Prompt:
Human: This audio cast is copyrighted material of Stifel Financial Corp.
and may not be duplicated, reproduced or rebroadcast without the consent of Stifel Financial.
I'm joined on the call today by Co-Presidents, Jim Zemlyak and Victor Nesi; as well as our CFO, Jim Marischen.
I'm going to start the call by running through the highlights of our third quarter, before turning it over to Jim, who will take you through our balance sheet and expenses.
I'll then come back with my concluding thoughts.
The COVID pandemic has impacted millions of people worldwide and resulted in ever-changing challenges for both our healthcare system and our economy.
Despite this backdrop, it's the focus of my partners and associates at Stifel that has enabled us to provide the high-quality financial advice that our clients have come to rely on over the past 20-plus years as we've grown into a premier wealth management and middle market investment bank.
With that, let's look at our results.
Simply, we had another great quarter.
Stifel benefited from strong capital raising and trading activity as well as continued growth in fee-based assets.
This more than offset the expected pullback in advisory revenue and net interest.
Noteworthy, we had one of our strongest recruiting quarters in recent history as we've been able to successfully implement a virtual recruiting strategy.
Our pipeline remains strong and despite the uncertainty of the U.S. economy resulting from the pandemic, Stifel remains well positioned for continued growth.
I want to highlight the strength of our business for both the quarter and year-to-date.
We generated record third quarter revenue and our second best quarterly earnings per share.
For the first nine months of the year, we achieved record revenue and earnings per share.
Capital raising revenue achieved a quarterly record, trading volumes are up year-over-year and credit quality remains strong at Stifel Bank.
Additionally, wealth advisor recruiting accelerated, which built on the momentum we achieved during the first six months.
The financial performance during the quarter and frankly, the past few years is driven by a diverse business mix that's enabled both our Institutional Group and Wealth Management segment to generate strong growth.
This diversification is illustrated by record nine month wealth management revenue despite significant declines in net interest income and deposit sweep fees, both a result of the Fed's implementation of a 0 rate environment.
Likewise, we achieved record nine month institutional revenue as record capital raising and brokerage more than compensated for a 13% decline in advisory revenue.
Simply, Stifel is a growth company with diversified, balanced and synergistic businesses.
Over the last 12 months, Wealth Management, under both brokerage and fee models has contributed 46% of net revenue.
Institutional revenues, comprised of equity and fixed income, investment banking and trading, made up 41%, while net interest income comprised the remaining 13%.
The synergy and complementary nature of these businesses is reflected in our return on tangible common equity, which is 23.2% over the past 12 months.
For the third quarter, Stifel's net revenues were $883 million, up 8% from the prior year, representing the fourth highest quarterly revenue in our history.
In fact, for the 12 months ending September 30, 2020, Stifel generated revenue of more than $3.6 billion, up 14% from the 12 months ending September 30, 2019.
Compensation as a percentage of net revenue came in at 59.6%, while operating expenses totaled 21%.
I would note that our compensation ratio is higher for both the quarter and year-to-date as compared to the full year 2019, primarily as a result of the decline in NII.
Relatively modest loan growth and the stabilization of economic factors, coupled with our management overlay, resulted in essentially no provision for loan losses.
To give a sense of the range of outcomes under our CECL economic models, assuming our base case scenario, we are approximately $40 million over accrued.
On our most severe scenario, we would be approximately $60 million under accrued.
Altogether, earnings per share were $1.59, up 6%.
Pretax margins were 19.4%, annualized return on tangible common equity was 22.2% and tangible book value per share increased 13% over last year to $32.34.
Moving on to our segment results.
And starting with our Global Wealth Management group.
Third quarter wealth management revenue totaled $527 million, up 4% sequentially.
The third quarter benefited from the expected rebound in asset management and service fees, which increased by 16% sequentially as well as improved brokerage revenue both offsetting an 11% decline in NII.
Through the first nine months of the year, our wealth management revenue was up 2% to a record of more than $1.6 billion.
Again, these results were achieved despite the fact that our NII and deposit fee income declined approximately $65 million.
Excluding this impact, our year-to-date wealth management revenue increased 18%, driven by strong growth in our brokerage and asset management revenues, both of which reflect strong recruiting end markets.
In the fourth quarter, we expect another strong quarter for our asset management revenue due to the 8% sequential increase in fee-based client assets, which totaled $115 billion at September 30.
I would also note that total client assets reached $326 billion at the end of the quarter and are just $3 billion below the record level set in the fourth quarter of 2019.
As you can see on the wealth management metrics slide, we had another outstanding recruiting quarter as our virtual recruiting strategies continue to produce significant growth in our advisor headcount.
To put numbers to this, we recruited 45 financial advisors with total trailing 12-month production of $38 million.
Our recruiting performance this quarter is a continuation of our successful recruiting efforts since the beginning of 2019, as we've added nearly 250 new advisors who had trailing 12-month production of roughly $200 million.
This will continue to drive future revenue growth in wealth management as the new advisors transition their clients onto our platform.
Looking forward, we have a lot of momentum behind our recruiting efforts.
And while there is some seasonality in the fourth quarter, primarily due to the holidays, our pipeline remains extremely strong, as Stifel remains a very attractive destination for high-quality advisors.
Moving on to our Institutional Group.
Through nine months, we generated record net revenue of $1.1 billion, which is up 33% from last year.
Reflecting our growth in investments, the first nine months of 2020 would represent our third highest annual revenue.
These results were driven by capital raising and brokerage, both up more than 50% from last year.
For the third quarter, net revenue totaled $363 million, up 25% from last year.
Similar to our year-to-date results, capital raising and brokerage increases of approximately 50% drove the increase in the quarter and more than offset the expected softness in advisory revenue.
Before I go into the details of this segment's performance on the next few slides, I want to take a minute to talk about the general perception of our institutional business.
I'm sure you remember that on last quarter's call, I commented that this segment is continually underappreciated by analysts.
In general, institutional businesses tend to be transactional in nature.
And consequently, there are persistent concerns that strong results in any given quarter are not sustainable.
While it's true that we're not likely to generate record results every quarter, we believe that performance in this business is better judged by annual results.
As you can see by the chart on the bottom half of the slide, not only have our results been sustainable, they've grown substantially.
In fact, if you annualize our results for the first three months of 2020, our institutional revenues have grown at a compound annual rate of nearly 11% since 2009 despite substantial changes in the operating environment.
This growth is a direct result of the investments we've made into our business that has enabled us to pick up market share and become more relevant to our clients, which will help to drive continued growth in the future.
With that said, let's move on to our institutional equities and fixed income businesses.
While this slide depicts brokerage and capital raising for both equities and fixed income, I'll focus on the brokerage business now and address capital raising on the investment banking slide.
Fixed income brokerage revenue was $97 million, up 60% year-on-year and was our third highest quarterly revenue ever, with the top two quarters occurring in the first half of the year.
As such, we are having a record year in fixed income brokerage, as the first three quarters are not only up 70% from 2019, but already surpassed our previous full year record in 2016 by 5%.
The strength of our results continues to be driven by activity in investment-grade, high-yield rates as well as municipals.
Equity brokerage revenue of $54 million was up 32% year-on-year as activity levels slowed from the record levels in the second quarter as market volatility slowed.
Like our fixed income businesses, we are also having a record year in our institutional equity brokerage business, as through the first nine months, revenues are up 23% from our previous nine month high recorded in 2014.
I would also note that I'm pleased with the contributions from our international businesses.
On the following slide, we look at our firmwide investment banking revenue.
Revenue of $218 million was relatively flat with the prior quarter and up 10% year-on-year, driven by record revenue and capital raising.
Overall, the third quarter was our third strongest investment banking quarter.
Much like my comments about our overall institutional business, our investment banking business has not only been sustainable on an annual basis, but has grown at a compound annual rate of 20% since 2009 and has more than offset industry headwinds in our institutional brokerage business.
We will continue to invest in this business as we believe that we can continue to take market share and grow as a premier middle market investment bank.
Looking at our capital raising business in the quarter, we generated record revenues in both our equity and fixed income issuance.
Equity underwriting revenue of $85 million was up 41% year-on-year and surpassed our prior record by 20% as IPO activity was up significantly from the prior quarter.
The record results in the quarter underscore the diversity of the business we've built as healthcare and technology were our strongest contributors, while our largest vertical, financials, slowed as clients looked to raise capital in the debt markets.
Our fixed income underwriting revenue of $53 million was also a record as our public finance business had a strong quarter and the issuance market continued to improve.
Stifel lead managed 264 negotiated municipal issues and one was again ranked number one nationally in terms of the number of issues managed.
Through the first nine months, we have lead managed 632 municipal issues, which is up 17% compared to the combined volume of Stifel and George K. Baum for the same period in 2019.
I would also note that although our corporate debt issuance revenues were down from the prior quarter, we continued to benefit from our bankers' ability to cross-sell services.
As I mentioned earlier, KBW's clients continue to benefit from our expertise in the debt issuance markets.
This again highlights the benefits of our model.
For our advisory business, revenue of $81 million decreased by 23% year-on-year as we were negatively impacted by the slowdown in bank M&A following a very strong year in 2019.
In terms of verticals, the performance of our advisory business was driven by technology, industrials and restructuring.
The decline in advisory was expected as the market had been impacted by the slowdown in deal announcements earlier this year following the pandemic.
That said, we continue to see our clients reengage and our pipelines continue to pick up.
While bank M&A activity continues to lag the robust levels we saw in 2019, we are starting to see some green shoots as we recently advised CIT on their announced sale of First Citizens, which will create a bank with $100 billion in assets.
