' CEO Discusses Q1 2014 Results - Earnings Call Transcript

Apr.30.14 | About: HFF, Inc. (HF)


Q1 2014 Earnings Conference Call

April 29, 2014 6:00 p.m. ET


Myra Moren – Director, IR

Mark Gibson – CEO

Greg Conley – CFO


Mitch Germain – JMP Securities

Brandon Dobell – William Blair & Co.

Jim Fowler – Harvest Capital


Good afternoon and welcome to HFF, Inc.'s First Quarter 2014 Conference Call.

[Operator Instructions]

I would now like to turn the call over to your host for today, Myra Moren, our Director of Investor Relations. Please go ahead.

Myra Moren

Thank you, and welcome to HFF Inc.'s earnings conference call to review the company's operating performance and production results for the first quarter 2014.

Earlier this afternoon we issued a press release announcing our financial results for the first quarter. This release is available on our Investor Relations website at hfflp.com. This conference call is being webcast and is available on the Investor Relations section of our website, along with a slide deck you may reference during our prepared remarks. This conference call is also being recorded.

Please turn to Slide Number 2 labeled Disclaimer and the reference to forward-looking statements. This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future growth momentum, operations, financial performance and business outlook. These statements should be considered as estimates only and actual results may ultimately differ from these estimates. Except to the extent required by applicable securities laws, we undertake no obligation to update or revise any of the forward-looking statements that you may hear today.

For a more detailed discussion of risks and other factors that could cause results to differ, please refer to our first quarter 2014 earnings release filed on Form 8–K, and our most recent annual report on Form 10–K, all of which are filed with the SEC and available on their website at www.sec.gov.

We may make certain statements during today's call which will refer to a non-GAAP financial measure, and we have provided a reconciliation of this measure to GAAP figures in our earnings release.

With that in mind, I'll introduce our senior management team. Conducting the call today will be Mark Gibson, our Chief Executive Officer, and Greg Conley, our Chief Financial Officer.

I'll now turn the call over to our CEO, Mark Gibson.

Mark Gibson

Thank you, Myra. Good evening everyone and welcome to the review of our first quarter 2014 results.

Before we get started, I would like to take a moment to thank John Pelusi for his tireless effort and energy in serving the firm, our clients and shareholders as CEO since our IPO in 2007.

As you have seen from our press release, HFF had a great start to 2014 with a very strong first quarter performance. We delivered over 40% growth in both transaction volumes and revenue, increased net income by approximately 60% and adjusted EBITDA by approximately 72%, as well as improved our adjusted EBITDA margin from 12.7% to 15.6%.

Our total revenue for the quarter increased to $76 million, which is the highest first quarter revenue reported by the company. It represents an increase of $21.8 million or 40.2% from the first quarter 2013 revenue total of $54.2 million.

The company's transaction volumes for the first quarter totaled approximately $10.7 billion, a 40.7% increase over first quarter 2013 volume of approximately $7.6 billion. This increase was led principally by a 72% increase in investment sales transaction volumes, comparing favorably to the 15% increase in total U.S. sales volumes in the same time period as reported by Real Capital Analytics.

We continue to maintain a strong balance sheet, with a cash position of over $104 million as of March 31, 2014, and no corporate level debt. As we have previously reported, maintaining a strong balance sheet is a key objective for the firm and requires the maintenance of significant cash reserves to ensure the firm has the flexibility to grow regardless of the prevailing economic environment.

Once those reserves have been established through our previously described philosophy on maintaining cash reserves, and given the firm's partnership owner mentality, it will be the intention of the firm to return capital to shareholders as we did on February 6, 2014 when we made a $68.2 million dividend payment to shareholders as well as a $56.3 million dividend payment in December of 2012, totaling $124.5 million in dividend payments to our shareholders. Any future return of capital to shareholders will be subject to the approval of both the HFF Executive Committee and HFF's Board of Directors.

