Northern Trust Corporation (NTRS) Earnings Call Transcript & Summary

All right. Okay. I guess we're kicked off. Thanks, everybody, for joining us. I do have a disclosure statement I need to read for important disclosures, please see Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. Okay. With that out of the way, Jason, thank you so much for joining us. Jason Tyler, CFO of Northern Trust.

Thank you, and Betsy, congratulations. This is a good conference. It's awesome to see so many great investors here and have everybody together. Everybody seems to be thrilled to be interacting more. So congratulations. It's really good.

Thank you. I appreciate that. Well, I just wanted to say thank you for coming. And for those of you who don't know, Jason, he's -- you've been at Northern Trust for...

10 years.

10 years, a decade. We would call it a decade, right? And prior to becoming CFO in 2020, you were Head of Global Corporate Strategy, right, Global Head of Institutional Group and Asset Management and CFO for Wealth Management.

All true.

Yes. So been through a variety of places within Northern Trust. All right. So before we get into the financials and details and things like that, I did want to just open up with a few business-related questions. And first off is, over the last couple of years, you've been entering some new markets, Philadelphia is one of them. You've been focused on taking share in existing markets like Florida and California. It would be good if you could update us on where some of the biggest pockets for growth for your wealth business are. And are there any new geographies that you're looking at?

Yes. It's a fun map to look at for us because one of the things analytically we've noticed is that we do very well in markets where we have brand recognition already. And so we don't just look for what's new. We look for where can we do even better and where we -- and where we already exist. And so putting new wealth strategies there can be a great return on expense dollars for us. But in terms of new markets, because that's always fun to talk about -- I think, there are 2 different dynamics. One, that gives a sense of our strategy and what levers we pull, and the examples you gave, one is in Philadelphia, we looked around, we didn't see a lot of other firms that were -- that we felt would be a great fit or that were available. And so we decided to hire people and start from scratch there a few years ago, and it's worked out well. We're getting really good traction. That will be a longer build. That's a path for us. The second opportunity is when we identify a local team in an area that we're very attracted to, and that's happened in Jacksonville, Florida, an area where we, broadly Florida, have done extremely well. We just celebrated 50 years in Florida. And a lot of our business is there because our clients come from Chicago and New York or down there. And so that's been bringing on a team that's experienced also doing really well. So we have different tools but the third one is something I think people don't talk about a lot, and it's our virtual market strategy. So we'll have high, high expertise in Chicago or Florida and we'll see a pocket of clients and prospects in area where we don't have bricks and mortar, it might be in Nashville or a Birmingham. And we have great success in sending those teams in, not just once, but on a consistent basis, saying, we're going to be here periodically. We can service you well. And so we have different tools depending on the market and what we think is going to work well.

Okay. One of the things you've also been doing is investing in the tech investments in the wealth sleeve, and maybe those are interrelated. At an industry level, at least from what I can see, typically, wealth managers investing in tech, it's primarily around the mass affluent. But obviously, you are high net worth, ultrahigh net worth. So can you tell us about some of the things you're doing on the tech side that's attracting your customer base?

Yes. It's for a long time, our technology spending in wealth management have been about maintaining goals-driven wealth management, which is our technology to interact with the upper, upper end of the wealth management strata. However, a few years ago, we determined that those even though, we have this adage, if you've seen one family office, you've seen one family office, they're all extremely different and ultra-high net worth individuals will like that, too. But there are some consistencies that come thematically about what they're like and they come from what we refer to as personas. And so we started investing in technology to bring together our insights around those personas. And so whether it's suddenly single people that have gone through a life-changing event and went from being married to single that may not have been in charge of the family finances. We've thought about business executives that, that's -- they've got stock concentration issues largely. And so what technology can we bring to show them what the experience looks like. And now we're experimenting with something that's very neat to think about clients that have different types of similar connectivity and help them look at individuals that are similar to them that we're starting to roll out. And so the technology we've invested in has been around enhancing goals-driven wealth management to customize more to what's on clients' minds of the characteristics that define them. And so to your exact point, it's not pushing down into the mass affluent space. It gets better every year at what we do well, which is the ultra-high net worth space.

Now one thing I did notice as well is that you are focused on that maybe slightly smaller assets under management, so to speak, a person who might have illiquidity in their book. But over time, it could become more liquid, right?

