Federated Hermes - Earnings Call - Q1 2018
April 27, 2018
Transcript
Speaker 0
Greetings, and welcome to the Federated Investors First Quarter twenty eighteen Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ray Hanley.
Please go ahead, sir.
Speaker 1
Good morning and welcome. Leading today's call will be Chris Donahue, Federated's CEO and President and Tom Donahue, Chief Financial Officer. And participating in the Q and A is Debbie Cunningham, our Chief Investment Officer for the money markets. During today's call, we may make forward looking statements and we want to note that Federated's actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings.
No assurance can be given as to future results and Federated assumes no duty to update any of these forward looking statements. Chris? Thank you, Ray, and good morning all. I will briefly review Federated's business performance and Tom will comment on our financial results. Looking first at equities, we closed the quarter with $64,000,000,000 of assets, down about $4,000,000,000 from year end due to net outflows and market decreases.
Gross sales of equity funds in separate accounts on a combined basis increased by $731,000,000 or 28% over the prior quarter. Our small cap funds have been strong performers and have attracted solid flows. We believe they are well positioned for further growth. MDT Small Cap Core with its top 1% Morningstar category ranking for the trailing three and five years at the end of Q1 had positive net sales of $153,000,000 to reach $520,000,000 in assets at quarter end. MDT small cap growth had top decile performance for the trailing three and five years at the end of the first quarter and posted positive net sales of $82,000,000 to reach just about 400,000,000 in assets at quarter end.
The Kaufman Small Cap Growth Fund with its top decile performance for the trailing one, three and five years at the end of the first quarter had positive net sales of $89,000,000 to reach $1,100,000,000 at quarter end. Other funds with positive net sales in the first quarter included our muni and stock advantage fund, MDT mid cap growth and International Leaders. As regards strategic value dividend, this strategy's objective is to provide a high and growing dividend income stream from high quality companies. The domestic funds twelve months distribution yield of 3.84 ranked in the second percentile of its Morningstar category at year end. This fund had a return of minus 6.5% in the first quarter as the January rate spike combined with no exposure to tech and consumer discretionary impacted absolute and relative performance.
However, looking at quarterly returns from inception through the 2017, the fund has been at the top or bottom quartile just about every quarter with about the same number of quarters in each. This pattern continued in q one with the fund in the top 2% for its March one month record and at the bottom of the category for the full quarter. Now using Morningstar data for the trailing three years at the end of the first quarter, six federated funds were in the top decile, 10 were in the top quartile and a dozen were in the top half. Trailing one year ranking showed seven top decile funds, 12 in the top quartile and 19 above median. Three weeks into Q2, net redemptions of equity funds are approximately $252,000,000 and equity SMA net redemptions are about 57,000,000.
We have seen early Q2 positive net sales in Kaufman's Small Cap Fund 95,000,000, MDT Small Cap Core 55,000,000, MDT Small Cap Growth 17,000,000, and MDT Balance Fund with almost 10,000,000. Turning to fixed income, assets decreased by about 2,000,000,000 in Q1 to 62,000,000,000 due largely to net outflows from institutional accounts and to a lesser extent from funds. Consistent with industry trends, we saw our high yield funds shift from $245,000,000 of net positive sales in Q4 to $216,000,000 of net redemptions in Q1. However, funds with net sales in Q1 included our ultra short bond fund, $267,000,000 and the total return bond fund of 186,000,000 and the floating rate fund at $26,000,000 Our fixed income business has a variety of strategies that are performing well. At quarter end using Morningstar data, our total return bond fund, institutional high yield bond, federated bond, and ultra short bond were all in the top quartile for trailing three years.
In total, we had five fixed income strategies with top quartile three year records at quarter end and 14 funds in the top third for the trailing three years. Fixed income fund net sales are negative early in the second quarter to the tune of 278,000,000. However, inflows in April in total return bond fund were over 100,000,000, and we had several other funds with modest net inflows. Now looking at money markets. Total money market assets increased slightly from year end with growth in separate accounts of just under 4,000,000,000 offsetting a decrease in money market fund assets of about $3,000,000,000 Our money market mutual fund market share at the end of the quarter was 7.3% compared to year end 7.4%.