Additionally in the fourth quarter, we advised Eastern Bank on the largest ever first step mutual conversion.
In terms of our overall pipelines, they continue to build, and I'm optimistic for our investment banking business overall.
I would note that the capital raising business is robust yet highly market dependent.
Before I discuss net interest income, I'll make a few brief comments regarding our GAAP earnings.
I would note that as we successfully integrated all of our recent acquisitions, we've seen the continued convergence of our GAAP and non-GAAP results.
This can be seen in what was our second highest quarterly GAAP earnings per share in our history, which resulted in an ROE of nearly 13%, an ROTCE of more than 20%.
Similar to last quarter, the strong GAAP earnings and the pause in our share buyback program resulted in fairly meaningful increases in book value and tangible book value that I'll describe in more detail in the following slides.
And now let's turn to net interest income.
For the quarter, net interest income totaled $101 million, which was down $14 million sequentially.
Our results were impacted by the 0% interest rate environment and elevated levels of cash on our balance sheet.
Our firmwide net interest margin declined to 190 basis points, which was consistent with the bank's net interest margin declining to 237 basis points.
Firmwide, average interest-earning assets were relatively flat due to a modest increase in our loan portfolio, primarily due to mortgage loan originations and an 80% increase in our cash position as a result of the debt and preferred equity issuances earlier this year as well as the elevated cash position held at the bank.
Moving on to the next slide, we review the bank's Loan and Investment portfolios.
We ended the period with total net loans of $10.9 billion, which was flat sequentially.
The breakdown of our portfolio skewed to a greater percentage of consumer loans through the end of the third quarter.
Our mortgage portfolio increased by $100 million sequentially as we continue to see demand for residential loans and refinancings from wealth management clients given the decline in interest rates.
Our securities-based loans increased in the quarter by approximately $120 million.
Growth in securities-based loans continues to be strong as FA recruiting momentum continues to grow.
Our commercial portfolio accounts for just less than half of our total loan portfolio and is comprised of C&I loans, which declined by 2% during the quarter.
Our portfolio is well diversified with our highest concentration in any one sector at less than 7%.
While the size of our portfolio declined in the quarter, we continue to focus our lending efforts on credits that have been less negatively impacted by the pandemic and typically have access to the capital markets, including such sectors as manufacturing, technology, healthcare and homebuilding supplies.
While we remain cautious in our approach to loan growth, we continue to look for opportunities to grow our balance sheet with limited credit risk.
Moving to the investment portfolio.
As you can see, the vast majority of our securities continue to be comprised of AA and AAA CLOs.
We've provided granular detail on the credit risk profile of this portfolio over the last few quarters and have not seen any material change in the underlying credit subordination provided by the securities.
We continue to view these securities as an attractive risk-adjusted return and an opportunity to have exposure to the underlying loans with structural credit protection.
We've not incurred any losses in this portfolio, and even under the most severe stress testing we deploy, we do not anticipate incurring any losses.
Turning to the allowance.
We adopted CECL earlier this year, and in the first half of the year, we incurred $35 million of credit loss provisions through the P&L, which doesn't include the $11 million opening adjustment that ran through equity.
Much of the increase in the first half of the year was driven by changes in macroeconomic scenarios based on the Moody's model, which estimated increasingly severe declines in GDP as well as increasing unemployment.
As you can see on the slide, while the allowance for credit loss was essentially unchanged, we did see an increase in the allowance and our coverage ratio on our commercial portfolio, which increased to 2.03% as a result of additional management overlays.
We continue to see strong credit metrics with nonperforming assets and nonperforming loans at eight basis points.
While we understand we are still in the early innings of the current credit cycle, we've yet to see anything but nominal charge-offs over the last several quarters.
Moving to capital and liquidity.
Our capital ratios were relatively stable during the quarter.
Our Tier one leverage ratio increased to 11.3%, primarily on the strength of our earnings and a lack of share repurchases.
Our Tier one risk-based capital ratio was 19.2%, a slight decline from last quarter's 19.3%, as we had elevated risk-weighted asset density in our trading portfolio, given some of the volatility we saw earlier in the year.
This decreased risk-based capital by approximately 90 basis points.
Looking forward to the fourth quarter, we would not anticipate any material changes in our balance sheet.
As I mentioned earlier, we will pay off our $300 million, five year senior notes when they mature in December.
Given the timing of the maturity, we anticipate that interest expenses will be modestly lower in the fourth quarter.
Our book value per share increased to $50.95, an increase of $2.11 sequentially and our tangible book value per share increased to $32.34, up from $30.16.
These increases were driven by strong quarterly earnings and improved marks on our AFS portfolio.
As I noted last quarter, our liquidity position remains strong.
In addition to the Sweep Program, the bank has access to off-balance sheet funding of more than $4 billion.
Within our primary broker-dealer and holding company, we've access to nearly $2 billion of liquidity from cash, credit facilities that are committed and unsecured as well as secured funding sources.
I would also highlight that despite another quarter -- another strong quarter in the equities market, we continue to see an increase in client allocations to cash.
Within our Sweep Program, we saw balances increase by $1.7 billion in the third quarter.
So far in the fourth quarter, client cash has grown another $400 million.
On the next slide, we provide 4Q guidance and go through our expenses.
In terms of our outlook for the fourth quarter, we would expect net revenues to be in the range of $870 million to $920 million based on strong growth in fee-based assets and the robust investment banking pipelines that Ron described earlier.
We forecast the bank's net interest margin to come in between 235 and 245 basis points, which is in line with our third quarter guidance.
Barring a meaningful decline in LIBOR, we estimate that our current guidance represents a good estimate for where we see bank NIM stabilizing.
This is based on the fact that our assets are predominantly floating rate, and we have limited reinvestment of cash flows from our bond portfolio in an environment with limited options for yield and fixed income.
We expect our firmwide net interest margin in the fourth quarter to come in between 190 and 200 basis points given the impact of the maturity of our five year debt in December.
Given NIM expectations, we expect our NII in the fourth quarter to be between $100 million and $110 million, which is in line with our third quarter guidance.
In the third quarter, our pre-tax margin improved 160 basis points sequentially to 19.4%.
This increase was a result of lower compensation accruals and a decline in our reserve for credit losses.
Specifically, the comp-to-revenue ratio of 59.6% was down sequentially as we accrued conservatively in the first half of the year.
And given our clear outlook for the remainder of the year, we feel more comfortable with our overall comp accruals.
As such, we are forecasting a comp ratio of between 57.5% and 59.5% in the fourth quarter.
Non-comp operating expenses, excluding the credit loss provision and expenses related to investment banking transactions totaled approximately $173 million and represented less than 20% of our net revenue.
We estimate that non-comp operating expenses in the fourth quarter will represent between 19% and 21% of net revenue.
In terms of our share count, our average fully diluted share count was up by 2% as a result of the increased share price and some modest issuance related to normal stock compensation practices.
In the fourth quarter, assuming a stable share price and no repurchases, we estimate our average fully diluted share count will be 77.4 million shares.
Unlike some of our peers that have more mono line business models, we are not solely reliant on strategies such as balance sheet growth or advisory growth.
Underscoring this, we've generated three of our top four strongest revenue quarters and are on pace to record our 25th consecutive year of record net revenue.
The strength of our performance was not limited to the top line as we also generated two of our top four earnings per share quarters, and our annualized earnings per share in the first three quarters would result in our second strongest annual earnings despite significantly lower NII and a substantial increase in our credit provision as a result of the implementation of CECL.
As we move toward 2021, I feel there is numerous questions about the impact of the elections, now less than a week away, and the impact on our outlook.
Regardless of the outcome, the short-term environment should be favorable for our various businesses.
As pundits often say, don't fight the Fed.
And in this case, you shouldn't fight an accommodative Fed coupled with huge additional stimulus package.
In conclusion, the diversified business model we've built continues to prove that it can generate substantial and sustainable revenue growth.
While the market and the economy remain uncertain given the pandemic and the presidential election, the business we've built over the past 20-plus years will continue to generate strong growth and solid returns over the long term.
 Assistant:

Chosen response: q3 non-gaap earnings per share $1.59.


Prompt:
Human: I'm joined on the call today by our Chairman and CEO, Ron Kruszewski; our Co-Presidents, Victor Nesi and Jim Zemlyak; and our CFO, Jim Marischen.
This audiocast is copyrighted material of Stifel Financial Corp.
, and may not be duplicated, reproduced or rebroadcast without the consent of Stifel Financial.
I'll start the call with some highlights from our quarter and first nine months.
Then Jim Marischen will review our balance sheet and expenses, and I'll wrap up with some concluding thoughts.
Our third quarter represented our second-highest net revenue and earnings per share, as both operating segments, Global Wealth and Institutional, generated strong results.
As I've said before, our success is driven by the continued reinvestment in our business.
And based on our investment banking and recruiting pipelines, organic bank growth and expertise in acquisitions, Stifel remains well positioned to continue and build upon our decades-long growth.
Revenue in the quarter totaled nearly $1.15 billion, an increase of 30%.
While certainly pleased with our quarterly revenue, it is noteworthy that we achieved this despite the fact that several large advisory assignments which we had forecast to close in the third quarter have slipped into the fourth quarter.
For the nine-month period, we generated record revenue of more than $3.4 billion, up 28% over the comparable period in 2020.
The growth in revenue and lower expense ratios resulted in non-GAAP earnings per share of $1.65, which is up 56% year-on-year, and $4.85 year-to-date, which is up 68%.
The strength of our results were driven by a combination of revenue growth and expense discipline, resulting in pre-tax margins of nearly 24%.
