Great. Thank you, Michelle.

Good morning and thank you for joining us today. With me here are Tad Smith, Sotheby's President and Chief Executive Officer, and Mike Goss, Chief Financial Officer.

GAAP refers to Generally Accepted Accounting Principles in the United States of America. In this earnings call, financial measures are presented in accordance with GAAP and also on an adjusted non-GAAP basis.

An explanation of the non-GAAP financial measures used in this earnings call as well as reconciliations to the comparable GAAP amounts are provided in the Company's Form 10-K for the period ended December 31, 2016. Also, during the course of this call, the Company may make projections or other forward-looking statements regarding future events or the future financial performance of the Company.

We wish to caution you that such projections and statements are only predictions and involve risks and uncertainties, resulting in the possibility that the actual events or performance will differ materially from such predictions. We refer you to the documents the Company files periodically with the Securities and Exchange Commission, specifically the Company's most recently filed Form 10-K.

These documents identify important factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements. Please see our investor Web-page for a transcript of our prepared remarks as well as the presentation detailing our rolling six months results.

Now, I'll turn the call over to Tad.

Thank you for joining us and for your interest in Sotheby's. This morning I will begin with a look at our fourth quarter results before turning to the market and the current environment.

I will end with an update on our four priorities. On our last analyst and investor call, we anticipated fourth quarter 2016 adjusted earnings per share to be in line with 2015's figure, and in the end we came in 14% higher with adjusted earnings per share of $1.35, driven largely by a number of outstanding fourth quarter sales.

For the full year, we reported adjusted earnings per share of $1.71, down 17% from 2015 adjusted earnings per share of $2.07. There are three key takeaways from the quarter's results.

First, we were cautiously optimistic in November, but as it turns out, the weight in that statement should have been on optimism as collectors responded enthusiastically to the great collections and works we secured for sale. Second, greater pricing discipline and intelligent deal-making contributed to yet another quarter of improved auction commission margins.

Third and most importantly, this quarter demonstrated that when the market stabilizes, let alone when it returns to its secular growth trajectory, our Company is poised to capitalize on the upturn and do very well for our shareholders. Turning to the first quarter of 2017, some have noted that our Masters Week sales in January were lower than a year ago, but there are two factors that are important to acknowledge.

This season we did not have a masterpiece like the Gentileschi we sold to the J. Paul Getty Museum in 2016 for $30.5 million, nor did we have a $24 million single owner sale as we had with the Taubman Collection.

When you remove both of those from the equation, our results were nearly flat at $41.9 million, and with strong prices achieved across paintings, drawings and sculpture. Our Americana Week sales totaled $19.4 million, our best result in a decade, anchored by the performance of an impressive number of distinguished private collections.

More than 1,000 lots were sold across six auctions, with a strong overall sell-through rate of 80.4%. Looking ahead, our major sales of Impressionist, Modern and Contemporary Art get underway on Wednesday night in London and we are encouraged.

Our Impressionist & Modern Evening Sale is led by a beautiful landscape by Gustav Klimt that is estimated to sell for more than $45 million. The sale also includes several important works by Pablo Picasso, including his Plant de tomate from 1944 which is estimated at $12.4 million to $18.6 million.

The top lot of our Contemporary Evening Sale is a monumental canvas by Jean-Michel Basquiat entitled Untitled (One Eyed Man or Xerox Face), which is estimated at $16.1 million to $21.9 million. The sale also includes an outstanding group of German works led by Gerhard Richter's Iceberg, which was painted in 1982 and is estimated at $9.8 million to $14.6 million.

Our Hong Kong team is in the final stages of assembling their spring sales. So it's a bit early to provide guidance on what we are seeing in that market.

However, last year 48% of purchases by Asian clients took place outside of our Hong Kong salesroom, a trend that we began to see in 2013. And of the top ten works sold by Sotheby's in 2016, half were purchased by buyers from Asia.

Moreover, we are very pleased that our relationship with our new largest shareholder has already been helpful to us in China. Lastly, it's important to remember that there is much more to Asia than China.

