Sotheby's (BID) Q1 2019 Earnings Call Transcript

Sotheby's (BID)
Q1 2019 Earnings Call
May. 02, 2019, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Sotheby's first-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this call is being recorded. At this time, I would like to introduce Jennifer Park, vice president of investor relations. Ms.

Park, please go ahead.

Jennifer Park -- Vice President of Investor Relations

Great. Thank you, Sarah. Good morning, and thank you for joining us today. With me on this call are Tad Smith, Sotheby's president and chief executive officer; and Mike Goss, chief financial officer.

GAAP refers to generally accepted accounting principles in the United States of America. In this earnings call, financial measures are presented in accordance with GAAP and also on an adjusted non-GAAP basis. An explanation of the non-GAAP financial measures used in this earnings call as well as the reconciliations to the comparable GAAP amounts are provided in appendix B to the first-quarter 2019 earnings release as well as the company's Form 10-Q for the period ended March 31, 2019. Also during the course of this call, the company may make projections or other forward-looking statements regarding future events or the future financial performance of the company.

We wish to caution you that such projections and statements are only predictions and involve risks and uncertainties resulting in the possibility that the actual events or performance will differ materially from such predictions. We refer you to the documents the company files periodically with the Securities and Exchange Commission, specifically the company's most recently filed Form 10-Q and Form 10-K. These documents identify important factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements. Please also see our investor web page for a transcript of our prepared remarks.

Now I'll turn the call over to Tad.

Tad Smith -- President and Chief Executive Officer

Thanks, Jennifer. Thank you for joining us this morning. Today, we are reporting a first-quarter 2019 loss per share of $0.15, compared to $0.12 per share in the prior period. After excluding certain charges, our adjusted diluted loss per share in the first quarter of 2019 was $0.15, compared to an adjusted diluted earnings per share of positive $0.09 in the first quarter of 2018, a first-quarter profit that has only happened a handful of times in the 30 years since we went public.

Our results in the first quarter would have been higher were it not for the rescheduling of certain spring Hong Kong sales into the second quarter of 2019 after occurring in the first quarter of the prior year. The schedule change moved $74 million in net auction sales from our wine and contemporary evening sales in Hong Kong from the first quarter to the second quarter of 2019. Despite being a traditionally small quarter, we do hold several important sales in the period that provide us with important indicators about the state of the market. Let's take a closer look at those results along with a few sales that have occurred since then before looking ahead to our important May auctions.

I will then turn things over to Mike to review the financials in more detail before taking your questions. So far in 2019, we're encouraged by what we are seeing in our global salesrooms and the picture we see for the market. While the overall supply of our sales was lower in some categories, demand and sell-through rates have remained strong. We began the year with our annual masters week auctions of old master paintings, drawings and sculpture in New York, which reached $100 million for the first time in eight years with nearly 50% of the sold lots achieving prices above their high estimates.

Our evening sale brought a total of $52.7 million and featured a group of works created by leading female artists from the 16th through the 19th centuries. Titled The Female Triumphant, the offering totaled $14.6 million and established new auction records for seven female artists. The series also included an auction of old master Drawings that achieved an exceptional $15.1 million, the highest ever total for any such sale at Sotheby's. Moving to London.

At the end of February and beginning of March, our impressionist, modern and contemporary art sales brought a total of $287.6 million. Despite macro concerns that affected supply and yielded an overall total smaller than last year by 28%, both evening sales achieved healthy sell-through rates of 91%. The series was led by Claude Monet's Venetian view that sold for $36.2 million against the $25 million low estimate in our impressionist & modern art evening sale. Asian collectors were particularly active in that sale.

We saw a 50% increase in bidders from Asia compared to the prior year. Those auctions were immediately preceded by outstanding results achieved by our contemporary team in New York, a $36.8 million contemporary curated sale, the highest ever total for the series. The sale was led by the second-highest price ever achieved at auction for Kerry James Marshall, $7.3 million paid for the artist's Untitled Painter, which soared past its $2.5 million high estimate. In mid-March, our Asia Week sales in New York brought an overall total of $45.7 million with five works surpassing $2 million.