In addition, reflecting our focus on returns to investor capital, we earned nearly 28% annualized return on tangible common equity.
Tangible book value per share also increased 27% in the last year.
Turning to the next slide.
Our third quarter net revenue was driven by record Global Wealth Management revenue and robust Institutional revenue.
As we forecasted, compensation as a percentage of net revenue declined sequentially to 58.2%.
Our operating expense ratio was 17.9% and, excluding credit provision and investment banking gross-ups, totaled 16.9%, which was within the guidance range we gave on last quarter's call.
Taken together, Stifel's quarterly pre-tax income totaled $274 million, which increased 60% from the third quarter of 2020.
As I said on last quarter's call, Stifel is and will continue to be a growth company, and our results in the third quarter and year-to-date illustrate our impressive long-term growth trajectory.
Our disciplined approach to capital deployment and acquisitions has resulted in a diversified business model that has not only made us more relevant to our clients, but also enabled us to grow during good and bad market environments.
Last quarter, we updated our full year 2021 revenue guidance to be in a range of $4.5 billion to $4.7 billion.
Our annualized nine-months revenue is essentially in the middle of our guidance and would represent our 26th consecutive year of record net revenue and up over 20% from last year.
Our performance in 2021 and, quite frankly, over the past six years has been a testament to our focus on consistently reinvesting in our business and our people.
We've built a diversified business comprised of highly talented people that has enabled our firm to generate consistent growth regardless of the operating environment, which is something I believe gets overlooked by analysts and investors.
We take a disciplined approach to capital deployment by focusing on where we can generate the best risk-adjusted returns.
Since the end of 2015, this approach has enabled us to consistently grow our assets from $13 billion to over $30 billion, execute and integrate 11 acquisitions, add nearly 700 financial advisors, initiate and consistently grow our dividend and repurchase approximately 20 million shares.
We accomplished all of this while improving our pre-tax margins over that time period from 10% to nearly 24% and through the first nine months of 2021 generated an annualized return on tangible equity of nearly 30%.
I would note these results are against a backdrop of a 0-rate environment, and Stifel is very well positioned from a net interest income and margin perspective for an increase in interest rates.
We expect this transaction to close at the end of October, and I'm excited about the strategic fit of this business.
As shown on this slide, we are adding a highly complementary business to our already strong fixed income franchise.
Vining Sparks focuses on providing institutional fixed income brokerage, balance sheet management, portfolio accounting and underwriting services to depository institutions.
Our analysis indicates that 70% of Vining Sparks' revenue is generated from depositories with less than $2 billion in assets, while nearly 75% of Stifel's depository revenue comes from clients with greater than $2 billion in assets.
As such, we believe that the combination of our two firms is not only highly complementary, but cements Stifel's position as the leading investment bank for depository institutions in the United States.
Looking another way at the complementary profile of this combination, there exists only a 5% revenue overlap within end clients of the combined client base.
We also believe there exist solid synergy opportunities in debt offerings and M&A through KBW and correspondent banking through Stifel Bank.
Moving on to our operating segments, and starting with Global Wealth Management.
Again we posted record quarterly and year-to-date revenue.
Third quarter revenue totaled $656 million, up 24% year-on-year, and year-to-date revenue was approximately $1.9 billion, an increase of 19%.
This growth was driven by recruiting, increased client activity and growth in interest-earning assets.
The continued growth in our asset management revenue in the third quarter was buoyed by higher market valuations and increased client assets in the second quarter, as the majority of our fee-based assets don't advance.
Despite muted growth in equity valuations during the third quarter, as measured by the S&P 500, we finished the quarter with record client assets of $407 billion and fee-based assets of approximately $150 billion.
I am pleased with both our loan growth and improvement in both net interest income, which increased 21% over last year, and a 10-basis point sequential improvement in our net interest margin.
The next slide highlights the strength of our recruiting and growth drivers of our platform.
For the quarter, we added 46 advisors, including 41 experienced advisors, with total trailing 12-month production of $35 million.
Our recruiting pipelines remain very robust.
And furthermore, I expect that our independent channel will begin to add to our recruiting success, as that advisor channel is gaining traction and momentum.
Moving on to our Institutional group.
We posted our second-highest revenue quarter, as we continue to benefit from increased activity levels and the scale of our business.
Our quarterly net revenue totaled $492 million, which was up 36% from the prior year.
nine-month revenue increased 39%, to over $1.5 billion.
Record quarterly advisory revenues of $208 million were up nearly 160%, while capital raising posted revenue of $153 million, up 18%.
As expected, trading revenue declined to $124 million, while year-to-date trading declined 10%, to $455 million.
Our Institutional pre-tax margin for the quarter was 25.4%, which was our second highest, trailing only the second quarter of this year.
For the first nine months, pre-tax margin was 25.3% and was up nearly 700 basis points, as we continue to generate substantial top line growth, which drives operating leverage.
Looking at the revenue components of the Institutional group, our equities business posted record nine-month results of $533 million, up 37%, while our third quarter revenue totaled $142 million, up 7% year-on-year.
Our fixed income business posted year-to-date revenue of $428 million and quarterly revenue of $135 million.
Our quarterly fixed income business reflected strength in capital raising, offset by a decline in trading revenue.
I'll focus on the trading businesses of these segments and discuss capital raising on the next slide regarding investment banking.
With respect to our trading businesses, quarterly equity revenue totaled $48 million, down 21% sequentially.
As I stated earlier, this was the result of lower market activity level, as volumes on the NYSE and NASDAQ declined 8% sequentially.
Additionally, we incurred mark-to-market losses attributed to warrants associated with certain investment banking transactions versus gains in the prior quarter.
For the first nine months, equity trading revenue was $189 million, up 1% from 2020.
Fixed income trading revenue of $76 million was down 17% sequentially, as we saw lower activity levels in agencies, corporates and munis, as overall market activity declined a similar amount.
On slide nine, investment banking quarterly revenue increased 71%, to $372 million, which was just $5 million short of what would have amounted to our fourth consecutive quarterly record.
Year-to-date, investment banking revenue totals nearly $1.1 billion, up 77%, as both advisory and capital raising are having record years.
The $208 million of advisory revenue was our second consecutive record quarter, driven primarily by the strength of our U.S. business; notably, financials, diversified services and technology.
While essentially all of our major verticals generated strong results, we also saw sequential gains in healthcare, industrials and in the fund placement business from Eaton Partners.
With our pipelines at record levels and barring a substantial change in the market or the economy, we expect another strong advisory quarter for the fourth quarter of 2021.
Moving on to capital raising, our equity underwriting business posted revenue of $104 million, up 22%.
We saw a balance in this business, with contributions from healthcare, technology, financials and industrials.
Our fixed income underwriting business posted its second consecutive record quarter, with $61 million in revenue, up 6% sequentially.
Our municipal finance business posted another great quarter, as we lead-managed 257 municipal issues.
For the first nine months, our market share in terms of number of transactions increased year-on-year by 140 basis points, to 12.7% market share.
In addition to the strength of our public finance business, we continue to see strong contributions from our debt capital markets business, as we completed a record number of deals in the quarter.
While activity levels in equity capital raising have slowed from the robust levels earlier this year, overall activity remains solid, and with strong pipelines in our fixed income underwriting business I expect another strong quarter for the fourth quarter.
Turning to slide 10.
For the quarter, net interest income totaled $132 million, which was up 10% sequentially.
Our firmwide net interest margin increased to 210 basis points, primarily due to increases in leverage finance fee income and our stock loan business, while our bank NIM remained at 240 basis points.
The growth in our NII was driven by a 5% increase in our interest-earning assets as well as the aforementioned increased leverage finance fee income and security lending activity.
In terms of our fourth quarter expectations, we see net interest income in a range of $125 million to $135 million and with a similar NIM to the third quarter, as we expect lower activity levels in some of the more episodic fee income opportunities to -- growth in our balance sheet.
I'd also note that we've updated our asset sensitivity based on the increased size of our balance sheet.
In our first quarter earnings call, we estimated that we'd generate an incremental $150 million to $175 million of pre-tax income as a result of a 100-basis point increase in rates.
However, given the nearly $3 billion increase in our balance sheet since the end of the first quarter, we are revising this forecast to a range of $175 million to $200 million, using the same market and deposit beta assumptions.
Moving on to the next slide.
I'll go into more detail on the bank's loan and investment portfolios.
We ended the quarter with total net loans of $13.6 billion, which was up approximately $730 million from the prior quarter and was primarily driven by growth in our consumer channel.
Our mortgage portfolio increased by $390 million sequentially, as we continue to see demand for residential loans from our Wealth Management clients.
Our securities-based loan portfolio increased by approximately $250 million.
Growth in these loans continues to be strong, as FA recruiting momentum continues to drive increased loan balances.
Our commercial portfolio increased by nearly $100 million sequentially, primarily due to a 5% increase in C&I loans, as increases in fund banking loans more than offset the expected reduction in PPP loans.
Moving to the investment portfolio, which increased by $330 million sequentially, the vast majority of the sequential growth was in our CLO portfolio, as we continue to see these securities as generating strong risk-adjusted returns.
Turning to the allowance.
We had a modest reserve release of approximately $700,000, as the improvement in our economic projections was essentially offset by the additional reserves tied to loan growth.
As a result of the reserve release and the composition of our loan growth during the quarter, our ratio of allowance to total loans declined to 91 basis points, excluding PPP loans.
I would reiterate that it's important to look at the level of reserves between our consumer and commercial portfolios, given the relative levels of inherent risk.
At quarter-end, the consumer allowance to total loans was 36 basis points; for the commercial portfolio, it was 120 basis points.