Yes. So our view on that is that there are a lot of entrepreneurs who have businesses that might be worth $100 million, $200 million, $300 million, $400 million and it's too late once you've read the newspaper to call them and say, what are you doing. And so we we've developed not just a process to get to them early, but get to them early with value and on how do you prepare that business to sell in the most economical way and in a way that's most tax advantage. We've gotten outstanding feedback from our clients and prospects on that as they've been gone to sell their business, that they're prepared well once they get to the finish line. And at that point, it's too late to do the planning to do all of the work that it takes. And so you can tell more and more our expertise is about trying to maximize our efforts within the top end of the market, whether it's after they've had liquidity events or just prior.

Okay. Let's turn to servicing. Northern has seen strong growth in alternative and hedge fund servicing over the past many years now. I'm trying to just think through what will be the drivers of growth from here. It just seems like you've been punching on all cylinders.

Yes, that's been a -- it's been a good growth area for us. And a lot of our -- not just the AUM growth and AUC growth, but just the client growth has come from that asset managers. And one thing people may not see as well, it's come disproportionally in Europe and just in general, internationally. And so I think something like 40% of the fund launches over the last several years have come internationally. And that's different for us relative to what we would have experienced several years ago. And so the talent that we have there, their ability to penetrate that market has been good. So I think that's an important dynamic. And the other component of it we've talked -- Pete Cherecwich, who runs that business, has talked about getting our fair share of the very large asset owners and managers but dominate the middle. And that component of looking at fund launches, are we disproportionately helping clients in that vein? That's a litmus test for us that we're doing quite well in that segment of the market. And so it's one of the metrics that business uses to illustrate that their strategy is working.

Okay. Currently, we've got a little bit of high volatility going on in the market, as I'm sure you know.

A little bit.

How is that as impacting your servicing pipeline and your sales activity? Is that a positive? Or should we look at that as a little bit of a slowdown?

It doesn't move the needle. Is my headline on it, and I know people think about we're working at -- they look at the VIX and they look at just movements in general in the stock market. I used to look at the number of days the market moves more than 1%. All those trends tend to tell you there's a lot more volatility. Interesting. If you think about our financial model, as you know as well as anybody, it just starts fundamentally with what are trust fees. And there, we're doing core work for clients. And the volatility where truly hits is in a couple of areas. It might hit in securities commissions and trading, which gets to something we've talked about recently integrated trading solutions, that's us doing more with our clients on an outsourced way. So middle market asset managers might say, we have a great alpha-generating strategy. We don't need to generate alpha from our trading desk. And so let's get that somewhere where maybe some alpha can be generated, but more importantly, we're not distracted with that. That's been a growth business for us. And that is correlated to the volatility in the markets. Second area, foreign exchange trading. And so there are, obviously, strong connectivity between volatility and even what we've seen in currency markets and what our clients do with us. If you add those, even those 2 bigger components up, and you think about what is that $200 million look like in revenue. And if it grows a little bit faster, but our overall revenue being $6.5 billion, $7 billion in revenue, it just doesn't move the needle much. So we watch it closely. The business takes pride in the growth. It's important for us -- but I think for people that are thinking about Northern Trust at 500 feet and thinking is that the needle mover from a margin perspective, the math doesn't get you there easily.

Is there anything on the volatility side that drives more demand? In other words, do you -- are you seeing any interest in new customers that are looking to outsource maybe for the first time given the high vol?

Yes. We -- the -- in particular in integrated trading solutions, seeing the need to maybe hire more traders internally versus getting that third phone call from Northern Trust saying, are you sure you don't want to talk to us about outsourcing, I think is that's where it plays in more. And even the regulatory dynamics and scrutiny of firms having to deal with those dynamics of different components of their business as opposed to saying, here's Northern Trust that can partner with us and help us. And so that's where it tends to play through more.

Okay. Maybe we could spend a little bit of time talking about the innovation that's taking place in the servicing space. And we talked a little bit already about the integrated trading solutions, but other pieces here, in particular, as it relates to the alternative and hedge funds solutions.

