HCI Group, Inc. (HCI) Q2 2019 Earnings Call Transcript

HCI Group, Inc. (HCI 2.16%)
Q2 2019 Earnings Call
August 6, 2019, 4:45 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the HCI Group incorporated second quarter 2019 earnings call. My name is Tim and I will be your conference operator this afternoon. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference call is being recorded and will be available for replay through September 6th, 2019 starting later this evening. The call is also being broadcast live via webcast and available via webcast replay until September 6th, 2019 on the investor information section of the HCI Group's website at www.hcigroup.com.

I would now like to turn the call over to Kevin Mitchell, HCI's Senior Vice President of Investor Relations. Sir, please proceed.

Kevin Mitchell -- Senior Vice President of Investor Relations

Thank you and good afternoon. Welcome to HCI Group's second quarter 2019 earnings call. With me today are Paresh Patel, our Chairman and Chief Executive Officer, and Mark Harmsworth, our Chief Financial Officer. Following Paresh's opening remarks, Mark will review our financial performance for the quarter and then turn the call back to Paresh for an operational update and business outlook. Finally, we will take your questions. To access today's webcast, please visit the investor information section of our corporate website at hcigroup.com.

Before we begin, I'd like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan, and project and other similar words and expressions are intended to signify forward-looking statements.

Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial conditions, and results of operations. HCI Group Inc. disclaims all the obligations to update any forward-looking statements.

With that said, I would now like to turn the call over to Paresh Patel, our Chairman and CEO. Paresh?

Paresh Patel -- Chairman and Chief Executive Officer

Thank you, Kevin and welcome, everyone. In a moment, Mark will give you details on our financial performance. But first, here are some highlights of the quarter. We generated fully diluted earnings per share of $0.90, continuing our consistent track record of profitability. We have been profitable in 45 of the last 47 quarters, the streak only being broken by Florida being impacted by hurricanes.

Also, in June, we paid our 35th consecutive quarterly dividend at roughly the share of $40.00 a share, we yield about 4% a year, which is a pretty good dividend. Also, during the quarter, we completed our catastrophic reinsurance program for the 2019 hurricane season. I am pleased to say that while we reduced the absolute spend compared to last year's program, we maintained similar levels of limit and retention. We believe this is due to the reinsurers appreciating our technologies that provide data transparency and efficient claims management.

And finally, and most importantly, TypTap's growth in premium more than doubled in Q2 compared to Q1. TypTap's growth is organic and it's profitable.

With that, I'll now turn over the call to our CFO Mark Harmsworth, who will walk us through our financial performance for the second quarter. Mark?

Mark Harmsworth -- Chief Financial Officer

Thanks, Paresh. Net income for the second quarter of $7.6 million was up from $6.4 million in the same quarter last year. For the first six months, net income of $14.3 million was down from $17.2 million in the same six months last year. Fully diluted earnings per share in the second quarter were $0.90 on a GAAP basis, down slightly from $0.92 in the second quarter last year, and on an adjusted basis, fully diluted earnings per share were $0.81 compared to $1.01 last year.

This quarter was an encouraging one for us. On our last call, I talked about the different stages of growth that should start to reveal themselves in the numbers. This quarter represented an important step in that direction. Consolidated growth written premiums of $133 million were 1% higher than the same quarter last year, given by the growth of TypTap, our technology-powered insurance subsidiary.

In the fourth quarter of 2018, TypTap wrote about $4 million of premium in flood and homeowners combined. In the first quarter this year, that grew by 50% to $6.1 million and in the second quarter, that more than doubled to just under $14 million, driven by the growth of TypTap's new homeowners' product.

The growth of TypTap has fueled consolidated premium growth quarter over quarter and we believe that this is a new phase for us as we move from one of carefully controlled risk reduction to carefully controlled profitable growth.

A few other highlights from the quarter -- as you know, we recently announced our new reinsurance program for the period June 2019 to May 2020. We estimate the consolidated net reinsurance costs to be about $124 million for that period. This does include expected growth for TypTap but is subject to a true up at the end of Q3.

