Boston Private Financial Holdings' (BPFH) CEO Clayton Deutsch on Q4 2016 Results - Earnings Call Transcript

| About: Boston Private (BPFH)
This article is now exclusive for PRO subscribers.

Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) Q4 2016 Earnings Conference Call January 19, 2016 8:00 AM ET

Executives

Adam Bromley - VP, Corporate Finance & Director-Investor Relations

Clayton Deutsch - CEO

David Kaye - Chief Financial and Administrative Officer

Corey Griffin - Chief Executive Officer of Boston Private Wealth

Analysts

Casey Haire - Jefferies

Alex Twerdahl - Sandler O’Neill

Michael Young - SunTrust Robinson Humphrey

Christopher Marinac - FIG Partners

Chris McGratty - KBW

Operator

Welcome to the Boston Private Financial Holdings, Inc. Fourth Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded.

I would now like to turn the conference over to Adam Bromley. Mr. Bromley, please go ahead.

Adam Bromley

Thank you, Kerry, and good morning. This is Adam Bromley, Director of Investor Relations of Boston Private Financial Holdings. We welcome you to this conference call to discuss our fourth quarter and full year 2016 earnings. Our call this morning includes references to an earnings presentation, which can be found in the investor relations section of our website, bostonprivate.com. Joining me this morning are Clay Deutsch, Chief Executive Officer; David Kaye, Chief Financial and Administrative Officer; and Corey Griffin, Chief Executive Officer of Boston Private Wealth.

This call contains forward-looking statements regarding strategic objectives and expectations for future results of operations and financial prospects. They are based upon the current beliefs and expectations of Boston Private’s management and are subject to certain risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

I refer you also to the forward-looking statements qualifier contained in our earnings release, which identify a number of factors that could cause material differences between actual and anticipated results or other expectations expressed. Additional factors that could cause Boston Private’s results to differ materially from those described in the forward-looking statements can be found in the company’s filings submitted to the SEC.

All subsequent written and oral forward-looking statements attributable to Boston Private or any person acting on our behalf are expressly qualified by these cautionary statements. Boston Private does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the forward-looking statements are made.

With that, I will now turn it over to Clay Deutsch.

Clayton Deutsch

Thanks Adam. Thank you all for joining the call this morning. In the fourth quarter, our company generated net income of $17.6 million, or $0.19 per share, compared to $0.22 per share last quarter and $0.17 per share in the fourth quarter of 2015. Return on average tangible common equity was 12.8% for the quarter and return on average common equity was 9.1%.

Before going further I want to call out four highlights for the quarter. First we finished the year strong. Our private bank generated quality balance sheet and earnings growth while ending the year with very strong asset quality metrics. Boston Private Wealth Management and Trust generated record levels of new business, while showing continued progress toward client and revenue stability.

Our investment management and wealth advisory businesses continued to deliver strong margins, and across all of our businesses we continue to do a great job for our clients. Taken together, excluding notable items in the fourth quarter, our businesses generated $30.2 million of pre-tax, pre-provision income in the quarter, up from $28 billion in the third quarter and $20 million to $22 million in preceding quarters.

The second highlight for the quarter, we successfully completed the sale of two Southern California offices in this past quarter. This added $2.9 million to our fourth quarter revenue, which we consider the first of our notable items. Third, we recorded a $9.5 million non-cash charge to reset the carrying value of our wealth business. Dave will have more to say about this charge and how it affected our reported earnings.

Finally, we announced that our board of directors approved an increase in the quarterly dividend to $0.11 per share. This marks our fifth consecutive annual dividend increase. We continue to view an escalating dividend as our preferred method of returning capital to our shareholders.

Reflecting on the quarter and normalizing for the notable items, I am excited about the core earnings power of the company. Excluding notable items, for the full year core pretax, pre-provision profit growth in 2016 was 8% over 2015. Full year core operating income rose 16%. The Boston Private management team and I enter 2017 excited about opportunities to continue to build growth and earnings strength.

With that I would like to turn the call over to Dave. Dave?

David Kaye

Thanks Clay. Good morning everyone. My comments will begin with Slide 3, which provides a summary of our key performance metrics. The return on average common equity for the fourth quarter of 2016 was 9.1%. That is down from 10.2% in the third quarter of 2016, but it is up from 8.1% in the fourth quarter of 2015.

