Cowen Inc (COWN) 2016 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for joining Cowen Group Incorporated's conference call to discuss the financial results for the 2016 third quarter. By now you should have received a copy of the Company's earnings release, which can be accessed at Cowen Group Incorporated's website at www.cowen.com.

Before we begin, the Company has asked me to remind you that some of the comments made on today's call, and some of [your] responses to your questions, may contain forward-looking statements. These statements are subject to risks and uncertainties described in the Company's earnings release and other filings with the SEC. Cowen Group Incorporated has no obligation to update the information presented on the call. A more complete description of these and other risks and uncertainties and assumptions is included in the Company's filings with the SEC, which are available on the Company's website and on the SEC website at www.sec.gov.

Also on today's call, our speakers will reference certain non-GAAP financial measures, which the Company believes will provide useful information for investors. Reconciliation of those measures to GAAP is consistent with the Company's reconciliation as presented in today's earnings release.

Now, I would like to turn the call over to Mr. Peter Cohen, Chairman and Chief Executive Officer.

Thank you, Operator. Good afternoon, everyone. Thank you for dialing in, and welcome to our third quarter earnings call. As I always am, joined by Jeff Solomon, President of Cowen, and Steve Lasota, our CFO.

Though equity markets moved to higher levels in the quarter, bringing most of the major indices to new highs, the general revenue environment for our businesses remain challenged, and with capital raising activities, merger advice, equity, commissions, and hedge fund asset flows facing headwinds, which I think you probably are all aware of. However, because of the number of steps we have taken to remake the firm over the past few years, Cowen's operating businesses were well positioned to perform in this environment.

Our economic income numbers are meaningfully higher today than they were in the last significant industry downturn in 2011, and better than last year's third quarter. As a result, our 2016 performance is focused on making a higher swing-low in economic income and putting ourselves to be in a position to make higher swing-highs and profitability when our businesses begin an uptrend.

For the third quarter of 2016, Cowen reported economic income of $11 million, or $0.10 per diluted share compared to an economic income loss of $14.5 million, or $0.13 per diluted share last year for the third quarter. At Cowen & Company, we are continuing to use this downturn in the market to make new investments in talent, to ensure organic growth in key investment banking, research, and other verticals in the future.

We have also continued to integrate our recent acquisitions of CRT, Credit Research and Trading, which was completed only this past May, as well as the prime brokerage businesses we acquired last year. Most recently, we also have acquired the Washington Research Group team, who joined us in August. The results of the work they're doing have yet to start manifesting itself in revenue flow, which we expect will happen, we'll start to see in the fourth quarter and into next year.

At Ramius, we invested in new teams and capabilities even as we sold our alternative solutions business, which was the successor to our old fund of funds business, with most of our portfolio teams outperforming their benchmarks. We continue to attract assets. We grew by a net $600 million during the quarter, so that's inflows net of outflows, plus performance. And we are taking steps to increase the profitability and extend the number of portfolio offerings in the asset management business.

Now, as it relates to Ramius itself, Ramius assets under management as of October 1 were $10.5 billion, which does reflect the elimination of the RASL assets, which were about $2.5 billion. The decline from July 1 includes approximately $2.5 billion of assets associated with the sale of our interest in Ramius Alternative Solutions. Excluding this reduction in assets, we had about $800,000 in redemptions, $522 million in subscriptions, and $286 million in positive performance.

As we announced in August, we entered into an agreement to sell our interest in the alternative solutions business, which as I said was the successor to our fund of funds business. The sale closed on September 23. The gross purchase price, or proceeds to us, were $17 million. That's before expenses. We had reached a point where we felt we could no longer effectively scale this strategy on our platform to bring it to its full profit potential. So, in conjunction with our partners in the business, we initiated a formal process to sell our interest. We are proud to have developed and scale of the team, and are happy to see that the business has found a home with a quality firm.