These results were 42% lower than the same series in 2018 largely due to a number of single owner consignments that were not repeated this spring. The top lot of the recent series was a rare and extraordinary hand scroll, Poems on Falling Flowers in Running Script that achieved $3 million in our sale of Fine Classical Chinese Paintings & Calligraphy. As I mentioned earlier, our major spring auctions in Hong Kong straddled our first and second quarters. Ignoring for a moment how these sales occurred between the two quarters, the results overall were superb.

The six-day series brought a net total of $397.7 million against a low estimate of $298.2 million. Including the buyer's premium, the aggregate total reached $482 million, the second-highest total in company history. We saw a healthy overall sell-through rate of 90% with competition across all categories and from all corners of Asia. The results were particularly strong in the modern and contemporary art categories, which bode well for our upcoming sales in New York in 12 days' time.

Before we turn to our upcoming auctions, a word on private sales. We continue to be very pleased with our private sale performance. While our first-quarter total is down compared to the same period last year, that is attributable to a handful of high value transactions we concluded in the first quarter of 2018 that weren't repeated this year. The good news is that we closed several significant private sales early in the second quarter of 2019, so we expect the 6-month picture to reflect our continued success in this area.

Nonetheless, a reminder that private sales by their very nature can be unpredictable and results can vary from quarter to quarter. But in the long term, we expect continued secular growth. Turning now to our important auctions this month. We opened with our impressionist & modern art sales which carry a low estimate of $305.5 million and begin with the evening sale on May 14th.

These sales are slightly smaller than our sales in May 2018, which is impressive given that we had one work sell for $157 million this time last year. The upcoming sale is led by one of the finest examples of Claude Monet's renowned Haystacks series. The painting is from a group of 25 canvases created by the artist in 1890 and is one of only four to come to auction this century. The work has remained in the same private collection since it was acquired by the present owners at auction in 1986 and is estimated to sell for more than $55 million.

The sale will also include a portrait by Pablo Picasso of his second wife, Jacqueline, that was completed over the course of a month at the end of 1962. Consigned by a Japanese private collection, the painting is estimated to sell for $25 million to $30 million. Our contemporary art evening and day sales have an overall low estimate of $326.3 million and will begin on the evening of May 16th. Among the highlights of the evening sale are two paintings with distinguished provenance being sold to benefit important cultural organizations.

Mark Rothko's Untitled, 1960 is being sold by the San Francisco Museum of modern art to benefit the institution's acquisitions fund and is estimated to sell for $35 million to $50 million. Study for a Head from 1952 is one of the most important paintings by Francis Bacon remaining in private hands and carries a presale estimate of $20 million to $30 million. The painting is from the collection of Richard E. Lang and Jane Lang Davis, which now belongs to the Friday Foundation, a private charitable organization.

As a reminder, tomorrow, we are opening completely reimagined galleries in our New York headquarters, and I encourage all of you to visit over the next two weeks. With limited capital investment, we've added more than 20,000 square feet of exhibition space. We now have 40 galleries of varying sizes spread across four floors and we accomplished this without disrupting our business. In fact, we conducted sales of $1.34 billion in New York over the past 11 months while the construction project was quietly under way, sealed behind temporary walls.

In addition to our major sales of impressionist, modern and contemporary art, we will have an array of works on view ranging from 20th Century Design to floral jewels from the 19th century to the present. Looking beyond our auctions, we are equally encouraged by the progress we are seeing across all of our digital initiatives. In the first quarter of 2019, the number of online buyers across our business in our live auctions as well as online-only sales was up 18%, the number of lots sold online was up 43% and the total dollar amount sold to online buyers was up 23% compared to the same period in 2018. The number of online-only sales we held in the first quarter of 2019 grew by 64% with overall sales growth of more than 100% compared to the same period one year ago.

On the digital sourcing side, the first quarter yielded equally encouraging indicators. In the first quarter of 2019, the number of items submitted to our online estimate platform grew 69%, the number of items we estimated increased 96%, the number of items consigned for sale, auction or private was up 113% and the number of sold lots rose 89% compared to the first quarter of 2018. Additionally, consignments through the platform contributed 30% of the net auction total of a recent sale of watches including a top lot, a Rolex, that sold for more than $250,000. In short, good quarter, good indications about things to follow, and we are on track.

I will now turn it over to my colleague, Mike, to go through our financials before we take your questions.