Our Tier 1 common ratio of 10% remains at the top-end of our target range. The two notable items that Clay mentioned resulted in a net after-tax charge of $4.3 million or $0.05 of diluted earnings per share during the quarter. For the full year of 2016 return on average common equity increased to 9.4%, and that is up from 9.0% in 2015. Diluted earnings per share increased to $0.81 for the full year, up from $0.74 in 2015.

Slide 4 shows the consolidated income statement. On a linked-quarter basis, net interest income increased 3% to $51.5 million, and core fees increased 2% to $38.5 million. Total other income increased to $5.5 million, and that drove a 6% increase in total revenues on a linked quarter basis. Total other income was positively impacted by the pretax $2.9 million net gain on sale and also $2.2 million of other items driven largely by a market value adjustment of the derivatives. The net gain on sale was attributed to closing our agreement to divest two offices in Southern California representing $104 million worth of deposits.

Total expenses for the fourth quarter of 2016 were $71.8 million and I will provide more details about that on the next slide. Total net income was $17.6 million, a decrease of 11% from the prior quarter. Excluding the after-tax impact of the previously mentioned notable items, adjusted net income attributable to the company was $21.9 million.

On Slide 5, we show a detailed breakout of our consolidated expenses. Fourth-quarter total expenses increased to $71.8 million and that is primarily due to the pretax $9.5 million goodwill impairment charge in the Wealth Management and Trust segment. The goodwill impairment charge was in conjunction with the annual impairment testing and as you know is a non-cash charge that does not impact our capital ratios and has no impact on future earnings.

Compensation, our largest operating expense, decreased 3% quarter-over-quarter and was flat year-over-year. Adjusted operating expenses were $62.3 million. That is a 1% linked quarter increase and a 5% decrease compared to core expenses in the fourth quarter of 2016.

Slide 6 shows our full year consolidated income statement. Overall the company showed 3% growth in pre-tax, pre-provision income primarily driven by an 8% growth in net interest income. 2016 total operating expenses increased 4% year-over-year. Finally increased provision credits coupled with the growth in pretax, pre-provision income contributed to a 10% overall increase in net income.

Slide 7 shows the full year highlights of the capital we returned to shareholders. This quarter the board of directors authorized a 10% increase in our common dividend and it is up to $0.11 per share on a quarterly basis. This marks the fifth consecutive year we have increased our dividend. During 2016 we paid $0.40 worth of dividends and completed $9 million of our $20 million share repurchase authorization. Through these two actions we returned 59% of 2016 earnings to common shareholders.

Moving to Slide 8, the top chart shows the relationship between our net charge-offs or recoveries and our provision for loan loss. As you can see, recoveries continue to positively impact the provision. This quarter we recorded a $1.1 million provision credit and that was driven by net recoveries and a decrease in criticized and classified loans, partially offset by an increase in loan volumes.

The chart below highlights the bank’s asset quality for the quarter. Asset quality was a source of strength this quarter as criticized loans decreased to $119 million, and that represents a 25% linked quarter decrease and a 23% decline year-over-year. We continue to maintain stronger reserves with the ALLL of the loans finishing the quarter at 128 basis points.

On Slide 9, we show the private banking segment, excluding the wealth management and trust portion of our bank. Here net interest income increased 3% linked quarter, primarily due to loan and deposit growth. Total other income includes the previously mentioned gain of the sale and other items. Total operating expenses increased 3% linked quarter to $31.3 million, while decreasing 2% year-over-year.

Slide 10 shows the past five quarters of average loan balances, and deposit balances by type. Total average loans for the quarter increased to 6% year-over-year with comparable growth rates of 5% to 6% in our three largest loan categories, which are residential lending, CRE and C&I. Average total deposits for the quarter increased 2% year-over-year to $6 billion and that is led by a growth in core funding.

Lower cost demand deposit and savings accounts increased year-over-year by 12% and 10% respectively, while the higher cost money market and CDs both decreased year-over-year by 3% and 5% respectively. Average total deposit balances were impacted by the divestiture of the $104 million of deposits as part of the sale of the two offices in Southern California. The deposits are included in the average deposits through the third quarter of 2016 and the divestiture in November offsets fourth quarter deposit growth.