As stated in our earnings release, our clients continue to embrace HFF's business model, which is singularly focused on being the best capital markets intermediary in the U.S. We have unswervingly adhered to our core guiding principles of placing our clients' interests ahead of our own and maintaining a platform that does not compete with the interest of our clients. By embracing a player approach leadership style by the firm's leadership, it's actively engaged in generating revenue for the firm through originating and executing real estate transactions. By retaining a partnership mentality of employee-owners versus employees, which is illustrated by the fact that HFF employees own more than 20% of the outstanding Class A common shares of HFF. By pay-for-performance compensation structure which greatly aligns the interests of HFF's leadership for the performance of the firm through our office and profit participation plan. And finally, by an intense focus on maintaining an exceptional team-oriented, merit-based culture which aligns the firm's to our clients' and shareholders' best interests.

We believe these guiding principles allow the firm to recruit best-in-class individuals in the form of recent college graduates and also experienced industry professionals. Since January 1, 2010 we have grown our total headcount, up 278, representing a 74% increase, and we have grown our total transaction professionals by 101, representing an increase of more than 63%.

Over the past 12 months we have grown our headcount by more than 10% to a total of 654 associates and our transaction professionals by approximately 8% to a total of 260. The growth in our production ranks is fairly well-dispersed as we had the transaction professionals through both promotion and outside recruitment in 16 of our 22 offices. We remain highly-focused on maintaining the firm's team-oriented culture by adhering to the aforementioned principles in order to continue to attract and retain best-in-class individuals to HFF.

We strongly believe the results generated by HFF for the first quarter and since the firm went public are directly attributable to the incredibly talented group of individuals which comprise the HFF team.

I would now like to turn the call over to Greg Conley who will report on our financial and operational results in more detail.

Greg Conley

Thank you, Mark. I'd like to go through our financial results for the first quarter of 2014. This information is also noted on slides 4 through 12 in the PDF material referenced earlier.

If you please turn to Slide 4. This provides the highlights of our first quarter 2014 performance. As Mark stated, we had a very strong start to 2014. We delivered improvement in revenue, transaction volume, our EBITDA and operating margins, and we continued to maintain a strong cash balance. In addition, our revenue base, spread over a diverse client base, as no one borrower or seller-client represents more than 1.8% of our capital market services revenues.

My next comments relate to Slide 5. As you can see, revenue for the first quarter of 2014 was $76 million, compared to $54.2 million in the first quarter of 2013, representing an increase of $21.8 million or 40.2%. In addition to the increase in transaction volumes, revenue gains can also be attributed to the productivity gains realized from the transaction professionals added over the past few years, which has been consistent with our strategy objectives.

The company had operating income of $3.8 million, compared to the first quarter of 2013 which has an operating loss of $100,000, for an increase of $3.9 million. The operating margins from the first quarter of 2014 was 5%, which is an increase of 520 basis points compared to a negative operating margin of 0.2% for the same period in 2013. This increase in operating margin for the first quarter is attributable to the 40.2% increase in revenues and the improved operating leverage achieved by the companies.

It is also important to note that, given the typical seasonality of our business, the first quarter of the year is generally our weakest quarter relative to revenue and financial performance. As a result, the increased operating cost had a disproportionate impact on our first quarter operating income and adjusted EBITDA margins due to the smaller first quarter revenue base. We had seen the same pattern in most of the prior years since our initial public offering in 2007.

Cost of services increased $11.2 million in the first quarter of 2014, or 32.2%, as compared to the first quarter of 2013. These increases are primarily attributable to the increase in commissions and incentive compensation directly related to the increased revenue, as well as an increase in a portion of the fixed cost component which is primarily related to an increase in salaries and other payable related expenses associated with the increase in headcount of 60 associates.

Cost of services as a percentage of revenue is 60.6% for the first quarter of 2014, compared to 64.3% for the first quarter of 2013. Cost of services as a percentage of revenue decreased for the quarter as we were able to spread the increased fixed cost component, as I mentioned earlier, which is primarily related to an increase in salaries and other payable related expenses associated with the increase in headcount, over a higher revenue base, which is another illustration of the increased operating leverage achieved by the company.