Mike Goss -- Chief Financial Officer

Thanks, Tad. One of the most important factors to understand when looking at the results for the first quarter of 2019 is the fact that our Hong Kong spring sale series occurred on a different schedule between the first and second quarters than they did last year with more of our sales this year occurring during the second quarter. As we heard from Tad earlier, the overall series was very successful in the aggregate, the second largest in our history and up 4% versus last year's great sales. But if you consider how these sales occurred by quarter, we reported Hong Kong's net auction sales in the first quarter that were down 7% versus last year and in the second quarter, they were higher by 9% versus last year.

Of course, what is bad news for the comparison in the first quarter is good news for the comparison in the second quarter. This also serves as another reminder why we always encourage investors to consider our rolling 6-month results as importantly as they consider our quarterly results. As for the rest of our results, the quarter played out generally as we had anticipated during our last earnings call when we acknowledged we were likely to return to a loss for the first three-month period of the year, more in line with our historical pattern of first-quarter losses. One particular piece of promising news is that we're encouraged by the first-quarter's 18.2% auction commission margin, which was up 90 basis points versus the margin one year ago.

For the trailing 6-month period ended in March, our auction commission margin improved from 17.1% a year ago to 17.4% this year. As importantly, by the time we get to June and we are looking back at the first half of 2019, we expect to see even more improvement on a year-over-year basis. You might recall on our last call together, we expressed optimism that we might see a slight strengthening of our auction commission margin in 2019 after experiencing pressure at midyear in 2018, so the outlook remains positive on this front. So what can we say about the second quarter? Clearly, we entered the quarter with two significant tailwinds: the favorable comparison we've already seen in Hong Kong and a promising outlook for the all-important New York sales in two weeks.

In addition, we're also comparing against a quarter a year ago with the two large paintings that significantly impacted our profitability last year. Without having comparable risks this year, or said another way, with a largely hedged guarantee exposure and relatively few high-priced, high-risk paintings in this year's auctions, we believe we're on track for a strong second-quarter comparison to last year. We're also confident that once we report the June quarter and we are looking back at our business on a trailing 6-month basis at that time, we will see a company with a stable to moderately growing and profitable base business along with even more promising signs from our major e-commerce initiatives. Now let's hand things back to the moderator for your questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Alex Maroccia with Berenberg. Your line is now open. 

Alex Maroccia -- Berenberg Capital Markets -- Analyst

Good morning, and thanks for taking my questions. In which regions and specific categories are you seeing the highest supply for auctions later in the year? And then the follow-on to that, are you seeing an increase in the supply of lower-priced items that will benefit margins?

Mike Goss -- Chief Financial Officer

Well, right now, we're all focused on May rather than the second half of the year. So -- and remember that in the second half of the year, the third quarter is virtually nonexistent in terms of major reads on what's happening in the marketplace. So it's all about May right now. And as far as May looks, the mix of product looks pretty good for us.

So I would say mix is our friend. To answer your question, Alex, I would say that the supply of lower-priced middle market items seems to be stronger than the higher-priced items where margins are lower.

Alex Maroccia -- Berenberg Capital Markets -- Analyst

OK. Got it. And then one more. It looks like the revolver ended the period at normally high versus Q1 '18.

What were the plans for the cash?

Mike Goss -- Chief Financial Officer

What are our plans for the cash?

Alex Maroccia -- Berenberg Capital Markets -- Analyst

Yep.

Mike Goss -- Chief Financial Officer

Well, we still believe that we have a significant excess capital above what we need. We don't have any specific plans and probably won't make any specific plans for the excess cash until after we get to -- get through the May sales and figure out where we go there. Between if you want to like compare our year-end balance to where we were previously, we've had to fund some good and attractive growth in SFS, which has been helpful. We've had elevated capital spending behind the new building largely here in New York.

So those two factors have led to a higher borrowing than we had before. And don't forget, relative to a year ago, we've repurchased $274 million worth of stocks since a year ago as well.

Alex Maroccia -- Berenberg Capital Markets -- Analyst

I got it. That's helpful. Thanks a lot guys.

Operator

Thank you. Our next question comes from the line of Ray Stochel with Consumer Edge Research. Your line is now open. 

Ray Stochel -- Consumer Edge Research -- Analyst

Great. Thanks for taking my question. Do you think we're beginning to see some signs of your data work and data investment supporting commission margins, guarantees and unsold ratios?