Turning to Slide 11, our core bank NII increased to $51.8 million. Net interest margin at the bank declined 1 basis points linked quarter to 2.91%. Excluding the interest recovered on previous non-accrual loans, core net interest margin decreased linked quarter by 1 basis point to 2.89%. The banks all in cost of funds decreased to 36 basis points as a result of the mix shift to demand deposit accounts during the quarter.

With that, I will turn it over to Corey Griffin, CEO of Boston Private Wealth. Corey?

Corey Griffin

Thanks, Dave. Slide 12 contains financial information for the wealth management and trust segment, which operates under the Boston Private Wealth brand. Total revenue increased 2% linked quarter to $11.1 million. Total revenue was positively impacted by higher asset-based fees and new business mandates from family office clients.

Total operating expenses increased by 9% driven by elevated salary expense, which includes year-end true-ups. After adjusting for notable items the segment’s net income was flat.

On Slide 13, we show both new business flows and net flows for Boston Private Wealth for the past eight quarters. New business flows rebounded to $201 million with good balance across all of our new business channels. For the full year, as Clay mentioned, we generated $954 million of new business, which is a record year for the business.

Net flows improved sequentially to a negative $82 million. Returning overall net flow to a positive remains a priority, but underlying trends show continued progress. A few examples, our quarterly net flows have averaged negative $80 million during the past three quarters compared to an average of negative $394 million from the third quarter of 2015 to the first quarter of 2016. Our existing client base added to AUM during both November and December, and despite negative net flows, from a quarterly perspective our monthly net flows were positive in three of the past seven months following a period of 17 straight months of negative flows.

The underlying theme at Boston Private Wealth is that business continues to stabilize. Our new business rebounded this quarter and we are continuing to track to win profitable clients with sophisticated financial planning needs that will drive revenue development over time. Our 2% linked quarter revenue growth highlights our efforts to restore the business to a sustainable positive growth trajectory.

In addition to fee-based wealth management clients, we have won business mandates in this quarter for a number of family offices that are not built based on AUM. These clients will generate ongoing revenue for the company but do not show up in the quarterly flows.

With that I will hand it back to Clay.

Clayton Deutsch

Thanks, Corey. Let me now address our other wealth businesses. Slide 14 shows AUM net flows by segment. We saw improved net flows in the investment management segment of negative $23 million. That is up from negative $111 million in the prior quarter.

The wealth advisory segment had net flows of negative $71 million during the quarter compared to negative $105 million in the third quarter. On a consolidated basis our three segments, including Wealth Management and Trust, showed linked quarter improvement in net flows.

On Slide 15, we show the total revenue for the investment management segment increase 16% linked quarter with a 14% increase year-over-year. Operating expenses increased 12% linked quarter and 10% year-over-year. Revenues were positively impacted by performance fee accruals, but were partially offset by increased bonus accruals resulting in net income growth of $400,000 for the segment. The investment management segment fourth quarter 2016 EBITDA margin of 34% remains above our 30% corporate target.

Moving to Slide 16, our wealth advisors reported revenues of $12.6 million, down 1% linked quarter and flat year-over-year. Operating expenses decreased 23% linked quarter and 15% year-over-year to $7 million, driven primarily by the revaluation of a retirement liability reflected in compensation expense. Fourth quarter 2016 segment EBITDA margins increased to 48% though run rate EBITDA margins are closer to our corporate target of 30%.

That concludes our comments on the quarter and on 2016. Now we will open up the line for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Casey Haire of Jefferies. Please go ahead.

Casey Haire

Hi, good morning, guys. How are you?

Clayton Deutsch

Good morning Casey.

David Kaye

Hi, Casey.

Casey Haire

I wanted to touch on – I will start with the wealth management’s , you guys have been – that was clearly a drag on pretax income in 2016, I know you guys have been targeting for sort of turning the corner in 2017, what is – sort of what is a reasonable pretax margin for you and does that include restructuring of that business?

Corey Griffin

Sure. Thanks Casey. This is Corey. As we have shared in previous calls, our focus is on stability first. So we might – well, we might over-invest in the short term to support our clients, our goal is to plan to return to single digit EBITDA this year.

Casey Haire

Sorry, single-digit EBITDA?

Corey Griffin

EBITDA margin, yes, single-digit EBITDA margin for the year.