We are tremendously excited about opportunities in Taiwan, Singapore, India where we recently opened a new office in Mumbai, and Japan where we are under new management. Looking more broadly at the market, there are also a number of macro factors at play and how they may impact the market and our business remains to be seen and it's important for us to continue to monitor a number of situations.

In the United States, we obviously have a new administration that is looking at tax reform and economic and regulatory policies that might affect the art market or Sotheby's. We are watching those developments closely and I'm happy to speak more to the topic in the question and answer period.

In the United Kingdom, Brexit is another factor we need to keep an eye on. In the short term, exchange rates present a favorable opportunity in our London salesroom for non-British buyers, but what will happen in the longer term depends on the U.K.'

s exit agreement and the nature of the legislation that is put in place. Turning now to our progress against our four priorities, and as a reminder they are; first, to implement a compelling growth strategy; second, to embrace technology more effectively, both internally and through client-facing products; third, to build a talented team within the organization and the processes to sustain success; and fourth, to allocate our capital more efficiently.

With respect to the first priority, to implement a compelling growth strategy; I already touched on our upcoming March sales in London, but a brief recap of our performance in 2016 demonstrates our progress on improving our position at the high end of the fine art market and our results speak for themselves. Last November, our Impressionist, Modern & Contemporary sales totaled $553.3 million, bolstered by the Ames Collection which brought $131.3 million, and Edvard Munch's Girls on the Bridge that sold for $54.5 million.

Our Frieze Week sales of Contemporary Art in London in October totaled $88.5 million, led by a $59.6 million Evening Sale that was 91% sold by lot. Our June Impressionist Evening Sale totaled $151.9 million and was nearly 89% sold by lot, with major works by Pablo Picasso and Amedeo Modigliani achieving $63.6 million and $56.6 million respectively.

The following week, our Contemporary Art Evening Sale totaled $69.4 million, with a strong sell-through rate of 87%. And last May in New York, our Impressionist, Modern & Contemporary sales totaled $484 million, with works by Cy Twombly and Francis Bacon exceeding $30 million each and records set for artists including Auguste Rodin and Sam Francis.

Earlier this year, we united the categories of jewelry, watches, wine, cars and experiences into one Luxury & Lifestyle Division under an experienced member of Sotheby's senior management team. It is an organizational structure that will help us align resources and bring greater focus to these areas.

A brief update on some of the categories involved; our global wine team just completed another year where Sotheby's was the number one wine auctioneer in the world, and there are a number of opportunities to grow our auction and retail businesses both online and offline that we are beginning to look at, in addition to other prospects that we see in this marketplace. In jewelry, we recently opened a retail space in London dedicated to Sotheby's Diamonds at our New Bond Street address.

We have been building out our international watch team and have made a number of important hires, including new global leadership, to complement our existing talent. RM Sotheby's led the global collector car market in 2016 with auctions sales of $380 million and an annual sell-through rate of 91%.

The firm's fourth annual Paris auction earlier this month realized $29.5 million, the Company's most successful sale held in the city to date. The upcoming Amelia Island sale in mid-March represents the largest offering in Amelia Island auction history and includes a superlative group of Rolls-Royces, Bentleys and other sporting icons from the collection of Orin Smith.

We also made a number of investments over the course of 2016, and these investments have gained traction in driving our future growth. I am very pleased with our advisory business and we have continued to add new clients since our acquisition of Art Agency, Partners just over a year ago.

We expanded the business to include advisory services for artists and artist's estates, filling a gap that currently exists between gallerists and lawyers, and hired a leader in the growing industry of artist endowed foundations. Last December, we acquired Orion Analytical, the firm founded and operated by Jamie Martin, one of the art world's leading forensic scientists and experts in art-authentication matters, and appointed him our new Director of Scientific Research.

Jamie's scientific expertise and the technical capability and processes he is establishing within Sotheby's build on our existing best-in-class due diligence process and will help protect our clients and shareholders from forgeries. In a world where collectors are rightfully concerned about authenticity, Sotheby's can use superior expertise, science, and a trusted brand to provide them with confidence.