We also continue to see strong credit metrics, with nonperforming assets and nonperforming loans declining to only four basis points.
Moving on to capital and liquidity.
Our risk-based and leveraged capital ratios increased to 20.6% and 12%, respectively.
The increase in our capital ratios was a result of continued strength in our operating results, an incremental $150 million of preferred equity and the decreasing impact of volatility associated with the pandemic on our trading portfolio.
We continued our share repurchase program in the third quarter by buying back 670,000 shares at an average price of $66.74.
Year-to-date, we've repurchased nearly 1.5 million shares, at an average cost of $66.34.
We have approximately 11.8 million shares remaining on our current share repurchase authorization.
We continue to feel good about our financial position, as our liquidity remains strong.
In addition to the $6 billion available in our Sweep Program, the bank has access to off-balance sheet funding of more than $5 billion.
On the next slide, we go through expenses.
In the third quarter, our pre-tax margin improved 450 basis points year-on-year, to nearly 24%.
The increase was a result of strong revenue growth, a lower compensation ratio and our continued expense discipline.
Our comp-to-revenue ratio of 58.2% was down 140 basis points from the prior year and was down 130 basis points from the prior quarter.
For the first nine months of this year, our comp ratio was 59.5%, which was down 120 basis points from 2020.
But I would note that our total year-to-date comp expense is more than $400 million above the comparable period in 2020.
Non-compensation operating expenses, excluding the credit loss provision and expenses related to investment banking transactions, totaled approximately $194 million and represented 16.9% of our net revenue.
The increase from the prior quarter was driven by increased conference, travel and entertainment expenses.
In the quarter, our non-GAAP after-tax adjustments totaled $13 million, or $0.11 per share.
As previously noted, the difference between GAAP and non-GAAP results are mainly related to deal expenses that primarily include stock-based compensation and intangible amortization.
The effective tax rate during the quarter came in at 25%, which was at the midpoint of our guidance we gave for the second half of 2021 on our last earnings call.
We'd expect to see the effective rate to move lower in the fourth quarter, given the anticipated benefit related to the tax impact on stock-based compensation.
In terms of our share count, our average fully diluted share count declined by 125,000 shares and was roughly in line with our guidance on last quarter's call.
Absent any assumption for additional share repurchases and assuming a stable stock price, we'd expect the fourth quarter fully diluted share count to be 119.5 million shares.
This increase is largely attributable to the shares that will be issued in conjunction with the Vining Sparks transaction.
2021 has clearly been an outstanding year in the markets, and our results so far illustrate the power of the business we've built and our ability to capitalize on this type of environment.
Through the first nine months, we're not only on pace to surpass our full year record revenue by more than 20%, but our earnings per share has already eclipsed last year's full year record, as our pre-tax margin is up more than 400 basis points despite the headwinds of a 0-interest rate environment.
Our ability to generate these types of returns is a direct result of both the acquisitions we've made and the people we've hired.
Our acquisition strategy has focused on adding complementary businesses that are not only accretive but are a good cultural fit.
And at that point, let me again emphasize how happy we are to be adding a firm like Vining Sparks to the Stifel organization.
Our strategy for recruiting is similar in many ways to our approach to acquisition, and we look not only for high-quality advisors and bankers but also individuals that are attracted to the culture we've built at Stifel.
Simply, this growth strategy has increased the scale of our business and relevance to our clients while enabling us to capitalize on the strength of the operating environment in ways we could not have seen just five years ago.
As I look forward, the fundamentals of the current market remain positive, as fiscal and monetary policies remain accommodative and low interest rates continue to benefit the equities markets.
That said, there are a number of potential headwinds that include increased inflation, the potential for tax law changes, regulatory reforms as well as the ongoing impact of COVID-19.
However, as we've proved over the past few years, our diversified business model is capable of generating strong results in a variety of market conditions, and I believe we remain well positioned for the future, fully understanding that market conditions can change quickly.
 Assistant:

Chosen response:
compname posts quarterly non-gaap earnings per share $1.65.
q3 revenue rose 30 percent to $1.1 billion.
qtrly non-gaap earnings per share $1.65.


Prompt:
Human: Sherwin-Williams remained focused in the third quarter on solving customer challenges, combating rising costs with pricing and investing for future growth in a difficult and highly fluid environment that is impacting the entire coatings industry.
Demand remained generally robust, but raw material inflation remained persistently high and raw material availability failed to improve.
While these conditions challenged our quarterly results, we continued to strengthen our customer relationships and take actions that strongly position us for the long term.
We're confident in the demand outlook and even more confident in our strategy, our people and our position in the market.
Let me briefly summarize the quarterly numbers.
Starting with the top line.
Third quarter 2021 consolidated sales increased 0.5% to $5.15 billion.
Raw material availability negatively impacted sales by an estimated high single-digit percentage, with about 75% of the impact in The Americas Group.
The remaining impact was largely in the Consumer Brands Group with an immaterial impact to Performance Coatings Group.
Consolidated gross margin decreased 630 basis points to 41.6%, driven by lower sales volume, raw material cost inflation outpacing our price increases near term and supply chain inefficiencies.
SG&A expense decreased 2.7% in dollars and decreased 90 basis points to 26.6% as a percent of sales.
Consolidated profit before tax decreased $264.1 million or 30.2% to $611.5 million.
The third quarters of 2021 and 2020 included $70.3 million and $76.4 million of acquisition-related depreciation and amortization expense, respectively.
Excluding these items, consolidated profit before tax decreased 28.4% to $681.8 million.
Diluted net income per share in the quarter decreased to $1.88 per share from $2.55 per share a year ago.
The third quarters of 2021 and 2020 both included acquisition-related depreciation and amortization expense of $0.21 per share.
Excluding these items, third quarter adjusted diluted earnings per share decreased 24.3% to $2.09 per share from $2.76 per share.
EBITDA was $834.2 million in the quarter or 16.2% of sales.
Net operating cash grew to $2.1 billion, or 13.5% of sales in the first nine months of 2021.
Moving on to our operating segments.
Despite strong demand, sales in The Americas Group decreased 0.4% as volume and mid-single-digit selling price increases could not fully offset the decrease related to raw material availability.
Segment margin decreased 3.8 percentage points to 21.3%, resulting primarily from lower sales volume and higher raw material costs, partially offset by selling price increases.
Segment SG&A remained basically flat year-over-year in dollars and as a percent of sales, as we continued investing in strategic growth initiatives.
Sales in the Consumer Brands Group decreased 22.8% against a very strong comparison a year ago.
The decrease included approximately five percentage points related to the Wattyl divestiture, lower volume and the negative impact from raw material availability, partially offset by selling price increases.
Adjusted segment margin decreased 11.7 percentage points to 14.7% of sales, resulting primarily from lower sales volume, higher raw material and supply chain inefficiencies, partially offset by selling price increases and good sales and marketing cost control.
Sales in the Performance Coatings Group increased 17.4%, driven by volume, price increases and favorable currency exchange.
Adjusted segment margin decreased 5.5 percentage points to 10.5% of sales as operating leverage from the higher volume, selling price increases and good cost control were more than offset by higher raw material costs, where inflation was the highest among the company's three operating segments.
Let me begin by reiterating the themes we provided on our September 29 update call.
First, the demand environment remains robust across our pro architectural and industrial end markets.
Many external indicators and more importantly, our customers, remain highly positive.
Demand is not the issue.
Second, we are ready to meet this demand.
We continue to invest in growth initiatives.
We have significant production capacity available today and we are bringing 50 million gallons of incremental architectural production capacity online over the next two quarters.
Our capabilities are not the issue.
The issues that impacted our third quarter and have persisted in October continued to be industrywide raw material availability constraints and inflation.
Let me be very clear on how we are responding.
Nobody has more assets and capabilities than Sherwin-Williams.
We're employing all of these to keep customers in paint and on the job better than our competitors.
We will continue to focus on customer solutions.
We are aggressively combating raw material inflation with significant pricing actions across each of our businesses.
We implemented multiple price increases in the quarter.
We will continue to do so as necessary.
We continue to work closely with our suppliers on solutions to improve availability sooner rather than later.
At the same time, we're exploring every avenue to better control our own destiny going forward, including our recent announcement to acquire Specialty Polymers, Inc. There's no shortage of confidence on our team, which is deep and experienced.
We fully expect we will emerge from these current challenges a stronger company with stronger customer relationships and with continued strong value creation for our shareholders.
In just a moment, I'll add some color to Jim's third quarter results summary.
But first, I'd like to make a comment on our results year-to-date.
While events largely outside of our control, it forced us to adjust our expectations, we have still delivered a solid performance.
2021 year-to-date consolidated sales were up 9.4% or $1.31 billion.
Despite high teens raw material inflation, adjusted PBT increased 1.5% or $33.1 million and adjusted diluted net income per share increased 4.8% to $6.80 per share.
Adjusted EBITDA is $2.73 billion or 18% of consolidated sales.
Even in this unusual environment, we've continued to make investments that will drive our momentum over the long term.
And we are confident we will see significant margin expansion as availability and inflation headwinds eventually subside.
Now returning to segment performance in the third quarter.
In The Americas Group, raw material availability challenges were a significant drag on sales.
The good news is that underlying demand remains sound and reported backlogs are strong.
We expect growth rates will improve significantly, commensurate with improvement in the industry supply chain.
Sales growth in the third quarter was led by Protective & Marine, which was up by high single-digit percentage.
We're seeing good demand in this business from customers in oil and gas, flooring and seal fabrication markets.
