PJT Partners Inc

NYSE:PJT

Earnings Call Transcript 2018-Q4

[Operator]

Good day, everyone, and welcome to the PJT Partners Full Year and Fourth Quarter Earnings Call. My name is Sue. I'm your event manager. During the presentation your lines will remain on listen-only. [Operator Instructions]. I’d like to advise all parties, the conference is being recorded.

And now I'd like to hand over to host Sharon Pearson, Head of Investor Relations. Please go ahead.

[Sharon Pearson, Head of Investor Relations]

Thanks very much, Sue. Good morning and welcome to PJT Partners full year and fourth quarter 2018 earnings conference call.

Joining me today is Paul Taubman, our Chairman and Chief Executive Officer, Helen Meates, our Chief Financial Officer.

Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements.

We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2017 Form 10-K, which is available on our website at pjtpartners.com.

I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance.

For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website.

And with that, I'll turn the call over to Paul.

[Paul Taubman, Chairman & Chief Executive Officer]

Thank you, Sharon. Good morning and thank you all for joining us. Earlier today, we reported our full year results for 2018, which are consistent with the goals we articulated at the beginning of the year and reflect the significant progress we are making across all of our businesses.

Firmwide revenues grew 16% year-over-year to $580 million. Strategic Advisory revenues grew more than 40% as we began to realize the financial benefits of our sustained investments. Park Hill achieved record results, led by strong performance in Real Estate and Secondary Advisory and our leading Restructuring business performed well on a relative basis, but experienced a modest decline in revenues, given the backdrop of the benign credit environment.

Now turning to each of our businesses in more detail. Turning to Park Hill. Park Hill delivered record results in 2018. Of note, this performance was achieved without any individual Park Hill business having a record year. This growth was driven by a substantial increase in real estate revenues and continued strength in secondary advisory. The growth trajectory for Park Hill in 2019 is accelerating, underpinned by a substantial increase in our mandated backlog.

Turning to Strategic Advisory. The hard work and consistent investment we have made in our Strategic Advisory business has now begun to show through in our financial results. Our substantial revenue growth in Strategic Advisory was principally driven by our involvement in larger and more complex transactions. Much of this activity involved European clients and/or cross-border transactions.

Our brand continues to grow as the depth and breadth of our industry and geographic presence expands. This is evidenced by the growing number of blue-chip companies we are advising around the globe and our leadership role in their transactions.

As always, we remain committed to significantly expanding our footprint through the addition of best-in-class talent at all levels. Our Strategic Advisory partner count increased by 30% from year-ago levels and is nearly doubled over the past two years. We increased the number of Strategic Advisory professionals by nearly 50% in 2018 and like our partner growth, this is almost doubled the level of two years ago.

In addition, we take great pride in the fact that this past year, we received nearly 7500 applications for upcoming summer internships. Our focus on attracting top talent at all levels is key to building a durable and sustainable franchise.

Turning to Restructuring. Our restructuring business maintained its leading market position advising on four of the five largest restructuring transactions in 2018. Consistent with our previous commentary, our restructuring business was down modestly year-over-year reflecting strong relative performance in a less-active restructuring environment.

Ahead of any downturn in the market, we have worked to solidify our competitive position in restructuring through closer collaboration with an increasingly more powerful Strategic Advisory business and the elimination of conflicts. This collaboration is evidenced by a significant increase in the number of joint restructuring Strategic Advisory assignments.

In 2018, more than half of our restructuring transactions has Strategic Advisory involvement. Our restructuring business activity remains broad-based across a number of sectors including energy, TMT, retail and health care. All in all, we are pleased with the progress we achieved across all of our businesses this past year and then how we have set ourselves up for robust growth in 2019 and beyond.

I will now turn the call over to Helen to review our financial results.

[Helen Meates, Chief Financial Officer]

Thank you, Paul, good morning. Beginning with revenues. The total revenues for the year were $580 million, up $81 million or 16% year-over-year. And the breakdown of revenues: Advisory revenues were $452 million, up 17% year-over-year with the increase driven by significantly higher Strategic Advisory fees. The substantial growth in Strategic Advisory was partially offset by a modest decrease in revenues from our restructuring business.

Placement revenues were $111 million, up 8% year-over-year driven by an increase in real estate fund placement fees. For the fourth quarter, total revenues were $175 million, down $15 million or 8% from a record quarter last year. The fourth quarter of this year was our second best in the company's history. A breakdown of revenues in the quarter: Advisory revenues were $133 million down 13% year-over-year. As we indicated in our last earnings call, our fourth quarter restructuring revenues were down relative to year-ago levels due to difficult comparisons.

