Encore Capital Group, Inc. (ECPG) Q3 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Encore Capital Group Q3 2014 Quarterly Earnings Conference Call. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Mr. Bruce Thomas, Vice President of Investor Relations for Encore. Please go ahead.

Thank you, operator. Good afternoon, and welcome to Encore Capital Group's Third Quarter 2014 Earnings Call. With me on the call today are Ken Vecchione, our President and Chief Executive Officer; Paul Grinberg, our Executive Vice President and Chief Financial Officer; and Jonathan Clarke, who was recently appointed to the role of Executive Vice President and Chief Financial Officer of our Midland Credit Management Business, and who will become Chief Financial Officer of Encore Capital in early 2015 after a transition period. Ken and Paul will make prepared remarks today and then we will be happy to take your questions. Before we begin, we have a few housekeeping items. Unless otherwise noted, all comparisons made on the conference call will be between the third quarter of 2014 and the third quarter of 2013. Today's discussion will include forward-looking statements subject to risks and uncertainties. Actual results could differ materially from these forward-looking statements. Please refer to our SEC filings and especially our most recent Form 10-K and Form 10-Q for a detailed discussion of potential risks and uncertainties. During this call, we will use a rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, which was filed on Form 8-K earlier today. As a reminder, this conference call will also be made available for replay on the Investors section of our website, where we will also post our prepared remarks following the conclusion of this call. I'd also like to add that we've recently upgraded the Investors section of our website and invite you to visit us online at encorecapital.com. With that, let me turn the call over to Ken Vecchione, our President and Chief Executive Officer