TAG's largest business, residential repaint, grew by a low single-digit percentage against a strong double-digit comparison.
As industry supply chain issues are resolved, we would expect this business to return to its prior growth levels, where we've delivered double-digit growth for the last five years.
New residential sales increased by a low single-digit percentage.
New housing permits and starts have been trending very well since last summer, and our customers are reporting solid order rates.
We're seeing a number of projects being pushed out as a variety of building materials beyond paint are in short supply.
Property management was up slightly in the quarter.
Improving apartment turns, along with the return to travel, the workplace and school are tailwinds that should support higher growth when raw material availability improves.
Our commercial business was down slightly in the quarter.
Similar to new residential, projects are taking longer to reach the painting phase due to short supply of multiple building materials.
And finally, as expected, our DIY business was down double digits versus an extremely difficult comparison, which was exacerbated by the raw material availability issues.
From a product perspective, interior paint sales performed better than exterior sales, with interior being the larger part of the mix.
We realized a mid-single-digit increase in price in the third quarter resulting from our February one and August one price increases and our mid-September surcharge.
We would expect the combination of these pricing actions to result in a high single-digit percentage price realization in the fourth quarter, putting our full year price realization for TAG in the mid-single-digit range.
We will continue to evaluate additional pricing actions as needed.
We've opened 50 net new stores year-to-date.
Along with these new stores, we continue to make investments in sales reps, management trainees, innovative new products, e-commerce and productivity-enhancing services.
We are not taking our foot off the gas on these growth initiatives.
Moving on to our Consumer Brands Group.
Sales decreased by a double-digit percentage, driven by difficult comparisons to the prior year, consumers returning to the workplace, raw material availability issues and the divestiture of the Wattyl business.
Overall, DIY demand continued to moderate to more normal levels compared to 2020.
This was partially offset by growth in the North American Pros Who Paint category, which was up strong double digits in the quarter and year-to-date.
While sales are down in all regions, sales were less impacted in North America, our largest region, compared to Europe and Asia, where COVID restrictions were more impactful.
Pricing was positive in the quarter, though below the level of The Americas Group.
As you know, our global supply chain organization is managed within this segment.
This team continues to work with suppliers to navigate the industrywide raw material supply chain disruptions caused by Winter Storm Uri and Hurricane Ida.
We stand ready with ample capacity and are adding more to serve customers at a higher level as raw material availability improves.
Last, let me comment on the third quarter trends in Performance Coatings Group.
We continue to see momentum as this is the fifth straight quarter of growth for this business.
Group sales increased by more than 17% in the quarter, including a currency translation tailwind of 2%.
Price was in the high single-digit range, and all regions and all divisions generated growth.
Regionally, sales in the quarter grew fastest in Europe and Latin America, followed by North America and Asia.
Every division in the group grew, the majority by double digits, driven by robust underlying demand, new customer wins and share of wallet gains.
I'll start with packaging, which generated strong double-digit growth against a high single-digit comparison last year.
Sales were up double digits in every region.
Demand for food and beverage cans remains robust, and our non-BPA coatings continue to gain traction within existing and new customers.
Next is General Industrial, the largest division of the group, which posted its third consecutive quarter of strong double-digit growth.
Sales were up double digits in every region.
Sales were strong across most of our customer segments, led by heavy equipment, containers and general finishing.
Our Coil Coatings business remains a consistent performer.
Sales grew by a double-digit percentage for the second consecutive quarter and were positive in all regions.
This team continues to do an excellent job at winning new accounts in all regions.
Construction and appliances led to growth.
Automotive refinish sales increased by a mid-single-digit percentage.
Miles driven are nearing pre-pandemic levels.
New installations of our products and systems in North America remained strong.
The Industrial Wood division generated low single-digit growth.
Growth in North America, our largest region, was up strong double digits, but was offset by Asia Pacific where COVID-related shutdowns had a significant negative impact on sales.
New residential construction continues to drive robust demand for our products in kitchen cabinetry, flooring and furniture applications.
Before moving to our outlook, let me speak to capital allocation year-to-date.
We've returned a little over $2.5 billion to our shareholders in the form of dividends and share buybacks.
We've invested $2.1 billion to purchase 8.075 million shares at an average price of $265.88.
We distributed $442.9 million in dividends, an increase of 20.4%.
We also invested $248 million in our business through capital expenditures, including approximately $36 million for our Building our Future project.
We ended the quarter with a net debt-to-adjusted EBITDA ratio of 2.5 times.
We also announced the Sika and Specialty Polymer acquisitions, which are expected to close in early 2022, if not sooner.
Turning to our outlook.
We expect robust demand to continue in North American pro architectural end markets.
We expect DIY demand to continue normalizing as consumers return to the workplace.
We expect industrial demand to remain strong.
Raw material availability challenges will remain a headwind in the fourth quarter, but the situation is improving.
We believe we have weathered the worst of Hurricane Ida, and supply should continue to come back online.
We expect to be in a make-and-ship mode and do not anticipate building any inventory until the first quarter of 2022.
On the cost side of the equation, our raw material inflation expectations for the year moved up to the low 20% range from the high teens given additional pressure we've seen since our last guidance.
We do not see any meaningful improvement until well into 2022.
All businesses remain aggressive in implementing price increases as necessary to offset these costs.
We recognize that the timing of price realization will continue to put pressure on margins in the near term.
And as we've said many times, we expect margin expansion over the long term and maintain our gross margin target in the 45% to 48% range.
Against this backdrop, we anticipate fourth quarter 2021 consolidated net sales will be up by a mid- to high single-digit percentage compared to the fourth quarter of 2020.
We expect The Americas Group sales to be up by a mid- to high single-digit percentage, with pro sales at or above the high end of this range and DIY sales returning to a more historic level.
We expect Consumer Brands sales to be down by a mid-teens percentage, including a negative impact of approximately seven percentage points related to the Wattyl divestiture, and we expect Performance Coatings sales to be up by a mid-teens percentage.
Embedded in our guidance is a similar impact to our architectural businesses as a percent to sales from raw material availability as we experienced in the third quarter.
For the full year 2021, we expect consolidated net sales to be up by a high single-digit percentage.
We expect The Americas Group to be up by a high single-digit percentage; Consumer Brands Group to be down by a mid-teens percentage, including a negative impact of approximately four percentage points related to the Wattyl divestiture; and Performance Coatings Group to be up by a low 20s percentage.
We expect diluted net income per share for 2021 to be in the range of $7.16 to $7.36 per share compared to $7.36 per share earned in 2020.
Full year 2021 earnings per share guidance includes acquisition-related amortization expense of $0.85 per share and a loss on the Wattyl divestiture of $0.34 per share.
On an adjusted basis, we expect full year 2021 earnings per share of $8.35 to $8.55.
Let me close with some additional data points that may be helpful for your modeling purposes.
We expect to see a slightly improved sequential gross margin in our fourth quarter as additional price increases are implemented in the quarter.
We expect to see contraction in our fourth quarter operating margin due to the contraction in gross margin, partially offset by leverage on SG&A due to the strong sales growth.
We will continue making investments across the enterprise that will enhance our ability to provide differentiated solutions to our customers.
We expect to have around 80 new store openings in the U.S. and Canada in 2021.
We'll also be focused on sales reps, capacity and productivity improvements as well as systems and product innovation.
We also plan additional incremental investments in our digital platform in the home center channel.
These investments are all embedded in our full year guidance.
We expect foreign currency exchange to be a tailwind of approximately 2% in the fourth quarter.
We expect our 2021 effective tax rate to be slightly below 20%.
We expect full year depreciation to be approximately $270 million and amortization to be approximately $310 million.
We expect full year capex to be approximately $370 million, including about $70 million for our Building our Future project.
The interest expense guidance we provided last quarter remains unchanged at approximately $340 million.
We expect to increase the annual dividend per share by 23.5% per share for the full year.
We expect to continue making opportunistic share repurchases.
We'll also continue to evaluate acquisitions that fit our strategy.
We're on track to deliver solid full year results even with the considerable supply chain and inflationary headwinds we are experiencing.
I remain extremely proud of our team and their focus on providing solutions to our customers.
Demand remains strong, our customer relationships have strengthened and we continue to invest in our capabilities.
We expect to finish the year with significant momentum that will carry us forward in 2022.
 Assistant:

Chosen response:
sherwin-williams q3 adjusted earnings per share $2.09.
q3 adjusted earnings per share $2.09.
q3 earnings per share $1.88.
sees fy adjusted earnings per share $8.35 to $8.55.
sees fy earnings per share $7.16 to $7.36 including items.
qtrly consolidated net sales increased 0.5% to $5.15 billion.
sees q4 net sales up mid-to-high single digit percent.
do not expect any moderation in raw material inflation any sooner than next year.


Prompt:
Human: On the call today are Signet's CEO, Gina Drosos; and CFO, Joan Hilson.
Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially.
During the call, we'll discuss certain non-GAAP financial measures.
For further discussion of the non-GAAP measures, as well as reconciliations of them to the most directly comparable GAAP measures, investors should review the news release we posted on our website at www.
We are embracing new capabilities in connected commerce with excellence as evidenced in this quarter's results.
Further to this, we are unlocking our team members' potential.
We know from listening and from our ongoing surveys that our team members are inspired by our purpose.
They're proud to be part of our organization and they're confident in the tightly integrated strategies that are guiding our growth.
Our team members' inspiration, pride, confidence, expertise, and growing digital capabilities are the most important drivers of my confidence in our long-term success.
It is an honor to work at their side.
As I reviewed Signet's performance in Q1, I want to leave you with three messages.