Year-over-year, fourth quarter restructuring revenues declined almost $25 million from an exceptionally strong fourth quarter in 2017. And while revenues in secondary advisory for the full year increased year-over-year results in the fourth quarter were also down significantly compared with fourth quarter 2017.

Placement revenues were $39 million up 14% compared with the same period last year driven by increased revenues from real estate and private equity.

Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments. Additionally there are some adjustments related to CamberView acquisition which were primarily transaction-related compensation expense and amortization of intangible assets. These adjustments are more fully described in our 8-K first adjusted compensation expense.

Full year compensation expense was $372 million compared with $320 million for the same period last year and as a percentage of revenues 64.1% for both 2017 and 2018. The year-over-year increase was driven by higher revenues, as well as increased headcount.

And turning to adjusted non-compensation expense, total non-compensation expense for the year was $109.1 million and included $10.4 million of expense which is billable to clients and was historically recorded on the balance sheet. On an apples-to-apples basis excluding the impact of a change in accounting for this expense, adjusted non-compensation expense was $98.7 million up 7% year-over-year and included approximately $1.8 million in expense relating to the CamberView acquisition.

For the fourth quarter excluding reimbursable expense of $3.2 million our adjusted non-compensation expense was $26.5 million and included a full quarter of CamberView operations. We are now beginning to see operating leverage in our baseline non-compensation expense.

Excluding the impact of the new revenue recognition standard we generated 120 basis points of operating leverage in 2018 with non-compensation expense representing 17.3% of revenues in 2018 compared to 18.5% in 2017. We remain focused on managing our non-compensation expense and expect to continue to deliver the benefits of operating leverage as our revenues increase.

Turning to adjusted pretax income. We reported adjusted pretax income of $99.2 million for the full year 2018 and $32.9 million in the fourth quarter with an adjusted pretax margin of 17.1% for the full year and 18.8% in the fourth quarter. The provision for taxes. As of prior quarters we presented our results as if all partnership units had been converted to shares, so that assumes all of our income was taxed at a corporate tax rate.

The tax rate also takes into account the tax benefit relating to the delivery of vested shares during the year at a value higher than their amortized cost. With those adjustments our full year effective tax rate was 22.9%. The full year rate was slightly higher than our estimate at the end of the third quarter due to a greater-than-anticipated concentration of business and higher tax states.

Earnings per share. Our adjusted if-converted earnings per share was $1.91 for the full year and $0.60 in the fourth quarter. Turning to share count. For the fourth quarter our weighted average share count was 41.3 million shares and reflects the full quarter inclusion of shares that were issued in connection with the CamberView transaction which closed at the beginning of the quarter.

During the fourth quarter we repurchased the equivalent of approximately 1.1 million shares at an average price of $46.62 through a combination of open market repurchases and exchanges of partnership units for cash.

For the full year 2018 we have repurchased the equivalent of approximately 3.2 million shares. Additionally, during the fourth quarter, we received notices to exchange approximately 216,000 partnership units. And as in prior quarters, we've elected to exchange these units for cash, which will settle next week. Consistent with our capital priorities, we will continue to focus on investing in the business, but also use excess cash flow to reduce any diluted impact from that investment.

A couple of notes on the balance sheet. We ended the year with approximately and $108 million in cash and short-term investments, $130 million in net working capital and $30 million in funded debt. And finally, the Board has approved a dividend of $0.05 per share. The dividend will be paid on March 26 to Class A common shareholders of record on March 6.

I'll now turn back to Paul.

[Paul Taubman, Chairman & Chief Executive Officer]

Thank you, Helen. Turning to our 2019 outlook. We have always viewed our progress through a year and multi-year lens and are steadfastly committed to executing on our strategy of building and sustaining a premier global advisory firm.

In Park Hill, we have repeatedly expressed our confidence in its growth prospects, resulting in large part from our investments in the real estate and secondary advisory verticals. In 2018, these businesses help Park Hill achieve record results.

As we turn to 2019, Park Hill is again positioned for significant growth led by these two businesses. In Restructuring in 2018, we were mostly able to offset the impact of lower-market activity through increased win rates in collaboration with Strategic Advisory.

Assuming a continued benign credit environment, our prospects for 2019 are broadly consistent with 2018. However, if the recent uptick in our restructuring activity persists, we may become more constructive as the year progresses.