Right. Yes. And even in the alternative, so it's another area where we're seeing disproportionately higher levels of fund launches. That's actually the sound bite, I think, that people should take away is in the alt space is having more activity. And so I think it's an area where more and more will start to compete. Ironically, it's very different in Europe versus in the U.S. We have different client activities there. And the teams have just connected differently in the alt space and one in different geographies. But our technology is across the organization. It's not just on the asset servicing side. It shows up in -- as we think about the foundation of Northern Trust, as we think about what we're doing from a risk and regulatory perspective. And then to the questions that you're asking, it gets it business unit growth, in particular. And so more and more, we're trying to categorize technology, innovation, growth, engagement into those 3 different buckets.

Okay. Moving to the balance sheet and net interest income.

Good topic.

Something I know you're very familiar with. So QT kicks off just 2 weeks ago. And just wanted to see if there's any early signs on how that's impacting your balance sheet.

It's -- my headline there is, it is -- it's very important to watch this, but it's very early. And I think about it as it's a marathon, and we just -- and the gun went off and people started and after the first mile, people are saying, how are you doing, what pace are you running? And I'm thinking it's not time to measure that yet. And so our goal in general on NII is make sure we take our time and do what we can to categorize the different buckets and attack them strategically in the right way. So I'll walk through that a little bit for people. On let's the wealth management side, particularly on deposits, which is a good set of deposits. It's a stable set. It's extremely valuable for us because there's longer duration on those deposits, which tells us we can invest them longer. And so there, it's let's -- and they're operational by nature. So there, the strategy is hold on to those deposits. Now you'll see fluctuations because as we come into the end of the first quarter, clients are building for tax payments in the beginning of the second quarter, they're building for tax payments. Those payments will hit, and then we'll see a decline coming off of that. So I think you get not -- you get trends there that are misleading. You get false trends. And so people have got to be very careful of it. But we're laser-focused on maintaining operational deposits in wealth. Now juxtapose that to the asset servicing side of the business. There's a tranche of deposits there that are also operational, highly valuable. We can, in turn, invest those longer and understanding that we can match the duration of the asset relative to that liability deposit that we have. At the top end, where clients -- our largest clients can call and say, we have $1 billion that we're going to -- that we want to put on a balance sheet to work for the next 3 weeks. And we're going to call you and we're going to call 4 or 5 other firms. What's the spread that you would give us. And think about how we're going to respond to that. And what we can -- all we can do if we take that in is we can put it in cash at whatever Central Bank it's coming in from a currency perspective. That's it. That's the only prudent thing to do. But think about how differently we're going to address the aggressiveness of responding to that relative to a wealth client saying, I see that rates have gone up by 75 basis points, where my deposit rate is going to go?

So you talked about protecting your deposit franchise, you're talking about the wealth franchise there.

We're talking about the wealth franchise and the operational component of -- and we're going to answer that phone call from that very large institutional client. But the answer is going to be very different, and our emotional reaction to it is going to be very differently whether it stays or whether it goes. And so -- and I think that gets back to the analogy of it's a marathon and a mile into it, we're not going to cause -- we're not going to high five or we're not going to get disappointed on some tolerance of fluctuation if it's largely in the nonoperational side of the business. The economics there just aren't as strong, and people get focused on the volumes and then multiplying that times what they think is an increasing net interest margin but that's not the way the math works. And we have to be more granular in how we analyze that and how everybody thinks about it to get a sense of how -- and predict how we're going to react to that. And as a way to react to what the volumes on the balance sheet are going to be like.

So I'll ask the question that I think is on other people's minds, so we -- we're not on your side, so we don't see it, which is why I'm going to ask, but how do you define operational deposits?

Yes. Well, for -- first of all, it's not just up to us. There are regulatory components of it. But I think the way to -- for people to litmus test it is that very high percentage of wealth management or retail deposits are considered operational. And for the asset servicing space, there are tests that come with the type of organization. So whether it's a hedge fund, whether it's a financial services firm management or a large asset owner like a pension fund. And then even beyond that, we look at a seasoning component to it. How long have the deposits been there and what -- and how tied are they to the transaction volumes of those relationships. And so even on the "retail side", because our retail is really high net worth and ultra-high net worth, we're not just looking at the deposit came into that account. We're letting those deposits, what we refer to as, season before we start to extend the investment of those on the asset side of the balance sheet.

Yes, I've just been wondering with this inflationary environment, will that drive some deposits down, just a little some of what we thought was operational end up leaving anyway because of the pressures that's building.