In October, we announced the acquisition of The Mei Moses Art Indices, now known as Sotheby's Mei Moses, and we are very pleased with our investment, providing us with unique access to objective and verifiable information to complement the world-class expertise of our specialists. Now turning to the second priority, to embrace technology more effectively and accelerate innovation both internally and through client-facing products.

Improving the experience and opportunity for clients to participate with us online has been a key priority and we have made significant progress and continue to see traction in early 2017. Online buyers spent $155 million at Sotheby's in 2016, up nearly 20% from the prior year, despite the overall sales decline in the art market.

53% of all online buyers in 2016 were new to Sotheby's, up from 41% in 2015. This is an important metric as we continue to focus on expanding our client base.

Another interesting data point has to do with unsuccessful bidders in our auctions, or underbidders as we like to call them. Underbidders are a crucial element to the success in the salesroom.

Incremental bids appear to yield an average 15% to 30% increase in the final selling price. As we continue to see many clients choosing online as their preferred method of bidding, it's interesting to note that in 2016 we saw a 67% increase in the total number of online underbidders in our live auctions.

Although it is early, so far in 2017 the results are also encouraging. During Americana Week, online sales were up nearly 70% compared to the prior year.

40% of the bidders in our Fine Jewelry sale in New York earlier this month participated online. Our editorial, video and social media programs have been significant factors in engaging clients and driving online participation.

You may recall a data point I have referenced before that I think bears repeating, clients who engage with our editorial content are 33% more likely to bid than those who don't. We are creating more content than ever before and we saw digital engagement across all touch points, including our Web-site, apps and social channels, grow as much as 35% year-over-year, including a threefold increase in video views.

Visitors to Sothebys.com spend 39% longer on our site than that of our main competitor, and we continue to reach an even broader audience through our market-leading social media program, with over 1 million followers and an average weekly growth of 2.9% in recent weeks, all contributing to the 57% increase in online bidders and 32% increase in online buyers that led to the overall totals for 2016 that I mentioned a moment ago. Following our launch of the Sotheby's Museum Network last fall, we have continued to add important museum partners and amassed a rapidly growing collection of over 300 videos.

Our first original series, sponsored by Huntsman, was The Treasures of Chatsworth, which featured one of Europe's greatest private houses and most significant art collections in 13 episodes and has more than 1.5 million views to date. In 2016, we also launched apps for the iPhone, iPad, Android phone, Apple TV, Amazon Fire and Samsung Smart TV, and we have a similarly ambitious rollout of new features and functionality planned for 2017.

One example is a consignment tool that will provide for a more streamlined experience for potential consignors and we anticipate being up and running next month. Our focus on using technology to improve our internal systems and processes remains a constant priority as we work towards creating a seamless experience for our clients.

This year, we are embarking on a major initiative focused on improving the key processes where our clients interact with us most, and we already took a number of important steps in 2016. On the information technology front, we began to bring our operation in line with best practices and improve the flexibility, scalability, and reliability of our systems and services.

We migrated the vast majority of our corporate applications and data to the cloud, and we implemented 24/7 tech support and proactive monitoring of our global data network as well as checks and processes to ensure all live and online sales are conducted with minimal or no disruption. From an operational perspective, we moved our catalogue production to London, improving efficiencies and achieving savings we can invest elsewhere.

We launched a pack-on-site service offering clients a lower cost 'soft pack' shipping solution for certain types of purchases. We introduced improvements for credit card payments in New York, London and Paris.

And in terms of our properties around the world, we completed new premises in Geneva, Mexico City and Dubai, and also made significant improvements to many of our galleries in New York. Our next priority is our people, to build a talented team and the processes to sustain success, and we made considerable progress in 2016.

