravisMathew expansion and the Korea apparel business, and increased freight costs and inflation. As we move into 2022, we continue to believe that higher sales volumes and select price increases will balance out inflationary pressures. Fourth quarter 2021 non-GAAP operating income was a loss of $43 million, down $21 million, compared to a loss of $22 million in the fourth quarter of 2020 due to the previously mentioned planned shift in Golf Equipment supply to 2022 launch products, as well as the increased costs previously mentioned. Non-GAAP other expense was $37 million in the fourth quarter, compared to other expense of $13 million in Q4 2020. The increase was primarily related to a $28 million increase in interest expense related to the addition of Topgolf. Non-GAAP loss per share was $0.19 on approximately 186 million shares in the fourth quarter of 2021, compared to a loss of $0.33 per share on approximately 94 million shares in the fourth quarter of 2020. Lastly, fourth quarter 2021 adjusted EBITDA was $14 million, compared to negative $13 million in the fourth quarter of 2020. The $27 million increase was driven by a $46 million contribution from the Topgolf business. Turning to certain balance sheet items on Slide 13. I am pleased to report that we are in a strong financial position with ample liquidity. As of December 31, 2021, available liquidity, which is comprised of cash on hand and availability under our credit facilities was $753 million, compared to $632 million at December 31, 2021, an increase of 19%. In addition, the Topgolf funding requirements from Callaway have improved compared to our initial expectations. When we announced the merger over a year ago, the funding needs for Topgolf were estimated at $325 million. As of year-end, their need for funding was significantly lower due to its faster-than-expected recovery and strong 2021 performance. At this point, we estimate that Topgolf will need almost $200 million less funding than we originally anticipated. And going forward, we estimate Topgolf will only need incremental funding from Callaway of less than $70 million, which would be used for future venue growth. Topgolf is already operating cash flow positive [Audio gap]. And we expect Topgolf to be able to fund its own growth and be free cash flow positive in 2024. At quarter-end, we had a total net debt of $1.4 billion, including venue financing obligations of $593 million related to the development of Topgolf venues. Since the merger, our leverage ratios have improved significantly. Our net debt leverage ratio was 3.1 times at December 31, 2021, compared to five times at March 31, 2021. Consolidated net accounts receivable was $105 million, a decrease of 24%, compared to $138 million at the end of the fourth quarter of 2020. Days sales outstanding for our Golf Equipment and Apparel businesses improved to 35 days as of December 31, 2021, compared to 45 days as of December 31, 2020. Our inventory balance increased to $523 million at the end of the fourth quarter of 2021, compared to $353 million at the end of the fourth quarter 2020 as we built supply for our new products within the Golf Equipment and Apparel businesses. In addition, Topgolf added $22 million in inventory. Capital expenditures for the full year 2021 were $234 million, net of REIT reimbursements. This includes $173 million related to Topgolf, primarily for new openings for the 10 months since the merger. This does not include $12 million of capex for January and February of 2021 prior to the merger. The full year 2022 forecast for Callaway and Topgolf is approximately $310 million, net of REIT reimbursements, including approximately $230 million for Topgolf. This increase in capital expenditures is due to the timing of REIT reimbursements and investment in systems integration and growth within the Golf Equipment and Apparel businesses. Lastly, on December 13, we announced that our board of directors approved a $50 million stock repurchase program. We repurchased a total of approximately 947,000 shares at an average price of $26.41 during the quarter and now have approximately $25 million authorization remaining under that program. Now, turning to our full year and first quarter 2022 outlook on Slide 14 and 15. For the full year, we expect revenue to be approximately $3.8 billion. That compares to $3.13 billion in 2021. Our full year 2022 net revenue estimate assumes continued positive demand for our Golf Equipment and soft goods segments and no significant supply chain or retail shutdowns due to any COVID resurgence. It also assumes approximately $1.5 billion in net revenue from Topgolf for the year. Full-year adjusted EBITDA is projected to be $490 million to $515 million, which assumes approximately to $210 million to $220 million from Topgolf. As Chip stated, we plan to add at least 10 new Topgolf venues in 2022, although the venue openings will be heavily weighted toward the back half of the year with five expected to open in the fourth quarter. From a profitability perspective, this means our 2022 venues will have a more limited impact to adjusted EBITDA in 2022 as we will incur full preopening costs for those venues with limited revenue. From a cost perspective, we will be making investments in personnel and infrastructure to support an overall larger business and future growth. We also anticipate continued cost pressure from increased freight cost and inflation including labor and commodity prices. Lastly, we anticipate a negative impact from changes in foreign currency rates of approximately $54 million on revenue and $38 million on pre-tax income due to a strengthening U.S. dollar and $8 million in hedge gains that are not expected to repeat. Despite these headwinds, we continue to believe strong demand, sales volumes, and select price increases across our business segments will balance out these pressures, and we expect all businesses to grow this year. Lastly, looking at the share count for full year 2022, want to note an accounting change taking effect this year that will cause our share count to increase to approximately 204 million shares. This change relates to the accounting for our convertible bond. This new role will require us to account for the bond, assuming it has been converted for calculating earnings per share. When calculating EPS, we will eliminate the interest paid related to the bond, and we will add 14.7 million shares to the earnings per share calculation as if the bond had been converted. For purposes of this calculation, we do not include the benefit of the [Inaudible] transaction we entered into at the time of the bond issuance, which at maturity would reduce the number of new shares issued by us [Inaudible] conversion by approximately 4 million to 5 million shares at current prices. Moving to the first quarter 2022 outlook. Our revenue guidance is just over $1 billion. Adjusted EBITDA guidance is $130 million to $145 million. This includes a negative foreign currency impact of approximately $21 million on revenue and $21 million in pre-tax income. Again, including the $8 million hedge gains in Q1 2021 that are not expected to repeat. I want to emphasize that there are several factors which could cause a positive or negative shift in our financial results between Q1 and Q2. Some of these factors include the timing of when we receive supply in the Golf Equipment or soft goods segments and whether products scheduled to be shipped at the end of March or beginning of April are deferred to Q2 or accelerated into Q1 as our Q1 guidance reflects our assumption that COVID continues to lessen during Q1 and that the Topgolf business including corporate events, returns close to 2019 levels. The pace at which happens will affect our first-quarter results. We feel good about our full-year guidance. In closing, we are proud of the performance of our business in 2021 and are excited to share our continued progress throughout 2022. Operator, over to you.

q4 non-gaap loss per share $0.19. sees full year 2022 revenue outlook of $3,780 million to $3,820 million and adjusted ebitda guidance of $490 million to $515 million. sees fy 2022 adjusted ebitda $490 million - $515 million. changes in foreign currency effects are estimated to have a negative full year impact of $54 million on net sales.

Unless otherwise stated, all net sales growth numbers are in constant currency and all organic results exclude the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of currency translation. As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms. It also includes estimated sales of our products through our retailers' websites. We are grateful you have joined us today. We delivered excellent performance to begin fiscal year 2022, reinforcing our optimism in the opportunities of tomorrow as we discussed with you in August. Our multiple engines of growth strategy enabled us to excel amid continued volatility and variability from the pandemic. Organic sales rose 18%, and adjusted diluted earnings per share grew an even stronger 31%. Encouragingly, relative to the pre-pandemic first quarter of fiscal year 2020, our business is 13% larger on a reported basis and more profitable. We achieved these outstanding results with increasingly diverse growth engines as we expected. By virtue of our dynamic strategy, we could act locally amid the complexity of the pandemic to both create and capture demand. The growth engines of makeup, developed markets in the West, and brick-and-mortar reignited and complemented momentum in skincare, fragrance, Mainland China, Travel Retail in Asia Pacific, and global online. 13 brands contributed double-digit organic sales growth, demonstrating the breadth of strength across our portfolio. Estée Lauder and MAC drove makeup emerging renaissance, while La Mer and Clinique delivered standout results in skincare. Impressively, skincare solidly outpaced its prior-year organic sales growth performance despite having the far toughest comparison among the categories. Fragrance showed double digits, driven by Tom Ford Beauty and Jo Malone London. Let me share a few highlights by brand. Estée Lauder advanced planning for the makeup renaissance delivered significant sales growth. As social and professional usage occasions resumed in certain markets, the brand was well-positioned with compelling innovation, superb merchandising, and on-point communication. Its double wear and futurist foundation franchises rose strong double digits, while its new pure color whipped matte lipstick was a hit. MAC strategically engaged consumers to drive performance in makeup. In the Americas and EMEA, excellent results from in-store activations and regional MAC the Moment campaigns combined with desirable innovation like luster glass sheer shine lipstick and magic extension mascara. The brand's new omnichannel capabilities, which leverage its freestanding stores, also contributed to the strength and demonstrate a new capability for MAC to benefit from going forward. La Mer performed magnificent and led the company with sales rising strong double digits. Its new hydrating infused emulsion expanded our portfolio of east to west innovation captivating consumers in every region. It is a striking example of the innovation gains we can achieve when the power of our data analytics combined with our creative talent and R&D. La Mer's iconic creme de la Mer prospered as a new global campaign focused on its moisturizing benefit realized terrific initial results. Clinique strived in skincare from the strength of its heroes. Moreover, its new smart clinical repair wrinkle correcting serum with powerful clinically led claims and compelling before-and-after visualizations extended Clinique win streak with innovation and further demonstrated the brand's ability to be highly relevant for consumers of all ages. DECIEM complemented our organic sales growth in skincare with its coveted vegan brand, The Ordinary. DECIEM is known for its transparency, which has enamored it with consumers. And in the first quarter, we launched the insightful Everything is Chemicals campaign. And the new Regimen Builder by The Ordinary on brand.com realized spectacular adoption, further enhancing the brand's powerful online ecosystem. Fragrance momentum continued with stellar double-digit performance in every region, powered by hero products and innovation from Tom Ford Beauty, Jo Malone London in our artisanal offerings. We are excited for the Estée Lauder brand launch of its luxury collection in the second quarter as it expands our portfolio in the high-growth segment of fragrances. Our fragrance category benefits from diversification among our categories as well as regions with outstanding performance from both historically strong markets for fragrance and emerging fragrance opportunities. The self-care rituals related to scent, which were embraced during the pandemic, continued even as social and professional usage occasions resumed. Of note, Tom Ford Beauty performed strongly in both fragrance and makeup such that the brand was among our top performers in the quarter. Its new Ombre Leather perfume and hero's Oud Wood and Lost Cherry fueled the brand's success. Our growth engines also diversified geographically, led by developed markets in the West. Our business in North America executed with excellence to deliver strong double-digit organic sales growth, powered by readiness for makeup's emerging renaissance, ongoing strength in skincare and fragrance, and recovery in hair care. Strategic go-to-market initiatives supported by on-trend innovation increased advertising spending, and expert in-store virtual services delighted consumers. Our expanded consumer reach enhanced these initiatives as Bobbi Brown launched in Ulta Beauty exceeded expectations, and we are encouraged by the early results of the new Ulta Beauty at Target and Sephora at Kohl's relationships. In Asia Pacific, many markets faced COVID-induced lockdowns and temporary store closures, which pressured performance. Despite this, the region still grew 10% organically driven by strength in Greater China and Korea. Mainland China achieved double-digit organic sales growth owing to skin care and fragrance, with online and brick-and-mortar both higher. We launched locally relevant innovation which proved highly desirable, while we also increased advertising spending, strategically expanded our consumer reach to match success on JD, and designed successful activation for Chinese Valentine's Day. We continue to invest in the vibrant and compelling long-term growth opportunity in Mainland China, led by our talented local team. We are enthusiastic for our new innovation center in Shanghai to open in the second half of this fiscal year. This new world-class innovation center will be the first of its kind for our company. With it, we will have a unique ability to grow and build on our market and consumer insights to develop exceptional products to meet and surpass the needs and desires of Chinese consumers. What is more, we are seeing the benefits of recent investment in online fulfillment, which have led to higher service levels and better inventory manager while setting the stage for expanded omnichannel capabilities in the market. From a channel perspective globally, brick-and-mortar grew strongly in markets which are gradually emerging from the latest wave of COVID-19. We realized excellent results across the board in brick-and-mortar, most especially in the Americas and EMEA. Our brands created excitement in store with enticing high-touch services and unique activations. We are encouraged by improving trends in the productivity of brick-and-mortar, owing to both increased traffic and our strategic actions, including those under the post-COVID business acceleration program. As brick-and-mortar reignites, our global online business continued to showcase its tremendous promise, with impressive organic results despite significant organic sales growth in the year-ago period. Online grew to be nearly double the size, on a reported basis, of the pre-pandemic first quarter of fiscal year 2020. Many markets capitalized on the remarkable new consumer acquisition trend of the pandemic to deliver sustained gain in repeat purchases. As we seek to engage with consumers in innovative ways, we advanced our work with Instagram, Snapchat, TikTok, WeChat, and others to capitalize on exciting trends in social commerce. We also deployed a technology solution, which enables brands to better customize consumer outreach by leveraging data to merchandise and personalized communication. This is leading to higher conversion rates for new consumers and a deeper level of relationship building after the initial purchase to foster retention. Initiatives such as this position us well to realize even greater success with trial and repeat. We continued to invest in online to strategically expand our consumer reach and realize promising results. For example, in the first quarter, La Mer launched on Lazada in Southeast Asia to tremendous success with differentiated merchandising, unique services, and prestige packaging, making it one of the platform's biggest brand launches ever. Our relationship with Lazada expanded in the current quarter with Jo Malone London's debut. Before I close, I wanted to share that today we will release our fiscal year 2021 social impact and sustainability report. We are incredibly inspired by the achievements of our employees globally. The report highlights initiatives across key areas, including inclusion, diversity, and equity. Climate, packaging, social investment, responsible sources, and green chemistry. I'm particularly proud of our support to employees globally who faced financial hardships due to COVID-19. The ELC Cares Employee Relief Fund awarded nearly 14,000 grants and distributed nearly $8 million through June 30, 2021. Here, a few among the many other highlights of the report: We are continuing to contribute to a low-carbon future. For the second year in a row, we sourced 100% renewable electricity globally for our direct operations and achieved net-zero scope one and scope two emissions. The company also made strong progress in its Science-based Targets for scope one and two and made efforts toward meeting its scope three science-based targets. We achieved our existing post-consumer recycled content goal ahead of schedule and announced a more ambitious goal to increase the amount of such material in our packaging to 25% or more by the end of calendar year 2025. We also committed to reduce the amount of virgin petroleum plastic in our packaging to 50% or less by the end of calendar year 2030. On the last few earnings calls, I discussed actions we are taking to make more progress on our commitments for racial equity as well as women's advancement and gender equality, which are reflected in the report. We also deepened our work by further aligning the strategy of The Estee Lauder Companies' charitable foundation to identify and support programs at the intersection of climate, justice, human rights, and well-being with a focus on equity, building upon our legacy of founding girls' education and leadership programs. In the beginning of fiscal year 2022 and aligned with our social impact commitments, we were pleased to announce a three-year partnership with Amanda Gorman, activist, award-winning writer, and the youngest inaugural poet in U.S. history. The Estée Lauder Companies will contribute $3 million over three years to support Writing Change, a special initiative to advance literacy as a pathway to equality, access, and social change. In addition, Mrs. Gorman will bring her voice of change to the Estée Lauder brand, debuting her first campaign in the second half of this fiscal year. In closing, we delivered outstanding performance to begin the new fiscal year amid the volatility and variability of the pandemic, while continuing to invest in sustainable long-term growth drivers. We are focusing on fundamental capabilities for product quality and the consumer-centric elements of acquisition, engagement, and high-touch experiences and services. We are doing this while improving our cost structure, diversifying our portfolio and its distribution, investing behind the best growth opportunities, and leading our values. Our confidence in the long-term growth opportunities for global prestige beauty and our company is reflected in the announcement today to raise the quarterly dividend. I'm forever grateful to the grace, wisdom, and ingenuity of our employees globally, who are making us a stronger company each and every day. We are off to an outstanding start with first-quarter net sales growing 18% organically, driven by the nascent recovery in the Americas and EMEA during the quarter compared to a more difficult environment in the prior year. Global logistics constraints caused some retailers, primarily in North America, to order earlier to ensure popular sets and products would be on counter for holiday. We estimate that this contributed approximately 1.5 points to our first-quarter sales growth that otherwise would have occurred in the second quarter. The inclusion of sales from the May 2021 DECIEM investment added approximately three points to reported net sales growth, and currency added just over two points. From a geographic standpoint, organic net sales in the Americas climbed 27% as COVID restrictions eased throughout the region. Brick-and-mortar retail grew sharply across all formats compared to the prior-year period when many stores were temporarily shut down. Distribution in Kohl's with Sephora and in Target with Ulta Beauty began its phased rollout to initial stores and online in mid-August, with minimal impact on net sales growth for the quarter. With the strong resurgence of brick-and-mortar traffic, online organic sales growth in the Americas declined single digits against a sharp increase last year, while organic online penetration remained solid at 31% of sales. The inclusion of sales from DECIEM added about nine points to the overall reported growth in the region. In our Europe, the Middle East, and Africa region, organic net sales rose 19% with virtually every market contributing to growth, led by the emerging markets in the Middle East, Turkey, and Russia as well as the U.K. Most markets throughout the region saw COVID restrictions lifted, and some tourism resumed during the peak summer months. By channel, the region saw more balance between brick-and-mortar and online growth. All major categories grew this quarter, and the region saw the strongest growth in fragrance and makeup as social occasions increased. Our global Travel Retail business grew double-digit as China and Korea continued to be strong. Internal travel restrictions during the quarter in China slowed Hainan sales temporarily, but restrictions lifted in early September, and traffic rebounded. Retailers also responded to the August dip by driving post-travel consumption online. Summer holiday travel in Europe and the Americas picked up, but international travel still reached only 40% of pre-COVID levels. In our Asia Pacific region, organic net sales rose 10%, driven by Greater China and Korea. The region overall experienced higher levels of COVID lockdowns this quarter compared to last year's quarter due to the rise of the delta variant, although online remains strong. Sales growth in Mainland China was somewhat slower due to COVID restrictions during July and August. And the pace of online sales growth slowed following the successful 6.18 programs last quarter and in anticipation of the 11.11 shopping festival. As we've mentioned before, these key shopping moments have created some additional seasonality in our business in this region. More than half of our brands in virtually all channels rose double-digit in Mainland China. Hong Kong and Macau were bright spots this quarter. They benefited from strong new product launches from La Mer and Jo Malone and successful marketing campaigns from several other brands. From a category perspective, net sales growth in fragrance jumped nearly 50%. Virtually every brand that participates in the category contributed to growth, with exceptional double-digit increases from Tom Ford Beauty, Jo Malone London, and Le Labo. Perfumes and colognes led the category growth; and bath, body, and home fragrances continue to perform well. Net sales in makeup rose 18% as markets in the Americas and Europe began to recover from COVID shutdowns. We are encouraged by the sequential improvement in makeup versus pre-COVID levels. However, makeup sales in the quarter were still 19% below two years ago. Nonetheless, Estée Lauder foundations continue to resonate strongly with consumers, and MAC leaned into the makeup recovery with a number of fun and compelling campaigns. Skincare sales remained strong during the quarter. Organic net sales grew 12%, and the inclusion of sales from DECIEM added six percentage points to reported growth. Nearly all of our skincare brands contributed to growth, although Estée Lauder had a tough comparison with the prior-year launch of its improved Advanced Night Repair Serum. Our haircare net sales rose 8% as traffic in salons and stores in the U.S. and Europe began to return. Both Aveda and Bumble and bumble saw growth in-hero products as well as continued strength from innovation. Our gross margin declined 100 basis points compared to the first quarter last year. The positive impacts from strategic pricing and currency were more than offset by higher obsolescence costs for both basic and holiday product sets and the inclusion of DECIEM. Operating expenses decreased 240 basis points as a percent of sales. Our strong sales growth was partly due to earlier orders from some North America retailers concerned about logistics constraints, and costs related to these sales are expected to be incurred in our second quarter. We do continue to manage costs with agility, realizing savings from our cost initiatives, while also investing to support a continued brick-and-mortar recovery as well as our strategic initiatives. Our operating income rose 32% to 941 million, and our operating margin rose 140 basis points to 21.4% in the quarter. Diluted earnings per share of $1.89 increased 31% compared to the prior year. During the quarter, we used 81 million in net cash flows from operating activities, which was below the prior year. This reflects a more normalized first quarter where we typically have seasonally higher working capital needs. We invested 205 million in capital expenditures as we ramped up our investment to build a new manufacturing facility in Japan. And we returned 749 million in cash to stockholders through both share repurchases and dividends. So now let's turn to our outlook. We are encouraged by the green shoots we are seeing around the world, even in the context of an environment of increased volatility. Our strong performance reflects our ability to navigate through the volatility while leveraging our multiple engines of growth. At the same time, we are mindful that recovery is tenuous and likely to be uneven. Nevertheless, we are cautiously optimistic, and our assumptions for fiscal 2022 remain consistent. We continue to expect an emerging renaissance in the makeup category as restrictions are safely lifted and social occasions increase. And as intercontinental restrictions are lifted, we expect international passenger traffic to build toward the end of the fiscal year. We began taking strategic pricing actions in July. And overall, pricing is expected to add at least three points of growth, helping to offset inflationary pressures. On the costs side, we plan to continue to increase advertising to support our brands and drive traffic in all channels. Selling costs are expected to rise to support the reopening of brick-and-mortar retail. We also continue to invest behind key strategic capabilities like data analytics, innovation, technology, and sustainability initiatives. As you are all aware, global supply chains are being strained by COVID and its related effects in some markets, resulting in port congestion, higher fuel costs, and labor shortages at a time when demand for goods is rising. This is causing us to experience inflation in freight and procurement, which we expect to impact our cost of goods and operating expenses beginning next quarter. Based on what we see through October, the expected benefit of pricing, combined with good cost discipline elsewhere, are enabling us to maintain our expectations for the year. For the full fiscal year, organic net sales are forecasted to grow 9 to 12%. Based on rates of 1.163 for the euro, 1.351 for the pound, and 6.471 for the Chinese yuan, we expect currency translation to be negligible for the full fiscal year. This range excludes approximately three points from acquisitions, divestitures, and brand closures, primarily the inclusion of DECIEM. Diluted earnings per share is expected to range between 7.23 and 7.38 before restructuring and other charges. This includes approximately $0.04 of accretion from currency translation and $0.03 accretion from DECIEM. In constant currency, we expect earnings per share to rise 11 to 14%. At this time, we expect organic sales for our second quarter to rise eight to 10%. The net incremental sales from acquisitions, divestitures, and brand closures are expected to add about three points to reported growth, and currency is forecasted to be neutral. Operating expenses are expected to rise in the second quarter as we support holiday activations and the continued recovery of brick-and-mortar retail around the world. Additionally, the prior-year quarter included some benefits of government subsidies, which are not anticipated in the current year quarter. We expect second quarter earnings per share of $2.51 to $2.61. Both currency and the inclusion of DECIEM are expected to be immaterial to EPS. Notably, our earnings per share forecast also reflects a 23% tax rate, compared to 15.9% in the prior year when we benefited from certain one-time items. In closing, we are pleased with the terrific start to the year and are proud of the continued efforts of our global team. We remain confident in our corporate strategy with its multiple growth engines to drive sustainable, profitable growth.

sees q2 earnings per share $2.51 to $2.61 excluding items. confirming full year outlook. qtrly adjusted diluted earnings per common share to $1.89. qtrly net sales increased 23% to $4.39 billion. for fiscal 2022, we continue to expect strong net sales and adjusted earnings per share growth with margin expansion. higher transportation and logistics costs to negatively impact cost of sales and operating expenses in fiscal 2022.

Unless otherwise stated, all net sales growth numbers are in constant currency, and all organic net sales growth excludes the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of currency translation. As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms and also includes estimated sales of our products through our retailers' websites. [Operator instructions] [Audio gap] Fabrizio. It is good to be with you today as our hearts continues to be with those impacted by COVID-19 around the world. We achieved record sales and profitability in the second quarter of fiscal year 2022. Our multiple engines of growth strategy showcased the benefit of its diversification. Every category, region, and major channel expanded. We size the favorable dynamics of skincare, fragrance-developed markets in the West, brick and mortar, and continue to prosper in the East with Chinese consumer, as well as in global travel retail and global online. The flexibility we built into our business model over the last decade enable us to both allocate resources to attractive growth opportunities and effectively manage the impacts by increasing inflationary environment. Our advanced planning for the key shopping moments of 11.11 and holidays allowed us to overcome supply chain obstacles. For our second quarter, reported net sales grew 14%. Organic net sales rose 11%. Adjusted operating margin expanded, and adjusted diluted earnings per share increased 15%. Today's results are all the more impressive compared to the pre-pandemic second quarter of fiscal year 2020 when we delivered record organic sales growth in our seasonally largest quarter. Despite the ensuing challenges of COVID-19, which escalated during the quarter with Omicron, we far exceeded the exceptional results of two years ago. Reported sales are 20% higher, driven by organic sales growth, and with every region now larger, and we are much more profitable. Our gains during the last two years reinforced our confidence in our ability to navigate the impacts of the prolonged pandemic. Moreover, our optimism in the opportunities of tomorrow remains incredibly strong, owing to the timeless desirability of our brands and our commitment during the pandemic to invest for the near and the long term. Our brand portfolio of large, scaling, and developing brands served as a powerful catalyst for growth as consumer reward the quality of our trusted brand and hero products. In the second quarter, 11 brands achieved double-digit organic sales growth versus the prior-year period. This broad-based trend is similar to the contribution in the first quarter despite a far tougher comparison. The momentum in our largest brands, Clinique, Estee Lauder, La Mer, and M·A·C, continues as the hero franchises capitalize on innovation in product engagement and high-touch experiences and services to drive trial and repeat. La Mer and Clinique delivered standout results in skin care, while Estee Lauder and M·A·C drove makeup emerging renaissance. Our scaling and developing brands achieved excellent results. Jo Malone London and Tom Ford Beauty led fragrance and were among our top-performing brands, while Bobbi Brown grew strongly driven by skincare. Aveda and Bumble and bumble delivered accelerating sales growth in hair care as Too Faced and Smashbox rose double digits in makeup. Product innovation also served as a powerful catalyst for growth across our brand portfolio, contributing nearly 25% of sales. This level of contribution is notable in a quarter when holidays exclusives represent a larger mix of business and especially so in a challenged supply chain environment. La Mer fueled by its iconic heroes on-trend holidays merchandising and highly sought new The Hydrating Infused Emulsion led the company's sales growth. The brand excelled in every region and across major channels, cheered by its loyal consumer and embraced by new cohort of consumers, including more men. Clinique's skincare portfolio with its desirable innovation and hero franchises performed strongly. Its new Smart Clinical Repair Wrinkle Correcting Serum drove sales gains in North America, amplifying the brand's global momentum in the serum subcategory. Clinique Take The Day Off makeup remover saw a dramatic uptick in sales, evidence of makeup's emerging renaissance and the staying power of this crowd-favorite skincare product, which is recruiting a new generation of consumers. For makeup, the Estee Lauder brand is a driving force in the category emerging renaissance, with makeup sales for the brand already larger than two years ago. Estee Lauder Double Wear hero franchise delivered remarkable performance, while its Futurist foundation, which is an East to West product born of skinification of makeup trend, was very strong. Our fragrance portfolio continued to go from strength to strength, owing to the enduring sand-based ritual created in the pandemic and enhanced by innovation, better online storytelling, and expanded reach as consumers in the East embrace this category. Each of Jo Malone London, Tom Ford Beauty, Le Labo, KILIAN PARIS, and Frédéric Malle delivered strong double-digit growth in every region, demonstrating the allure of these brands around the world. Tom Ford Beauty exemplifies the benefits of a strategic focus on heroes and innovation. Its new Ombre Leather Parfum had a halo effect on the other perfumes such that sales for the franchise doubled. In the third quarter, the brand is leveraging its global appeal with a flare of local relevance in the fragrance launch of Tom Ford Rose Trilogy. Our growth engines also continue to diversify by region as we anticipate. Developed markets in the West performed especially well. North America executed with excellence to capture brick-and-mortar reopening trends and deliver a strong holiday across channels. Festive seasonal exclusive, including Estee Lauder Blockbuster Set and Aveda collaboration with Philip Lim, proved highly sought. Indeed, our in-store and online activation and merchandising were incredibly successful, with brand.com posting a record Black Friday. Every category grew double digits organically in North America led by makeup where our brand paired trusted product with enticing innovation as social and professional user education increased. M·A·C, Bobbi Brown and Too Faced produced engaging content and artist-led education to inspire consumers to size the joy and creativity of the category. Mainland China delivered high single-digit organic sales growth, an impressive result given the regional restrictions in the quarter, the pressured brick and mortar, and makeup. Online sales rose double digits organically, even after having posted significant growth in the year-ago period. For 11.11 on Tmall, the Estee Lauder brand ranked No. 1 flagship store in beauty for the second consecutive year as La Mer's flagship store topped luxury beauty once more and Jo Malone London again led in prestige fragrance. On JD, the Estee Lauder brand ranked No. 1 flagship store in beauty in its first year. Skincare and fragrance grew double digits organically in Mainland China. Hero products and innovation excelled, driving new consumer acquisition and repeat purchases. Several brands expanded prestige beauty share in the quarter, including Estee Lauder, La Mer, and Dr. Jart+. Looking ahead, we are excited about the long-term growth opportunity in the vibrant Asia-Pacific region and, most notably, in China. We are a few months from opening our new innovation center in Shanghai. Our aspiration for it are bold as we aim to meet and exceed the desires of Chinese consumers. The center is designed to enable end-to-end innovation from concept, from product packaging through development, scale-up, and commercialization. I am pleased to share that the build-out of our state-of-art manufacturing facility near Tokyo is also progressing very well, which is a testament to the amazing work of our global supply chain team amid the pandemic. Its first phase is complete, and we are on track to start limited production by the first quarter of fiscal year 2023. Our growth engines further diversified by channel as both online and brick and mortar prospered. Specialty-multi and department store contributed meaningfully, and freestanding store in the West performed very well on reopening. Traffic improved and complemented our strategic actions, including those under the post-COVID business acceleration program, to benefit productivity in brick and mortar. This channel trends are encouraging for the long term, even if tempered in this moment by Omicron. We continued to expand our omnichannel capabilities in the quarter to give consumers flexible and convenient shopping options for greater certainly for fulfillment. Buy online, pickup in-store offerings in the United States for M·A·C, Aveda, Jo Malone London, and Le Labo are driving favorable average order value trends, and we are expanding the capability to more doors internationally, which holds great promise for the future. Our global online channel delivered excellent performance, with organic sales rising high single digit after having surged over 50% in the year-ago period. Each of brand.com, third-party platform, pure play, and retail.com contributed to growth. The drivers included higher levels of engagement for virtual try-on and tools for choosing shade and scent, sophisticated assembly to drive trial and repeat, and more and better live streaming. Indeed, in North America, La Mer generated the most sales from a live stream to date in the quarter. Our brands are innovating in social commerce on Instagram, Snapchat, TikTok, and WeChat, among others. We gained momentum in this promising online ecosystem during the quarter. Too Faced leveraged an Instagram live shopping event to launch its new fragrance. Estee Lauder Double Wear followers on TikTok skyrocketed with its latest campaign also driving brand awareness and affinity much higher. And Tom Ford Beauty creatively debuted its new flagship site on WeChat's mini program in China. Embedded with these outstanding results across categories, regions, and channels is the progress we are making in social impact and sustainability. Since we spoke with you in November, we are pleased to have received several external recognition of our ESG efforts. We were named to Forbes inaugural list identifying the world's top female-friendly companies, leading the way to support women inside and outside the workforces. And for the fifth year in a row, we were named to Bloomberg Gender Equality Index. We were included in the CDP's Climate A-List for the second consecutive year, which is a tribute to our deep commitment to climate action and to the highest level of transparency around our environmental interest. Last, MSCI recognized our progress toward our 2025 ESG goal in its recent upgrade of the company to an A rating. The company, our brands, and our employees have a number of events and activations planned in honor of Black History Month, and we are continuing to focus on our racial equity commitments and the work of accomplishing our goals. As we embarked in -- on the second half of our fiscal year, our innovation pipeline is rich with newness, especially for sustainability. La Mer newly advanced The Treatment Lotion, which will be on country in March as a powerful upgrade inside and out, crafted using our unique Green Score methodology and housed in a new recyclable glass bottle made with 20% post-consumer recycled glass. This methodology, which was peer-reviewed in academic journal, Green Chemistry, during the quarter, evaluate ingredients and formulas throughout the lenses of human health, ecosystem health, and the environment. This approach can be adopted, built upon, and scaled by others across our industry to further advance sustainability. Estee Lauder is launching an all-new Revitalizing Supreme moisturizer created with innovations in formula and ingredients in a new recyclable glass jar. Smashbox is introducing Photo Finish Silkscreen Primer collection featuring vegan formulas with a skin-defending complex and instant makeup benefits. Lastly, DECIEM vegan brands, The Ordinary, is welcoming back Salicylic Acid 2% Solution, boosting a win list of over 400,000 for the new formula. In closing, we delivered outstanding performance amid the accelerated volatility and variability, as well as supply chain challenges of the pandemic. This demonstrates that we have the competency to navigate complexity well. Our commitment to invest for the long term is of great importance in this moment as we benefit from the advancement we have made over the last few years in data analytics, technology, R&D, and supply chain. These announced capabilities, combined with our strong portfolio of desirable brands, exceptional talent, and more flexible resource allocation, are enabling us to realize the power of our multiple engines of growth strategy even in a difficult external environment. The grace, wisdom, and ingenuity of our employees in this still-challenging moment knows no bounds. They are the embodiment of our company's strong culture. And to them, I extend my deepest gratitude. As you just heard, our momentum continued in our second quarter, with net sales growing 11% organically and 14% in total, led by a continued overall progression and recovery despite the volatility inherent across markets with a prolonged pandemic. We had a solid holiday performance across all of our regions. The inclusion of sales from the May 2021 DECIEM investment added approximately 3 points to reported net sales growth, and the currency impact was neutral. From a geographic standpoint, organic net sales in the Americas rose 19% as holiday shoppers return to brick-and-mortar retail where we had an exciting array of gifting products and holiday activations in-store. And even with more consumer shopping in stores, organic sales online also grew solidly in the Americas, with online representing more than a third of sales in the region. Every market in the region contributed to sales growth this quarter, and the inclusion of sales from DECIEM added approximately 5 points to the total reported sales growth in the region. In our Europe, the Middle East, and Africa region, organic net sales rose 13%. Growth was diverse and broad-based, with global travel retail, as well as every market contributing. All channels grew, led by double-digit growth across brick and mortar as recovery continued in both developed and emerging markets in the region. Despite a strong performance during key shopping moments, organic sales online declined slightly, primarily driven by the U.K., due to a tough comparison with the prior year, which was more severely impacted by brick-and-mortar lockdowns. The inclusion of sales from DECIEM added about 3 points to total reported sales growth in the region. Our global travel retail business grew low double digits. Travel restrictions have eased globally, and international passenger traffic continued to progressively improve, resulting in some stores reopening during the quarter, particularly in Europe and the Americas. Travel retail continues to be led by Asia Pacific where demand from Chinese consumers remain strong. In our Asia-Pacific region, organic net sales rose 5%. Most of the markets in the region grew, led by Mainland China and Australia, although we continue to see variability in COVID restrictions and retail traffic across markets. Sales grew across most major channels in the region, especially online, which benefited from the recent launch of three brands on JD.com. The inclusion of sales from DECIEM added approximately 1 point to total reported sales growth in the region. From a category standpoint, organic net sales of fragrances grew 30% with double-digit increases across all regions. Exceptional double-digit increases from Jo Malone London, Tom Ford Beauty, Le Labo, and KILIAN PARIS reflected strong performances from hero products, new product launches, and the continued growth of the bath and body and home subcategories. Organic net sales in makeup rose 12% as consumers in the Americas and Europe responded to social media activations, holiday assortments, and trends. Estee Lauder foundations continue to resonate very strongly with consumers, especially those in the Double Wear and Futurist franchises. M·A·C continued to drive the makeup renaissance with engaging, interactive campaigns throughout the quarter, like the special M·A·C trend Halloween report and solid holiday collections. Too Faced, Tom Ford Beauty, Smashbox, and Bobbi Brown also contributed to growth in the category this quarter. Organic net sales in skincare grew 7%, reflecting double-digit increases from La Mer, Clinique, and Bobbi Brown. The inclusion of sales from DECIEM added 4 percentage points to reported growth. Our organic net sales in hair care rose 18% as traffic in salons and stores improved, primarily in the Americas. Aveda's growth came mostly from holiday gifts and hero franchises and in online and freestanding stores, while Bumble and bumble focused on recruiting new consumers in the specialty-multi channel. Our gross margin improved 20 basis points compared to last year. The benefits of strategic price increases and favorable currency more than offset the impact of higher makeup mix and lower gross margin on DECIEM products. Inflationary pressures in our supply chain are expected to begin to more prominently impact cost of goods in our fiscal third quarter. Operating expenses decreased 140 basis points as a percent of sales. Our leverage of selling expense and general and administrative expense was partially offset by increases in advertising and shipping costs, the latter due to both inflation and our direct-to-consumer online growth. Operating income rose 22% to $1.44 billion, and our operating margin expanded 160 basis points to 25.9% in the quarter. Our tax rate at 21.4% continued at a more normal level this year versus the prior year, which was impacted by a one-time benefit associated with GILTI. Diluted earnings per share of $3.01 increased 15% compared to the prior year. For the six months, we generated $1.85 billion in net cash flows from operating activities, compared to $1.98 billion last year, which reflects both a return to more normalized working capital needs, as well as increased inventory, to mitigate some of the risk of supply chain disruption, given the ongoing global macro challenges. We significantly increased our capital investment to $459 million to support the construction of our new production facility near Tokyo, as well as investments in our online business and other technology enhancements. And we returned $1.84 billion in cash to stockholders through a combination of share repurchases and dividends, with an increase in our dividend rate occurring in the second quarter. So turning now to our outlook. We delivered an exceptional first half characterized by strong and diversified double-digit organic sales growth and disciplined cost management in the context of intermittent COVID disruptions, including the rise of the omicron variant, high inflation, and volatility. Looking ahead, we are raising guidance to reflect our expectation for a strong year despite the potential further spread of Omicron, supply chain challenges, and increased inflationary pressures. Inflation and transportation and procurement is expected to impact our cost of goods in the second half. However, the benefit of pricing and cost mitigation efforts are helping to offset some of the inflation impacts for the fiscal year. At this time, we expect pricing to add approximately 3.5 points of growth with the inclusion of the additional pricing actions we are taking during our second half. We are planning to support the continuation of the recovery with increased point-of-sale staffing as retail traffic continues to gradually improve. We are also planning to support key hero franchise launches in our third quarter from Estee Lauder, La Mer, and Origins with increased marketing and advertising support. This investment will increase cost toward the latter part of the third quarter with more of the benefit to be realized in the fourth quarter. For the full fiscal year, organic net sales are forecasted to grow 10% to 13%. Based on rates of 1.146 for the euro, 1.357 for the pound, and 6.399 for the Chinese yuan, we expect currency translation to be negligible for the full year. This range excludes approximately 3 points from acquisitions, divestitures, and brand closures, primarily the inclusion of DECIEM. Diluted earnings per share is expected to range between $7.43 and $7.58 before restructuring and other charges. This includes approximately $0.07 of accretion from currency translation and $0.03 of accretion from DECIEM. In constant currency, we expect earnings per share to rise by 14% to 17%. We expect organic sales for our third quarter to rise 8% to 10%. The net incremental sales from acquisitions, divestitures, and brand closures are expected to add about 3 points to reported growth, and currency is forecasted to be negative by about 1 point. We expect third quarter earnings per share of $1.55 to $1.65. Currency is expected to be $0.01 accretive to EPS, and the inclusion of DECIEM is not expected to be material. In closing, our results thus far clearly demonstrate the power of our diversified portfolio. Temporary softness in our Eastern markets driven by the pandemic was again offset by renewed growth in our Western markets. A resulting slight slowing of growth in skin care was offset by remarkable growth in fragrances. We continue to be choiceful about where we invest, and the flexibility we have built into our cost structure is helping us to mitigate some of the COVID-related disruptions and inflation while allowing us to continue to invest appropriately in our future growth. This agility, along with the resilience of our remarkable teams worldwide, gives us confidence that we can continue to manage through the temporary complexities caused by the prolonged pandemic by focusing clearly on our long-term strategy and executing against it with excellence.

sees q3 earnings per share $1.55 to $1.65 excluding items. q2 adjusted earnings per share $3.01 excluding items. q2 sales rose 14 percent to $5.54 billion. q3 reported net sales are forecasted to increase between 10% and 12% versus prior-year period. full year fiscal 2022 reported net sales are forecasted to increase between 13% and 16% versus prior-year period. sees fy 2022 earnings per share $7.43 to $7.58 excluding items. q3 adjusted diluted net earnings per common share are projected to be between $1.55 and $1.65. expects to take charges associated with previously approved restructuring and other activities in fy 2022. company expects higher costs to negatively impact cost of sales and operating expenses for remainder of fiscal 2022.