Management fees for the alternative investment management segment averaged $5.2 million per month in the third quarter of 2016, which is unchanged from the second quarter earlier this year, second quarter of 2016. The average management fee for the quarter was 53 basis points, unchanged from the prior year period. This number has always been suppressed by the effect of the low fee-paying assets of RASL, so we would expect that the realization on fee should increase in the future. As we have noted in the past, because fee structures vary by product and channel, we do not manage to this metric, but we do believe that this number will trend higher, as I just mentioned.

In what's been a challenging year in general for hedge funds, Ramius Affiliated Funds mostly outperformed the broader hedge fund indices. Year-to-date, we raised $1 billion, 60% of which is for emerging strategies, and attracted some very high quality blue chip investors across all products. Emerging strategies include event, equity long-short, global macro, and distressed credit.

In merger arbitrage, we expanded this strategy's global footprint to the successful launch of the MLIS Ramius Merger Arbitrage UCITS fund in partnership with Bank of America Merrill Lynch, one of the premiere UCITS platforms in Europe. The launching having just occurred, asset growth is just beginning. In addition, the team was recently ranked number one for the month of August by BarclayHedge. Healthcare Royalty Partners had a successful quarter, and continues to attract interest and assets for new investors. Our consumer focused long-short equity fund, which launched earlier this year, has attracted some prominent investors, and it's performing quite well.

Subsequent to the quarter-end, we launched another equity long-short fund initially focused on the communications, technology, media, and consumer sectors with a very talented portfolio manager who we had mentioned in last quarter's call, Samantha Greenberg. Initial investors include a large corporate pension fund and a prominent high net worth individual. We introduced long-short strategies because they are the largest hedge fund category and the most scalable, and with the right portfolio managers, we think has the best opportunity to outperform the indices. We believe that our newest partners are on track to reach scale, and we're looking forward to helping them achieve significant progress in the fourth quarter of 2016 and into 2017.

Investment performance on the balance sheet rebounded during the quarter, as you can see, as some of our investment strategies benefited from stabilization in the market, a growing market, or increasing market sentiment, and easing of volatility. The biggest contributor to the rebound was merger arbitrage, which as you know was adversely affected by the extraordinary events surrounding the termination of the Pfizer-Allergan transaction in the second quarter of last year.

We want to thank all of our colleagues for what we achieved in the quarter and their efforts to move the organization forward. And I will now turn it over to Jeff, who will discuss the quarter at Cowen & Company.

Thanks, Peter. US capital raising environment improved somewhat from the start of the year, but overall activity remains muted. In the US IPO market year-to-date, overall dollar volume raised is at its lowest level in 13 years.

Considering this, the most difficult market since 2003 in terms of IPOs, Cowen's performance in investment banking was pretty solid. This is a testament to the strategy we set forth in 2010 to build a top-notch, sustainable investment banking business, initially focusing on healthcare verticals. Healthcare, and more specifically biopharma, is traditionally the most active sector for raising equity capital, and we felt it would serve as our anchor as we grew additional verticals. This approach has served us well because, despite the lower level of equity capital raising activity across all industries, our healthcare clients have consistently raised capital throughout this period.

Our third quarter ECM revenue was fairly consistent with the first few quarters of the year, coming in at about $24.9 million, down 49% from the prior year quarter. We also successfully executed on our backlog with a window that was only slightly open, as during the quarter we closed 22 transactions compared to 27 in the prior year period. We were a book runner on more than half of the transactions in the quarter, consistent with our prior year quarter, and our average underwriting fee declined to $1.1 million compared to $1.8 million a year ago, reflecting lower amounts per transaction in terms of money raised.

While the majority of our equity capital markets revenue represents fees associated with traditional follow-on or IPO activity, a growing number of our clients accessed equity capital through convertibles and continuous shelf offerings. In fact, we have booked a greater amount of fees associated with convertibles and continuous shelf offerings this year than in previous years, and collectively, these two products accounted for more than 25% of the ECM revenue for the quarter.