No. It's a really good topic because what's happened as you separate for a sophisticated client, whether they're on the wealth side or the asset servicing side, and there, the first thing they tend to think about is, is this a risk asset or a risk control asset. And on a risk asset, they're boiling it down is in mid-cap, small-cap, large cap. Is it private equity? Is it public equity and how are we going to think about hedge and long-only versus shorting, on the -- but then there's the risk control component. And on the risk control component, there are also a -- there are a ton of different places on the spectrum you could go, bank balance sheet, money market mutual funds, ultrashort, laddered bond portfolios. Within that spectrum alone over the last couple of years, those rates were flat. And so there is no decision to make. And so clients -- a lot of clients have said, "Leave it on the balance sheet. I've got ultimate liquidity, leave it on the balance sheet." Now it's not that the Fed funds rate has gone up. It's that the yield curve is, it's that the -- there's steepness to the yield curve. And so they have choices to make, and they have to go back and now make more determinations of where within that risk control framework do I want to be from a duration risk and yield perspective.

Right? So when you are going after the retaining of operating deposits in wealth, how do you think about that from a rate perspective, if the client is looking for money market fund rate, does that make sense for you to match that rate with the deposit or...

Rule number one is -- in that example, if an existing wealth client calls us that our first -- our first goal is hold on to deposits, keep it inside Northern Trust because we do all of the things that I mentioned. And let's just live to be there, to be the liquidity source. A big part of our business is liquidity, and we're proud of that. We're not shy about that. And so clients can then -- we can talk about rates that are reflective of what their transactions are like, what their risk tolerance is like. And our whole conversation with clients comes down to what are the goals that you have as an investor. And a lot of our clients -- the goals are more around preservation. It's less around I sold my business for $200 million. You now have $100 million of that. I want to get it to $250 million. A lot of them are just saying, "I want to make sure on this risk control feature that bucket, we're holding on to deposits well, I'd like to get an attractive yield from it." And then there are other clients saying, "My whole investment portfolio is about is about yield. And so I care everywhere along the spectrum." And so it's customized to what the -- it comes back to goals of clients.

So I just want to bring it back to QT. So we're analysts. We're trying to estimate what's going to happen even though we're in the first mile of a marathon. So and looking back at what happened last QT, I think, on average, you did lose some deposits, right? Deposits were down about 8%. And this time, QT is expected to be about 3x the pace of last cycles QT. So just wondered how you think through that math.

Yes. So last time -- I think, it comes back to not just what is the rate of QT, but what does the yield curve look like and what are clients trying to solve for, and what is the equity market doing at the same time. Because back to -- there are a lot of times, this is about a rebalancing effort. And so even though QT is happening, clients will say, well, it's not just that money is leaving, my equity portfolio, my risk assets are down 12%. And I want more exposure there. And so they're using their cash as a funding mechanism to do that. In other instance -- other instances, they're saying, markets have been good for the last several years. And I'm sufficient in terms of the goals I have. And for us, it's not goals, it's typically not my kids need to go college and it tends to be -- I'm deciding about a second home in California or Florida, what are the tax differences between them. I want to endow to professorships at my alma mater. How does that work? And so the conversations are very long term. And so for us, as we think about what are the -- and I know that some firms can go back and they can look at that QT dynamic. But for us, on the deposit side, it's driven largely by wealth clients that are factoring in more than money supply, which does, I acknowledge, drive the deposit volume of a lot of large sophisticated institutions.

Okay. So then deposit betas this cycle versus last cycle for you?

Yes. Last cycle, it wasn't a 100-meter dash, but it was short. And we -- everybody had a sense, we will get 2, 3, 4, 5. And by the time you got to Fed funds at 150, you wanted to make sure that you had some spread. And so for each increase with each hike, you're trying to make sure that you're pacing yourself into landing at 150 with a decent spread. This time, the view is maybe not going to land at 150 to 175, maybe we're going to land at 250, 300, maybe 325. And so the goal early on is stay with the pack and make sure that you do what you can to hold on to those deposits. Now caveat to that, again, at the top end, there's going to be some money that's super rate-sensitive. And we may say we're going to pass on some of that. We have to have tolerance in that bucket for there to be volatility. So we're not high-fiving over bringing on deposits from others because our rate was so attractive, and we're not wringing our hands because we lost some in a relatively short period of time. But the goal is just make sure if we're going to get to -- if this is going to be a test of what does spread look like and what does volume look like when the Fed is done, then we don't -- at this point, it's about maintaining client engagement.

