Altisource Portfolio Solutions S.A. (ASPS) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Altisource Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instruction will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Ms. Michelle Esterman, Chief Financial Officer. Ma’am, you may begin.

Thank you, operator. We first want to remind you that the Form 8-K, and quarterly slides are available on our website at www.altisource.com. These provide additional information investors may find useful. Our presentation today contains forward-looking statements made pursuant to the Safe Harbor provisions of the Federal Securities Laws. Statements in this conference call and in our press release issued earlier today, which are other than historical fact are forward-looking statements. Factors that might cause actual results to differ materially are discussed in our earnings release as well as our public filings. The company disclaims any intent or obligation to publicly update or revise any forward-looking statements regardless of whether new information becomes available, future developments occur or otherwise. Today’s presentation also contains financial measures that are non-GAAP financial measures. A reconciliation of these non-GAAP measures to their GAAP equivalent is included in the appendix to today’s presentation. Additionally, the financial data in the presentation that we’re discussing today is unaudited and preliminary based upon estimates and subject to completion of the company’s financial closing procedures and the audit of the company’s financial statements. This data has been prepared on the basis of currently available information and the company’s final numbers for this data may materially differ from these estimates. Joining me for today’s call is Bill Shepro, our Chief Executive Officer. I’d now like to turn the call over to Bill.