Unless otherwise stated, all net sales growth numbers are in constant currency and all organic results exclude the impact of acquisitions, divestitures, brand closures, and the impact of currency translation. As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms. It also includes estimated sales of our products through Retailer's websites. I hope you and your families are in good health, and our hearts continue to be with those impacted by COVID-19. We delivered outstanding performance amid the pandemic in fiscal year 2021, capped with an exceptional fourth quarter and powered by our dynamic multiple engines of growth strategy, as well as the timeless desirability of prestige beauty. In a year of pain and sorrow, our employees cared for each other, their families, and our company with compassion, creativity, and resolve. While the challenges of COVID-19 persist, we confidently begin fiscal year 2022 as a stronger company, full of aspiration for the opportunities of tomorrow. For fiscal year 2021, sales rose 11% as we pivoted our energy resources to the growth engines of skin care, fragrance, Asia Pacific, travel retail in Asia Pacific, and global online. Impressively, eight brands grew double digits, led by Estee Lauder, La Mer, and Jo Malone London. Multiple waves and variants of COVID-19 to the extent the center reach were unexpected a year ago drove volatility and variability throughout the year. We saw reopenings revert to closing, and reopenings in one market meant with renewed lockdowns in other markets. Despite this, we delivered on the goal we set last August for sales growth to improve sequentially each quarter. Our sales exceeded $16 billion for the first time ever, up 9% from fiscal year 2019 on a reported basis, fueled by skin care and fragrance. Adjusted operating margin expanded to 18.9%, which is 140 basis points above fiscal year 2019 as we invested in today's strongest growth engines, managed cost with discipline, and funded long-term growth opportunities. Adjusted diluted earnings per share rose 21% relative to two years ago. We delivered these excellent results while pushing our social impact and sustainability goals and commitment. First and foremost, we remain focused on employee and consumer safety and well-being. We achieved important milestones for our 2025 sustainability goals, expanded our inclusion, diversity, and equity programs, defined a strategy for women's advancement and gender equality, and advanced work toward our racial equity commitments. Here are a few among the many areas of our progress. We achieved net-zero carbon emissions and 100% renewable electricity globally for our own operations. We also set science-based emissions reduction target, addressing Scope 1 and 2 for our direct operation and certain elements of Scope 3 for our value chain, signaling our new level of ambition for climate actions. We launched ingredient glossaries for seven additional brands, such that 11 brands now offer this insightful content. We transformed our traditional inclusion, diversity, and equity week into a blockbuster virtual experience, with 35 events involving thousands of participants from 25 countries. We also introduced new educational offerings, including four antiracism and inclusive leadership. We expanded our grassroots-led employee resource groups, which served as a source of support and comfort throughout the tumult of last year. The women leadership network is our largest group and is now global, with its expansion into Latin America and Asia Pacific. We created two new leadership programs for women and black employees. The Open Door women's leadership program is a unique intensive course to develop our next generation of women leaders. Building on its success, we designed the Open Doors collection, a self-guided program to bring these leadership skills to all our employees around the world. The form every chair leadership and development program is successfully held to ensure that black employees have equitable access to leadership trainings, mentorships, career development, and advancement opportunity, as well as to build a stronger, more inclusive network of talent across the organization by promoting visibility and facilitating leadership connections points with participants. Our new partnership with Howard University focused on its alumina-hosted 12 engaging events and launched an accelerator program to help increase the pipeline for black talent with career, coaching, professional training, and self-empowering networking. Let me now turn to product innovation, which serve as an impactful catalyst for growth in fiscal year 2021. Innovation represented over 30% of sales, exceeding our expectations. We combine data analytics with our creative talent and R&D to successfully anticipate scale and set trends across categories. The Estee Lauder brand achieved its fourth consecutive year of double-digit sales growth in fiscal year 2021, fueled by strength across its many hero franchises in skin care. Trusted products, along with innovation, were highly sold from Shanghai to New York, Paris, and now Sao Paulo given the brand's well-received launch in Brazil. Advanced Night Repair newly reformulated serum sparked excellent sales growth. Revitalizing Supreme's new Supreme+ Bright Moisturizer, further bolstered the accelerating franchise, while Re-Nutriv new eye serum served and created a halo effect on demand. In makeup, the brand's double wear Futurist and Pure Color franchises produced significant double-digit sales growth in the fourth quarter and exciting early signs of makeup renaissance. La Mer delivered outstanding double-digit sales growth in the fiscal year as innovation soared and engaging campaigns with iconic ingredient-based narratives drove demand for its hero products. Clinique skin care excelled in fiscal year 2021. Sales rose double digits and powered the brands to high single-digit sales growth. The brand successfully met consumer needs through the launch of Moisture Surge 100 Hour with its unique hydration benefits and target solution for hard-to-solve skin care problem like Even Better Clinical Interrupter. Clinique showcased its promise for makeup renaissance with stellar double-digit category growth in the fourth quarter with the new Even Better Clinical serum foundation and Even Better concealer capitalizing on its skin care authority. All told, our robust skin care portfolio from entry prestige to luxury and across subcategories is fulfilling this journey needs around the world. Dr. Jart+ with its [Inaudible] derma brand positioning and hero products delivered strong double-digit organic sales growth in the second half of fiscal year 2021. In May, we amplified the strength of our skin care portfolio as we became a majority owner of DECIEM with its coveted ingredient-based brand, The Ordinary, and emerging science-driven NIOD brand as part of its portfolio. Complementing skin care strength, fragrance delivered striking sequential sales growth acceleration throughout the year. Each of our luxury and artisanal fragrance brand contributed meaningfully from Jo Malone London to Tom Ford Beauty, Le Labo, Kilian Paris, and Frederic Malle in both established fragrance markets of the West and emerging fragrance market of the East. Tom Ford Beauty's private blend franchise is both recruiting new consumers and driving strong repeat in markets newly embracing the category, with the brand's drag in sales more than doubling in Mainland China during the year. The Asia Pacific region was another dynamic growth engine in fiscal year 2021 as annual sales growth accelerated from 18% to 22% led by Mainland China where sales rose strong double digits. Several smaller markets also contributed to Asia Pacific's strengths. The region, however, experienced increasing pressure from the pandemic as the year evolves with Japan and many markets in Southeast Asia, particularly impacted from renewed lockdowns in the second half. Mainland China prospered as we invested in its vibrancy of today, an opportunity of tomorrow. We entered more cities, reaching 145, expanded our presence in specialty-multi, opened the freestanding doors, and increased our advertising spending. Skin care and fragrance sales grew strong double digit for the fiscal year. We are encouraged that the makeup accelerated to double-digit sales growth in the second half. Our brands delivered excellent results for the key events of Tmall's 11/11 Global Shopping Festival and 6/18 Mid-year Shopping Festival as engaging live streaming generated product discovery for many new consumers. For the recent 6/18 among Tmall beauty flagship stores, the Estee Lauder brand ranked No. 1 in total beauty, while La Mer ranked first in luxury beauty and Jo Malone London led the fragrance category. To further capture the market recent online growth opportunity, we are continuing to invest in Tmall and brand.com to expand our capabilities. Most recently, some brands increased coverage of a different demographic by launching on JD in July. With international travel largely curtailed, we expanded our investment in the dynamic travel retail development of Hainan highland to serve the Chinese consumers in the best possible way given the island tremendous traffic growth and higher duty-free purchase limits. Our brands further elevated the in-store and prepaid shopping experiences, delivered ideal merchandising, and leveraged live streaming to drive strong sales growth. Online strive globally in fiscal year 2021, characterized by strong double-digit sales gain and step change in its power as a growth engine. We accelerated our consumer-facing digital infrastructure and fulfillment investments. The challenge is now more than twice as big as it was two years ago and greatly benefit from its diversification as each of brand.com third-party platforms, retail.com and pure-play retailers delivered outstanding performance. During the year, brand.com came to epitomize the allure of a luxury flagship store for each brands, localized by market and reimagined with our classic high-touch services. We expanded virtual trainer, live streaming, omnichannel capabilities, and consultations with our expert beauty advisors. Consumers at all ages explored, replenished, and engaged in an immersive environment of entertainment and community. Our brands increasingly leveraged the exciting trends in social commerce by integrating with Instagram, WeChat, Snapchat, and others. Estee Lauder launched on TikTok with the Night Done Right hashtag, driving nearly 12 billion views and the creation of almost 2 million videos. It challenged use-diverse creators to educate a younger audience on how important is to take care of your skin at night, showcasing Advanced Night Repair. Clinique zit happens campaigns on TikTok became a viral sensation, highlighting the brand acne solution and spurring the creation of nearly 700,000 videos on the app. Together, these and other strategic actions delivered exceptional results for brand.com as new consumers, conversion, basket size, repeat, and loyalty members grew considerably. Beyond the favorable growth rates, the direct relationship we fostered with consumers enabled us to better optimize engagement in-store and online, offering exciting future growth opportunities. We are investing across all channels of online, collaborating with traditional and pure-play retailers on initiatives to actualize prestige beauty online potential. We spoke on the last call about having expanded our presence with pure-play retailers, which continued into the fourth quarter, most especially in EMEA. And as I discussed a few minutes ago, we are expanding our consumer coverage in Mainland China. For fiscal year 2022, we expect these growth engines of skin care, fragrance, Asia Pacific, travel retail Asia Pacific, and global online to continue to try, owing to our strong repeat purchase rates, sophisticated data analytics, drive consumer acquisitions and retention, high-touch online services, and robust innovation pipeline. Three compelling skin care innovation recently launched: Estee Lauder new Advanced Night Repair Eye Matrix is focused on lines in every eye zone, while La Mer The Hydrating Infused Emulsion is designed to replenish, strengthen and stabilize skin with healing moisture and has already proven to attract new consumers. Clinique Smart Clinical Repair Wrinkle Correcting Serum is designed to visibly reduce stubborn lines. Our Shanghai innovation center is expected to open in the second half of this fiscal year, enriching our capability in product design, formulation, consumer insight, and trend analytics for Chinese and Asian consumers. Also with the new center, our East to West innovation will benefit, enabling us to create more successes like Estee Lauder Futurist Hydra or Supreme+ Bright and La Mer, The Treatment Lotion. As the world emerge from the pandemic, we will be the best diversified pure-play in prestige beauty as more engines of growth contribute across categories, geographies, and channels. Makeup and hair care are poised to gradually reignite as growth engines as our developed markets in the West and brick-and-mortar retail. Growth in emerging markets is expected to resume over time as vaccination rates increase. We anticipate the momentum in makeup will build around the world driven by local reopening and increase in socially professional user education, just as we saw in the fourth quarter. Indeed, makeup started to improve to the end of fiscal year 2021 driven by our hero subcategories of foundation and mascara. Newness in the category was highly sold, evidenced by the success of MAC Magic Extension mascara, Too Faced lip plumper, Smashbox Halo tinted moisturizer and Bobbi Brown Sheer pressed powder. Contributing to makeup emerging renaissance, MAC launched MAC The Moment, a campaign linking its makeup products and artists inspire trends to key experiences such as dead night parties, weddings, and back-to-school shopping. Too Faced expanded into browse in July with a collection that includes an innovative brow gel that add color and texture. Similar to makeup, hair care is set to benefit from the rise of socially professional user education, as well as salon reopenings. Aveda, which is now 100% vegan, and Bumble and bumble enter fiscal year 2022 with momentum, owing to desirable innovation and rich consumer engagement from strong online performance globally over the past year. As makeup and hair care reunite, we expect our engines of growth will gradually diversify by geography and channel, initially driven by developed markets in the West and, over time, by emerging markets. In the United States, the fourth quarter, we aligned innovation, advertised spending, and in-store activations as consumers returned to stores eager to explore beauty and experience high-touch services. Across brick-and-mortar from regional and national department stores to specialty-multi and freestanding stores, our business in the United States prospered, most especially in makeup and fragrance, and exceeded our expectations. As we start our new fiscal year, Bobbi Brown recently debuted in Ulta Beauty. Several of our brands launched online and in-store with Sephora at Kohl's and Ulta Beauty at Target. In closing, we leveraged the power of our multiple engines of growth strategy to elevate the company to new heights in fiscal year 2021. We did this while living our values with the health and well-being of our employees as primary focused and making important progress on our social impact commitment and sustainability goals. Our success and agility in operating amid the challenges of the past year give us confidence for fiscal year 2022 as we expect volatility and variability from the pandemic to persist for some time to come. This year, we are celebrating our 75th anniversary as a company and beginning our next 75 years incredibly inspired by the opportunities of tomorrow as the leading global house of prestige beauty with the most talented employees to whom I extend my deepest gratitude. Navigating through the highly uneven recovery this past year has certainly required greater agility and flexibility, and our teams across the globe rose to the occasion, delivering superb results for the fiscal year while also establishing a stronger foundation for future growth and profitability. We delivered exceptional net sales growth of 56% in our fourth quarter as we anniversary pandemic-related store closures in the prior-year period. The inclusion of six weeks of sales from DECIEM added approximately 3 points to growth in the quarter. Our performance also exceeded the prepandemic levels of the fiscal 2019 fourth quarter by 9% driven by significant sales increases in Mainland China, the skin care and fragrance categories, global online and travel retail in Asia. All three regions grew and all product categories within each region grew during the quarter. Net sales in the Americas region rose 86% against the prior-year period with almost no brick-and-mortar retail open. Throughout the quarter, consumer confidence in the U.S. grew as COVID restrictions abated and people resume shopping in stores again. Our brands responded with strong programs supporting recovery, new product launches, and animating key brand shopping events like Mother's Day. Sales in the region remain below fiscal '19 levels for the quarter, reflecting in part the loss of over 900 retail locations that represented nearly $170 million in annual sales. Additionally, makeup has historically been the largest category in the region, and the category has yet to fully recoup sales lost during the pandemic. Nevertheless, we are encouraged by the sequential acceleration in North American sales, which has been better than we expected. Net sales in our Europe, the Middle East, and Africa region increased 65%, with all markets contributing to growth as COVID restrictions eased throughout the quarter. Global travel retail, which is primarily reported in this region, continued to suffer from a significant drop in international passenger traffic but grew strong double digits in the quarter as comparisons eased and local tourism in China, especially to Hainan, remained robust. Across developed markets in the region, store traffic has begun to pick up, and retailers have become more comfortable with restocking. Emerging markets in the region saw strong retail in the quarter driven by locally relevant holiday activation, retailer events, and online performance. Sales in the region were slightly above fiscal '19 levels for the quarter, primarily due to the resilience of travel retail. Net sales in the Asia Pacific region rose 30%. Virtually every country contributed to growth, although the pace of improvement varies widely among the markets, and the resurgence of COVID has slowed a full recovery. Sales of our products online continued to rise strong double digits in the region driven by the successful 6/18 Shopping Festival Campaign in China and including the continued strength of social e-commerce. Mainland China continued to experience robust double-digit growth with broad-based improvement across product categories, brands, and channels. Other markets in the region, including Korea, Hong Kong, and Japan, grew exceptionally against prior-year brick-and-mortar lockdown. Sales in the region were 50% above 2019 levels, largely reflecting China's rapid emergence from the pandemic last year. Net sales in all product categories grew sharply this quarter. And skin care, fragrance, and hair care drove higher sales in fiscal 2019. Fragrance led growth with net sales rising 150% versus prior year. Luxury fragrances resonated with consumers looking for self-care and indulgence and among Chinese consumers increasingly attracted to the category. Home, Bath & Body products have also gained traction during the pandemic and help to attract new consumers. Jo Malone London saw recovery to prepandemic levels in brick-and-mortar. And the brand's blossom and brit collections were popular in Asia. Standouts from Tom Ford Beauty include the recent launch of Tubereuse Nue and the continued strength of Bitter Peach and Rose Prick. Net sales in makeup jumped 70% against the prior year that reflected the greatest beauty category impact of COVID-19, particularly in Western markets where makeup is the largest category. The makeup category in prestige beauty has proven to be especially sensitive to brick-and-mortar recovery due to the use of testers and in-store services by consumers. Estee Lauder saw strong growth of Futurist and double wear foundations in Asia, and MAC liquid lip color and eye products, especially mascara, outperformed. Hair care net sales grew 52% as salons and stores reopened. The launch of the Aveda's blonde revival shampoo and conditioner also contributed to category growth, adding to other strong innovation programs over the past several months from Aveda. Net sales in skin care continued to thrive. Jart+ brands, particularly in Asia. Skin care sales growth also benefited from the addition of DECIEM in the quarter by approximately 4 percentage points. Our gross margin improved 650 basis points compared to the fourth quarter last year. This favorability reflected significant improvements in obsolescence and manufacturing efficiencies compared to the prior-year impact of COVID-19 on our sales and on our manufacturing locations. Operating expenses rose 36% driven by the planned increase in advertising and selling costs to support the reopening of retail and the recovery. Additionally, we sharply curtailed spending last year in response to the onset of the pandemic, and some of these costs were reinstated, primarily compensation. We delivered operating income of $385 million for the quarter, compared to a $228 million operating loss in the prior-year quarter. Diluted earnings per share of $0.78 included $0.02 of favorable currency translation and $0.02 dilution from the acquisition of DECIEM. Our full-year results reflect the benefits of our strategic focus as we leaned into current growth drivers and invested behind future areas of growth while effectively managing both costs and cash. The sequential acceleration of our business throughout the year culminated in net sales growth of 11%. The strength of Chinese consumer demand, both at home and in travel retail, the resilience of the skin care and fragrance categories, and the momentum we drove in our online channels all supported our growth. Our distribution mix continued to evolve even as brick-and-mortar reopened. Sales of our products through all online channels continue to thrive as they rose 34% for the year and represented 28% of sales. Despite the continued curtailment of international travel, our business in the travel retail channel grew, ending fiscal 2021 at 29% of sales. Among brick-and-mortar retail, specialty-multi and perfumeries grew, while department stores and freestanding stores experienced the greatest impact from the ongoing pandemic and declined for the year. Operating expenses declined 300 basis points to 57.5% of sales. Selling and store operating costs decreased as high service stores were either closed for part of the year or they reopened with reduced traffic and staffing levels. Additionally, in-store merchandising costs decreased, while advertising investments, primarily digital media, rose faster than sales to support our brands and the recovery. We achieved significant savings from our cost initiatives, including Leading Beauty Forward and the preliminary benefits from the post-COVID business acceleration program, and this gave us the flexibility to reinvest in necessary capabilities, absorb some of the inflation in media and logistics costs, as well as support the reinstatement of certain compensation elements that were reduced or frozen due to the onset of the pandemic. Our full-year operating margin was 18.9%, representing a 420-basis-point improvement over last year and 140 basis points above fiscal 2019. This year also includes 50 basis points of dilution from the inclusion of Dr. Jart+ and DECIEM. Our effective tax rate for the year was 18.7%, a decrease of 450 basis points over the prior year, primarily driven by the geographic mix of earnings, which included a favorable one-time adjustment for fiscal years 2019 and 2020 related to recently issued GILTI tax regulations. Net earnings rose 57% to $2.4 billion and diluted earnings per share increased 57% to $6.45. Earnings per share includes $0.11 accretion from currency translation and $0.08 dilution from the acquisition of Dr. Jart+ and DECIEM. In fiscal 2021, we recorded $148 million after tax or $0.40 per share of impairment charges related to our Smashbox and GLAMGLOW brand, as well as certain freestanding retail stores. Restructuring and other charges related primarily to the post-COVID business acceleration program were $176 million after tax or $0.48 per share. These charges were more than offset by the one-time gain on our minority interest in DECIEM of $847 million after tax or $2.30 per share. The Post-COVID Business Acceleration Program is progressing quickly, with projects underway across all regions. We have closed nearly 500 doors or counters, including about 50 freestanding stores under the program in fiscal 2021. We also closed approximately 100 additional freestanding stores outside of the program and upon lease expiration, primarily in North America and in Europe. We realigned our go-to-market organizations to better reflect our evolving channel mix. We are also winding down certain brands such as BECCA and RODIN. These actions are expected to continue into fiscal 2022. For the total program, we continue to expect to take charges of between $400 million and $500 million through fiscal 2022 and generate savings of $300 million to $400 million before tax by fiscal 2023, a portion of which will be reinvested. We continue to focus on maintaining strong liquidity while also investing for future growth during the year. Cash generated from operations rose 59% to $3.6 billion, primarily reflecting the higher net earnings. We utilized $637 million for capital improvement, supporting increased capacity and other supply chain improvements, further e-commerce development, and information technology. We repaid $750 million of debt outstanding from our revolving credit facility, issued $600 million of new long-term debt, and retired $450 million of debt. We used $1.1 billion net of cash acquired to increase our ownership interest in DECIEM, and we returned $1.5 billion in cash to stockholders during the year via increased dividends and the reinstatement of share repurchase activity in the second half of the fiscal year. So looking ahead to fiscal 2022, we are encouraged by the increasing vaccination rates and reopening of markets around the world. We look forward to the resumption of international travel, increasing foot traffic in brick-and-mortar retail, and the development of our recent acquisitions. We are still mindful, however, that the recovery has evolved unevenly, and some markets are seeing their third or fourth waves of COVID, including increasing effects of new more contagious strains of the virus hindering a return to normal life. This has been particularly evident in the U.S. over the past several weeks. Additionally, increasing climate and geopolitical events make it difficult to predict the corresponding impact on our business. Nevertheless, given the strength of our programs, we are cautiously optimistic, and therefore, providing a range of sales and earnings per share expectations for the fiscal year, caveated with the following underlying assumptions: progressive recovery in the makeup category as full vaccination rates increase and mask-wearing abates in Western markets during the first half of the fiscal year; beginning of the resumption of international travel in the second half of the fiscal year; the addition of new retail accounts for some of our brands should provide broader access to new consumers, notably through Sephora at Kohl's and Ulta at Target in North America and the addition of JD.com in China online; the inclusion of incremental sales from DECIEM, benefiting sales growth for the fiscal year, primarily in the Americas and EMEA regions and in the skin care category; pricing is expected to add approximately 3 points of growth, helping to offset inflation risk in freight, media, labor and commodities; increased advertising support as markets reopen and further investment behind select capabilities, including data analytics, innovation, technology and sustainability initiatives while maintaining good cost discipline elsewhere. We forecast increasing benefits from our post-COVID business acceleration program as it ramps up this year. Approximately $200 million of the cost we cut during the pandemic are expected to be reinstated. These primarily include hiring, travel and meeting expenses, furloughs, and other leaves of absence and compensation. In addition to these assumptions, there are a few nonoperating items you should be aware of as you adjust your models. Our full-year effective tax rate is expected to return to a more normalized level of approximately 23% from 18.7% in fiscal 2021. Net interest and investment expense is expected to be around $150 million. The increase is primarily due to the comparison to last year when we recorded the benefit of our minority interest in DECIEM through May 18, 2021. At that time, we acquired a majority ownership in DECIEM, and we began to fully consolidate the entire business and deduct the portion of the income we don't own as a charge to net earnings attributable to noncontrolling interest. This charge is expected to be less than $5 million in fiscal 2022. Net cash flows from operating activities are forecast between $3.2 billion and $3.4 billion. Capital expenditures are planned at approximately 5% of projected sales as we develop additional manufacturing and distribution capacity, notably for the building of our new facility in Japan. We also expect to fund more robust research and development capabilities in China and North America, increase investment in technology and support new distribution and e-commerce for our brands. Our capex plan for the year also includes some spending deferred from last year. Organic growth adjusts reported sales growth for both currency and changes in structure such as acquisitions, divestitures, and brand closures. This should help provide a more meaningful understanding of the performance of our comparable business. Additionally, reflecting the level of volatility still in the environment, we are at this point widening our guidance ranges for the year. For the full fiscal year, organic net sales are forecasted to grow 9% to 12%. Based on August 13 spot rates of 1.17 for the euro, 1.381 for the pound, 1,164 for the Korean Won, and 6.479 for the Chinese yuan, we expect currency translation to add 1 point to reported sales growth for the full fiscal year. As I mentioned earlier, this range excludes approximately 3 points from acquisitions, divestitures, and brand closures, primarily the inclusion of DECIEM. Diluted earnings per share is expected to range between $7.23 and $7.38 before restructuring and other charges. This includes approximately $0.19 of accretion from currency translation. In constant currency, we expect earnings per share to rise by 9% to 12%. This also includes approximately $0.03 accretion from DECIEM. At this time, we expect organic sales for our first quarter to rise 11% to 13%. The incremental sales from acquisitions, divestitures, and brand closures are expected to add about 3 points to reported growth, and currency is expected to be accretive by approximately 3 points. Operating expenses are expected to rise in the first quarter as we invest in the reopening and recovery of brick-and-mortar retail around the world and some of the temporary cost measures start to ease. We expect first-quarter earnings per share of $1.55 to $1.65. Currency is expected to be accretive to earnings per share by $0.05, and DECIEM is forecast to have no impact. In closing, while we are cautious about the uneven recovery to date, we remain confident about the strategic actions we continue to take to support sustainable, profitable growth post-pandemic and the agility we have demonstrated this past year.

sees q1 earnings per share $1.55 to $1.65 excluding items. strong net sales recovery expected to continue in fiscal 2022. sees fy 2022 earnings per share $7.23 to $7.38 excluding items. qtrly adjusted earnings per share $0.78. q1 organic net sales forecasted to increase between 11% and 13%. fy reported net sales are forecasted to increase between 13% and 16%. fy organic net sales forecasted to increase between 9% and 12%.

And I'm going to start my discussion on Pages four through six. I don't have to recount all the areas of uncertainty and turmoil we faced last year, not only at EMCOR, but our country and world writ large. However at EMCOR, we were able to point to our values of mission first, people always. And they held us together and allowed us to perform at a very high level. These values served as our touch point to have a focus first on the health and safety of our employees. At the same time, we knew we also had to continue to serve our customers as we provided essential services across a range of projects and service calls. As demonstrated by our first quarter results, we continue to deliver strong performance by executing well for our customers while focusing on the well-being and safety of our employees. The first quarter of 2021 was an outstanding quarter by any measure. We earned $1.54 per diluted share versus $1.35 in the year-ago period on revenues of $2.3 billion with operating income margins of 5.1%. We had strong revenue growth in Mechanical Construction segment, up 8.4%. We had strong growth in our U.S. Building Services segment, up 10.3% and had strong growth in our U.K. Building Services segment, up 12.8%. That was aided somewhat by FX. We were essentially flat in our Electrical Construction segment. And as expected, we had a significant decline in revenues of over 35.3% in our Industrial Services segment, which was impacted not only by industry conditions but also the Texas Freeze, which in many cases, pushed out our turnaround schedule into the second quarter of 2021. And the work we did in connection with the freeze could not make up for the shortfall caused by that freeze. We also had a TRIR or a recordable incident rate of under one at 0.92, which was exceptional performance and again, shows our focus on safety and well-being throughout the pandemic, but really that's everyday at EMCOR because it's one of our core values. These results, again, show the diversity of EMCOR's business with our ability to pivot to more resilient and stronger markets when some markets like the current downstream refining and petrochemical, oil and gas markets are weakened as a result of reduced demand. As we analyze our first quarter performance, we continue to earn strong operating income margins in our Electrical and Mechanical Construction segments. At 8.8% in our Electrical Construction segment and 7.2% in our Mechanical construction segment, these operating income margins show that we are earning very good conversion on the work that we win, and we are executing well on our contracts, which are largely fixed-price contracts. I intentionally use the word earned in describing these operating income margins. We have tough and demanding customers, who drive a very competitive bidding and selection process. The more complex the work, the more we compete not only on price but also on capability. We have to invest for productivity, not only through tools like BIM or Building Information Modeling prefab, but also better personal protective equipment and hand tools and individual work practices. But we also invest in training and best practice sharing so that we are always learning from each others to employ the best means and methods for our work. We also must work collaboratively with our supply chain partners, and that is more important than ever as the economy starts back up to make sure that we have the right products at the right place, at the right price across our geography and portfolio of projects. This is especially important on large, complex projects with accelerated time schedules. Our subsidiary and segment leadership teams work hard to perform for our customers every day, and they are among the most skilled teams in our industry. Our U.S. Building Services team had an exceptional quarter, earning 5% operating income margins on 10.3% revenue growth. We had strong performance from mechanical services and both our government and commercial site-based businesses. We continue to have strong demand for mechanical retrofit projects and IAQ or indoor air quality solutions. Our site-based businesses continue to see increased demand for small project work from our total facility management customers. Our leadership from our subsidiaries to the business units to the segments are working well with our customers as they return to more in-office or on-site work. We are a trusted partner as they prepare and operate their facilities to keep their employees safe and improve their employee safety and peace of mind as they return to the workplace in a more significant way. And we do expect that to accelerate in the next few months. Our U.K. team is performing well and has experienced the same demand drivers and business context as our U.S. Building Services team. At 7.4% operating income margins and revenue growth of 4.5% without the impact of foreign exchange, we are doing very well. We continue to perform well in serving our customers, which have some of the most complex facility services needs in the U.K. We also continue to execute well on our project work in the U.K. We have a very good team, who are laser-focused on serving their customers well and have earned their customers' trust. Our Industrial Services segment had a tough quarter as expected. We earned positive EBITDA but we're slightly negative on an operating income basis. We have likely made positive operating income in this segment but for the impact of the Texas Freeze, which pushed out the turnaround schedule. We leave the quarter with increased remaining performance obligations or RPOs at $4.77 billion, up from $4.59 billion at year-end 2020, an increase from the year ago level of $4.42 billion. We will discuss our remaining performance obligation trends more later in my remarks. We exit the quarter with a pristine balance sheet. And we are putting that balance sheet to work to build our business and to return cash to our shareholders. With my opening complete, I'll now turn over the conversation to Mark, who will discuss his favorite quarter as he only has to comment on the quarterly performance. So let's expand our review of EMCOR's first quarter performance. Consolidated revenues of $2.3 billion are up a modest $4.2 million or 20 basis points over quarter one 2020. Our first quarter results include $29.1 million of revenues attributable to businesses acquired pertaining to the period of time that such businesses were not owned by EMCOR in last year's first quarter. Acquisition revenues positively impacted each of our United States Electrical Construction, United States Mechanical Construction and United States Building Services segments. Excluding the impact of businesses acquired, first quarter consolidated revenues declined $24.8 million or 1.1% organically. Before reviewing the operating results of our individual reportable segments, I should point out that such results reflect certain reclassifications of prior year amounts due to changes in our internal reporting structure aimed at realigning our service offerings. Most notably, we have transferred our Ardent and Rabalais subsidiaries from our United States Electrical Construction segment to our United States Industrial Services segment. With that being said, I will now review the results of each of our reportable segments, starting with our revenue performance during the quarter. With the exception of United States Industrial Services and United States Electrical Construction, all of EMCOR's reportable segments experienced first quarter revenue growth. United States Electrical Construction quarter one revenues of $456.2 million decreased $5.6 million or 1.2% from 2020's comparable quarter. Excluding acquisition revenues of $6.5 million, this segment's revenues declined 2.6% organically as revenue reductions within the manufacturing and transportation market sectors were only partially offset by increased project activities within the commercial and institutional market sectors. United States Mechanical Construction revenues of $903.9 million increased $69.8 million or 8.4% from quarter one of 2020. Revenue growth was primarily attributable to an increase in commercial, healthcare and transportation market sector activities due to continued strong demand for our services, partially offset by revenue declines within the manufacturing and institutional market sectors. This substantial quarterly revenue growth was despite a reduction in short-duration project volumes as a consequence of the continuing impact of the COVID-19 pandemic and represents a new first quarter revenue record for this segment. EMCOR's total domestic construction business first quarter revenues of $1.36 billion increased $64.2 million or 5% and reflects a strong start to the year. United States Building Services record quarterly revenues of $581.8 million increased $54.2 million or 10.3%. Excluding acquisition revenue contribution of $22.6 million, this segment's revenues increased to $31.6 million or 6% organically. Revenue gains within their commercial site-based services division due to an increase in event-driven snow removal as well as a resumption in project volume as certain customer facilities begin to reopen were the primary drivers in quarter-over-quarter revenue improvement. The segment's mobile mechanical services division additionally experienced stronger project and retrofit demand with an emphasis on services aimed at improving indoor air quality. United States Industrial Services revenues of $235.4 million decreased $128.5 million or 35.3% as this segment continues to be impacted by the negative macroeconomic conditions and uncertainty within the markets in which it operates. Additionally, and as Tony mentioned, the Industrial Services segment was negatively impacted by normal weather conditions and related power outages within the Gulf Coast region, which resulted in the delay of active projects and the deferral of previously planned maintenance and turnaround activities with certain of their customers. Although we were able to assist some of our customers with emergency repairs resulting from the February storm, this unplanned work was not enough to offset the lost quarterly revenue caused by these deferrals and delays. United Kingdom Building Services segment revenues of $126.7 million increased $14.3 million or 12.8% due to growth in project activities across the portfolio as customers began to release projects which were previously on hold due to the COVID -- due to COVID-19. This segment's results additionally benefited by $9.5 million as a result of the strengthening of the pound sterling, given the lifting of uncertainty around the terms of the United Kingdom's trade deal with the European Union that became effective on January 1, 2021. Selling, general and administrative expenses of $224.1 million represent 9.7% of first quarter revenues and reflect a decrease of $2.9 million from 2020. SGandA for the first quarter includes approximately $2.4 million of incremental expenses from businesses acquired inclusive of intangible asset amortization expense, resulting in an organic quarter-over-quarter decline in SGandA of $5.4 million. This organic reduction is primarily attributable to lower employment costs as a result of reduced headcount due to various cost-control measures enacted during 2020 as well as a period-over-period decline in travel and entertainment expenses due to a combination of cost-avoidance measures as well as restricted company travel protocols. These decreases were partially offset by an increase in incentive compensation expense, predominantly within our United States Mechanical Construction segment, due to higher projected annual operating results than what was anticipated during the same prior year period. Reported operating income for the quarter of $117 million compares to $106 million in 2020's first quarter and represents an increase of $11 million or 10.4%. Operating margin of 5.1% has expanded by 50 basis points from the prior year's 4.6% operating margin. This performance reflects a new first quarter operating income and operating margin record for EMCOR. Our United States Electrical Construction segment's operating income of $40.3 million is consistent with 2020's quarter one performance. Reported operating margin of 8.8% represents a 10 basis point improvement over last year's first quarter as a result of a modest increase in this segment's gross profit margin. First quarter operating income of our U.S. Mechanical Construction segment of $65 million increased nearly $20 million from the comparable 2020 period, and operating margin of 7.2% represents a 180 basis point expansion year-over-year. This improved performance is primarily due to greater gross profit across most of the market sectors we serve as a result of both the volume increases previously referenced and a slight improvement in revenue mix as compared to the year-ago period. This segment's operating margin additionally benefited from a reduction in the ratio of selling, general and administrative expenses to revenues as a result of strong quarterly revenue growth without a commensurate increase in this segment's overhead cost structure. Consistent with the commentary during my revenue discussion, this performance has established a new first quarter record in terms of both operating income and operating margin for our United States Mechanical Construction segment. Our total U.S. construction business is reporting $105.2 million of operating income and a 7.7% operating margin. This performance has improved quarter-over-quarter by $19.7 million or 23.1%. Operating income for our U.S. Building Services segment of $29.3 million is an $8.1 million increase from last year's first quarter, while operating margin of 5% represents a 100 basis point improvement. An increase in gross profit resulting from greater snow removal activities with customers that are contracted on a per snow event basis within the segment's commercial site-based services division and an increase in gross profit from project building controls and repair activities within the segment's mobile mechanical services division were the primary drivers of the quarterly increase in operating income. In addition, the segment's operating income and operating margin benefited from a reduction in SGandA expenses as compared to the prior year due to the various cost-reduction actions instituted subsequent to the first quarter of 2020. This operating income and operating margin performance represents a new first quarter record for this segment. Our U.S. Industrial Services segment operating loss of $2.4 million represents a decline of $17.9 million when compared to operating income of $15.4 million in last year's first quarter. The reduction in period-over-period operating results is due to the previously referenced adverse market conditions, which this segment continues to face as well as the impact of February's extreme winter weather event. In addition, performance of this segment was negatively impacted by lower plant and labor utilization due to significant reduction in revenues. On a positive note, this segment was able to partially offset these negative headwinds with a nearly 21% reduction in first quarter selling, general and administrative expenses due to certain cost savings initiatives enacted in calendar year 2020. U.K. Building Services operating income of $9.4 million or 7.4% of revenues represents an improvement of $3.6 million and 230 basis points of operating margin expansion over 2020's first quarter. This performance represents an all-time quarterly record for operating income and operating margin as we experienced a strong resumption in project work during the quarter as the United Kingdom market approaches the hopeful conclusion of their COVID-19 lockdown mandates. Additionally, operating income for the quarter benefited from approximately $800,000 of favorable foreign exchange rate movement. We are now on slide nine. Additional financial items of significance for the quarter not addressed in my previous slides are as follows. Quarter one gross profit of $341.1 million represents 14.8% of revenues, which has improved from the comparable 2020 quarter by $8 million and 30 basis points of gross margin. Both our gross profit and gross profit margin represent new first quarter records for EMCOR despite the significant headwinds we continue to experience within our United States Industrial Services segment. Diluted earnings per common share in the first quarter is $1.54 as compared to $1.35 per diluted share for the prior year period. This $0.19 or 14.1% improvement establishes a new quarter one record for the company and also ties the all-time quarterly diluted earnings per share record, which we previously achieved in quarter four of 2019. We are now on slide 10. As evident from slide 10, EMCOR's liquidity profile remains strong. Cash on hand is down from year-end 2020 primarily as a result of cash used in operations due to the funding of 2020's companywide incentive compensation awards as well as the funding of our United Kingdom subsidiaries' VAT deferral from the prior year. Additionally, we repurchased $13 million of our common stock pursuant to our share repurchase program and utilized nearly $32 million of cash and investing activities, including $24 million to fund the two acquisitions that we completed during the first quarter of this year. Working capital levels have increased modestly primarily due to a reduction in our current liabilities, given a decrease in accounts payable as well as a reduction in accrued payroll and benefits due to the previously mentioned funding of prior year incentive awards, the increase in goodwill as a result of the businesses acquired within our United States Electrical and United States Mechanical Construction segments. Net identifiable intangible assets have decreased as a result of approximately $15 million of intangible asset amortization expense, partially offset by the impact of additional intangible assets recognized in connection with the previously referenced 2021 acquisitions. Total debt, exclusive of operating lease liabilities, is virtually unchanged since year-end 2020. As a result of our consistent outstanding borrowings and the growth in stockholders' equity due to our net income for the quarter, EMCOR's debt-to-capitalization ratio has reduced to 11.5%. Our balance sheet remains pristine and in conjunction with our available credit allows us to invest in our business, return capital to shareholders and execute against our strategic objectives as we navigate through ever-changing market conditions. It's all yours, Tony. I'm going to be on page 11, remaining performance obligations by segment and market sector. So if I had to sum it up in a lot of ways, in 2020, we had a lot of COVID disruption here in this quarter, the first quarter going to the second. We have a little bit of that left, but for the most part, first quarter 2021, the demand environment and the project bidding for construction and service projects were continuing to be active. As I mentioned earlier, total remaining performance obligations or RPOs at the end of the first quarter were just under $4.8 billion, up $351 million or 7.9% when compared to the year-ago level of $4.4 billion. And RPOs increased $181 million for the first three months of the year from the year-end level of $4.6 billion. Our domestic construction segments experienced strong project growth in the quarter, with the RPOs increasing $219 million or 6.1% since the year-ago period of March 31, 2020. All but $15 million of that is organic growth. The $15 million belongs to a Chicago-based electrical contractor that really focuses on infrastructure that joined us in February. Building Services segment RPOs increased in the quarter $121 million or 22% from the year ago quarter, a portion of which was the August 2020 acquisition of a Washington D.C. full-service mechanical contractor. However, more representative of what we are now experiencing in this segment, RPOs grew $60 million or up 10% from December 31. All of that is organic growth. And to paraphrase what I said in February, this work is both the resumption of regularly scheduled mechanical systems maintenance. So we're maintaining -- we're maintaining systems that haven't been running full out, and then small project work as a result is coming back in. And then there's modifications and improvements around that on efficiency and indoor air quality. If you go to the right side of that page by market sector, clearly, our largest sector for RPOs continues to be commercial projects. And we're continuing to see strength, and I'll talk about this on the next page, in the resilient sectors that we've highlighted such as data center. And I call it supply chain's buildup for e-commerce delivery and fulfillment. Those -- that commercial segment, which also includes the retrofit activity and new build, is 44% of total RPOs. For the year-over-year and sequential quarter-over-quarter comparison, commercial RPOs increased $314 million and $216 million, respectively. The rest of this sector is pretty much netted as in and out as project activity increased a little in some sectors and decreased a little in others. And that's really just the normal ebb and flow of project activity. In general, project interest is favorable in most all sectors with the exception of hospitality that continues to be challenged. As an indication of future market activity, the March ABI came out a week or so ago. And while I think this is a soft index always, it's worked on a board survey from architects and it's self-reported numbers. But it's been the same forever, so it's OK. If it's consistently that way, then you can start to draw trends off of it. It jumped over 50, which is expansion territory in February and was over 55 in March. And one of the analysts noted the regional scores, for the most part, were in positive territory, and the general outlook was upbeat. Now that's clearly true from a year-ago period. Correspondingly, the March Dodge Momentum Index, which is an index of nonresidential building projects in planning, also posted a pair of strong gauge in February and March. It's up low double digits at 11% from a year-ago period, pretty much right before the full impact of the pandemic. Look, I think it's important for me to just take a step back here. First quarter of last year was a good quarter. And until the pandemic came, it was probably one of the best economies that, in my business career, I've ever operated in. So that's the compare that a lot of these numbers are coming off of. So it's important to know that. And both of these leading indicators are indicators of potential future activity. They're moving in tandem, which is what we like to see. And we do a whole bunch of other analysis, and I'll talk about that later of what we're going to -- what we believe could happen to nonres this year. I'm now going to jump to page 12, and I'm going to give you a little updated commentary on these resilient sectors that we talk about. If you look at the first two, I'd like to think about that as the build-out of our data infrastructure and our supply chain infrastructure. That's still very strong. It's concentrated in about -- on the data center side, five or six geographic areas. We're in 60%, 70% of those areas now either electrically or mechanically. We continue to build our data center maintenance business. And on the warehousing side, these are the big million square foot-plus warehouses. For the most part, this is a life safety play for us on the fire protection side. I would argue we are the best in the business at it. Not only are we providing a great solution, we do it cost effectively, and we do it time efficiently. And we got some of the best prefab capability in the industry. We're also doing targeted electrical work depending on the region of the country on these warehouses. Industrial and manufacturing, it's down a little bit for us right now, but that's really driven by food process, which we have a pretty good pipeline of potential opportunities. But we're actually very bullish on manufacturing because of where we play. We do see supply chain reshoring back to the southeast. That could be either out of Asia, most notably China, or Mexico as people look for redundant supply. I don't think we want to go -- people on their high-margin projects want to be caught in a situation like they were at the beginning of the pandemic, or I do think we're in a decoupling mode versus China as far as supply to the U.S. I think the other part is we are in some good secular markets that we expect to continue, most notably, semiconductors. We are very strong in some of the key markets, whether they be Arizona, which were very strong mechanically. We have a terrific team in Arizona that does this work superbly. This is very difficult work and very complex. And the team we have in Arizona that execute is the best in the business. We also have electrical capability in Utah, which is the Salt Lake City area, which is another one of the semiconductor hubs. And we also have electrical capability in the Pacific Northwest, most notably the Portland area, which is also a semiconductor hub. These are the three major hubs. We have capability in each, and we have great relationships with both our general contractor customers and construction management customers as well as the OEMs and end users. Health care, we continue to see strength. We've made the right acquisitions. You look at the work we'll be doing down in the Georgia market with BKI. You look at the work we'll do in the Houston market with Gowan. You look at the work we'll do -- continue to do in the Midwest with Shambaugh and a combination of companies. And you look at the work we'll continue to do in California. The healthcare market continues to be very strong for us. And I just gave you a couple of markets. We really do this work, broadly speaking, across the country. And we do it both in a retrofit basis, which we expect more and more mechanical and electrical retrofits. And we also see new build coming back in healthcare. Again, this is both a construction opportunity for us and a maintenance opportunity for us. I think one thing people appreciated when they were an EMCOR customer through the pandemic is we can help them make their facilities more flexible when they needed to, to handle patient surges or different kinds of healthcare they needed to deliver. Water and wastewater continues to be a good market for us, especially in Florida. These projects can be lumpy in how they get delivered. We've got one of the best teams in the industry down in Florida, and we're very proud of them. I'll get to the last two, mechanical services, indoor air quality. We're the best in the business at this. The OEMs develop solutions, but they need a company like EMCOR to be able to deliver those solutions. And we deliver these solutions as good or better, and I would say better on a consistent basis than anybody in the industry. That's both the mechanical services, to fix things; indoor air quality, as their whole well building concept becomes more prevalent; and then finally, on efficiency. And we've been the best efficiency people for a long, long time. I would add another sector that sort of overlays this. We will participate in any energy transition. People ask us about that. And clearly, when you have the best pipe fitters and electricians in the business and the people that know how to supervise them, you're going to be part of that. We already are part of it on small-scale solar in a more significant way out in California. The way I think about small-scale solar is the way I thought about distributed generation and cogeneration. That's really what it is in 20 megawatts or less. As you get to the bigger things, we are building capability, especially in Texas right now. We'll see how that goes. I think it's going to go well, and we'll continue to build that capability and anything that the refiners do along the line of carbon capture, it's pipe. And I'm very happy that Exxon and people like Valero are talking more about renewables, renewable diesel and carbon capture. We'll be there to help them do that. So we feel good about these resilient markets. We don't chase fads at EMCOR. We build capability, and we execute. And we can pivot around these markets, and we've done that over a long period of time. I'm going to finish now on page 13 and 14. As we entered 2021, let's think about what the context of it was. Vaccinations were just starting to get rolled out. We were in a world of COVID surges in parts of the country. And as February started to come, we gave guidance, but that was our backdrop. But we continued to perform. Our folks are resilient, and they're really good at what they do. In that initial guidance, we gave you about eight -- seven, eight weeks ago, we expected to earn $6.20 to $6.70 in earnings per diluted share. And if you look at that midpoint, that would be another record year, Mark, after how many, 7? And we expected to do that on $9.2 billion to $9.4 billion in revenue. And so we clearly thought that the revenue was going to accelerate as the year went on. And think about the tough compare we're having here in the first quarter with industrial. Up until the third week of March of last year, industrial was having a very good first quarter. So we went back. We thought about it and we said, "Okay, we had a better first quarter than we expected. And so with that, we're going to raise the low end of our guidance range to $6.35". That's a $0.15 movement from the $6.20. And we're going to take the top end of the range up about a $0.05 or $6.75 per diluted share. We're going to keep revenue guidance where it is, and we'll certainly know more about that when we get out of the second quarter. And as we said in February 2021, we did expect 2021 to be another year of outstanding performance. But let's think about this. We have to execute every day. We're doing this across 4,000 projects of size of $250,000 or more. But if you added up all our projects, we're doing this now over about 12,000 projects and service events. And if you take service calls, it's multiples of that. And we have to do that against the backdrop of record operating income margins in our Electrical and Mechanical Construction segments in 2020. And we do expect those increased revenues to help us mitigate some of that challenge. So when we gave you our guidance, we laid out some assumptions. And what I'm going to do now is talk about what that assumption was and what the update on that assumption is now eight weeks later with first quarter in the books. So the first assumption was our Industrial Services segment, as many of you know, primarily serve the downstream petrochemical and refining markets. We didn't think it would materially improve until the fourth quarter and that it would gain momentum going into 2022 as demand for refined products will continue to be challenged early in 2021, especially through the end of the second quarter. Demand is picking up. So let's talk about what that view is now. We still believe as far as performance in the segment, that's the accurate view of the market. Some trends are clearly positive now. Crack spreads are very good in high teens. The renewable diesel market is a market we're helping our customers get ready for and serve through upgrades and adaptation of their facilities. And refinery utilization has moved into the low 80s, trending toward the mid-80s. We fully expect that to be in the high 80s by early June. It's going to be driven by really aviation fuel at this point. So we had an assumption at the beginning of the year also that the nonresidential market would decline modestly. What do we think now? We think that market potentially could be flat for the year. And the second quarter trends will provide more insight as we may see accelerating demand through the year. This market now could have either breakeven performance or modest growth in 2021. We also said that we would continue to execute well on our more resilient market sectors to include manufacturing, commercial driven by data center and logistics warehousing, water and wastewater and all the things I just mentioned on the previous page. We still think that's true and even more true today. And we do expect as the year to go on that manufacturing gains strength, and we'll see it first in our backlog. We did talk about the COVID environment. We did not expect -- did not expect a more restrictive COVID environment than what we were operating in as we gave guidance in February. We did expect a more normal operating environment as the year progressed. We talked about that we were operating near 100% capability. We don't use the word capacity because we always look -- we can add tradespeople. We've learned how to work under these COVID precautions. It does require a lot more planning, and we have to be much more precise in our execution. But you know what? That's sort of how we operate anyway. And it's nothing new for us to keep our employees' safety first. It's one of our core values, and quite frankly, people would not want to work for us if it was not. So what's my updated view on that? I believe that as we enter third quarter, move through third quarter into fourth quarter, more of our job sites will start to be -- look more normal in conditions in most of the states that we operate in because we continue to see positive trends in those states. And we will see that in the U.K., too. I think that might happen here as our vaccinations continue to pick up. We do expect -- we said we expect to continue to help our customers with IAQ, energy efficiency replacement projects, optimizing their systems and helping bring their employees back to work. I would say that's going as expected. So then you say, "How do we go from where we are at the low end of the range, the midpoint of the range to the top end of the range"? I'd say that each one of those trends or mix of those trends get better. So maybe the nonres market's better than we thought it was, especially for projects that can be completed in the year. And that's especially true as things normalize and work normalizes and people start to spend more capital. Our refining and petrochemical customers begin to gain more comfort with improved demand for refined products. And they say, "Look, instead of trying to bunch all that work into '22, we start to pull some of that work forward into '21". That would be a logical thing to do. They do worry about manpower in tight -- when they have a bunch of work scheduled. We may be able to have some of those discussions. Momentum in IAQ and efficiency accelerates. That could happen, especially on the efficiency side as folks realize that all the investment in IAQ actually hurts efficiency. And their customers will be demanding them to make their facilities more efficient. And look, we've got to keep our productivity strong as we transition. We want to keep some of those gains we've made with scheduling. We want to keep the emphasis we've had on prefab even on smaller jobs as we transition. I think -- I sort of know we will. But we have to keep that first and foremost in our minds, and of course, we're not going to open the floodgates on travel. Mark talked a little bit about the organic SG and A. That's more positive than you think it is because he had a sentence in there that was pretty key. Think about the outlook we were taking on incentive compensation last year versus this year. We told you we expected to have organic reduction of around $15 million, $20 million. We're at the high end of that right now on a run rate basis. And if we have increased incentive long term, that's a good thing in our field operations because that means we're doing better. The other thing that I know you ask about, and I'll just get in front of it now a little bit is on stimulus. The thing that will impact us this year, the government spending that will impact us this year is all related to these COVID emergency packages. We will benefit from that because of the money that went to the states and municipalities to make their budgets more flushed to allow them to complete some of their smaller capital projects and get some of the transit systems moving again. It will help them think through that and start that. We'll also benefit from some of the spending that's going to go on institutions and schools. Again, go back to this IAQ efficiency and building wellness theme. We're seeing that already. That's what will impact 2021. If this larger infrastructure package of about 50% of the money, give or take, is stuff we could participate in or projects we could potentially participate in, that for the most part is a late '22, early '23, likely late '23, early '24 event for us. You think about everything that has to happen with a project to get it going. And I think let's all recall late 2008, early 2009. For large-scale infrastructure projects, yes, there's concepts that people want to execute. People don't do detailed design on concept. And so as we learned back then, there's no such thing as a shovel-ready project. There isn't here either. But one of the things that could be quicker is if we get energy efficiency dollars right and figure out how to flow that out, which, in my mind, would be through the utilities in their programs. The other thing you'll ask about is labor. Look, we're sort of at the top end of that food chain. That's not something that we had issues with. I do think I'm glad I'm not a painter or a roofer or a cleaner right now because there is headwinds about hiring labor at the low end, especially with the enhanced employment benefit -- unemployment benefit. It requires us -- also on the factory side, we're lucky to be who we are because we can, like I said earlier, work closely with our supply chain partners and work real hard to mitigate the impact because they're also having difficulty ramping up. And you probably heard that on all the calls with the manufacturers. I'm sure you did. When we get to capital allocation, we had a lot of detail on that in our year-end discussions. Our guidance contemplates that we will continue to be disciplined capital allocators. And we'll do that between organic growth, which we love to fund; acquisitions; share repurchases; and dividends. We're on track to meeting -- toward meeting that goal this year. This year, we've already done three acquisitions. We have a very good pipeline. Those may be moving a little slower as we try to understand the impact of pandemic on operations, but we'll get through that. And we feel very good about our pipeline right now.