In Strategic Advisory, while we delivered significant revenue growth in 2018, it is still early days in the build-out of our business. We've always talked about the importance of having a sufficiently tenured-partner base in order to fully realize the potential of our Strategic Advisory business. Our revenue grew significantly in 2018, despite the fact that the number of advisory partners on our platform for more than two years grew only modestly.

In 2019 and 2020, our season-partner count is set to increase appreciably. Measured against a broad range of leading indicators and strategic advisory, we entered 2019 in a significantly better position than a year ago. Overall we are highly confident in our 2019 prospects.

And as always, we will continue to measure our progress in years not quarters. While we will experience the inevitable quarter-to-quarter fluctuations in our reported performance, our 2019 growth trajectory should be evident by mid-year.

And with that, we will now take your questions.

[Operator]

Hello, everybody. Your question-and-answer session will now begin. [Operator Instructions] Your first question comes from the line of Devin Ryan, JMP Securities. Please go ahead.

[Devin Ryan, JMP Securities]

Great. Good morning, everyone. How are you guys?

[Helen Meates, Chief Financial Officer]

Good morning.

[Paul Taubman, Chairman & Chief Executive Officer]

Good morning, Devin.

[Devin Ryan, JMP Securities]

First question here just Paul appreciate kind of work where you finished off just on the outlook and it would be great to just get a little bit more context on some of the momentum that you highlighted in the Strategic Advisory business today and kind of the expectations there. So I think you mentioned you have 23 partners. They've been on the platform now for two years that's up from 18, one year ago and then just nine in 2016. And so that's pretty significant kind of step-function growth. And so we're just trying to from the outside think about the potential growth in Advisory mandates and what you guys are seeing in the business? And should it directionally follow that? Or is that effectively what you're seeing today or expecting? Just trying to – I know it's not ever a kind of a perfect kind of smooth line here but just trying to think about kind of orders of magnitude because you have had such a significant ramp in the number of senior producers over the last couple of years that have been on the platform for long after probably would be productive at this point.

[Paul Taubman, Chairman & Chief Executive Officer]

Well, Devin let me come at this in two different ways. You think about, what we've done with the Strategic Advisory business? We've always said that, we need to accomplish three things. One is, we need to attract the best-in-class most talented bankers. Second is we need to have sufficient scale in terms of the number of those bankers. And third, we need those bankers to be on the platform for a sufficient period of time, so that they're able to penetrate corporations around the globe and generate real tangible results for us. I think the first thing we were able to do from the outset was become a clear destination for best-in-class talent.

And from day one, we've been able to assemble truly a differentiated roster of world-class bankers all intent on working together to serve clients. I think we now have about 40 Advisory partners on the platform, which is double where we were two years ago and we're beginning to get to sort of minimum scale to really operate this business.

The third thing which is just a matter of time is for all of those partners to have enough opportunities to recalling on clients, transferring their relationships, bringing them new ideas, being sought after for advice, translating mandates into announcements, and then into financial results. The first two are firmly in place. The third is just simply a matter of time.

And as we look at our progress in 2018, we saw the increase in revenues meaningfully outstrip the increase in tenured partners. And I don't want to turn this into a 100% correlation between the tenure and the results, but I think it's the best way to think about the business. So, that's sort of one answer.

The other is, we've always talked about the fact that we're reporting results which reflect the firm really of two years ago, because many of the reported revenues today are mandates that we won a year or two years ago. And I'm constantly managing this business based on leading indicators but reporting based on lagging indicators. And when we look at, the number of mandates, when we look at our pipeline, we look at the number of clients that we have active mandates with, where those transactions are in their gestation period. And we look at how we entered 2019 and the momentum we have from a quarter ago or year ago is quite significant progress. And then when we add to that, the benefits of CamberView which has now been part of the family for all of four months. And we have the benefits of their breath of relationships and we start to see all of this moving forward. I am as confident as ever about our strategic advisory build-out and how it translates into financial results.

[Devin Ryan, JMP Securities]

Great. Thanks for all that color Paul. And a follow-up here just on the Park Hill business. You had really nice end of the year and then you mentioned record year without any individual records in kind of the individual sub-businesses.

And so I suspect there's some seasonality in the year-end, but you also mentioned an acceleration in new mandates. So, just love to get a little more perspective around what's driving that acceleration, is it in the environment? Or is it just the business maturing? And just give us maybe a little more sense of how that business and individuals within Park Hill are interacting maybe more with restructuring and the M&A advisory teams today?

