Newmark Group Inc (NMRK) 2018 Q2 法說會逐字稿

Good morning. My name is Shantelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Newmark Second Quarter 2018 Earnings Conference Call. (Operator Instructions)

I'll now turn the call over to Jason McGruder, Head of Investor Relations. Sir, you may begin when ready.

Thanks. I'm doing double duty today. We issued our second quarter 2018 financial results press release and a presentation summarizing these results this morning. You can find these documents at ir.ngkf.com.

Unless otherwise stated, the results provided on today's call compare only the second quarter of 2018 with the year earlier period. We'll be referring to our results on this call only on an adjusted earnings basis, unless otherwise stated. We may also refer to adjusted EBITDA. Please see today's press release for results under Generally Accepted Accounting Principles or GAAP.

Please note that for all periods from the third quarter of 2018 onward, we will simplify our definition of adjusted EBITDA so that the term excludes GAAP charges with respect to allocations of net income to limited partnership units. Therefore, the term adjusted EBITDA will be consistent with what we now refer to as adjusted EBITDA before allocation to units. Please see the section in the back of today's press release for the complete definitions of any such non-GAAP terms, reconciliations of these items to the corresponding GAAP results and how, when and why management uses them.

I also remind you that information on today's call regarding our business that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 as amended in section 21E of the Securities Exchange Act of 1934 as amended. Such statements involve risks and uncertainties. Except as required by law, Newmark undertakes no obligation to update any forward-looking statements.

With regards to references to the proposed spin-off of Newmark on today's call, it is important to note that we cannot provide any assurance regarding when, if, how or whether the spin-off will take place. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see Newmark's Securities and Exchange Commission filings, including but not limited to the risk factors set forth in our most recent prospectus and any updates to such prospectus contained in subsequent Form 10 K, 10-Q or 8-K filings.

I'm happy to turn the call over to our host, Howard Lutnick, Chairman of Newmark.

Thank you, Jason. Good morning and thank you for joining us for Newmark's Second Quarter 2018 Conference Call. With me today are Newmark's CEO Barry Gosin, our Chief Operating Officer, Jim Ficarro; and our Chief Financial Officer, Mike Rispoli.

Newmark had another excellent quarter, generating over 15% revenue growth. Adjusted EBITDA grew by 39%, and posttax adjusted earnings grew by 35%. We continue to make progress towards our planned spin-off, which we intend to complete by the end of 2018.

Due to our upcoming spin-off, we believe that Newmark is trading at very attractive multiples versus its publicly traded, full-service peers despite growing between 2x and 3x faster. For example, at yesterday's close, Newmark traded at 9.2x 2018 price to adjusted earnings versus 16x to 22x for our full-service peers and at 8x 2018 enterprise value to adjusted EBITDA, which compares to 10x to 12x for our full-service peers.

For the full year 2018, we expect our revenues to increase by 19% to 28% and adjusted earnings per share to grow by 22% to 39%. We expect our strong [out] performance to continue into 2019. Given our expected growth, for the full year 2018, the company's board of directors declared dividend for the second quarter of $0.09 per common share. We expect our dividend to remain consistent for each of the four fiscal quarters of 2018.

In addition to returning cash in the form of dividends, Newmark's board of directors double our share purchase authorization to $200 million.

And with that, I'm happy to turn the call over to Barry.

Thanks, Howard. Good morning, everyone.

We once again generated strong top line growth from leasing capital markets, valuation and advisory and global corporate services. Over 80% of Newmark's revenue growth for the quarter was organic. In addition to making a number of high-profile hires, we also recently closed the acquisitions of Jackson Cooksey and multiple Integra Realty Resources offices. In June of this year, we agreed to acquire RKF, and we anticipate this deal to close by the end of the third quarter. We expect these acquisitions to be immediately accretive and to strengthen our platform.

We also believe that we gained further market share in investment sales during the quarter as our revenue growth outpaced comparable industry volume metrics. While capital markets generate the most headlines for the industry, I'd like to highlight that the 67% of our revenues which are recurring were up 27%. We expect Newmark's momentum to continue as we make accretive acquisitions, attract industry-leading talent to our platform as well as well as win new business.

In terms of overall U.S. commercial real estate market, the fundamentals remain strong for office and industrial as employment growth continues and e-commerce expands. Retail continues to be challenging for some owners, but transaction activity for retail properties was strong in the quarter.