We added unique talent to our organization with a particular focus on technical and leadership skills, most significantly in our specialist departments, but also in the areas of finance and strategy, business development and product development. We also elevated a number of talented colleagues to leadership positions around the globe, including most recently our new Chief Operating Officer, Adam Chinn, who joined us from Art Agency, Partners a year ago and whose leadership has significantly improved both deal making excellence and our margins.

We realigned existing talent and made a number of key hires in the Impressionist, Modern and Contemporary fields. We continue to build for success in private sales.

We have added the perspective and sophistication of a well-regarded collector to lead our private sale efforts in Contemporary Art in New York. He will join us next month after nearly two decades on Wall Street, during which he established himself as a respected collector of Post-War and Contemporary Art.

We have appointed new leadership for our S|2 gallery in London and have a dedicated team in place. We filled important gaps in our regional scope, hiring talent in cities including Los Angeles, Palm Beach and Mumbai.

Our fourth priority is to allocate our capital very efficiently. Using an example, I want to take a moment to discuss auction guarantees, hedging strategies, how they function and how we use them.

Imagine a collector who invested in a painting several years ago and it has been hanging on his or her wall ever since. For whatever reason, they would like to raise some cash, but they don't want to sell the work if there is a risk of it going unsold at auction or being over-shopped privately.

Because of the insight and expertise of our talented team, we have an informed understanding of the value of the work of art and access to people who want to own it, so we can confidently offer a guarantee to the seller and hedge it on the other side. And importantly, we can charge a premium for the service of eliminating the client's risk.

So in short, used prudently, guarantees are good for consignors, collectors, the market overall, and investors. And with respect to our hedging of such guarantees, for the shareholders, as of February 22, 2017, we had outstanding auction guarantees totaling $147.7 million, and as of that date we have reduced our financial exposure with irrevocable bids or hedges totaling $89.4 million, and we may yet secure more irrevocable bids in the lead up to the March sales.

With that, I will turn it over to my friend, Mike, to expand on our results and shed some light on what we might expect in 2017.

Thank you, Tad, and good morning everyone. I'd like to spend my time with all of you this morning addressing two questions.

How specifically did we outperform our expectations for this quarter, and what does this quarter suggest for the future of Sotheby's? As for the first question, how did we outperform our expectations for the quarter, we must first start with net sales.

Net sales for the period were down 34% versus the prior period, but down only 19% if you exclude the Taubman sales from a year ago. At the time of our last call, we had expected to continue along the same path as we had been on for the first nine months of the year, which was down 24% excluding Taubman.

So we basically outperformed in the salesroom by 5% or so. That's not the entirety of the story, however.

Even more significantly, our auction commission margin rose strongly for the fourth consecutive quarter, 18% versus last year's level of 12.9%, or even more telling, last year's 15.9% if you exclude the impact of the Taubman sale from last year's figures. The rest of the P&L looks pretty much as we all expected.

Expenses were kept in check, our tax rate was lower, and we benefitted from the impact of our stock buyback program on the number of shares outstanding. The net result was a 13% improvement in fourth quarter adjusted earnings per share versus the same period a year ago, despite net sales levels, which were 34% lower than the year ago period.

Interestingly, these results were also achieved after giving effect to a $7.4 million loss on inventory activities, which largely reflects a write-down in the value of house inventory to reflect lower realizable values as we more aggressively seek to sell this legacy inventory in the coming year and use the resulting cash for more productive activities. Now for the second question, what does this quarter suggest for the future of Sotheby's?

Let's start with the key takeaways from the year we just completed. Despite market softness that led to a 29% annual reduction in net sales, our adjusted EPS was down only 17%.

We achieved this because auction revenue was off considerably less than net sales were off, only 15%, the result of better discipline on pricing, more prudent guarantee writing, and a product mix of lower priced lots. At the same time, we managed to keep our expenses in check, especially with respect to compensation expense which we've intentionally structured to be more variable with performance.

We benefitted from a much lower number of shares outstanding as a result of our more disciplined approach to capital allocation. And a lower tax rate also helped.