Okay. Question on the positive side, ECB rates are moving off of negative.

Amazing.

Exciting?

Yes.

How big of a benefit is that for you when they turn positive?

So let me split it pre and post. So the -- so first, let's frame the dollars. And so we've talked about the fact that USB is probably 70% of our deposit base. Sterling is the next at a little over 10%. ECB and Aussie in the neighborhood of, call it, 5%, 6%, just to frame it at a high level. And then -- but when it's down and then creeping up, the deposits -- our clients have said, "I get it, you're going to charge me because you're being charged to have funds at the Central Bank." But as that -- as you get charged less, you charge us less. Once it gets to zero, that curve probably -- that correlation probably looks different. And so that's one is that zero acts as a little bit of a nonlinear inflection point. The second, which is a super important factor is the rate rise is driven by inflation. And our clients know that. And so they're asking us, where does inflation hit, where do we pay for it? And in many instances, we might come back and say the fee -- your custody fees are going to have to be higher. Another alternative is as rates go up, we're going to do better. And so that spread that we're working with clients is another mechanism to address inflation. And so it's another tool we have that clients -- that statistically clients understand it might be in their benefit. And so that rate getting above zero, it brings more into play how are we, with our clients, going to address inflation.

Okay. A question on the loan volume. You've mentioned in the past that loan volumes have been spiky. Is that the right word?

Probably.

Okay. Can you give us a sense as to how things are trending this quarter?

Yes, I can. For those that aren't as close to it as you are, let me explain spiky.

Sure.

So in the deposit side, it's a big pool of last $140 billion, $150 billion. And so even large, large movements don't move that cumulatively very much. On the loan side, it's actually driven more -- most of our loans are -- they come from the wealth management business, not necessarily all families. Some comes from businesses but that are inside our wealth management business. In that business, we're dealing with -- we deal with 30% of the richest 400 families in the world. They're multi, multi, multibillionaires and sometimes when they see opportunities in the marketplace, and they've got a lot of money on custody with us. Instead of selling something and taking a tax hit on it, if they've got a low tax basis, they'll say we want you to loan us money. And those can be large, large dollar amounts. And if you get 1 or 2 clients with the same view, the same theme doing that, it's needle moving, not 10% of our loan book. But it can be noticeable. And that's why I'm always cautioning people to not look on a linked quarter basis and say, your loans are up that can be -- if it's coming from our family office business, and we tend to try to say if it is, then that doesn't necessarily predict a trend. All that said, we have had an increase in what I'd refer to as the more core base of our wealth loan book, and that's come from what we've talked about being more engagement with clients around our desire to do more with them. We don't want them to see us as a reluctant lender where they're keeping $25 million with us and think we don't want to lend them $2 million for a home in Boca because they don't want to sell an asset. We want to do that for them. So concerted effort, go out, talk to those clients about your desire to do that. And then we think loan growth will come. It did. We went from -- we had significant loan growth over the last couple of years as a result of that intentional effort. A lot of that low-hanging fruit has been harvested. And so -- the -- I'd say, the predictive component of that is we are not going to see the same trajectory we saw recently. However, the team says we're more in a business as usual, more growth function still in our loan activity. So the flatness that we experienced pre this initiative is not indicative of growth in the future nor is that initiative given period where we're out telling clients don't go somewhere else to borrow the $2 million for the Boca home, we'll do it for you.

So we have a couple of weeks left in the quarter. And maybe you could give us a sense as to what trends or color you're seeing to date, we've had big moves in the equity and bond markets.