We continue to be very positive on the outlook for debt capital markets, and this quarter we closed two transactions. In September we announced the new head of our DCM area. With new leadership in place, we're in a stronger position to leverage our credit sales and trading platform at Cowen Credit Research, which we acquired earlier this year.

Our M&A business had another solid quarter, five deals in four sectors, and this represents a number of different sectors, including industrials, technology, healthcare, and information services. Altogether, the third quarter for investment banking was most diverse in terms of industry mix. It reflects our efforts in recent years to build out our industry and product expertise in verticals outside of healthcare and ECM. And while we always have more work to do, during the quarter we announced the hiring of several new industry bankers with significant M&A experience, both in healthcare and in some of our other core industries.

Turning to our institutional business, institutional brokerage business, which includes equities, prime services, and the new Cowen Credit Research and Trading business, core equities revenues, which we define as cash equities, electronic trading, special situations, options, and convertible trading, we declined about 8% compared to the third quarter of 2015, but was largely flat to the second quarter of 2016. It is important to note that although revenue was down, our performance was quite strong, given the fact that equity trading volumes were the weakest they had been in quite some time. In fact, the latest market research indicates that we held market share even as others lost significantly.

We continue to invest in differentiated research capability as the environment for great talent seeks out our platform. As Peter mentioned, during the quarter we hired the six-person team of the Washington Research Group, and their macro policy commentaries cover topics such as Washington strategy, aerospace defense, financial services, healthcare, housing, medical devices and technology, and is really a natural complement to the corporate insights from our equity and credit research team.

Importantly, macro policy targets the portfolio managers at our long-only clients, which is an area of the marketplace which actually controls a significant amount of commissions but has, to date, been underpenetrated by Cowen. We passed the one-year anniversary of our prime services business acquisitions, having closed on those in the third quarter of last year and the fourth quarter of last year.

These acquisitions formed our prime services business, and overall, the business development has been positive even as trading volumes for the past few months have fallen. Customer assets in custody are growing, and to just give you some metrics there, as of September 30, 2015, AUM at Cowen Prime was $4.6 billion, but today as of September 30 is $7.3 billion, and that includes the Concept assets, as well.

Year-to-date, the growth in custody assets is approximately 9%, and the good news is that newer clients are carrying more debit and short balances, which means that our financing revenues are growing even as our commissions have slowed down in the past few months. Large long books create an opportunity for us to lend hard-to-borrow securities, which is a service we intend to offer, and we're currently building out a new securities lending business that will dovetail into our prime services business. The good news is the pace of wins in our outsourced trading business has accelerated, which is encouraging as it's helped us to offset the natural attrition of clients who grow to a size where they ultimately end up internalizing their trading activity.

This is the first full quarter of Cowen Credit Research and Trading on our platform. The business, which focuses primarily on distressed credit trading, emerging markets, special situations, equities, and trade claims is performing in line with our revenue expectations. We're really just getting started with revenue integration opportunities and have yet to see the benefits of the integration. But, early collaboration we're seeing in equities has actually been quite encouraging. In addition, our equity and credit research analysts have co-authored a number of research pieces and have collaborated on a number of ideas, which has really added audience to both our equities franchise and our corporate credit franchise. And it's really created a lot of interesting opportunities for us to monetize capital structure in both equity and credit accounts.

So, that's what's happening at Cowen & Company. I will turn it over to Steve Lasota, who will review our financials. Steve?

Thank you, Jeff. In the third quarter of 2016, we reported a GAAP net loss attributable to common shareholders of $4.9 million, or a loss of $0.05 per diluted common share compared to GAAP net loss attributable to common shareholders of $11.9 million, or a loss of $0.11 per diluted common share in the prior year period. GAAP income before income attributable to non-controlling interest, taxes, and dividends was $24.1 million. Income attributable to non-controlling interest was $18.5 million. Income tax expense was $8.8 million. Preferred stock dividends were $1.7 million, which led to a GAAP net loss of $4.9 million.