Thematically, we hope to accomplish much of the same in 2017. From a net sales perspective, we're off to a good start with our Modern, Impressionist and Contemporary consignment levels in London, but this strength will be offset somewhat when we convert those sales back to dollars at a much reduced exchange rate versus a year ago.

It's still a little early to make a call on our all-important second quarter sales in New York, but given the trends we're seeing elsewhere, we're certainly feeling less headwind than we were at this time last year. On the revenue line, we expect to continue our progress on margins, especially with our November Buyer's Premium increase working in our favor for the full year.

However, we would expect to see some tempering in the rate of progress versus 2016, especially if stronger net sales materialize at the higher end of the market and a change in mix starts to work against us. On the expense side, we do expect to see a modest increase in our spending from year to year, particularly as we accelerate our investments in digital marketing and other technology-driven initiatives, and hopefully in our compensation expense that varies with performance.

Finally, from a tax rate perspective, I would expect to see a slight uptick in our tax rate, as our profit mix shifts back to the United States, our highest taxed region. But of course, potential tax reform is still a bit of a wildcard there.

With respect to the balance sheet, our objective is to continue our progress in allocating capital to the maximum benefit of our shareholders. In 2017, that will take the form of more aggressive conversion of inventory to cash, and perhaps a return to our stock buyback activity, although no firm decisions have been made in that direction.

Given this approach to managing the financial side of our business, we feel that if the market stabilizes, or even better, if the headwinds we faced in 2016 turn to tailwinds at some point in 2017, this year will be a year in which the progress we've made against our four key priorities will be more clearly demonstrated. It's too early in the year to conclude that we're at that point just yet, but we're certainly poised to take advantage of a recovery when such upturn occurs.

So now let's turn the call over to your questions.

Just one. You mentioned on the compensation expense becoming more variable.

Can you give us kind of an idea how we can think about that I guess as it looks like the art market is starting to improve, and if it does kind of take off, how we should be thinking about that, the compensation line, moving proportionately or just kind of how we can model that going forward?

It's a good question, Greg. For the senior leadership team, I'm talking all but Tad, Tad is even more skewed towards performance, roughly one-third of our compensation is based on salary, one-third is based on performance versus an annual target, and one-third is based on long-term incentives which is cliff-vested over three years versus the target that the Board sets for a return on invested capital.

We don't disclose what those targets are exactly but that middle third, the bonus, is roughly driven by profit measures, again performance versus a plan. The stock is versus return on invested capital, so we're constantly truing that up against our three-year forecast, since it has three-year vesting.

I think the best thing to do when people are thinking about expense levels for 2017 is to look at what it was in 2015 and kind of assume we go back to that level.

Okay. That's very helpful.

Thanks a lot.

This is Jason on for George. [Indiscernible] in the quarter, Tad, I'm wondering you had mentioned that you have a growing confidence in the art market, and obviously we saw that in the Q4 results, but just curious if you're going to offer up anything in terms of the conversations you're having with dealers and collectors, if there's anything qualitative you can kind of shed some light on that gives you confidence in the coming quarters and a rebound in the market?

Yes, we feel good. There's a lot of supply in the mix, some of that you saw pop up in March.

I think you're going to see some of it popping up in May. There are a lot of pitches going on and I feel quite good about it.

Okay. And then maybe you can just contrast your relationship with collectors, a couple of years ago that was obviously a smaller relationship than it is today as you've added art agency partners and some additional services.

So, can you just talk about how that relationship with your customers has changed?

I don't want to comment on two years ago, but what I'll say is that I feel very excited about our relationship with our clients in the Americas. I feel very, very excited about it in Europe.

I feel very excited about it in Asia, Central Asia, East Asia. And I guess we've got a little work to do in Antarctica but we'll try to get there.

Congrats on great results. Tad, your comments about the marketplace, the market stabilization comment, where are we in this inning and how do you offset that with the uncertainty around tax reform and economic regulation?

How do you think your customers and your customer base is perceiving that and how does the market stabilization factor interplay with the important collecting that you're doing in the second quarter and as we think about the second quarter top line as well? Thank you.