Thank you, Bruce, and good afternoon. I appreciate everyone joining us for a discussion of our third quarter results. I'd like to acknowledge the hard work and dedication of the people of Encore for delivering another quarter of solid financial performance and recognize their efforts as we work together to build our global business. Before I get started, I'd like to provide some context to the third quarter's earnings. This quarter, we focused on driving growth from our core business and through our recent acquisitions. Where appropriate, we continue to drive cross-organizational synergies while maintaining our focus on worldwide collections and capital deployment. The Atlantic Credit Financial (sic) [Atlantic Credit & Finance] purchase, which we've previously announced, closed in August and provides us greater collection and deployment opportunity in the high-balance fresh paper channel. Now for the results. Encore's third quarter GAAP EPS rose to a record $1.11 per share compared to $0.82 per share in the third quarter of 2013. Excluding onetime items and convertible noncash interest, non-GAAP economic EPS was a record $1.17 per share compared to $1.02 per share, an increase of 15% from the third quarter of 2013. GAAP net income for the quarter was $30 million, and adjusted income was $31 million, or 15% greater than the same quarter last year. Cash collections increased 7% to a near-record $407 million. This increase was driven primarily by strong performances of our recent acquisition. Adjusted EBITDA was $252 million, an increase of 9%. Our overall cost-to-collect this quarter was 38.7%, reflecting the favorable impact of our European subsidiaries in our results this year. Our estimated remaining collections or ERC, at September 30 was approximately $5.1 billion, an increase of $1.1 billion or 27% compared to the end of the third quarter a year ago. During the quarter, our capital deployment demonstrated the strength of our global platform and the versatility of the geographic and asset class diversification strategy. We deployed $335 million in the quarter with roughly half, $174 million, coming from our core business in the U.S. We also deployed $109 million of capital in the U.K. as the purchasing environment for Cabot and Grove entered the seasonally stronger second half of the year. Our domestic deployments, including our acquisition of Atlantic's higher-balance fresh portfolio, reaffirms our ability to deploy capital profitably even as the U.S. market continues to be challenged by historically low levels of charge-offs and the absence from the market of 2 of its largest issuers. With regard to our core markets, pricing in the U.S. remains steady, and in some cases, we're seeing declining prices for similar portfolios. We are not seeing much change to the supply in the environment in Q4, as 2 of the larger issuers has yet to return to the market after a lengthy absence. In Europe, pricing remains competitive, as supply improved in the seasonally stronger back half of the year as expected. Consolidation within the market for debt buyers continues. The market for Grove's IVA business, which we expected to be inconsistent in the back half of the year, shows signs that supply may move from Q4 into Q1. In Spain, we're seeing a rich opportunity pipeline, and accordingly, we're actively buying consumer information sets to support that growing business. In the Latin American markets, for us, in Colombia and Peru, we're seeing consistent supply and a healthy pricing environment as new sellers have entered the market. In addition, our experience in the region has exposed us to several interesting expansion opportunities in Latin America. Our results for the third quarter are in part, a direct result of our growth strategy, which I've shared with you over the past several months. Our growth strategy has 3 components: continuing to invest in the core business, expanding into new geographies and exploring business model adjacencies and expansion. Continuing to invest in our core business is the first component of our strategy. As the supply dynamics in our core business continue to be challenged by record low levels of charge-offs and the absence of 2 key issuers, we made a strategic move to expand our presence within our core by acquiring Atlantic Credit & Finance. Atlantic is a leader in the market for buying freshly charged-off debt, which was not an area of strength for us prior to the transaction. Combined with our experience -- expertise in the later-stage collections, Atlantic is already allowing us to be more competitive in the market and enabling us to win more deals at a better return than we could have without them. While it's still early, the Atlantic acquisition is performing to expectations, both in terms of collection and costs. To achieve our growth over the longer term, the second leg of our strategy involves our expansion into new geographies. Cabot, Marlin, Grove and Refinancia provide us with this geographic diversity. In our third quarter results, you will see that 1/3 of our deployments and 1/4 of our collections have come from our international subsidiaries. The third component of our growth strategy, exploring business model adjacencies and expansion, is where we will leverage some of our core competencies in other areas. When these opportunities come to fruition, we will share them with you. I'd like to provide an update on our recent acquisitions. First, we closed the acquisition of Atlantic Credit & Finance in the third quarter in a move that we would expect would strengthen our core business, and this transaction has already begun to pay off. Based in Roanoke, Virginia, ACF has been buying and collecting debt for nearly 20 years, with a particular expertise in fresh, higher-balance accounts. This is a terrific complement to our core competency of collecting on later-stage, lower-balance paper, and Atlantic has enabled us to improve our capabilities across the account life cycle. We are excited about this acquisition for a number of reasons. First, with Atlantic, we have the opportunity to win more business in the fresh, higher-balance segment of the market. Second, we expect to bring accounts that Atlantic is unsuccessful in converting into our core business. And third, over time, we can learn from Atlantic's practices to improve the way we collect on fresher accounts in every geography. In an effort to minimize integration risk and preserve their high level of productivity, Atlantic will continue to operate in much the same way as they did prior to the acquisition. We look forward to maximizing the return on investment in Atlantic, and the early results look very promising. Turning our attention to Cabot. You can see Cabot's economic EPS contribution was $0.21 this quarter and in line with our business plans. After deploying approximately $93 million in the third quarter, Cabot has now deployed $295 million in the first 3 quarters of 2014 and over $500 million including the acquisition of Marlin's portfolio. Cabot has also grown their ERC to over $2.3 billion. From an operational perspective, we are successfully moving sizeable numbers of legacy Cabot nonpaying accounts onto the Marlin legal collections platform. Our performance in India in servicing Cabot's accounts continues to meet expectations in both the quality and quantity of the collections, and we expect to continue to increase India's capacity in 2015. Propel continues to grow and contribute to Encore. Propel's acquisition of a nationwide Tax Lien portfolio and servicing platform in the second quarter expanded its operational footprint from 11 states to 22 states, increasing our ability to deploy capital in this asset class. Propel's receivables secured by property Tax Liens have grown 48% over the last year and now exceed $276 million. Propel continues to benefit from Encore's analytical strength and our operational expertise, leveraging our Costa Rica call center to provide both Spanish- and English-language support to Propel's consumers. We expect that the securitization of a pool of Propel's Texas Tax Lien assets earlier this year, and the corresponding lowering of our cost of capital will further support Propel's earnings contribution in the future. Before I hand the call over to Paul, I'd like to mention that Jonathan Clark has joined us as Chief Financial Officer of Midland Credit Management, and he will succeed Paul as Chief Financial Officer of Encore in early 2015. As I shared earlier this year, Paul has been tasked with continuing to grow and diversify Encore's business through acquisitions and will also oversee Encore's European and Latin American operations. Jonathan has a strong track record in leading complex financial services organizations. He will be an asset to us as we continue our growth evolution. He comes to us from Sallie Mae, where he was Executive Vice President and Chief Financial Officer. While there, he increased shareholder value, reestablished Sallie Mae as a major player in the securitization market and guided the company through the financial crisis. Over the next few months, Paul and Jonathan will continue to work together to create a smooth transition. In addition, Paul and Jonathan will soon take to the road and begin to transition the IR function and give many of you, over time, the opportunity to develop a relationship with Jonathan. I am confident that we have 2 very strong contributors in the right positions to continue advancing our corporate strategies. With that, I'll turn it over to Paul, who will go through the financial results in more detail.