Good morning and thank you for joining today’s call. This morning I plan on discussing recent commentary regarding Altisource’s fees, our 2015 accomplishments, and our 2016 strategic initiatives. Michelle will then discuss our financial performance and I will provide a few closing remarks. Before beginning, I would like to apologize to our shareholders for not releasing our earnings and Form 10-K within your and our expected timelines. At Altisource, we take pride in our timely and transparent communications with our shareholders. Unfortunately, while we very much wanted to have our normal and timely shareholder communications, as a result of the continued work that we needed to do on the impairment analysis of our Technology Services segment, we’re unable to issue our earnings release, complete our Form 10-K, and hold our investor call within the timeline that you have come to expect from us. We expect to file our Form 10-K on or before March 15. Before I discuss our 2015 performance and our 2016 initiatives, I would first like to directly address the recent commentary regarding Altisource’s fee to Ocwen. As we have stated on several prior occasions, we believe that our pricing for our services to Ocwen is within market pricing for like services, because we believe that prices are consistent with the fees we charge other customers for similar services and the fees our competitors charge for similar services. In this regard, historically, we have reviewed publicly available information regarding fees charged or paid by others for similar services and have conducted market studies. We have found that this research have supported our belief that pricing for our services is within market pricing. Now, to our results and strategy. I’m very pleased with the company’s performance in 2015. The fourth quarter capped off a year a very strong operating performance with 2015 service revenue being the best in Altisource’s history. As you can see from Slide 8, service revenue and adjusted pretax income, adjusted net income, and adjusted earnings per share all meaningfully exceeded the midpoint of our 2015 scenarios. While we had a previously disclose, sorry, while we had previously disclosed the non-cash impairment charge in the fourth quarter, it does not impact either one, our views on Altisource’s long-term prospects, or two, our 2016 financial scenarios. Michelle will discuss this in greater detail in a few minutes. We also made excellent progress with our strategic initiatives and continued our focus on providing high-quality compliant services to our growing customer base, paving the way for future growth and continued customer diversification. In particular, I would like to highlight on Slide 9, that we grew adjusted service revenue unrelated to Ocwen and its portfolio by more than 40% in 2015. Our breadth of product service and solution offerings continue to be well received by the market, as demonstrated by several client wins, negotiations to expand services with existing customers, current negotiations with large prospects, and ongoing RFP activity. With respect to recent customer wins, in December, we reflected by a top four bank as part of a competitive process to provide property inspection and preservation services. We’re very pleased to have been awarded this business and believe it will continue to solidify our position in the market. We’re confident that we’re focused on the right strategic initiatives. As a result, our plan for 2016 is centered on the continued advancement of the four initiatives that we discussed with you throughout 2015. These initiatives, as outlined on Slide 3, are to continue to grow one, our servicer solutions business; two, our origination solutions business; three, Owners.com, our consumer real estate offering; and four, our real estate investor solutions business. This morning I’ll discuss our key accomplishments for each initiative and our plan for 2016. Beginning with our servicer solutions business. During 2015 we continued to diversify our client base, strengthen our sales and marketing organizations, and develop a robust pipeline of opportunities from both existing and new customers. During the year, we are selected by two top 10 banks and now have agreements to provide servicer solutions, including servicer technologies to five top 10 banks, one GSE and Ocwen. With respect to our December win, which I mentioned earlier, we are actively engaged in the client onboarding process and plan to begin providing services in April. We are also negotiating expanded statements of work with existing customers and are in varying stages of contract negotiations and advanced sales discussions with several large prospects. Our recent customer wins and large prospects represent substantial revenue opportunities for us, with each one representing more than $1 million in potential monthly revenue. We believe these activities combined with our sales pipeline will enable us to continue to diversify our customer base and provide a growing recurring revenue base. Turning to origination solutions. During 2015, we focused on expanding our offerings through the acquisition of CastleLine, developing richer capabilities for mortgage builder and enhancing our value proposition for the members of Lenders One. We also strengthened the origination solutions leadership team, including installing the co-founders of CastleLine to lead this business. Our origination solutions business have several notable achievements during 2015, positioning us for meaningful customer and revenue growth in 2016 and beyond. Altisource was selected by new and existing customers of CastleLine, including a top 10 originator to provide products and services related to CastleLine certified loan product. These wins combined with other traditional fulfillment opportunities have created a solid pipeline for our underwriting and fulfillment business. Lenders One entered into a strategic alliance with Freddie Mac during the fourth quarter, expanding our relationship with GSEs. Additionally, Lenders One added several new preferred vendors and investors and continues to provide Lenders One members with pricing and execution benefits and enhanced access to mortgage products. Altisource have competitive advantages, which allow us to provide our customers with industry-leading products, services and solutions to help them achieve better execution, increase their revenue, reduce their costs, and mitigate their underwriting and regulatory risks. We are taking advantage of these capabilities by launching several new products this year that are specifically designed to benefit the members, preferred investors, and vendors of Lenders One, and continue to reinforce and enhance the overall value proposition of the cooperative. I will provide further updates on these new products on subsequent earnings calls. Turning to sales and marketing. Similar to the strategy we deployed for the servicer solution initiative, we have begun to leverage our enterprise wide sales organization to offer our origination services to larger banks and plan to expand on middle-market sales organization to address other prospects. Our third initiative is growing Owners.com, our consumer real estate offering. 2015 was a very busy year for the team, preparing for the 2016 market launch of our online platform to represent homebuyers. Over the course of the year, we put the infrastructure in place to display real estate listings directly from the local MLS boards, enhance the user experience to support both sell-side and buy-side transactions to our customer advisor teams and develop marketing content to launch our buy-side offering. From a brand and user interface perspective, we significantly enhanced the site experience, which is currently being tested with a portion of our website visitors. Our 2016 focus for Owners.com is to build brand awareness, drive customer engagement, and increase consumer adoption of our buy-side brokerage services. We are deploying a city by city rollout of our multichannel marketing campaigns, having launched in our first two local markets; Atlanta and South Florida three weeks ago. While still very early, the increase in unique visitors and leads are better than we anticipated. Based on the results from this initial market launch, we will refine our product and marketing approach. By the end of 2016, we expect to have launched our marketing campaigns in approximately 15 greater metropolitan areas. Our fourth strategic initiative is growing our real estate investor solutions business. During 2015 through our acquisitions of RentRange and Investability, we dramatically increased our capabilities to provide end-to-end services for the largest institutional real estate investor, down to the fragmented and underserved smaller portfolio investor. Our full set of investor services now includes; property search, rental assessment, acquisition, closing, renovation, tenant evaluation, property management, and disposition. With respect to our institutional real estate investor clients, Altisource Residential or RESI currently uses our services to support its bulk acquisition and one-by-one purchase of homes. During 2015, we provided diligence and title services in connection with RESI’s acquisition of 1,300 homes. Additionally, during the fourth quarter, we provided brokerage and settlement services for RESI’s acquisition of rental homes through its one-by-one acquisition program. We are committed to helping RESI managing grow its rental portfolio at attractive net yields by leveraging our footprint and lower costs. We believe this will translate into revenue growth for Altisource through transaction support and ongoing management of the homes. In summary, I’m very pleased with our operating results and the progress we’re making in our strategic initiatives to diversify and grow our revenue and earnings. I’ll now turn the call over to Michelle for a financial update.