Operating, administrative and other expenses have increased by approximately $6.2 million from $17.9 million or 33% of revenue in the first quarter of 2013, to $24.1 million or 31.7% of revenue in the first quarter of 2014. The increase in these expenses is primarily attributable to a $5.2 million increase in personnel expenses related to an increase in incentive-based compensation expenses, including our office and firm profit participation plan expenses, and increased stock compensation expense of approximately $2.2 million, which was primarily related to an increase in the mark-to-market adjustment on liability-based stock awards, which awards fully vested as of March 1, 2014.

Additional cost increases relate to an increase in office-related costs and certain other discretionary expenses such as travel and entertainment, and other operating expenses due to increased production activity. Please note that the decrease in these margins from 33% in the first quarter of 2013 to 31.7% is another illustration of the improved operating leverage achieved by the company.

Interests and other income net decreased $1.3 million for the first quarter of 2014 compared to the first quarter of 2013, primarily due to the decrease in other income related to our Freddie Mac Program Plus Seller Servicer business.

Income tax expenses for the first quarter of 2014 increased by approximately $1.8 million compared to the first quarter of 2013, primarily as a result of a $3.2 million increase in pretax book income. The company's effective tax rate for the first quarter of 2014 is approximately 41%.

The net income attributable to Class A common stockholders for the first quarter of 2014 was $3.7 million or $0.10 per diluted share, as compared to net income of approximately $2.3 million or $0.06 per diluted share for the first quarter of 2013, which represents an increase in net income of approximately $1.4 million or $0.04 per diluted share.

The company's adjusted EBITDA for the first quarter of 2014 increased $5 million or 72.5% compared to the same period in 2013. Our adjusted EBITDA margins came in at a 15.6% for the first quarter of 2014, which is an increase of 290 basis points over the adjusted EBITDA margins through the first quarter of 2013.

Please refer to slides 6 through 9 as they relate to my next comments regarding balance sheet and liquidity related items.

As Mark stated, we continue to maintaining the strong balance sheet as the company's cash balance on March 31, 2014 was $104.8 million, compared to a cash balance of $201.3 million at December 31, 2013, representing a decrease of $96.5 million. A significant portion of the decrease in cash is related to the $68.2 million special dividend payment declared by our Board and made to the stockholders of our Class A common stock on February 6, 2014.

The company's use of cash is typically related to the limited working capital needs during the year and the payment of taxes. The company has virtually no corporate-level debt to service other than that related to our Freddie Mac business, which is offset with the mortgage notes receivables.

During the first quarter of 2014, the company's net cash used in operating activities was approximately $22.5 million, which is typical of past patterns where we typically have cash used in operating activities in the first quarter. The net use of cash during the quarter was primarily driven by the decrease in working capital due to the payment of compensation items, including our performance-based awards related to 2013 and accrued for in the balance sheet at December 31, 2013.

This decrease in working capital related to the compensation and performance-based accruals is illustrated on the balance sheet as the balance in the liability line item titled Accrued Compensation, Accounts Payable and Other Current Liabilities decreased over $40 million from December 31, 2013 to March 31, 2014. The net use of cash from investing and financing activities net after consideration of the $68.2 million dividend payment was approximately $5.8 million.

I would like to make a few comments regarding our production volume and our operational measurements noted on slides 10 through 12.

As noted on Slide 10, our production volume was up 40.7% and our average transaction size is up $3.7 million or 13.6%. As Mark previously mentioned, the increase in transaction volume is driven by the 72% increase in investment sales transaction volume. Investment sales transaction volumes increased to 44.2% of the total transaction volume in the first quarter of 2014 from 36.1% in the first quarter of 2013. The total number of transactions increased by 66 or 23.8% and the company's loan servicing portfolio increased 9.8%.

Slide 11 provides the historical summary of our headcount and also the first quarter 2014 comparison to the first quarter 2013. Again total headcount, number of producers as of March 31, 2014 is up 10.1% and 7.9%, respectively, over the past 12 months.

Slide 12 provides a summary of certain production and operational measures. Please note that the revenue per producer is up approximately 30% for the quarter and up 19% for the trailing 12 months.