Prime money fund assets increased about 5% in the first quarter to over $30,000,000,000 Assets in our prime private liquidity fund increased to $730,000,000 in the first quarter, up from about $530,000,000 at year end. This product and our prime collective fund had just over $1,000,000,000 in combined assets at quarter end, up from $845,000,000 at the end of last year. These products preserve the use of amortized cost accounting and do not have the burden of redemption fee and gate provisions. Taking a look now at our most recent asset totals as of April 25. Managed assets were approximately $386,000,000,000 including $261,000,000,000 in money markets, dollars 64,000,000,000 in equities and $62,000,000,000 in fixed income.
Money market mutual fund assets were $175,000,000,000 In the institutional channel, RFP and related activity continues to be solid and increased over last year and diversified with interest in MDT and dividend income for equities and high yield core broad low duration for fixed income. We began the first quarter with about $65,000,000 in wins that are yet to fund. Total SMA assets ended the quarter at 25,100,000,000.0 The SMA business produced 1,500,000,000 in gross sales, up from $1,300,000,000 in the prior quarter, but had $679,000,000 in net redemptions in the first quarter. Federated still ranks fifth in the MMI Dover rankings of the largest SMA managers at the 2017, which is the most recent data available. On the international side, we recently announced the agreement to purchase 60% controlling interest in Hermes Investment Management from the BT pension scheme.
We expect this acquisition to close in the third quarter. We believe that the combination of Federated and Hermes offers the potential for growth and stability from a broad spectrum of attractive, differentiated, actively managed strategies and powerful distribution capabilities in key markets around the world. We are excited to combine forces with the outstanding people at Hermes and see many benefits for the clients, employees and shareholders of both organizations. We have received excellent feedback from Hermes on the positive reaction of many of their clients to the deal. Over the coming months, we will work together on growth strategies that can leverage the strengths of each company.
We are evaluating the application of a number of Hermes strategies for The US institutional market including the successful alternative private market strategies that Hermes has offered for years. We also expect to register mutual funds that will offer some of Hermes' best investment ideas to our customers. We are also planning to integrate their ESG principles into our portfolio management processes. And we will be looking to how we can help grow the successful Hermes EOS business. And this features leading, world leading ESG related services to investment managers.
We will also work with Hermes to evaluate opportunities for them to offer federated strategies to their clients. We also continue to progress on the launch of our new efforts in the Asia PAC region with a focus on opportunities in Greater China, Korea, and Japan. We continue to work on establishing strategic relationships with financial institutions and adding regional distribution of federated investment strategies. This effort complements our European, UK and Canadian operations. Managed assets in these markets totaled about $14,500,000,000 at quarter end.
In addition, we continue to seek alliances and acquisitions to advance our business. Tom? Thank you, Chris. Q1 results were impacted by the adoption of the revenue recognition standard. As a result, certain distribution expenses and other expenses are now recorded as reductions to revenue.
Total revenue decreased by $14,500,000 from the prior quarter. Of that amount, about $8,600,000 was due to the adoption of the revenue recognition standard, which was offset by related lower distribution expense of $6,700,000 and lower other expense of $1,900,000 The remaining $6,000,000 decrease in revenue was mainly due to having two fewer days in the quarter. Revenue was down $9,600,000 compared to Q1 of last year due to the adoption of the revenue recognition standard, which I mentioned, decreased revenue by $8,600,000 a $6,800,000 decrease due to a change in a customer relationship that occurred during Q1 twenty seventeen and changes in the mix of average money market assets, which impacted revenue by $4,700,000 These decreases were partially offset by an increase of $4,400,000 in revenue from higher average equity assets, an increase of $4,300,000 due to lower money fund minimum yield waivers and an increase of $1,900,000 from higher fixed income assets. Equities contributed 43% of Q1 revenues and combined equity and fixed income revenues were 60% of the total. Operating expenses decreased $3,300,000 compared to the prior quarter and $11,500,000 from Q1 twenty seventeen.
The decreases from the prior quarter or the decrease from the prior quarter was due to the adoption of the revenue recognition standard, which caused expenses to decrease by $9,000,000 and lower distribution expense of $1,700,000 from two fewer days in the quarter, offset by higher comp and related expense from incentive compensation and seasonally higher payroll taxes. The decrease from 2017 was also due to the adoption of the revenue recognition standard, which reduced expenses by $8,700,000 as well as a decrease of $8,600,000 in distribution expense due to changes in the mix of average money market fund assets. The previously discussed change in a customer relationship reduced expenses by $5,300,000 These decreases were partially offset by increased incentive comp of 5,300,000.0 a $3,500,000 increase due to lower money fund minimum yield waivers and approximately $1,500,000 related to the Hermes transaction. Compensation related was higher than preliminary estimates we gave in January due largely to higher incentive compensation expense from higher gross equity sales, which increased by $731,000,000 compared to the prior quarter. An early estimate of 2Q comp and related is about $76,500,000 down from the $78,000,000 in Q1 due largely to seasonality around payroll taxes and benefit expenses.