Thank you, Bill. This morning we reported 2015 service revenue of $940.9 million, adjusted net income attributable to shareholders of $143.5 million and adjusted diluted earnings per share of $6.96. Slides 4 through 7, provide highlights of our results for the current quarter and year compared to prior periods. This morning I’ll discuss our results in greater detail. Beginning with service revenue, we are very pleased with 2015 service revenue, which was better than our high-end scenario. Growth in our asset management business and the full-year benefit of the 2014 Mortgage Builder acquisition offset lost revenue from the November 2014 discontinuation of the lender placed insurance brokerage business, the full amortization of Equator acquisition deferred revenue in November 2014 and fewer 2015 property valuation referrals. The growth of the asset management business was driven primarily by a higher number of both non-Ocwen and Ocwen homes sold on Hubzu and growth in the property inspection and preservation business. Turning to margins. Gross profit as a percentage of service revenue was 39% in 2015 compared to 40% in 2014. Service revenue growth in the higher-margin Mortgage Services segment offset a decline in gross profit margins in the Financial Services and Technology Services segment. Mortgage Services slight decline in gross profit margin was driven by service revenue growth of the lower margin property preservation inspection business and the November 2014 discontinuation at the higher-margin lender placed insurance brokerage business. This was partially offset by higher margin Hubzu revenue growth. The decline in gross profit margin in the Financial Services and Technology Services segment was due to revenue mix within these segments and the full amortization of the Equator deferred revenue in November of 2014. As you will see in our results, in the fourth quarter, we recognized $71.8 million non-cash impairment charge in our Technology Services segment. The impairment charge is comprised of $55.7 million impairment of goodwill and $11.9 million impairment of intangible assets, and $4.1 million impairment of premises and equipment. The non-cash charge is primarily driven by the company’s current projected Technology Services revenue from Ocwen, additional investment in technologies provided to Ocwen, and higher discount rates for certain businesses from the overall technology environment and not a result of our recent acquisitions of Equator and Mortgage Builder. Goodwill and intangible assets are evaluated for impairment at the segment level. If we were able to evaluate these assets at the company level, we would not have had an impairment of goodwill or intangible assets, as there were significant headroom in the Mortgage Services and Financial Services segment. We continue to believe that our technology businesses are an integral component of our strategic initiatives and this charge does not impact our views on Altisource’s long-term prospects or our 2016 financial scenarios. Excluding the impairment charge and gain on Equator earn-out liability, 2015 operating income as a percentage of service revenue of 15% was lower than 18% in 2014, primarily from lower gross profit margins, higher legal and compliance-related compensation and professional services costs, and an increase in sales and marketing expenses to support our growth and diversification plans. Our sales and marketing efforts are paying off with meaningful customer wins and a robust attractive pipeline of opportunities. 2015 adjusted diluted earnings per share of $6.96 was slightly lower than $7.16 in 2014, driven by lower adjusted net income and partially offset by share repurchases. Our effective tax rate for 2015 increased to 15.6% from 6.9% in 2014. The non-cash impairment charges while deductible on our 2015 tax returns shifted the mix of earnings across jurisdictions with a higher proportion of our earnings coming from higher tax rate jurisdictions. We anticipate that our 2016 effective tax rate will be between 8% and 9%. From a cash perspective, we had another very strong year. We generated $195.4 million of cash from operations in 2015, representing 21% of service revenue, both of which were approximately the same as 2014. We deployed a balanced approach to capital allocation. During 2015, we used $58.9 million to repurchase 2.1 million shares of our common stock at an average price per share of $27.60, representing a 11% of the outstanding shares at the beginning of the year. We used $44.4 million to repurchase $49 million of our debt at a weighted average discount of 10.3%. As a result of repurchases and cash growth, net debt declined 17% during the year to $357.3 million at the end of 2015. We also invested $36.2 million in facilities and technology and used $28.7 million to acquire businesses to support our initiative. We ended the year with cash of $179.3 million. As a capital life services business, we expect to generate significant cash from our operation. In 2016, we plan to continue to deploy a balanced approach to capital allocation. We plan to use cash from operations to opportunistically repurchase stock in debt, invest in facilities and technology, and invest in businesses that support our initiative. Based on our growth opportunities in the current trading price of our stock, we believe repurchasing our stock is the best way to return value to our shareholders. We also believe it makes sense to repurchase our debt at attractive levels, as we continue to delever. During January and February of this year, we repurchased 181,000 shares of our common stock at an average price per share of $27.58. With respect to the operating metrics we share with you in our slides, we are planning to consolidate this information in future presentations to align our reporting with our core initiative. On our third quarter 2015 earnings call, we walked through our 2016 scenarios in detail. I won’t repeat all of this comments today, but I want to draw your attention to a few aspects of the financial scenarios. As you can see on Slide 8, achieving the midpoint of our 2016 scenarios, provides us with almost $900 million of service revenue, $134 million of adjusted pre-tax income, and $6 of adjusted diluted earnings per share. With respect to our diversification efforts, at the midpoint of our 2016 scenarios, service revenue from customers unrelated to Ocwen will improve to approximately 40% of service revenue in 2016 from 21% in 2015. Further, under the midpoint of our scenarios, we anticipate growing non-Ocwen revenue by 80%. Given the success we’re achieving with non-Ocwen revenue growth coupled with a robust pipeline of opportunities, we believe this is achievable. I will now turn the call back to Bill for closing remarks. Bill?