Thank you, Ken. Jonathan and I have already spent a lot of time together over the last few weeks, and I'm anticipating a very smooth transition. As Ken discussed, we had a very productive third quarter, reflecting strong performance from our recent acquisitions, and our core business continues to deliver strong contributions to our bottom line. Before I go into our financial results in detail, I would just like to remind you that, as required by U.S. GAAP, we are showing 100% of Cabot, Grove and Refinancia's results in our financial statements. Where indicated, we will adjust the numbers to account for non-controlling interest. We generated $407 million of collections in the third quarter. This performance reflects the steady execution of our collections operation and, in particular, the continued growth of our operations outside of the U.S. 1/4 of our total collections, $102 million, were generated from accounts in the U.K. compared to 18% of our total collections in Q3 of 2013. For the quarter, our call centers contributed 46% of total collections or $189 million compared to $157 million in Q3 of 2013. Legal channel collections accounted for 41% of total collections and grew to $166 million in the third quarter compared to $154 million in 2013. Collection agencies accounted for 13% of total collections and declined to $53 million in the third quarter compared to $69 million in 2013, which was the quarter after we acquired Asset Acceptance and, therefore, had a disproportionate amount of related collections handled through their agencies. In addition, keep in mind that, for some of Cabot's purchases, we are contractually required to keep accounts with certain collection agencies for a period of time. When excluding the collections made by agencies on behalf of Cabot, only 5% of collections in the quarter came from third-party collection agencies compared to 11% in the same quarter a year ago. For the quarter, revenue was $273 million, an increase of 16% over the $236 million of revenue in the third quarter of 2013. This quarter marked the seventh consecutive quarter of revenue growth for Encore. With regard to our revenue from receivable portfolios, as a percentage of collections and excluding the effects of allowance reversals, our revenue recognition rate was 60.4% compared to 58.6% in Q3 of 2013. For the quarter, we had $5.8 million of allowance reversals, much of which was 0 basis allowance reversals, compared to $3 million of allowance reversals in Q3 of 2013. We had no portfolio allowances in the quarter. As many of you know, once we have evidence of sustained over-performance in a pool, we will increase that pool's yield. Consistent with this practice and as a result of continued over-performance, primarily in the 2010 through 2012 vintages, we increased yields in those pool groups this quarter. Turning to cost-to-collect. Excluding acquisition-related and other onetime costs, our overall cost-to-collect for the third quarter was 38.9%. Breaking the overall cost-to-collect into its components, Cabot's cost-to-collect in the quarter was lower than our overall cost-to-collect due to the fact that Cabot's portfolio primarily consist of consumers who are already on payment plans and involves very little litigation. Even though the addition of Marlin has marginally increased Cabot's cost-to-collect due its litigation focus, we expect that, over time, Cabot's investment in Marlin will drive incremental net collections and a higher overall return. Within our U.S. business, direct cost per dollar collected in our call centers improved to 7.2% in Q3 versus 8.4% last year. This was the result of improved consumer insights, which allow us to more effectively determine which consumers have the ability to pay and how to best engage with them, as well as certain reduction in headcount after completing the integration of Asset Acceptance. Direct cost per dollar collected in the domestic legal channel was 36.3%, down from 39.6% in Q3 of 2013. While cost-to-collect is an important metric, we don't focus on it in isolation. For example, when we acquire a business in which some of the paying accounts are already placed at collection agencies, we may keep those accounts at the agencies even at a higher cost rather than risk payer attrition that can occur when accounts are migrated from agencies to internal call centers. Additionally, cost reduction efforts at collection sites, such as those we talked about in connection with the Asset Acceptance acquisition, may be deferred until after the seasonally high collection period in Q1 and early Q2, even if this results in higher cost during that period of time. Lastly, we may increase the number of accounts placed in our legal channel, resulting in additional court cost expense in order to generate incremental net collections and future revenue. Overall success in our business is driven by generating the greatest net return per dollar invested. We accomplish that by generating more gross dollars collected per investment dollar at what we believe to be the industry's lowest cost per dollar collected. Our legal channel, which includes both legal outsourcing and our internal legal operations in the United States, continues to contribute meaningfully, both in terms of dollars collected and cost-to-collect. Total dollars collected in our legal outsourcing channel in the U.S. was $126 million at a cost-to-collect of 35.6%, representing a 180 basis point improvement over the 37.4% cost-to-collect in the same quarter a year ago. In Q3, we collected $28 million in our internal legal channel at a cost-to-collect of 39.3% compared to 46.8% last year. We expect our internal legal cost-to-collect will continue to improve over time as we place more volume in this channel. I'd like to reiterate that our long-stated preference is to work with our consumers to negotiate a mutually acceptable payment plan tailored to the personal financial situation. These plans almost always involve substantial discounts from what we are owed. We not only believe that this is the right thing to do for our consumers but the right thing to do for our business. For Encore, legal action is always a last resort and is pursued only after numerous attempts to communicate and reach an acceptable agreement with a consumer. As investors who are familiar with Encore know, adjusted EBITDA is one of the most important ways that we measure our company's operating performance. It helps us determine amounts available for future purchases, capital expenditures, debt service and taxes, and it gives investors a clear picture of the strong cash flow generated by our business. As mentioned earlier, collections were strong and grew 7% in the third quarter. This growth in collections led to improved cash flows, with third quarter adjusted EBITDA increasing to $252 million, which was up 9% over last year, a particularly strong result considering that a year ago, our adjusted EBITDA was boosted by the large number of paying accounts in the Asset Acceptance portfolio acquired in the second quarter of 2013. Our estimated remaining collections, or ERC, at the end of the third quarter was $5.1 billion, an increase of 27% over last year. This increase was driven primarily by Cabot's acquisition of Marlin and the portfolio we acquired as part of the Atlantic acquisition. We believe that our ERC, which reflects the value of portfolios that we have already acquired, is conservatively stated because of our cautious approach to setting initial curves and our practice of only increasing future expectations after a sustained period of over-performance. There were certain onetime and noncash items that affected our results this quarter. $0.06 were related to the noncash interest and issuance costs associated with our convertible notes, and $0.04 were related to onetime acquisition and integration costs. These charges were partially offset by a tax benefit related to our Asset Acceptance acquisition. After adjusting for these, we end up with a $1.13 per fully diluted share and $1.17 on a non-GAAP economic basis. In calculating our EPS on a non-GAAP economic basis, we exclude those shares associated with our convertible debt that are reflected in our EPS denominator from an accounting perspective but which will not be issued as a result of the call spread we entered into at the time we issued the convert. For Q3, there were approximately 1 million shares included in the calculation of GAAP EPS, which will not increase the number of outstanding shares as a result of the call spread. With that, I'd like to turn it back over to Ken.