For 2018, we expect our combined federal, state and local tax to be about 24 to 25%. We maintain the same priorities for use of capital, acquisitions, dividends and share repurchases. Our Board declared a dividend of $0.27 an increase of 8%. Among the factors considered in raising the dividend were the lower tax rates from the 2017 Tax Act. We continue to be active on the share repurchase front with 118,000 shares bought in Q1.
At quarter end, cash and investments were $378,000,000 of which about $349,000,000 was available to us. We expect to use mostly cash and to a lesser extent our revolving credit agreement to fund the purchase price and related obligations of approximately $358,000,000 for the Hermes acquisition. In addition to cash, we have $210,000,000 of unused capacity on our revolving credit agreement at the quarter end and this does not include the $200,000,000 available on an accordion basis, which is a feature in the loan agreement. Kevin, that concludes our prepared remarks. We'd like to open up the call for questions.
Speaker 0
Certainly. We'll now be conducting a question and answer session. Our first question is coming from Patrick Davitt from Autonomous Research. Please proceed with your question.
Speaker 1
Hey, good morning. Thanks.
Speaker 2
In the last few weeks, we've seen Goldman cut the fees on their entire range of money funds by about three to five basis points. And then this week, we saw a lag indicating the tension to get a lot more aggressive on pricing in that
Speaker 3
product. And I know
Speaker 2
you get this question every quarter, I'm just curious if you given those data points, you could update your thoughts on increasing pressure on fees and the mutual fund side of the money fund business.
Speaker 1
Thank you, Patrick. Yes, the pressure is constant. And from my experience for decades, has never really relented. And if you look at our funds on a gross basis and then, of course, on a net basis, they're very, very competitive in the industry. So what others are doing for their fees, I I really can't address.
But we look very, very closely at these numbers pretty much every day to see what the world is doing. And on a gross and net basis, we are very, very comfortable with where we are and very, very well aware of the fact of what's needed to maintain and enhance our money market business.
Speaker 2
Great. Thanks. And my follow-up, historical patterns would suggest ultra short funds become increasingly out of favor as rates go higher. We haven't really seen that happen yet or any weakness inflows there. Is there any reason that you think this rate cycle would be different for that product?
Speaker 1
We don't have a specific reason to why it would be different. We do note that our sales of Ultrashort products this quarter versus the all of last year are up over $100,000,000 on average. And I think at this point, I think you'd get a better answer to that if I let Debbie comment.
Speaker 4
Sure, Patrick. I think at this point, like what we're seeing is a rebound off of what's been a very long and unusually low rate environment, zero for the short end for a very long period of time. And the ultra short products were able to capture a pretty nice spread over that zero rate environment for the better part of the last ten years. And what we're also working with in today's rising rate environment is the Fed that is telegraphing in very specific and well processed way what their intentions are. The dot plots didn't exist in the last rising rate environment that we were in.
So I think both of those things are continuing to keep ultra short funds in favor. In addition, when you look at our own ultra short products, they are the very short end of the spectrum. And quite honestly, if you looked at money market funds prior to the last two rewrites of rule two eight seven, the ultra short funds look a lot like those did then, which were constant NAV products. Now, obviously, they're mark to market products, so they're not constant NAV. But their movement has been not huge and the spread over the cash and liquidity products has been substantial enough to keep customers comfortable that that's a good portion of their strategy for their liquidity bucket positions.
Speaker 1
Patrick, just one other thing on the April flow data that Chris mentioned on the fixed income side, a meaningful part, a little more than half outflows we've seen in April are coming from the ultra short side of the equation. But we've seen that before in April and we relate that to tax seasonality.
Speaker 2
Very helpful. Thanks guys.
Speaker 0
Thank you. Our next question is coming from Michael Carrier from Bank of America Merrill Lynch. Your line is now live.