Now, the income tax expense increased because of quarter-on-quarter fluctuations in our income attributable to non-controlling redeemable interest, which can cause us to record higher income taxes due to the fact that GAAP requires us to use full-year projections in calculating the quarterly tax provision. Income attributable to non-controlling interest changed significantly from the last two quarters due to the positive performance of one of our consolidated funds. GAAP revenue was $131 million. Net gain on investments was $26.2 million. Comp and benefits expense was $98.5 million. And G&A and other expenses were $49.7 million.

In addition to our GAAP results, management utilizes non-GAAP financial measures, which we refer to as economic income. Management uses economic income to measure our performance and to make certain operating decisions. In general, economic income is a pretax measure that excludes the impact of accounting rules that require us to consolidate certain of our funds, certain other acquisition-related adjustments and reorganization expenses, goodwill and intangible impairments, and preferred stock dividends.

The remainder of my comments will be based on these non-GAAP financial measures. In the third quarter of 2016, the Company reported economic income of $11 million, or $0.10 per diluted share. Our comparable GAAP pretax net income attributable to Cowen of $5.5 million differed from our economic income of $11 million due to $5.5 million in transaction-related expenses.

Our prior year economic income loss was $14.5 million, or $0.13 per diluted share. Third quarter economic income revenue was $153.5 million compared to $82.8 million in the prior year period. Investment banking revenue was $36.7 million compared to $53 million in the third quarter of 2015. Quarterly brokerage revenue rose 23% year-over-year to $51.5 million. Management fees were $16.5 million compared to $18 million from the prior year period. Incentive income was $11.8 million compared to a give-back of $8.6 million in the prior year period. Investment income was $19.7 million compared to an investment income loss of $22 million in the prior year period. Other revenue was $17.2 million compared to $564,000 in the prior year.

Comp and benefits expense for the quarter was 61% of economic income revenue compared to 67% in the prior year period. Variable non-comp expenses in the third quarter were $14.8 million compared to $11.7 million in the prior year period. The increase is primarily related to higher floor brokerage and trade execution costs due to higher brokerage revenue and increased marketing and business development expenses, most of which is related to acquisitions during late 2015 and 2016.

Fixed non-comp expenses totaled $28 million in the third quarter compared to $26.2 million in the second quarter of 2015. This increase was primarily due to higher communication, increased occupancy costs, and increased depreciation and amortization, all of which are related to acquisitions during late 2015 and 2016. GAAP stockholders' equity increased by $8.4 million to $771 million at September 30 of 2016.

Common equity, which is shareholders' equity, less the preferred stock, was $669.9 million compared to $661.5 million at September 30 of 2015. Book value per share, which is common equity divided by shares outstanding, was $6.24 per share compared to $6.18 at September 30 of 2015. Intangible book value per share, which is common equity less goodwill and intangible assets, was $5.42 per share compared to $5.62 per share at September 30. Invested capital was $683 million as of September 30, 2016.

I will now turn the call back over to Jeff for closing remarks.

Thanks, Steve. And with the $1 billion in total capitalization and a stable platform, we're seeing the benefits of being able to have the resources to invest in business and talent to drive shareholder value when many of our competitors are facing significant challenges. We've made several investments in talent during this market downturn, and we'll continue to do so selectively as opportunities present themselves. We've also done so while balancing our cost structure.

We are looking to take advantage of our newer capabilities, such as credit research and trading and prime brokerage, to further our services in debt capital markets and equity finance, as well as advance our other businesses. And it takes courage to invest during a time period in which others are eliminating businesses and headcount. And while it will take a period of time for these investments to manifest themselves in our numbers, we believe the effort we're making to invest in key individuals and businesses will position us for our next leg of growth.