Casey Haire

Okay and I mean that – okay, so is that more on the expense side or do you expect revenue improvement?

Corey Griffin

It is a little bit of both.

David Kaye

Yes.

Casey Haire

Okay. And then just on the expense side, what is a good starting point for first quarter of 2017, and I know you guys have been talking about doing some initiatives this year, some investments into the platform, just wondering what is a good expense trajectory as we look towards 2017?

David Kaye

Sure. I will take that one. So if you look at the fourth quarter really stripping out the goodwill, it was about a 62.5, let us call it a quarter for expenses. In the first quarter we are going to get 2 million worth of the sort of seasonal 401(k), it is better. And then, I would say just normal salary increases of 2% to 3% are going to cost us about $500,000 a quarter. So first-quarter you are going to see that 62.5 much closer to about a $65 million run rate.

For the full year we are planning on making investments, particularly in our technology area and I think you could see on a run-rate basis the 3% to 4% increase in overall expenses year-over-year. With those investments we do have some offsets. As you mentioned on the wealth management side we still expect some initiatives we have taken to take hold and reduce cost there, but that will be spent on as I said some investments in technology.

Casey Haire

Okay, great. And just lastly, on the credit outlook, a nice tick down in the criticized assets this quarter, is the recovery pool exhausted at this point and do we – so what is sort of the net charge-off outlook and how are you guys feeling at that 128 reserve level?

Clayton Deutsch

The recovery pool is dwindling, but there is still more out there. Again I would expect some lower than average provision levels if we can get some more of those recoveries. Also just the total gross charge-offs have been very low as well, reflecting the outstanding credit quality. So, it is a really difficult one to predict quarter-by-quarter though Casey.

Casey Haire

Okay. Thank you.

Operator

The next question comes from Alex Twerdahl of Sandler O’Neill. Please go ahead.

Alex Twerdahl

Hi, good morning guys.

Clayton Deutsch

Hi Alex.

Alex Twerdahl

A couple of questions, first off Corey, you mentioned some revenues in the BP Wealth that are tied to some family offices and not directly tied to flows, can you quantify or just give us a little bit more color around, what percentage of revenues and exactly where that comes into the P&L just to help us with modeling for the future?

Corey Griffin

Sure. It is about a million in revenue total.

Clayton Deutsch

We don't really call it the AUM because it is not really AUM. The assets associated with the families it is probably $1.5 billion in assets. We are not putting that on our AUM because we don't have discretion or custody of those assets, but we are sort of working with those families on that $1.5 billion.

Alex Twerdahl

So it is about a $1 [million], and that is a [million] per quarter or a [million] per year?

Clayton Deutsch

Annual.

Alex Twerdahl

Okay. And then, do you guys – you have been pretty spot on with your loan growth targets, it is sort of 6% to 7% over the last year or so, is that a good expectation for 2017 as well?

Clayton Deutsch

Yes.

Alex Twerdahl

Okay. And then I just wanted to follow-up on the previous question on the reserve, when I look at it you guys have had now four years of net recoveries. You haven't taken a net provision for it really since 2011, your criticized loans are down 25% this quarter alone, how do you – I must look at it and say how do you justify having a reserve of 128, I mean is there something that we are missing in there that makes you guys more cautious then pretty much every other bank out there?

David Kaye

I mean, I think we have a methodology that looks at our actual net charge-offs. We also take into account environmental factors. Those have been coming down because on average our charge-offs have been coming down. I mean some of it is still it is elevated because of some of the legacy charge-offs that we had going back in 2009, 2010, 2011. But as we work through and as that part of the portfolio rolls off and is out you would expect to see that coming down a little bit.

Alex Twerdahl

How far is the look back on charge-offs, I mean I thought it was around three years for a lot of companies, but you guys look back further when you do the reserve methodology, I mean is there going to be like a quarter all of a sudden, where we see a big chunk of charge-offs that happen in 2009, all of a sudden doesn't get included in the look back and it is going to cause a big adjustment?

David Kaye

No, I think for the look back what you want to do is capture the full range of the cycle and so, I think right now we have a longer look back in order to capture that. We have about an eight year look back, but you wouldn't see a big spike now.

Alex Twerdahl

Okay. Thanks for taking my questions.

David Kaye

Thanks.