Speaker 5
Thanks guys. Hey Tom, just first one just on the comp for the quarter and the guidance, it just seems like it's probably a little bit higher than expected. And I understand your point on the strong sales on the equity side. Like how does that kind of get incorporated versus like the redemptions or the performance? And how can that play out?
Meaning if your revenues are under pressure, will we see some flexibility in the comp? Or is a lot of that being driven by the sales momentum?
Speaker 1
Yeah, Mike. It's a good question. If we have strong products, which we have on a number of basis, as Chris went through, particularly the small cap, and the sales force is actually able to sell it, then they get to earn more and we get to pay more. And it doesn't have anything to do with redemptions that would happen in other funds, which of course are going on as we all know about. So I used to call it a success item when we were paying more out in incentive comp and it was a pretty good leading indicator to the future that the products were successful.
If that trails off, their comp would trail down. But we're looking at the performance and looking at what the sales force is producing and not expecting that to trail off.
Speaker 5
Okay, thanks. And then follow-up, maybe for Chris, just on the equity products. When we look at the outflows in the quarter, you mentioned kind of the weakness in strategic value dividend early in the quarter. But just wanted to get some sense, was it a lot of Was it the performance?
Anything unusual? And then on the small cap strategies where you are seeing positive flows and momentum, just any kind of context on capacity across those funds just because in the industry, obviously, a lot of small cap funds have been closing, but it seems like you guys have more capacity.
Speaker 1
Okay. Yes. On the first part of the question, we didn't see anything unusual. The ten year went to 3%. We didn't own as much technology as others because they don't pay dividends.
We own the consumer staples that got whacked, so that is nothing unusual. However, as I mentioned, we're still running a very strong product with respect to what we said it would do, which is to pay a good dividend and buy companies with growing dividends. And the way the portfolio manager team would look at it is that there's now a sale on dividends into the future. So there was nothing unusual there. In terms of capacity on the small caps, none of these funds are in danger of threatening capacity at this point.
On the philosophy of it, I would mention that when the PM teams determine that their act doesn't play anymore, then we would declare victory and have, you know, have a close of a fund. But we're not in danger of getting there anytime soon.
Speaker 5
Okay. Thanks a lot.
Speaker 0
Thank you. Our next question is coming from Ari Ghosh from Credit Suisse. Please proceed with your question.
Speaker 6
Hey, good morning, everyone. Just on the core expense base, excluding the content distribution, I think you were looking for pretty much flattish levels for most items heading into 2018. And now with the deal, was just hoping you could give us an update on your outlook for some of these core line items excluding comp and distributions for 2018 and how we should think about the growth rate as we head into 2019?
Speaker 1
Yeah. For 2018, on the call when we announced the deal and we had the call, we talked about an impact to 2018 of 20¢. And we haven't broken that out in terms of which line items it's gonna hit. And I don't think we're prepared to do that right now. In terms of '19, the guidance that we said was oh, and also on the '18, we did talk about cash and have that as an accretive from our view of cash of 5¢.
And then in '19, we said that our models showed a $02 basically reduction in EPS. And on a cash basis, we said $16 And I don't really have any updates on those numbers except we are spending the money, which I did mention about 1,000,000 point dollars in Q1 of transaction costs on the deal.
Speaker 6
Got it. Then just as a follow-up on the Hermes deal. So it looks like their adjusted 2017 pretax numbers, their profit and EBITDA levels benefited pretty much from deferred comp. And if I look at that line item, it kind of was ForEx versus trailing periods. So just curious if their legacy deferred comp is going to flow through your financials as it vests over the next three to four years?
Or if all of this is embedded in the deal price and thus like it resets upon the deal sourcing?
Speaker 1
No, Ari, that the historical LTIP costs will not go through in the future nor do they impact our calculation of EBITDA and the numbers that we gave on the call two weeks ago.
Speaker 2
Yes. We
Speaker 1
looked at the transaction on basically on a run rate basis and then did our estimates based on that.
Speaker 0
Thank you. Our next question is coming from Ken Worthington from JPMorgan. Your line is now live.
Speaker 7
Hi, good morning. Thank you for taking my questions. Maybe first for Debbie on the rate sensitivity on money fund customer behavior. So maybe one, are you seeing retail money move from banks to funds? Maybe two, are you seeing an impact from intermediaries moving client cash from funds back to the balance sheet?
And then lastly, on the institutional side, any evidence that money is moving from money market funds to the direct market? Thanks.