We believe the results in our operating businesses demonstrate the success of our strategy thus far, as we have been prudent shepherds of capital. Before opening up the call to questions, though, I'd like to thank our colleagues not only for working as hard as they do to achieve our vision for the future, but for making Cowen such a great place to work.

Operator?

(Operator instructions.) Devin Ryan, JMP Securities.

Maybe just starting on Ramius, I don't know if you can give any more detail just on the redemptions in the quarter on the subscriptions, where they came from, and then just kind of broader outlook, how you guys are feeling about flows right now.

Sure. We had subscriptions in merger arb. We had subscriptions in both of our long-short equity products. We grew in healthcare royalties. Real estate we didn't have any offerings in the quarter, but we're going to be closing two new real estate funds in the fourth quarter. The redemptions came partially from RASL. We had redemptions there. We had very small redemptions in merger arb, but net-net, merger arb grew by about $100 million in the quarter.

Peter may have mis-spoke on the call actually earlier. There were $800,000 in redemptions for the quarter. So, I just want to be clear, I think he actually said $800 million by accident, so there were $800,000, Devin.

Right, exactly, and I guess that does make a difference, so that's helpful. So, very little there in the subscriptions. So, I guess then on the outlook for flows, how do you guys feel? There's obviously more product now that you have RASL behind you, so what does it look like, moving forward?

Well, I don't know if we can be specific because we don't really know the timing, but all of our strategies are performing well, and we've got a lot of interest in the royalties business. We've got a lot of people looking at merger arb, which had a tremendous rebound in the third quarter. Our two long-short equity products have done very well, and we've got a lot of people looking at those. We do know we will be closing, between our debt fund and an equity fund, over $300 million of new assets in real estate. Those are the bigger ones.

I think a lot of what you're seeing, Dev, in terms of what we're hearing about hedge funds make [big, high profile] hedge fund closures honestly are steps that we took five or six years ago. And as we reshape the business to be a little more nimble with much more focus on targeted product, with easily articulated strategies, we recognized I think six years ago that some of the challenges associated with managing multi-strategy and, frankly, fund of funds money was significant.

So, I really feel like there's a shift more to emerging managers, if you will, and away from some of the bigger asset aggregators. We thought that would happen, frankly, a lot longer ago than it has, but we're starting to see that happen, and our launches have actually been very difficult market, pretty good launches. It's just going to take a while to scale, and I think that the numbers that we've raised to date, Peter mentioned $600 million in AUM just in emerging strategies year-to-date, that's pretty good when you talk about how all the new launches have gone. So, we're pretty good.

Yes. Just to add to what Jeff said, we believe the environment we're in today, A) is very hard to run a very, very large pool of diversified assets. I think you're better off running more pools, smaller pools of very focused assets and very kind of niche strategies that you know very, very well. And that's the path we set out when we rebuilt Ramius. We went out of the multi-strategy business after 2008. And it's working for us, and we think there are some nichey new strategies that we can add in the next 12 months that, in aggregate, can be meaningfully scaled, no one of them being terribly big, but if you put a bunch of them together, they can be very good.

And the investor is looking for a very nichey, very bespoke, very focused strategy. It's not like just trust me with your money. Somebody who wants merger arb wants merger arb today as opposed to, well, I'll get it through multi-strat. That used to be the answer. And as you've seen, a lot of the multi-strat guys are suffering from redemptions. So, the landscape has changed a lot, and it's going to continue to change.

And maybe speaking of niche strategies, healthcare royalty, I know you guys have a large level of accrued carry there that isn't included in the balance sheet, so we can't really see what that is. I'm curious if you have an update of where that sits today, or roughly what that looks like. And then, any thoughts around the timing of when we could see that roll through the P&L?

Dev, as we've talked about in the past, we still have a good insight as to what that number is, but there's still a couple of investments that need to run their course before we will recognize those incentive fees, or the carry. And it's still hard to predict, but it shouldn't be too far out in the future.