Thanks, Michelle. I’m very pleased with our operating results and the progress we are making on our strategic initiatives to diversify and grow our revenue and earning. I believe Altisource’s share price is substantially undervalued and is not reflective of a strong progress we are making. The management team is committed to generating shareholder value for continued operational performance against our strategy and a thoughtful approach to capital allocation. We believe our 40% non-Ocwen growth in 2015, recent customer wins, current negotiations with new and existing customers, and our robust pipeline activity demonstrate Altisource’s value to the market and our ability to deliver on our initiatives. We are very pleased with our results and excited by the opportunities in front of us. I’d now like to open up the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Lee Cooperman with Omega Advisors. Your line is now open.

Thank you and congratulations on a good report. A few questions, if I may, maybe just get them all out and you can handle them in whatever order if you want. We show cash at year end of $179 million. What is the minimum cash you need to run your business? That would be question number one. The question number two is, anticipated cash generation in 2016, I think, we generated $195 million in cash last year. What type of level of cash generation would you expect this year? Third, I noticed in your guidance, you’re assuming an average of $20 million, 375 shares in your forecast, but we ended the year with $19.2 million. You brought more shares back in January and February and you indicated the desire to buy more stock over the balance of the year. So we seem to be at a little bit of a fluff or a safety net that you built into your numbers. And am I right that the guidance you’re projecting is a range of low $4s to say $8 or an average of $6 for the year? And then finally, if you have a view on your concentrated ownership, if I take Mr. [indiscernible] stock, our stock, and a few other larger shareholders, we probably could take the company private and generate this cash flow for ourselves. But is this something that we would ever consider doing, given how mis-priced the equity seems to be? But let’s see how are the first few questions get answered.

Yes, Lee, this is Bill. I think I’ve got most of your questions down. I think your first question was with respect to the cash to run the business. I mean, generally speaking, we like to – I like to think we should keep about $100 million of cash on the balance sheet. In terms of cash generated, Michelle, what’s our midpoint of our scenarios for next year in terms of service revenue?

$894 million [ph].

So, Lee, we generally, I mean, this year, I think, we generated 20% or little over 20% of operating cash as a percentage of service revenue. So I would anticipate that that’s a good benchmark for 2016 as well.

[Multiple Speaker]

Yes, that’s right.

Okay.

I will have Michelle come back to your question about the share count in a second. In terms of the range in our scenarios, I think, Michelle do you have that handy in the slides? The pre-TB EPS range below mid and high.

I think it was $447.96, but that was predicated on $20 million through and 75,000 shares, which you’re already, at least, a million shares below that.

Yes, by the way, I do think in terms of what we put into the scenarios, Lee, in terms of share buy back, it’s likely the share count will be lower than what we’ve put in our scenarios, given where we’re at. But in terms of the 2016 right now, we have adjusted earnings per share at the low point of $4.14, the midpoint at $6, and the high at $7.87, and then let me have Michelle address your question with respect to shares, and I’ll come back to your last question.