Tad Smith -- President and Chief Executive Officer

Hi, Ray. Here's the thing. When I first saw the flash for the quarter, I had exactly the same thought enter my mind, and we can't prove or disprove it. What we can say is that the mix for the first quarter was beneficial overall.

But the proportion that is online remains so small that statistically, it's very difficult to do that. Also, we could say that the -- remember, we increased the buyer's premium in the first quarter, which was beneficial. And a close look at that -- said that a good portion of that might not have been retained in the consignment getting. So overall, I think the best and the most conservative position to say is that it was largely mix-driven because we don't have any evidence to the contrary, and the evidence at such micro levels is murky.

But boy, it sure does give you a good feeling, doesn't it?

Ray Stochel -- Consumer Edge Research -- Analyst

Got you. Yeah. And then how should we be thinking about your new auction engine and when those investments will begin to pay off? And if you'd be willing to share how long is the runway of innovation here and what's possible, I guess, over the next few years? Thanks.

Tad Smith -- President and Chief Executive Officer

Yesah. With respect to the new auction engine, that the -- what was really interesting was the press leak that went out yesterday, the day before, about our print sales. Our prints were both the evening sale and the day sale were run on the new Viking platform. And it was quite a remarkable set of auctions.

And what I mean by that is if you were watching them, a good portion of the auction was sold before the live portion of the auction actually began, and the heavy online interest going into it. And that was very encouraging. If you talk to the head of the prints department, who is a very successful and tenured executive here, she was absolutely thrilled with it, and she would point to the application of the Viking platform as being a material reason why the prints this week really kind of blew the roof off the place in a great way. In fact, I think it was the highest yielding sales since 2007 or something, if my memory serves me correctly.

We are rolling that out throughout this calendar year, Ray. We want to have virtually all of our auctions on the Viking platform. At the same time, by the way, we are tweaking and upgrading it as we roll it out. We see new innovations that we could be adding to it and so that innovation process is under way.

The nice thing is -- with respect to investing in the Viking platform, most of that will be, as I said on the last earnings call, completed in this calendar year. The investment in the content management system, which was a significant amount last year, will also be fully completed by this calendar year. And we are also investing in a CRM platform that will be rolling out on the second half but the investment there is quite modest. And in terms of the innovation profile, here's the thing.

What's really exciting and we don't say much about it publicly, but whether it's in the machine learning or in the online consignment platform or in making it easier to bid through digital technologies, what we're seeing is we're getting far enough down the pike on the investment cycle. Not only are we expecting better things economically in 2020 than we're experiencing this year, but we're [Inaudible] as new and increasingly as capital-intensive innovations available to us with a tweak here or a tweak there because we've made so much progress so far. So we're really excited about where we're going and we're really excited about what the future holds. And we're -- like you in the first part of your question, looking for little green shoots, if you will, but the size of the traditional business is so large and so -- well, it's so large in comparison to the digital, it's very hard to discern the shoots quite yet.

Because when it gets larger though, I think they will be quite apparent. One thing we do know is that the math on the incremental business and from a contribution-to-overhead perspective is very exciting, and we like that. As it grows, it should be robust.

Ray Stochel -- Consumer Edge Research -- Analyst

Got it. Thanks again.

Operator

Our next question comes from the line of Oliver Chen with Cowen and Co. Your line is now open. 

Unknown speaker

Hi, good morning. This is Max on for Oliver. Thanks for taking our question. So first, can you guys just provide some puts and takes around the strong auction commission margin during the quarter? And how should we think about 2Q given the easy compare as well as momentum in the business? And then we have one more follow-up.

Tad Smith -- President and Chief Executive Officer

OK. Well, it is largely driven by mix. Remember the way our buyer's premium schedule is structured so that less expensive paintings carry a much higher auction commission or a buyer's premium than higher-priced paintings, that is pretty much the tale of the tape in its entirety for the first quarter. It was helped a little bit in that that's the Hong Kong sales that pushed from Q1 and into Q2 intended to be lower-margin sales, that was helpful.

So -- but that also is kind of part of the whole mix equation. As for the second quarter, yes. You are right. Last year's reported auction commission margin was 14.1%.