Operator

Our next question comes from Michael Young of SunTrust. Please go ahead.

Michael Young

Hi, good morning.

Clayton Deutsch

Hi.

Michael Young

Clay, I just wanted to start off with sort off maybe a top of the house view on your focus for 2017, I know in the past you have sort of targeted an ROTCE return profile that you are working towards is that the same this year and could you give us any updated thoughts on what you are focused on?

Clayton Deutsch

Sure. There are three things that are kind of top of mind. We are focused on more than that. I have reviewed with the board this week my seven-point agenda for ’17, but let me shorten the list and focus on the big ones. I do believe there is more earnings power in the balance sheet of the bank. It is somewhat environmental. We would like to see a continued progression in the rate environment, but even setting that aside, we are very enthused about advancing the private bank.

We are seeing high quality loan and deposit growth. We are not yet changing our guidance on balance sheet growth, but we are bullish on the bank’s prospects. If anything, we could probably round growth up not down without violating our oath to shareholders to manage within a sustainable growth rate that is not overly capital consuming.

So that is theme one, high quality disciplined expansion of the bank clientele across our markets, expanding the earnings power of the balance sheet. That excites us, and that is a big goal for ’17. Second, we already touched on this, but continuing to progress in Boston Private Wealth is a big gainer. Right now despite all the noise we are right around breakeven EBITDA margin. That is consistent with our oath to shareholders that we would end the year with the business stable and poised to do good things, and with the earn rate right around neutral.

The second big gainer is obviously that business needs to contribute, and needs to – I am talking now in the earnings sense, as you all know I am prepared to be patient. We are trying to build that business right. I am pleased with the business building progress in the year just ended, and that business will perform for us going forward. I think that is a gainer.

Third, the affiliates have to do more. So while in the narrative, I bragged about the margins, our affiliates did not grow in the year just ended. And those affiliates are all good businesses and good practices. They need to grow. So we are working with each of those teams. I am pleased with margin generation. We need to see growth.

So as I think about that going forward earnings power of the company those are the three big things I look to. Our expense discipline will continue. So notwithstanding Dave’s acknowledgment of some up-spend in technology, we are going to continue to try to have expense discipline be a signature element of what we do. And then I will defer to Dave on recoveries. I don't consider that core earnings. We are conservative on reserving and that will unfold as it unfolds. But that is how I think about the core margin, core earnings power of the company.

Michael Young

Okay. So not a specific target for the year then?

Clayton Deutsch

Well, I think our targets are unchanged. I continue to believe our primary goal is to outperform our cost of equity. Our house ROE targets for the long term are 11%. As I said throughout last year though we need a little bit of rate relief. When you wash out all the noise we think our core ROE came in the mid 10 range in the environment this past year. We need to push it higher. But no real fundamental change in our balance sheet aspirations or our earnings targets. We are going to work very hard to continue to expand earnings. That's our primary financial objective.

Michael Young

Great. And just if I could circle back on your first point of the agenda you mentioned that the balance sheet growth of the bank. What's kind of driving maybe slightly greater optimism there? Is it just what you are hearing from customers or is it sort of just the macro with the new regime in Washington etcetera, could you elaborate on that?

Clayton Deutsch

Well, let me start with the easy one. It's not the macro and new regime and that's not a political comment, the new administration isn’t even installed yet. I am just speaking in the present case I see a lot of progress in our client acquisition and client development efforts. I see good disciplined growth across our markets; Boston and broader New England, Southern California, Northern California. We have an exciting growth option in Florida where we have been heavily wealth only and have opportunities to expand our wealth and private banking business.

So it's more excitement about what I see happening with our client base and what I see happening with the client power of the private bank. Looking forward, I think anything the new administration can achieve and anything that happens in the U.S. economy to the positive certainly is all good for us. And, I wish nothing, but the best for the new administration.

Michael Young

Okay. Great. Thanks Clay.

Operator

[Operator Instructions] Our next question comes from Christopher Marinac of FIG Partners. Please go ahead.

Christopher Marinac

Thanks. Good morning guys. Dave or Clay, could you remind us on the mechanics of how the loan portfolio turns over as rates rise and so as we have these short interest rate nerves we have seen and how if they continue how that would parlay into higher margin?

Clayton Deutsch

Dave why don't you step through that.