In terms of – I'd like to separate tax reform and set that aside for just one second, and I'll come back to it, Oliver – in terms of how people are feeling, if you look at the stock market, if you look at generally the growth profile in the United States, I think on average people are feeling noticeably better about it. I think if you look at Europe, they are feeling a little bit better about that.

At the same time, the probability of an unusual outcome has gently gone up. So in other words, the distribution of outcomes has become on average much more favorable but the distribution of outcomes has become a bit flatter, which is to say that everyone is feeling better but there's a higher probability, very gently higher probability, that there is some risk around it.

And that is a good segue into what are the kinds of risks. One thing is that at least in the United States there is a high degree of enthusiasm for some pro-growth policies, including regulation changes and also particularly tax reform.

With respect to tax reform, it has lots of positives. If the corporate rates become more favorable and there's repatriation, that's definitely better for investment.

The stock market is already probably benefiting from that. And if more money gets put into our pockets and we're feeling better about things, that will definitely have a positive impact going forward.

If either the prospects for either legislation in the United States dim or people get a look at what the legislation is and they decide they don't like it quite as much, I said a minute ago, the distribution of outcomes would be a bit flatter even though the average goes up. Well, that would be an example of a situation where they may not be as enthusiastic and that would be a risk to the marketplace.

I have to tell you, I feel quite good about it and I'm thinking things are going to go rather well. If, Oliver, you have a more specific question on tax reform as it affects us, feel free.

I mean, obviously the environment right now legislatively has been cloudy, but we've been thinking about it.

Do you still feel like it's a relevant driver in terms of thinking about how the S&P turns and how that might relate to your customer base?

Yes, in so far as taxes affect either decision-making, such as with respect to States or anything like that, yes, of course it's going to be a relevant matter. At the same time, it also has secondary consequences.

If the tax reforms create growth and a much more favorable environment for investment and favorable environment for spending, that's also a positive. And by the way, of course there is the additional thing, which is if there are border adjustability elements that come into play and it creates some macroeconomic uncertainty or some shifting, it can be a positive or a negative, and it just depends on how that plays out.

Okay. Thanks Tad.

And Tad, on the digital engagement side, you've let us know about a lot of really helpful statistics. Where do you feel like you would prioritize what we should focus on as the biggest needle movers?

And as digital engagement becomes increasingly important, how do we think about that in terms of our models, whether that'd be aggregate auction sales growth or margin enhancement, and what's been surprising as you crunch the data and have more analytical capabilities in terms of decision-making you've been making on the digital engagement strategy?

Very, very good questions, Oliver. I would say, the thing that I follow most of all is what proportion of our sales comes through online.

And the reason that's important to me is because I think if you think about the more and more that we do online, the stuff that goes on behind it, the massive consumer CRM stuff, the understanding and insight we have on serving our customers, the ability to use advanced digital techniques to connect the customer to marketing, to connect our salespeople more effectively to our understanding of the marketing, that our customers need, that is effective, all of that stuff behind the underlying sales number just is positive. So, another way to say it is, we just reported last year $155 million, plus or minus, in online sales, imagine what the character and complexion of the Company operationally and in terms of a client experience looks like when that number is not $155 million but it's $1.5 billion or $2 billion or $3 billion.

And it's a completely different looking company and a very, very – and even more exciting one than the very exciting one we have. Our view is, it's clear that we reach a small proportion of the world's people that otherwise could be trading with Sotheby's.

And when I look at it, I say, one of the reasons we do that is because we have this fantastic machine digitally that we're just on the cusp of experiencing the growth with and this is literally exploding and it will continue to grow, and we're chasing it and investing in it. And first you'll see it in the features when you use our tools and then you'll see it in our marketing, and then you will see it actually in the online sales, and then you will see it in the results.

It's a very, very exciting thing and that's why we're investing more in it. We see real opportunity and real growth there.

It's great for shareholders. It's even better for clients.

And by the way, it's plain fun for our staff.