On a trailing 6-month basis ending in March, we are at 17.4%. So clearly, we have a lot of headroom versus last year's second quarter. Remember, last year's second quarter was adversely impacted by two paintings, large paintings, on which we recorded very little buyer's premium, if any. If we adjusted last year's first -- second quarter for those two paintings, it was still 15.5%, and we think we'll be comfortably above even that in the second quarter given what we know about that mix of sales in May.

Unknown speaker

Got it. Thank you. And then just more broadly, what is your sense for the overall global consumer health? What are you seeing out there?

Tad Smith -- President and Chief Executive Officer

The overall market is strong. And here's the thing, when you look at the sales in the first quarter, you observed that they are lower. But what's crucial to that is the following: there are two things that will drive our actual sales in each quarter. One is how much supply we get and then the second is when it sells, how well does it sell, what is the sell-through rate, etc., etc.

The reason that's important is because the determinant of the supply typically happens two to four months before the sale actually occurs. And so what -- the things that can affect supply are prospective, meaning people, four months before the London sale that we recently had, were thinking about, gee, do I want to consign in London when the -- back -- if you think about late 2018, when the equity markets are in some trouble, when there's some uncertainty in terms of the government and the political situation in the U.K.? Or they think a little bit at -- or they're thinking about consigning in Hong Kong, again, and this is in November and December or in sometimes as late as January for 2019. They're thinking about Hong Kong and at that time, the prevailing sentiment was a lot less favorable for the world macroeconomic situation than it is right now. The equity markets were in more a phase of uncertainty.

China hadn't begun or it had probably begun to slightly reinflate the market there, the China Central Bank, but it had not really advanced much. And the sentiment now is quite bullish. And that reason that's important is because -- so we had lower supply that was determined before, months before the sales actually happen. And then what we looked -- and that's sort of arguably a reflection of the sentiment at that time.

But then you look at how they sell once they're there, and that's the reflection of the sentiment right then. And what you see there is the sell-through rates are popping, the estimates are going -- sorry, the items themselves are performing very well against their estimate, and that tells you that the market is strong right now. So the paradox of this is people report, ah, our first quarter was down, and that is a function of supply. And the -- but the most important thing for investors to look at is well, how -- given the supply that was sort of determined several months early, how did it perform right then? And what's -- that's why we went into the details that we did around the Hong Kong sales.

That is a great indicator that Asia is feeling good. It's robust, that we're going into the May sales feeling very good. And that's sort of the paradox and it's really helpful if we get that clear because right now, the sentiment is strong. So when you look at what we report, the sales for our May sales are slightly down but that was from a sentiment two to three months ago.

So that's the point. We feel very good about things despite the fact the reported sales for the first quarter were lower but that was supply driven, and we're well past that.

Unknown speaker

Got it. Thank you. That was very helpful. Will yield.

Operator

Thank you. Our next question comes from the line of Greg Pendy with Sidoti & Company. Your line is now open. 

Greg Pendy -- Sidoti and Company -- Analyst

Hey, guys. Thanks for taking my questions. Just one, just in the Q, just looking at the outstanding auction guarantees, they're down over 50%. Is that largely reflecting just the two paintings last year? Or is that mix or is there something to read into? Are people looking for less guarantees right now? Just any color on that.

Tad Smith -- President and Chief Executive Officer

Very perceptive question, Greg. Well, it turns out if you look at our mix for May, we have a large number of estates that could have taken a -- or -- and also terrible organizations, beneficiary organizations, philanthropic organizations that had a choice to choose to go with a guarantee during the consignment process or to go with a share deal, share deal meaning a nonguaranteed deal. Sorry, I don't mean to sort of speak in code there. And it's a very interesting indicator of the market because these are very sophisticated consignors.

Many of them are advised by third-party advisors that have decades of experience in the business. They have seen ups and downs in the market. And when you begin to see that very sophisticated consignors that are well advised are saying, hmm, maybe we don't want the guarantee. Maybe we don't want to pay for the insurance premium, it's an indicator, in fact, of the health of the market.

Greg Pendy -- Sidoti and Company -- Analyst

Got it. And then just one final one. Just the inventory, I know you guys have spent roughly two years winding down the inventory. Would you say that that has become sort of a position of strength now where I think the strategy was to really not use guarantees on -- to win the business but to really kind of have the inventory more or less pieces of art that you are willing to hold on your own views?