Multifamily rents and vacancy rates continue to show improvement, although industrywide U.S. investment sales volumes declined for this property type in the second quarter while the industry was up 8% in the first half of the year. Our multifamily sales volumes were up 12%. Overall U.S. investment sales volumes were up by 2% year-on-year in the second quarter and 4% in the first half, while leasing activity remained strong in many markets throughout the country.

As we have previously said, year-over-year comparisons for Berkeley Point originations are not as meaningful this quarter due to a single $2.2 billion transaction in the second quarter of 2017. Excluding that one financing, Berkeley Point's originations increased by 7%. The timing of loan origination often varies from period to period, which makes full comparisons more useful. Given our strong pipeline of financings, we expect our origination volumes to increase by more than 75% in the second half of 2018, as compared to last year, and for our full-year origination volumes to grow, including the $2.2 billion deal in 2017.

With that, I'm happy to turn the call over to Mike.

Thank you, Barry, and good morning, everybody.

Newmark generated overall revenues of $466.6 million, an increase of 15.2%. Our compensation expenses increased 12.8% to $269 million while noncompensation expenses increased 4.7% to $114 million. The majority of our compensation expenses are variable in nature and tied directly to revenue, while our noncompensation expenses are largely fixed.

Because of the seasonality of commercial real estate revenues, the first quarter generally has the lowest operating margin of the year. This seasonality is typically reversed in the second half of the year, making our third and fourth quarters our most profitable.

Noncompensation expenses for adjusted earnings include our noncash OMSRs as well as the additional $24.5 million of pass-through expense related to ASC 606. Excluding these items, noncompensation expenses for adjusted earnings decreased by 2% in the second quarter of 2018.

In addition, we will record income from our NASDAQ shares in the third quarter of each year through 2027. Based on yesterday's closing stock price, we expect the income from the NASDAQ shares to generate approximately $91 million in the third quarter of 2018. We recently announced transactions related to the monetization of the expected 2019 and 2020 NASDAQ payments. We received $152.9 million of cash from the transaction with no downside risk while maintaining all appreciation above $94.21 on those 1,984,000 NASDAQ shares.

In addition to these monetized NASDAQ shares, we expect to receive an additional 7,936,000 NASDAQ shares worth more than $725 million based on yesterday's closing price. We have clearly demonstrated the ability to monetize these shares with no downside risk while maintaining all of the upside. Using similar math, we can monetize NASDAQ to buy back a significant amount of shares post spin, reduce our net debt to virtually 0 or accretively acquire companies without significant dilution.

Turning to our earnings, our adjusted EBITDA before allocations to units improved by 39.5% to $99.2 million for a margin of 21.3%, which was up by approximately 370 basis points year-on-year. Our pretax adjusted earnings for the quarter were up by 27.9% to $75.5 million while our pretax margin expanded by over 160 basis points to 16.2%.

Our GAAP pretax income declined largely due to the $2.2 billion Berkeley Point financing in the year-ago period and higher grants of exchangeability with the material portion of those grants related to producers extending their contracts. We expect our GAAP earnings to be significantly higher in the second half of the year. This is due in part to our strong pipeline of Berkeley Point financings.

Our tax rate for adjusted earnings was 13.2% for the quarter versus 18% a year earlier. Our tax rate declined due to the U.S. Tax Cuts and Jobs Act. Our posttax earnings increased 34.9% to $65.3 million. Our posttax earnings per share increased 19% to $0.25.

Newmark's fully diluted weighted average share count for the quarter was 258.7 million for adjusted earnings. The GAAP share count for the quarter was lower because GAAP excludes certain share equivalents in order to avoid anti-dilution. The year earlier weighted average share count for adjusted earnings was 228.4 million. Newmark had no statistics for GAAP earnings per share prior to the IPO.

Newmark's fully diluted share count increased mainly due to the first quarter 2018 sale to BGC of approximately 16.6 million newly issued exchangeable limited partnership units of Newmark for $242 million at a price of $14.57 per share. Our fully diluted share count as of June 30, 2018, was 258.9 million shares.