[Paul Taubman, Chairman & Chief Executive Officer]

Well, appreciate the question. We've always said that large parts of Park Hill line up very well with our strategic advisory business. And we've also said that the intersection of those two businesses is most pronounced when it comes to secondary business which really emanates from coverage of financial sponsors and the real estate business.

And that's where most of our focus has been in knitting these businesses together. And that's where we've always expected to see the most tangible results. And that's where we've been quite pleased with the early results of that investment in knitting these businesses much more closely together.

As we look out at 2019, we have the ability to view the mandates that we have secured in both real estate and on the secondary advisory side. And there is a pronounced uptick in those mandates and we're highly confident that the momentum we have going into 2019 will produce quite significant results in this year and that we'll be able to capitalize on that momentum in future years.

So, that's really where most of the initial focus has been and we certainly have proof-of-concept in 2018, but my sense is we're just beginning to tap into the power of that combination. And I'm quite comfortable leaning in as I think about Park Hill's performance for 2019.

[Devin Ryan, JMP Securities]

Okay, terrific. I'll hop back in the queue. Thanks Paul.

[Paul Taubman, Chairman & Chief Executive Officer]

Thank you, Devin.

[Operator]

Thank you. And your next question comes from the line of Richard Ramsden of Goldman Sachs. Please go ahead.

[Sal Saroni, Goldman Sachs]

Good morning. This is Sal Saroni filling in for Richard today. Can you please provide any clarity on CamberView's contribution to revenue growth realized this quarter? And then how should we think about that growth going forward, particularly, relative to the existing advisory business?

[Helen Meates, Chief Financial Officer]

So, we're not breaking out the CamberView performance, specifically, but what I would say is that our year-over-year growth was not significantly impacted by the contribution from CamberView.

If you look at the first nine-month results which we were required to release an 8-K post the closing. If you add a full year of results from CamberView, full year revenues in 2018 would have been $615 million. But it's very much an integrated business that we're not going to break out separately.

[Sal Saroni, Goldman Sachs]

Okay. Thank you. That's helpful. And then on the restructuring franchise, could you please just elaborate a little bit on some of the weakness that you had called out for the quarter? Was it predominantly due to more difficult comps? Or were there any particular geographies or industry verticals that were the more challenged?

And then of course going forward as well, if you could please just elaborate on where you think you can grow some of the revenue within the broader franchise?

[Paul Taubman, Chairman & Chief Executive Officer]

Yes well in restructuring I think we've been consistent throughout the year that given the muted macro backdrop for restructuring activity. We were expecting our business to be roughly consistent with year ago, we've talked about it being flat to modestly down. Our results for the year were right in line with what we had expected.

The fact is that this year our restructuring revenue was much more evenly dispersed amongst the four quarters than it was in the four quarters a year ago. So in some quarters restructuring had very easy comps and some quarters it had more difficult comps. This happened to be the quarter and where it should had more difficult comps.

But in -- no way did it change the way we thought about the business which was flattish for the year. It's just that the timing of our closings issues little different than the timing of closings next year. Simple as that.

[Sal Saroni, Goldman Sachs]

Okay. Thank you.

[Operator]

Thank you. Your next question comes from the line of Michael Needham, Bank of America. Please go ahead.

[Michael Needham, Bank of America]

Hey, good morning. The first question I have is on the operating margin. Your revenue growth is roughly cap-up with the pretty rapid headcount growth of the firm. What level of revenue do you need to reach for your compensation ratio to decline?

[Paul Taubman, Chairman & Chief Executive Officer]

I don't think there's an exact answer to that because some of that is a function of just how aggressively we continue to attract talent to the platform. But I think it's pretty clear that over the next couple of years, the investment in talent that we're making becomes a lesser and lesser percentage of our overall cost base. So the investment as a percentage comes down, that's point one.

Point two is, we've made a lot of investment and we're just on the cost of getting a financial return for that. And since there's an awful lot of operating leverage in the business I think we're going to have two helpful factors going forward: One is, the investment having been made. The return will start to generate in the form of meaningfully higher revenues. And the investment as a percentage of the overall cost base will continue to diminish.

And I think those two things together give us again good line of sight that the number comes down. But I'm not going to be overly prescriptive on when it begins to come down.

[Michael Needham, Bank of America]

Okay. And then for hiring you gave the headcount growth in Strategic Advisory on the last year. Can you also -- I think that probably includes the CamberView acquisition. And then you had some promotion at partner level, just wondering how dialogue has been recently for external hires? This is a time of the year where -- these people at some of the other firms may be looking to make a move.