Number one, we outperformed Q1 expectations and are raising our fiscal '22 guidance today.
Number two, we're making steady progress in all four of our where to play strategic focus areas and all three of our how to win core strengths: consumer-inspired insights, connected commerce presence, and our culture of innovation and agility.
We are continuing to expand these strengths because we know they are sources of competitive advantage.
We're outpacing market growth.
And as a result, we're growing share.
I'll talk through each of these points but first, let's look high level at the Q1 numbers.
Total sales were $1.7 billion, an increase of more than $250 million, or 18%, compared to Q1 two years ago.
This is significant because two years ago, we had 467 more stores than we have today.
E-commerce is playing an increasingly important role with sales up more than 110% in the quarter versus last year and 124% versus two years ago.
Cash flow from operating activities of $161 million year to date was up $169 million compared to last year and $56 million compared to two years ago.
Having already paid down debt and with $1.3 billion of cash at quarter-end, we are continuing to invest in growing our business and, as Joan will discuss, returning cash to shareholders.
Ending inventory was $2 billion, $373 million lower than last year.
Our inventory reduction efforts are now institutionalized, less about rationalization and more about optimizing our merchandise mix and availability, getting the right product to the right places to maximize the speed of delivery and sales.
Our digital capabilities give customers access to virtually every piece of jewelry in our system, no matter where it is, which is unlocking new levels of inventory productivity, so this has become more than a working capital story.
We are increasing our ability to flow newness into our inventory pipeline, bringing more innovative new products to more customers more frequently.
And with data analytics, we're ensuring we have optimized assortments where we need them.
Our Q1 performance demonstrates that we are off to a strong start implementing phase 2 of Signet's transformation, which we call Inspiring Brilliance.
On that note, I want to transition now to taking a closer look at the progress we're making in each of the four where to play strategic focus areas that we outlined two months ago in our virtual investor event.
First, we are winning in our biggest businesses.
Our strategy for keeping our core strong and growing is holistic.
It begins with the work we've done to differentiate our banners, including merchandise assortment, price tiers, balancing self-purchase and gifting, and offering brands that are designed to appeal to each banner's distinct target customer.
For example, we're generating compelling and highly targeted content that's tailored for each channel where we communicate with customers and for the moment in their journey when they are engaging with us.
Our merchandise assortment is also uniquely targeted for each banner, including Neil Lane and Adrianna Papell at Kay, Vera Wang and Disney Enchanted at Zales, Levian and Pnina Tornai at Jared, and others across our portfolio.
Perhaps most importantly, we're focused on product.
Our merchants are continuing to innovate and scour the market for emerging ideas.
In bridal, this means larger, high-quality diamonds with more radiance and sleeker designs.
For the gift giver, collections with meaning really help our customers express their feelings.
And for the self-purchasing woman and man, our most innovative collections reflect the style changes that we have seen this year: yellow gold, layered neckpieces, and fully outfitted ears.
We're finding that customers want to wear jewelry with all looks, including casual, athleisure, professional, and they want to do so particularly now that they are reigniting their social lives.
Our differentiated banner propositions are working.
All of our U.S. banners delivered double-digit revenue growth compared to two years ago.
We attribute much of this to the success we're having in attracting new customers across our banners with our holistic marketing and customer experience strategies while maintaining the loyalty of existing customers as well.
For example, roughly 60% of our sales growth in Q1 across Kay and Zales came from new customers.
We've benefited from stimulus spending and other tailwinds, of course, but we believe that we've captured more than our fair share of this spending by having the right targeted assortments with the right level of newness differentiated by banner.
This is evidenced by Kay's strong growth in gifting and Zales' self-purchase.
Further, increasingly optimized assortments for our target customers led to an ATV increase of nearly 20% in these banners versus two years ago.
When we combine our knowledge of product as a jeweler and our knowledge of customers as a retailer, along with the scale of our data-driven operations, we win, especially in our biggest businesses.
Second, we're making progress on our strategy to accelerate services, which are returning to pre-pandemic levels.
Services are especially important because they are a long-term relationship builder, the glue that connects a lifetime value of relationship and purchases between a customer and our Signet team.
We jump-started services in Q1 in several ways.
We enhanced our financial services by expanding and strengthening payment offerings for customers.
We recently announced a new and more favorable agreement with two long-term partners, ADS and Genesis.
This gives us the ability to provide more payment flexibility more simply and more profitably than we could before.
We're also continuing to expand customization services.
This remains a growing trend.
Among recently engaged people, 13% designed their ring from scratch.
We're offering customization tools across all our largest banners.
With the Vera Wang love configurator, Zales' customers can choose a diamond or a gemstone center.
Kay enables customers to create a completely customizable engagement ring with a create-your-own-design tool or design a ring with Neil Lane to get that handcrafted Hollywood glamour style just the way they want.
And Jared customers have a variety of ways to put their personal touches on jewelry, whether adding an engraved phrase to a ring or working directly with Jared artisans online or in person at one of our in-store foundry studios.
Consistent with this, customization sales are up low double digits in Jared stores with a foundry.
We also continue to build on our investments in James Allen, a specialist in the custom jewelry space, and we're seeing strong results with more than 130% revenue growth to last year.
Further, we launched custom design and restoration events across Kay, Zales, and Jared in Q1.
We offered customers a 10% discount to bring in existing pieces of jewelry to be reimagined or restored to their previous brilliance.
These events, on their own, enabled us to exceed our goals for the quarter, and we plan to continue hosting them banner by banner going forward.
We're also moving into new areas such as jewelry rental subscriptions with the acquisition of Rocksbox, and we're quickly growing brand awareness through cross-promotion within our banners.
Jared, for example, offered customers a free two-month subscription to Rocksbox when purchasing a Jared piece, and then provided a bounceback coupon to anyone who activated a Rocksbox subscription.
We'll be offering a growing range of cross-banner promotions like this in the months ahead, including a Rocksbox rental offering partnership with Piercing Pagoda this summer.
We are building momentum and services, which we continue to believe is a billion-dollar growth opportunity on the path to the $9 billion overall revenue goal we laid out at our virtual investor event.
The third strategic focus area where we're making progress is expanding midmarket accessible luxury and value.
We're focused sharply on growing the top end of the midmarket with more intentional accessible luxury offerings.
For example, Jared's fastest growth this quarter came through higher price point merchandise, primarily above $3,000.
This includes Jared's new premium diamond assortment with sales of larger stones up roughly 30% to two years ago.
Chosen Platinum, Pnina Tornai, and Royal Asscher were strong merchandise drivers.
Piercing Pagoda is expanding our strength at the value end of the midmarket, delivering its strongest quarter ever in Q1.
Just to emphasize, ever means Q1 fiscal '22 was higher total revenue than any prior quarter for Pagoda, including fourth quarter.
Customers are highly receptive to our new assortment with particular emphasis on gold, which represents 75% of Pagoda sales.
Pagoda now has more than 135 stores on track to deliver $1 million in sales this year.
And we currently have four Pagoda locations that already have more than $1 million in sales to date this fiscal year, a feat that took until August to achieve in fiscal '20.
We're eager to keep Piercing Pagoda growing and highly relevant.
We're taking two critical steps in that direction by investing in advertising and launching a branding refresh.
The strong return on our additional investment in advertising was proven this quarter as we continued to increase Pagoda's banner awareness.
Sales were up three times to Q1 of last year and up 80% to two years ago on a smaller store base in both years.
Our second step, updating branding, is one that we believe will further accelerate our return on advertising spend.
Our customer research indicates that the Piercing Pagoda name doesn't have the same modernity that our merchandise and banner experience bring.
So we're testing the opportunity to freshen and broaden Pagoda's brand equity and attract new customers while retaining existing ones.
Our fourth strategy is to lead digital commerce in the jewelry industry.
Our ability to combine digital and in-store experiences at the scale we are able to is a significant competitive advantage and we're continuing to innovate and to invest in both.
For perspective, Kay delivered nearly 17% more brick-and-mortar sales per square foot of physical store space than in the first quarter two years ago.
And Zales is delivering 35% more.
In total, Q1 e-commerce sales were up more than 110% compared to last year, and brick-and-mortar same-store sales were up more than 105%.
As part of our growing connected commerce approach, we are integrating our physical stores into the digital customer experience with data-driven in-store consultations, buy online pickup in-store and curbside, and increasingly seamless interaction across our websites, stores, and inventory pipeline.
This integration is making a difference.
While physical foot traffic is still down compared to this time two years ago, we've delivered growth through both higher conversion and higher average transaction value.
We believe this is because we are starting to provide a best-in-class experience from the first touchpoint of the digital shopping experience, all the way through in-person store consultations and fulfillment.
We added more than 100 new features and capabilities across our digital platforms in Q1 to ensure every digital touchpoint is a moment of customer delight.
Virtual try-on for Kay drove over a 110% increase in its add-to-cart rate and nearly a 70% increase in order conversion in Q1.
We also rolled out Google Business Messages and Apple Business Chat, features that allow customers to engage virtual jewelry consultants in real-time or offline from search results or maps.
Applications like these are laying the groundwork for further enhancements later this year as we build our agile team infrastructure and iterative innovation capabilities.
Last year, we implemented virtual selling at the end of Q1 and had around 50,000 virtual interactions with customers.
This quarter, we had more than 450,000 virtual interactions.
And importantly, conversion is also improving as our teams' capabilities continue to mature.
Further, our cart to check out conversion rate is up, and the rate of site visits that turn into cart views is up as well.
Our digital development teams are not settling for creating the best online jewelry experience.
They're setting the bar higher by finding and innovating the best online consumer experiences in any category, and then bringing those experiences for our jewelry customers.