In summary, the company had a very strong start to 2014 and a solid operating performance for the first quarter of 2014, particularly when considering that we continue to make strategic investments in our business consistent with our growth strategy. The company's strong operating performance was likewise reflected in our improving operating margins in the first quarter of 2014, despite the increase in operating costs to support the increase in headcount and business activity.

We continue to believe that we have a very efficient and strategic as it relates to our management of expenses, and any incremental increase should have minimal impact to our bottom-line results of a full year-over-year comparative basis, provided the market continues to expand and we continue to experience revenue growth consistent with the investments we made in our business.

I'll now turn the call back over to Mark for his comments on the industry. Mark?

Mark Gibson

Thank you, Greg. Turning our attention to the commercial real estate industry in general, we will briefly comment on some key industry metrics.

As illustrated on slides 15 and 16, Real Capital Analytics reported total transaction volume of $87 billion for the first quarter of 2014, as compared to $76 billion for the first quarter 2013, an increase of 15%.

Total volumes for fiscal year 2013 were approximately $360 billion, for a 19% increase relative to 2012 volume of $300 billion. Of note, the 2013 total volume represents a decline of approximately 37% from $574 billion reported in 2007. The 2013 transaction volume closely resembles the production volume reported in 2005 of $363 billion.

On a comparative basis, HFF's 2013 investment sales volume has increased 52% since 2007 and 241% since 2005. Of particular interest to HFF are the recorded AUMs of those that closed-end and open-ended fund market on slides 17 through 19. As you will note, the closed-end fund market AUMs for yearend 2012 was reported to be $335 million, up 50% from the 2007 AUM total of $223 million. And the open-ended fund market reported total 2013 AUM of $134 billion, up 20% from the 2008 AUM total of $112 billion.

As illustrated on Slide 20, over 50% of the investors active in the closed-end fund market have an average hold period of less than five years. When these increased AUM statistics are combined with $1.4 trillion of loans maturing over the next three years, as seen on Slide 21, it would appear a good foundation exists for the industry in general.

As noted on Slide 22, the volume has been largely concentrated in 20 markets across the U.S. and has followed the long-term trend lines of major to non-major markets clearly illustrated on Moody's data on slides 23 through 25. We expect capital flows to continue this long-term trend into the near future whereby more capital will be looking to invest in non-major markets due primarily to the competitive pricing currently being experienced in major markets and relative yield premiums which can be achieved in non-major markets presently as illustrated on Slide 26.

Of particular note, capital is highly focused on sustainable job growth and geographies, offering a solid foundation for business expansion to determine the city state in which to invest. As a result of this analysis, we have witnessed both foreign and domestic capital shifting larger allocations to non-major markets, and in past years, based on the conclusions of the future economic health of certain regions and cities. It should be noted, the aforementioned higher allocations to non-major markets are on the margin and do not represent a significant change from past cycles. Investors remain focused on the liquidity in any given market, and therefore the velocity of trade [ph] in a given market is a key underwriting metric.

In general, capital remains pinnacle [ph] for both the equity and debt commercial real estate markets. On the equity front, commercial real estate compares favorably on a risk-adjusted basis relative to other competing asset classes. As a result, the industry is witnessing increasing allocations to commercial real estate in virtually every genre of equity investor.

As noted on Slide 27, according to a Cornell study, the institutional investor market is increasing its allocation to 8.7% and remains approximately 90 basis points under-invested. Foreign investment in the U.S. is also very active despite FERPA [ph], as is shown on slides 28 through 31. And finally, the public REIT and the unlisted REIT market continue to have access to capital to invest.

From a debt perspective, the vast majority of insurance company lenders increased their allocations to commercial real estate in 2014 and view commercial mortgages favorably relative to other fixed income alternatives. Likewise, the commercial bank market is actively increasing its real estate outstandings. And finally, the CMBS market remains very active as well. HFF is encouraged by the diversification of the buyers of CMBS bonds, noted in Slide 32, as well as the increase in the number of B-piece [ph] buyers.