Yes, on the diluted share count, so we did not update this since we put it out in the third quarter. Of course, it could fluctuate depending on the share price and whether or not dilutive shares are in the money or not, but it’s an estimate…

Let me just make a simple observation. You guys have bought stock back at materially higher prices. You’re sitting with, if I assume the $100 million which as you suggested, Bill suggested is your minimum cash, you’ve got $79 million of excess cash and you generate $160 million of cash, so that’s $230 million. The entire market capital of the company is $442 million of the equity. So it would seem to me, if you’re rational, if you liked it at $27, you would have loved it at $23.

Yes, Lee, we believe, as I said during my prepared remarks that the stock is substantially undervalued. And we think buying shares back should be one of the – one way in which we spend our capital.

Yes. My only suggestion, once you get some kind of 10b-5 program approved, because IBM, in my understanding, they buy up to the day earnings reported, they buy the day earnings reported, because they have a program that allows them that flexibility. But we want to be in a position to take advantage of Mr. Market rather than being exploited by Mr. Market. But if we have what it looks like to be, the ability to buy back half of the company this year, we would have a buyback that enables us to operate to the advantage of the company and not to be picked off by the street?

Yes. So, Lee, we typically do a 10b-5 each quarter, but we actually have been having conversations internally about whether we should extend it beyond the quarter. So we have the opportunity when the stock price is trading much lower to be buying without having to wait until our window is open, so that’s good feedback and we agree.

Okay. Thank you.

So I think your last question was about the concentrated ownership. We – look, we don’t believe it’s appropriate on this call to comment one way or the other with respect to our strategic options. But we – what we can say is, we and the Board are very focused on increasing shareholder value. As you pointed out, we have very strong liquidity and earnings, and we have a regular dialogue with our Board to our strategic planning process and our regular Board meetings and discussing what we think is the best way to create shareholder value. And so I’ll leave it at that, if that’s okay.

Just one last observation, without getting you in a forecasting game, the market is obviously pricing us as a melting ice cube. I know you’re working very hard to develop non-Ocwen businesses. If you were a betting man, looking out five years from now, do you think will be a large and more profitable company without make any specific forecast? I think it would be a large and more profitable company in five years, or smaller company in five years?

Lee, we’re absolutely trying to be a larger more profitable company. The business we’re bringing on to these other customers is very similar. Our margin profile is our existing business. We’re making very, very good progress from a sales and marketing perspective. I’m incredibly impressed with both the business unit leaders and the sales and marketing team with our ability to win competitive RFPs with major national – against major national players and we have clients that are very happy with our work. So I firmly believe, look, we may not win on all four of our initiatives. But I firmly believe, we have a very good strong fighting chance with each of the four initiatives for them to be successful and for us to be a much, much larger and more profitable company in the years to come.

My only comment, as you know, I’ve been an advocate for splitting the return of money to shareholders through the dividend and the buyback. But I say, if you have a high degree of confidence in everything you just said with $79 million of excess cash in the books another $160 million coming in, which is half of the market capital of the company, we should be much more aggressive in the buyback than we’ve been. I’ll leave it at that and congratulate you on good numbers and wish you the best.

Thanks, Lee.

[Operator Instructions] Our next question comes from the line of Kevin Barker with Piper Jaffray. Your line is now open.

Good morning. Thanks for taking my questions. I noticed that your amount of revenue per non-GSE delinquent servicing has gone up quite a bit over the last two quarters. Now some of that was due to the change in a billing structure with Ocwen and the geography of how those revenues are recognized? Could you just reconcile how we look at the accounting changes versus the projections that you had for servicing revenue in the beginning of 2015 versus what it looks like in the end of 2015?

Hey, Kevin, it’s Bill. So when we put together our 2015 scenarios – financial scenarios, we knew that there was going to be a change in how the pricing was going to be handled. We may have been off by a couple of months here there. But we had already built that into our 2015, so last year’s financial scenarios. So and then with respect to the higher service revenue per delinquent loan on non-GSE, I’ll let Michelle comment on that.

So the fourth quarter, we had higher service revenue per non-GSE loan, driven primarily from a higher volume of orders in the REO property preservation and inspection business and also higher property valuation services.

Was there anything in particular that cause the acceleration of those services in the fourth quarter, or was there something else that drove that?

No. So with respect to the property valuation, we receive orders based on triggers, and it just happened to be seasonally a stronger quarter for more valuation orders, just a timing as to how they’re ordered by our customers.