Thanks, Paul. The Encore team delivered great third quarter performance, and as you've seen from our continued progress on the acquisition front and in our capital deployment, we are broadening our capabilities, deepening our understanding of our markets, and through our operational execution, we are providing ourselves with the flexibility to enter new markets and geographies while positioning ourselves better to navigate the challenging dynamics in our traditional markets. As a result of all of these efforts, we are evolving into an increasingly diverse international specialty finance company. Now we'd be happy to answer any questions that you may have. Operator, would you please open up the lines?

[Operator Instructions] Our first question comes from David Scharf with JMP Securities.

First off, Ken, maybe more just kind of a very big-picture question, setting aside just all the numbers. Is it fair to say that your commentary this quarter, as it relates to pretty much most major issues, U.S. supply, pricing, foreign competition, collection environment, regulatory outlook, is this pretty much a replay of 3 months ago? It sounds like most of the core drivers and -- in metrics and outlook are pretty much the same, which I would take to be a positive. I just want to make sure I'm not missing anything.

No, no, Dave, I think that's exactly right. This quarter, for us as a company, was more on focusing on having the integration of the acquisitions and continuing to focus on the core and have the core produce the results that we wanted to produce. Really, nothing has changed quarter-to-quarter on the market side on pricing. It's, as I said, stayed flat to slightly down. Occasionally, you'll see the weird price coming in from a small player that may lift the pricing of a portfolio. But so far, the trend has been flat to slightly down, which we -- which we're pleased with. And basically, it's -- I want to say business as usual, whether it's in the U.S. or in the U.K. markets. We're just looking to execute against what we've already acquired.