I'll share one quick example of how this integration and growing digital capability is working.
We recently worked with a customer who came to us through our virtual chat feature with a mission and a deadline.
He wanted to propose to his girlfriend the next day.
Erika, one of our virtual consultants, noticed the urgency in his messages, and she made it her mission to help him achieve his.
This customer's soon-to-be fiance had a dream ring in mind, a cushion-cut two-carat syn pave ring in white gold.
Erika immediately began searching our virtual inventory to identify stores nationwide that had or could create the piece he was looking for.
She found a store near him that had the cushion cut with the color, clarity, and size that he needed.
Erika connected him directly to that store.
The customer loved the ring and bought it on the spot, a $25,000 sale I might add.
The team set and sized the ring while he waited.
He proposed that evening, she said yes, and he sent our team photos of the happy moment.
This customer told us he loved being able to start his shopping journey virtually, look at pieces online, chat with a virtual consultant, have us do the shopping with him, and then have the diamond and ring together for him to view in person.
That's the power of Signet connecting digital and physical, alongside our mission of helping all people celebrate life and express their love, even in 24 hours or less.
What I hope you can see is that we are growing in each of our integrated strategic focus areas.
The best strategies are tightly integrated and create more value because they are mutually reinforcing.
It's making a difference as we've outpaced market growth over the last year and are gaining market share.
I also want to emphasize that we are delivering the performance I've outlined with a deep sense of purpose.
We are committed to ongoing leadership in corporate citizenship and sustainability, and we view ESG initiatives as an important growth driver.
This past quarter, we released the company's first-ever corporate citizenship and sustainability report.
This reflects our continued leadership, prioritization, and board oversight of ESG initiatives.
We announced our 2030 corporate sustainability goals through our three love: love for all, love for our team, and the love for our planet and products.
As we enhance our corporate citizenship and sustainability goals, we believe in prioritizing our own team.
This quarter, we launched Signet's first team member experience, which is focused on providing team members with an exceptional and inclusive place to work while also providing a robust set of learning and career development opportunities.
Having been named a certified great place to work company last year, we aim to keep our high engagement and discretionary effort momentum going.
And we are active in the communities we serve as advocates for change.
We made the first donation from our Signet Love Inspires Foundation to the Equal Justice Initiative as there is much to be done to fight systemic racism.
And in line with our mission of celebrating life and expressing love for all, the company is celebrating Pride month across Signet banners and has endorsed the Human Rights Council's business statement on anti-LGBTQ plus state legislation.
As a global company with long-standing partners and vendors around the world, we donated to the Gajera Charitable Trust in India with the intention of support for COVID relief efforts.
We believe these purpose-inspired actions are attracting even more top talent to our highly dedicated team and are attracting and appealing to customers who are voting with their wallets in support of companies and brands that share their values and take a stand.
In summary, the Inspiring Brilliance phase of our transformation is off to a strong start.
We outperformed expectations in Q1, and we're making progress in all of our strategic focus areas.
We are growing our core strengths into meaningful competitive advantages.
And most importantly, we are outpacing the market, growing share, and fulfilling our purpose as a company.
We still have plenty of hard work to do to sustain our performance and deliver long-term growth.
But we're encouraged by the momentum that's building and inspired by the opportunity to serve our customers and help grow the jewelry industry.
Inspiring Brilliance is advancing our transformation and has accelerated our growth to deliver a strong first-quarter performance.
specialty jewelry market, and we believe we are winning share, particularly in the mid-market.
There are four key highlights this quarter.
First, our financial performance was strong in the quarter as we grew our top and bottom lines on a lower store base.
We grew our top line through higher conversion and average order value despite lower traffic.
Our top-line strength was complemented by our continued cost discipline and leveraging of our fixed cost base.
Second, our balance sheet is strong.
Efficient use of working capital through inventory reduction and spend management delivered an increase in liquidity to last year.
Third, we successfully executed new credit agreements, resulting in benefits to our customers and favorable economics to Signet, reflected in our raise of cost savings guidance.
Lastly, we're committed to invest in Signet's growth and are raising our capital expenditures for the fiscal year.
We are investing in our talent, banner differentiation, and technology.
We are also pleased to announce today the reinstatement of a common dividend, demonstrating our confidence in cash flows and business performance despite our conservative view of the back half.
Turning to the quarter, first-quarter total sales grew 98.2% over last year on a lower store base.
Our sales growth was broad-based.
We saw strong performance across formats, regions, channels, and categories.
While overall jewelry category trends remain healthy, we continue to outpace the market growth.
specialty jewelry market grew over 72% for the three months ending in April.
Compared to that market growth, our U.S. banners grew total sales more than 109% this quarter.
Our integrated strategic choices, including new connected commerce capabilities, modern marketing strategies, and enhanced product assortment, are all enabling a more than 250-basis-point increase to our brick-and-mortar conversion rate within our biggest businesses versus two years ago.
Moving on to gross margin, we delivered approximately $680 million this quarter or 40.3% of sales.
While that rate is a significant improvement to last year, when we look back versus two years ago, this is a 540-basis-point improvement.
We expanded our gross margin rate through a combination of factors.
First, our top-line performance allowed us to leverage fixed costs, and we are benefiting from cost savings within gross margin.
Second, services revenue carries a more favorable margin profile and is growing, importantly, compared to two years ago, in programs such as extended service agreements.
Lastly, through enhanced pricing discipline and new capabilities, we improved our merchandise margin during the quarter.
Flexible fulfillment and ship from store provide our customers nearly all of our product across our channels while more effectively managing our inventory throughout its lifecycle.
For the first time, ship-from-store automation is now available across all of our banners.
SG&A was approximately $512 million or 30.3% of sales.
Here again, the rate reflects a significant improvement to last year, but it was also a 290-basis-point improvement to two years ago.
We're effectively using data analytics to create a labor model that integrates our new capabilities, resulting in a 60% improvement in labor productivity versus two years ago.
Our new labor model, coupled with our enhanced product assortment and marketing strategies resulted in a 15.2% increase in our North America average transaction value to last year.
In addition to labor productivity improvements, we are continuing our cost-savings efforts, including technology harmonization, optimizing our real estate portfolio, and overall spend management.
Non-GAAP operating profit was $168.9 million, compared to an operating loss of $142.5 million in the prior year.
First-quarter non-GAAP deluded earnings per share was $2.23, up from a loss per share of $1.59 in the prior year.
Turning to the balance sheet, we continue to drive working capital efficiencies.
We reduced our inventory by $370 million to this time last year.
Accounts payable also remains an important component of our working capital management and we continue to effectively manage payment terms within our network of vendors.
We ended the quarter with $2.5 billion in liquidity, up over $1.2 billion to last year.
Recall, we have no drawings under our revolver and our longer-term obligations mature in calendar 2024.
Turning now to financial services and as recently announced, we finalized agreements to restructure our credit offerings.
We've extended and expanded agreements with two of our long-standing credit partners through the calendar year 2025.
The terms of the new agreements will help to streamline the process for customers.
As an example, ADS will originate a wider array of customer profiles and Genesis will expand our second look program to do the same.
I'd note that all banners will now harmonize to offer our customers no-down-payment financing with a minimum monthly payment structure.
These agreements, which are effective July 1, also provide favorable economics to Signet.
As these agreements were more favorable than originally contemplated, we're raising our fiscal '22 cost savings guidance by $20 million to a range of $75 million to $95 million, and we now expect cumulative three-year cost savings to be in the range of $220 million to $240 million.
Recall, our current agreements with third-party, nonprime receivable purchasers are in place until the end of June.
We have signed a nonbinding letter of intent with them and are currently working toward a definitive agreement, and the terms would remove consumer credit risk from our balance sheet.
Now, I'd like to discuss our fiscal 2022 financial guidance.
We continue to expect stronger sales performance in the first half of the fiscal year.
As the vaccine rollout progresses, we continue to believe there could be a shift in wallet share away from the jewelry category toward experience-oriented categories.
The magnitude and timing of which is difficult to predict.
As such, we're planning for increased marketing expenses to continue to fuel momentum in the front half, as well as proactively manage against changes in consumer spending as the year progresses.
As a result, we continue to conservatively plan for same-store sales to be negative in the second half of the fiscal year.
Additionally, India continues to see the tragic impact of the pandemic.
And while we've proactively managed against disruptions to date, supply chain risk could increase later in the year.
We expect second-quarter total sales in the range of $1.6 billion to $1.65 billion with same-store sales in the range of 76% to 82%, and non-GAAP EBIT of $118 million to $130 million.
For the fiscal year, we now expect total sales to be in the range of $6.5 billion to $6.65 billion with same-store sales in the range of 24% to 27%, and non-GAAP EBIT of $490 million to $545 million.
We remain on track to open up 100 locations and close at least 100 locations, with nine openings and nine closings this year.
This includes the testing of formats that are quick to set up and require significantly less inventory on hand, as well as formats that contain multiple banners.
We'll continue using format testing this year to determine the best way to offer our customers our breadth of capabilities as efficiently and effectively as possible.
Our long-term capital priorities remain to invest in the business, pay down debt, and return capital to our shareholders.
First, in keeping with these priorities and as a result of our performance and cash generation, we are increasing our capex by $25 million to invest in growth initiatives.
This brings our fiscal '22 capital expenditures to a range of $175 million to $200 million with a continued focus on digital and technology investments to further strengthen our competitive advantage and long-term positioning.
Second, recall that we paid down the balance of our revolver and filed a loan in Q4 of fiscal '21, and our remaining maturities which carry favorable interest rates come due in calendar 2024.