[Paul Taubman, Chairman & Chief Executive Officer]

Yes I think as we said consistently, we're looking at talent 365 days a year. I think we all saw about everyone moving early in the year. I think that's really changed for a variety of reasons: One is with more deferred compensation being paid out to bankers at big banks, the economic consequences of moving midyear versus at the end of the year are not nearly as severe as they used to be.

And also in a world where firms like ours are getting increasing traction there is a lot of more draw and pull to our firm. So we're seeing a cadence that is interestingly more tied to the individual banker deal flow than it is to the calendar. And there are many conversations that we're having where there is a significant dialogue, but the banker is waiting for the right time to be able to make a move without creating dislocations with their client base.

So, we're quite advance on a bunch of conversations. We'll continue to announce the -- them in number, but not in individuals, because it's been our practice to not put our press releases in the light when we hire individuals. We think it's best and most respectful to let those individuals just come onto our platform without a great deal of fanfare.

[Michael Needham, Bank of America]

Got it. Okay. And last one for me. I may have missed in your prepared remarks, last quarter you said the shadow pipeline of mandates was up significantly year-over-year. Did you update that language this quarter?

[Paul Taubman, Chairman & Chief Executive Officer]

I didn't, but in answering Devin's question I did make the fact that we have positive momentum where they're measured from year ago or quarter ago in terms of mandates and our backlog and pipeline. So I think we still see accelerating momentum, notwithstanding the fact that we had a fourth quarter of turbulent macro conditions against that backdrop. We continued to gain traction in security mandates and we have a greater backlog from our quarter ago and from a year ago.

[Michael Needham, Bank of America]

Okay. Thank you.

[Paul Taubman, Chairman & Chief Executive Officer]

Thank you.

[Operator]

Your final question is from the line of Chris Walsh, Buckingham Research. Please go ahead. Chris, put your line be on mute.

[Chris Walsh, Buckingham Research]

Hey, sorry about that. Hi, Paul.

[Paul Taubman, Chairman & Chief Executive Officer]

No worries. Hello.

[Chris Walsh, Buckingham Research]

So with roughly the sort of PJT's bankers sitting in Europe and APAC, can you just give us a sense of how the international build-out the platform is trending? It seems like revenues per partner outside the U.S. is a little bit below the levels seen domestically, but that might be the result of the more limited opportunities say with Brexit, elections et cetera impacting the M&A side of things. So we'd just really love to hear your thoughts on the growth and progress you're expecting out of those bankers. And I guess secondly, are the bankers in Europe and Asia are more heavily weighted towards any specific product area right now? For instance restructuring versus M&A? Thanks.

[Paul Taubman, Chairman & Chief Executive Officer]

Well first – yeah, I mean, just let me sort of just clarify a couple of things. We don't have bankers on the ground in Asia of any consequence. So our footprint internationally has been heavily concentrated to Europe. And we don't break out within Strategic Advisory. Our revenue breakdown between was Europe or U.S., but I did note in my remarks that a lot of our increase in strategic advisory has been the result of increased cross-border flow and work with European clients. And I've said repeatedly that Europe is going to be one of the great success stories of our firm because in Europe, we have the three elements that I highlighted before.

We have a sufficient number of supremely talented bankers who've been on the platform for an extended period of time and we've seen real traction. If you look at our roster of clients and our transactions there's actually a heavy international component to it. So we're quite pleased with the progress there in Europe. And a lot of that is also driven by the fact that we're covering industries and companies in those industries that are global in nature and whether they're domiciled in the U.S. or in Europe or in Asia for that matter that their desire to do business around the globe is significant. And our ability to serve up a team of bankers around the globe who are connected to the client and can serve them in a differentiated way has been one of our differentiating elements and we expect that to show up more and more in our results and in our announced transactions.

[Chris Walsh, Buckingham Research]

Got it. And are you seeing any softness in Europe? One of your peers last night stated 32.41 expectations that Europe was going to be a little bit softer on the heels of some of this Brexit turmoil?

[Paul Taubman, Chairman & Chief Executive Officer]

Well we don't -- we certainly haven't seen it softer for our business. And to some extent, we may be very idiosyncratic because we're gaining traction in Europe. We've made the investment and we made those three elements in place in Europe, the quantity, the quality and the continuity. My own view is that when Brexit creates challenges, it also creates opportunities. I expect that particularly if we end up in a hard Brexit situation, you may see some downward revisions to GDP growth that may create more of a restructuring environment. You've also seen in the midst of Brexit some iconic U.K. companies being fought over in a knock-down-drag-out battle to acquire these companies. So there is still activity in almost any environment and for us, I think we're right sized, right scale to take advantage of the opportunity.