Moving on to the balance sheet, as of quarter end, our cash and cash equivalents were $60.3 million, restricted cash was $315 million, long-term debt was $659.7 million and total equity was $778.3 million. The restricted cash is pledged for the benefit of Fannie Mae and includes an elective excess of approximately $260 million above the minimum required balance. We have chosen to maintain excess liquidity in the Fannie Mae restricted account, as we believe this has a favorable impact on the company's credit profile. We currently expect to withdraw our elective excess capital within 12 months.

The change in cash and cash equivalents since year-end was due to the repayment of $423.5 million of long-term debt as well as our continued investment in the business. Total equity increased largely usually due to the unit sale, NASDAQ monetization, GAAP net income and the previously reported impact of ASC 606.

After the end of the quarter, BGC closed an offering of $450 million of 5.375% senior notes. BGC intends to use some of the net proceeds of these offering to redeem the $112.5 million of 8.125% senior notes due 2042, which were assumed by Newmark in connection with the IPO. These notes are callable at par. BGC expects to lend Newmark the funds to redeem the callable notes, which will reduce Newmark's annualized interest expense by approximately $1.8 million.

We believe that the combination of lower long-term debt, increased total equity and improving adjusted EBITDA has significantly strengthened Newmark's balance sheet and further solidified our credit ratios. For example, on long-term debt to adjusted EBITDA at the midpoint of our 2018 EBITDA guidance range is 1.3x.

As Howard mentioned, we continue to make progress towards our planned spin-off, which we intend to complete by the end of 2018. We are working with the rating agencies to obtain our own credit rating and believe that we have positioned the company to be investment grade. This will allow us to refinance our long-term debt at an attractive interest rate. Separation from BGC is required in order for the spin-off to be tax-free.

With that, I'm happy to turn the call back over to Barry.

Thank you, Mike.

Our outlook is as follows, we expect to generate revenues of between $1.9 billion and $2.05 billion, or an increase of 19% to 28% compared with approximately $1.6 billion last year.

We continue to anticipate our 2018 tax rate for adjusted earnings to be in the range of 12% to 14% versus 18% in 2017. We expect our 2018 earnings per share to be between $1.40 and $1.60 as compared to $1.15 last year, or an increase of 22% to 39%.

We are raising our outlook for adjusted EBITDA before allocations to units to between $500 million and $550 million, an increase of 34% to 47% compared with approximately $374 million in 2017. We expect to update our annual guidance periodically over the course of the year.

Our stock currently trades at a significant discount to our peers based on either price to earnings or enterprise value to adjusted EBITDA. As we continue to grow at our industry-leading pace, we expect our adjusted earnings, adjusted EBITDA, dividends and stock price will all go higher.

Operator, we'd like to open this call for questions.

(Operator Instructions) Your first question comes from Jade Rahmani with KBW.

Wanted to see if you could give any color on where you think you're gaining -- the Newmark brand is gaining the most traction across your various business lines and geographies.

We're gaining traction in pretty much every category. Capital markets has been the fastest trajectory over the last few years. So we continue to hire great talent. We continue to get and win more business. That's doing really well. Our leasing and agency business is up significantly, so all of those businesses are moving pretty nicely.

In terms of the recruiting environment, could you provide any color perhaps on the value proposition that you're offering various brokers and teams to join Newmark? And also if you've seen any trend in the market of various teams choosing to go independent, perhaps to build scale, and then eventually consolidate back into one of the larger players.

Seeing very few people wanting to go get smaller. The world is consolidating. Clients want more from their providers, so the consolidation is continuing, which creates an opportunity for us. We are very attractive because do have opportunities where we can use certain people in certain markets that are not overcrowded, so we're very attractive. We're a very entrepreneurial environment. Brokers like us. We enable and empower the brokers to do more with the stuff we have, and people more and more are very interested in Newmark as a brand to join.

And in terms of the new hires, what's the typical lag period before there's a material impact on revenue production? Is it about six months? And so could you quantify what percentage of your investment professionals are not yet at a normalized revenue basis?

It takes -- depending on the product class, investment sales might take a little longer than 6 months to ramp up as they finish work at their old firms, so maybe somewhere between 6 and 12 months, leasing brokers. On the tenant rep side, probably would take a little longer. On the landlord rep side, probably a little shorter timeline. What you've seen from us is continued investment through 2017 and through the first half of 2018 at a really rapid pace. So we're continuing to invest in brokerage talent and valuation and advisory talent, and you've seen we've grown that business. So all of our, or more than 80% of our growth this year has been organic, and we expect to continue to see that kind of growth from the talent that we've hired over the last 6 to 12 months going forward as well as some of the acquisitions that we've announced and closed.