A final point on the general real estate market relates to the pricing of real estate. As previously stated, capital flows to U.S. commercial real estate remain good. It is our view that capital availability is key to transactional volume. Pricing is determined by several factors including the cost of capital, inventory levels of assets for sale, the view of the U.S. economy, replacement costs, supply of new product to the market, etcetera.

As illustrated on slides 33 through 36, many investors believe the returns generated through total return compression have largely been achieved and therefore future returns will be dependent on the fundamentals or NOI growth. Therefore, their buy side underwriting metrics are reflecting the same [ph].

Finally, I would like to add that while interest level from investors, owners and lenders and commercial real estate as an asset class remain good, we are always mindful of macro events which could have a significant impact on the real estate industry in general and transactional volumes specifically should they occur. Those events generally take the form of the overall macroeconomic health of the U.S. economy and foreign geopolitical issues.

In closing, our successes are directly tied to our clients and therefore we would like to thank each of our clients who continue to show their confidence in our ability to create and execute viable solutions for them, as evidenced by the 344 separate transactions, representing approximately $10.7 billion in transaction volume consummated during the quarter. Just as important, these results are a testament to our associates as well, and therefore we would also like to thank each of them for providing superior value-added services to our clients.

Operator, I would like to now turn the call over to questions from our callers.

Question-and-Answer Session


All right. [Operator Instructions]

All right. It looks like we do have a question coming in from the line of Mitch Germain with JMP Securities. Please proceed.

Mitch Germain – JMP Securities

Good evening. Congrats on the first call, Mark.

Mark Gibson

Thanks, Mitch.

Mitch Germain – JMP Securities

Just curious how the transition to the CEO role has been and how are you with regards to scheduling your time between clients and corporate needs.

Mark Gibson

It's a very good question, Mitch. As we have stated previously, we've had an executive committee for many years comprised of myself, Joe B. Thornton, John Pelusi and John Fowler who have steered the company both strategically, in setting the strategic plan as well as setting the focus of our growth strategy together. So in terms of operating the business for the strategy that we've embraced, there has been really no changes, as we have collectively done as a partnership for quite some time.

In respect to the balance of time between corporate and client, as you will note in our previous press releases, we have increased the number of voting members to our executive committee by four individuals, which has allowed us to diversify the needs and operations of the company across a broader spectrum of people. And in addition, we promoted seven non-voting members to the executive committee, both for succession purposes as well as education and other operational issues facing the company as we continue to grow.

That has really allowed me to balance very effectively the needs of the corporate duties as well as maintaining the same time with our investors and clients across the U.S.

Mitch Germain – JMP Securities

Great, I appreciate the answer. With regards to Philly, I guess there was a press release out that you've begun the process of staffing up the office. And if you could provide some insight where that stands right now, I'd appreciate it.

Mark Gibson

Mitch, with every office that we start, it's really dependent upon the leaders in that office and the ability to attract and retain best-in-class individuals to the platform. So we have made some announcements that you have seen in terms of individuals that have reacted very favorably to HFF opening of Philly office, and we have brought them onboard in a fairly short timeframe as a result of the leadership we had in Philadelphia.

Mitch Germain – JMP Securities

Do you anticipate similar hiring levels in 2014 versus the 2013?

Mark Gibson

As you know, Mitch, we don't give any guidance going forward, and that would be very difficult to predict. We have extraordinarily tough hiring standards and expectations. And to the extent that we are able to find individuals that meet those standards, we are -- we would be very interested in increasing. But to the extent that we don't, then we're not growing for growth's sake.

Mitch Germain – JMP Securities

Great. Maybe last question, for Greg, that $2.2 million of stock comp, that's fully -- that goes away, is that the way to look at it?

Greg Conley

Well, no, there's two ways to look at this, Mitch. As you know, that's been kind of a lumpy number for us quarter to quarter since we granted those awards back in the end of 2010, because we had to mark those to market because of certain conditions placed on those. And last year, as you know, if you look at the full year 2012, we had $8.3 million in stock comp expense. It affects operating income but not adjusted EBITDA because it's an add-back for adjusted EBITDA purposes. But the majority of that number last year in '12 was related to that mark-to-market awards because of the runoff in the stock price last year.