Got it. Got it. That's helpful. And just curious, as it relates to the U.S. market, I kind of feel like I have to ask it every quarter, but as loss rates in a lot of consumer credit products remain quite low and employment continues to tick up modestly, is there any discernible change in the collection environment that's more positively skewed?

No. I mean, it looks the same every quarter in and out for us. It really hasn't changed much.

Got it, okay. And I just want to make sure, the capital deployment, the non-Propel, just on the core finance receivables, the $299.5 million, does that include anything that came over with ACF? Or was that, for better purposes, in sort of an organic number?

No, there were some things that came over with ACF. And of course, we have -- we now have some of the ACF's forward flows in our numbers and projected to be in our numbers for Q4 as well.

Dave, $105 million was allocated to the Atlantic portfolio as part of that transaction, so included in that number was $105 million for Atlantic.

Okay, I got it. And then, I heard, for the U.K., it was how much, $109 million?

Yes. It was $93 million at Cabot and then $16 million at Grove.

Our next question comes from Mark Hughes with SunTrust.

When you look at the receivables, year-over-year, they are up about 30%. If you look at expected remaining collections, up about 27%. If you look at collections, up about 7%. Can you talk about that? I know that there are mix issues in there, that the -- some of the European portfolios, the collections are more spread out. But is there anything there that we should think about in terms of higher pricing on portfolios maybe dampening collections? How should we look at those numbers?

Mark, actually, the largest driver for the collections was the fact that, on June 13, 2013, we completed the Asset acquisition. And unlike most other purchases that we do, a significant portion of that portfolio were payers. And so there were a lot of collections coming off of that portfolio immediately after that acquisition, which drove collections in Q3 '13 much higher than they would have been otherwise. So the growth in collections of only 7% is not a reflection of slower growth. It's just a reflection of very high period of collections following the Asset Acceptance acquisition. And then the growth in the balance sheet and the growth of the ERC reflects the fact that we're deploying capital intelligently and that we expect a lot of future collection growth coming out of our existing book. So the 2 are driven for different reasons, but we expect strong performance going forward, and we had a very strong period a year ago.

And Mark, when you have time, turn back to Slide 11, and you'll see that cash collections in the quarter before we purchased Asset was $278 million. In the quarter, we did purchase -- in the following quarter, Q3, sums up to $380 million in collections. So you could see that big uplift at that point.

You described the enthusiasm about the Spanish market, and you're buying some data sets there. When do you think you'll be in a position to actually do some material buying?

So we've done some buying. The Grove team is very methodical in their approach. I would say some of this is always dependent upon who is selling, so you never know when a big deal comes up. But we're trying to position ourselves for that big deal by understanding consumer behavior and beginning to model that. So we'll wait and see, but we've gotten a couple of small deals. And as I said, the pipeline is beginning to really heat up there. But in Spain and also in the U.K. IVA market, there's a lot of unpredictability and lumpiness to when portfolios actually get sold. There's what the tell us and then when they pull the trigger, the lag there is a little longer than I would expect or I'm used to compared to the U.S. market.

And one thing I would just add relating to Grove is that -- actually, before we acquired Grove, a number of their purchases in Spain were -- of telecom accounts, which is what they were buying before we acquired them. Now we're focused on financial services. But with the telecom accounts come a lot of consumers and a lot of data. And so while the amount of capital deployed in Spain hasn't been material, from an Encore perspective, the number of accounts acquired have been very significant, which has enabled us to do a lot of modeling around the performance of consumers and behavior of consumers in Spain. So we believe we're positioning ourselves to take advantage of opportunities as they come up.

Yes. For this month, for this quarter, 1/3 of the deployment for Grove was in the U.K. and the rest was in Spain, still small numbers.

But maybe next year, you see more ramp in Spain?

Well, next year, I'll say, we see more of a ramp for growth overall. I think we've kind of discussed that at our Investor Day. And some of that growth is going to come from Spain, absolutely.