Tad Smith -- President and Chief Executive Officer

Yeah. So let me -- there are two kinds of inventory: one, I would -- and you're alluding to them, but let me just sort of call them good inventory and bad inventory. Good inventory happens where we think, for some reason, that we should take something on the balance sheet pursuant to an opportunity to sell it. Sometime -- most of the time, it occurs as a result of a special client situation where it makes sense for us to have a short-term view, take it on the balance sheet and then find an opportunity to sell it down the line.

That's good inventory. We take it on, we wanted it. We have a clear view on the value and we are going to move it down the line with a specific point in time. We have a plan.

Bad inventory is inventory that is unexpected. This results from guarantees crucially that are not hedged, unhedged guarantees that -- of items in the auction room that don't sell. And when we -- when they're unhedged, we end up owning that if they failed to sell. So that is bad inventory.

And what we've done in the last few years have been selling down the bad inventory, turning that back into cash for our shareholders and redeploying it to more useful, more productive uses. Yes, one of the things that I think has been a sort of change in financial strategy for us in the last couple of years is that we really are pretty careful about unhedged guarantees. We like to have our guarantees hedged. We think it's a -- better for us, better for our clients and it's a good sort of -- it also gives a lot more confidence when people are considering buying in the auction room.

So while we will occasionally take a guarantee that is unhedged, it's only when we have a lot of confidence that it's not going to wind up as inventory, and we feel very good about it. So the combination of hedging our guarantees, and only taking inventory where we think it is what I call good inventory where it's for investment purposes or for a specific client thing where we have a time and a plan going forward, should keep our capital allocation strategy with respect to inventory overall in a very good place for our investors.

Greg Pendy -- Sidoti and Company -- Analyst

That's helpful. Thanks a lot.

Operator

Thank you. Our next question comes from the line of Omar Saad with Evercore ISI. Your line is now open. 

Tad Smith -- President and Chief Executive Officer

Omar, are you there?

Mike Goss -- Chief Financial Officer

Wescott?

Operator

If you're phone is on mute, please unmute your phone. 

Westcott Rochette -- Evercor ISI -- Analyst

Sorry about that. This is Westcott Rochette. Could we talk a little bit about your digital business? It obviously gained a lot of momentum. You guys are talking about it more publicly now.

When you think about the digital business and then thinking more from the supply side, how are you going about customer acquisition to drive the supply? Are you thinking about having supply driven or pulled in for specific auctions or can it stand alone on evergreen pieces that are up there that are constantly flowing? And how do you think about the evolution of that business?

Tad Smith -- President and Chief Executive Officer

Very good question. So interestingly, we are talking a lot more about the digital business. But interestingly, we have not said much about customer acquisition. So maybe it's worth saying a few words about it now.

We have a vibrant, that we measure very analytically, customer acquisition effort that has been under way and developed over the past few years and we've invested in it and by the way, it's bearing fruit very nicely. It entails a large and robust, both earned and unearned media approach. We have a digital advertising strategy that uses a return on promotional investment model that thinks about very analytically how we do and where we find them. Our social media, we -- and our videos that we create, we tie it specifically to the number of people that are seeing them.

We track them very specifically to people and whether or not they're bidding. It is a robust area that we, as I said, we don't talk much about it but crucial to this is we're not just building -- we're not just making it easier for people to buy and also easier for people to consign and then not letting them know about it. We have a robust area of outbound and inbound marketing, social media and electronic and digital efforts to bring people to us and then follow them through and then follow-up after it. So we like that.

And honestly, there were periods last year which is kind of interesting where on our online consignment platform where we had to turn off the digital advertising effort, this is in 2018, because we're actually bringing too many people in. It was more coming in on the online consignment platform that we could actually handle operationally. So we actually turned it down and we -- I don't know with David, I don't think we've quite turned it on this year again. We're roughly -- we've done a little bit but we could -- we have substantially more bandwidth.

The marketing -- our ability to bring people into Sotheby's through new channels is greater than our ability to serve them while they're here in some of these digital areas. So we have to be a little bit careful on the consignment getting side. On the advertising side -- sorry, on the digital demand side, very robust. And if you -- in fact, I think if you look at the last earnings call, you'll see that we've made some comments about our digital reach, our digital views, our videos, our consumption.