Okay, thank you. And just there last question, Mike, on our models, is there anything we should know in terms of the nature of the comparisons ahead into Q?

And also there's a dynamic where the auction commission margin compares get tougher given some great progress on a multiyear basis and pricing adjustments, however, and also the net sales gets a little bit easier on the top line in terms of the compares. So, if you could help us elaborate and think about that as we calibrate what's ahead, that'd be great.

Certainly. You're absolutely right that the progress we've made in auction commission margin aren't going to continue indefinitely into the future to the tune of 200 and 300 basis points comparisons.

We're going to start laughing ourselves. I still think we have a little ways to go before that loses steam.

And as I mentioned in my comments, as the market recovers at the higher end where buyers' premiums are lower, that will work against us as well, but we still feel pretty good at the auction commission margin, at least for the next quarter or two. As for how you think about the year, we're certainly planning for the first half to be you know roughly on par with the year ago, and if we hope to see any recovery, it will likely be later in the year.

So, as you are thinking about quarters, I'd kind of keep that in mind.

Okay. And on the pricing front here in terms of the marketplace, are there any things we should think about with the market really seeing this change in terms of where you are with the stabilization factors, and just curious about pricing because it's still – I imagine it's still hard to get the best of the best and that's also important in terms of lots?

Well, you know we've done a pretty good job of just saying no on some tough asks from potential consignors. And as we've noted the schedule to our Buyer's Premium increase, which is what really drives auction commission margin, is that we didn't implement that change until November.

So, for the first part of the year, we'll be comparing against a lesser Buyer's Premium Schedule. So, I still think we're in pretty good shape in this first half of the year.

Oliver, let me chime in. It's very important to note that if you thought about demand and supply, the supply of art, and jewelry by the way and wine and cars too, the supply curve is not sheerly elastic.

It's really quite a grooved and heterogeneous supply curve, which means that different consignors have a variety of things that go into their decision to consign. One is their degree of confidence that we will maximize the value of a picture.

Add if they believe that they can get 10% or 15% or whatever percent more from a group of individuals that will sell it better and has better access and understand how to market it better, then the fact that they will walk away from a 1 percentage point difference from some competitive option makes sense. Secondly, it's also important to see that in so far as we can create areas where we can demonstrate a differentiation and a superior value proposition, that presents another opportunity.

So, it is not always purely the deal. And finally, by the way, a lot of it is based on relationships, understanding how things get in there.

And by the way, relationships have a corollary to that, which is what I would call energy. Energy is when you are out with a client and you're brainstorming with that client and you come up with ideas for the client that the client have actually never thought about, as opposed to just printing a catalog or distributing a catalog electronically, actually engaging with them and helping them think things through, and then by the way back to the advisory business, having a deep understanding of how you can solve their problem as opposed to merely get the maximum value for the picture.

All of those things are additive to the margin. And then I mentioned on the first remarks, the point I would make about, if you can deploy your capital well and with superior insight, hedge it well, you can yet add even further value.

Every one of these aspects, and I've gone on for several minutes about every one of these aspects, creates an ability to have an enhanced margin or a differentiation vis-a-vis the competitor, and that's what we're focused on.

Thank you. Congrats on all the engagement and the talent development.

Best regards.

I wanted to switch gears, you gave some good color, maybe just talk a little bit about your outlook for private sales, how is the integration of some of your newer talent progressing, and 7% of revenue in 2016, where do you see that, where can that get to over the next several years?

As was clear in the current quarter, rather the most recent quarter we reported on, private sales is lumpy, it's influenced by either large pieces or going through the system any one time. At the same time what we like to see is that there is although lumpy that it's upward trending.

And we're very excited about our new team in place for that, both the one we got last year which is making great progress, and also the ones that are making it happen. For example, we've mentioned in prior calls, maybe two calls ago, I got a question about what are the elements of private sale, how you think about it, and things like the object database or other key tools that we have that will connect the people who have the property to a person that knows where it should go and at what price, those are the kinds of things that we are making good progress on.