Also, note that the estimated reinsurance costs are net of about $10 million of estimated benefits under multi-year agreements. The insurance premiums seeded in the second quarter were slightly higher than they should be going forward, as of course, they only reflect one month of the new less costly agreements.

As has been the trend for a while, investment income was up from the same quarter last year, reflecting higher interest income and higher limited partnership income. We had a very small net-realized loss on the sale of some investments as well as a $1.3 million unrealized gain on equities, reflecting the increase in the stock market in the second quarter.

In terms of expenses, just a couple things to note -- first, obviously, interest expense is down significantly from the same quarter last year as a result of paying off the convertible debt in March. Second, loss expenses are up about $2.5 million from the second quarter last year. We had some adverse development in the quarter and we increased reserves as we did in the first quarter.

The second quarter was a fairly average one in terms of weather and the 2019 accident year is developing significantly better than 2018. But to be cautious, we are reserving for 2019 at the same rate as the adjusted rate for 2019. As a result, our reserves on the balance sheet continue to go up.

As of June 30th, 2019, total reserves for daily claims, excluding CATs, are about $2.75 million higher than December 31st, 2018 despite the fact that the number of open claims is actually down about 8%. While the recent AOB legislation may help the overall claims environment, we are continuing to take a cautious stance.

Now, to the balance sheet, a couple of quick things here -- first, long-term debt is down from the end of last year by about $88 million and our debt to cap ratio has dropped from 58% to 47% after we paid down a convert back in March. Second, you'll notice a new item on the balance sheet for 2019 called revolving credit facility. This is the amount that we have drawn on the new credit facility with Fifth Third Bank to fund certain real estate investments this year.

Just a few quick comments on capital management, as you know, we declared and paid a dividend of $0.40 per common share in the second quarter and announced the dividend of the same amount for the third quarter. As Paresh mentioned, current stock price, that's a yield of right around 4%.

The board approved a $20 million stock buyback program for 2019 and in the second quarter, we bought back 161,000 shares, bringing the total to about 192,500 shares to the end of June. The number of common shares outstanding is down about 4% to 8,053,000 at the end of June and this should continue to decline as we execute on the balance of the 2019 buyback plan, of which there is about $12 million at the end of June.

On a fully diluted basis, we are now just under 10 million shares outstanding at the end of June. This should also continue to decline as we continue to execute on the buyback plan. Just as an aside, at the rate we're buying back shares, our basic share count by the end of 2019 should be about 11% less than it was at the end of 2017.

That means that someone that owned a share of HCI stock on December 31st, 2017, they will effectively own 11% more of the company than they did 24 months before and they received over $3 in dividends along the way. I should also mention book value. Our net book value per share is up from $21.71 at the end of 2018 to $23.16 at the end of the quarter.

In terms of holdco liquidity, we have over $50 million of cash and investments at the holding company level as well as access to the remaining $55 million in the revolving credit facility, for total liquidity of just over $100 million.

And with that, I will turn it back to Paresh.

Paresh Patel -- Chairman and Chief Executive Officer

Thank you, Mark. Q2 demonstrates that our investments in technology and our focus on analytics are paying off. While some other insurtech companies say they are developing disruptive technologies doing insurance in a better way and hoping some day in the future to be profitable, we do all of that now. We have industry-leading technologies and we are already profitable.

Our internally developed technologies include an automated online platform for quoting and binding policies. Other things we also have are automated intelligent underwriting tools that help us do risk selection. We have policy management software and systems and we have world class claims management software. All of these technologies make our processes fast, efficient, and cost effective, while improving both the customer's and the agent's experience and helping us reduce cost.

We also believe we have superior analytics that identify trends and improve underwriting performance. Our underwriting standards are strict and exacting. We are very selective in the policies we accept. And our automated underwriting tools incorporate all of these analytics. These tools have processes that are very similar to artificial intelligence software in that they are constantly learning and improving.