q1 earnings per share $1.54. q1 revenue rose 0.2 percent to $2.3 billion. raises fy earnings per share view to $6.35 to $6.75. sees fy revenue $9.2 billion to $9.4 billion.

Our performance under these conditions is outstanding. Our organization showed the grit, resiliency, discipline and innovation that we are known far. And we stayed focused on keeping our employees safe, while executing for our customers. Turning to our financial results. Throughout our discussion, all my financial commentary disregards the impact of the impairment charge that Mark will cover in detail. We earned an adjusted $1.44 per diluted share for the second quarter. Adjusted operating income margins for the second quarter were a strong 5.47% [Phonetic]. Operating cash flow is excellent at $276 million on a year-to-date basis. We accomplished this in an environment where we had 15.5% negative organic revenue growth for the quarter just ended. Our Mechanical Construction segment performance was exceptional with operating income growth of 24% and 8.5% operating income margins. Our Electrical Construction segment had strong operating income margins of 7.2%, despite having a 20.17% [Phonetic] decrease in revenues as they were more significantly impacted by the mandated shutdowns than our Mechanical Construction segment was, and further the Electrical Construction segment is more exposed to the volatility caused by our oil and gas exposure in this segment. Our US Building Services segment had a very strong quarter with 5.6% operating income margins, despite a 9.8% revenue decrease. We saw demand improved through the quarter, especially in our mechanical services and government services businesses. We exited the quarter in a nice hot steamy summer with an even more competitive cost structure. Our Industrial Services segment is also moving ahead in a very challenged market. Our customers are cutting costs, deferring work and fighting through a really tough market for them and as a result, for us. We will continue to maximize any opportunity available, cut costs and look to provide flexible solutions when possible. I don't anticipate this trend to improve until at least the first quarter of 2021 at the earliest. We are fortunate to be a segment leader and have long-standing relationships with the most important customers in the downstream refining and petrochemical markets. Our UK segment had a strong quarter and we expect this execution and performance to continue. They faced many of the same challenges that our US Building Services segment faced. However, our UK customer base is more institutional, manufacturing and government-focused, and as a result, we have field [Phonetic] employment throughout the UK shutdown as we were deemed essential in many cases. So how did we continue performing in this environment and how will we continue to perform. My comments cut across all EMCOR reporting segments. We outlined some of these actions on our first quarter call in April and we executed well. So number one, we focused on employee safety first and as a result, we were able to staff drop safely and with the right people. Said differently, our people had confidence that we would do the right thing. We limited guidelines to keep operating, and when necessary to reopen. We aggressively procured PPE, that's the personal protective equipment upfront. There are employees needed to keep working and we execute the training necessary to work safely in this environment. We communicated at all levels with a focus on safety, execution and results. Our flat organizational structure helped our communications remain effective and unhampered despite COVID-related challenges. Number two, we thoroughly, quickly implement all the different government mandates and programs with respect to COVID. Our staff did a superb job in distilling these mandates and programs into specific actions for our subsidiary operations to continue operating productively and safely and in compliance with these varied government mandates. Number three, we aggressively cut SG&A through both the short and long-term measures. We cut executive pay 25% in the quarter, cut other salary employees pay in the quarter, furloughed staff, permanently laid off salary staff, cut almost all travel and entertainment expenses, and reduced any additional discretionary expenses. We reduced $21 million in the quarter versus the year-ago period, and when removing incremental SG&A for businesses acquired, we cut $28 million on an organic basis. I expect about half of those cuts to be permanent. We acted fast and decisively and it shows in our results. Further, we aggressively right-sized our craft labor workforce to match demand through layoffs and furloughs. Number four, we knew we had to comp out what would be reduced productivity because of increased use of PPE and the implementation of other COVID-related safety measures. We have successfully combated this challenge and met this challenge by working with our customers and our workforce to offer better scheduling, planning and work practices. We believe for the most part that we are near breakeven on a productivity basis to where we would have been pre-COVID. Number five, we trained our field and sales force on IAQ, that is, indoor air quality and other building enhancement products and projects during the initial phases of COVID, so we would be ready to provide solutions for our customers to be able to return to their facilities with confidence and in an improved indoor environment. Number six, our subsidiary leaders led us well as any organization that I could imagine. I'll say that again. Our subsidiary leaders led us well as any organization that I could imagine and they executed all the above initiatives I just mentioned in an exceptional manner. With all that said, we leave the quarter with a strong RPO position of $4.6 billion [Phonetic], our balance sheet has strengthened through the quarter despite adverse conditions and an even more competitive cost structure than we already had. With all that said, I will turn the discussion over to Mark. Over the next several slides, I will supplement Tony's opening commentary on EMCOR's second quarter performance, as well as provide an update on our year-to-date results through June 30. So let's revisit and expand our review of EMCOR's second quarter performance. Consolidated revenues of $2 billion, were down $310.2 million or 13.3% over quarter two 2019. Our second quarter results include $50.2 million of revenues attributable to businesses acquired, pertaining to the time that such businesses were not owned by EMCOR in last year's second quarter. Acquisition revenues positively impacted both our United States Mechanical Construction and United States Building Services segments. Excluding the impact of businesses acquired, second quarter consolidated revenues decreased approximately $360.4 million or 15.5%. All of EMCOR's reportable segments experienced quarter-over-quarter revenue declines as a result of the containment and mitigation measures mandated by certain of our customers, as well as numerous governmental authorities in response to COVID-19. This resulted in facilities closures and project delays, which impacted our ability to execute on our remaining performance obligations in many of the geographies that we serve. The specifics to each of our reportable segments are as follows. United States Electrical Construction segment revenues of $445.9 million, decreased $123.5 million or 21.7% from 2019 second quarter. In addition to the negative impact of the COVID-19 pandemic on second quarter revenues, the unfavorable variance year-over-year was partially attributable to 2019's all-time record quarterly revenue performance. Revenue declines in most of the market sectors we serve were partially offset by quarter-over-quarter revenue growth in the institutional and hospitality market sectors. United States Mechanical Construction segment revenues of $790.4 million, decreased $32.7 million or 4% from quarter two 2019. Excluding acquisition revenues of $47.9 million, this segment's revenues decreased organically 9.8% quarter-over-quarter. Revenue declines in manufacturing and commercial market sector activities were muted by revenue gains quarter-over-quarter within the institutional transportation and healthcare market sectors. The prior-year quarter also represented an all-time quarterly revenue record for our US Mechanical Construction segment. Second quarter revenues from EMCOR's combined United States Construction business of $1.24 billion, decreased $156.2 million or 11.2%. Some of this growth in RPOs has come at the expense of revenue generation during the second quarter due to COVID-19. However, we were also successful in obtaining new project opportunities during this period. United States Building Services quarterly revenues of $472.4 million, decreased $51.3 million or 9.8%. Excluding acquisition revenues of $2.3 million, this segment's revenues decreased 10.2% from the record results achieved in the second quarter of 2019. Reduced project and controls activities within their mobile mechanical services division largely attributable to the impact of COVID-19 as well as large project activity in their Energy Services division were the primary drivers of the quarterly revenue decline. Additionally, as mentioned on previous calls, we are continuing to see a reduction in IDIQ project activity within our government services division due to both a smaller contract base as well as an overall reduction in government spending. EMCOR's Industrial Services segment was significantly impacted by the sharp decrease and volatility in crude oil prices resulting from geopolitical tensions between OPEC and Russia, as well as the dramatic reduction in demand for refined oil products due to the containment and mitigation measures implemented in response to COVID-19. These factors have resulted in a decreased demand for our services, as this segment's customer base has initiated severe cost containment measures, which have resulted in the deferral or cancellation of previously planned maintenance, as well as the suspension of most capital spending programs. As a result, our Industrial Services segment's second quarter revenues declined $212.2 million from the $295.5 million reported in 2019 second quarter. This represents a reduction of $83.3 million or 28.2%. United Kingdom Building Services revenues of $93.1 million, decreased $19.4 million or 17.3% from last year's quarter. The period-over-period revenue reduction was primarily attributable to a decrease in project activities resulting from COVID-19 containment and mitigation measures instituted by the UK government. This segment's quarterly revenues were also negatively impacted by $3.4 million of foreign exchange headwinds. Selling, general and administrative expenses of $205.2 million, represent 10.2% of revenues and reflect a decrease of $21.1 million from quarter two 2019. SG&A for the second quarter includes approximately $7.2 million of incremental expenses from businesses acquired inclusive of intangible asset amortization, resulting in an organic quarter-over-quarter decrease of approximately $28.3 million. The decline in organic selling, general and administrative expenses was primarily due to certain cost reductions resulting from our actions taken in response to the COVID-19 pandemic. This includes a period-over-period decrease in salaries expense due to both reduced head count as well as temporary salary reductions. Additionally, incentive compensation expenses decreased due to lower projected annual operating results relative to incentive targets when compared to the prior year. Lastly, we have experienced reductions in both medical claims as well as certain discretionary spending such as travel and entertainment costs quarter-over-quarter. The increase in SG&A as a percentage of revenues is due to the reduction in quarterly consolidated revenues, without a commensurate decrease in certain of our fixed overhead costs as we do not deem the current operating environment to be permanent. During the second quarter, we identified certain indicators of impairment within those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets. Previously referenced volatility in crude oil prices as well as the containment and mitigation measures implemented in response to the COVID-19 pandemic significantly impacted the demand for our services within these businesses resulting in revised near-term revenue and operating margin expectations. These negative developments additionally resulted in uncertainty within the US equity markets, which led to an increase in the weighted average cost of capital utilized in our impairment analysis. The combination of lower forecasted revenue and profitability along with the higher weighted average cost of capital has resulted in the recognition of $232.8 million non-cash impairment charge during the quarter. $225.5 million of this charge pertains to a write-off of goodwill associated with our Industrial Services reporting unit, while the remaining $7.3 million relate to the diminution in value of certain trade names and fixed assets within our United States Industrial Services and our United States Electrical Construction segments. As a result of the non-cash impairment charge just referenced, we are reporting an operating loss for the second quarter of 2020 of $122.6 million, which represents a decrease in absolute dollars of $242.6 million when compared to operating income of $120 million reported in the comparable 2019 period. On an adjusted basis, excluding the impact of the non-cash impairment loss, our second quarter operating income would have been $110.1 million, which represents a period-over-period decrease of $9.8 million or 8.2%. While adjusted operating income has declined, we have experienced an increase in operating margin on an adjusted basis. For the second quarter of 2020, our non-GAAP operating margin was 5.5% compared to our reported operating margin of 5.2% in the second quarter of 2019, reflecting strong operating conversion within most of our reportable segments. Considering the operating environment during the quarter, our entire team did a great job. Specific quarterly performance by reporting segment is as follows. Our US Electrical Construction Services segment operating income of $32.2 million, decreased $11.6 million from the comparable 2019 period. Reported operating margin of 7.2%, represents a 50 basis point decline over last year's second quarter. The reduction in quarterly operating income and operating margin is due to the significant decrease in revenues as well as the impact of favorable project closeouts within 2019 second quarter. Second quarter operating income of our US Mechanical Construction Services segment of $66.9 million, represents a $13 million increase from last year's quarter. Despite the disruption caused by the COVID-19 pandemic, this segment experienced an increase in gross profit within the commercial, institutional and healthcare market sectors. Operating margin of 8.5%, improved 190 basis points over the 6.6% operating margin generated in 2019, primarily due to a more favorable revenue mix than in the year-ago quarter. Our total US Construction business is reporting $99.1 million of operating income and an 8% operating margin. This performance has improved by $1.4 million and 100 basis points of operating margin from 2019 second quarter. In addition, it represents a sequential improvement from 2020 first quarter in both absolute dollars and margin performance. Operating income for US Building Services is $26.4 million or 5.6% of revenues. And although reduced by $1.6 million from last year's second quarter, represents a 30 basis point improvement in operating margin. The quarter-over-quarter reduction in operating income was due to lower gross profit contributions from their mobile mechanical services and energy services division as a result of reductions in revenues as previously mentioned. The improvement in operating margin is due to a better mix of service maintenance and repair activities within this segment's mobile mechanical services division. Our US Industrial Services segment operating income of $3 million, represents a decrease of $13.1 million from last year's second quarter operating income of $16 million. Operating margin of this segment for the three months ended June 30, 2020 was 1.4% compared to 5.4% for the three months ended June 30, 2019. The decrease in operating income and operating margin was primarily driven by the reduction in quarter-over-quarter revenues, which resulted from the adverse market conditions mentioned during today's call, as well as significant pricing pressure due to limited shop services opportunities. UK Building Services operating income of $5.4 million was essentially flat with 2019 second quarter, as foreign exchange headwinds accounted for the modest period-over-period decline. Operating margin of 5.7%, represents an 80 basis point increase over last year as a result of improved maintenance contract performance as well as the implementation of cost containment measures which resulted in SG&A expense reductions. We are now on Slide 9. Additional financial items of significance for the quarter not addressed on the previous slides are as follows. Quarter two gross profit of $315.3 million is reduced from 2019 second quarter by $31.1 million or 9%. Despite this reduction in gross profit dollars, we did experience an improvement in gross profit as a percentage of revenues with the reported gross margin of 15.7%, which is 80 basis points higher than last year's quarter. We are reporting a loss per diluted share of $1.52 as compared to earnings per diluted share in last year's second quarter of $1.49. On an adjusted basis, after adding back the impairment loss on goodwill, identifiable intangible assets, and other long-lived assets, non-GAAP diluted earnings per share is $1.44 as compared to the same reported at $1.49 in last year's quarter. This represents a modest reduction of $0.05 or just over 3%. Not to be repetitive in my commentary, but in light of COVID-19 in the economic backdrop we all experienced during the last several months, EMCOR has done a great job of maximizing returns were given the opportunity to deliver its services. With the quarter commentary complete, let's turn our attention to EMCOR's first six month results. Revenues of $4.31 billion, represent a decrease of $169.1 million or 3.8% when compared to revenues of $4.48 billion in the corresponding prior-year period. Our second quarter revenue declines offset revenue gains posted in quarter one at each of our US Mechanical Construction, US Building Services, US Industrial Services and UK Building Services segments, while our US Electrical Construction Services segment has had two consecutive quarters of revenue contraction. Year-to-date gross profit of $648.3 million is lower than the 2019 six-month period by $6.8 million or a modest 1%. Year-to-date gross margin is 15%, which favorably compares to 2019's year-to-date gross margin of 14.6%. Gross margin improvement was largely driven by our combined US Construction business as well as our UK Building Services segment. Selling, general and administrative expenses of $432.2 million for the 2020 six-month period, represent 10% of revenues compared to $432.4 million or 9.6% of revenues in 2019. While SG&A for the year-to-date period has decreased nominally from the prior-year, the substantial cost reduction measures implemented in the second quarter have positioned us at a lower run rate than at this time last year. We reported a loss per diluted share of $0.14 for the six-month ended June 30, 2020, which compares to diluted earnings per share of $2.77 in the corresponding 2019 period. Adjusting the results for the current year to exclude the non-cash impairment loss on goodwill, identifiable intangible assets, and other long-lived assets, results in a non-GAAP diluted earnings per share of $2.78. When comparing this as adjusted number to last year's reported amount of $2.77, we are reporting a $0.01 increase. I would like to remind everyone on the call that our performance for the first six months of 2019 set records for most financial metrics with earnings per share in particular, exceeding the prior benchmark by almost 30%, not to marginalize the sizable impairment charge taken this year, but the fact that on an adjusted basis, we were able to slightly exceed our previous year record. Despite the extraordinary market challenges presented, I believe EMCOR has done quite an exceptional job. My last comment on this slide pertains to EMCOR's income tax rate for 2020. As noted on the slide, EMCOR's tax rate for the six months ended June 30, 2020 was 59.4%. Our tax rate for the remainder of 2020 will continue to be impacted by the impairment charges recorded during the second quarter, the majority of which were nondeductible for -- tax purposes. So with that said, at this time, our full-year estimated tax rate is between 58% and 59%. However, this can change if any discrete tax events occur during the remainder of the year. We are now on Slide 11. I spent some time during our quarter one earnings call detailing EMCOR's liquidity profile. As a reminder, the first quarter is historically our weakest from a cash generation standpoint, due to the funding of prior-year earned incentive awards. In addition, 2020's first quarter was negatively impacted by our inability to monetize certain of our first quarter revenue activities due to delays in customer billings resulting from our previously communicated ransomware attack. However, as Tony mentioned, we had record operating cash flow for the first half of the year and as a result, our liquidity profile has improved from our already strong position. With strong operating cash flow through June, we have paid down the $200 million revolving credit borrowings outstanding as of March 31, 2020 and our cash on hand has increased to $481.4 million from the approximately $359 million on our year-end 2019 balance sheet. The improvement in operating cash flow was due to excellent working capital management by our subsidiary leadership teams as well as the benefit of the deferral of certain tax payments due to government measures enacted in response to the COVID-19 pandemic. These measures which included the deferral of estimated US federal income tax payments, the employer's portion of Social Security tax payments. Please note that while we will continue to benefit from some of these deferrals throughout the remainder of 2020, our estimated US federal tax payments were funded subsequent to the quarter on July 15. Changes in additional key balance sheet positions are as follows. Working capital levels have increased primarily due to the increase in cash just referenced. Goodwill and identifiable intangible assets have decreased since December 31, 2019, largely as a result of the impairment charges previously referenced, in addition intangible assets have decreased as a result of $29.4 million of amortization during the year-to-date period. Stockholders' equity has declined due to the operating loss recognized during the first six months of 2020. EMCOR's debt to capitalization ratio of 13.5%, is essentially flat when compared to our position at 2019's year-end and is reduced from 19.9% at March 31, 2020. We have just over $1.2 billion of availability under our revolving credit line and anticipate that we will continue to generate positive operating cash flow during the last six months of calendar 2020. EMCOR's balance sheet and resulting liquidity position remains strong and we continue to preserve our flexibility in evaluating all market opportunities. In short, we continue to win work and have seen our small productivity improve through the second quarter as it hit a low point in April for bookings and execution. Some comparisons to consider. Total RPOs at the end of the second quarter were just about $4.6 billion, up $365 million or 8.6% when compared to the June 2019 level of $4.23 billion. RPO has also increased $167 million from the first quarter of 2020, reflective of the continued demand as we are seeing for market -- continued demand we are seeing for our services in our markets. So for the first six months of 2020, total RPOs increased $555 million or 13.8% from December 31. With all this growth, only $11 million relates to a tuck-in acquisition. So almost all of that growth is organic. Domestic RPOs have increased $346 million or 8.4% since the year-ago period, driven mainly by our Mechanical Construction segment. We did burn through some Electrical Construction project as we completed some complex work. However, we expect to backfill these projects as we continue to see demand, especially in the high-tech and data center market, and high-tech for us means semiconductor and the data center market. As the economy opens up, combined with the hotter weather, we are getting more access to facilities and seeing a resumption of our work. Additionally, both of our Industrial Services and EMCOR UK segments increased RPO level by roughly 15% respectively from June 30, 2019. On the right side of the page, we have, on 12, we show RPOs by market sector. Of the eight market sectors listed, all had year-over-year RPO increases, except for manufacturing and industrial. This is not to be confused with our Industrial segment. Currently, we are in the process of completing some major food processing projects. We continue to see demand for these large complicated projects and have a number of potential opportunities we are looking at. Commercial project RPOs comprise our largest sector -- market sector to over 40% of the total. This is a 19% increase from year-end, spurred by our data center projects. And as we have said before, we are uniquely suited for these fast-paced, especially in the hyperscale projects from both electrical and mechanical perspective. Other very active markets for us are healthcare, and water and wastewater, with these sectors being up 25% and 49% respectively from year-end 2019. To-date, we have not seen any material slowdown in bidding opportunities apart from the mandated areas, that was New York, New Jersey, Boston and parts of California, and a little bit in Pennsylvania. However, these areas are now open. As I said earlier, the industry has adapted safety -- safe work practices and protocols to keep project progressing and especially to keep workers safe. Finally, we are positioned very well to help our customers as they adjust our HVAC and building control systems to improve the IAQ and cleanliness of their buildings and other facilities. It starts with the introduction of more outside air into the space as one of the simplest ways to make a building healthier. But unfortunately, this makes the building less efficient. We have strong experience in IAQ systems and our service companies and mechanical contractors know how to implement UV lights, bipolar ionization, enhanced filtering and control system modifications. Most of this work will never make it into reported RPOs from a quarter-to-quarter basis and it is a quick turn, high margin activity. Together, it will amount to a nice medium-sized project with good margins. I do expect these IAQ additions to longer-term spur a more robust HVAC replacement market as we seek to increase efficiency to combat the increase in IAQ, especially the introduction of outside air. So as I said in our first quarter call, I don't know exactly how all the work, specifically will rollout and how that booking will be, it's a fluid and challenging environment. There will be bumps along the way. However, the direction of future opportunities for a contractor like us remain pointed in a positive direction. So now I'm going to close on Pages 13 to 14. When we went through guidance in April, we said we had hoped that we can provide a view on the outlook for the remainder of the year during the second quarter earnings call. We have spent the last few weeks debating internally whether to provide more definitive versus generic guidance for the remainder of the year. We have decided to provide more specific guidance with some caveats which mostly deal with the external environment. The main caveat is, we expect operating conditions to remain similar to today's operating conditions where most of the country is open for our type of work and we are deemed an essential [Phonetic] activity. So we decided to give guidance as to the why and what as outlined below. Subject to that main caveat, we are likely going to earn $5 to $5.50 diluted earnings per share this year on an adjusted basis adding back the impact of impairment. I think revenues will likely be $8.6 billion to $8.7 billion. In this revenue guidance is our expectation from our recent forecast where we believe that all of our reporting segments will grow revenues in the second half of the year versus the first half of the year except for our Industrial Services segment. We now understand how COVID-19 has impacted our productivity. We have seen stabilization in small project work and the summer heat is helping our US Building Services segment. We have a strong RPO position and we see markets recovering, especially in our Mechanical and Electrical Construction segments and in our US and UK Building Services segments. So how do you move up in this range largely will depend on three factors, the external market remains largely same or even improves from today's operating environment. Under today's conditions, we can book and execute work, keep our workforce productive and we believe we will continue to see the recovery in the small project work. IF the Industrial Services segment -- our folks have an opportunity to help customers in an unexpected way, then we will perform slightly better than expected. And we have no major project disruptions or any new significant customer bankruptcies. So as far as capital allocation, the dividend is safe for the foreseeable future. However, we are unlikely to make any more share repurchases in the near term. We will look to execute sensible tuck-in acquisitions, where we have decent visibility into and belief in the long-term success of the acquisition. That's really no different than any time we buy a company, and we are based on the business, the market and the improvements we can make. We have several potential Mechanical or Electrical Construction segment acquisitions and are in the preliminary stage of discussion on -- several mechanical services, a few small ones and fire protection acquisitions that we will likely execute.

q2 non-gaap earnings per share $1.44 excluding items. q2 loss per share $1.52. sees fy 2020 revenue $8.6 billion to $8.7 billion. sees fy 2020 non-gaap earnings per share $5.00 to $5.50. emcor group - during q2, recorded significant impairment charge primarily related to u.s. industrial services segment.