In terms of the origination guidance of 75% growth year-on-year in the back half, is that particular to Berkeley Point or is that also inclusive of investment sales and non-GSE mortgage banking?

That's particular to Berkeley Point. I can say that we started off the quarter really well. We rate locked on about $1 billion -- on $1 billion -- approximately $1 billion worth of loans to Berkeley Point. We have visibility into a pretty good back end.

Okay. And just lastly the guidance, just wondering if you could give any color what drove the increase in adjusted EBITDA guidance, but C revenue and adjusted EPS were unchanged.

Yes. There's a little bit of a mix difference in terms of the revenue for the year, so we have some higher margin revenues replacing lower margin revenues, which are driving our earnings up. As you know, we've added more shares through the year, primarily as a result of the BGC investment at $14.57 per share in the first quarter. And when you put all that together, it keeps our EPS in the same range but drives up our earnings.

Your next question comes from the line of Alexander Goldfarb from Sandler O'Neill.

Just a few questions here. First, can you just walk us through the intercompany loan that BGCP is going to be lending money to Newmark, what the rate is? And then also just if the whole idea of financial separation is truly financial separation to get a tax-free spin, why wouldn't Newmark pursue its own independent debt options? I mean, you could get a private issuance. You could do other things that are solely under Newmark rather than perpetuating the link between the two companies.

Sure. So there was an opportunity to get rid of some high-yield debt which is at 8.125%. BGC typically loans at their cost of capital plus 1% to Newark. So Newmark will save probably 160 basis points, close to 160 basis points. It may be for a short period of time.

And what's your...

I'm sorry, Alex?

What is the absolute rate that we should think about for that loan?

It'll be around 6 1/2% versus the current 8.125%. And you're right, Newmark is in the process of replacing -- getting its own debt and its own credit rating, so it will be for a short period of time. But we saw an opportunity to reduce our interest expense, and we took that opportunity.

Okay. And then if we go and just look at your results this morning, I mean, on an operations basis, if it -- basically it seems like if it wasn't for the compensation and unit grant add backs, you guys would've been well below the street and us. So can you just walk us through sort of the P&L, what's going on? And then with all this hiring, are you guys just doing a lot of big, upfront contracts that are hitting and you're not getting the revenue or -- it just seems like comp expense is outpacing the revenue production. But if you could just walk through because, again, looking at the P&L, it looks like if it weren't for the add-backs, you guys would have missed.

Yes. Remember on the exchange charges, there was some benefits to that, namely, it keeps our effective tax rate down between 12% and 14%. These are shares that are already in the share count, so it's already in our fully diluted share count, and we grant exchangeability to those partnership units over time. We fully expected those grants to go up as our earnings go up so that we can keep our tax rate low.

Just to be clear, when we issued shares to our employees over the years when the stock was $6 at BGC and $7 and $8 before the spin, those shares, when they exchanged them at the BGC equivalent of $11 or the Newmark equivalent of $14, that is significant appreciation. We get the tax deduction, but it costs us no money, right? When we issued the shares, the shares went in the share count, so this is not cost. That appreciation keeps our tax rate down, but it does not cost us more money, and that's the key. The cost of exchangeability, the cost of my employees selling their units and shares, does not cost the company more money. That is the key. A regular company that issues RSUs, the appreciation the employees get, capital gain, and the company gets no deduction. At our company, the employees get ordinary income and the company gets a tax deduction, so that is what -- that structural change keeps our tax rate down, right? It makes it look like our GAAP earnings are lower than they actually are, and that's why our EBITDA is so strong and continues to grow. So as you get experience with the company, you're going to see that the way you've described it was just -- it's because it's new and it's just lack of experience -- what you're going to see is the appreciation of the stock. It does not cost the company money. If the stock doubled, all the unit holders who had it now, they would be -- if we let them sell their shares, there would be a huge tax deduction. It would look like a huge exchange charge, but all that happened is the stock went up, the company got a huge tax deduction. But it didn't cost the company any more money because these shares are already in the share count. They are already in the share count, and as you get more comfortable with the company, you'll understand that the way you said that we had some sort of miss because our stock appreciated over the last couple of years, you'll realize we did not issue more shares. It was not additional comp charge. You will become comfortable with just not -- just ignoring those exchange charges because those are primarily driven by stock appreciation.