So, we believe that these tools and their strict underwriting standards based on years of data that have enabled us and will continue to enable us to profitably navigate the challenging Florida and South Florida market.

All these technologies and analytics are embodied in TypTap, our technology-driven insurance company. TypTap in the second quarter is adding about $1.5 million of new premium per week, up from $800,000 per week in the previous quarter and $500,000 per week in the quarter before that. It now has over $32 million of premium in force and we project by the end of the year, TypTap will have over $50 million of premium in force.

And one more time, TypTap's rapid growth is organic and profitable. We're not sacrificing margins for the sake of growth. This is important because bear in mind that $100 million of premium at a 20% margin generate the same profit dollars as $400 million in a premium with 5% margins. We are very proud of the progress TypTap is making.

And with that, we're reading to open the call for questions. Operator, please provide the appropriate instructions.

Questions and Answers:

Operator

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. One moment please while we poll for questions.

Our first question comes from the line of Matthew Carletti of JMP Securities. Please proceed with your question.

Matt Carletti -- JMP Securities -- Analyst

Thanks. Good afternoon. Paresh, a couple questions to start -- maybe just sticking on TypTap, can you paint a picture for us as you look ahead, not quarters but several years down the road, how do you see TypTap developing vis-à-vis Homeowners Choice? At some point, do you, as we're, I would say, past proof of concept, look to transition some of that over or are they truly going to be kind of independent and maybe grow passively different?

Paresh Patel -- Chairman and Chief Executive Officer

Matt, the simple way of looking at that is Homeowners Choice has a wonderful set of customers and people love that brand and people and their customers have been long-term customers on average for six to seven years. So, we see no reason to disrupt that installed base. But that's the existing book, Homeowners Choice.

The growth and the future of the company lies in TypTap. You've been on calls for several years. We're making sure that everybody clearly understands that we are doing the things everybody said was impossible to do, which is grow organically, grow rapidly, make money.

This is all done one policy at a time and TypTap has achieved numbers that are fantastic at a very early stage in its life in terms of premiums in force. We are going to add more and more capabilities and lines of business and areas that we do business in to the TypTap brand because that's a name that's synonymous with the future.

Matt Carletti -- JMP Securities -- Analyst

So, when you say areas that you do business and lines of business, can you expand there a little bit? Is that building the book a bit more outside of Florida or is that getting more diversified even within Florida or a little bit of both?

Paresh Patel -- Chairman and Chief Executive Officer

I'm going to start sounding insurtechy, I'm sorry. Think of it this way -- when we started TypTap, we were going after the flood opportunity. The flood opportunity is about $3 billion, I think, nationwide. We're in Florida, so, maybe it was about $1 billion. That was the premium in Florida. We were addressing a $1 billion opportunity. By adding homeowners, we add another $8 billion of opportunity and we're now attacking a $9 billion market combined and we're trying to see how much of that market share can we get.

In the future, what we're going to do is expand into other states and maybe other lines because we are trying to increase that market, the total addressable market, and increase it from $9 billion to some much greater number. As you know, in the insurance space, there are hundreds of billions of market space to eventually attack. You had asked the question long-term that's what we are aspiring to do over the course of the next several years.

Matt Carletti -- JMP Securities -- Analyst

Great. Then shifting gears a little bit, what are your views on -- in your eyes, how has the AOB environment evolved in Florida, particularly given the changes that took place July 1? What did you see in the ramp-up before July 1 and how has that changed since July 2?

Q;

So, obviously, July 1 is an inflection point, but because of the passage of a new law going to effect on July 1. But right now, it's too early to tell what major effect it has had on the industry going forward. Now, will we know in a few months' time? Absolutely. It's just that it's too early to tell right now.

In terms of our experience and what we saw, we did not see a material difference in the number of AOB claims and/or lawsuits leading up to July 1. I think that was the nature of your question as to what's going to happen post-July 1 and what it's going to look like July 1 of next year. It's just too early to tell.