Speaker 4
Sure. Let's let's start with the first one, retail out of deposits and into funds. Yes. We're starting to see faster let let let let me couch it by saying we're starting to see faster growth in funds than the deposit market. So if you looked at the most recent, statistics, the deposit market grew through, I think it was February 2018, over the last year at a pace of 2.8%.
The fund industry, the mute the money market fund industry, two a seven funds, grew six and a half percent. So they're off smaller bases, so the dollars are actually, you know, out out of whack because of that. The the the money on dollars are smaller because it's off of a $2,600,000,000,000 base versus off of a 10,000,000,000,000 base for the deposit market. Nonetheless, the percentage gross growth is finally in the favor of the funds. Specifically, from our own clients' perspective, we are seeing, retail customers, back into those products and out of deposit products, some into the government funds, more into the prime funds.
And although there are not many of them are not utilizing sweep options yet still in that process, There are a lot of ticket trades that have been undertaken in in that market. Going to the second part of your question from an intermediary standpoint, not seeing a whole lot of wholesale change from an intermediary perspective with their underlying clients' cash. Again, more directed by what I would call the underlying clients coming through more in the ticket trade market, not necessarily wholesale changes along the intermediary line. And from an institutional market perspective, that's actually where we've seen the most amount of growth at least in prime institutional. Government institutional was down a little bit in the first quarter, although down less on an industry basis than what's historically the case.
Usually the first quarter is a very large outflow quarter from an industry standpoint. And although it was down some, was not a huge amount this first quarter compared to others. But the institutional prime sector is actually the fastest growing sector from our experience as well as from the industry's experience. So rather than going into the direct market at this point, it seems to be taking the path of going into that prime institutional market.
Speaker 7
Okay. Great. Thank you. And then just on the separate account side, elevated gross redemptions this quarter in fixed income and equity. And I think, Chris, you mentioned one of the fixed income funds.
But what were the products that were driving the elevated gross redemption side of the equation both on the equity separate accounts and the fixed income separate accounts? Thanks.
Speaker 1
Ken, it's Ray. I mean, on the separate account on the equity side, as Chris mentioned, did have elevated numbers there and that would have been we did have a pickup on the SMA redemptions for strategic value, which would track in that SMA in that separate account category. On the fixed income side, about two thirds of it was from lower shorter duration fixed income mandates on lower fee side of it.
Speaker 7
Okay, great. Thank you very much.
Speaker 0
Thank you. Our next question is coming from Robert Lee from KBW. Your line is now live.
Speaker 3
Thank you. Good morning, guys. Maybe just starting, Tom, just with the 1,000,000 point dollars transaction costs flowing through the P and L in the quarter, should we just assume that, that kind of number is going to stick around at least the next couple of quarters and maybe as we get to the end of the year kind of revert back to its historic range?
Speaker 1
It's going to get higher. It's going to get a lot higher. Our guidance was $22,000,000 in closing costs.
Speaker 3
I'm sorry, go ahead.
Speaker 1
It's the tip of 1,000,000 point dollars is just the tip of the iceberg.
Speaker 3
Okay. Thanks for the reminder.
Speaker 0
Can you maybe talk a
Speaker 3
little bit about distribution shelf space? Obviously, continued a lot of large distributors winnowing down their lists and narrowing their focus. So can you maybe update us on kind of how you feel like you're faring with that in at the larger distributors who are going through that process? Or maybe in any way that perhaps you're also thinking about or have retooled your distribution approach, particularly in the larger distributor channels?
Speaker 1
We have retooled the distribution approach. We reorganized the sales department when Paul Oman came in. He spent good bit of time figuring out the lay of the land from his perch on the tree and the changes that occurred in the marketplace. And as of year end, there was some restructuring. Now we still have 213 consultants slash sales reps in and about the country, but they were restructured.
And part of it was exactly to address the question you're on, which is what's our approach to the platforms and how do we do that? And so we enhanced the groups that are calling directly on the platforms, and we have found this to be a very, very good situation. When because of what was then the DOL drive, various of the firms cut thousands of funds off of their list. We found that none of the key funds that we were after were cut. And in fact, we've been able to add and preserve very, very good mandates at Federated.