Right. Howard, I appreciate that, but I mean, I'm looking on the screen, the stock's up 4 1/2%, so it's not just me. I mean, the market, I think, looked at the P&L this morning and had a similar reaction. So I think -- look, as the earnings grow and the top line grows, that's a positive, but I think when you see that it's add backs that allowed for the company to meet earnings, that's a tougher situation to write up. It's much easier for analysts to write up that, hey, top line beat. Their revenues exceeded our expectation. Those are the type of headlines I think that you'd rather read and that would drive the stock. But if I can just ask one final question, in your comments in the press release this morning, it said that you guys intend to have the spin done by the end of 2018 and appreciate the timing. And then just curious, the "intend," is that just sort of a generic sort of safe harbor "intend" but the view is that you want to get -- you'll have it done sooner? Or are there some issues with getting the investment-grade rating that make you say, look, we're hopeful to get it done by the end of 2018, but it actually may slip.

There are no issues that we know of. We are just saying things take time, and we expect or we intend to get it done by the end of the year, and -- but we're working hard on it, and if it can be done sooner, of course, it will be done sooner. We don't know of anything that would lead us to think otherwise.

(Operator Instructions) Your next question comes from David Ridley-Lane with Bank of America Merrill Lynch.

Curious on the intra-quarter acquisitions that were announced. If you don't want to go or give sort of financial details on each one, I can understand that. But any help that you could give us in sort of quantifying and sizing maybe the aggregate impact of the announced acquisitions this quarter?

David, we haven't been disclosing the revenues from the acquisitions that aren't overall material. I think we have disclosed the number of brokers that are at each of these companies in some of the press releases. So we're adding 50 to 100 brokers and a tenant rep in a Texas firm and another probably close to 100 brokers in retail across the country. But I think the bigger story here is, as we've done with our other acquisitions, we have the ability and a plan to really grow those businesses, and we fully intend to do that.

We will take your question under advisement, and we will study whether it's a good idea that at each quarter when we come out with those costs to give you scale and scope, so we'll take that under advisement and take a look at that.

Sure. And then on the gains from mortgage banking and your view on the back half, what does that kind of suggest, your market-wide view, if you will? What are you embedding in terms of the industry assumption there?

We see the pipeline, we see the applications, the amount of origination, the amount of sales, what's going back and forth, and we feel good about what we have in the pipeline. So many of the things that we instituted with the purchase of Berkeley are starting to bear some fruit.

And as you know, Fannie got off to a little bit of a slow start this year. They started to pick up the originations in the second quarter, and they always want to hit their cap. Both Fannie and Freddie want to hit their caps for the full year, so we're seeing a lot of activity in the market.

Your next question comes from the line of Henry Coffey with Wedbush.

(technical difficulty)

To all the exciting questions, but a very interesting quarter. So you made the comment -- and just correct me if I've got this wrong -- that 75% of your growth was organic. So should that -- should I focus just on the revenue number and say, okay, so the revenue increased year-over-year $62 million. 75% of that is about $45 million or $46 million, and the rest was acquired over the last 12 months? Is that the appropriate way to think about it or should I be just measuring it in a different way?

Yes, I think that's generally correct. We did say that over 80% of our growth in the quarter was organic.

Oh, it was 80%. I'm sorry. I got that wrong. Okay. That's easy to fix.

So but your math is correct, yes.

And then in terms of understanding the share count, especially as the business grows and you recruit more people, etc., etc., right now it's 258.7 million and the end of period share count using the same math was about what? That's a question.

It was about the same. It was within a very small amount, 258.9 million.

Okay. And then in terms of forward growth on that, I know you've increased your buyback, but at what point -- you're issuing equity, so you're not buying back stock. So what is the trigger for you actually to think about buying back stock or is that number, that 258, going to keep growing every quarter as you recruit employees and other factors that drive that number higher?

Yes. As far as the buyback, we will look at that post spin in that regard, but I'd like just to address one point from prior. Just keep in mind on our comp line as -- if stock appreciates, we receive -- the company receives a tax deduction for that value. It's a noncash expense, but it is a tax deduction, which benefits the entire group. As far as the buyback, again, we're going to consider that strongly post spin.