So going forward, the majority of that $2 million increase in the first quarter that's related to the mark-to-market awards, they are now going to come off. You're not going to see that expense coming through any longer. But as you know, on January 30, we granted 750,000 shares to those who were adding value to the firm, and it was based on a review over a period of time. And that has a five-year vesting schedule to it. But this one won't be under the GAAP requirement of mark-to-market accounting; it's going to be amortized on a straight-line basis. And the expense that we anticipate coming through on a quarterly basis is about $1 million.

So if you're just looking at 2013 expense compared to what is going to be fully amortized on a straight-line basis in 2014, you'll see a slight decrease in that number.

Mitch Germain – JMP Securities

Right. Thanks guys.

Mark Gibson



All right. So it looks like you have another question. The next question comes from the line of Brandon Dobell. Please proceed.

Brandon Dobell – William Blair & Co.

Thanks. Afternoon guys.

A couple of ones to focus on Greg for a second. I think in the deck you guys referenced variable costs now I think in the 56% of revenues. Could you give us a sense of what you guys consider to be variable cost versus fixed costs?

Greg Conley

We consider our variable costs -- and we disclose that in the liquidity section of Q and the K, Brandon, for your reference -- but we consider the variable costs to be our commissions and incentive comps that are directly variable on a revenue perspective to the -- directly variable to the revenue, and then profit participation which is variable to the income of the company.

So, you know, it's -- they're variable but two different -- two different metrics.

Brandon Dobell – William Blair & Co.

Got it.

Greg Conley

So when you look on a year-to-year basis, since 2010, our -- that variable cost as a percent of revenue has been increasing. And again it's due to the operational efficiencies that we've been gaining. Last year we ended the year in 2013 with that number at 65.9%.

Brandon Dobell – William Blair & Co.

Got it. Okay. And others, an awful lot of noise these days around the agencies and given your exposure to some of the seller servicer stuff and how it gets rolled into the P&L. Any sense of how other income line is going to look this year relative to last year? I know it's not as important thing for the adjusted EBITDA number, but trying to get a sense of how much it came move around compared to what happened last year with the agencies for you guys [ph].

Greg Conley

Well, I mean my first comment to that is it's hard to give you an expectation going forward because we don't give guidance. So I'm not going to be able to give you that.

But as you know, through the news, there's a lot of different things going on with the agencies and rumors that occur through press releases, and last year the agencies had shifted philosophies in how they're going about generating business for -- on the commercial real estate side, and it's impacted those that do business with the agencies.

For us, I think I'd like to add this, that we're diversified in that, in our multi-housing business, the agencies only represent one of many financing sources for us. And while it has an impact in the other income line, to a certain extent it doesn't necessarily impact our multi-housing business as it relates to how we finance those loans.

Brandon Dobell – William Blair & Co.

Okay. Maybe it's more operational focused, Mark, as you guys think about the office footprint, is there an optimal size of -- I know that question varies with the size of the market, markets it may serve, but just from a kind of a headcount perspective, is there a point where you feel, all right, this is -- we've got too many people in here, so, managing the up-and-coming producers is becoming too much of a time bandwidth issue for the more experienced people, or is there a point at which an office really starts to hit its productivity or profitability curve? I guess we're just trying to figure out kind of looking across the office footprint, you know, where we should expect you guys to add headcount, and what kind of impact it may have on our overall profitability.

Mark Gibson

Brandon, that's a good question. To answer it specifically, we do not have a certain number that we are achieving. Rather we have a strategic plan that we have consistently adhered to since we've gone public, even before that. We would like to establish all of our business lines and product lines within each office in the system.

At present we have approximately three offices that contain a full arsenal of our product lines and business lines. So we have quite a bit of woods chopped ahead of us, in order to build out the platform to contain all of our business lines and product lines, in the markets that we serve. There are clearly some markets from a population and inventory level and velocity trade level that would not warrant all of our business lines. But for those that do, we are keenly focused on doing that.

Brandon Dobell – William Blair & Co.