We had an exceptional quarter. As reported with respect to operating income at $135.9 million, operating income percentage at 6.2% and with respect to earnings per diluted share at $1.76 on a non-GAAP adjusted basis. We earned revenues of $2.2 billion in the quarter and had operating cash flow of $270 million. We had excellent operational performance and cost control. Our team executed with focus, discipline and precision. We continue to take steps to keep our skilled trades workforce safe, motivated and productive. We achieved this performance despite a very difficult operating environment for our EMCOR Industrial Services segment, which you know focuses on downstream, petrochemical and oil and gas. We have structurally reduced our SG&A by about $7 million to $9 million per quarter on a go-forward basis. The exceptional performance of our segments billed in the industrial services GAAP, thus demonstrating how the diversity and balance in EMCOR can work for our shareholders. I will cover some of the highlights by segment, and I will cover the broad themes and practices that have driven our performance during these challenging times. Our electrical and mechanical construction segments had outstanding performance in the quarter and on a year-to-date basis. We leveraged our cost structure across a solid mix of projects to earn strong and robust operating income margins of 9.2% in our Electrical Construction segment and 9% in our Mechanical Construction segment. We leveraged a lower cost structure, but more importantly, had exceptional field performance on our projects. We did benefit on some project closeouts and resolutions. We always have some of those, something that Mark will cover in more detail. But the underlying performance and productivity in these segments is as good as we have ever had. Our building -- U.S. Building Services segment performed exceptionally well. With a record quarterly operating income percentage of 6.9%. Our commercial site-based business and their best third quarter ever and resets our cost base to position us for even more success in the future as we grow the business. We have a very good customer mix. Our customers are demanding, but by involving us in their maintenance capital spending they provide us with the opportunity to add value through incremental small project and service activity. Our Government business also had a very good quarter. In addition, we excellent repair service and project performance in our mobile mechanical services division. Our repair service is aided by a hot summer, coupled with significant demand for our IAQ or indoor air quality product and services. We also are near flat year-to-date for project bookings on an organic basis, which shows significant recovery from the large drop in organic bookings in April and May. We also completed a nice acquisition in August, that will build our project capabilities and allow for long-term service growth in the Washington, D.C. market. Our Industrial Services segment had a tough quarter in line with what we expected and discussed on our second quarter earnings call. Demand has dropped significantly across the industry. And that, coupled with successive hurricanes made for a very difficult quarter. This is a tough environment for industrial services as we focus on petrochemical and refining. However, we are well positioned with our customers rebound, we have reset the business through aggressive cost-cutting and redeploying personnel to the work that is available. The issue is our field supervision is absorbed and productive. However, they are capable of managing much larger work scopes versus what is available today, and that is where the leverage is in this segment. Our U.K. segment continues to steady performance and continues to build on its strong market position. Our strong customer relationships give us opportunities to not only meet their service needs, but also their maintenance and project retrofit needs. I want to take this opportunity to share with you how we've succeeded in this challenging operating environment across EMCOR. These actions and themes are why we have had this exceptional year-to-date performance across our business. Number one, we kept our focus as an organization. As we have moved through this ever-changing environment in 2020, we have stayed focused on accomplishing our mission for our customers. We are already a flat organization. And we had direct communication at multiple levels. We became even flatter with even better communication across our company. Number two, employee safety is and has been our number one priority throughout this pandemic. Our people were able to keep this priority paramount as it is one of our core values. We just had to implement these practices in a different way. Our team knows we avoid short cuts and we always emphasize worker safety. This unrelenting focus and commitment to safety is not new to us, and it is one of the main reasons we can fill the best team in the industry. Number three, would work together across this large decentralized organization by focusing on the task at hand, and we have sought to comply at all times with a multitude of regulations, programs and procedures in this constantly changing environment. Our staff has made sure that our subsidiaries had the best available information to implement the practices needed to keep progress moving on a project or a service demand. Again, teamwork and mutual respect for each other are core values of EMCOR. Number four, we stayed focused not only on safety, but also productivity. Our people took ownership of job sites, brought solutions forward that allowed us to at least maintain the productivity we bid in the jobs, through better scheduling, adjusted work practices, more prefabrication and better job site logistics. In many ways, we were uniquely trained to perform in this constantly changing environment. We are a team of very successful trade contractors who know how to react and adapt to changing markets and job site conditions. Number 5, we have positioned ourselves into some good long-term markets, which I will talk about later, such as healthcare, manufacturing, high-tech manufacturing, data centers, commercial and food processing. We offer valuable services in these markets through our electrical trades, our HVAC technicians are pipers, welders, millwright, sprinkler fitters and plumbers. We are able to move between markets with scale and agility and can handle the most complex construction and service opportunities within these markets. Number six, we were prepared and trained to serve our customers with new products when the pandemic hit. We bundled together our services and products related to IAQ/indoor air quality and building wellness and had these solutions ready to present to our customers when we were able to reenter buildings, campuses and industrial facilities. We've helped and continue to help our customers reopen with more peace of mind by improving the airflow and air quality in their workplaces. We became leaner and more productive. We cut costs early and deep in some of our businesses. We did not wait to react. We found new ways to work through technology. And finally, number eight, we leveraged our scale, our suppliers work with us to make sure we had the necessary personal protective equipment necessary for our people to do their jobs. We had the job materials we needed to be successful, despite supply disruptions that may have impacted others. We shared ideas on how to keep safe, but also stay productive. For me, it's been humbling to see this high level of execution during these difficult times. It speaks to the leadership of our segment and subsidiary leaders who look for solution when obstacles are in front of them. And our highly skilled and dedicated workforce who continue to work and serve our customers throughout these difficult times driven by this pandemic. And with that, Mark, I'll turn it to you. Over the next several slides, I will augment Tony's opening commentary on EMCOR's third quarter performance as well as provide an update on our year-to-date results through September 30. So let's revisit and expand our review of EMCOR's third quarter performance. Consolidated revenues of $2.2 billion are down $86 million or 3.8% from quarter 3, 2019. Our third quarter results include $81.4 million of revenues attributable to businesses acquired, pertaining to the time that such businesses were not owned by EMCOR in last year's third quarter. Acquisition revenues positively impacted both our United States Mechanical Construction and the United States Building Services segments. Excluding the impact of businesses acquired, third quarter consolidated revenues decreased approximately $167.5 million or 7.3%. Unlike our results for the second quarter of 2020, where each of our reportable segments had quarter-over-quarter revenue declines we did see revenue gains in three of our five segments during the third quarter of this year. However, when you remove the impact of businesses acquired, all of our U.S. reportable segments experienced organic revenue declines period-over-period, as the effects of the COVID-19 pandemic as well as the disruption within the oil and gas markets are still impacting a number of our businesses. United States electrical construction revenues of $508.9 million decreased $45.8 million or 8.3% from 2019's third quarter. Revenue declined across multiple market sectors due to the continuing impact of the pandemic, including the associated containment and mitigation measures as well as the curtailment of certain capital spending by some of our customers. This segment additionally experienced a significant reduction in revenues within the manufacturing or industrial market sector, where certain of our electrical businesses perform services for both midstream and upstream oil and gas customers. Not dissimilar to our Industrial Services segment, the Electrical Construction segment has experienced numerous project deferrals, specifically in the Manufacturing and Industrial market sector resulting from cost control actions initiated by many of their customers within the broader oil and gas industry. United States Mechanical Construction segment revenues of $891.5 million, increased $22.3 million or 2.6% from quarter three of 2019. The results of this segment represent record third quarter revenue performance, excluding acquisition revenues of $61.1 million, the segment's revenues decreased $38.8 million or 4.5% organically. Reductions in quarter-over-quarter revenues from the manufacturing market sector inclusive of activities within the food processing submarket sector as well as the healthcare market sector due to project completions in the prior year are the primary reasons for this segment's organic revenue decline. EMCOR's total Domestic Construction business third quarter revenues of $1.4 billion decreased by $23.5 million or 1.6%. United States Building Services quarterly revenues of $551.5 million increased $19.4 million or 3.7% and represents an all-time quarterly record for this segment. Excluding acquisition revenues of $20.3 million, this segment's revenues decreased approximately $900,000 or less than 0.25%. Reduced building control project activities due to access restrictions created by the COVID-19 pandemic were almost entirely offset by increased small project revenues, including indefinite delivery, indefinite quantity project volume from this segment's government services division as well as an increase in demand for certain services aimed at improving indoor air quality in response to the pandemic and in line with the recommendations from the CDC. United States Industrial Services revenues of $139.7 million decreased $94.4 million or 40.3% and as this segment continues to be impacted by the negative macroeconomic conditions and uncertainty within the markets in which it operates. Additionally, our quarterly performance within this segment was adversely affected by work stoppages resulting from hurricane and tropical storm activity in the Gulf Coast region, where the majority of our industrial services operations are located. United Kingdom Building Services segment revenues of $110.1 million increased $12.5 million or 12.7% from last year's quarter. Revenue gains for the quarter resulted from new maintenance contract awards as well as strong project activity across our customer portfolio. In addition, revenues of this segment were positively impacted by $5 million as a result of favorable foreign exchange rate movements within the quarter. Selling, general and administrative expenses of $226.8 million represent 10.3% of third quarter revenues and reflect an increase of $6.7 million. The current year's quarter includes approximately $8.9 million of incremental expenses from businesses acquired, inclusive of intangible asset amortization, resulting in an organic quarter-over-quarter decrease in selling, general and administrative expenses of approximately $2.2 million. SG&A expenses for the third quarter of 2019 and were favorably impacted by $4.5 million of insurance recovery and legal settlements within the Industrial Services segment. When excluding these recoveries from the prior year period, the adjusted organic decline in 2020's third quarter SG&A is $6.7 million. Quarter-over-quarter reductions in salaries and travel and entertainment expenses due to a combination of cost-cutting measures and the continuing impact of the COVID-19 pandemic were partially offset by an increase in quarterly incentive compensation expense due to EMCOR's improved operating performance during the period and our revised upward expectations for full year 2020. The increase in SG&A as a percentage of revenues is due to the reduction in quarterly consolidated revenues without a commensurate decrease in certain of our fixed overhead costs as we do not deem the current operating environment to be permanent. This is consistent with our assessment during this year's second quarter. Additionally, with quarter-over-quarter a sequential increase in total incentive compensation expense previously mentioned, our SG&A as a percentage of revenues was unfavorably impacted by approximately 50 basis points within the third quarter of 2020. Reported operating income for the quarter of $135.9 million represents a $20.1 million increase or 17.4% as compared to operating income of $115.7 million in 2019's third quarter. This represents an all-time quarterly operating income record for EMCOR, which is quite remarkable performance when you consider the economic backdrop. Our third quarter operating margin is 6.2%, and which favorably compares to the 5.1% of operating margin reported in last year's third quarter. We experienced operating margin expansion within each of our reportable segments other than our U.S. Industrial Services segment, which is reporting an operating loss for the quarter and our U.K. Building Services segment, which was essentially flat period-over-period. Specific quarterly performance by reporting segment is as follows: Our U.S. Electrical Construction segment operating income of $47.1 million increased $13.4 million from the comparable 2019 period. Reported operating margin of 9.2% represents a 310 basis point improvement over last year's third quarter. This improvement in both operating income dollars and operating margin is largely attributable to increased gross profit contribution from commercial market sector activities, inclusive of inclusive of numerous telecommunication construction projects. In addition, operating income and operating margin of this segment benefited from favorable project closeouts within the transportation and institutional market sectors, which positively impacted quarterly operating margin in the current year by 70 basis points. Third quarter operating income of our U.S. Mechanical Construction Services segment of $80 million represents an $18.8 million increase from last year's quarter, while operating margin in the quarter of 9% and represents a 200 basis point improvement over 2019. Despite the impact of the COVID-19 pandemic, this segment has experienced increased gross profit from projects within the majority of the market sectors in which it operates. In addition, a more favorable mix of work with within both the manufacturing and the commercial market sectors drove the improvement in quarterly operating margin. Our combined U.S. construction business is reporting a 9.1% operating margin and $127.1 million of operating income, which has increased from 2019's third quarter by $32.3 million or 34%. For the third quarter of 2020, operating income and operating margin for our U.S. Building Services segment was $38.2 million and 6.9%, respectfully. The performance of this segment represents an all-time quarterly record in terms of both operating income and operating margin. Operating income increased by $3.2 million over last year's third quarter, and operating margin improved by 30 basis points. These increases were primarily due to increased gross profit and gross profit margin from this segment's commercial site-based services division. In addition, this segment's results for the current quarter benefited from lower selling, general and administrative expenses due to cost-cutting measures enacted in response to the COVID-19 pandemic. Our U.S. industrial services operating loss of $9.8 million represents a decrease of $15.4 million compared to operating income of $5.6 million in last year's third quarter. These conditions have resulted in reduced capital spending and the implementation of various cost-cutting measures by certain of our customers, which has resulted in a decrease in demand for the services provided by this segment. Compounding this reduced demand, and as I referenced during my revenue commentary, the Gulf Coast region has been impacted by numerous named storms during 2020's hurricane season, which resulted in the suspension of planned maintenance activities as our customers focused on storm preparation and recovery efforts. U.K. Building Services operating income of $5.3 million represents an approximately $600,000 increase over 2019's third quarter due to an increase in gross profit within the segment. Operating margin of 4.8% is slightly reduced from 2019's third quarter operating margin of 4.9%. We are now on slide nine. And additional financial items of significance for the quarter not addressed on my previous slides are as follows: quarter three gross profit of $363.2 million or 16.5% of revenues is improved over last year's quarter by $27.2 million and 180 basis points of gross margin. We experienced quarter-over-quarter improvement in gross profit dollars in all reportable segments other than our Industrial Services segment due to the unfavorable market conditions previously outlined. Diluted earnings per common share of $1.11 and compares to $1.45 per diluted share in last year's third quarter. Adjusting our record quarterly performance for the negative impact on our income tax rate resulting from the nondeductible portion of the noncash impairment charges recorded during the second quarter of this year, non-GAAP diluted earnings per share for the quarter ended September 30, 2020, and is $1.76, which favorably compares to last year's quarter by $0.31 or 21.4%. My last comment on this slide is a continuation of my income tax rate commentary which, as you can see on the bottom of slide nine, is 54.7% for the quarter due to the nondeductibility of the majority of quarter two's noncash impairment charges. With one quarter of 2020 remaining, I anticipate that our full year tax rate will be between 53% and 54%, which is a downward revision from the previous range provided on our quarter two call. With my quarter commentary complete, let's now turn our attention to EMCOR's year-to-date results through September 30. Revenues of $6.52 billion, representing a decrease of $255.1 million or 3.8% and when compared to revenues of $6.77 billion in the corresponding prior year period. Our year-to-date results include $214.1 million of revenues attributable to businesses acquired, pertaining to the period of time that such businesses were not owned by EMCOR in the 2019 year-to-date period. Excluding the impact of businesses acquired, year-to-date revenues decreased organically 6.9%, primarily as a result of the significant revenue contraction experienced during quarter 2, given the containment and mitigation measures mandated by certain of our customers as well as numerous governmental authorities in response to COVID-19. Year-to-date gross profit of $1 billion is higher than the 2019 nine month period by $20.4 million or 2.1%. Year-to-date gross margin is 15.5% and which favorably compares to 2019's year-to-date gross margin of 14.6%. The year-over-year gross margin improvement was largely driven by our combined U.S. Construction business. Selling, general and administrative expenses of $659 million represent 10.1% of revenues as compared to $652.5 million or 9.6% of revenues in the prior year period. Year-to-date 2020 includes $25.2 million of incremental SG&A, inclusive of intangible asset amortization pertaining to businesses acquired. Excluding such incremental cost, our SG&A has decreased on an organic basis, by approximately $18.7 million year-over-year. Reported operating income for the first nine months of 2020 is $119.2 million, adjusting this amount to exclude the noncash impairment loss on goodwill, identifiable intangible assets and other long-lived assets recorded in the second quarter, results in non-GAAP operating income of $352 million for 2020's nine month period as compared to $338 million for the corresponding 2019 year-to-date period. This adjusted non-GAAP operating income represents a $13.9 million or 4.1% improvement year-over-year. Diluted earnings per common share for the nine months ended September 30, 2020, is $0.96 when adjusting this amount for the impact of the noncash impairment charges previously mentioned, non-GAAP diluted earnings per share was $4.54, and as compared to $4.22 in last year's nine month period. This represents a $0.32 or 7.6% improvement period-over-period. We are now on slide 11. EMCOR's liquidity profile continues to improve as we just completed another quarter of strong cash flow generation, bringing our year-to-date operating cash flow to $546.8 million. Our operating cash flow has benefited from the effective management of working capital by our subsidiary leadership teams, coupled with the impact of certain government measures enacted in response to the COVID-19 pandemic. Which allow for the deferral of the employer's portion of social security tax payments and the remission of value-added tax for our U.K. subsidiary. On a year-to-date basis, these measures have favorably impacted operating cash flow by approximately $81 million. With this strong operating cash flow, cash on hand has increased to $679.3 million, from the approximately $359 million on our year-end 2019 balance sheet and is the primary driver of the increase in our September 30 working capital balance. Other changes in key balance sheet positions of note are as follows: Goodwill has decreased since December 31, 2019, as a result of the noncash impairment charge recognized during the second quarter of 2020, partially offset by an increase in goodwill resulting from the businesses acquired during the 2020 year-to-date period. Largely as a result of $44.8 million of amortization expense recorded during the first nine months of this year. Our identifiable and tangible asset balance has decreased since December 31, 2019. Similar to our goodwill balance, decrease was partially offset by incremental intangible assets recognized as a result of the acquisition of two businesses during the first nine months of this year. Total debt has decreased by approximately $30 million since the end of 2019, reflecting our net financing activity during the year. Although not included on this slide due to the periods presented, EMCOR has paid down approximately $273 million of borrowings under its credit facility, inclusive of borrowings executed during 2020. And EMCOR's debt to capitalization ratio has decreased to 12.3% as of September 30. Lastly, our stockholders' equity has decreased since December 2019 and as our share repurchase activity and dividend payments for the nine month period of 2020 have exceeded our net income due to the impairment loss recognized in the second quarter. Due to our strong cash flow performance, in concert with our available credit, EMCOR remains in a very strong position to take advantage of any market opportunities that may be present in future periods. Well, Mark, and that's what happens when we're in the third quarter, right? Total RPOs at the end of the third quarter were a little over $4.5 billion, up $495 million or 12.3% when compared to the September 2019 level of $4 billion. RPOs, likewise, increased the same amount, $494 million for the first nine months of 2020. With all this growth being organic, except for approximately $86 million relating to two acquisitions in the current 12-month period. Taken together, our Mechanical and Electrical Construction segment, RPOs have increased $409 million or 12.4% since the year ago period. Sevenths growth is organic, with the balance being RPOs that came with our November '19 acquisition of BKI, a full-service mechanical contractor headquartered in the Atlanta area. I should note here that thus far in 2020, BKI has more than doubled its RPOs total in the first nine months of this year as they continue to win work, including projects in the data center, manufacturing and healthcare markets. The integration of BKI has gone very well due to the exceptional team they have. They really are a terrific team, and we're thrilled to have them on our team. Building Services segment RPOs increased in the quarter as this segment's small project, repair service work also continues to regain its footing. Remember, the small project work in this segment was the first to fill the effect of the pandemic as building operations simply shut down. We are getting in there now as facilities open up and more and more building owners and tenants are looking for ways to increase their indoor air quality in their facilities. And I'll go a little deeper into IAQ on the next slide. Project bookings are nearly flat on a year-to-date basis, which is a pretty good recovery, considering the deep drop in bookings we had in April and May. On the right side of this page, we show RPOs by market sector. Similar to a quarter ago, all eight market sectors listed at year-over-year RPO increases, except for Manufacturing/Industrial, where we have just completed some major projects and are looking at reloading for additional. And we feel pretty good about that as we are in the midst of developing some some good prospects in the manufacturing sector as supply chains change, and we also are very strong in high-tech manufacturing. Many of these projects come in pieces versus all once into our backlog. Commercial project RPOs comprised our largest market sector at over 42% of total. This is almost a 20% increase from the year-end, and it's really spurred by two things: really high-tech and data center projects it bears repeating. our industry has -- has adopted the safety and work protocols to keep projects progressing with a larger goal of keeping workers safe. Our protocols are working. The industry keeps working and bidding opportunities continue in pretty much all sectors and geographic markets. So I'm going to take the next two pages and cover on pages 13 and 14. And what I'm going to discuss is some markets and opportunities where as we move forward, we believe, have some resiliency for us to operate in. And I'm now going to turn to page 13, and it says future affects our markets. We believe we have multiple pockets of resistance despite wider nonresidential uncertainty. Let's go first to data centers. This has only gotten stronger through the pandemic. It was strong already. And it demands our electrical, mechanical and fire protection demand across Mid-Atlantic, Pacific Northwest, Midwest and Southeast. We've done a good job here, and we're one of the leaders, and we've also made some strategic acquisitions, especially in the last 15 months, not only in fire protection assets, but also key electrical contractors like we did in the Midwest and also in the Southeast, which is emblematic of our BKI acquisition. And of course, we built organic capability here and build off long-term success in data center markets, and we are able to build these hyperscale on time, on budget and with speed. It's important to note here that there's always changes in the data center market. Projects get redesigned, they get moved. They get delayed as they get redesigned, other ones get accelerated. That was a routine course of business outside of the pandemic and really has little to do with the pandemic, in our case. On the warehouse side, we continue to build out e-commerce supply chain, and we continue to see very strong demand on not only regular warehouses, we continue to see demand across cold storage. This is especially true for our fire protection and sprinkler work. In industrial manufacturing, we believe we are well positioned for electrical mechanical opportunities and millwright opportunities driven by the reshoring of supply chains to the Southeast and relocation from higher cost states and sites. We do believe also that we'll have additional food processing opportunities. Anecdotally, we won at least three jobs in the last four months, which would have been headed either to Mexico or overseas that are now being built in the Southeast. On the healthcare side, we continue to see demand for our work, electrical, mechanical, fire protection and then eventually service. Hospitals are looking to retrofit. They're looking to build new facilities. And they're looking to have more flexibility in their existing facilities and build new facilities. We have grown backlog here. We expect to continue to grow back on. Now, look, this can be episodic. Things come in and out on the big project side. But the flip side of that is we're not doing as much service work as we typically have done in hospitals as they deal with the impacts of COO. Long term, we expect to do more retrofit work. People do things to be more flexible -- well think about it, we did a lot of work to create negative pressure environment through the pandemic in these hospitals. We expect to continue to do that. But -- and if you have a bigger casualty event, accidents, terrorist situations, they want to be able to do positive pressure. So facilities are going to have to move between the 2. And that's all about airflow and the kinds of work we do. And then you're going to have to have enhanced Electrical Systems & Communication wiring in those facilities. And we're uniquely positioned to help with those. And we have great relationships with some of the biggest hospital systems in the country, and we helped them through the pandemic. We helped them build some of their new facilities in the past, and we expect to do both in the future. And I think you're starting to see the impact of that in our backlog. On the water and wastewater site side, this, we think, is a good long-term market for us, especially in Florida. And really there, they're looking for comprehensive construction services. And in water and wastewater, many times, we serve as a prime contractor, bringing all trades and activities together. Mechanical Services, we believe, has been a good market for us for a long, long time. We have a terrific business. Most of it rests in Building services some of our service operations rest in our Mechanical Construction segment. And you can see that in our 10-Q. We see growing demand stepping from maintenance deferrals. We think there's going to be a lot of retrofit opportunities. I'm going to cover both that and indoor air quality. As we switch to page 14. EMCOR has been a leader for a long time as you look at block one of HVAC capabilities. HVAC is a big part of our business, and it can be up to one three or more of what we do in any given year. If you look at it, we do new construction, of course, we can. We could do big work. We talked about that on some of those resilient markets on the page before, core, tenants fit out. We're a great retrofit company. We know how to do the energy retrofit work, we know how to engineer that energy retrofit work, and we know how to support and help all the ESCOs that are doing that energy retrofit work. That equipment replacement, energy retrofit lighting upgrade, building control systems. One of the things maybe we don't brag about enough is the capability that we have in that aftermarket of HVAC. We're the leader there. And we are the largest independent controls contractor on top of everything else. And really what we seek to get to is building wellness, have the most efficient building, but have it be a place that's healthy. Now as you move to Block two indoor our air quality, let's think about this at a high level. Really the goal over the last 20 years. And I've seen this from an OEM. I've seen it from a service perspective. I've seen it from a new construction perspective, has been to take in outside out of the building. Outside air is inefficient, right? In the summer with humidity, it causes an efficiency problem and the winter costs the same for obvious reasons. And so we've worked real hard to take outside air out. That all went by the wayside in the middle of March. Now we're opening up air dampers that haven't been opened in a long time. And actually, buildings are going back to 25 CFM per person, and that's cubic feet per minute. And we had got that down to 15%. And we had to safe and productive ways to do that, like demand control ventilation. So what are we doing now on indoor air quality? Well, a lot of it is, "hey, you've got to give people peace of mind", and you, as an owner, have to do everything possible to increase the wellness and indoor air quality of your building. So how do you do that? You do that through enhanced filtration. We take things from a Merck 10 or 12 up to a 14 or 15. You do that for UV Lamp Technology that gets better and better. And this stuff actually works. It reduces surface contamination. And it increases airborne in activation, right? So things pass-through the coil, pass across the air handler media. And as a result, you make a cleaner. Needle 0.5 polar ionization, we're one of the leaders in the implementation of that technology. And as I talked about earlier, we spent a lot of time training on this all the way down through our technicians during the lockdown and the pandemic, and we were ready to go. There's a recent case study here. This is someone that has 240 buildings. Mainly small packaged equipment. So here, you have to attack it by getting into the mixing box. And how do you do that? You do that through UV because what you're trying to do, is get the surface contamination gone through UV lights. We'll do this across 240. We'll do this in 90 sites. The goal is to demonstrate to the employees and actually have it happen as the indoor air quality gets better. This was a large multi-state corporation with lots of sites. And I've given a number that we thought it would be like a good medium-sized project. This is actually much better than we thought it was going to be. It's hard to quantify exactly what it will be, but it's something we can get in front of our customers with and help them drive productivity in their buildings by giving them a better workspace. Now one of the things you have to think about is indoor air quality and efficiency work across purposes with each other. I personally believe we've already had a good retrofit market. That retro market is going to gain strength as we move through 2021 on the HVAC side. And again, EMCOR, being the largest independent air conditioning contractor with a great retrofit capability, we'll clearly be in a position to help our customers balance into our quality against efficiency. With that, I'm going to turn to the last two pages, 15 and 16, and I'm going to close out here. Clearly, we have done much better than we expected when we withdrew guidance in April. And then when we reinstated guidance with our second quarter earnings announcement, both of which we believe were the right thing to do. Today, we are raising our guidance for earnings per share from continuing operations. We will move to $5.90 to $6.10 non-GAAP adjusted earnings per share and revenues of around $8.7 billion. In providing this revised guidance, we have assumed the following operating environment: First, we remain an essential service in most cases. Second, we continue to execute productively in this environment. Third, there are no significant shutdowns like we saw in March and April. And for us, that means our sites, our projects are crafts. Four, we expect to have continued strong performance from our Electrical and Mechanical Construction segments, Building Services and the U.K. We still see pretty good opportunities that we are estimating and bidding and to date, we have seen no significant project deferrals outside of oil and gas, as Mark described it. Now on the note, nonresidential market may move downward in the fourth quarter or continue to sort of be mixed. We do expect that decline to be in the mid-single digits as we move into 2021. This is still a big market. And if you refer back to page 13, we have a lot of operating space in what we believe are resilient markets. For industrial services, which is downstream, refining and petrochemical, for the most part, we do expect sequential improvement as we go from Q3 to Q4, but nothing significant for the balance of the year. And as of today, we do expect the first quarter of 2021 to be better than the fourth quarter of 2020. We have some visibility, not as much as we would typically have at this time. However, we do not expect any significant contribution from this segment for the balance of the year. Where we end up in this range now is largely a factor of job timing, completion and service demand. As far as capital allocation, we will continue to return cash to shareholders for dividends and then we do expect to return to some level of share repurchase activity in the next few quarters. We expect to continue to be a balanced capital allocator. What I'm really excited about is we are rebuilding our pipeline of potential acquisitions and expect to start executing that pipeline in early 2021. We expect those acquisitions to be similar to the acquisitions that we executed from 2018 to 2020, which really was a terrific period for us to grow our company through acquisition. We certainly have the balance sheet to support such growth in our company. And we, again, expect to remain balanced capital allocators.

compname reports q3 earnings per share $1.11. q3 earnings per share $1.11. q3 revenue $2.2 billion versus refinitiv ibes estimate of $2.11 billion. sees fy 2020 non-gaap earnings per share $5.90 to $6.10. q3 non-gaap earnings per share $1.76. sees fy 2020 revenue about $8.7 billion. raising full-year 2020 guidance.

As we have navigated the last two years, we have learned to operate in highly uncertain and volatile environment. And we have done it with success on almost any metric. We've had to accomplish our mission while keeping our people safe. Our company values of Mission First People always have served us extremely well throughout these unprecedented times. We had an exceptional third quarter at EMCOR, especially against a very difficult comparison in the prior year. As you may recall, in the third quarter of last year, we were bringing about a third of our company back to full operations. We had projects poised and ready to resume or start, delay service that needed to be completed. And buildings, campuses and production facilities that we helped our customers reopen as they resumed operations. Further, we had yet to bring back our full complement of staff that we need to sustain and build our operations. Said simply, we had an abundance of work had all the materials and a lower cost base, as we were still returning to full operations after the extreme cost reductions we had taken in response to the pandemic. Against that backdrop in comparison for the third quarter of 2021, we were able to post $1.85 and earnings per diluted share, versus $1.76 of adjusted diluted earnings per share in the year ago period. We grew revenues to $2.52 billion, with 14.5% overall revenue growth and 12.2% organic revenue growth. We posted 5.4% operating income margins despite strong headwinds from supply chain issues and labor disruptions caused by the Delta Variant. I believe this is very good performance considering the operating conditions we faced in the quarter. We grew remaining performance obligations or RPOs 18.7% from the year ago period to $5.38 billion. We generated operating cash flow of $121 million, despite the strong organic revenue growth. All-in-all, we had a very successful quarter that continues to show the strength and diversity of our business. But more importantly, the outstanding leadership provided by our teams at the subsidiary, segment and corporate level. Our electrical and mechanical construction segments had excellent performance in the third quarter of 2021. Both segments posted strong operating income margins, and had strong organic revenue growth. Through careful planning on our large projects, and excellent supplier relationships we mitigated a lot of the supply chain disruptions facing our operations. However, we have seen cost increases of 10% to 20% and anticipate that such increases will continue in the near future. And that is only part of the issue, as we have seen lead times increased by two to three times their normal levels. Our success in the quarter points to the continued resiliency of our teams, the ability to navigate these issues, deliver for our customers and continue to keep our workforce productive and safe. We continue to have a robot pipeline of data center, warehousing and healthcare projects. And we had strong bookings with our manufacturing clients in the quarter. Building Services had the most difficult comparison a quarter as a deep cost cuts taken at the height of the shutdown were most severe in the segment. We still post a decent operating income marked as a 5% against the year ago period of 6.9%. However, we were most affected in this segment by supply chain issues and diminished productivity. Although demand for our retrofit project work is very strong, we had some issues with a synchronization of our supply chain with our labor planning, resulting in reduced productivity. To mitigate these issues, it has become a common practice that daily communications on deliveries and price changes on our quick term project and service work. Further, this segment also bears the brunt of the dollar per gallon increase in the fuel, which gasoline and diesel year-over-year due to its large fleet and this had an impact of 20 to 30 basis points on operating income margins. We can pass some of this increase on our customers that had just repriced into our time and material rates in June. We will do so again between now and January across the majority of our building services operations. This is the second increase this year, which is not our usual practice of executing which is once a year, usually in June. Demand remained strong and we will continue to improve our planning over the next quarter or two. Industrial Services continue to operate as we expected. We improved on a year-over-year basis with respect to revenue and operating income. We had some impact with respect to the storms in the Gulf Coast. But that mainly just pushed out work to later in the year or into next year. And we did have some disruption to our shop work in Louisiana. Demand for our services continues to build. Refinery utilization is at a very high level. And we expect to and we expect to execute a better fourth quarter turnaround season this year versus the year ago period. We also anticipate much improved demand as we exit the year and move into the first quarter of 2022. The U.K. continues to execute well for its customers with double digit revenue growth and good operating income margins. Demand remained strong for our services. But like in the United States, we are also battling supply chain issues for our quick term project work in the United Kingdom. We'll leave the quarter with a pristine balance sheet, strong fundamentals and record RPOs. Over the next several slides I will augment Tony's opening commentary on EMCOR's third quarter, as well as provide a brief update on our year-to-date results through September 30. So let's revisit and expand overview of EMCOR's third quarter performance. Consolidated revenues of $2.52 billion are up $320 million or 14.5% over Quarter 3, 2020 and represent a new all-time quarterly revenue record for EMCOR. Each of our reportable segments experienced quarter-over-quarter revenue growth. Excluding $50.3 million of revenues attributable to businesses acquired, pertaining to the time that such businesses are not owned by EMCOR and last year's quarter, revenues for the third quarter of 2021 increased nearly $270 million or a strong 12.2% when compared to the third quarter of 2020, which was still somewhat impacted by the effects of the COVID-19 pandemic. The specifics of each reportable segment are as follows: United States Electrical Construction revenues of $527.9 million increased $55.9 million or 11.8% from 2020s third quarter. Excluding acquisition revenues within the segment of $29.5 million this segment's revenues grew organically 5.6% quarter-over-quarter. Increased project activity within the commercial healthcare and institutional market sectors were the primary drivers of the period over period improvement. United States mechanical construction segment revenues of $999.6 million increased $108.1 million or 12.1% from Quarter 3, 2020. The results of this segment represent a new quarterly revenue record. Revenue growth during the quarter was driven by increases within the manufacturing, healthcare and commercial market sectors. With respect to the manufacturing market sector, we are in the early phases of construction on several food processing plants, which will accelerate further as we move into 2022. From a healthcare market sector perspective, there continues to be greater demand for our services, as we are engaged in a number of projects ranging from mechanical system retrofits to complete installations in both new and existing healthcare facilities. Lastly, within the commercial market sector, we continue to see strong demand for data center project work given growth in digital storage and cloud computing across the United States. And we continue to assist our e-commerce customers with the build out of the warehouse and distribution network through both traditional mechanical as well as fire protection services. Third quarter revenues from EMCOR's combined United States construction business of $1.53 billion increased $164 million or 12%, with 9.9% of such revenue growth being organic. This combined revenue performance eclipses the quarterly revenue record established by this group during the second quarter of this year. Despite this record revenue performance, each of our construction segments have increased the remaining performance obligations both year-over-year as well as sequentially. United States Building Services Quarterly revenues of $632.5 million increased $75.9 million or 13.6%. Excluding acquisition revenues of $20.8 million the segment's revenues increased at 9.9% organically. Revenue gains were reported within our mobile mechanical services division due to increase project, service repair and maintenance activities. Our commercial site based services division as a result of new contract awards, and our government services division given an increase in indefinite delivery indefinite quantity project volumes. EMCOR's industrial services segment revenues of $232.2 million increased $60.7 million or 35.4% due to improve demand for both field and shop services, as we are beginning to see some resumption of maintenance and small capital spending in the energy sector. United Kingdom Building Services revenues of $129.5 million increased $19.4 million or 17.6% from last year's quarter. Revenue gains for the quarter resulted from the continuation of strong project demand from the segment's maintenance customers who previously deferred such work during 2020 as the result of the COVID-19 pandemic in the related prolonged U.K. government lockdown measures. Additionally, the segment's revenues were positively impacted by $8 million, a favorable foreign exchange rate movements within the quarter. Selling, General, Administrative expenses of $243.9 million represent 9.7% of third quarter revenues and compared to $226.8 million or 10.3% of revenues in the year ago period. The current year's quarter includes approximately $5.3 million of incremental expenses from businesses acquired, inclusive of intangible asset amortization, resulting in an organic quarter-over-quarter increase in SG&A of $11.9 million. Consistent with my commentary during our second quarter earnings call, the prior year period benefited from substantial cost reductions resulting from our actions taken in response to the COVID-19 pandemic. A significant percentage of such savings pertained to employment costs, including furloughs, headcount, reductions, and temporary salary reductions. Conversely, EMCOR's considerable revenue growth in 2021 has necessitated an increase in headcount in the current year. Additionally, our SG&A for the current period reflects an increase in healthcare costs, as the result of a normalization in the level of medical claims, as well as greater travel and entertainment expense due to a partial resumption of certain business activities by our workforce, when compared to the same timeframe in 2020. The reduction in SG&A as a percentage of revenues as a result of the aforementioned increase in quarterly revenues without a commensurate increase in certain of our overhead costs, as we were able to successfully leverage our cost structure during this period of strong organic revenue growth. Reported operating income for the quarter of $137.4 million or 5.4% of revenues, compares to operating income of $135.9 million or 6.2% of revenues in 2020's third quarter. The 80 basis point reduction in operating margin loss due to reductions in gross profit margin within several reportable segments due to a less favorable revenue mix, which I will elaborate on during my individual segment commentary. Despite this reduction in quarter-over-quarter operating margin, EMCOR's $137.4 million of operating income represent a new third quarter record. Specific quarterly performance by segment is as follows: Our U.S. Electrical Construction segment operating income of $44.1 million decreased $1.9 million from the comparable 2020 period. Reported operating margin of 8.3% represents a reduction from the 9.7% margin reported in 2020's third quarter. The decrease in both operating income and operating margin is due to a decline in gross profit within the commercial and transportation market sectors given a change in the composition of project work performed quarter-over-quarter. In addition, and as disclosed in last year's third quarter, the results from the prior year period benefited from the settlement of final contract value on two projects, which favorably impacted this segments Q3, 2020 operating income and operating margin by $4.4 million and 70 basis points respectfully. Third quarter operating income for U.S. Mechanical Construction Services segment of $82.3 million represents a $2.3 million increase from last year's quarter, while operating margin of 8.2% represents an 80 basis point reduction from the 9% earned in 2020's 3rd quarter. From an operating margin perspective similar to our Electrical Construction segment the reduced profitability can be attributed to a less favorable mix of work during the quarter. Most notably, this segment experienced a decrease in gross profit margin within the manufacturing market sector, as the results for the period include increased revenues from certain large food processing projects, for which we are for which we are acting as the construction manager and carry lower than average gross profit margins when compared to our traditional subcontractor arrangements with our customers. Further, the results for the year ago period benefited from the favorable close out of several manufacturing projects, which resulted in incremental operating margin contribution. To be clear, the impacts within the quarter for both our Construction Segments relate to discrete projects or events. Our combined U.S. Construction business is reporting $126.4 million of operating income with an 8.3% operating margin. This level of operating income represents a new third quarter record for our combined construction business. I would like to add that though below that of the prior year, the operating margins today in 2021 for each of our Electrical and Mechanical Construction segments exceed both their three year and five year average margins. Operating income for U.S. building services is $31.6 million or 5% of revenues. This represents a reduction of $6.9 million and 190 basis points of operating margin quarter-over-quarter. Growth and operating income within the segment's commercial site based and government services divisions was not enough to offset the clients within its mobile, mechanical and energy services divisions. As I commented during last quarter's call, our Mobile Mechanical Services Division has a large number of fixed price capital projects currently in process, which traditionally have a lower gross profit margin profile than the segments call out service and small project work. In addition, during the quarter, we experienced some productivity issues partially due to the delayed receipt of certain equipment and materials, which has impacted our profitability both in terms of dollars and margin. Lastly, growth in the segment's SG&A expenses due to headcount additions to support revenue growth, as well as incremental amortization expense related to businesses acquired further compressed operating income and operating margin. Our U.S. Industrial Services segment operating loss of $3 million represents a $5.9 million improvement from the $8.9 million loss reported in 2020's 3rd quarter. Development improvement, this segment continues to be impacted by difficult market conditions within the oil and gas industry. Additionally, though, not as severe as in the prior year quarter, this segment experienced lost workdays due to both temporary plant and certain customer site closures, resulting from named storm activity in the Gulf Coast region during the 2021 quarter. U.K. Building Services operating income of $6.6 million or 5.1% of revenues represents an increase of $1.3 million and a 30 basis point improvement and operating margin quarter-over-quarter. Approximately $400,000 of this period-over-period improvement is due to positive foreign exchange movement, with the remainder attributable to an increase in project activity primarily within the commercial market sector. We are now on slide nine. Additional financial items of significance for the quarter not addressed in the previous slides are as follows: Quarter three gross profit of $381.3 million is higher than the comparable quarter by $18.2 million or 5%, gross margin of 15.1% as lower than the 16.5% and last year's third quarter due to the shift in revenue mix in each of our U.S. Electrical and Mechanical Construction segments as well as their U.S. building services segment as I just referenced during my segment operating income discussion. Diluted earnings per common share of $1.85 represents a new quarterly record for the company and compares to $1.11 per diluted share in last year's third quarter. Adjusting 2020's earnings per share for the negative impact and our prior year income tax rate resulting from the non-deductible portion of last year's non-cash impairment charges recorded during 2020 second quarter. Non-GAAP diluted earnings per share for the quarter ended September 30, 2020 was $1.76 when compared to our current quarter's performance, we are reporting a $0.09 or 5.1% quarter-over-quarter earnings per share improvement. With my quarter commentary complete, I will touch on some high level highlights with respect to EMCOR's results for the first nine months of 2021. Revenues of $7.26 billion represent an increase of $747.8 million, or 11.5%, of which 9.4% of such revenue growth was generated by organic activities. Operating income of $387.8 million or 5.3% of revenues represents a significant increase from reported operating income for the first nine months of 2020 and a double digit increase from the corresponding adjusted non-GAAP operating income figure for that period. Year-to-date diluted earnings per share is $5.17 and represents an increase of approximately 14% over 2020's adjusted non-GAAP earnings per share for the nine month period. Although not shown on the slide, my last comment on our year-to-date results is with respect to operating cash flow. For the first nine months of 2021, we have generated approximately $114 million of operating cash flow, which is well below 2020s record performance. As I commented last quarter, our substantial organic revenue growth has required increased working capital investment. This contrast to 2020 where for a large part of the year, we were liquidating our balance sheet due to the revenue declines resulting for the from the COVID-19 pandemic. Further, it is important to note that last year's nine month operating cash flow was favorably impacted by $82.3 million due to government stimulus measures that allow for the deferral of certain tax payments in both the United States and the United Kingdom. As previously communicated, my expectation for full year 2021 was operating cash flow in excess of $300 million. With our upward revision in 2021 revenue expectations, I am still targeting the same level of operating cash flow performance, but it is possible that we may not eclipse the $300 million target should our working capital investment be greater than expected during the fourth quarter. EMCOR's balance sheet remains strong and liquid. Cash on hand is down from year-end 2020 driven by cash used in financing activities are approximately $213 million, inclusive of $183 million used for the repurchase of our common stock and cash used in investing activities of $137.5 million, most notably due to payments for acquisitions that have cash acquired totaling approximately $114 million. These uses of cash were partially offset by cash provided by operations of $114 million as I noted just a few moments ago. Working capital has increased by nearly $20 million. Increases in accounts receivable on contract assets resulting from our substantial organic revenue growth during the period were partially offset by the decrease in our cash balance just referenced as well as our increase in contract liabilities. The increase in goodwill is predominantly a result of the five businesses acquired during the first nine months of this year. Net identifiable intangible assets increased by $19 million as the impact of additional intangible assets recognize the connection with the previously referenced acquisitions which was largely offset by $48 million of amortization expense during the year-to-date period. As a reference point, on a full year basis we anticipate depreciation and amortization expense, including both depreciation of property, plant and equipment, as well as amortization of intangible assets to be approximately $112 million for 2021. Total debt exclusive of operating lease liabilities is fairly consistent with that of December 2020. And EMCOR's debt-to-capitalization ratio has reduced to 11.4% from 11.9% at year-end, 2020. EMCOR remains well positioned to capitalize on available opportunities as our balance sheet, combined with the borrowing capacity available to us under our credit agreement provides us with great flexibility and pursuing numerous organic and strategic investments. I would like to give a call back to Tony, Tony? And I'm going to be on page 12 remaining performance obligations by segment and market sector. We had another strong project bookings quarter here at EMCOR. Each of our five reporting segments are RPO growth year-over-year, while as we mentioned earlier, simultaneously increasing revenue over the same period. We also saw RPO growth in seven of the eight market sectors in which we report. So it's fair to say that we're currently seeing strong future demand across all of our segments and market sectors. While September 30, is a single point in time, and project certainly ebb and flow, we are well positioned moving into 2022. As mentioned earlier, total company RPOs at the end of the third quarter were just under $5.4 billion, up $849 million or 18.7% when compared to the year ago level of $4.5 billion. Organic RPO growth was strong 15.6%. Year-to-date for the nine months completed in 2021 total RPOs have increased $784 million, or just over 17%. The strong booking activity across the company trends related to a book-to-bill ratio well over one, despite the company generating record revenues. Our two domestic construction segments experienced strong construction project growth in the quarter, with RPOs increasing $606 million or 16.5% from the same period last year. RPOs were lifted slightly by two Midwestern Electrical Construction Services acquisitions completed this year. Building Services or RPO levels increased 180 million or almost 29% from the year ago quarter, 142 million and 180 million was organic. We continue to see widespread small and short duration project demand and believe this will remain active through the end of the year and into 2022 as workers returned to buildings, campuses, factories and institutional facilities across the country post COVID and as the Delta variant hopefully continues to subside. Our Industrial Services segments, our RPO increase of $53 million from September 2020. Work within our heat exchanger shops has been building and while still are lower than historical levels, pricing appears to be improving a bit. Further, we continue to build capability, execute fixed price contract work, in both our electrical and mechanical trades in this segment. While this segment remains challenged due to macroeconomic forces, we are starting to see signs of increased activity, much as we expected as we move into 2022 and that is good news. In summary, we continue to see strong momentum in our core markets and our scale, diversity of demand, and ability to pivot to more resilient sectors has allowed us to continue to have strong bookings in RPO growth, but also very strong organic revenue growth. I'm now going to finish our discussion on pages 15 and 16. We are closing in on yet another record year performance at EMCOR despite a very difficult operating environment. At the beginning of the year, we expected that margins would be under some pressure. But we believe that we would have the necessary revenue growth to offset any margin compression. We foresaw the supply chain issues, but quite frankly, they are worse than we expected. We not only have seen increasing and volatile pricing, but lead times that extend through two to three times normal levels. Energy prices, especially gasoline and diesel costs have increased by more than we anticipated. We also expect COVID to be much less impactful than it was as a Delta variant caused disruption on some job sites and send some key supervision into quarantine. Working in this challenging environment, we continue to deliver in a no excuses manner and execute well for our customers while keeping our employees safe. Despite such headwinds, we are raising our guidance. Our new guidance is diluted earnings per share of $6.95 to $7.15 and we now expect our revenues between $9.80 billion and $9.85 billion. As we close on 2021, we do expect to continue to be challenged by supply chain and productivity issues. But we will work through them as we are resilient. We expect the non-residential market to show mid-single digit growth in 2021 and expect that momentum to continue into 2022. We, like all large employers will have to navigate complying with the pending emergency temporary standard or ETS with respect to mandatory vaccination and testing and the executive order mandating vaccination on federal contracts. The ETS has not been released and therefore the related costs to comply and the impact to our productivity are unknown. We expect to energy generate additional operating cash flow in the fourth quarter. And we expect to continue to be balanced capital allocators. To date into 2021, we have repurchased $183 million in EMCOR stock, paid $21 million in dividends and invested $114 million in acquisitions that will continue to position EMCOR for long term and sustained growth. Our board of directors just authorized a new and our largest share repurchase authorization of an additional $300 million. We continue to have a very active acquisition pipeline.

emcor group q3 revenue rose 14.5% to $2.52 billion. q3 earnings per share $1.85. q3 revenue rose 14.5 percent to $2.52 billion. sees fy earnings per share $6.95 to $7.15. sees fy revenue $9.8 billion to $9.85 billion. authorizes additional $300 million share repurchase program.