Matt Carletti -- JMP Securities -- Analyst

Great. And then just a couple of real short ones. You mentioned a little bit of reserve strengthening. Was that largely AOB related or was that related to something else?

Mark Harmsworth -- Chief Financial Officer

No. It's just general, fairly similar to what we did in the first quarter. We added $2.5 million, something like that. About three-quarters of that is related to 2018. As you know, our loss ratio usually runs between about 23.5% to 25.5%. We initially booked 2018 a little bit on the lower end of that based on the way it looked at the end of the year and we're just increasing that a little bit. We've moved it up from about 23.5% to 24.5%, I think. So, it just reflects an adjustment in the alternate for 2018 and a little bit of 2017.

Matt Carletti -- JMP Securities -- Analyst

Okay. Last one, just the number -- do you have net written premiums handy?

Mark Harmsworth -- Chief Financial Officer

I do -- $52 million.

Matt Carletti -- JMP Securities -- Analyst

Great. Thanks very much and best of luck going forward.

Operator

Our next question comes from the line of Mark Hughes of SunTrust. Please proceed with your question.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Thank you. Good afternoon. The TypTap run rate, did you say $1.5 million per week recently?

Paresh Patel -- Chairman and Chief Executive Officer

Yes.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Was there a boost in 2Q around the start of storm season? Will that settle down a little bit in 3Q or are you continuing to see that build?

Paresh Patel -- Chairman and Chief Executive Officer

Mark, at some point, the accelerating build will tail off. As I said in my prepared remarks, we were doing about $400,000 a week in December. It accelerated all the way through the first quarter, where we ended at about $800,000 a week and then it continued accelerating in the second quarter to $1.5 million. We're still doing that. Hopefully, it keeps accelerating through the end of the year, but obviously, eventually it will tail off. Even at $1.5 million, it's a very good number to keep sustaining at.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Then maybe just an update on where you're seeing success -- what is the normal profile either in terms of the structure or the behavior of the typical TypTap buyer?

Paresh Patel -- Chairman and Chief Executive Officer

So, we think two things that you should factor into this -- this is looking under the hood that makes this very encouraging -- our quote to buying ratio is around 7%. Putting it differently, every 100 quotes we do, we end up making about seven policies. That goes to that point about being selective.

So, there are a lot more people who want to be TypTap customers than we are willing to accept as TypTap customers because it's helping us shape the profile of the book to what we want it to be. I don't have it handy, but I know things that we monitor and look at is what the average premium per policy is and it's quite healthy. I'm being told it's about $2,900.

Mark Harmsworth -- Chief Financial Officer

Yeah. It's very similar to HCPC. It's between $2,800 and $2,900 per policy.

Paresh Patel -- Chairman and Chief Executive Officer

So, a simple sound bite takeaway from this is we are growing TypTap organically with the same characteristics as we once upon a time grew Homeowners Choice, repopulating from Citizens. You can imagine how encouraged we are that if we get the same outcome as we eventually did with Homeowners Choice, this could be a wonderful outcome.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

When you say quote to bind, is that a request to quote? So, they ask for a quote from you and you bind 7% of those policies?

Paresh Patel -- Chairman and Chief Executive Officer

Actually, how we define it -- because this system is automated, somebody requests a quote. They go to an agent, the agent types in the address and whatever. The fact that they got a quote for that policy is what triggers in our system. So, there were 100 opportunities at least started with TypTap for every 7 that are bound.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Understood. The investment income in the quarter, any unusual items there? I know you said partnership income was up. Is this a good sustainable level, would you say, on a go forward basis?

Mark Harmsworth -- Chief Financial Officer

Yeah. It was a little higher than normal, Mark. The limited partnership income averages about $750,000 a quarter and in Q2, it was $1 million for the quarter, so, about $250,000 higher than average. So, other than that, I think everything was pretty normal. What we did in Q2 is probably a little higher than what you would expect going forward, mainly because it was a good quarter for limited partnership income.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

And policy acquisition costs continued to move up a little bit. Is that the TypTap effect or is that strong growth in the quarter?