So for example, that whole list of MDT small cap funds and even the Kaufman small cap fund were very important funds that were preserved and, in fact, being added to others as we speak. One of the other things we've discovered is that as you have top performing products of this type, that helps you with your your other funds. And then we look at the arrangements with Hermes, which we've already had discussions and questions from some of these platforms about when and how this can be integrated or when some of those products could be available as well. Obviously, we haven't even closed yet, so that's a down the road deal. But that's another enhancement to our ability to stay on and improve the product listings with the big firms.
Speaker 3
Great. And then maybe just one last question. I mean, appreciate the color on kind of the nature of the strategic value product suite. But can you maybe just size for us at least within the SMA bucket, how big that strategy and its variations is relative to your equity your equity separate comp business?
Speaker 1
Yes, Rob. The SMA is around $22,000,000
Speaker 3
Great. Thanks guys. Appreciate it.
Speaker 0
Thank you. Our next question is coming from Bill Katz from Citi. Your line is now live.
Speaker 8
Hi, good morning. It's Ben Herbert on for Bill. Just wanted to touch on back to Hermes and just if you're getting you mentioned the efforts to integrate some of their products, but any early feedback from gatekeepers beyond early plans?
Speaker 1
Well, as I just mentioned, we have had some preliminary discussions and comments from some of the so called gatekeepers, I use the term platforms, about when this could happen and what products we could look forward to. And we're just not prepared to go down chapter and verse on that because we haven't closed them. We don't know which funds we would we would do that with. What we have, Hermes themselves has had excellent conversations with their client base and have gotten comments about the fact that it strengthens Hermes to have a US distribution platform, and they were happy with that. And some of their clients have mentioned that they see the clear growth potential that the transaction offers Hermes and a strong fit because of the lack of overlap from both a product and a distribution point of view.
But I think at this point, the most important thing to focus on is that the people and the enterprise are excited and very positive about the arrangement. And all of the fundamentals that you could look at point to a very complementary and positive growth potential as we march towards closing.
Speaker 8
Thanks for that. And then maybe just a follow-up on investment spend or need there to pick up in expense this quarter. But is there anything underlying pickup in investment spend or also how you might be thinking about investment spend through the rest of the year ex Hermes?
Speaker 1
Outside of due diligence cost and the tech things to make sure we can connect on the things we need to connect with and the obvious fees that used to get spread out over years now get one time expenses. And then our plans for growth and Hermes plans for growth. I don't think we have things in our schedule of big upticks in expenses outside of that.
Speaker 0
Our next question is coming from Kenneth Lee from RBC Capital Markets.
Speaker 9
Just a quick follow-up on the equity flows in the quarter in the first quarter. Were there any sizable institutional redemptions that you would like to call out that were any meaningful drivers within those flows?
Speaker 1
No, Ken. There was some activity on the institutional side, but nothing really outsized. As we talked about earlier, the bulk of the separate account outflows came from the SMA side of strategic value. And so no, there wasn't The institutional activity as Chris mentioned, we actually had a pretty good uptick in our RFP activity during Q1 and the strategies there are performing pretty well. So no, there wasn't anything to point to.
Speaker 9
Okay. And just one more on the in terms of the money market funds, maybe any comments on seeing any kind of incremental flows from cash repatriation from overseas post tax reform? Thanks.
Speaker 1
Right out of the box, we had several large clients make deposits of a meaningful amount. So we've seen some of it already, and I'll let Debbie give you her report on that.
Speaker 4
To date, I'd characterize it as being very, very short lived. So, you know, what Chris is is referencing, certain companies, large blocks coming in, remaining in for a short period of time and going back out. Presumably, those were firms that sort of had a hint as to what was gonna happen from a repatriation perspective and knew what they had how they were going to use that cash once it came back into to the whether they were paying a special dividend, whether they were buying back stock, whatever it happens to be. They had a specific use for that cash and it sat in liquidity products, money market funds for a short period of time only. In speaking with clients that have not confirmed any amount from a repatriation perspective, but have every intention of doing so, it seems as though there's quite a lot on the table for reviewing just exactly how they do want to use it, whether it's better off staying where it is for some portion of it, whether they need it for a certain purpose or whether it can be used more for general balance sheet purposes once it's back in The U.
S. And I think there's a I'd say probably at least 80% of those that could potentially be impacted by the repatriation are still in that mode at this point.
Speaker 9
Okay, great. Very helpful. Thanks.
Speaker 0
Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.
Speaker 1
Thank you for joining us today. We appreciate your time and this concludes our remarks.
Speaker 0
Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.