In 2020, we had a terrific year despite an extremely challenging operating environment. We delivered extraordinary results through disciplined execution and resilience. I am extremely proud of our EMCOR team. I don't think any of us could have imagined this high level of performance when we started to understand the impact of COVID-19 on our operations in March of 2020. In 2020, we had $8.8 billion in revenues and set records on an adjusted basis for earnings per diluted share of $6.40, operating income of $490 million and operating income margin of 5.6%. We also had record operating cash flow of $806 million. Mark's going to cover all the financials in much more detail and especially the key components of our cash flow performance in his financial commentary, inclusive of the fourth quarter and full year 2020 performance. We delivered these stellar results because we have diversity and demand for our services. And we have end markets that have proved resilient and have provided us with opportunities to execute well for our customers. These results are a testament to our skilled employees and our subsidiary, segment and corporate leadership, who kept focused and resolute through the ever-changing environment in 2020. Across our company, we worked hard to keep our employees safe, and it was our number one priority throughout the year. We innovated and found ways to maintain and even improve our productivity. We became leaner and even more expeditious in our decision-making. And we're able to leverage technology to connect our leadership effectively to the front lines despite COVID-19 protocols. We did not let obstacles become excuses. Instead, we overcame obstacles, and we delivered exceptional results. I now want to highlight some of our segment performance. Our Electrical Construction segment performed well with 8.4% operating income margins. Despite the disruptions in some of our operations from COVID-19 and due to shutdowns, we still posted outstanding results. These results were driven by excellent execution in the commercial sector driven by data center and telecommunication and really excellent execution across all market sectors. We've performed the work well and really innovated on the means, the methods and the scheduling so that we can not only keep our employees safe, but enhance our productivity. Our Mechanical Construction segment had an exceptional year by any measure. We also had 8.4% operating income margins with exceptional performance across the commercial sector, again driven by telecommunications and data centers. And we also had strength in warehousing, manufacturing, water and wastewater and the healthcare end markets. We showed great innovation through increased use of BIM or building information modeling and prefabrication and worked hard to keep our employees safe and productive. We believe in both of our construction segments that we not only met, but we exceeded our customers' expectations. Our United States Building Services segment team showed grit and resilience as they faced the COVID-19 disruption in late March, April and May, with many of our customer sites not acceptable, bookings off as much as 40% in some of our subsidiary companies and in some of our product lines and a very cautious resumption of decision-making by our customers to allow us to resume service and projects. We did rebound robustly from mid-June forward, and we're well prepared to execute project work for our customers that optimize their equipment and control systems, improve the wellness of their facilities through indoor air quality or IAQ solutions and sought to help our customers return to work safely and productively. We also served as the boots on the ground for our customers to keep lightly occupied buildings, campuses and schools operational, functioning and safe over the past 10 months. We are well positioned to keep serving our customers as they reopen and seek to make their building safe, efficient and productive for their employees. Our U.K. Building Services segment mirrored the performance of our U.S. Building Services segment. We navigated the severe lockdown actions in the U.K. and continued to keep our customers productive, operational and able to conduct their businesses. We also made organizational changes that enhanced our leaders' responsiveness by making our organization even flatter, more aligned and leaner, which has led to crisper and more efficient decision-making. Our U.K. team continues to win in the market as we have a culture of innovation and execution. As you all know, our Industrial Services segment mostly serves the downstream oil and gas or refining and petrochemical markets. These end markets had a severe dislocation of demand as planes stop flying and people stop driving. And this segment was also impacted at the beginning of the year with a disruption in the global oil and gas markets. We cut costs aggressively and maintain profitability on an EBITDA basis. We are well positioned with demand for our services returns, which is not likely to happen until the fourth quarter of this year. We expect the larger, more sophisticated, well-capitalized service providers to emerge stronger. And yes, we are clearly one of them. We exit 2020 with our remaining performance obligations or RPOs at an all-time high of $4.6 billion, 13.8% higher than the year-ago period. We have very strong RPOs and are continuing to benefit from the very strong demand for data center construction, logistics and supply chain support, especially with our fire protection trade, healthcare, water and wastewater. And we expect manufacturing to be as strong also as 2021 progresses. We expect to benefit from increasing demand for IAQ, that's indoor air quality, and building efficiency projects and solutions. We depart 2020 with an exceptional balance sheet that allows us the room to grow and build for the future while continuing to return cash to our shareholders through dividends and share repurchases. 2020 was an extraordinary year, and we performed exceptionally well, which is a real testament to our people, our subsidiary leaders, our segment staff and leadership and our corporate staff and leadership. I will now turn the discussion over to Mark. Over the next several slides, I will provide a detailed discussion of our fourth quarter results before moving to our full year performance, some of which Tony outlined during his opening commentary. So let's discuss EMCOR's fourth quarter performance. Consolidated revenues of $2.3 billion in quarter four are down $122.4 million or 5.1% from 2019. Our fourth quarter results include $55.4 million of revenues attributable to businesses acquired pertaining to the period of time that such businesses were not owned by EMCOR in last year's fourth quarter. Acquisition revenues positively impacted both our United States Mechanical Construction and United States Building Services segments. Excluding the impact of businesses acquired, fourth quarter 2020 consolidated revenues decreased $177.9 million or 7.4% organically. Our segment performance was mixed within the quarter, with most of our reportable segments experiencing quarter-over-quarter organic revenue declines. In general, we have seen reductions in revenues in those geographies or market sectors which are continuing to be most significantly impacted by the COVID-19 pandemic. However, when we consider the incremental revenue generated from our acquisitions, we were successful in generating fourth quarter revenue growth from three of our five reportable segments. Specific segment revenue performance for the quarter is as follows: United States Electrical Construction segment revenues of $493.5 million decreased $71 million or 12.6% from quarter four 2019. Revenues declined across multiple market sectors due to the continuing impact of the COVID-19 pandemic, including the associated containment and mitigation measures as well as the curtailment of capital spending by some of our customers. Consistent with my third quarter commentary, this segment experienced a significant reduction in revenues from industrial project work within the manufacturing market sector, where certain of our electrical businesses perform services for both midstream and upstream oil and gas customers. Additionally, the segment's operations that serve the metropolitan New York and California markets continue to face revenue headwinds as these geographies remain some of the most restrictive with regards to COVID protocols. United States Mechanical Construction segment revenues of $969.4 million increased $73.8 million or 8.2% from quarter four 2019. Excluding acquisition revenues of $24.2 million, the segment's revenues increased $49.6 million or 5.5% organically. Revenue growth within the quarter was broad based across most market sectors, with commercial and healthcare representing the most significant period-over-period increases. These revenue gains were partially offset by a quarterly revenue decline in manufacturing market sector activity due to the completion or substantial completion of certain large projects during the early part of 2020. This revenue performance represents an all-time quarterly record for our United States Mechanical Construction segment and surpasses the previous record set in 2019's fourth quarter. EMCOR's total domestic construction business fourth quarter revenues of $1.46 billion increased $2.7 million or less than 0.25%. United States Building Services revenues of $568.1 million increased $29.1 million or 5.4%. However, when excluding acquisition revenues of $31.2 million, this segment's quarterly revenues decreased $2.1 million or 40 basis points. Revenue gains within their mobile mechanical services division resulting from incremental contribution from acquired companies and their commercial site-based services division due to new contract awards or scope expansion on certain existing contracts were partially offset by a quarter-over-quarter revenue decline within the segment's energy services division due to reduced large project activity when compared to 2019's fourth quarter. Consistent with our United States Mechanical Construction Services segment, revenue performance within our United States Building Services segment represents an all-time quarterly record. United States Industrial Services revenues of $135.5 million decreased by $163.7 million or 54.7% as this segment continues to be impacted by the negative macroeconomic conditions and uncertainty within the markets in which it operates. Cost control and cash preservation actions taken by customers of this segment have resulted in the suspension of capital spending programs and the curtailment of maintenance activity, which has severely impacted demand for our Industrial Service offerings. With the rise in telecommuting and the various restrictions on travel in response to COVID-19, there have been significant reductions in both vehicle miles driven and airline miles traveled, which is further prolonging the weakened demand this segment has been experiencing since late quarter one of 2020. United Kingdom Building Services segment revenues of $115 million increased $9.4 million or 8.9% from last year's quarter. Revenue gains for the quarter resulted from strong project activity as well as incremental revenue from new contract awards. Additionally, fourth quarter 2020 revenues were positively impacted by $2.9 million as a result of favorable foreign exchange rate movement in the period. Selling, general and administrative expenses of $244.6 million reflects an increase of $3.7 million from quarter four 2019. The current period includes approximately $4.4 million of incremental expenses from businesses acquired, inclusive of intangible asset amortization, resulting in an organic quarter-over-quarter decrease of approximately $700,000. A reduction in salaries expense due to a decrease in head count necessitated by lower organic revenue as well as reduced travel and entertainment expenses due to a combination of cost-avoidance measures as well as restricted company travel were the primary reasons for the organic decline in SG&A. These decreases were largely offset by an increase in quarterly incentive compensation expense due to EMCOR's actual operating performance exceeding its previously forecasted 2020 full year results. As a percentage of revenues, selling, general and administrative expenses totaled 10.7% in quarter four 2020 versus 10% in the year-ago period. The quarter-over-quarter increase can be attributed to the reduction in our consolidated quarterly revenues without a commensurate decrease in certain of our fixed overhead costs, including those of our Industrial Services segment as we do not deem the current operating environment to be permanent. Our assessment continues to be based on our evaluation of future market opportunities. And we expect to see some return to normalcy in industrial maintenance and capital spending when we ultimately move beyond the depressed demand caused by the COVID-19 pandemic. Reported operating income for the quarter of $137.6 million represents a $14.7 million or 12% increase when compared to operating income of $122.9 million in last year's fourth quarter. This operating income performance eclipses our previously established all-time quarterly record, which was achieved in 2020's third quarter. Our fourth quarter operating margin was 6%, which compares favorably to the 5.1% of operating margin reported in 2019's fourth quarter. We experienced the operating margin expansion within each of our reportable segments other than our U.S. Industrial Services segment, which is reporting an operating loss for the fourth quarter and our U.K. Building Services segment, which achieved a consistent margin in each year's quarterly period. Specific quarterly performance by reportable segment is as follows: our United States Electrical Construction segment had operating income of $43.4 million, which increased by $2.1 million from the comparable 2019 period. Reported quarterly operating margin is 8.8% and represents a 150 basis point improvement over 2019's fourth quarter. This increase in both operating income dollars and operating margin is largely attributable to increased gross profit contribution from commercial market sector activities, inclusive of numerous telecommunications construction projects. These gross profit gains were partially offset by reduced gross profit contribution from the transportation and manufacturing market sectors due to both the closeout of projects in prior periods as well as the continued headwinds attributable to the COVID-19 pandemic. Fourth quarter operating income of the United States Mechanical Construction Services segment of $100.4 million represents a $31.5 million increase from last year's quarter, while operating margin in the quarter of 10.4% represents a 270 basis point improvement over 2019. This segment has continued to experience strength in the majority of the market sectors we serve, most notably demonstrated by increased gross profit contribution from project activity in the commercial, healthcare and institutional market sectors. In addition, our Mechanical Construction segment experienced a more favorable mix of work than in the prior year and benefited from strong performance by our fire protection operations. Our combined U.S. construction business is reporting a 9.8% operating margin and $143.7 million of operating income, which has increased from 2019's fourth quarter by $33.5 million or 30.4%. Operating income for United States Building Services of $28 million represents a $3.8 million increase from last year's fourth quarter, and operating margin of 4.9% represents an improvement of 40 basis points when compared to the prior year. This segment experienced improved gross profit performance from its mobile mechanical services division, inclusive of incremental contribution from acquired companies. In addition, the segment continues to benefit from reduced levels of selling, general and administrative expenses due to cost-mitigation actions implemented in response to the COVID-19 pandemic. Our United States Industrial Services segment operating loss of $8.2 million represents a decline of $21.3 million, which compares to operating income of $13.1 million in last year's fourth quarter. These conditions have resulted in considerable reductions in capital spending by certain of our customers, which has led to a decrease in demand for this segment's service offerings. This environment was further exacerbated by an active hurricane season, which resulted in the suspension of planned maintenance activities that would have occurred during both quarters three and four of 2020. United Kingdom Building Services operating income of $4.2 million represents an increase of approximately $300,000 over quarter four of 2019. Operating margin was 3.7% for both quarter periods. We are now on slide nine. Additional financial items of significance for the quarter not previously addressed are as follows: quarter four gross profit of $383.9 million or 16.8% of revenues is improved over last year's quarter by $19.1 million and 160 basis points of gross margin. Restructuring expenses in 2020's fourth quarter pertain to the realignment of management resources within our combined U.S. construction operations. Diluted earnings per common share of $1.45 compares to $1.54 per diluted share in last year's fourth quarter. Adjusting our 2020 quarterly performance for the negative impact on our income tax rate resulting from the nondeductible portion of the noncash impairment charges recording -- recorded during the second quarter of 2020, non-GAAP diluted earnings per share for the quarter ended December 31, 2020, is $1.86, which favorably compares to last year's fourth quarter by $0.32 or nearly 21%. Our tax rate for quarter four of 2020 is 41.8%, which is significantly higher than the tax rate for the corresponding 2019 period due to the nondeductibility of the majority of the impairment charges just referenced. My last comment on slide nine is with respect to our $259.5 million of operating cash flow in the quarter, which favorably compares to $178.8 million of operating cash flow in the year-ago period and reflects the continued effective management of working capital by our subsidiary leadership teams. Our operating cash flow was aided by the organic decline in revenues, which resulted in a contraction in accounts receivable. Additionally, the deferral of the employer's portion of social security taxes in the United States benefited our cash flow by approximately $35.2 million during the fourth quarter of 2020. On a full year basis, the social security tax deferrals, coupled with the deferral of value-added tax in the United Kingdom, has favorably impacted our 12-month operating cash flow by approximately $117.3 million. These amounts will be repaid in 2021 and 2022. And obviously, we'll have the opposite effect on our operating cash flow in such future periods. With the fourth quarter commentary complete, I will now augment Tony's introductory remarks on EMCOR's annual performance. Consolidated revenues of $8.8 billion represent a decrease of $377.6 million or 4.1% when compared to our record annual revenues in 2019 of $9.17 billion. Our year-to-date results include $269.6 million of revenues attributable to businesses acquired pertaining to the period of time that such businesses were not owned by EMCOR in the 2019 period. Acquisitions positively impacted each of our United States Electrical Construction, United States Mechanical Construction and the United States Building Services segments. Excluding the impact of businesses acquired, year-to-date revenues decreased organically 7.1%, primarily as a result of the significant revenue contraction experienced during quarter two as the majority of our operations were most significantly impacted by the COVID-19 pandemic during such period. In addition, our annual revenues were negatively impacted by a decrease in demand for certain of our service offerings within our United States Electrical Construction services and United States Industrial Services segments as a result of the adverse conditions experienced within the oil and gas industry. Discrete segment revenue performance for full year 2020 is as follows: United States Electrical Construction segment revenues of $1.97 billion decreased $243.2 million or 11% from 2019's $2.22 billion of revenues; acquisitions contributed $25.4 million of incremental revenues, resulting in an organic decline of $268.5 million or 12.1%. Revenue contraction within the majority of the market sectors in which we operate. Most notably, the commercial and manufacturing market sectors were the primary drivers of this year's year-over-year decrease. As I mentioned in my commentary on our fourth quarter results, although this segment has a diverse geographic footprint, a number of its operating companies within both the metropolitan New York and California markets were severely impacted by COVID protocols, which resulted in a decrease in the number of short-duration project opportunities as well as various project delays. These impacts, coupled with the completion or substantial completion of certain large projects in 2019, contributed to the decline in organic annual revenues. In addition, and as previously referenced, certain of our operations in the segment which are exposed to the upstream and midstream oil and gas sector experienced a significant decline in demand in 2020. Partially offsetting these revenue reductions were increased revenues from project activities within the institutional and hospitality market sectors during the year. United States Mechanical Construction revenues of $3.49 billion increased $145.2 million or 4.3% compared to 2019. Acquisitions contributed $188.8 million of incremental revenues to the segment, which, when excluded, results in an organic revenue decline of $43.7 million or 1.3% from 2020. This organic decrease can be largely attributed to reduced project volume within the manufacturing market sector with a heavy concentration in the food processing submarket sector as a result of the completion or substantial completion of certain large projects in 2019. Similar to our United States Electrical Construction segment, this segment additionally experienced the negative effects of the COVID-19 pandemic, which resulted in a reduced number of short-duration project opportunities during calendar 2020. United States Building Services segment revenues of $2.11 billion increased $3.2 million or less than 0.5%. Acquisitions contributed $55.4 million of revenues, resulting in an organic revenue decline of 2.5% when compared to full year 2019. The decrease in project and building controls activities within the segment's mobile mechanical services division, largely as a result of the impact of the COVID-19 pandemic, which resulted in the temporary closure of certain customers' facilities, coupled with the decrease in large project activity within the segment's energy services division were the primary contributors to such organic revenue reduction. In addition, the segment experienced a decrease in revenues from its government services division as a result of the loss of certain contracts not renewed pursuant to rebid. These revenue contractions were partially offset by increased customer demand for certain services aimed at improving the indoor air quality within their facilities as well as an increase in revenues within the segment's commercial site-based services division as a result of new contract awards and scope expansion on certain existing contracts. United States Industrial Services segment revenues of $797.5 million decreased $290.1 million or 26.7% from 2019's $1.09 billion of revenues. At the risk of sounding repetitive, for most of 2020, the segment has been severely impacted by negative conditions and uncertainty within the markets in which it operates due to the dislocation between crude oil supply and demand resulting from COVID-19 and geopolitical tensions within OPEC. In addition, during the back half of 2020, the segment experienced suspension and deferral maintenance in capital projects by its customers as a result of hurricane and tropical storm activity in the United States Gulf Coast region. Revenues of our United Kingdom Building Services segment for 2020 increased 1.7% to $430.6 million, primarily as a result of new maintenance contract awards within the commercial and institutional market sectors. Revenues were also favorably impacted by $2.3 million as a result of exchange rate movement in the pound sterling year-over-year. Selling, general and administrative expenses of $903.6 million represent 10.3% of revenues as compared to $893.5 million or 9.7% of revenues in 2019. Full year 2020 SG&A includes $29.6 million of incremental expenses, inclusive of intangible asset amortization pertaining to businesses acquired. Excluding such incremental amounts, our SG&A has decreased $19.4 million on an organic basis, primarily as a result of certain cost reductions resulting from our actions taken in response to the COVID-19 pandemic. As referenced during my quarter commentary, the increase in SG&A as a percentage of revenues is a result of the organic decrease in our revenue without a commensurate decrease in certain of our fixed overhead costs as we do not deem the current operating environment to be permanent. 2020's year-to-date operating income is $256.8 million. Adjusting this amount to exclude the noncash impairment loss on goodwill, identifiable intangible assets and other long-lived assets recorded in the second quarter, our non-GAAP operating income for the year was $489.6 million. This compares to operating income of $460.9 million for full year 2019 and represents a $28.7 million or 6.2% improvement year-over-year. Despite the headwinds experienced in 2020, three of our five reportable segments achieved higher operating income and higher operating margins than that of the prior year. Of the two segments which did not, United States Building Services is reporting a modest decline of just over 1%, while our United States Industrial Services segment suffered a significant year-over-year reduction, resulting in an operating loss for 2020. With regard to each segment's discrete performance, I will start with our electrical -- United States Electrical Construction segment. Their 2020 operating income of $166.5 million represents an all-time segment record, and it is an increase of $4.8 million or 3% compared to the prior year. Operating margin for 2020 is 8.4%, which is 110 basis points higher than 2019. This year-over-year improvement in operating income dollars was due to a reduction in selling, general and administrative expenses due to cost-control measures enacted during the course of 2020. The increase in operating margin for the year was a result of an increase in gross profit margin given favorable project execution and a more profitable mix of work within this segment. These improvements in gross profit margin were partially offset by an increase in the ratio of selling, general and administrative expenses to revenues as a result of the year-over-year revenue contraction within the Electrical Construction segment. United States Mechanical Construction operating income of $292.5 million increased $67.5 million or 30% over 2019 levels, and operating margin reached 8.4% versus 6.7% in the prior year. Acquired companies contributed incremental operating income of $9.3 million, inclusive of $12.7 million of amortization expense associated with identifiable intangible assets. The increase in operating income for 2020 was primarily due to strong project performance throughout the year in the majority of the market sector served by this segment, resulting in an increase in annual gross profit. The 170 basis point improvement in operating margin was also a result of our solid project execution and improved gross profit margin, most notably within the manufacturing and commercial market sectors. These increases in gross profit and gross profit margin were partially offset by an increase in selling, general and administrative expenses, primarily as a result of an increase in incentive compensation expense due to the improved year-over-year operating performance for this segment. United States Building Services operating income for 2020 of $113.4 million declined by $1.3 million or 1.2% due to a reduction in year-over-year large project activity within the segment's energy services division as well as decreased project and building control opportunities within their mechanical services division due to both temporary closure and restricted access to certain customer facilities impacted by the COVID-19 pandemic. These reductions were partially offset by incremental operating income contribution from companies acquired, which totaled $4.5 million, inclusive of $3.2 million of amortization expense associated with identifiable intangible assets. In addition, this segment experienced increased gross profit resulting from greater demand for certain services aimed at improving indoor air quality as various customers made changes to their HVAC systems in advance of their employees returning to work as recommended by the Center for Disease Control. Operating margin of 5.4% was consistent with the prior year as a reduction in gross profit margin was offset by a decrease in the ratio of selling, general and administrative expenses to revenues due to certain cost-reduction measures taken during 2020. Our United States Industrial Services segment incurred an operating loss of $2.8 million for 2020 as compared to operating income of $44.3 million in 2019. This segment implemented significant cost reductions during the year in an effort to mute the year-over-year decline. However, as previously discussed, this segment's overhead structure includes a significant investment in fixed infrastructure, including plant and equipment. As we view current market conditions to be -- as to be temporary, that infrastructure is needed to respond to changes in demand patterns once they ultimately recover. Operating income of our United Kingdom Building Services segment of $20.7 million or 4.8% of revenues compares to operating income of $18.3 million or 4.3% of revenues in the prior year. The $2.3 million improvement is largely due to an increase in gross profit from new maintenance contract awards, while the 50 basis point expansion in operating margin is attributable to both the increase in gross profit margin as well as a reduction in the ratio of selling and general and administrative expenses to revenues. SG&A of this segment benefited from various cost-control initiatives implemented by our U.K. team. We are now on slide 12. Additional key financial data on slide 12 not addressed during my full year commentary is as follows: year-to-date gross profit of $1.4 billion is greater than 2019's gross profit by $39.5 million, while gross margin of 15.9% is higher than last year's 14.8% by 110 basis points. Total restructuring costs of $2.2 million are increased from 2019 due to actions taken during 2020 to both realign certain management functions as well as rightsize our cost structure in light of the revenue headwinds we faced. Diluted earnings per common share was $2.40 compared to $5.75 per diluted share a year ago. When adjusting this amount for the impact of the noncash impairment charges recorded in 2020 second quarter, non-GAAP diluted earnings per share of $6.40 as compared to the same $5.75 in last year's annual period. This represents a $0.65 or 11.3% improvement year-over-year. We are now on slide 13. As outlined on this slide, EMCOR's liquidity profile remains strong despite the headwinds we faced during the course of 2020. Our cash balance has increased from $358.8 million at December 31, 2019, to $902.9 million at the end of 2020. Operating cash flow of $806.4 million, aided by the FICA and VAT cash tax deferrals previously referenced, was the primary driver of this increase. Operating cash flow was partially offset by cash used in investing activities of nearly $95 million, predominantly representing payments for acquisitions of businesses and capital expenditures as well as cash used in financing activities, which totaled $172 million and consisted of the repurchase of our common stock, net repayments under our credit facility and dividends paid to our stockholders. Working capital has increased by over $236 million as a result of the increase in our cash balance, partially offset by a reduction in accounts receivable given the lower organic revenue during the period as well as an increase in contract liabilities due to advanced billing on certain long-term construction projects. Other changes in key balance sheet positions of note are as follows: goodwill has decreased since December 31, 2019, as a result of the noncash impairment charge recognized during the second quarter of 2020, partially offset by an increase in goodwill resulting from businesses acquired or purchase price adjustments made during the year. Our identifiable intangible asset balance has decreased since the end of last year largely due to $60 million of amortization expense recorded during 2020, which was partially offset by incremental intangible assets recognized as a result of the acquisition of three businesses during calendar 2020. Total debt has decreased by $35.7 million since the end of 2019, reflecting our net financing activity during the year. And course, debt-to-capitalization ratio has decreased to 11.9% from 13.2% in the year-ago period. Lastly, our stockholders' equity has decreased slightly since December 2019 as our net income was offset by share repurchases, dividend payments and postretirement plan liability adjustments made during 2020. Our balance sheet, in conjunction with the credit available to us, continues to put us in a position to invest in our business and achieve our strategic objectives as we look forward to 2021 and years beyond that. Hey, Mark, that's a well-deserved drink of water. And year-end was always the toughest and we've been doing it a long time together. Remaining performance obligation or RPO by segment and market sector. I'll go through the numbers briefly and then go deeper to the market trends we are seeing. As I stated in my remarks, total RPOs at the end of 2020 were a shade under $4.6 billion, up $559 million or 13.8% when compared to the year-ago level of $4.03 billion. The strength of our RPO and the associated bidding activities surprised us a bit given the uncertainty of the pandemic, economic dislocation and disruptions for the year. However, as we have said in the past, during uncertain and challenging times, we have often seen a flight to quality and fiscally strong construction and service providers prosper. It's still a little too early to tell by 2020 and now into 2021. It sure looked like one of those times. I should probably repeat. My mic wasn't on. So I'm going to go on to page 14, remaining performance obligations by segment and market sector. Look, they're up $559 million or 13.8% for those that didn't hear it. And really, there's a flight to quality a lot of times when you move from 2020 into 2021, and this certainly looks like one of those times. Our domestic construction segments experienced strong project growth in 2020 with RPOs increasing $495 million or 15.2% since the end of 2019 as we continue -- and continue to see demand for electrical mechanical systems, both in new construction and retrofit projects. Our United States Building Services segment RPOs increased in the quarter as this segment's small project repair service work continue to rebound from its abrupt, almost hard stop at the beginning and the height of COVID-19. Some of this resumption is a return of regularly scheduled maintenance on mechanical systems and then the return of small project work. And some is focused, as you'd imagine, around modifications and improvements in IAQ, indoor air quality, which I will discuss in detail in a few slides. It was quite a recovery from the March, April and May time frame when the segment was hit especially hard as described earlier, with bookings down 40% in many cases. Over on the right side of the page, we show RPOs by market sector. Throughout 2020, we experienced strong year-over-year growth in the commercial, healthcare and water and wastewater sectors. Commercial projects, which make up 41% of that total RPOs, increased $297 million or close to 19% for the year. As we stated last quarter and continued to experience in the fourth quarter of this year, demand for hyper data -- scale data center construction has high demand, as does high-tech manufacturing, and warehousing and logistics also remain strong. We are a nationwide leader in this section of the commercial market sector, and quite frankly, I don't see any letup in this activity anytime soon. We are also in Part one design discussion on several large design build through process opportunities. For the year, healthcare project RPOs increased $207 million or 56%. And water and wastewater project RPOs grew similar by 57% to $173 million. As one might surmise, given the impact of the pandemic, healthcare as a sector of the nonresidential construction market is expected to be slightly higher in 2021 and likely better than that for us as our customers build new facilities and retrofit existing facilities. By the way, RPOs in these three market sectors are at all-time highs for us since we transitioned to RPO reporting from backlog reporting in March of 2018. The nonresidential market, as measured by the U.S. Census Bureau for put-in-place activity, remains a very large market, and it was roughly $800 billion at the end of December 31, 2020. It's down 5% in 2020. However, it is not a uniform market, given its size and breadth and opportunities still exist. On the next page, I will discuss how well-thought and patient capital allocation strategy has allowed this growth in our RPO base and growth to occur despite choppy and uncertain overall markets. And on nonresidential market, they decreased 5%. I'm now on page 15, capital allocation. We have long had a major market presence in mechanical and electrical construction services and have continued to allocate capital to fill in the white space, either geographically or by adding capability in these important segments. Further, we have used our capital to build leading capabilities in HVAC service, building controls and mechanical system retrofit. We have built that capability and capacity through organic growth and acquisition in a sustained manner over many years. We are also one of the country's leading life safety contractors. And this activity mostly resides in our mechanical, and that is the sprinkler fitters and electrical, fire alarm and security installation and upgrades and low-voltage systems construction segments. Again, these capabilities were built over a long period of time through acquisition and organic investment. These are concrete examples where we have built successful platforms that allow us to have the capability to serve a broad spectrum of customers with the right products and specialty trade capabilities. Our investment decisions and patience have allowed us to build and maintain capability through cycles and serve a diverse set of customer opportunities. We have not only invested in over 20 acquisitions and we spent around $555 million on those acquisitions since 2017 until today, but we also have returned significant cash to our shareholders through share repurchases and dividends. I'm now on page 16, titled Resilient Markets. As we discussed on the previous two pages, we have shown that we have very good diversity of demand at EMCOR, and we have used that capital to grow organically and through acquisition to allow us to build upon such diversity of demand and resiliency in our business. This is not an accident, but it is a part of our long-term capital allocation strategy as discussed on the previous page. For example, EMCOR's data center capabilities were built enhanced over a very long period of time. We started building the largest data centers in the country for financial institutions and the original hosting providers almost 20 years ago. Today, we build data centers that are five times larger to seven times larger than these previous "large data centers". We have continued to grow that capability over the last five years and expanded through organic investment or acquisition or a combination of both. We are one of the leaders in the specialty contracting for these complex facilities. That's all the electrical trades, mechanical trades and sprinkler fitters. Data center construction is a good market for us, and we expect it to be for the foreseeable future. It is also a growing part of our maintenance activities. We have -- we are fortunate to have other markets that have shown resiliency. We continue to support our customers' e-commerce growth primarily through our life safety services and the construction of large cold storage and other warehouse facilities as our customers transform their warehouse networks to allow for more fast-paced growth. We continue to believe that we are very well positioned to support our customers as they build more resiliency into their supply chains by reshoring projects. We also continue to see significant opportunity for large and small design-build food processing clients. Health care is also a good market for us and has been for a very long period of time. These are complex facilities that are seeking to become more flexible in the delivery of their care in the long term. Water and wastewater is a market that we believe will have significant opportunity for us and has significant opportunity for us today and also in the next three to five years, especially in Florida. And finally, as I have discussed previously, is our position as a leading HVAC services contractor. We are in a compelling position to provide indoor air quality solutions and services. We see very strong demand currently and expect this to continue over many years. We have experienced and are continuing to experience strong demand for upgrading, enhancing HVAC and building control systems for both energy efficiency and flexibility of demand and use. This has always been a good market for EMCOR for many years, and it spans all market sectors. As discussed, serving these resilience markets is not by chance. We've built this capability over many years, and we have some of the best field leadership, trade supervision and skilled trades people in the industry to execute in these markets. I'm now going to wrap this up on page 17 and 18. As we enter 2021, we are still in the world of COVID-19 mitigation and restriction. The oil and gas markets are still depressed, and the nonresidential market is expected to decline by another 3% to 5%. Despite that less-than-cheery backdrop, we expect to continue to perform well in 2020. We expect revenues of $9.2 billion to $9.4 billion and expect to earn $6.20 to $6.70 in earnings per diluted share. 2021 should be another year of outstanding performance. We will have to execute very well to maintain the 2020 record levels of operating income margins of 8.4% in our Electrical and Mechanical Construction segments. We do expect to increase revenues, which may help us mitigate this challenge. Underlying this range are the following assumptions: our Industrial Services segment does not materially improve until the fourth quarter but gain strong momentum headed into 2020 as demand for refined products will continue to be challenged during 2021, especially through the end of the second quarter. The nonresidential construction market will decline modestly. We will continue to execute well in our more resilient rock market sectors to include manufacturing, commercial driven by data centers and logistics and warehousing, water and wastewater, energy retrofits and healthcare. Our end market diversity has been and continues to be a real strength of EMCOR. We do not expect a more restrictive COVID-19 environment than what we are operating in today. We do expect a more normal pre-COVID-19 operating environment to emerge as the year progresses. We are operating near 100% capability on our jobs with no meaningful COVID-19-induced issues. Our leadership and trades people have learned how to work and even prosper under the COVID precautions. We have learned to plan and execute, but always have the mindset that our employee safety comes first, which is nothing new or novel for us as it is one of our core values. We expect to continue to help our customers improve their facilities' air quality with indoor air quality solutions, improve energy efficiency through replacement projects and optimizing their systems. And we are going to help them bring back their employees back to work with an improved piece of mind through our efforts. Our ability to move to the upper range of our earnings guidance range will depend on the following: the nonresidential market, especially our more resilient markets, are stronger than projected because the bounce back is faster as the U.S. and the U.K. normalizes from COVID-19 restrictions. Our refining and petrochemical customers begin to gain more comfort with improved demand for rerefined products and increase their scope for this year's work performed by us. Our momentum in indoor air quality and efficiency projects continues to not only increase but accelerates further, and our productivity stays strong as we transition to more normal operating conditions. I'm going to talk a little bit about what happened in Texas last week as we have a significant business in Texas. Clearly, the power disruption in Texas last week affected not only EMCOR's business operations, customer sites, but also more importantly, our employees and their families. Many of our customers went to skeleton staff for three to five days, and many shut down operations almost completely. We have mostly resumed operations in our Industrial Services and also our construction services and Building Service customer sites. We will be there to help our customers complete their planned turnarounds, execute on planned maintenance and repairs related to the storm and to resume project work already under way or that was ready to start in the last few weeks. We have may -- we may have work that was planned for the first quarter that will now extend into the second quarter that -- and it may have had more activity in the first quarter than it will now have. We expect to continue to be balanced capital allocators as we have shown on the previous pages. We have more capital to allocate in balance, but we know how to do that. And however, our guidance contemplates that we will continue to be disciplined allocators between organic growth investments, acquisitions, share repurchases and dividends.

q4 earnings per share $1.45. q4 revenue $2.28 billion versus refinitiv ibes estimate of $2.2 billion. sees fy 2021 earnings per share $6.20 to $6.70. q4 non-gaap earnings per share $1.86. sees fy 2021 revenue $9.2 billion to $9.4 billion.

Before we begin, I'll cover two items. Actual events or results could differ materially. Certain factors related to future expectations are or will be detailed in our fourth quarter and full-year 2020 financial results news release. Reconciliations to the most directly comparable GAAP financial result -- financial measures and other associated disclosures, including a description of the excluded and adjusted items are available in the fourth quarter and full-year 2020 financial results news release, which can be found on our website. We've had a strong recovery in the fourth quarter and robust performance for the full-year despite the challenges associated with COVID-19. I'm incredibly proud of how Eastman employees around the world responded to these challenges and stepped up to help us deliver in 2020. And here are some of the highlights. Early in the year, we took quick and decisive action to adjust our operations to keep employees safe and preserve our operational integrity. We shifted our financial forecast for prioritizing cash and liquidity given the uncertainties and we delivered another year of outstanding cash flow, our fourth consecutive year of cash flow greater than $1 billion. While we prioritized cash, our earnings performance was resilient, which is a testament to the tremendous investments we've made in our innovation portfolio and our overall business portfolio over the last decade, including enhancing our market development and commercial capabilities. Additionally, we demonstrated we have diverse portfolio of businesses and end-markets, which gives us this ability. As you know, we are committed to being a leader in the circular economy, we've accelerated progress and it's paying off with several wins across our portfolio, including Eastman being named as a Wall Street Journal Most Sustainably Managed Company of 2020. In addition, in our 2020 Sustainability Report, we committed to the ambitious goals of reducing our Scope 1 and 2 greenhouse gas emissions by one-third by 2030 and achieving carbon neutrality by 2050. Looking forward to 2021, we entered this year with momentum from our record fourth quarter results, and we're seeing clear signs of recovery across many of our markets, including strong orders in January. That said, visibility remains limited due to the continuing effects of COVID-19. This means that we will continue to focus on what we can control. In 2020, we meaningfully reduced capacity utilization as we aggressively managed inventory well beyond the decline in demand to maximize cash. As a result, EBIT declined by about $100 million just related to this additional inventory actions we took. If volume is flat in '21 compared with '20, we would have about a $100 million tailwind from this improved utilization as we go into this year or about $0.60 a share. Looking at our cost structure, you'll recall that we reduced costs by approximately $150 million in 2020 versus '19, and we estimate about $100 million of this was temporary. We also took actions to accelerate our transformation program and we are on track to reduce costs in 2021 to offset the return of those temporary costs. As a result, in 2021, we expect our cost structure to be about flat with compared -- when we compare it to 2020. On top-line growth, we expect growth from three levers. First, we anticipate market to continue to improve relative to 2020, as we have seen in Q4 and in January. Second, we continue to make progress with our innovation-driven growth model to grow faster than our underlying markets in many of our specialty products. There are a number of examples of this across our portfolio in 2020 and we expect it to continue in '21. Third, we project a strong improvement in mix with recovery in these high-value markets and the innovation-driven growth of our premium products. Significant portion of our headwinds in 2019 with the trade war as well as 2020 with COVID-19 were related to mix. As growth in our specialty products accelerates in '21, improved mix will be a powerful driver of our earnings growth. We've already seen this benefit in Q4 of '20 and expect it to accelerate through '21. There are also headwinds, including the lack of visibility related to COVID-19 and other global macroeconomic uncertainties. In addition, we're seeing costs for raw materials, energy and logistics rising, and have competitive pressures in a few products. When we put this together, we expect our '21 adjusted earnings per share will increase between 20% and 30% compared to 2020. This means our expected '21 earnings per share will be well above 2019, which would further demonstrate the strength of our portfolio. We anticipate a strong start to 2021 with adjusted earnings per share similar to the first quarter of '20. You recall in the first quarter of 2020, our earnings per share was up 15% year-over-year, a very strong performance for our industry at that time. Finally, on cash, a high priority for Eastman, we expect '21 to be our fifth consecutive year of free cash flow above $1 billion. A moment ago I talked about our intention to be a leader in the circular economy, and as part of that commitment, today, we're announcing along with Tennessee Governor, Bill Lee, our plan to build one of the world's largest methanolysis facilities here in Kingsport. Through methanolysis, this world-scale facility will convert waste plastic, polyester plastic that often ends up in landfill and waterways into durable products. Over the next two years, Eastman will invest approximately $250 million in the facility, which will support Eastman's commitment to addressing the global waste crisis and mitigating challenges created by climate change, while also creating value for shareholders. Using the company's polyester renewal technology, this new facility will use 110 kmt [Phonetic] of plastic waste to produce premium high-quality specialty plastics made with recycled content. This will not only reduce the company's use of fossil fuels feedstocks, but it will also reduce our greenhouse gas emissions by 20% to 30%. This is incredibly exciting news and we're only just beginning. I'll close where I began with appreciation for the men and women of Eastman to make all this happen and do it with a bias for action, adaptability and optimism for the future. I share their optimism. This is an exciting time for Eastman. Our strengths have never been clearer, and it gives me the confidence that we are well positioned to manage in this uncertain environment and deliver long-term attractive earnings growth and sustainable value creation for our owners and all of our stakeholders.

eastman chemical co - expect 2021 adjusted earnings per share to be 20% to 30% higher than 2020 adjusted eps. eastman chemical co - sees 2021 free cash flow to be greater than $1 billion.