Okay. Okay. Within the quarter, was there any larger transactions or portfolio deals either on the debt side of the investment sales side that were worth calling out that we should keep in mind as we're trying to model either productivity or average transaction size going forward?

Greg Conley

There is not, Brandon. If there were, we would have called it out on the earnings release. So, at least this quarter, there weren't. Clearly last year we had that in the third and fourth quarter. It was worth calling out from a comparative purpose.

Brandon Dobell – William Blair & Co.

Yes, got it. I just want to make sure. All right. Thanks guys. Appreciate it.

Greg Conley

Thanks, Brandon.


All right. So it looks like you have another question or two coming from the line of Jim Fowler with Harvest Capital. Please proceed.

Jim Fowler – Harvest Capital

Good evening, gentlemen. Thanks for taking the question. Two actually. The first is the equity placement channel didn't exhibit any seasonality. In fact it was up sequentially and up notably year over year. Can you comment on why that didn't -- doesn't show seasonality similar to the other two channels?

Mark Gibson

Jim, it's Mark. I really -- I don't have an answer for it. That business line is really important to the firm. But I don't have any rationale that I could convey to you regarding seasonality.

Jim Fowler – Harvest Capital

Does it -- I know you don't guide, and the next two are probably going to elicit that response, but let me try it. The investment sales line, you know, excellent year-over-year growth, I'm wondering, as you sit here today, do you see anything, I mean as you're building out offices, etcetera, and the backdrop of the marketplace, that leads you to conclude that the ramp through the year would look materially different either positive or negative relative to the significant ramp that you had last year, especially the third to fourth quarter?

Mark Gibson

Jim, it's a good question but one that would be a forward-looking statement that we're not going to make.

Jim Fowler – Harvest Capital

Got it. And the last one, the -- when you're in each of the segments, the products, is there a natural -- is there a level of transaction where thinking about your business on a basis-point basis, I know you look at it on productivity per producer on your slides, but I look at it that way as well, and also look at it as basis points per dollar volume, and that can exhibit some -- a little bit of volatility. It makes me wonder whether I should be looking at that in thinking about maybe at certain level of transactions that you're capped on a dollar fee versus a lower level of transaction. Is that something I should take at the consideration as I'm thinking about the revenue -- the volumes and the revenue on a basis-point basis?

Greg Conley

Jim, this is Greg. Let me first say that, while I hear what you're saying how you look at it, I can only tell you that over time, and if you look back since we've gone public and even before that, our average transaction size has fluctuated anywhere from $28 million to $35 million, was probably the highest point on the average transaction size, so it's kind of in that zone of reasonableness. And if you then look at our average basis points when you click our total revenue into consideration, that's been in the 60 to 65 basis points range.

So I would tell you that, based on the mix of business over that period of time, it's been fairly consistent. And you can always find a deal here or a deal there that doesn't meet into that range of typical reasonableness. And we've always said that, if you're working on a very large portfolio deal, you might find that there's a dollar limit on the fee that you can charge and it won't be based on a standard basis points like you would see on other deals.

So that can occur on an outlying basis, but I think, based on the trends and our track record that you can look back to, it's been fairly consistent and the pricing we've been able to get in the marketplace based on the types of transactions that we've been engaged on.

Jim Fowler – Harvest Capital

Yes. I mean I have to look back, to, I think it looks like the fourth quarter of '11, to find a basis-point number that's materially more than this quarter, which was 71 -- a little over 71, and that was just a couple of basis points higher then. So I mean this is a really good quarter on a basis-point basis. But --

Greg Conley

I would also caution you, Jim, that we've also said that it's hard to look at things and make an assumption about the company's direction just on one quarter. We don't control when transactions close and the timing of them, but we're always working on transactions.

Jim Fowler – Harvest Capital

Yes, good. Good. Thank you very much. Congratulations. And good job on the first call, Mark. Appreciate it.

Mark Gibson

Thanks, Jim.


All right. So it looks like there are no further questions at this point. So I'm going to turn it back over to Mark Gibson.

Mark Gibson

Okay. Well, thank you all for joining the call. We appreciate your support of the company. And we look forward to talking to you again in a few months on our second quarter conference call.

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