Yes. Just to give you an idea, we know what those fees are, but they have to be crystallized by the sale essentially of the last asset in the fund. And so, there's a very small number of assets left in fund one, but they have to be realized. And so, just a matter of time until that happens. Obviously everybody's economically aligned to make that happen sooner rather than later, and it's hard to say whether or not it will be a 2017 event. It could be. But, soon as it happens, we will let you know. Everybody's very focused on it.

Right, that's helpful. I understand that it's a moving target here until it's actually realized, but at the same time it seems like it's not mark to market, if you will, in terms of what we can see, so it's kind of incremental benefit that just to maybe even think about that would be helpful. But anyways, okay, we'll stay tuned.

Maybe moving on just to the capital markets, so you guys made some hires in debt capital markets, and they seem complementary with what you're doing with CRT. So, I'm just trying to think about the potential for that business, how much bigger can it get, and if you have any thoughts around the revenues that you're targeting with your DCM platform.

Well, I think we see an opportunity here, as we pushed out to some other areas in equity financing. We've been doing DCM for a while, but we had about six months where we needed to get new leadership in here, and we took our time. I think this is a great time to be looking at funding emerging growth companies using debt, as we've seen a significant growth in the alternative lending landscape. We really see an opportunity also to take advantage in the leverage finance space of doing more deals that are both high yield and privately placed as we look at our leveraging off of the CRT distribution platform.

So, this is all part and parcel of being able to build out a holistic approach to growth customers. So, the strategy is simple. When you walk into a client to talk to them about their financing alternatives, if you don't have a range of financing alternatives that you can present to them with a range of capital costs associated with them, then you're simply pushing product.

And we've always said [here] that the best opportunities are when you sit down with a client, think strategically about how best to finance their business, and you should be product-agnostic and doing that, and adding these capabilities both, as you've seen, not just in DCM, but adding out convertibles and adding our ability to do continuous offerings gives us a chance to basically talk to clients about a whole range of options, and then execute on them when we figure out collectively which are the best for them.

So, I think we'll see growth just because we're in a low yield environment and there's a lot of capital sloshing around looking to be put to work in direct lending. And the clients we serve are really underserved by the banking universe, the larger banking universe for sure.

And maybe just the last one here around investment banking outlook, obviously get that the long-term dynamics around healthcare and why we'll see a resumption activity, it's kind of a matter of when, not if, it seems. But, I'm curious what you're seeing in the backdrop right now, if it feels like we're moving closer to that time where companies say, okay, we've got to go, or are we waiting for something else to happen, whether it's an election or something else that's going to trigger that movement of companies actually coming to market? I'm just curious if we're getting any new indicators that would suggest things are improving there.

It's sector by sector, I would say. Each sector has its own dynamic. There's no question that there are sectors that are waiting until after the political landscape is a little bit more established in order to access the markets. But, we are starting to see some technology companies come to market. We tend to focus on industries in equity capital markets. We tend to focus on industries that are a little bit more capital intensive because they're repeat customers. And I just think that's a nuance most people don't focus on. There are definitely high profile software deals and Internet deals that come, and I'm not saying that we wouldn't be involved in them, but generally speaking, they're not big capital users, so they don't access the market significantly over time.

And so, we're much more focused in those areas and being able to provide debt financing and M&A advice. And there we're seeing, as you can see from the activities we've had, we've actually had a pretty robust quarter for us, again, given the size of our investment banking footprint, in those areas. So, I think that the election will certainly answer one big question, and I certainly think that the Federal Reserve Board finally getting off the schnide and raising rates will answer another question. And once those questions get answered, people will understand a little bit more what the landscape looks like and access the markets.

I still think that, as we've seen this year, it's sort of the opposite in terms of healthcare financing, which drives a lot of our revenues still. It's the opposite of the way it was last year, but as we've been saying for a long time, these are clients that need to raise money in any kind of environment. There are always clients that need to raise money, and we are certainly doing -- we've increased our market share tremendously even over last year, and we've become the go-to shop in the sectors that we bank most heavily.