Today, I'm joined by President and Chief Executive Officer, Lal Karsanbhai; Senior Executive Vice President and Chief Financial Officer, Frank Dellaquila; and Executive Vice President and Chief Operating Officer, Ram Krishnan. Please join me on Slide two. Turning to Slide three. I'd like to briefly highlight that Emerson has been publishing a corporate social responsibility report for many years now. We have renamed the report The Emerson Environmental, Social and Governance Report and are excited to highlight all of the goals, momentum and global standards that our organization is working toward. In particular, our environmental sustainability framework, greening of Emerson, by Emerson and with Emerson, captures our internal sustainability efforts, our enablement of our customer sustainability journeys through our products and solutions and our collaboration efforts with various sustainability stakeholders. I encourage you to review the document next month when it is published. I'd like to briefly mention our recent Emerson Exchange Virtual Series, which took place from November through March. Emerson Exchange is a chance for our customer base to interact with other users, industry experts and Emerson technology leaders. Despite the obvious in-person limitations of the pandemic, Emerson had a tremendously successful virtual engagement with customers, focusing on digital transformation, sustainability, technology and many other topics. This virtual framework dramatically expanded the reach of this already very popular user event. Due to the success of the hybrid format, we will likely be adopting such a format going forward. More details to follow as the time and place for the next Emerson Exchange event is finalized. Over to you, Lal. I would like to say a few things before passing it on to Frank. Firstly, to our global team, three things. This was one that was delivered based on strong execution, which required agility and creativity as we jumped over a number of hurdles over the last three months. The result was top-class profit leverage over 40% across our operations, well done by everyone. Momentum is building, and it's more broadly today and across a large number of our markets than it was three months ago. This expansion across both platforms, now as the cycle expands, will enable us to make critical technology investments, building on our strong differentiation and customer relevance. You energize me every day in the journey and on the journey that we're taking together. Secondly, I would like to recognize David Farr, who stepped -- whose Board service concluded today after more than 20 years. Jim is a highly qualified independent director who is extremely passionate about people, culture and the future of Emerson. I look forward to working alongside Jim and our entire Board. Frank, over to you. We had a strong quarter, and I'd like to take you through the highlights of that over the next several slides. The strengthening recovery that Lal referred to in most of our end markets, combined with the benefits from our cost reset actions, drove strong operating performance and strong financial results in the second quarter. Adjusted earnings per share for the quarter was $0.97, ahead of our guidance midpoint of $0.89 and representing 9% growth versus the prior year. Demand strengthened significantly with sales ahead of expectations at 2% underlying growth and March orders toward the high end of expectations at 4% underlying growth. Within that growth number for the orders, significantly, Automation Solutions continues its steady improvement in both orders and sales, while Commercial & Residential Solutions continues to experience robust demand across all its lines of business and in all geographies with 11% sales growth and 21% orders growth for the trailing three months through March. The cost reset benefits for the program that we implemented almost two years ago are being realized as planned, driving adjusted segment EBIT growth of 15% and 150 basis points of increased margin to 19.1%. Additionally, cash flow continues to be strong, up 37% year-over-year with free cash flow up nearly 50%. This represents 125% conversion of net earnings. We continue to execute on the remaining elements of our cost reset actions. With the bulk of it behind us at this point, we initiated $21 million of additional restructuring in the quarter. Please turn to the next slide, if you would, for comments on the EPS, the earnings per share bridge. Operational performance was very strong in the quarter, adding $0.14 to adjusted EPS. As we guided in February, stock compensation was a significant headwind in the quarter due to the mark-to-market impact, which was caused by the difference in the share price at the end of last year's second quarter and this year's second quarter. Of course, you'll recall that last year, share prices in general were all severely depressed with the onset of COVID and we closed last year's second quarter at $48 versus $90 this year. And that headwind was within $0.01 of the guidance that we gave you in February. Tax, currency and other miscellaneous items netted to about $0.04 of tailwind and a small impact from share repurchase. So in total, again, adjusted earnings per share was $0.97 versus the guide of $0.89. Please go to the next slide for comments on the P&L. So as I mentioned, underlying sales growth exceeded expectations at 2% and it was 6% on a reported basis, including acquisitions and currency. Gross profit slipped just a bit, 10 basis points, mainly due to business mix, given the growth in our Commercial & Residential Solutions business. SG&A increased by 10 basis points, but the real story here is that excluding the stock compensation impact, operationally, it was down 220 basis points, indicative of the magnitude of the cost reduction activity and the flow-through of the benefits. We had very strong leverage on SG&A, and the spend was actually down year-over-year when you exclude the impact of the stock comp. Adjusted EBIT margin was 18.2%, and our effective tax rate was within one point of last year. Share count at 603 million. And again, adjusted earnings per share at $0.97. If you please turn to the next slide, we'll talk about earnings and cash flow. Adjusted segment EBIT increased 15% with the margin increasing 150 basis points to 19.1%, as I said earlier. Leverage on the volume and cost reset benefits offset the material cost headwinds that we did see in the quarter. Again, stock comp was nearly a $100 million headwind. It was partially offset by some other corporate items. Adjusted pre-tax earnings were down 20 basis points to 17.3%, again, as the impact of the mark-to-market on the stock comp [Indecipherable]. Operating cash flow was very strong, almost a record again at $807 million, up 37%. Free cash flow at $707 million was up 48%, driven by the strong earnings and favorable balance sheet items. Lastly, trade working capital was down to 16.8% of sales as the impact and the distortions from the COVID-related volume decline are beginning to normalize and as the businesses do a good job managing inventory as we return to growth. Please turn to the next slide, we'll go through Automation Solutions. Orders continue to turn upward here. We were at negative 5% on a trailing three-month basis, making good progress, and we're on the trajectory that we have been mapping out for several months. Underlying sales were above expectations at negative 2%, and we're encouraged to see the continued sequential improvement in order rates underpinning the sales. China was very strong, and they were favorable comps, but also due to good strength in discrete, chemical and energy markets. Our demand in North America improved sequentially, but it did lag other world areas. However, there are noteworthy pockets of growth, very encouraging signs in both discrete, life science, food and beverage and power generation. Importantly, we also continue to see increasing KOB3 activity across our process automation customer base, driven by increased STOs and focused spend on opex and productivity. Margin in the platform increased 180 basis points of adjusted EBIT, 230 basis points at adjusted EBITDA driven by the cost reset savings. The OSI integration continues to go well. The expected synergies are being realized, and we are increasingly encouraged in validating the case that we made for the acquisition when we did it last October. Backlog is roughly flat sequentially at $5.3 billion, but it is up 14% year-to-date. Please turn to the next slide, where we review Commercial & Residential Solutions. The story here is very, very strong growth. Orders continue to strengthen with the March underlying trailing three-month rate at 21%. The demand is primarily driven by ongoing strength in residential end markets, but significantly cold chain, professional tools and other commercial and industrial markets are also picking up and contributing to the growth. All businesses in all regions were positive, indicative of the trend. Strong growth in China, over 50%, was attributable to commercial HVAC and cold chain demand in addition to the favorable comp. Europe grew 9% on the strength of continued demand for heat pumps and other energy-efficient sustainable solutions. Margins improved 40 basis points at the adjusted EBIT level. Cost reduction benefits were somewhat offset by price/cost headwinds, which we'll discuss a little more when we cover the guidance. Commercial & Residential backlog has increased almost 60% year-to-date to about $1 billion. This is about $400 million above what we would consider normal for this business. Operations are working through the significant challenges to meet strong customer demand across most of the businesses in this platform. Please go to the next slide, and we'll talk about the updated guidance for the year. Based on the strength we see in orders, the increasing pace of business, we are very encouraged and we are improving our sales outlook for the year. We now expect underlying sales in the range of 3% to 6% overall, with Automation Solutions roughly flat and Commercial & Residential up in the 12% to 14% range. The stronger volume will drive improved profitability. We now expect 17.5% adjusted EBIT margin for the entire enterprise. Cash flow was also projected higher at $3.3 billion operating cash flow and $2.7 billion of free cash flow, an increase of $150 million. Our tax, capital spending, dividend, share repurchase assumptions remain as they were. We're raising adjusted earnings per share guidance by $0.20 at the midpoint from $3.70 to $3.90, and we're tightening the range to plus or minus $0.05 from plus or minus $0.10. We're doing this, increasing the guidance in the face of additional headwinds to profitability, because we're very encouraged by the underlying strength of the business and the read-through of the cost reset actions that the business has been working very diligently now for almost two years. The additional headwinds, you can see in the margin there on the right of the slide, mainly $50 million more of unfavorable price/cost, driven by continuing increases in raw materials costs and about another $20 million of stock comp expense versus what we estimated back in February. The speed and the magnitude of the price increases in key inputs, steel, copper, plastic resins is unprecedented. Operations are actively and effectively working to mitigate the margin impact through selected price and cost containment actions, and the good work that they're doing gives us the confidence to raise the guidance despite these increased headwinds. On the plus side, we expect to retain about $10 million more in the year of the COVID-related savings than we previously estimated as basic activity like travel and everything that goes with it comes back in more slowly than we would have thought a couple of months ago. If you please go to the next slide, I'll give you an update on orders. So as I mentioned earlier, our underlying trailing three-month orders turned positive in the month of March at 4%. This is consistent with the upper range of the guidance that we provided to you in February. It's driven by ongoing strength in Commercial & Residential Solutions, as you can see, at 21%, and continued significant improvement in Automation Solutions as our global markets recover. And increasingly, we see improvement in our traditional process industries as well in North America. We expect general demand to remain strong for the balance of the year. We expect the Automation Solutions markets to accelerate through the second half and the Commercial & Residential HVAC demand will go up somewhat later in the year, but we would expect to see some of the other end markets, commercial, professional tools and such, recover to partially offset that tapering off in Commercial & Residential. So all in all, we believe we have a good outlook for the second half of the year. If you please go to the next slide, the underlying sales growth outlook. Based on what we see and the pace of the improvement in orders, for the second half, we see growth in the high single-digits range at about 7% to 11%, and that will drive the full year growth of 3% to 6%. We expect net sales to be just a bit above $18 billion. I'll just cover a few charts here with the group. Again, increased momentum turning to -- on Chart 15 here. First, on Automation Solutions, we are -- we were led through the recovery in the first half by our discrete and early cycle businesses within the platform. And essentially, what's occurred as we've navigated through the second quarter is a broader recovery in their -- in the mid-cycle elements of this platform. So we see a return to growth in Q3, which is very positive after five down quarters in this business and continued demand in short cycle as well as the acceleration in the core process automation markets in the back half of the year, yielding a 4% to 8% range in the second half and a flat year guidance on sales. If you turn to Page 16, I'll give you some color on what's going on in the world areas. Perhaps, before I do that though, I'll just paint it from a KOB perspective. KOB3 has been incredibly strong, both in our discrete spaces, but more interestingly, as we navigated the second quarter into our process spaces. Frank referenced the shutdown turnaround activity, which is up double -- mid-double -- teens for the year and the STO schedules are holding in full, honestly, as we go into the summer, into the fall season, which is very encouraging. The site walk downs are up almost 50% year-over-year, also very encouraging. And of course, the long-term service agreements are up almost 40% across the world in the business. Very encouraging to see and really provides the fuel for the underlying activity we're seeing in the process space. On a KOB1 basis, things are not completely stopped. Obviously, we digested a significant LNG wave, but there's more activity on the horizon. We've entered the feed stage on two very important projects: the Baltic LNG and the Golden Island BASF in China. Those are important opportunities for us in automation. And secondly, we were awarded the Sempra Costa Azul LNG project on the Pacific Coast, in the Baja Peninsula of Mexico, which has a significant value for us and was awarded and will be booked here in the third quarter. So there is some activity. We continue to engage on the KOB1. And as that starts to loosen up a little bit, I think we're very well positioned. The tale of the tape, honestly, for the remainder of the year for this business is going to be the Americas. It's going to be a significant swing from a down 16% first half to a second half in that 10% midpoint. And we'll see that, we saw that already as we entered April, and we'll continue to see that recovery, I think, as we go through the latter half of the year into 2022. Europe, an incredibly strong first half, driven by life sciences, activity around biofuels, the number of KOB2-type project awards, and we continue to see that strength, and I feel confident that, that strength will be there into the second half of the year. Of course, across all of this, the discrete environment has been very, very good into Asia, Europe and in North America, whether it's automotive, medical or semiconductor, and we expect that strength to remain there. So overall, feeling much better about the second half here and feeling very good about how North America is shaping up for us in automation. Turning to Chart 17, some comments on Commercial & Residential. What a great year this team is having. And obviously, the beneficiaries of a tremendous residential cycle. Much of it was driven by pandemic inventory levels -- pre-pandemic inventory levels, a prebuild in the cooling season that then we also benefited from a secular shift into suburbs and high family home construction and renovation. All of that has led into incredible residential strength through the year. Obviously, my expectation is that it starts to dampen as we get into the latter parts of the fiscal year. However, the mid-cycle professional tools, cold chain businesses are accelerating, and that's what we see here in this very balanced perspective for this business throughout 2021, and I'm very encouraged by what we're seeing in the later cycle pieces. Of course, we -- there's some good underlying technology evolutions as well that will impact the residential, be it the refrigerant changes or the heat pump moves in Europe, which are -- which will continue to drive good growth for the businesses. And then turning to Page 18. Again, a very balanced picture here from a world area perspective. And overall, a strong second half with the commercial industrial segment of this business continuing to improve as the residential market start to taper, as I discussed. I think all the world areas should grow, again, in the low double-digit to mid-teen range as we go into the second half. In the Americas, we are seeing residential demand remained strong in the near term and the commercial market is really starting to accelerate. And the cold chain piece, particularly, which is driven by transport and aftermarket, and then we see the tools momentum building in the professional channel. So very encouraged by that. Europe, I mentioned heat pump activity. We expect that to stay strong. And of course, a surge in construction should bolster our plumbing and electrical tools business. And then lastly, in Asia, China is the headline contributor to growth as some of you have already noted, and demand is driven by commercial air conditioning and cold chain solutions. So with that, Pete, I'll turn it to Page 19, and we'll go to Q&A.

compname reports q1 adjusted earnings per share $0.97. q2 adjusted earnings per share $0.97. expect overall continued improvement in industrial and commercial demand over remainder of 2021. q2 net sales of $4.4 billion up 6%. expect that residential demand will remain robust, but begin to taper in second half of year. sees fy 2021 net sales growth 6% - 9%. sees fy adjusted earnings per share $3.90 plus or minus $0.05. sees fy 2021 gaap earnings per share $3.60 plus or minus $0.05.

Today, I am joined by President and Chief Executive Officer Lal Karsanbhai, Chief Financial Officer Frank Dellaquila and Chief Operating Officer Ram Krishan. Please join me on slide two. Please take time to read the safe harbor statement and note on non-GAAP measures. First, Mike Train, our Chief Sustainability Officer, will be attending this year's United Nations Climate Change Conference, COP26, in Glasgow. Mike will be a panelist at the adjacent Sustainable Innovation Forum, participating in two notable discussions. The first discussion will be how to support small to medium enterprises to adopt net zero pathways; and the second, on supporting breakthrough innovation to green, hard-to-abate sectors. Mike has worked this year to drive many greening of, by and with Emerson initiatives. One notable greening -- green by example is in the recent announcement between BayoTech and Emerson to accelerate production of and distribution of low-cost, low-carbon hydrogen. In the agreement, Emerson will deliver advanced automation technology, software and products in support of BayoTech building hundreds of fully autonomous hydrogen units to enable hydrogen fuel cell commercial trucking fleet and abatement projects in steel and cement. Another exciting initiative is our $100 million commitment to corporate venture capital, Emerson Ventures, designed to accelerate innovation by providing insight into cutting-edge technologies that have the potential to solve real customer challenges. The investment commitment will advance the development of disruptive, discrete automation solutions, environmentally sustainable technologies and industrial software in key industries. Finally, our investor conference historically has been in February. However, due to the recent announcement with AspenTech, we have decided to move our investor conference to May. It will be located at the New York Stock Exchange on May 17, 2022. 2021 was a phenomenal year for Emerson. It developed very differently, obviously, than we planned a year ago. For one, I was named CEO and brought a new value-creation agenda to the table. But equally important, we operated in an environment which was both rewarding and challenging for the organization. Through it all, our teams around the world did a fabulous job. I want to express my sincere gratitude to all the Emerson employees around the world. 2021 was characterized by strong demand in our residential air conditioning business as well as our hybrid and discrete markets in automation. Furthermore, we have experienced a recovery in process automation markets. The automation KOB three mix for 2021 was up two points to 59%. And Emerson's September three-month trailing orders were plus 16%. We grew 5.3% underlying and leverage at 38% operationally, inclusive of a $140 million swing in our price/cost assumptions from November through to the end of the fiscal year. The earnings quality of this company continues to be excellent with free cash flow conversion of 129%. The fourth quarter, however, was challenged significantly by supply chain, logistics and labor challenges. And that is not dissimilar from anything you've heard before. This was experienced in the form of material cost inflation, notably steel, electronics and resins, and lead time extensions. In addition, we experienced logistics challenges in availability of lanes and costs. And lastly, U.S. manufacturing labor, which was characterized by higher turnover rates, absenteeism and overtime costs. In the quarter, we missed sales by $175 million. And alongside a challenging price/cost environment in our climate business, it resulted in a negative $0.14 impact to earnings per share for the quarter and a $0.19 impact to 2021 EPS. Having said that, the company grew 7% in the fourth quarter and had 19% operating leverage. Turning to 2022 and some initial thoughts. The first half of the year will not look dissimilar from the fourth quarter with slight sequential improvement as we go to Q2. Price/cost and supply chain challenges unwind in the second half of the year against the backdrop of continued strong demand. The price/cost assumption in the year will be a positive $100 million for 2022. I'm very optimistic for 2022. The operating environment has unpredictability, but it is significantly more stable than a year ago and demand is much stronger. The residential A/C cycle will moderate as we go through 2022. However, we expect automation markets to continue to strengthen driven by digital transformation and modernizations, replacement in MRO markets and select LNG and sustainability-driven KOB one, most notably methane emissions reduction projects and carbon capture. I have confidence that we will deliver 30% incrementals on our underlying sales in 2022. This addresses execution, and as you know, that's one of the three pillars we identified as a management team for accelerated value creation. We have equally taken significant steps in our journey to modernize our culture and advance ESG initiatives. The Board named Jim Turley as the company's Independent Chair of the Board, we named Mike Train as the company's first Chief Sustainability Officer, and we hired Elizabeth Adefioye as Emerson's first Chief People Officer. I'm very proud of the diversity targets we set for the enterprise, the changes to our long-term compensation and annual bonus structure to include ESG measures and the commitments we have made to accelerate greenhouse gas intensity reductions. Lastly, turning to the portfolio. We recently concluded a comprehensive portfolio review, which culminated in a two-day session with our Board of Directors in early October. We left the meeting with a defined portfolio road map and pathways. The key elements were as follows. Firstly, in terms of the portfolio today and how we are thinking about it. We will continue to divest upstream oil and gas hardware assets. Secondly, we will action low-growth or commoditized businesses. And lastly, we will action disconnected assets. All three of these actions will take place over time with intentionality, with patience and a keen awareness of cycles and meeting the value-creation proposition to our shareholders. Secondly, we identified four large, profitable, high-growth end markets, each with at least $20 billion of size and projected to grow higher than 4% a year into the future supported by macros. The four end markets will be the hunting ground for our M&A activity. Lastly, we defined two possible end states for the portfolio and the journey that we'll embark up and have embarked on. One of the four markets is industrial software, a $60 billion segment that we identified growing at 9%. The AspenTech transaction is an exciting step for Emerson and a very important transformational step for this corporation. AspenTech is one of the best-run industrial software companies in the space with highly differentiated technology and a phenomenal leadership team led by Antonio Pietri for who I have the greatest personal admiration. The AspenTech company will be a highly diversified business with transmission and distribution as its largest served market and is uniquely positioned to enable our energy customers to transition to a lower-carbon future. I'm optimistic of the synergy opportunities that exist and believe the new AspenTech, which will be 55% owned by Emerson shareholders, will be a differentiated platform for future industrial software M&A. I'm very excited about this, as I hope you can tell. We expect to close the transaction in the second quarter of 2022 following the completion and approval of the customary regulatory items. So we're really pleased with the financial results for fiscal 2021. As Lal said, we ended the year with a great deal of uncertainty and far exceeded the expectations we had at the beginning of the year. The underlying demand environment developed much as we thought it would. There was continued strength in global discrete and hybrid automation markets, and the North America process markets began to gain momentum later in the year. The global demand in our commercial/residential markets was strong and broad based, particularly in the U.S. residential air conditioning market, and it far exceeded the expectations that we had going into the year. Our operations team successfully worked through labor and supply chain issues, particularly toward the end of the year, and delivered strong results that we're able to report to you today. Toward the end of the year, the intensifying combination of rising material costs, supply chain challenges and labor constraints in the U.S. did begin to weigh on sales volume and profitability. We've worked through that in the fourth quarter. We will continue to work through that in the first half of fiscal 2022. Despite these fourth quarter challenges, we're pleased to report that we achieved the key financial targets that we committed to you in August regarding underlying growth, adjusted EBIT margin, adjusted earnings per share and cash flow, and you can see all of that in the table. This was achieved in the face of an unexpected increase in key raw materials, mainly steel and copper, that resulted in an unfavorable price/cost swing of $140 million during the year versus the expectation and the guidance that we gave you a year ago. We're very grateful for the extraordinary effort of our operations teams at every level and the manufacturing employees who made this happen under some of the most challenging conditions that we have seen. This slide highlights our strong 2021 results. The continued recovery in our end markets drove strong full year underlying growth of more than 5%. Net sales were up 9% year-over-year, including a one point impact from acquisitions, mainly OSI, which closed at the beginning of the fiscal year. Adjusted segment EBIT benefited from strong leverage in operations, 38%, as Lal just mentioned, and adjusted EBIT from underlying volume and the benefit of cost reset actions that were begun two years ago. These cost reductions more than offset price/cost headwinds, which, as I said, were $140 million versus our expectation at the beginning of the year, and the supplies chain challenges that raised costs and reduced availability. Cash flow was robust, up 18% year-over-year attributable to the strong earnings growth and working capital efficiency. Free cash flow conversion of net earnings was 129%. Adjusted earnings per share was $4.10, exceeding our guide by $0.03 at the midpoint and up 19% for the year. Automation Solutions grew -- underlying growth was flat year-over-year. Growth turned positive in the second half driven by strong discrete and hybrid markets, while the later-cycle process automation markets delivered sequential improvement as we moved through the year. Adjusted EBIT increased 230 basis points due to the strong leverage driven by cost reset benefits. Commercial & Residential saw exceptional growth, up 6% underlying year-over-year due to broad strength across the residential and commercial markets with mid-teens growth in all world areas. Adjusted EBIT increased 20 basis points versus prior year. Price/cost headwinds worsened in the second half, particularly in the fourth quarter, as we anticipated on the call in August, but were offset for the full year by strong underlying leverage and spending restraints. Operational performance was strong throughout the year, adding $0.59 to adjusted EPS, overcoming a $0.19 headwind from supply chain and $90 million of unfavorable price/cost. Operations leveraged at more than 35% on volume and cost actions. Nonoperating items contributed $0.02 in that, overcoming a significant headwind from the stock comp mark-to-market accounting. Share repurchase totaled $500 million, as we guided, and added about $0.03. In total, adjusted earnings per share was $4.10, as I said, an increase of 19%. Regarding the fourth quarter, strong end market demand drove underlying growth of 7% with net sales up 9%. This growth was achieved despite a $175 million impact from supply chain, logistics and labor constraints that affected both platforms in somewhat different ways. Adjusted segment EBIT dropped 10 basis points, reflecting a 200 basis point impact from supply chain volume constraints across the company and from the increasingly negative price/cost headwind in commercial/residential. Free cash flow declined 39% mainly due to higher working capital to support the growth versus the prior year. Adjusted earnings per share was $1.21, exceeding the guidance midpoint by $0.03 and up 10% and versus the prior year. Automation Solutions underlying sales were up 3% with strong recovery in the Americas, particularly in the power generation and chemical markets, partially offset by declines in other world areas. Sales were reduced by about $125 million or four points due to supply chain constraints. Our backlog was up 16% year-to-date and now sits at $5.4 billion, $100 million less than at the end of the third quarter. Typically, our backlog would reduce more in Q4. However, due to strong orders and supply chain constraints, backlog remains elevated above the levels we would otherwise have expected. Strong leverage and cost reductions drove a 170 basis point improvement in adjusted EBIT. Commercial & Residential underlying sales increased 13% and driven by continued strength in North America residential HVAC and home products as well as heat pump demand in Europe. Sales were reduced by about $50 million or three points due to supply chain constraints, which, together with sharply increasing material cost headwinds, which were expected, perhaps a little worse than we expected in August but are expected, drove a 340 basis points decline in adjusted EBIT. Clearly, as you can see, the operating environment is a challenge as commodity inflation, electronic supply, logistics constraints and labor availability continues to impact our global operations. Net material inflation headwinds accelerated through fiscal 2021, as you can see on the chart, primarily driven by steel prices, with majority of the impact being felt by our Climate Technologies business. North American cold-rolled steel pricing increased once again in October, extending the streak of monthly price increases to 14 months. However, the magnitude of the increases have declined in recent months, and more importantly, hot-rolled steel prices dropped around $20 a ton in October, a positive sign for us. We do anticipate steel prices to start to flatten out over the next few months and net material inflation to peak in the first half of fiscal 2022. We continue to stay focused and diligent on our pricing plans by executing on our contractual material pass-through agreements, surcharges for freight and more aggressive annual general price increases. We remain confident that price/cost will turn green and will be a strong positive for the second half of fiscal 2022. Our current plans indicate that price/cost will be approximately a $100 million tailwind for the fiscal year. Turning to the next slide. On the commodity front, while steel prices are at elevated levels today, as I mentioned earlier, they are showing some signs of flattening, providing optimism that we will see North American cold-rolled steel prices start to decline in the coming months. Plastic resin prices have remained elevated due to high price, inelastic demand and weather-related supply challenges. Copper prices have also surged as of late, but our hedge positions will dampen the impact to the fiscal year. Now while COVID-related restrictions are improving in Southeast Asia, capacity at key electronic suppliers remains constrained. Several key component suppliers have extended lead times and pushed out delivery forecasts, which has increased shortages and decommits to our EMS suppliers. Furthermore, we are closely watching the impact of industrial power outages in China, which have become a common occurrence at manufacturers and has led to an increase in silicon prices. For us, electronic shortages are impacting multiple business units in both platforms, and supply is expected to remain a challenge into fiscal 2022. Extended logistics lead times, particularly on ocean freight, has had an impact on our global operations, port congestion in the U.S., weather and COVID-related disruptions in China being the key drivers. These dynamics are highlighting how critical regionalization is even on lower-variation parts and components, and the work we have done over the past many years to regionalize are clearly proving the importance of this strategy. This is exemplified by several of our businesses with strong regional supply bases which have performed very well and avoided expensive airfreight and significant expediting costs. Finally, hiring and retention challenges continue in many of our U.S. plants, predominantly in the Midwest, as competition for available labor is intense. High levels of turnover and absenteeism in these locations have impacted productivity and driven increased overtime. Now on slide 12, despite the unprecedented challenges, our supply chain and operations teams have worked tirelessly to continue to meet the needs of our global customers. Many creative solutions are being implemented on a real-time basis to ensure continuity of materials supply to our global plants and availability of freight lines to make our shipment commitments. Our teams have leveraged strong supplier relationships, utilized prequalified alternate sources, leveraged contractual agreements and stepped in to assist our suppliers where needed. Our regional manufacturing footprint and the enhanced resiliency of our supply network through multi-sourcing that we spent years developing has certainly been an advantage for us in these challenging times. Accelerated actions around hiring and production shifts to plants with stable workforces has ensured we continue to meet our customers' needs. Many of our global plants are producing at record levels as our disciplined investments in factory automation have allowed us to unlock additional capacity to combat labor availability challenges. And looking forward to 2022, demand continues to be strong across both of the platforms. The trailing three-month orders for Automation Solutions were up 20% versus the prior year driven, as I said prior, by continued automation investments in discrete and hybrid markets, and we believe that will continue into 2022, and, of course, the strengthening of the process automation spend. While KOB two and KOB three drove most of the orders growth in 2021, the new infrastructure bookings for LNG and decarbonization will improve, I believe, through 2022, providing further upside. Increased site access will drive increased walkdown and shutdown turnaround activity in the business. To give you perspective, 2021 walkdowns were up 50% year-over-year with more than 5,000 globally, with each walkdown driving substantial KOB three pull-through. Shutdown turnaround bookings were up -- for -- in 2021 10% year-over-year driven by strong spring season that extended into the early summer. 2022 shutdown turnaround outage activity spend is expected to be up mid-single digits, led by chemicals and refining, leading to high single-digit bookings growth. Turning to Commercial & Residential Solutions. The U.S. and Europe order rates continue to be strong heading into 2022, while Asia has begun to moderate. Overall, the trailing three-month orders were 9% in September. And thinking a little bit further into 2022, many of our key climate technologies end markets will continue to have momentum, including aftermarket refrigeration, commercial HVAC, food retail and foodservice driven by new store builds and quick service restaurants and residential heat pumps. Turning to slide 15. Looking ahead to 2022, it will be a year characterized by strong underlying demand and an improving operating environment. The late-cycle process automation business will continue its recovery with mid-single-digit annual growth. Meanwhile, discrete and hybrid momentum will endure with high single-digit and mid-single-digit growth, respectively. Growth will moderate in residential markets as demand stabilizes, but improving commercial and industrial environments will benefit Commercial & Residential Solutions. Decarbonization and sustainability projects, as noted earlier, will provide further growth opportunities as budgets get allocated toward these projects. Based on this macro landscape, we believe -- we continue to expect demand to be strong in 2022. Supply chain and price/cost headwinds continue through the first half, pressuring first quarter leverage but turn to significant tailwinds in the second half and end positive in the year. The team has done a significant amount of work progressing our restructuring programs. Emerson's 2021 adjusted EBITDA of 23.1% surpassed our previous record. Over 90% of our restructuring spend communicated in our investor conference is complete, and over 70% of the savings have been realized with remaining longer-term facility projects left to be completed. Great work as a team. So given this landscape, we expect underlying sales growth of 6% to 8% in 2022 and net sales growth of 4% to 6%. Underlying sales growth for Automation Solutions will be 6% to 8%, while Commercial & Residential Solutions will be 6% to 9%. As Ram discussed, we expect price/cost to turn into tailwind for the year of approximately $100 million. $150 million of restructuring activities includes the minimal remaining spend on our cost reset program and additional programs, including footprint activities, that have been identified and are planned in the fiscal year. Historically, our adjusted earnings per share excludes restructuring and other items like first year purchasing accounting in the calculation. Looking at the 2021 column of the bridge to the right, our prior adjusted earnings per share of $4.10 increases to $4.51 when removing the impact of intangibles amortization expense of $0.41. For 2022, the amortization expense is expected to be approximately $0.42 driven by -- driving, excuse me, our adjusted earnings per share to between $4.82 and $4.97. Please note that all guidance does not include the impact of the AspenTech transaction, which is expected to close, as I said earlier, in the second quarter of calendar year 2022. Turning to slide 17. We expect a first quarter 2022 underlying sales growth of 7% to 9% with broad underlying strength across Automation Solutions and Commercial & Residential Solutions. Automation Solutions will experience underlying sales growth in the mid to high single digits, while Commercial & Residential Solutions underlying sales growth will be in the high single digits to low double-digit range. Adjusted earnings per share is expected to be between $0.98 and $1.02. Amortization for the quarter is expected to be roughly $0.10.

sees fy 2022 adjusted earnings per share $4.82 to $4.97 . emerson - fourth quarter net sales were $4.9 billion up 9 percent from the year prior. emerson - expect that 2022 will be characterized by strong underlying demand. emerson sees q1 adjusted earnings per share $0.98 to $1.02. emerson - sees 2022 net sales growth 5% to 7%. emerson - sees 2022 adjusted earnings per share $4.82 to $4.97. emerson - qtrly adjusted eps, which excludes restructuring and first year purchase accounting charges, was $1.21.