Mark Harmsworth -- Chief Financial Officer

Yeah. I talked about this a little bit on the last call and I had suggested that that's a percentage that will start to go up a little bit as the mix changes. TypTap has a higher cost of acquisition per policy. So, as the balance shifts toward TypTap in periods when TypTap is riding a lot, that percentage is going to go up. If we continue to write strong in Q3, it will probably again be higher in Q3. But Q2 is probably a pretty good estimate of where it will be. It's a little higher than what I had suggested on the call last time just because TypTap grew considerably faster than I expected it to.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Finally, I wonder if Paresh, you might comment on the competition. Is it maybe reduced appetite on a part of other carriers for business influencing or contributing to your growth of TypTap? How do you assess the market when you look at your competitors?

Paresh Patel -- Chairman and Chief Executive Officer

So, there have been lots of different conversations and statements made by competitors all over the place on the matter. I think there are going to be more changes coming in the coming quarters because people have talked about rate increases, which, again, tends to agitate a book of business. You will probably get more churn in the state of Florida.

From a measurable metric form our perspective, the fact that we're doing something like 7,000 quotes a week gives us a very good idea that there is obviously a fair amount of business that is looking for a new carrier every given week. So, that gives us plenty of opportunity from which to select a policy that we want. And what you're saying is it was easier to select a good book of business from citizens when they had $1.5 million policies than when they have $500,000 policies. The 7,000 quotes a week tells us there's lots of churn going on that lets us assemble the book we want. If people do rate increases, etc., other dislocations of the marketplace, that will just enhance that number.

Mark Harmsworth -- Chief Financial Officer

And to Paresh's point before, while we are growing in TypTap and while we're excited about that, we're being very, very selective, as you said, about the policies we pick. The reason for that goes to what I talked about in my comments about that sustainable profitable growth, not just growing for the sake of growing.

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Understood. Thank you.

Operator

I would like to remind all participants at this time if you would like to ask a question during the Q&A session, please press *1 on your telephone keypad. Our next question comes from the line of Christopher Campbell of KBW. Please proceed with your question.

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Hi, good afternoon, gentlemen. Just a few numbers questions -- it sounds like the adverse development was $2.5 million. What were CATs of absolute dollar amount and then what were repurchases?

Mark Harmsworth -- Chief Financial Officer

So, in Q2, we had about $500,000 related to CATs, if you will. So, there are a couple things in there. First of all, there are four CATs that we're keeping track of -- so, Michael, Irma, Matthew, and the hailstorm. We're obviously looking at that every quarter. We increased the ultimate from the hailstorm from Q1 from $5 million to $5.25 million. So, there's $250,000 worth of expense for that in Q2.

And then, we also had about $200,000 to $250,000 worth of expense related to Matthew and that's just something that continues to run a little bit. The rest of it is just -- that's it for CATs, no movement in Michael or Irma. That's the only CAT numbers that are in that $24 million.

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Okay. Got it. And then just a quick question on Matthew -- why has that storm been so hard for companies to get their estimates right on? We're seeing a lot of development on that, not just HCI, but in general. Was there anything special about that storm that made it harder to adjust than a normal CAT?

Paresh Patel -- Chairman and Chief Executive Officer

Are you talking about Matthew or Michael?

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Matthew, yeah.

Mark Harmsworth -- Chief Financial Officer

Matthew was two years ago? The development on that has not really been that significant from the initial ultimate, maybe 15% higher than originally, something like that. There are not that many claims left open. It's just some of those claims. You end up settling for a little bit more than you expected to. We've still got some pretty good reserves left for that. I don't think it's really developed.

Paresh Patel -- Chairman and Chief Executive Officer

I don't think anybody's talking about any Matthew development in any great fashion.

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Okay. I'm just thinking one of your peers also had Matthew development this quarter too. It seems kind of late reported. I was just seeing if there was anything special about it. And what accident years drove the reserve strengthening? Was that all '18?