And third, on capital return, as we announced today, we're pleased to return cash to shareholders through a common quarterly dividend, which has been reinstated at $0.18 per share.
We're proud of the results we delivered this quarter and we're proud of our team's execution and commitment to each other and to our customers.
And as we look ahead, we remain focused on our continued transformation under inspiring brilliance.
 Assistant:

Chosen response:
signet jewelers' first quarter results exceed expectations.
q1 non-gaap earnings per share $2.23.
q1 sales $1.7 billion versus refinitiv ibes estimate of $1.62 billion.
sees q2 total revenue $1.60 billion to $1.65 billion.
sees q2 same store sales up 76% to 82%.
sees fy same store sales growth 24% to 27%.
sees fy total revenue $6.50 to $6.65 billion.
expects to close over 100 stores in fiscal 2022 and open up to 100 locations.
increased its gross cost savings expectations for fiscal 2022 to $75 million to $95 million.
signet jewelers - expect some tailwinds from stimulus and slower than anticipated return to travel spending to subside in back-half of 2021.


Prompt:
Human: I'm joined today by Mike Renna, our President and Chief Executive Officer; Steve Cocchi, our Chief Financial Officer; as well as additional members of our senior management team.
Throughout today's call, we'll be making references to future expectations, plans and opportunities for SJI.
Reconciliations of economic earnings to the comparable GAAP measures appear in both documents.
Our CFO, Steve Cocchi, will then review our third quarter and year-to-date operational performance and financial outlook.
Mike will conclude by offering some closing remarks.
I am pleased to report that SJI, notwithstanding the continuing challenges of COVID, again delivered solid performance in the third quarter and through the first nine months of 2021, and we remain on-track to achieve our strategic and financial goals for the year.
Through the first nine months, we have seen economic earnings increase by 12% or approximately $12 million, reflecting solid performance in both our utility and nonutility businesses.
Consistent with our strategy, our utilities, South Jersey Gas and Elizabethtown Gas represent the bulk of our earnings.
Utility margin growth remained strong, reflecting above-average customer growth, positive rate case outcomes, infrastructure modernization programs and effective O&M management.
Natural gas remains in strong demand across New Jersey with our utilities adding more than 12,000 new customers over the last 12 months.
And while we are seeing increased new construction across the state, most of our growth continues to come from customers converting from heating oil and propane.
Our infrastructure modernization and energy efficiency investments, critical to assuring safe and reliable service to our customers, remain on-track and have the added benefit of significantly reducing methane emissions.
On October 1, in keeping with the cadence approved by the BPU, we began recovery of these investments made over the last 12 months.
I am also pleased to report that our regulatory initiatives continue to advance.
In August, the BPU approved South Jersey Gas' engineering and route proposal to construct needed system upgrades in support of a planned 2 Bcf liquefied natural gas facility.
As you know, the BPU has called utilities in New Jersey to evaluate preparedness for potential gas supply interruptions.
This investment is critical to ensuring service is not interrupted in the event of a significant outage, either behind our city gate or in one of the two interstate pipelines that serve the South Jersey Gas system.
Preliminary engineering and design of the project has commenced.
Regarding pending initiatives, we have requested $742 million in Phase 3 infrastructure modernization investments at South Jersey Gas.
This next phase of system modernization targets coated steel and vintage Aldyl-A plastic pipe, supporting the Murphy administration's safety and reliability, job creation and environmental goals.
The retirement of Rate Counsel in September and the leapfrogging of approval of our LNG redundancy proposal has extended our anticipated time line a bit.
But settlement discussions continue to progress, and we remain optimistic for a positive resolution soon.
With regard to pending legislation, the potential for rate base in RNG and hydrogen investments in New Jersey continues to enjoy strong bipartisan support that aligns with Governor Murphy's clean energy goals and is expected to be a priority item during the upcoming lame duck period.
As previously communicated, we believe this legislation will encourage innovation and accelerate New Jersey's decarbonization efforts.
Turning now to our nonutility operations.
Both our energy management and energy production segments delivered solid quarterly and year-to-date results.
Energy Management results reflect strong performance in both wholesale marketing and fuel management, while Energy Production reflects positive results from fuel cell and solar investments over the past 12 months, particularly our Staten Island fuel cell as well as contributions from our 35% equity interest in our RNG development partner, REV.
I am pleased with our progress on our clean energy and decarbonization goals.
Our five-megawatt fuel cell project in the Bronx that was announced in June is under development and moving forward.
Similar to our 2 Staten Island for cells that were brought online in 2020, this fuel cell, which will be our third catamaran is eligible under New York's VDER program, which fixes 75% of revenue and is supported by O&M agreement that guarantees 95% availability.
SJI will receive 92% of the investment tax credits, cash flows and net income from this project.
Our decarbonization investments to our partner REV, remain on-track as well.
Our 35% ownership of REV is now contributing nicely to our bottom line.
And our development of renewable natural gas from future ejection into SJI system and other utility systems across the country continues to move forward.
Engineering and design work at eight dairy farms is wrapping up with construction on deck and in service on-track for the second half of 2022.
As Mike noted, our business has performed very well in the latest period and through the first nine months of 2021.
For the third quarter, SJI posted a loss in economic earnings of $18.8 million compared with a loss of $6 million for the comparable period a year ago.
The latest period reflects improved results from utility operations, which was achieved despite the ongoing challenges of the pandemic and the inherent seasonality of our business.
These improved results from our utility business were offset by decreased profitability from nonutility operations, largely related to year-over-year timing of the recognition of ITCs from renewable investments.
Our utilities contributed a narrower third quarter loss in earnings of $17.2 million compared to a loss of $18.4 million in the third quarter last year.
Improved results primarily reflect rate relief at South Jersey Gas, strong customer growth, and base rate roll-ins related to infrastructure modernization and energy efficiency investments under our authorized plans.
Our nonutility operations contributed third quarter economic earnings of $8.1 million compared to $21.6 million last year.
Energy Management contributed third quarter economic earnings of $4.4 million compared to $6.6 million last year, reflecting solid profits from asset optimization activities, albeit less robust than last year and improved profitability from our retail consulting activities.
Energy Production contributed third quarter economic earnings of $3.9 million compared with $13.8 million last year.
As previously mentioned, the decrease largely reflects timing associated with the recognition of ITCs from renewable energy investments, which was partially offset by positive contributions from fuel cell and solar investments made over the past 12 months as well as contributions from decarbonization investments through our 35% equity ownership in REV.
Midstream contributed a loss in third quarter earnings of $300,000 compared to earnings of $1.2 million last year, reflecting the absence of AFUDC related to the cessation of development activity for the PennEast Pipeline project.
Our other segment contributed a loss in economic earnings of $9.6 million compared to a loss of $9.2 million last year, reflecting higher interest and bank fees partially offset by lower outstanding debt.
For the nine months year-to-date, economic earnings were $112.1 million compared with $100 million last year.
Improved utility results and consistent nonutility results largely reflect the same factors as previously discussed, that impacted third quarter results.
Our capital expenditures and clean energy investments for the year-to-date were approximately $434 million with more than 80% of this amount allocated for regulated utility investments in support of utility infrastructure upgrades, system maintenance and customer growth.
Our balance sheet, debt and credit metrics have all improved over the past year and support our growth plans.
And as always, we remain committed to a capital structure that supports our regulated, focused capital spending plan while maintaining a balanced equity to total capitalization, ample liquidity and a solid investment-grade credit rating.
Our GAAP equity to total capitalization improved to 35% as of September 30, compared with 32.2% on December 31, 2020, reflecting debt and equity financing and repayment of debt using proceeds from asset sales.
Our non-GAAP equity to total cap, which adjusts for mandatory convertible units and other long-duration debt, improved to 43.4% at September 30 compared with 39.7% at December 31, 2020.
We continue to have ample liquidity at both SJI and our utilities with approximately $1.3 billion in total cash credit capacity and available through our equity forward and approximately $1.1 billion available as of September 30.
In addition, with the proactive refinancing efforts we've undertaken over the past year, as well as repayment of debt from our transactions and the remarketing of our prior mandatory convertible units, SJI has no significant debt maturities due in the near term.
Turning now to guidance.
Based on solid operational performance through the first nine months of the year, we are reaffirming our expectation for 2021 economic earnings of $1.55 to $1.65 per diluted share.
Our long-term economic earnings-per-share growth target remains 5% to 8%, with significant step-ups expected in 2023 and 2025, driven by timing associated with utility rate cases and clean energy investments.
We're also affirming our five-year capital expenditures outlook through 2025 of approximately $3.5 billion.
As you know, PennEast capex in our five-year plan was relatively small, approximately $100 million, and we've identified a variety of utility and clean energy investments that match our current strategic growth requisites to take its place.
We are excited by the progress we've made in 2021 and remain highly confident in our ability to execute on our plan to safely and reliably deliver the clean decarbonized energy of the future through a fully modernized 21st century system.
But before opening up for Q&A, let me address a question that may be on your minds.
With regard to the recent rise in gas commodity prices, let me remind you that SJI has a prescriptive hedging plan in place approved by the BPU and designed to minimize the kind of pricing volatility our sector has witnessed in recent months.
Based on this program, any impact to customer bills would largely be resolved in our next BGSS discussions with the regulators with new rates effective next October.
I know many of you have gotten to know and engaged with Dave over the years.
He has served our company admirably and with great distinction for many years, including most recently with the responsibility of leading our utilities.
 Assistant:

Chosen response:
south jersey industries reaffirms guidance.
reaffirming 2021 economic earnings guidance of $1.55 - $1.65 per diluted share.