In addition, a slide deck providing detailed financial results for the quarter is also posted on our website. This quarter, e-commerce data is not included in our category overview due to a restatement of the external validate. Our team has moved with speed to address the ongoing challenges of operating in this environment, while continuing to focus on keeping each other healthy and safe. As I will talk about in a moment, while the pandemic-driven demand is the main story, we remain focused on our business strategies to ensure that we are well positioned as the pandemic subsides. Leading with innovation, operating with excellence, and driving productivity are the keys to our success both now and into the future. Looking at the results for the quarter, we maintained our top line momentum with strong sales across categories and markets around the world, resulting in organic sales growth of 12.7% with battery up 11% and auto care up 27%, globally. We delivered adjusted gross margin of 40.7% as we were able to meet the demand while incurring lower incremental costs than we did last quarter. This combination of strong top line growth and improving margins resulted in adjusted earnings-per-share growth of 38% and adjusted EBITDA growth of 17%. We were also able to take advantage of low interest rates to refinance a portion of our debt, which will result in significantly reduced interest expense going forward. We are off to a solid start for the fiscal year. With lower interest expenses due to the refinancing, we are increasing our outlook for the full year adjusted earnings per share to a new range of $3.10 to $3.40. In a few minutes, Tim will provide more detail on the results for the quarter as well as our view for the full year. Let me start with category trends where we continue to see strong consumer demand. As Jackie mentioned earlier, our category data this quarter does not include e-commerce due to an external database restatement. Globally, battery category value was up 6.9% and we continue to see consumers purchasing batteries for immediate use. Consumers have increased the number of devices they own as well as their usage of those devices. With a gain of 2.5 share points, Energizer is growing faster than the category, driven by distribution gains in the U.S. and in international markets, including Canada, France, Korea and the UK. With auto care, the U.S. category grew more than 10% as a result of changes in consumer behavior, including an increased focus on cleaning and disinfecting as well as an increase in do-it-yourself activities. During the quarter, Energizer's auto care share was flat. Of note during the quarter, we did see strong growth in non-measured channels, including e-commerce, home center and international markets. In auto care, we are meeting the needs of consumers by rolling out innovation and strengthening our product pipeline. We recently launched an Armor All disinfectant, as consumers are more focused than ever on keeping their cars clean and disinfected. We also acquired a small formulations business which to-date has primarily commercialized household disinfectants. The robust portfolio of innovative cleaning, disinfecting and odor-eliminating formulations we've acquired is an extremely attractive addition to our R&D pipeline and is expected to enhance our leadership in auto care. In looking at e-commerce, while we don't have consumption data this quarter, based on our sales, we continue to see solid e-commerce performance versus prior period. Our investments and ongoing focus are paying off and positioning us to lead well into the future. If we take a step back, the pandemic-driven demand in our categories has been and for the foreseeable future, will continue to be the main story, and while our priority will be to successfully navigate a very complicated operating environment in order to meet this elevated demand efficiently, we are also undertaking initiatives to emerge from this period poised for growth in the future. As we are nearing completion of our integration efforts, including the recent bolt-on acquisitions, we are also undertaking several initiatives to modernize our core operational capabilities. Let me take a moment to provide an update on these initiatives. Despite the challenges of this past year, our integration activities for the battery and auto care acquisitions have continued and are scheduled for completion by the end of 2021. In the first quarter, we realized $20 million in synergies and we remain on track to achieve $40 million to $45 million in 2021 and to deliver more than $100 million in total synergies. We also closed on the acquisition of an Indonesian battery plant, which contributed significantly to our ability to meet the strong demand during the quarter and will enable further efficiencies in the future. In addition to the integration activities, we have launched several significant projects to modernize our core, as the pandemic related shifts have shown very clearly we must become a more digitally advanced organization in order to ensure we can meet the demands of the consumer in a rapidly changing operating environment. We are transforming our global product supply organization by moving to an end-to-end category structure, which will create greater agility within each category and closer connections to customers and consumers. We are also investing in our business planning tools and supply planning analytics to provide more predictive insights, which are needed for today's environment. The end result will be a product supplier organization that is better equipped to capitalize on opportunities while also enhancing our ability to navigate disruption. These efforts are already paying off as we were able to meet the continued elevated demand, especially in batteries with lower-than-expected COVID-related costs. This project will continue to be important in the near-term to meet demand and in the medium-term to take better advantage of opportunities across our business. We are also investing in more advanced data and analytics capabilities, which will enable us to better detect and understand in near real-time, impacts to the business, from shift in consumer behavior and macroeconomic events, such as mix shifts in markets or products. Armed with the most recent data and insights, our commercial and marketing teams can respond and more effectively connect with consumers and drive growth in our business. These projects as well as other smaller ones will enhance our ability to operate more effectively and will also drive out costs from the business. We are committed to the efficient lower cost operating model you have seen from us in the past, while being equally committed to ensuring we have the flexibility to invest in opportunities to drive future growth. We believe these initiatives will allow us to do both. Our strategic priorities of leading with innovation, operating with excellence and driving productivity have served us well as we navigated the pandemic and they will remain critical going forward. However, 2020 also provided significant insight that will enable Energizer to emerge as a stronger, more resilient and dynamic company. The pandemic reminded us that consumers are at the heart of what we do. Fundamentally, it was consumer behavior that drove disruption. As their habits and routines changed, they gravitated to trusted brands and engage with our categories in new and different ways. They accelerated the changes in how they consume information and ultimately how they shop. Our consumer insights, combined with our powerhouse brands, enable us to create value, for our retail partners by ensuring we are there to meet consumers where they are going. Remaining consumer focused, investing in our brands and ensuring we can adapt at the speed in the marketplace are the keys to our success in the future. We will leverage the best attributes of a large scaled organization with the mentality of a start-up, where small teams are unleashed to focus on critical initiatives. With that, I will now turn things over to Tim, who will provide more details about our financial performance for the quarter, including our refinancing efforts, capital allocation and our outlook for the fiscal year. As Mark indicated, our organic revenue growth of 12.7% coupled with cost controls and favorable currency tailwinds resulted in strong adjusted earnings per share of $1.17, adjusted EBITDA of $192 million and adjusted free cash flow of $90 million. Taking a deeper look at the top line, both our Americas and International segments grew organically more than 12% with batteries up 11% and auto care up more than 27%. As Mark mentioned, the categories in which we compete continued to experience elevated demand. In addition, our organic sales growth also benefited from distribution gains that began last summer as well as some shifting of shipments between quarters. Finally, the growth we are seeing this year is off of prior-year first quarter organic sales decline of 3.4%. Adjusted gross margin decreased 110 basis points versus the prior year to 40.7%, although this represented a sequential improvement versus the last quarter. Gross margin was impacted primarily by incremental COVID costs of approximately $12 million, largely related to air freight, fines and penalties and personal protection equipment necessary to meet the sustained elevated demand, end channel customer and product mix as well as increased operating costs resulted from increased tariffs associated with higher volumes, commodity cost and transportation cost, consistent with inflationary trends in the global market. Partially offsetting these impacts to gross margin, the first quarter benefited from synergies of $13 million and favorable currency exchange rates. As we exit the first quarter, we believe the incremental COVID costs from air freight and fines and penalties over the remainder of the year will significantly diminish. However, like many other companies, we anticipate additional cost pressures from increased tariffs, commodities and transportation to impact us over the remainder of the year and we have includes these items in our outlook. A&P as a percent of net sales was 5.8% versus 6.4% in the prior year, due primarily to the strong top line growth experienced in the current quarter. Consistent with our priorities, we continue and invest, on an absolute dollar basis, in A&P to support our brands with total A&P up $3 million or 6%. Excluding acquisition and integration cost, SG&A as a percent of net sales was 13.4% versus 15.1% in the prior year. This was primarily due to the elevated sales experienced in the current quarter. On an absolute dollar basis, adjusted SG&A increased $2.7 million, driven in part by higher overheads associated with the top line sales growth and the timing of costs partially offset by synergies of $7 million and lower travel expense due to COVID. As Mark mentioned, we realized $20 million of synergies in the quarter with $13 million in cost of goods sold and $7 million in SG&A. For the full year, we continue to expect to realize $40 million to $45 million of incremental synergies. In total, we have recognized nearly $90 million since we completed the battery and auto care acquisitions and remain on track to realize in excess of $100 million by the end of fiscal 2021. We also took advantage of accommodating debt markets to refinance our existing short-term secured debt and our 2027 unsecured bonds with a new $1.2 billion term loan. Based on the new all-in interest rates, we anticipate annualized interest savings of roughly $25 million with about $19 million to be realized over the remainder of fiscal 2021. We also amended certain covenants in our credit agreement, which will create additional capacity and flexibility in our debt capital structure. Our net debt to credit defined EBITDA at the end of the quarter was 4.6 times, reflecting improved EBITDA performance and debt pay down during the quarter of $80 million, excluding refinancing activities. At the end of the quarter, our total debt was approximately $3.4 billion, with nearly 85% now at fixed rates and an all-in cost of debt of approximately 4.3%. And finally, we continue to drive shareholder returns through our balanced approach to capital allocation, by investing in our business through innovation, brand-building activities and the projects we mentioned earlier to modernize our core and drive cost out of the business, delivering a quarterly cash dividend of $27 million; repurchasing 500,000 shares for $21 million, representing an average price of $42.61; paying down $80 million of debt excluding refinancing activity; and finally, completing two bolt-on acquisitions. As a result of our strong organic growth in the first quarter and the interest expense savings from the refinancing we undertook in December, we are updating our full year fiscal 2021 outlook for the following key metrics. Net sales growth is expected to be at the upper end of the range of 2% to 4%, driven in large part by continued elevated battery demand in North America and favorable currency impacts. Adjusted gross margin rate is expected to be essentially flat on a year-over-year basis in line with our previously provided outlook. Adjusted EBITDA is expected to be at the upper end of our previously provided range of $600 million to $630 million and free cash flow of $325 million to $350 million remains unchanged due to working capital requirements, in particular, inventory, as we look to rebuild safety stock. Adjusted earnings per share is now expected to be in the range of $3.10 to $3.40. I would also like to provide a reminder regarding the quarterly phasing for the remainder of 2021. Beginning late in our second quarter of 2020 and through today, we have seen elevated demand for both battery and auto care products due to the impacts of COVID. In 2021, we expect to continue to see net sales growth until we lap those elevated demand, at which point, we will likely start to see year-over-year declines in net sales as we approach a more normalized level of demand. We expect this will begin to occur toward the end of the second quarter in battery and late in the third quarter in auto care. With respect to gross margin rates, we expect them to remain consistent throughout the year. The gross margin rate in this quarter was better than our expectations due to lower than expected COVID costs, the timing of the realization of synergies and the impact of favorable foreign currencies. While we are increasing components of our outlook for the full year, there remains a great deal of uncertainty over the balance of the fiscal year with respect to the pandemic and related macro factor and impacts, including currencies, commodities and transportation costs. We have addressed the items that are within our control and continue to improve our execution. Actions that we have taken, include continuing to drive increased distribution with strong organic growth across all categories and geographies; improving supply chains surety with expanded capacity and significantly reducing incremental COVID cost by the end of the first quarter; and finally, refinancing more than half of our debt portfolio over the past seven months through the accommodative debt markets. We remain confident that continued focus on our strategic priorities and our balanced approach to capital allocation will allow us to deliver long-term shareholder value. In the midst of a very uncertain operating environment, we will focus on meeting the demands of today, while building the capabilities we will need to succeed in the post-pandemic period. Our operating performance in the first quarter is a testament to the efforts of our colleagues around the world to make, ship and deliver the products that our consumers need during this time.

energizer holdings sees fy adjusted earnings per share $3.10 to $3.40. sees fy adjusted earnings per share $3.10 to $3.40. q1 adjusted earnings per share $1.17 from continuing operations. organic net sales increased 12.7%, or $93.3 million, in first fiscal quarter. energizer holdings sees 2021 outlook for revenue growth and adjusted ebitda to the high end of previously disclosed outlook range.

In addition, a slide deck providing detailed financial results for the quarter is also posted on our website. This quarter e-commerce data is not included in our category overview as the data is not currently available. It is uncertain when that data will become available in the future. Today, I am pleased to share our second quarter 2021 results, which build on the momentum from our first quarter as we benefited from elevated demand, expanded distribution and strong execution, all of which led to robust earnings growth. As we look specifically at the results for the quarter, we maintained top line momentum with organic sales of 12.7% with strong sales across categories and markets around the globe. We were able to meet that demand while also demonstrating improved cost control and delivering synergies, which partially offset the inflationary headwinds from transportation, tariffs and product input costs. Our adjusted earnings per share were $0.77, more than double the prior-year, driven by strong organic sales growth, synergy realization, favorable currencies and lower interest expense. Given our performance in the first half, we are increasing our full fiscal year outlook to the following. Net sales growth to 5% to 7% adjusted earnings per share to a new range of $3.30 to $3.50 and adjusted EBITDA to a new range of $620 million to $640 million. Tim will provide more information on both the quarterly results and the revised outlook in a moment. Turning to category trends. Consumer demand in our categories remains elevated. As a reminder, the category data I'm about to provide does not include e-commerce, as Jackie indicated in our opening comments. Starting with batteries, few changes in consumer behavior that have emerged since the beginning of COVID drove the battery category globally. First, an increase in the number of devices on per household; and second, an increase in the amount of time devices are being used, which has led to more frequent battery replacement. During the three months ending February, our brands grew faster than the category and we gained 2.1 share points globally as we benefited from the previously discussed distribution gains. In the most recent four weeks through March, in markets like the U.S., Australia and the UK, the category experienced year-over-year declines as we lapped the initial spike in COVID related buy. We anticipated these year-over-year declines, including a 13.9% decline in the U.S. during that four-week timeframe. However, if you look at those same markets on a two-year basis, there is robust growth when compared to the pre-pandemic levels. In the U.S., for example, the category was up 14.1% for that four-week period when you compare 2019 to 2021. Across both the most recent four weeks and the two-year basis, Energizer significantly outpaced the category. Looking at the U.S. AutoCare category, in the 13 weeks through February, we saw a healthy category growth of 7.4% as the category experienced both an increase in household penetration and existing consumer spending more on cleaning and maintaining their cars. Given the seasonality of our portfolio, the cold weather and the short-term constraints on our wipes supply which have recently been resolved, Energizer lag category growth in the U.S. Similar to batteries, we are seeing category growth in the latest four weeks and on a two-year basis with Energizer outpacing the category. Finally, while we don't have e-commerce category data this quarter, our net sales have increased 70% across our combined portfolio, a reflection of our investments and ongoing focus which are paying off and positioning us to lead well into the future. The environment remains dynamic and we can't predict the impact of vaccines, the virus variance or the resulting consumer habits. However, in surveys with consumers, many expect their pandemic influence habits to continue, including the increased use of devices such as home health and home office equipment as well as increased focus on their auto cleaning habits. During the quarter, we faced inflationary headwinds from transportation, tariffs and input costs. However, we were able to offset a significant portion of these through the delivery of synergies. As we look to the future, we do not believe that these costs are transitory and have initiated productivity and revenue management efforts to offset them. Our revenue management efforts are focused in three main areas. Channel and mix management across our markets, brands and pack sizes, including leveraging the breadth of our strong battery brands from premium to value. Resetting our promotional framework, including the frequency and depth of promotion and price increases based on a longer-term outlook of product input costs, our innovation pipeline and currency impacts. As an example of this work, we've recently announced price increases in the U.S. in our AutoCare portfolio to offset the headwinds we are experiencing. Going forward, we will evaluate a number of factors including macroeconomic conditions, product input costs, transportation costs, market dynamics, innovation and currency to assess the need for additional pricing actions across the balance of our portfolio. Our internal initiatives designed to reshape our organization and to ensure we are poised for future growth are all progressing well. Specifically, we are on track to deliver over $120 million in synergies by the end of fiscal 2021, a portion of which is being reinvested in the business through innovation and brand building activities. We have significantly increased production in the Indonesian plant that we acquired in the first quarter, which provides us with a source of high-quality products at lower costs. We have built an impressive innovation pipeline for our AutoCare business and have advanced our international growth plans with International AutoCare organic growth for the second quarter at 24%. Our global product supply team has made significant strides in reshaping our network, which we expect will result in greater efficiency, effectiveness and supply chain resiliency. And finally, we have launched project to advance our organization's data and analytics capabilities, creating a seamless data flow which starts with the consumer and ease its way through our organization in a more automated manner, will ensure that we are positioned to meet the demands of consumers in a rapidly changing operating environment. With that, I will now turn things over to Tim who will dive deeper into our financial performance for the quarter and provide more details about our updated outlook for the fiscal year. As Mark touched on, as we crossed the halfway mark for the fiscal year, we are pleased with our continued momentum. Our organic revenue growth of 12.7% combined with synergy realization, cost controls, lower interest expense and favorable currency headwinds resulted in strong adjusted earnings per share of $0.77, up more than double the prior-year second quarter and adjusted EBITDA of $148 million, up 20% compared to the prior year. Taking a deeper look at the organic revenue growth. We maintained our top line momentum with strong sales across all of our categories and geographies. Both of our segments showed organic growth with the Americas up nearly 16% and International up 6%, and our Battery and Auto Care businesses grew benefiting from elevated demand and distribution gains that began last summer. Adjusted gross margin decreased 110 basis points versus the prior year to 40.5% in line with our adjusted gross margin reported in the first quarter. This was impacted primarily by increased operating costs that resulted from higher tariffs associated with source product to meet elevated demand, transportation, labor and product input cost, all consistent with inflationary trends in the global market. Additionally, our gross margin was negatively impacted by the lower margin profile associated with recent distribution gains and acquisitions, synergies of $14.2 million and favorable impacts from currency exchange rates partially offset these negative impacts. As Mark mentioned, we do expect inflationary headwinds over the balance of the current year and into next year. At the present time, we are essentially fully hedged on a commodity costs for fiscal year 2021. Looking beyond this year, we will continue to take actions to offset the impact of these headwinds through continuous improvement efforts and pricing actions. A&P as a percent of sales was 4% relatively flat compared with the prior year's second quarter. Consistent with our priorities, we invested on an absolute dollar basis in A&P to support our brands and innovation with total A&P spending of $4 million or 19% over the prior year. Excluding acquisition and integration costs, SG&A as a percent of net sales was 16.7% versus 18.4% in the prior year, primarily the result of elevated sales experienced in the current year. On an absolute dollar basis, adjusted SG&A increased $6 million in part because of the higher overheads associated with our top line sales growth and foreign exchange rate impacts. We realized nearly $20 million in synergies this quarter, bringing the total for that first half of 2021 to $40 million. Since our Battery and Auto Care acquisitions were completed, we have recognized approximately $109 million of synergies, exceeding our initial targets and we expect to realize an additional $10 million to $15 million over the balance of the year. As I mentioned last quarter, we've taken advantage of favorable debt markets and refinanced a significant portion of our debt over the last 12 months. We expect these refinancings to contribute to a $30 million reduction in our 2021 interest expense, of which $8 million was realized in the second quarter. At the end of the quarter, our total debt was approximately $3.5 billion or 4.8 times net debt to credit defined EBITDA, with nearly 80% at fixed interest rates and an all-in cost of debt of 4.2%. As a result of our strong organic growth in the first half of the fiscal year, we are updating our full year fiscal 2021 outlook for the following key metrics. Net sales growth is now expected to be between 5% to 7%, owing in large part to a prolonged elevated battery demand in North America and favorable currency impacts. Adjusted gross margin rate is expected to be essentially flat on a year-over-year basis in line with our previously provided outlook. Adjusted earnings per share is now expected to be in the range of $3.30 to $3.50. Adjusted EBITDA is expected to be in the range of $620 million to $640 million. And finally, adjusted free cash flow is expected to be at the low end of our previously provided range of $325 million to $350 million due to working capital requirements, mostly related to inventory as we look to rebuild safety stocks. The revised net sales outlook provided for the full year reflects a low-single digit decline over the balance of the year consistent with our prior outlook. We began lapping elevated COVID-related battery demand late in the second quarter and we will lap the favorable impacts of weather on our AutoCare business, particularly in refrigerants in the third and fourth quarter. With respect to gross margin rates, we expect them to remain roughly flat throughout the balance of the year as synergies and the impacts of favorable currency offset inflationary cost pressures and mix shifts. We will also benefit over the rest of the year as our gross margin in the third and fourth quarter of 2020 was burdened with one-time COVID-related costs of $9 million and $19 million, respectively. As we turn to the second half of the year, we expect to build on the momentum from the strong first half by executing on our strategic priorities to deliver the full year outlook. We have had a great first half of fiscal 2021, which is a testament to the efforts of our colleagues around the world to make, ship and deliver the products that our consumers need during this time. We are focused on winning the day by staying focused on the consumer and delivering for our customers, all while building the foundation to win in the future.

sees fy adjusted earnings per share $3.30 to $3.50 including items. q2 adjusted earnings per share $0.77 from continuing operations. sees fy sales up 5 to 7 percent. increased full year outlook to 5% to 7% net sales growth. sees full year adjusted earnings per share $3.30 to $3.50.

During the call, we will discuss our results for the fourth quarter and fiscal 2021 as well as our outlook for fiscal 2022. In addition, a slide deck providing detailed financial results for the quarter is also posted on our website. Despite operating in what remains an incredibly volatile environment, we delivered on our previously provided 2021 outlook for net sales, synergies, adjusted earnings per share and adjusted EBITDA. 2021 was our sixth consecutive year of organic revenue growth behind elevated demand and distribution gains. This top line growth, combined with synergies we achieved from the Spectrum acquisition and interest expense savings translated into strong adjusted earnings per share and EBITDA growth. In a few moments John will provide details on the fourth quarter and full year. However, before he does some key headlines from our fiscal 2021 performance. For the first time our Company exceeded $3 billion in net sales. We also maintained top line momentum with organic sales growth of 7.3% including growth of nearly 17% in our auto care business. Our battery and auto care businesses benefited from elevated demand and distribution gains in North America. Auto care further benefited from the expansion in our international markets, reaching $100 million in sales in those markets for the full year. We also delivered synergies of $62 million for the year, resulting in total synergies from the Spectrum acquisition in excess of $130 million, 30% higher than our initial estimate. And we continue to invest in our brands, resulting in strong brand preference globally. With more consumers selecting our battery brand, we gained 2.2 share point in the last 12 months. This performance is a tribute to our team and their resiliency. Since the beginning of the pandemic, we have consistently adapted in real-time to ensure business continuity and repositioned Energizer for the future. The hard work of our global colleagues to produce and deliver products to our customers and consumers in a time of heightened demand and significant disruption has been impressive to witness on a daily basis. In a moment, I will provide headlines for our 2022 outlook. However, before I do I want to provide an update on a few key topics that will set the stage for the future. First, our categories remain healthy and are showing solid growth when compared to pre-pandemic levels and we expect the consumer behaviors supporting that demand will continue for the foreseeable future. Specifically in batteries, there are two drivers. Devices owned per household are up mid single digits in the US and an increase in the amount of time those devices are being used. Consequently, consumers are using more batteries, which has resulted in new buying patterns versus a year ago, including increased purchase frequency and spending per trip. As a result, on a two-year stack basis without e-commerce, the global battery category has grown by 2.9% in value and 3.7% in volume. In the near term, we will see the category decline as it did in the three months ending August 2021 where it was down 6.9% in value and 5.3% in volume due to comping elevated demand from a year ago. However, as we look to the long term, we anticipate the category to experience flat to low single-digit growth, albeit on a higher base as the category has increased in size due to consumers' behavior during the pandemic. Within the category, our iconic brands remain well positioned. Our brands outpaced the category, resulting in a 2.2 share point gain versus last year as we increased distribution in the US and internationally with share gains in those markets representing 70% of our total battery revenues. Turning to the auto care category. Over the last five years the auto care category has shown consistent growth, a trend that continued in the latest 13 weeks with category value up 3.5% versus year ago and 16.3% versus 2019. The growth is being driven by consumers continuing the do-it-yourself behaviors established during the pandemic, including higher levels of cleaning and renewed interest in car care as a hobby, a higher number of cars in the car park and an increase in the age of vehicles given the shortage of new vehicles and the recovery in miles driven given the increase in personal travel. All of this increased US household penetration to nearly 75% with the resulting buy rate that is up 20% as consumers are buying the category more frequently and spending more per trip. As we look ahead, we anticipate the auto care category will settle in at low single-digit growth once it has cycled through the COVID-related demand. In the US, we continue to be the market leader in this large and growing category driven by our Armor All brand, which continues to have positive momentum due to the strength of our innovation and brand-building activities. As I mentioned earlier, our efforts to leverage our geographic footprint and expand our auto care brands internationally are proving successful. While the categories are showing resilience, the macro environment in which we are operating is volatile, which leads me to the next important topic around operating costs. Costs related to commodities, transportation and labor, continue to rise. We saw a significant escalation in these costs during the fourth quarter and we expect these headwinds to continue throughout 2022, resulting in over $140 million of increased input costs versus 2021. In order to mitigate the impact of these costs, we have executed or planned pricing against roughly 85% of our business. In addition to raising prices to cover input cost inflation, we have also strategically redefined our battery pricing architecture to reestablish relative value across pack sizes, resulting in a progressive rate increase on larger pack sizes. Currently, we are exploring the opportunity for additional pricing opportunities across our business. We expect these pricing actions, improved mix management and cost reduction initiatives to partially offset the impact on our gross margin rate. As you all know, in addition to the challenges companies are experiencing related to increased costs, the global supply chain network is under pressure from increased demand and pandemic-related disruption. Earlier this year, we made the decision to proactively build inventory to ensure we have product for the peak battery selling season and upcoming auto care resets. The change is in response to both the potential for supply disruption we have seen in recent quarters and the higher level of in-transit inventory versus historical levels due to shipping delays and port congestion. As such, our inventory at the end of fiscal '21 was up 42% versus the prior year. This action has given us flexibility to avoid disruption and ensure we service our customers as reliably as possible in this environment. With that backdrop, I'll turn to a high-level overview of our 2022 outlook. The two headwinds I mentioned earlier, the decline in demand to more normalized level and inflationary cost trends have impacted our outlook. In fiscal 2022 organic sales will be roughly flat with auto care growth and pricing actions across our businesses, offset by volume declines in battery as we comp prior year elevated demand in the first half of the year. Despite our cost reduction initiatives and pricing actions, we expect to see gross margin rate erode, given the escalating costs resulting in year-over-year declines in EBITDA and EPS. Given the macro environment, we are proactively exploring additional options to reduce our costs, enhance our mix as well as evaluate additional pricing to further offset these cost headwinds. I will provide a more detailed summary of the quarterly financial results and then the highlights for fiscal 2021 before turning to our 2022 outlook. As a reminder, we have posted a slide deck highlighting our key financial metrics on our website. For the quarter reported revenue grew 40 basis points with organic revenue down less than 1% versus 6% organic growth in the prior-year quarter. Robust demand and distribution gains in auto care delivered a 11.5% growth in the quarter, which offset the expected decline in battery. We expect these difficult comparisons in batteries to continue for the first half of 2022. Adjusted gross margin decreased 70 basis points to 37.7%. The combination of $9 million in synergy benefits and the elimination of $19 million of COVID-related costs from the prior year did not fully offset inflationary cost pressures related to commodities, transportation and labor. In addition category mix impacted our gross margin as our lower margin auto care business achieved significant growth relative to battery in the quarter. Excluding acquisition and integration costs, SG&A as a percent of net sales was 14.3% versus 15.6% in the prior year. The absolute dollar decrease of $9.4 million was driven primarily by a reduction in compensation costs. In the quarter, we realized $9 million in synergies, bringing the total for 2021 to $62 million. We have delivered over $130 million of synergies related to our battery and auto care acquisitions, well exceeding our initial targets. Interest expense was $13.4 million lower than the prior-year quarter as we are benefiting from significant refinancing activity over the past 18 months. During the fourth quarter, we entered into a $75 million accelerated share repurchase program. Approximately 1.5 million shares were delivered in fiscal 2021 and we expect another 400,000 shares to be delivered in the first quarter of fiscal '22, bringing the total number of shares repurchased under the ASR program to approximately 1.9 million. Now turning to the highlights for fiscal 2021. As Mark mentioned, we delivered our full-year 2021 outlook for revenue, adjusted EBITDA and adjusted EPS. Net sales grew 10.1%, including organic sales up 7.3% as we experienced robust growth in both the Americas and International and across all three product categories, batteries, auto care and lighting products. Adjusted gross margin was down 100 basis points, as higher input costs were partially offset by synergies and the reduction of COVID-related costs incurred in 2020. Interest expense, benefiting from significant refinancing activity, decreased $33 million. Adjusted earnings per share increased 51% to $3.48 as higher sales, synergies and lower interest expense more than offset the higher input costs. And adjusted EBITDA increased 10%. At the end of 2021, our net debt was approximately $3.2 billion or 5.1 times net debt to credit defined EBITDA with nearly 85% at fixed interest rates, no near-term maturities and an all-in cost of debt below 4%. Our adjusted free cash flow for 2021 was $203.5 million. The decline versus the prior year primarily reflects working capital investments as we proactively invested in incremental inventory given the continued volatility in the global supply network and uncertainty around product sourcing, transportation and labor availability. Now turning to our fiscal 2022 outlook. As Mark discussed, our categories remain healthy and are showing solid growth when compared to pre-pandemic levels. As we enter fiscal 2022, we are benefiting from significant pricing actions. However, input costs continue to rise. The outlook we are providing for next year reflects pricing actions that we have executed or planned as well as the assumption that our input costs remain at current levels for the full year. Organic revenue is expected to be roughly flat with auto care growth and pricing actions across 85% of our businesses, offset by declines in battery as we comp prior year elevated demand in the first two fiscal quarters. We also expect reported revenue will be negatively impacted by foreign currency headwinds of $20 million to $25 million at current rates. As we have talked about for the last couple of quarters, input costs including raw materials, labor and transportation costs, are rising rapidly and supply chain networks continue to be stressed. Last quarter I highlighted the potential for an additional 100 basis points of gross margin headwinds in 2022 if input costs did not improve. And as of today, the trends have worsened. While we expect the absolute dollar amount of these rising costs to be offset by the pricing actions and cost reduction efforts that our team has undertaken, we now project gross margin headwinds of approximately 150 basis points, based on current rates and assumptions. These inflationary cost pressures, combined with the anticipated volume declines in battery in the first half of the year, are expected to result in adjusted earnings per share in the range of $3 to $3.30 and adjusted EBITDA in the range of $560 million to $590 million. As we look at our capital allocation priorities during this volatile macro environment, we will continue to invest in our businesses and brands for the long term while returning cash to shareholders and paying down debt. While 2021 was a solid year for Energizer and one that we are proud of, our focus today is on moving forward and working to further mitigate the cost headwinds we are facing while ensuring our products are available to consumers around the world.

expect reported revenue will be negatively impacted by foreign currency headwinds of $20 million to $25 million at current rates for fiscal year 2022. for the fourth fiscal quarter, strong auto care performance drove net sales growth. sees fy 2022 adjusted earnings per share in range of $3.00 to $3.30. sees 2022 organic revenue to be roughly flat. energizer holdings - current operating environment remains very volatile. will remain focused on offsetting headwinds through additional pricing and cost reduction opportunities in fiscal 2022.

In addition, we will also be presenting certain non-GAAP financial measures. We delivered solid first quarter results due to robust demand for our products and services in each of our business segments. Orders over the last three weeks or 12 weeks, excuse me, are 25% higher than the same period F '20 pre COVID. We reported first quarter fiscal 2021 adjusted earnings of $1.25 per diluted share, a 36% increase over the first quarter of last year. Our Motive Power business generated strong revenue and earnings growth, while our Specialty business continued its positive momentum, fueled by accelerating demand for our transportation products. Despite challenges in the supply chain, Energy Systems began its rebound from a challenging fourth quarter, driven by growing demand and a variety of end markets, including mid spectrum 5G, broadband and utility markets. Similar to other industrial companies, we are facing some challenges in the wake of the world's steepest economic recovery as businesses reopen and competition for labor, materials and transportations remains fierce. While we are seeing unprecedented demand growth, we have experienced constraints in our ability to bring on new employees necessary to keep up with demand. Freight and tariffs continues to be a source of cost pressure, along with a variety of other components, including resins and semiconductor. Our team has responded well to these short-term challenges and we expect to see steady improvements in the supply chain as we work to mitigate its impact by identifying alternative sourcing methods and further leveraging our global footprint to align supply with demand. As these temporary issues unwind, we will benefit from the strong market momentum. I'd now like to provide a little more color on some of our key markets. Let's start with our largest segment, Energy Systems, which saw a modest improvement from the prior quarter, growing revenue by more than $22 million and generating a nearly $4 million gain in operating income versus Q4. Demand for our Energy Systems' products remains strong, with order intake from one of our larger telecom customers picking up after a slow Q4 that was driven by 5G radio availability, labor and permitting challenges. Broadband orders continue to improve and are expected to accelerate dramatically as the California Public Utilities Commission public safety grid shutdown extended network backward -- backup programs roll forward. While the market is displaying positive momentum, Energy Systems continues to experience drags in three primary areas. First, we have seen higher tariffs and freight costs as our efforts to move contract manufacturing out of China closer to home is slowed by COVID versus our plan. Also, container shipping rates are in an unprecedented fourfold from historical rates and expedited fees are common. Delayed sales due to supply chain challenges, including semiconductors, continue to constrain our top line and gross margins due to a lack of capacity for higher margin cable power supplies, DC power plants, and Thin Plate Pure Lead products. Second, we have incurred additional engineering costs to support our Touch-Safe collaboration with Corning as well advancing -- as well as advancing our lithium offerings and the other NPIs supporting 5G and renewables from which revenue will begin to accelerate in the second half of this fiscal year. Our investment in R&D will also accelerate during the calendar year to advance the DC fast charging initiative that will benefit our next fiscal year. These investments will position us to be a significant participant in these new mega market trends. Third, the ES group has been more heavily burdened with the ramp up of the integration inefficiencies of the NorthStar acquisition. As noted prior, this integration and expansion is roughly nine months behind schedule due to COVID. Despite the short-term cost pressures, we remain committed to TPPL expansion and cost improvements to handle the rapidly expanding TPPL demand in all lines of business. Driven by sound underlying demand, we expect the Energy Systems business to continue its upward trajectory with the full opportunity set to be unleashed as these COVID-related supply chain headwinds subside. Our Motive Power business was a bright spot during the quarter. Despite some lingering supply chain constraints, we returned to the historically higher end of our return on sales for this business. Our backlog is now at historic levels and our NexSys TPPL along with recently released lithium variance continues to gain market acceptance. We anticipate normal seasonality over the summer holiday months. While lift truck industry order statistics remain exceptionally high, we are being mindful of OEM supply limitations. We are confident they're -- we are well positioned to benefit from a steady recovery throughout the balance of the fiscal year. The restructuring of our Hagen, Germany facility remains ahead of schedule in regards to cost and timing, with most of the cost savings yet to be realized. We will further evaluate our global footprint to ensure we can meet strong current order patterns and continue to extract savings with further standardization of our legacy product offerings and other business transformation initiatives. Our Specialty business contributed another strong quarter to our overall results despite the NorthStar-related cost drag I mentioned earlier. As the high-speed line and other productivity capacity enhancements are installed in our TPPL factories, we will enjoy lower costs and increased capacity in our second half results. Demand in our transportation business remains exceptional, buoyed by significant incremental revenue that we are positioned to win as additional Springfield capacity comes online. US transportation grew rapidly from the year ago quarter and our backlog remains at record levels. We expect continued strong demand for the remainder of the calendar year from the US economic recovery. We delivered exceptional results in aerospace and defense, as all of our markets were strong including tactical vehicles and munitions. Munitions recorded several key wins based on our industry-leading technology that provides 40% extended life in thermal batteries. We will have doubled this business since the acquisition in just five years. Positive recent conversations with several large customers, combined with the US source lithium initiatives the Biden administration is highlighting in their infrastructure legislation, gives us great confidence in the future growth opportunities in many of our businesses. As you all know, we announced our battery energy storage system plus DC fast charge initiative in the fourth fiscal quarter, which remains on track regarding product development and performance all while this tremendous market opportunity continues to grow. Our goal is to deliver an EV charger that charges any electric passenger car as fast as the car can handle, reducing the process from hours to minutes. By using a large stationary battery to quickly charge the EVs, we can dramatically reduce system installation costs at many sites, including the size of the AC transformer and high voltage cabling from the utility interconnect, as well as the opportunity to provide optimized energy usage and emergency backup power. Feedback from our potential launch customer has been very positive, both on the speed of the development and level of software maturity, and we will continue to provide updates on this exciting initiative as we move forward. Although we expect to continue to face some supply chain disruptions in the near term, the fundamentals of our business are stronger than ever with global demand for our products and services growing by the day. The massive 5G build out is getting underway and will provide a strong multi-year tailwind for EnerSys. Thin Plate Pure Lead demand is growing rapidly in all lines of business, and the launch of best-in-class modular lithium systems in Motive Power and Energy Systems further enhances our market-leading positions. Lastly, a large bipartisan infrastructure bill is moving through Congress with additional bills being discussed, which could provide another catalyst for EnerSys in areas such as the electric grid, EV charging, and the rural build out of high-speed broadband. I'd like to close by recapping our strategic initiatives, which remain unchanged. One, to accelerate higher margin maintenance free Motive Power sales with NexSys iON and NexSys PURE. Two, to grow the portfolio of products in our Energy Systems business, particularly in telecom, with fully integrated DC power systems and small cell site powering solutions, which will accelerate our growth in 5G, as well as the addition of our battery energy storage system plus DC fast charging initiative. Three, to increase Thin Plate Pure Lead capacity, particularly for transportation market share in our Specialty business. And finally, four, to reduce waste through the continued rollout of our EnerSys operating system. We will continue to execute on each of these initiatives and look forward to providing you updates on our progress in the quarters ahead. With that, I'll now ask Mike to provide further information on our first quarter results and go forward guidance. I am starting with Slide 11. Our first quarter net sales increased 16% over the prior year to $815 million due to a 12% increase from volume and 4% from currency gains. On a line of business basis, our first quarter net sales in Energy Systems were up 5% to $371 million; Specialty was up 21% to $108 million; and Motive Power revenues were up 28% to $336 million. Motive Power's growth was mostly from 22% in organic volume and 5% in currency improvements. The prior year Motive Power first quarter revenues were impacted significantly by the pandemic, with a 24% decrease in revenue. Our Motive Power revenues for Q1 are now comparable to the first quarter of two years ago. Energy Systems at a 3% increase from volume and a 3% improvement from currency, net of a 1% decrease in pricing. Specialty at 18% in volume improvements along with 2% positive currency and 1% in pricing. We had no impact from acquisitions in the quarter. On a geographical basis, net sales for the Americas were up 13% year-over-year to $557 million with the 12% more volume and 1% in currency; EMEA was up 27% to $201 million from 18% volume, 10% improvement in currency, less 1% in pricing; Asia was up 3% at $57 million on 9% currency improvements, less 6% volume decline. On a sequential basis, first quarter net sales were flat to the fourth quarter. On a line of business basis, Specialty decreased 19% from a very strong Q4 due to resin shortages, which are largely behind us; Motive Power was up 1% as it rebounds from the pandemic; and Energy Systems was up 6% from organic volume. On a geographical basis, Americas and EMEA were relatively flat, while Asia was up 5%. Now a few comments about our adjusted consolidated earnings performance. As you know, we utilize certain non-GAAP measures in analyzing our Company's operating performance, specifically excluding highlighted items. Accordingly, my following comments concerning operating earnings and my later comments concerning diluted earnings per share exclude all highlighted items. On a year-over-year basis, adjusted consolidated operating earnings in the first quarter increased approximately $14 million to $75 million, with the operating margin up 50 basis points. On a sequential basis, our first quarter operating earnings dollars declined $3 million from $78 million, while the OE margin dropped 40 basis points to 9.2%, primarily due to Energy Systems results, which Dave has addressed. Operating expenses, when excluding highlighted items, were at 14.5% of sales for the first quarter compared to 16.1% in the prior year, as our revenue growth exceeded our spending. On a substantial -- excuse me, sequential basis, our operating expenses declined $1 million and 10 basis points. Excluded from operating expenses recorded on a GAAP basis in Q1, our pre-tax charges of $14 million, primarily related to $6 million in Alpha and NorthStar amortization of intangibles and $8 million in restructuring charges for the previously announced closure of our flooded Motive Power manufacturing site in Hagen, Germany. Excluding those charges, our Motive Power business generated operating earnings of 15.1% or 470 basis points higher than the 10.4% in the first quarter of last year due to easing of pandemic-related restrictions and demand, coupled with ongoing OpEx restraint. The OE dollars for Motive Power decreased over 20 -- excuse me, increased over $23 million from the prior year. On a sequential basis, Motive Power's first quarter OE decreased 50 basis points from the 15.6% margin posted in the fourth quarter due to higher lead and other input costs. Energy Systems operating performance percentage of 3.5% was down from last year's 8%, although it improved from last quarter's 2.6%. OE dollars decreased $15 million from the prior year, however, it increased $4 million from the prior quarter on higher volume. The cost of higher tariffs, freight, materials and manufacturing costs continues to create headwinds. Specialty operating earnings percentage of 10.6% was up from last year's 6.5% on higher volume, but down from last quarter's 13.2%. OE dollars increased $6 million from the prior year, but declined $6 million from a strong fourth quarter on lower revenue. Please move to Slide 14. As previously reflected on Slide 13, our first quarter adjusted consolidated operating earnings of $75 million was an increase of $14 million or 23% from the prior year. Our adjusted consolidated net earnings of $54.4 million was $15 million higher than the prior year. The improvement in adjusted net earnings reflects primarily the rise in operating earnings along with lower interest expense and a small currency gain. Our adjusted effective income tax rate of 18% for the first quarter was slightly lower than the prior year's rate of 21% and lower than the prior quarter's rate of 19%. Discrete tax items caused most of these variations. We have made no adjustments for any proposed changes in taxation announced recently. First quarter earnings per share increased 36% to $1.25, which was the top of our guidance range. We expect our weighted average shares for the first quarter -- excuse me, second quarter fiscal '22 to remain relatively constant with approximately 43.5 million outstanding. As a reminder, we now have over $55 million in share buybacks authorized, and we purchased nearly $32 million recently. This recent buyback reflects the return to our normal pattern of removing the dilutive impact of our stock comp program. Last week, we also announced our quarterly dividend, which remained unchanged from prior levels. Our balance sheet remains strong and positions us well to navigate the current economic environment. We have $406 million of cash on hand, and our credit agreement leverage ratio was 1.95 times levered, which allows over $600 million in additional borrowing capacity. Last month, we extended and amended our credit facility on favorable terms, which is now in place through 2026. We expect our leverage to remain near 2.0 times in fiscal 2022. We spent $26 million on our Hagen restructuring along with $46 million in inventory growth to support higher backlogs. And as a result, our cash flow from operations was negative $48 million in the first quarter as we expected. The balance bits [Phonetic] from the Hagen, Germany restructuring started in Q1 and we should exit the year with a $20 million annual run rate. Capital expenditures of $16 million were in line with our prior guidance. Our capex expectation for fiscal 2022 is $100 million and reflects major investment programs in lithium battery development and continued expansion of our TPPL capacity, including the NorthStar integration. We anticipate our gross profit rate to remain near 24% in Q2 of fiscal 2022. As Dave has described, we believe all three of our lines of business find their products in high demand. Near-term supply challenges are restricting our ability to execute fully on these opportunities. Our guidance range of $1.03 to $1.13 for our second fiscal quarter of FY '22 reflects the impact of these challenges along with the normal seasonality of Q2 and the added investments in product development and personnel.

sees q2 adjusted earnings per share $1.03 to $1.13. q1'22 backlog growth of $157m. qtrly adjusted earnings per share $1.25.