David Kaye

Yes, we probably have somewhere around 30% of our loan book that will rise within the first three months, so as rates raise that will help us.

Christopher Marinac

Okay. And then obviously if liquidity continues to be strong that's going to have an impact on margin too. Would you have any forecast of whether that does or doesn't occur?

David Kaye

That liquidity sort of ebbs and falls as the year unfolds. And in the first quarter tends to be a little bit tighter on liquidity as we see some deposit outflows associated with tax payments and such, but then it builds in the latter half of the year traditionally.

Christopher Marinac

Got it. Okay that's helpful. And Clay, if we see any change on corporate tax rates would you envision that all of the flows in the bottom line earnings or is it possible that you or the banks kind of invest some of those dollars in the future different initiatives like you talked about this morning?

David Kaye

Yes it's a good. I mean, I know it's noteworthy that one of our industry leaders said it would all be bid away. I am not sure, I’m not sure it would all be bid away. I think it would be shared with clients and with shareholders. I understand the big bank view I think those are very high fixed cost operations and in the fullness of time and a awful lot of that stuff does get priced away. In our case, I am less sure I am convinced that for us in the short term, a reduction in tax rates is an opportunity; let me say it that way. How it ultimately washes through the business model is not wholly clear to me. I actually do not think it would all get bid away. I think there would be beneficial effect for clients and I also think there would be beneficial effect for earnings.

Christopher Marinac

And Dave if there is tax rate with the sort of short term noise and how that gets implemented be relatively minor for Boston Private do you think?

David Kaye

That's just hard to speculate on what that changes are going to be.

Christopher Marinac

Okay. That's fine. Great guys. Thank you for the insight. Really appreciate it.

David Kaye

Thanks Chris.

Operator

Our next question comes from Chris McGratty of KBW. Please go ahead.

Chris McGratty

Hey good morning everybody.

David Kaye

Hello Chris.

Chris McGratty

David I just want to make sure I understand the expense guide. So in the first quarter it's kind of a 65 start. And then in your prepared remarks you talked about some investment and tech kind of in that 3% to 4% range all in. Is the right way to think about it 65 and then maybe turning higher over the balance of the year because of this or obviously could slice here back in the second quarter, but is it like run rate kind of going in the mid 66-ish by the end of the year. Is that right?

David Kaye

Yes. It could head up that way Chris. That's right. So immediately in the first quarter that will probably in the 65 range, and then just a mathematically sort of 3% to 4% growth on the 62.5 that we had in the quarter would push you more to 65-ish range for the balance of the year.

Chris McGratty

Okay, great. The deposit data, how are you guys modeling and your disclosure you modeled pretty neutral, rate sensitivity, but I think given your margin you should get a little bit benefit if the rate environment stays where it is. Where do you guys – can you walk me through how you guys are thinking about data?

David Kaye

I think what we disclosed are sort of somewhere in that 50-60 range on the data depending on that, when we have it by sort of category, but I think overall it’s right around 60 if I’m remembering that right.

Chris McGratty

Okay. That's great. Let me put the last question if I could. I think you have got another year five quarters of the west field contribution. As far as from the below line numbers the last payment in the first quarter of 2018, is there any other adjustments that we should be thinking about over the next four quarters in the 2018 that would potentially mitigate some of that dilution? Thanks.

David Kaye

Yes. I mean I think that if you look at the amortization of intangibles, I mean that two years out, so in 2018 that will probably be $2 million lower. In 2019 that's like $3 million lower, so that helps offset some of the loss of that discontinued operations income.

Chris McGratty

Okay. So you are referring to the roughly six [Indiscernible] that was this year that by 2018 should be kind of in the full range?

David Kaye

Yes. And then by 2019, it's sound to three or something like that. We put that in our disclosure as well.

Chris McGratty

Got it. Okay. Just want to make sure. Thanks a lot for taking the question.

David Kaye

Thanks Chris.

Operator

And this concludes our Question-and-Answer session. I would now like to turn the conference back over to Clayton Deutsch for any closing remarks.

Clayton Deutsch

I will just share with you. We’ll go back to the earlier question. We are excited about 2017 and we are very focused on the three sources of progress that I described. And we look forward to trying to demonstrate that to you as the year unfolds. Thank you.

Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!