[Operator Instructions] Our next question comes from Robert Dodd from Raymond James. Robert J. Dodd - Raymond James & Associates, Inc., Research Division: I'm looking at the detail in the queue in terms of pricing, and you mentioned increased competition, et cetera. If I look at Europe for 2014 and the incremental purchases, again, the $109 million, the total estimated collections for that only went up 150 million despite putting 109 roughly -- 105, roughly, to work, which implies a pretty low purchase multiple in the U.K., particularly during the third quarter. Is that the case there? Or have there been revisions down in purchases of prior quarters in 2014? Can you give us any more color there?

So there is a lot of impact of mix of purchases in the U.K. from one period to the other. So keep in mind that a lot of what Cabot has historically purchased are paying accounts, where the purchase price is a much higher percentage of face than what you might see in the United States because the consumers are -- a significant percentage of them are already on payment plans, and the cost-to-collect is actually a lot lower. So the multiple is lower than it would be otherwise. So there's a lot of mix implications of what's purchased from one period to another as it relates to the U.K. Also, within the U.K., when we acquired Marlin, a big component of our purchase price related to the ability to drive uplift in Cabot's portfolio. And so when you look at multiples as it relates to the Marlin acquisition, you have to look at both the multiple pay for that portfolio as well as additional ERC that we expect to generate out of Cabot's back-book as a result of using Marlin's platform. So there are lot of different components, but the environment really hasn't changed much from this quarter to previous quarters. We're still generating very good returns in the U.K.

[Operator Instructions] Our next question comes from David Scharf with JMP Securities.

Ken, I just want to follow up on kind of the recurring comment about ongoing consolidation in the U.K. I know there was a recent investment in a top 3 or 4 buyer, but can you expand a little more? I mean, is there an identifiable pipeline? I'm just trying to get a handle on maybe what to expect over the next 12 or 18 months.

Yes, well, let me just make -- the opening investment thesis for us was that there would be enough organic growth for us, and then there would be also opportunities to consolidate other platforms onto ours. That's when we bought Cabot. Of course, then we brought Marlin and connected it to the Cabot platform. There were just recently a trade that occurred for another, I'll say, second-tier debt purchaser, and we see at least a couple of others that are in the process or soon will be in the process of being sold. So that debt -- that platform consolidation has begun, and I think it will continue not only through '15 but into '16. So the U.K. market is following the U.S. market slowly, but it is following the U.S. market.

Got it. And just one kind of follow-up financial question just for Paul. Can you just, I guess, help me relate the -- I guess, the minority, the very small minority interest line relative to the first couple of quarters of this year on the consolidation?

So the minority interest line is going to be based on the investment at Cabot, the debt levels at Cabot. There is an impact on it as well. There's some fair valuing that gets done of our potential repurchase of the minority interest at some point in time. So there are 3 or 4 components that will impact that line that go into the determination of the value at any given quarter. I don't know if that answers your question.

Well, yes, I mean, more than anything else, I'm just trying to get a sense for how to think about this going forward. I mean, it looks like it was under a $1 million in the third and fourth quarter last year. It was $4 million and $2 million, respectively, in the first half of this year. And then, it was just a couple of hundred thousand dollars this quarter. And seems to be pretty variable.

I mean, I think, the best way to look at that line -- actually, the best thing to do is probably to look at contributions to Encore rather than focus on the minority interest line because we showed a slide today of what the EPS contribution from Cabot to Encore was going to be -- was over the last couple of quarters, and we expect that over time, that will continue to grow. So rather than focus on the non-controlling interest, I think if you focus on what their contribution is to Encore, the non-controlling interest will fall out.

I'm showing no further questions at this time. I'd like to turn it back to Mr. Ken Vecchione for closing remarks.

Thank you. So clearly, the management and the executive teams have been focused on driving growth from our existing inventory and integrating our 2014 acquisitions within Encore. As we prepare for our 2015 budget cycle and begin to lock down our 2015 budget, we are focused on pushing and unlocking organic growth from our current book of business. This doesn't mean that we're not going to pursue acquisitions that fit our strategic plan, but rather, have the acquisitions provide us the flexibility to optimize our capital deployment in 2015. Just wanted to drop that note to you. And that concludes our call for today. I want to thank you, all, for participating. We look forward to talking to you in the fourth quarter. And Jonathan and Paul look forward to meeting some of you right after this call next week. Thanks, again, for all your attention and time.

Ladies and gentlemen, thank you for participating in today's conference. This does concludes today's program. You may all disconnect. Everyone, have a great day.