In addition, we will also be presenting certain non-GAAP financial measures. Then I will take a step back and provide an update on how we're tracking against the strategic initiatives we laid out at our 2019 Investor Day a little more than a year ago. As we entered our second quarter, the COVID-19 pandemic continued to disrupt economic activity unevenly in markets around the world. However, we began to see a rebound from the viruses impact on our business throughout the period and actually exited the quarter with [Technical Issues] very close to pre-pandemic levels. The US and Chinese motive power markets have recovered much faster than Western Europe, while Energy Systems and Specialty were less impacted by COVID. We continue to build on the cost reductions we instituted early in the first quarter, while always staying ready to flex operations backup in response to demand recovery. As you may recall, our model allows us to quickly adjust our capex and opex without impacting our revenue growth objectives or our quality of service. Many of the opex initiatives we have put in place will enable us to maintain an improved level of operational efficiency with our new global line of business alignment even as the demand ramps up. All of our major facilities remain open and we continue to prioritize the safety of our employees as COVID cases rise around the world. Despite the ongoing headwinds caused by COVID-19, the diversified nature of our business was evident during the quarter as we reported solid second quarter fiscal 2021 adjusted earnings of $1 per diluted share. Our Specialty segment was particularly strong, especially in the transportation portion of our business. Energy Systems turned in a solid quarter with the beginnings of 5G uptick becoming apparent. And while our Motive Power business still lagged Q2 prior year overall, our maintenance free TPPL NexSys PURE products have continued to outperform. It appears that the COVID market disruption is accelerating our customers' interest in our new dual chemistry NexSys products. This conversion to maintenance free combined with the lingering impact of COVID in Europe and our overall productivity improvements drove our decision to close our legacy flooded Motive Power factory in hog in Hagen, Germany. Due to improving business conditions and our streamlined cost structure, we generated exceptionally strong cash flow during the quarter, enabling an incremental $86 million in net debt reduction to achieve debt leverage of just under 2.1 times. We did this while still investing in the business. I'd now like to provide a little more color on some of our key markets. Our largest segment, Energy Systems performed well during the quarter, despite the impact of the pandemic. In the Americas, we saw growing momentum throughout the second quarter with improved order rates for broadband and continued robust demand for battery systems, particularly on the telecom front. Combined EMEA and APAC delivered double-digit year-over-year revenue growth. Global telecom carriers remain committed to investing in their networks to increase capacity and reliability. In the Americas, the completion of the T-Mobile merger has led to large purchases for our cabinets, batteries and electronics, as a complete system for their 5G ramp up. In addition to the direct benefits of the merger the mandated DISH spin off presents a significant opportunity for EnerSys in the quarters ahead as this fourth quarter nationwide provider looks to build their own 5G network. The broadband business continues to be a story of short-term pain that will inevitably lead to exciting long-term growth for EnerSys. The COVID induced work and school from home policies have stressed all broadband networks and resulted in the MSOs focusing near-term network capex on capacity augmentation over longer term network hardening programs. There is no denying that the reallocation of budgets has negatively impacted our business over this period. However, there is a clear light at the end of the tunnel as two of our largest broadband customers have recently begun allocating increased capex to network powering and we have seen improved order rates in Power Project approvals, driving an upcoming recovery for our broadband segment. Factoring in this positive trend along with the industries clear need for long-term network power infrastructure to support increased 5G power consumption. We expect the broadband business to transition from a headwind to a tailwind in the near future. As noted earlier, our new maintenance free NexSys products are being well received in the market. I am pleased to say we have started the launch of our NexSys iON lithium motive power batteries and are in the early stages of testing and validation globally with key forklift OEMs. We have also initiated pre-launch end-user site demonstrations globally with very positive results in several large accounts. Our sales team is focusing the NexSys iON products on the portions of the market with the most demanding duty cycles. For example, we trialed NexSys iON at a Carpet Mill that runs their fork trucks nearly 24/7, where there is very little time to recharge the batteries. The increased capacity and excellent charge acceptance of NexSys iON allowed the customer to keep running while charging only during breaks. The new third-generation TPPL motive power pack is also progressing on schedule, with respect to the high-speed line commissioning. And we've -- as we've discussed previously, this new product family will be using large format carbon enhanced TPPL batteries coupled with a match battery management system. The carbon additive when controlled correctly will provide the user with a significant increase in energy throughput resulting in longer life. Further, the addition of a battery management system integrated with the vehicles and the chargers will allow the same experience as our lithium family of products. The third segment of our business Specialty, had another outstanding quarter particularly in light of the ongoing impact of COVID. Our results in this segment are being driven by our success in transportation where our backlog remains strong and over the road new truck demand is improving. The automotive aftermarket business was very strong in the quarter following several recent contract wins, along with continued success and retail channels with distributors such as NAPA. We have continued to increase EnerSys's market share in the transportation sector by leveraging our technology platform with TPPL. Our defense business improved sequentially in the second quarter as our thermal products continue to win more awards. Our ongoing expansion of these thermal products used in munitions also continues to progress. The majority of these programs have capitalized on our industry-leading cobalt disulfide battery technology that provides lighter weight and extended operating times for applications in air and missile defense, air to ground weapons, and hypersonics. Our satellite business continues to shine as well. Now that I've given you a brief overview of our second quarter results and the prevailing trends in each of our business segments. I wanted to take a look back at the strategic initiatives we outlined in our October 2019 Investor Day, which very much remain our core areas of focus today and we are seeing excellent progress in each of these. As a reminder, they include the following global initiatives. One, growing the portfolio of products in our Energy Systems business, particularly in telecom with fully integrated DC power systems and small cell side powering solutions, which will accelerate our revenue growth from 5G. Two, accelerating higher margin maintenance free Motive Power sales with NexSys iON and PURE. Three, increasing transportation market share in our specialty business; and fourth, reducing waste through continued rollout of our EnerSys Operating System. Our acquisition of the Alpha Technologies Group two years ago created the only fully integrated AC and DC power supply and energy storage provider for broadband telecom in energy storage systems. It positioned EnerSys to provide a single source solution for fiber connectivity enclosures, small cell power, power conversion, power distribution, and energy storage back up with a nationwide engineer furnish and install organization to turnkey and maintain the project. The opportunity we initially saw in office coming to fruition as large customers expanded their spending patterns from just batteries to EnerSys's complete systems offering. We expect this trend to continue in the quarters ahead. AT&T opportunities are improving for us as they deploy 5G infrastructure for macro and RAN sites, while our strategic collaboration with Corning to speed 5G deployment through a next generation touch safe line powering system for small cells is advancing. This collaboration will leverage Corning's industry leading fiber, cable and connectivity expertise and EnerSys's Technology leadership in their remote powering solutions. It has been endorsed by one of our largest telecom customers. We are excited by this opportunity in all of the actions we are seeing on the 5G front, to help you better understand the impact it is already having on our business. It is worth noting that we have already seen $50 million of 5G-related revenue lift during this year, which we believe is only the tip of the iceberg for this long-term growth driver. Unfortunately, the 5G benefit was masked by the reallocated capex spending from our larger broadband customers during the quarter as discussed earlier. We remain more excited and bullish than ever about the longer term impact 5G will have on our business, especially with the new technologies we are deploying to assist our customers in this mega trend. As a result, we are projecting steady 6% plus CAGAR of Energy Systems sales over the next five years. Our next strategic initiative maintenance free Motive Power is well on track to our five-year plan. In the quarter for example, while Americas flooded lead acid battery sales were down 25% year-on-year; Americas Motive Power TPPL NexSys sales were up 25% in the same period. As this trend continues and demand resumes, maintenance free will comprise a larger portion of our Motive Power revenue and the higher gross profit margins will have an even more dramatic impact on our profitability. We are now estimating that our maintenance free NexSys offerings will grow to be the majority of our battery business by fiscal year '25. We are pleased to say that the next generation initiatives growing transportation market share in the Specialty segment has been a resounding success over the past 12 months. The transportation business in the America's continues to improve as we see signs -- as we sign up new customers for ODYSSEY TPPL products in the premium automotive and trucking spaces. While still impacted by shutdowns from COVID, we grew our Transportation business by 64% this quarter with the integration of NorthStar and are currently limited only by TPPL capacity that will increase dramatically when the high speed line is fully operational. We are well positioned to capitalize on the strong backlog and ongoing demand for our long-term -- and our -- as our long-term transportation sales outlook matches our planned capacity over the next five years. At this point the integration of NorthStar is nearly complete, ODYSSEY branded automotive products are now being produced in NorthStar factories and our new high-speed line is proceeding through its commissioning in the newest plant with commercial revenue expected before the end of this calendar year. NorthStar factors report to a TPPL global leadership team to more effectively share best business practices with our three other TPPL factories. Managing TPPL under one global team has been critical to our ability to integrate NorthStar and increase production capacity in such a short period of time. Despite completing the integration, however, we've been hampered by under absorption at our factories due to COVID, as well as the inefficiencies inherent in all start-ups. These inefficiencies include the time necessary to hire new people and train them on new products and systems. This was more challenging in a period when many government incentives paid them to stay unemployed. These short-term manufacturing inefficiencies have masked other areas of operational improvement, which will contribute to shareholder value in years to come. While we are clearly on the right track and beginning to see the benefits of each of these initiatives, we estimate COVID-19 has delayed our progress against our Investor Day model by three to four quarters. With that in mind, during his portion of the call, Mike will provide an update on the plan we laid out during Investor Day. I'd like to conclude by saying that despite the challenges we've continued to confront with the pandemic, I am very proud of how our team has operated in this new environment. Looking ahead, we are extremely excited by the accelerated 5G build out and the significant opportunity for our industry-leading TPPL product provide us customers continue to seek a maintenance free solution to their critical power needs. With that, I'll now ask Mike to provide further information on our second quarter results and go forward guidance. However, I am starting with Slide nine. Our second quarter net sales decreased 7% over the prior year to $708 million, due to an 11% decrease from volume, a 1% decrease in pricing, net of 1% increase from currency and a 4% increase from acquisitions. On a line of business basis, our second quarter net sales in Motive Power were down 21% to $264 million and Energy System net sales were down 1% at $341 million, while Specialty increased 24% in the second quarter to $104 million. Motive Power suffered a 21% decline in volume, due to the pandemic and a 1% decline in price, net of a 1% increase in FX. Energy Systems had a 4% increase from the NorthStar acquisition and a 1% improvement from currency offset by decreases of 1% and 5% in pricing and volume respectively. Specialty had 17% from the NorthStar acquisition less 9% in volume improvements and 1% increase from FX, net of a 3% decline in price and mix. On a geographical basis, net sales for the Americas were down 8% year-over-year to $481 million with an 11% volume drop and a 1% price decline, net of a 4% increase from acquisitions, offset by 1% decrease from currency. EMEA had a 6% -- was down 6% to $172 million on 13% volume and 2% price declines with 5% improvements in currency and 4% from acquisitions, while Asia was up 3% to $56 million, due primarily to currency. Please now refer to Slide 10. On a sequential basis, second quarter net sales, were up slightly, compared to the first quarter driven by translation improvements. On a line of business basis, specialty increased 17% with NorthStar starting to contribute its capacity for transportation sales, while Motive Power was flat and Energy Systems was down 4% on soft broadband revenues. On a geographic basis, Americas were down 2%, EMEA was up 8%, while Asia was up 1%. Now few comments about our adjusted consolidated operating earnings performance. As you know, we utilize certain non-GAAP measures in analyzing our company's operating performance, specifically excluding highlighted items. Accordingly my following comments concerning operating earnings and my later comments concerning diluted earnings per share excluded all highlighted items. On a year-over-year basis, adjusted consolidated operating earnings in the second quarter decreased approximately $9 million to $66 million with the operating margin down 50 basis points. Lower commodity cost and operating expenses were not enough to offset the volume declines and higher manufacturing costs. However, on a sequential basis, our second quarter operating earnings improved 70 basis points to 9.35%. Operating expenses when excluding highlighted items were at 15.7% of sales for the second quarter, compared to 16.1% in the prior year as we reduced our spending by $11 million year-over-year and nearly $3 million sequentially. Excluded from operating expenses recorded on a GAAP basis in Q2, our pre-tax charges of $11 million, primarily related to $6 million in Alpha and NorthStar amortization and $3 million in restructuring charges. Excluding those charges, our Motive Power business segment achieved an operating earnings percentage of 9.2%, which was 120 basis points lower than the 10.4% in the second quarter of last year, due to the 21% lower volume mentioned earlier in driving a $11 million drop in operating earnings. On a sequential basis Motive Power's second quarter OE also dropped to 120 basis points from the 10.4% margin posted in the first quarter, due primarily to the reduction of $2.3 million in recovery on business interruption proceeds from the $3.8 million in Q1, down to $1.5 million. The recovery on our business interruption claim from the Richmond fire has nearly concluded as has most of the reconstruction of the facility. We received $5 million in April, which was reflected in last fiscal year's fourth quarter results. We received another $4 million in May, which was recorded in the first quarter of fiscal '21 and we received over $1 million in July, which are reflected in Q2's results. We expect to collect another $2 million on the matter, bringing the total recovered to nearly $13 million. Overall, the claim including property loss and cleanup along with the business recovery, totaled approximately $45 million. Energy Systems operating earnings percentage of 8.8% was up from last year's 8.6% and up from last quarter's 8%. OE dollars decreased $0.5 million from the prior year primarily from lower operating expenses and increased $2 million from the prior quarter on lower commodity costs and operating expenses. Specialty operating earnings percentage of 11.4% was down from last year's 12.3%, but up from last quarter's 6.5%. OE dollars decreased nearly $2 million from the prior year on higher volume -- excuse me, they increased nearly $2 million from the prior year on higher volume and increased $6 million from the prior quarter on higher volume and lower manufacturing variances. Please move to Slide 12. As previously reflected on Slide 11, our second quarter adjusted consolidated operating earnings of $66 million was a decrease in $9 million or 12% from the prior year. Our adjusted consolidated net earnings of $43 million was nearly $10 million lower than the prior year. The decline in adjusted net earnings reflect the decline in operating earnings, as well as a $4 million foreign currency loss, primarily on unfavorable exchange rates for intercompany balances. Our adjusted effective income tax rate of 17% for the second quarter was lower than the prior year's rate of 18% and lower than the prior quarter's rate of 21%. Discrete tax items caused most of these variations. Fiscal 2019s full-year tax rate was 17%, while our fiscal 2020 tax rate was just below 18%, which is consistent with our expectations for fiscal 2021. EPS decreased 19% to $1 on lower net earnings. We expect our third fiscal quarter of 2021 to remain near the $43.1 million of weighted average shares outstanding in the second quarter. As a reminder, we still have nearly $50 million of share buybacks authorized, but have no immediate plans to execute any repurchases with perhaps the exception of the modest annual repurchase made to offset employee stock dilution. Our recently announced dividend remains unchanged. We have included our year-to-date results on Slides 13 and 14 for your information, but I do not intend to cover these in detail. Our balance sheet remains strong and well positioned for us to navigate the current economic environment. We now have nearly $414 million of cash on hand and our credit agreement leverage ratio is now 2.1 times, which allows over $600 million in additional borrowing capacity. We expect our leverage to remain below 2.5 times in fiscal 2021. We generated over $87 million in free cash flow in the second fiscal quarter of 2021. Our first half free cash flow generation was very strong at $177 million. Our receivable collections also remained very good with our DSO matching its historical low. Capital expenditures of $40 million were at our expectations for the first half of the fiscal year. Our capex expectation for fiscal '21 of approximately $65 million to $70 million has expanded slightly as the economic outlook has improved. Our major investment programs, those being lithium battery development continued expansion of our TPPL capacity, including the NorthStar integration. The installation of our high-speed line and the transition of NorthStar products for the European market to our French factory are all progressing as planned. Our high-speed line is being commissioned this month and should soon commence operations. Even with these investments, we've had retained the agility to flex our manufacturing footprint as needed. Our decision announced last night to close our Hagen, Germany facility after nearly 25-years of group ownership reflects our assessment that; one, the transition of maintenance free solutions for forklifts; two, the collective oversupply of flooded batteries for forklifts in EMEA along with; three, the continued slump in demand from the pandemic and other market conditions. It was the decision we struggled with given the strength of the workforce and our lengthy ownership of that facility. It will cost in excess of $80 million with 75% being cash charges for severance, decommissioning, cleaning and closing open contracts with vendors, but it should payback in under four years and we can handle all expected demand from our other existing factories. We anticipate our gross profit rate to remain near 25% in Q3 of fiscal '21, as the lower utilization in some of our factories over the July to September months will not hit our P&L until this third fiscal period, which we are now in. We expect expanding margins thereafter. As we had previously mentioned, we recently took the time to refresh our outlook from that provided on our Investor Day last fall. As Dave mentioned, we still feel the core of our expectations remain intact beyond the nine to 12 month delay due to the pandemic in reaching our previously provided target for an additional $300 million in incremental adjusted net earnings. We believe the most profound updates are that; number one, the conversion to maintenance free solutions for Motive Power is progressing faster than initially expected, thus precipitating the closure of our Motive Power factory in Hagen, Germany. Number two, our increased confidence in our solutions for the 5G build out. Number three, stronger-than-expected demand in the automotive aftermarket. Number four, our planned TPPL capacity expansions will still satisfy our projected needs; and five, our performance in this recession has been as we predicted on Investor Day, if a recession were to occur. As Dave described, we believe Motive Power markets are recovering, while our Energy Systems and Specialty markets continue to have bright prospects. With some of the uncertainty from our elections in the pandemic behind us, we currently feel we have enough visibility to provide a guidance range of $1.17 to $1.21 in our third fiscal quarter.

sees q3 adjusted earnings per share $1.17 to $1.23.

Before we get started, I would like to wish everybody a happy Veterans Day. In addition, we will also be presenting certain non-GAAP financial measures, particularly concerning our adjusted consolidated operating earnings performance and our adjusted diluted earnings per share, which excludes certain highlighted items. Our second quarter results reflected a combination of record market demand across all of our segments, with Q2 '22 orders 36% higher than the same period pre-COVID fiscal year '20, but accompanied by continued inflation and supply chain challenges. We reported second quarter adjusted earnings of $1.01 per diluted share, which was a slight increase over the second quarter of last year. Our Motive Power and Specialty businesses delivered better than expected results, while Energy Systems continue to be disproportionately impacted by its Asia-sourced supply chain. Strong demand led to our quarter end backlog reaching an all-time record exceeding $1 billion, which is more than double normalized levels. The backlog growth primarily occurred in our Energy Systems and Specialty lines of business and is indicative of extremely robust end market demand over and above the COVID recovery. Let me take a minute to provide you some added color of the current economic environment. As has been a common theme among most industrial companies this earnings cycle, we are facing a number of challenges in the wake of the global economic recovery as businesses aggressively compete for labor, materials and transportation, all while still navigating isolated COVID disruptions. The trend we saw in Q1 has continued with nearly $20 million of sequential cost increases in freight, wages, lead, non-lead commodities and semiconductors. Our team continues to take aggressive actions to mitigate these pressures, including the implementation of additional price increases, resourcing of materials and engineering redesigns. As these issues stabilize, our financial results will more fully reflect our record backlog, enhanced profitability and across-the-board demand for our products. I'd now like to provide a little more color on some of our key markets. Let's start with our largest segment, Energy Systems, which continues to see robust demand with Q2 '22 order rates increasing over 50% compared to pre-COVID Q2 '20. We saw exceptionally strong demand in 5G mid spectrum and broadband. We also received our first orders from the California Public Utilities' Public Safety Grid Shutdown Extended Network Backup Program. Shipments for these orders are expected to ramp in Q3, Q4 and into fiscal year 2023. In addition, we believe these programs may be extended to other states presenting another opportunity for future growth. Countering the strong demand is the fact that Energy Systems has our longest and most complicated supply chain, which was therefore the hardest hit by the macroeconomic environment in the quarter. The Energy Systems price recapture cycle is longer due to the project nature of this business while working through the contractual obligations of its lengthy backlog. As a result, in Q2, ongoing pricing actions lagged inflation and were largely offset by mix with more service revenue offsetting higher margin electronics orders that could not be shipped or could not be delivered due to chip shortages. Tariff mitigation strategies, including our efforts to move contract manufacturing out of China and closer to home, continue to be slowed by semiconductor availability. Freight costs for Energy Systems alone rose sequentially an additional $6 million in the quarter, doubling the prior year level. While Energy Systems' operating earnings this quarter were disappointing, market demand and macro trends, combined with additional price increases and the resourcing of electronics, still point to an extremely positive long-term path for the business. However, due to the current state of the global supply chain, especially availability of semiconductors, our third quarter will remain challenged. That said, as many of our commodities' inflation trends appear to have peaked, we are confident our price recapture initiatives will catch up in the near future. Despite the challenges we noted in our Energy Systems business, one of EnerSys' core strengths is our diversification. Our Motive Power business continued its positive momentum during the quarter outperforming both top-line and profitability expectations as demand returned to pre-COVID levels. Revenue decreased $15 million from Q1 due to the traditional European summer holidays. Nevertheless, we believe this business has not yet reached its full potential as our OEM customers' demand has been hampered by their ability to secure chips. Margins improved as a result of price and mix improvements as well as ongoing opex efficiencies with Motive Power enjoying nearly 20% higher operating earnings than the same pre-COVID period in F '20. Our NexSys TPPL and recently released lithium variants continue to generate enthusiasm in the market. In addition, the restructuring of our Hagen Germany facility nears completion ahead of schedule on cost and timing, with savings beginning to be realized. We will also continue to extract additional savings with further standardization of our legacy product offering and other business transformation initiatives. We remain well positioned to benefit from a steady recovery in this business throughout the balance of the fiscal year. Similar to Motive, our Specialty business delivered a solid quarter. A&D is performing well and demand in the transportation business remains extremely strong, slowed [Phonetic] only by TPPL supply constraints in Americas and Europe. We expect very robust transportation growth in Q3 as a result of our focus on aligning capacity with demand and our belief that the truck market will continue its growth into calendar year '22 as a result of the improving economic -- improving economy and their anticipation that chip shortages will improve. Our Thin Plate Pure Lead production capacity continues to grow and we will exit the fiscal year at our planned run rate of $1.2 billion per year. The financial performance for TPPL manufacturing has been under significant pressure all year long with COVID-related staffing and supply chain shortages hampering productivity. We expect significant reductions in manufacturing variances next fiscal year as the supply chain issues slowly subside. Reduced manufacturing variances combined with a record backlog and continued strong demand signals from our transportation customers gives us immense confidence in the future of our Specialty business. Our product road map is one of the most exciting areas of our business as the technology advancement of our product pipeline has been long in the making, but well worth the wait. We have fully launched 11 lithium variants for Motive Power Group and continue to expand our product portfolio. We have received OEM approvals and the family has successfully completed, all witness to our testing. The demand for lithium products throughout our Energy Systems Group also continues to grow. In addition to the lithium portion of the California PUC success mentioned earlier, telecom and residential home energy products are all performing well on UL tests. Progress on the development of the TouchSafe product with Corning continues to go well. Customer plans for their high-frequency networks using this solution are accelerating. Last but certainly not least, our EV fast charge and storage initiative is quickly moving forward. Feedback from our potential launch partner customer has been very positive, including speed and development as well as the level of software maturity. We should see our first revenue for this product next fiscal year. EV charging is a key focus of the recently passed Infrastructure Bill. Looking ahead, our near-term challenges revolve around addressing global supply chain issues as well as rising commodity and labor costs and shortages. We are actively working to mitigate these pressures through incremental price increases, alternative sourcing, engineering redesigns and aggressive hiring actions. We will remain nimble as we adjust to the changing environment. Despite these hurdles, there is a lot about EnerSys to generate real excitement. Current demand for our products is greater than I can ever remember, fueled by a massive 5G build-out and high growth categories such as transportation. Our future growth opportunities include significant investments in rural broadband, high frequency small cell deployment, EV charging, home energy storage, transportation market share growth, increased defense allocations and material handling OEMs returning to normalized levels. We will continue to execute on our strategic initiatives and look forward to providing you updates on our progress in the quarters ahead. With that, I'll now ask Mike to provide further information on our second quarter results and go-forward guidance. I am starting with Slide 10. Our second quarter net sales increased 12% over the prior year to $791 million due to an 11% increase from volume and 1% from price, net of mix. On a line of business basis, our second quarter net sales in Energy Systems were up 9% to $370 million, Specialty was down 3% to $101 million and Motive Power revenues were up 22% to $321 million. Motive Power's improvement was mostly from 20% growth in organic volume and 2% improvement from pricing. The prior year Motive Power second quarter revenues were significantly impacted by the pandemic, resulting in a 21% decrease in organic volume. Our Motive Power revenues for H1 of this year, however, are comparable to the pre-pandemic levels of two years ago. Energy Systems had a 9% increase from volume as well as 1% improvement from FX, but had a 1% decrease in price after including negative mix. Specialty had a 5% pricing improvement that was offset by an 8% erosion in volume due largely to delayed shipments. We had no impact on revenue from acquisitions in the quarter. On a geographical basis, net sales for the Americas were up 14% year-over-year to $550 million, with 14% more volume. EMEA was up 5% to $180 million from a 3% increase in volume and 2% in pricing. Asia was up 10% at $661 million on 7% more volume and 3% currency improvements. On a sequential basis, moving to Slide 11, our second quarter net sales were down 3% from the first quarter, largely due to the normal vacation holidays in Europe and supply chain shortages. On a line of business basis, Specialty decreased 6% with supply constraints pushing out order fulfillments into Q3. Motive Power was down 5% due to the European holiday season previously mentioned and EMEA was flat -- excuse me, Energy Systems was flat. On a geographical basis, Americas was also relatively flat and Asia revenues were up 8%, while EMEA was down 11% mostly from lower volumes. On a year-over-year basis, adjusted consolidated operating earnings in the second quarter decreased approximately $5 million to $61 million with the operating margin down 160 basis points. On a sequential basis, our second quarter operating earnings dollars eroded $14 million from $75 million, while the OE margin decreased 150 basis points to 7.8%, primarily due to the persistent supply chain headwinds and inflation in Energy Systems, which Dave has addressed. Operating expenses, when excluding highlighted items, were at 14% of sales for the second quarter compared to 15.7% in the prior year and 16.1% from two years ago as our revenue growth exceeded our spending growth and we have maintained a more efficient operating leverage. On a sequential basis, our operating expenses were relatively flat. Excluded from operating expenses recorded on a GAAP basis in Q2 are pre-tax charges of approximately $12 million related to $6 million in Alpha and NorthStar amortizations and $4 million in restructuring charges from the previously announced closure of our flooded Motive Power manufacturing site in Hagen, Germany. Excluding those charges, our Motive Power business generated operating earnings of $41 million or 12.8%, which was 370 basis points higher than the 9.2% in the second quarter of last year due to strong demand and easing of pandemic-related restrictions, favorable mix from maintenance-free growth and ongoing opex constraint or restraint. Operating earnings dollars for Motive Power increased over $17 million from the prior year and $6 million from two years ago. On a sequential basis, Motive Power's second quarter OE decreased 220 basis points from the 15.1% margin posted in the first quarter due to the vacation season volume decline noted earlier, along with higher lead and other input costs. Energy Systems operating earnings percentage of 2.3% was down from last year's 8.8% and the prior quarter's 3.5%. OE dollars of $9 million were $5 million below last quarter and $22 million below prior year. The cost from higher freight, tariffs and materials caused the OE erosion with unfavorable mix from supply shortages offsetting the lagging pricing improvement realization. Specialty operating earnings percentage of 11.8% was up from last quarter's 10.6% and last year's 11.4%. OE dollars were largely flat sequentially and year-on-year, driving the margin improvement from improving pricing was the lower sales volume. Please move to Slide 13. As previously reflected on Slide 12, our second quarter adjusted consolidated operating earnings of $61 million was a decrease of $5 million or 7% from the prior year. Our adjusted consolidated net earnings of $44 million was in line with prior year but $11 million lower than the prior quarter. Our adjusted net earnings reflect the changes in operating earnings along with the lower adjusted tax rate. Our adjusted effective income tax rate of 16% for the second quarter was slightly below the prior year's rate of 17% and lower than the prior quarter's rate of 18%. Discrete tax items caused most of these variations. Second quarter earnings per share rose slightly year-over-year to $1.01, although it was slightly below the bottom of our guidance range. We expect our weighted average shares in the third fiscal quarter of 2022 to be approximately 42.5 million versus the 43.3 million in the second quarter. Our Board of Directors also recently renewed the $100 million share buyback authorization we had in place over the last two years that was completed with these recent October purchases. Last week, we also announced our quarterly dividend, which remains unchanged from prior levels. Slides 14 and 15 reflect the year-to-date results and are provided for your reference, but I don't intend to cover these at this time. Our balance sheet remains strong and positions us well to navigate the current economic environment. We have $408 million of cash on hand and our credit agreement leverage ratio is now at 2.0 times, which allows nearly $550 million in additional borrowing capacity. In July, we extended and amended our credit facility on favorable terms, which now is in place through 2026. We expect our leverage ratio to remain between 2.0 and 2.5 times in fiscal 2022. Our year-to-date cash flow from operations was a negative $66 million. Included in that amount was $28 million in spending on the previously announced restructuring of our Hagen, Germany Motive Power Plant, which is in the second quarters -- which in the second quarter started delivering on cost savings that should exceed $20 million annually. The negative operating cash flow was also due to our inventory expanding $123 million to meet rising revenues as well as from higher input costs and transit times, along with the other inefficiencies induced by supply chain disruptions. Capital expenditures of $35 million were in line with our prior guidance. Our capex expectation for fiscal 2022 remains approximately $100 million and reflects major investment programs in lithium battery development and our continued expansion of our TPPL capacity. We anticipate our gross profit rate to remain near 22% in Q3 of fiscal 2022. As Dave has described, all three of our lines of business find their products in high demand. Near-term supply challenges are restricting our ability to execute fully on these opportunities. As a result, our guidance range of $0.96 to $1.06 in our third fiscal quarter of 2022 reflects the impact of these supply chain challenges, which we continue to see as temporary. Please move to Slide 17. On a longer-term basis, we recently renewed -- or reviewed our updated five-year plan with our Board of Directors. We remain confident that our top-line growth and overall profitability goals are still achievable with respect to the final years' deliverables. However, those targets, as previously communicated, will take an additional year to be achieved compared to our Investor Day model in reflection of the delays the pandemic and supply chain challenges have had not only on our own progress but that of our customers and their broader markets. After more than 25 years with the company and 12 years as Chief Financial Officer, Mike has announced his intention to retire at the end of this fiscal year. While we will miss his wisdom and experience, we are very confident that Andy Funk is the right person to fill this role and help EnerSys complete its transition from a battery maker to a world-class energy systems leader.

sees q3 adjusted earnings per share $0.96 to $1.06. qtrly non-gaap earnings per share $1.01.

For a list of factors which could affect our future results, including our earnings estimates. In addition, we will also be presenting certain non-GAAP financial measures. Our third quarter reflected strong demand for our products and services, with order trends accelerating during the period. The strength of our business was even more impressive considering the ongoing headwinds created by the COVID-19 pandemic, which continued to disrupt economic activity around the world. We've been able to maintain cohesion throughout the EnerSys workforce despite a number of positive, symptomatic and close contact cases among our employee base. Those cases can lead to disruption in daily production schedules as workers are sent home in order to comply with COVID-19 protocols. EnerSys continues to emphasize social distancing, hygiene, the use of masks and reminding our employees to follow the same guidelines in their personal activities, which has helped to mitigate the impact compared to many companies, but we have not been immune. Despite the ongoing challenges caused by COVID-19, the demand for EnerSys products was clear during the period as we reported strong third quarter fiscal '21 adjusted earnings of $1.27 per diluted share, which included a $0.10 benefit from the settlement of our claim related to the September 29 fire in our Richmond, Kentucky facility less $0.03 per share in foreign currency losses. Energy Systems benefited from telecom driven 5G growth in the Americas and our motive power business saw marked revenue and earnings improvement over the second fiscal quarter. Our specialty segment continued its positive momentum in our third quarter, bolstered by our growing transportation backlog. I'd now like to provide a little more color on some of our key markets. But before I begin, I would like to comment on how many of our customers across all of our lines of business have signaled increasing demand and alerted us to be ready. There seems to be pent-up demand which should accelerate near-term growth. Our largest segment, Energy Systems, has struggled in recent quarters from slow broadband orders. The MSOs had focused on increasing node capacity for their work-from-home demand. Those MSOs have now resumed strong orders for our products, which increased their networks power capacity. Even more encouraging, MSO participation in recent wireless spectrum auctions and their enunciation of their intention to carry their 5G and 4G traffic on their own networks validates the broadband growth assumptions of our Alpha acquisition strategy. Telecom 5G growth is also accelerating in the Americas, confirming their commitment to invest in their networks to increase capacity and reliability. Our 5G small cell powering project collaboration with Corning is progressing even better than we had hoped. In this quarter, we believe the network investment in 5G has, for the first time, surpassed the existing 4G network spend. It is also encouraging to see data center markets improving. In addition to our traditional businesses, renewable energy markets continue to expand with incredible opportunities for storage applications. The new administration has clearly focused on this emerging market. We plan to respond by updating our product offering using the same modular approach from our other lines of business. We will share more specifics with you on how we will participate in renewable energy storage and EV charging in coming calls. When you consider forklifts, we are currently the leader in charging electric vehicles globally, and this technology is easily transferred. Lastly, we are beginning to see the positive impact of the global alignment of the Energy Systems organization as we leverage regional expertise and key account development. Our motive power business showed considerable improvement in the period compared to the second quarter, delivering higher sequential revenue and operating earnings. Our order rates have surpassed the pre-COVID levels of a year ago despite sporadic pandemic-related restrictions, particularly in EMEA. The Hagen, Germany restructuring is ahead of schedule and forecasted to beat its budget. Although those restructuring benefits have not yet impacted our earnings, they will grow in magnitude throughout calendar year 2021, reaching nearly a $20 million annual run rate by the end of fiscal year 2022. Another exciting development is the launch of our NexSys iON lithium motive power batteries. Several OEMs continue to accelerate their adoption of this chemistry, and our sales team is focusing efforts for NexSys iON products on the portions of the market with the most demanding duty cycles. The third segment of our business, Specialty, maintained its positive momentum with another strong quarter, which was slowed only by the ongoing impact of COVID on our capacity ramp, thereby delaying our ability to meet surging demand. Our transportation backlog continued to grow as we added a significant number of customers to the ODYSSEY channels. We currently are working with nearly every major player in the aftermarket distribution channel, along with many key truck OEMs and fleet operators. TPPL gained further traction in the quarter. The high-speed line is up and running, and we are adding a second shift to our Springfield plant and bringing on additional oxide and pasting capacity. We're also encouraged by several new awards in our aerospace and defense business. Before wrapping up, I'd like to take a minute to talk about some exciting advancements we've made on the technology front. We mentioned our lithium launch for motive power. Our customers have begun to order our new NexSys iON products, and initial customer feedback is very positive. We have also achieved our first OEM approval and continue to work with other material handling manufacturers. The demand for fully integrated products has significantly increased for our Energy Systems group. To ensure necessary product development keeps up with the market's pace of change, we are aggressively hiring engineers. Our emphasis is on telecom, home and industrial energy storage. Moreover, we are accelerating the development of high-voltage electric vehicle fast-charging stations using batteries to speed the process. A considerable number of the building blocks have already been developed for our material handling program, allowing extension into these new markets with substantial growth potential. Our ability to stay on the cutting-edge of new technology development, while continuing to leverage core lead acid products, will further enhance our competitive edge in the quarters and years ahead. In conclusion, I continue to be humbled by our employees' ability deliver in the face of the ongoing global pandemic, quickly adapting to unforeseen challenges by remaining focused on delivering the products and services our customers have come to expect. Our overall strategy remains unchanged: one, to accelerate higher-margin maintenance-free motive power sales with NexSys iON and NexSys PURE; two, to grow the portfolio of products in our Energy Systems business, particularly in telecom, with fully integrated DC power systems and small cell site powering solutions which will accelerate our growth from 5G; three, to increase transportation market share in our Specialty business; and finally, to reduce waste through the continued rollout of our EnerSys operating system. As we continue to execute on each of these initiatives, the strength of the EnerSys platform and our position as the global leader in stored energy solutions will drive additional long-term value for our shareholders for years to come. With that, I'll now ask Mike to provide further information on our third quarter results and fourth quarter guidance. I am starting with slide eight. Our third quarter net sales decreased 2% over the prior year to $751 million due to a 3% decrease from volume, net of a 1% increase from currency. On a line of business basis, our third quarter net sales in the motive power were down 4% to $304 million, while Energy Systems net sales were down 2% at $337 million, while specialty increased 7% in the third quarter to $109 million. Motive power suffered a 5% decline in volume due to the pandemic, net of a 1% increase in FX. Energy Systems had a 4% decrease from volume, net of a 2% improvement from currency. Specialty added 6% in volume improvements and 1% increase from currency. There were no notable changes in pricing, and we had no impact from acquisitions. On a geographical basis, net sales for the Americas were down 1% year-over-year to $499 million, with a 1-point decrease from currency. EMEA was down 4% to $194 million on a 9% volume decline, net of a 5% improvement in currency, while Asia was flat at $58 million. Please now refer to slide nine. On a sequential basis, third quarter net sales were up 6% compared to the second quarter, driven by volume improvements. On a line of business basis, Specialty increased 5%, with NorthStar continuing to contribute its capacity for transportation sales. And motive power was up 15% as it rebounds from the pandemic, while Energy Systems was down 1%. On a geographical basis, Americas was up 4%, EMEA was up 13% and Asia was up 4%. Now a few comments about our adjusted consolidated earnings performance. As you know, we utilize certain non-GAAP measures in analyzing our company's operating performance, specifically excluding the highlighted items. Accordingly, my following comments concerning operating earnings and my later comments concerning diluted earnings per share exclude all highlighted items. On a year-over-year basis, adjusted consolidated operating earnings in the third quarter increased approximately $15 million to $78 million, with the operating margin up 210 basis points. On a sequential basis, our third quarter operating earnings improved $12 million or 110 basis points to 10.4%. We settled our claim for the Richmond fire, which was -- which resulted in a $6 million benefit in the quarter. $4 million was a gain on the replacement of equipment reflected in operating expenses from the property policy, while $2 million was a final recovery on the business interruption policy and is credited to cost of sales. Operating expenses when excluding highlighted items were at 14.8% of sales for the third quarter compared to $16.4 million in the prior year as we reduced our spending by $15 million year-over-year and by 100 basis points sequentially. Excluded from operating expenses recorded on a GAAP basis in Q3, our pre-tax charges of $22 million, primarily related to $6 million in Alpha and NorthStar amortization and $12 million in restructuring charges for the previously announced closure of our flooded motive power manufacturing site in Hagen, Germany. Excluding those charges, our motive power business achieved operating earnings of 13.3% or 330 basis points higher than the 10% in the third quarter of last year, due primarily to the insurance claim recovery of $6 million described earlier. On a sequential basis, motive power's third quarter OE also increased 420 basis points from the 9.2% posted in the second quarter, due primarily to sequential increases of nearly $5 million in recovery of the business interruption and other proceeds from the Richmond fire. OE dollars for motive power increased nearly $9 million from the prior year despite lower volume due to its lower operating expenses and $6 million in insurance recovery, while OE increased $16 million from the prior quarter on higher volume and $5 million for more in insurance recovery. The Richmond fire damage which has since been repaired or replaced and now a more capable, safer facility is in operation. Please see our 10-Q for more specifics on cash received and the related accounting. Meanwhile, Energy Systems operating earnings percentage of 7.4% was up from last year's 6.3%, but down from last quarter's 8.8%. OE dollars increased $3 million from the prior year, primarily from lower operating expenses, but decreased $5 million from the prior quarter on lower volume and higher operating expenses. Specialty operating earnings percentage of 11.9% was up from last year's 10.1% and up from last quarter's 11.4%. OE dollars increased nearly $3 million from the prior year on higher volume and lower operating expenses while increasing $1 million from the prior quarter on higher volume. Please move to slide 11. As previously reflected on slide 10, our third quarter adjusted consolidated operating earnings of $78 million was an increase of $15 million or 23% from the prior year. Our adjusted consolidated net earnings of $55 million was nearly $11 million higher than the prior year. Improvements in the adjusted net earnings reflect the rise in operating earnings, net $3 million in foreign currency losses, primarily on unfavorable rate changes on intercompany borrowings. Our adjusted effective tax rate of 17% for the third quarter was slightly higher than the prior year's rate of 16%, but in line with the prior quarter's rate of 17%. Discrete tax items caused most of these variations. Fiscal 2019's full year rate was 17%, while our fiscal 2020 rate was 18%, which is consistent with our current expectations for fiscal 2021. EPS increased 22% to $1.27 on higher net earnings. We expect our final quarter of fiscal 2021 to increase slightly -- the outstanding shares to it increased slightly from the third quarter as higher share prices increased dilution from employee stock programs. As a reminder, we still have nearly $50 million of share buybacks authorized, but have no immediate plans to execute any repurchases with perhaps the exception of the modest annual repurchase made to offset employee stock plan dilution. Our recently announced dividend remains unchanged. We have also included our year-to-date results on slides 12 and 13 for your information, but I do not intend to cover these in detail. Our balance sheet remains strong, and we are well-positioned for us to navigate the current economic environment. We now have nearly $489 million of cash on hand, and our credit agreement leverage ratio is below 2.0 times, which allows over $600 million in committed additional borrowing capacity. We expect our leverage ratio to remain below 2.0 times for the balance of fiscal 2021. We generated over $218 million in free cash flow through three quarters of fiscal 2021. Our Q3 free cash flow generation was very strong at $41 million despite the drag of rising working capital from increased revenue. Capital expenditures year-to-date of $54 million were at our expectations. Our capital expectation for fiscal 2021 of $75 million has expanded again slightly as the economic outlook improved. Our major investment programs, those being: the lithium battery development; continued expansion of our TPPL capacity, including the NorthStar integration; the integration of our high-speed line and the transition in NorthStar products for European markets to our French factory are all progressing as planned. Our high-speed line has completed its commissioning and is expanding to a second shift this month. Even with these investments, we have also retained the agility to flex our manufacturing footprint as needed. Our closure announced last November of our Hagan, Germany facility has progressed better than our expectations in terms of speed and cost. So we believe we will begin enjoying about half of the expected $20 million per year of savings next fiscal year, with the full benefit thereafter. We anticipate our gross profit rate to remain near 25% in Q4 of fiscal 2021 as lower utilization in some of our factories over the holidays and from enhanced COVID restrictions will impact our P&L in Q4. We have initiated price increases in our fourth quarter to mitigate the rising costs of many of our non-led inputs, which should maintain our margins. As David has described, we believe motive power markets are recovering, while our Energy Systems and Specialty markets continue to have bright prospects. With some of the uncertainty from our election and the pandemic behind us, we currently feel we have enough visibility to provide guidance in the range of $1.25 to $1.31 in our fourth fiscal quarter.

qtrly adjusted earnings per share $1.27.