Yes. Equity markets, in particular. And I'm glad you brought up the bond market impact, and it's not as severe, it's not as correlated, but even when bonds -- with rates up, the bond values go down. And so that impacts our asset levels as well. It's something that people shouldn't overlook. That said, I'd say the things we should focus on, one, loan volumes are holding up pretty well, nothing to highlight there. The deposit volumes are down. And we've and I talked about that in the operational deposits that we care -- mostly that we care more about, it's been much more flat and a small decline, but very attributable to what we would anticipate with just traditional tax activity. On the institutional side and largely in nonoperational deposits, there's been a decline. And we've seen that. It's within the tolerance that what we anticipated. But overall, if you combine the overall deposit base, down approximately 6% from what averages were at the same -- averages were over first quarter. Fee waivers. We talked about the fact that we were going to leave some strategic waivers in place to ensure that clients are still thinking about us and particularly the direct market. And the interest rate-driven fee waivers, gone. The strategic waivers where we're saying we should adjust pricing there, are -- still exist but at the lower end of that $10 million to $15 million within quarter range that we gave. And then on expenses, a couple of categories. One, equipment and software, we mentioned on the call, there is a $5 million lift quarter-over-quarter just coming -- linked quarter, just coming from depreciation being higher. Our continued investment there showing another $5 million to $10 million incremental to that $5 million. And so that just is part of our normal journey going forward in that area. And then in outside services, the sequential increase in 2Q, we see happening, but not as high as the fourth quarter level. So up but not as high as fourth quarter. And then other operating expense is probably worth highlighting that there's more of a typical sequential increase based on travel. That first quarter tends to be light. We're seeing that a little bit higher. We're here. And a lot of our -- so many of our partners are in a good way getting in front of our clients.

Okay. Anything on NII there or...

I don't -- thank you for highlighting that. The 6% down is a big drop that people might not expect, but the impact to NII is not -- from that drop is not as high. It's not at the same margin as the rest of the business -- as the rest of the portfolio is what I would want people to take away just to not create a false flag that NII isn't doing well. And so it's -- that drop is disproportionately in thinner incremental net interest margin activity.

And then you also mentioned prudent on buybacks earlier this year. Can you give us a sense as to how you're thinking about payouts?

Sure. A couple of things. One, let's think about AOCI and how the 10-year is up a lot. And so I think we gave a number of $350 million to $400 million on the call. As we sit today, incremental to that closer to $700 million. And so that's a drag as we think about how much available earnings we have to deploy. And to walk people through it, it's -- we think what net income came in, what are we going to do with the dividend? And then we test what's happening with RWA. And so for us, obviously, the dividend is super important. And even on that just briefly, we've tended to be in that 30% to 50% range. Even with AOCI going where it's going, we still feel like we've got a -- we're looking freshly at what's that 30% to 50% range, where are we? And so that's on our radar screen to be talking about. And then -- so the impact of AOCI, what it really does is tell you, do you want to take CET1 down even more if you want to buy back stock? Or do you want to just stay on the sidelines? And that's the type of discussion that we have at that point. But that's nice -- it's a nice part of being in a position where we feel very good about our capital levels and the AOCI hit that we've had, it's not permanent. Those will recoup that just with time. And so we don't have to panic around that. And obviously, our levels are such that we feel good about where we are.

I just want to confirm the comment you made, $300 million to $400 million is what you had said initially. But now that rates are up so much, it's an incremental $700 million. So are you talking about $1 billion this quarter?

No.

You're talking about [indiscernible]

Yes. Yes. That's right. I'm sorry. Thank you for confirming that, yes. At this point, from the end of first quarter to today or yesterday or give me Friday because I'm not sure I look at $700 million.

Okay, in total.

In total.

Right. All right. Got it. And I guess, the last question here is, would you think about doing anything with the securities book to reduce that risk going forward in the event that inflation still kicks around?

Back to why, what would it enable you to do or what would it -- or what -- there's not a -- we consider it all the time. We're always thinking about that, but -- and what is the cost of it? The cost is you can't sell -- that you really can't sell those securities at that point. And so for us, we have to say, well, there is a cost to it. It's preventing you to do more. And so we look at it all the time, but the capital position we're in, it doesn't -- it wouldn't tell you with where we are plus incremental movement in the 10-year as a proxy, it does not tell us that we should do anything. We don't have to do anything differently. We will look at it. We might, but it's not -- that wouldn't be driven out of any necessity to meet a certain capital ratio, particularly since over time, the earnings coming from higher NII and the recovery of AOCI, both lead to higher capital positions.

And the recovery over time is like a 3-, 4-, 5-year kind of time frame?

Yes. And it's not linear in that way, but that's -- if you think about where the duration of the book was to 7-ish somewhere in there. And so it just gives you a little bit of a proxy for where you'd see that recovery.

Well, we do accrete it back into our model. So that's why I wanted to know if I was on track with my 3- to 4-year time frame there.

That's good.

All right.

All right.

Thank you.

And congratulations again on the conference. It's great to see everybody.

Thanks so much, Jason, for joining us. Bye.

All right. Thanks, Betsy.