And as I said increasingly, the borders around the world are dissipating and the ability to seamlessly assemble teams located in different parts of the globe to best serve clients is a differentiating factor and that placed our advantage. So I expect us to continue to get traction in the European American and over time Asian markets.

[Chris Walsh, Buckingham Research]

Great, thank you for taking my questions and congrats on another solid year.

[Paul Taubman, Chairman & Chief Executive Officer]

Thank you.

[Helen Meates, Chief Financial Officer]

Thank you.

[Paul Taubman, Chairman & Chief Executive Officer]

Thank you very much.

[Operator]

Your final question comes from the line of Jeff Harte, Sandler O'Neill. Please go ahead.

[Jeff Harte, Sandler O'Neill]

Good morning. A couple from me. One, kind of building off the last question in Europe versus what we’ve heard from many peers, are you able to differentiate for us at all between kind of your positive operating -- or your positive outlook -- the positive environment tailwinds versus what appears to be pretty significant for PJT momentum in some of the Advisory businesses. Can you differentiate at all between those two?

[Paul Taubman, Chairman & Chief Executive Officer]

Well I guess yes and no. So we've said repeatedly, we are an idiosyncratic-growth story because we have a balance of businesses that is unlike any of our peers and that we are early days in the build-out of Strategic Advisory. And therefore we will for a long time to come be a market share as opposed to a market-sized story. So that gives us the ability to grow in most any environment.

And I think the combination of businesses we have, the fact that we are not as developed in our build-out gives us a lot of tailwind that others may not have. So that's very specific to PJT. At the same time, we talk to companies around the globe and we have a clear feel for the broader macro backdrop and the M&A environment overall, and we have not seen any slowdown in the level of activity, desire to pursue strategic initiatives. And we've talked about this endlessly, there are number of factors which are fueling a long-term secular change in M&A as a tool in the toolkit. And we've talked about technological dislocation time cycles are speeding up; the cost of standing still, it is increasing in never-changing world; tax reform, which has reduced friction cost, desire for growth need to continue to reinvent businesses and the like.

So we're not at all of the view that the M&A business over time slows, but having said that, it's always going to be deeply cyclical business. And if there is a shock to the macro inevitably M&A will slow down. But I think we're extremely well-positioned to whether that's storm and anything else that gets thrown our way for all the reasons we just talked about. So we feel very good about our situation and we're continuing to be constructive on the macro, but we're not relying on a positive macro for us to achieve our goals.

[Jeff Harte, Sandler O'Neill]

Okay. And finally, can you guys talk a little bit about kind of your cash position in the balance sheet. I suppose, I'm coming from the perspective of cash and short-term investments are relatively low for our fourth quarter period-end versus history. Now you've got $30 million of debt, you didn't have before and you see fairly buying back more stock. And maybe are you comfortable with the cash levels here? And kind of how should we -- or should we think about kind of minimum cash levels going forward?

[Paul Taubman, Chairman & Chief Executive Officer]

Before Helen answers the question, I'll just say, you have an extremely conservative management team when it comes to financial policy. We believe very strongly in our resources and we believe very strongly in the value of our currency. And when we undertook the CamberView acquisition, we shied away from making it an all-equity financed combination because we believe so deeply in our story and we put in place a mix of cash and stock to finance that transaction.

It so happens that it came in the fourth quarter, which is right before the payout of the year-end bonuses. So while the levels may dip for a very short period of time, we're very comfortable with their ability to very quickly replenish the coffers and be in a very strong financial position on a continuing basis. We believe whether now when will be there going forward.

[Helen Meates, Chief Financial Officer]

Yes. The only thing I would add is that as you know the cash builds throughout the year. So we're very comfortable with our position now. As we finish the first quarter, we will continue to build cash. And there is a minimum operating cash that we will -- we won't go below, but we also have a revolver that we have available to us to tap into. So we're very comfortable with the amount of cash that we have.

[Jeff Harte, Sandler O'Neill]

Okay. Thank you.

[Paul Taubman, Chairman & Chief Executive Officer]

All right. Thank you all very much. We look forward to speaking with you after our first quarter results. Thank you all and have a good day.

[Helen Meates, Chief Financial Officer]

Thank you.