And so when you think about the service revenue per delinquent loan per quarter is averaging money little about $500 million per quarter in 2015. How would you think about that over a longer period of time?

Yes, I think, look, within the quarter – within – between quarters it can fluctuate, Kevin, based on seasonality. I think generally and it also depends on mix of services that we provide and this is a metric we’re talking about in terms of providing to Ocwen. So it can depend on the mix. But I think generally speaking again in the summer months, when we have more REO sales and you have more – typically you have more property inspection and preservation, you might see higher numbers and then usually it will trail off, as the year, as you get to the end of the year and into the – and it would be a little bit lower going into, and in the first quarter.

So you would say that the numbers that you’re reporting in the back-half of this year are relatively abnormal because they’re high near the end of the year, or is there something else driving that?

No, I wouldn’t say – no, I would say they are a little bit abnormally high with, excuse me, with respect to the valuation business just simply, because it was a high – we received more referrals than we had been receiving just based on the timing as to how our clients send us business. So – but outside of that, I think, it was a pretty normal quarter.

Okay. And then on Slide 14, you laid out that your total service revenue was – beat the average and your scenario B for 2015. How much did acquisitions play a part in your revenue growth in 2015?

Look and that’s a really good question. From 2014 to 2015 we cited during our prepared remarks that our non-Ocwen revenue grew by 40%, the vast majority of that was organic growth, not acquisition. And 2013 going to 2014, there was more acquisition than organic, but 2014 to 2015 and in our numbers from 2015 to 2016, it’s organic growth.

So the $941 million in servicing revenue and then the unrelated to Ocwen were $193 million, you’re saying 40% of the not related to Ocwen is due to acquisitions, is that right?

No, no. When you look at 2016 and when we say that we are going to be at 40%, if we hit the midpoint of our financial scenarios, 40% of our revenue roughly will be a non-Ocwen, that’s due to organic growth inside the business. Now some of that maybe organic growth of businesses we’ve acquired in the past, but it’s not a result of acquisition of new acquisitions.

Is that – a lot of that related to the recent contract win that you had with the top four banks or top four financial institutions?

It’s related to expanding our services with existing customers. It’s a growing business with existing customers. It’s the new client we just added. It’s a very active pipeline of new business. We believe we’re going to bring on, it’s a variety of items that I mentioned during my prepared remarks.

Okay.

But just to be clear it is organic.

The service revenue unrelated to Ocwen of $193 million, how does the pretax operating margins compare on that revenue versus the total service revenue of $941 million?

Yes. So with respect to our servicer solutions, Kevin, I would say the margins are very, very consistent with the margins we generate from Ocwen. And, in fact, on the margin they are probably even higher-margin, because we’re leveraging some fixed costs. With respect to our origination business that say much lower margin business today, but we expect over the next couple of years that to get into the 30% margin, today, it’s probably single-digits or break-even, but we have very, very high expectations for that to substantially improve over the next couple of years.

Okay. And then in regards to the comments that you had about the SEC’s investigation Ocwen on pricing between Altisource and Ocwen on the fees charged, do you know, if the New York Department of Financial Services completed their pricing study?

I think, Kevin, first just to be clear, I’m not making any comments with respect to Ocwen’s SEC investigation. My comments were around Altisource’s pricing to Ocwen and why we believe their market. And so we wouldn’t comment on Ocwen-related matters.

Okay. But is it fair to say that that study is ongoing?

Look, I think that’s a question, Kevin, you have to ask the management team over at Ocwen. From our perspective, we’re very comfortable that the like services, our pricing, our pricing is market. And we’ve done a lot of work here at Altisource to support that statement and I listen to Ocwen’s earnings call a couple of days ago, and then Ron Faris in response few questions, basically said the same thing.

Okay. And then the follow-up on some of the least comments regarding capital management. Would you consider possibly accelerating the pay down of debt versus share buybacks in order to deleverage and continue to generate in order to deleverage and reduce the amount of potential that you may have going forward?

Yes. So, Kevin, first, I think we did a very nice job bringing down our net debt in 2015 compared to 2014. And, yes, we are going to continue to opportunistically evaluate buying back some of our debt.

Okay. Thank you for taking my questions.

Thank you.

[Operator Instructions] At this time I’m showing no further questions. I’d now like to turn the call back over to Michelle Esterman for closing remarks.

Thank you for joining the call today. We look forward to talking to you next quarter.

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.