So, I feel pretty good about where we stand. And as things turn back around and that backlog gets cleared, we'll be in good shape.

Further to what, Jeff's saying, I can't remember a time ever where more people approach us, like almost daily, about joining our platform from all manners and walks of the financial services industry. And we have invested right through this difficult cycle and spent, I would say, many millions of dollars where the revenue is not evident yet, but will be forthcoming.

And we're going to continue to do that, because the consolidation that's going on is likely, if anything, to accelerate unless the environment changes radically. And I think once this election is behind us and we find out exactly what Elizabeth Warren has in mind, that potentially could create a lot of opportunity for us, and we want to be positioned for it.

Last one, actually, just on the Luxembourg transactions. Are there any in the backlog we should expect over the next several quarters?

We continue to look for them, Devin, but there's nothing that we see in the next couple of quarters.

Our Luxembourg business, that was a byproduct of the last one where we actually have a small operating insurance company, has been profitable. We have every expectation we'll finish the year profitable. We also last year went into the aircraft leasing business. This is a very bespoke business, because we're serving government, government agencies. It's small, but it's profitable. We're looking to grow that business. So, there's a lot of investment spending that's going on around here for the future.

(Operator instructions.) Steven Chubak, Nomura.

Good afternoon, guys. This is actually Julian Craitar filling in for Steven. So, my first question is around comp. So, year-to-date, your comp ratio is around -- correct me if I'm wrong -- 62%, and I think last quarter, Steve, I think you were aiming for roughly a 60% comp ratio for the full year. Is that still an achievable target? How should we be thinking about that?

It obviously depends on how the fourth quarter goes. But, as Peter was just discussing a little bit, we are making some investments for the future. We have been approached by a number of people that were brought on the platform. You've seen some of the announcements that we've made. So, anywhere between 60% and 62% for the year seems achievable, but again, it depends on the fourth quarter.

And lastly, just switching gears, I noticed that in priors you typically buy back around, let's say, three to four million shares a year, and so far this year you've repurchased around a little over 1.5 million shares. And your share count actually increased a little bit this quarter because of the vesting of equity awards. How should we be thinking about the fourth quarter in terms of share repurchases? Should we start to see a decent uptick in amount of share repurchases to offset that higher share count? How should we be thinking about that?

I think we've slowed it down in part because the environment is a little bit more uncertain, and obviously we're extremely well capitalized. So, we feel that -- and we have a number of growth initiatives, as I think Peter mentioned, that are on our horizon.

So, the balance we have in terms of buying back stock versus investing in the future of the business is always an artful balance. We've decided, at least this quarter and probably for the foreseeable future, that we're not going to be doing a lot of stock buybacks, but only because we love the fact that we've got the capitalization where it is, and it gives us a tremendous amount of flexibility to invest in new businesses that, longer-term, will drive more growth.

So, it's not to say that we won't. We'll look at it from time to time, and if it becomes ridiculously opportunistic, we'll continue to look at it versus some of the new growth initiatives. But, right now, we're feeling that we have our capital very well deployed to take advantage of some pretty significant long-term dislocations.

Thank you. And I'm showing no further questions on the phone lines at this time. I would now like to turn the call back over to management for closing remarks.

Well, thank you all for dialing in. And as I think you've heard us say, we are investing through this cycle, and are pretty excited about some of the new businesses that we think we're going to be building, or we will be building. And let's hope that this election gets behind us and we get back to some kind of normalized market environment, and volumes improve, and we'll be a beneficiary of it.

But, in any event, the steps we're taking to diversify the business, we believe it's definitely going to pay dividends down the road and give us a much more stable revenue and earnings base.

So, with that, thank you all, Happy Halloween, and everyone get out and vote for somebody.

Thanks, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.