You'll see our unique visitors going up. You'll see all of the metrics that you want to see on customer acquisition robust. Ideally, what I'd like to do is get it to a place where on your analyst reports, you start with this rather than start with the overall sales and the correlation of the stock price.

Westcott Rochette -- Evercor ISI -- Analyst

Yeah, of course. Of course. And thinking about the type of auctions that you run as you pull it in, are you going to follow other sites where you're constantly getting product and people go? Or are they're going to try to accumulate them into specific auctions that people drive to?

Tad Smith -- President and Chief Executive Officer

So we have a blended approach, which is we're creating special and exciting curated auctions. You could go online right now or go on your app right now and you would see a really wonderful, curated Berluti auction. You would see a specialized high-end liquor auction, and you would also see some of our more typical Masters and other sales that are also available for sale right now with auctions. So the platform is highly scalable and highly flexible, and we're able to do many different kinds of things with it.

We can do an online-only format. We can do a presale that is an online format that then rolls into a live auction. And one of the other things that we're looking at is how we think about buy it now. And then if we pivot to Sotheby's Home, we've also got or -- our wine store, we've got a retail format.

We've got a really -- where I think in terms of digital flexibility, we have spent a lot of time and effort to get, again, where investors should feel quite good about it, a really terrific platform that can do a lot of different directions.

Westcott Rochette -- Evercor ISI -- Analyst

That's really good. Can I...

Tad Smith -- President and Chief Executive Officer

And we think so, too. We're excited about it.

Westcott Rochette -- Evercor ISI -- Analyst

Can I ask about where you feel you are in economics and contribution for the digital efforts? Obviously, a couple of years building. Are you at a stage now where the investment cycle will be funded by the growth that you're seeing? Like when should we expect to see a positive net contribution, assuming you continue in the same trajectory?

Tad Smith -- President and Chief Executive Officer

Well, what we said in the last call, which no need to change, was that for 2019, we are feeling very good about things in terms of where we are with investment. And by 2020, our view is that the contribution to overhead incrementally from some of these or the cost savings that we achieved through some of them would begin to show results. So we thought 2019 was really the last phase of the major net investment cycle. The reason I'm emphasizing the word net is because as I mentioned two or three questions ago, we're seeing a lot of little innovations as we go down the pike and we want to keep pursuing these innovations, but what we want to see is that the contribution from either through cost savings or improved revenue moves everybody into a more favorable long-term and secular margin beginning next year.

That's where we are. And of course, from a free cash flow, we're also going to benefit next year because the spending on the buildings in particular will be in the rearview mirror, and we kind of like that.

Westcott Rochette -- Evercor ISI -- Analyst

That's great though. Good luck in the upcoming auctions.

Tad Smith -- President and Chief Executive Officer

Pardon me?

Westcott Rochette -- Evercor ISI -- Analyst

I said good luck on the upcoming auctions.

Tad Smith -- President and Chief Executive Officer

Thank you. Well, go online and buy something or come see them.

Westcott Rochette -- Evercor ISI -- Analyst

It's out of my price range, but I'll look at it.

Tad Smith -- President and Chief Executive Officer

Actually, on that, I'm glad you mentioned. You gave me a soft pitch. As a reminder, 60%, 6-0 percent of the things that we sold last year are under $10,000, and you can buy a bottle of wine and that's well within anyone's price range.

Westcott Rochette -- Evercor ISI -- Analyst

All right. I'll look at that. Thank you very much. Bye bye.

Operator

Thank you. This concludes today's question-and-answer session. I would now like to turn the call back to Tad Smith for any further remarks.

Tad Smith -- President and Chief Executive Officer

Thank you, everybody. Please do come see the building, and if you happen -- if you're passing through New York, it's beautiful. And we appreciate all of your attention this morning. Thanks.

Duration: 40 minutes

Call participants:

Jennifer Park -- Vice President of Investor Relations

Tad Smith -- President and Chief Executive Officer

Mike Goss -- Chief Financial Officer

Alex Maroccia -- Berenberg Capital Markets -- Analyst

Ray Stochel -- Consumer Edge Research -- Analyst

Unknown speaker

Greg Pendy -- Sidoti and Company -- Analyst

Westcott Rochette -- Evercor ISI -- Analyst

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