So on that issue, that add back that you're -- the expense add back related to the -- is it simple for me to look at it and to say, well, it's really just the equivalent to what a lot of the West Coast companies do with stock compensation expense. It just has a different dynamic and different accounting, but the same basic issue that you're recognizing a stock grant and converting that. The only difference between stock compensation expense and this is that you've already done the capital add, and so it's really just recognizing a "stock-based" form of compensation. Is that -- because there's no share issuance, there's no change in paid-in capital, etc.?

That's okay, but it's actually more positive than that, which is we book in our adjusted earnings compensation according to GAAP without exception. So basically that means if we gave an option, we would take it from our adjusted earnings. When we give equity, we amortize it according to GAAP without exception, right? What happens is because we issue the equity in the form that we do, when that stock appreciates, that appreciation creates -- just the appreciation, not -- so if we gave someone $1 million worth of stock and they signed a five-year contract that amortizes it over the five years, that's $200,000 a year. There's nothing -- and that's in our adjusted earnings, but if that appreciated, right?

If that unit appreciates in value, you get a charge and you also get a tax deduction.

Exactly right. So it makes it look like we've earned less when we, of course, have not. It gives us a tax deduction so we pay less taxes, which is a benefit to us. But so that the idea -- of course that five-year example is just a simple hypothetical, but the idea is we take our compensation according to GAAP without exception, and it's not -- and we're not bleeding out our compensation from adjusted earnings. That would not be true. But the company has had dramatic growth and dramatic appreciation for our employee partners. And when they sell some shares, we get a huge tax deduction, and we've set it that way so we would get a tax deduction. But it also looks like a GAAP -- because it is compensation, it's a GAAP charge, so that's why we say our exchangeability charges are noncash, nondiluted, noneconomic. They have no...

No, no. I get it. I get it. I get the concept, I just want to make sure, like -- and that's going to be always a volatile item depending on where the shares are and what employees are doing, etc. and then the add back --

That's right.

Will be -- now it looks like the add back's about 93% of the actual charge, and that's what it's going to always be.

Yes. You've got the point. It'll be volatile, and you understand. Yes.

Your next question comes from the line of Jade Rahmani with KBW.

I appreciate the disclosure you give about operating cash flow excluding the GSE businesses because I know the timing of deliveries of those loans can be volatile. Just wanted to make sure, were there any seasonal working capital adjustments that would've caused cash flow to be outsized because it was pretty close to adjusted earnings, which is a positive validation of the way you define earnings.

Yes. I think that's exactly right. If you remember in the first quarter, there were some working capital uses. In the second quarter, it's basically our adjusted earnings less what we've invested or reinvested back into the business to continue to grow. So I think you're exactly right.

Okay. And then just turning to the M&A pipeline, wanted to ask if you could make any comments about what you're seeing in terms of deal flow, if there's still an attractive pipeline of deals that you're looking at.

Well, the pipeline is robust. If you remember, we talked about appraisal and valuation. We hired 1 person about 2 years ago, maybe 1.5 years ago. We now have 400 people in our appraisal business. The way we've done everything is by hiring the right leader who's a Pied Piper. We then are able to expand that platform geographically by other disciplines. So in appraisal, we have hotel, we have health care and they're all part of this assemblage of a monumental appraisal business. Now the acquisition of RKF comes with leadership with the same conceptual framework and the Pied Piper effect, so it will not only be accretive to us instantaneously, but it'll be more accretive to us because what we've done is connected with the acquisition's #1 retail broker in New York. We hired the #1 person who's attractive to other smaller platforms around the country and we -- so there we now have another lane to travel in. And pretty much everything we've done, including the hiring of the Boston team, Rob Griffin, and then the Shannon team on the West Coast and then the team in Northern California. And we're working our way around the country food group by food group, discipline by discipline, person by person. This is heavy lifting. And I would say the combination of acquisition of companies, the acquisition of talent, the expansion of types of businesses, the opportunities that hit us is accelerating.

Okay. Thanks very much. And just lastly, if the stock hypothetically were to stay in the current range, what would the tax rate be in 2019?

We obviously haven't given guidance beyond 2018, but our expectation is that we would keep the tax rate in about the same range.

(Operator Instructions) There are no further questions at this time.

I'd like to thank everybody for joining us. Look forward to speaking again.

This concludes today's conference call. You may now disconnect.