Mark Harmsworth -- Chief Financial Officer

No. Probably the best way to look at it is to look at the first six months total. So, we've booked about $4.5 million worth of adverse on what we think of as daily claims. About two-thirds of that is 2018. Then there's a little bit for 2017 and then very minor amounts for prior years. I think I talked earlier about that. The development on 2018 has just been a little bit higher than we expected. So, we tweaked that, but not dramatically higher. It's mostly '18 and '17.

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Perfect. What was the dollar amount you guys spent on share repurchases? I think it was 161,000 shares. How much was that in actual dollars?

Mark Harmsworth -- Chief Financial Officer

For the quarter? $6,663,000.

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Perfect. Now, I think you had mentioned you guys didn't see a spike up in terms of AOV claims before the deadline. How would you describe, now that we're like a little over a month into the posed AOV reform area, like have you seen a noticeable year over year improvement in any of your July claims metrics that are giving you confidence that AOV reform might be a positive in terms of core loss ratios?

Paresh Patel -- Chairman and Chief Executive Officer

Chris, as we said earlier, it's just too early to call. The reason being is don't forget -- the legislation and what it does, it's for all AOVs that are signed after July 1. You still have a tail going back several years of AOVs that were signed several years before that. This is going to take a while to shake out in any direction as to what concrete effect it has. 36 days after legislation went into effect, it's just too early to tell.

Mark Harmsworth -- Chief Financial Officer

Yeah. Just to add to that a little bit, I agree it's too early to tell and there may be a positive impact of it, but we're not baking any of that into our reserving methodology at this point. I think I mentioned it earlier in my prepared remarks, but if you take out the hailstorm, which we treated separately, 2019 is developing favorably compared to 2018, but we're just continuing to reserve it at that higher rate. If some positives come out of AOV, then we'll deal with it. I think it's going to be a while before we really start to see that and we're not baking any of that optimism into our reserving methodology in any way.

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

One last one on the reinsurance rails, it sounds like you guys are spending less overall with similar limits and retentions. Was your pricing down? Is that the way we should think about it, given how little loss creep that you guys had?

Paresh Patel -- Chairman and Chief Executive Officer

Chris, the reason it's difficult to answer that question in that context is because different people have different ways of saying was pricing up, down, left or right? Are you talking about on a risk-adjusted basis and so on? All I know is at the end of the day, we've got a similar tower to the one as last year and the money we've spent is several million dollars less. How it allocates into all the different pieces, different layers move around in different ways.

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Got it. Were there any major parts of the program that changed it? I'm thinking on a risk-adjusted basis. It sounds like you paid less.

Paresh Patel -- Chairman and Chief Executive Officer

That's what I'm saying. Risk-adjusted basis is a technical computation. It's designed to say per unit cost, it was this or that. The other side of it for our economics is how many millions of limits do you buy and what was the dollar spend for? What we're saying is that we bought the same units as last year and we had a gross spend that was less. We'll leave it to everybody else to say whether the rates are up or down or left or right, yeah?

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

Thanks for all the answers.

Operator

I would like to remind all of our participants at this time, if you would like to ask a question, please press *1 on your telephone keypad. At this time, this does conclude our question and answer session. I would like to turn the call back over to Kevin Mitchell, who has a few closing remarks.

Kevin Mitchell -- Senior Vice President of Investor Relations

On behalf of the entire management team, I would like to express our appreciation for the continued support we received from our shareholders, employees, agents, and most importantly, our policyholders. We look forward to updating you on our progress in the near future.

Operator

Thank you for joining us today for our presentation. This concludes today's call. You may now disconnect. Have a wonderful rest of your day.

Duration: 36 minutes

Call participants:

Kevin Mitchell -- Senior Vice President of Investor Relations

Paresh Patel -- Chairman and Chief Executive Officer

Mark Harmsworth -- Chief Financial Officer

Matt Carletti -- JMP Securities -- Analyst

Mark Hughes -- SunTrust Robinson Humphrey -- Analyst

Christopher Campbell -- Keefe, Bruyette & Woods -- Analyst

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