And then we also have the new leadership that we announced in my initial remarks for the United States for Contemporary, and that's also very exciting. So, we're making good progress.

I would say it's – and I think I said two calls ago, it's going to take a year to get it there and we're going to be patient, but at the same time I'm seeing lots and lots of encouraging success.

Very helpful. Switching gears, in the areas of talent and people, you mentioned one new hire next month.

Specific areas of the business that you're still looking to bolster going forward?

Jewelry. We've made some good progress in watches, but in jewelry we could use a little bit more.

And I would say a little bit in business development. We've got a good bit of hiring by way underway already in digital technology and marketing and we have some openings there.

But I have to say, our philosophy on talent has changed a little bit in the past couple of years, which is we've got a really, really great team, the team is really, really working well together, and we feel good about things. And so, what we're doing now is we are – when we see what I would call a best athlete or a great athlete that's available, we will try to find a way for that athlete to contribute in a way that's meaningful for our clients and our shareholders.

And so, that's the mode we are in and we welcome resumes.

Excellent. Lastly, given inch-thick mild, but H1 you mentioned flat with H1 2016, specifically auction commission margin or are you referring to EPS or just general results as well?

A little bit more generally. One of the things that's – when you have lower shares outstanding as a result of our stock buyback, that actually hurts you in a quarter like the first quarter where we're likely to have a loss.

And so, I would encourage everyone to kind of do their models before looking at share count because that can really throw things. But it's more of a general observation, Dan, that we see the market improving kind of throughout the year rather than immediately.

The one thing, Dan, I would add is, one of the real things that you buy into when you buy in Sotheby's is a fair bit of limited revenue visibility. And so, I remember one quarter ago I think we were saying, it felt little bit like it'd be the quarter one year ago, and we just spent a few minutes in our earnings call explaining why it was significantly more than we thought.

And so, we're on the cusp of the sales beginning in London for this quarter, and we are seeing – and I think I said, I feel quite good about what we're seeing on the supply side for the marketplace overall in May, all of those are really good indicators, and there's a high degree of – well, there's just a high degree of data, if you will, around our sales results. So, what you see is, we feel good but how that turns into numbers is just a little early in the year for us to be able to say much.

Understood. Again guys, congrats on the progress.

Appreciate the color.

Tad and Mike, when you sort of replatformed and thought about how to reposition the business, there were sort of two themes, there's more than that, but two simple themes were around people and around systems and sort of sharing of information across the platform to help one another. If you could isolate the response to sort of share, so not the market itself, but how do you think each of those, the folks that you've brought in as a team but also the systems and the way you're working in a [continuum of] [ph] [indiscernible] systems, how do you think those are affecting your share within the businesses in which you operate?

The interesting question about it is, we don't have visibility on share of profit or share of revenue, and that's what we'd really like, right, because what is reported publicly in auctions is the share of the sales. And so, I feel very, very good about where we are in terms of revenue and I feel very good about where we are in terms of profit, and I feel great about where we're going.

In terms of your two-pronged thing, we actually really do think about it in terms of those four very basic priorities. One is, developing and implementing a clear strategy.

And by the way, a lot of it, that strategy by the way has multiple prongs but it's about getting things done. Number two, it's really technology and innovation.

Number three, it's the team and getting that right. And number four, and this is crucial, and by the way it showed up in the fourth quarter and the full-year results, capital allocation, using it wisely, making sure that we are constantly thinking about how to get the maximum return on investment for our shareholders.

Sometimes that means buying 20%-plus of our stock back, sometimes it means extending guarantees and hedging them, sometimes it means taking on an acquisition with talent, sometimes it means taking a couple of little bolt-ons that extend our capabilities. We really think about it in terms of four different priorities.

Okay, that's helpful. Thank you.

Given the strong growth trends that you guys are seeing in terms of online auctions, I'm curious if there are any kind of smaller competitors that have set up I guess competitive Web-sites that you think are gaining meaningful share in that area?

I mean the ecosystem for the online space is robust. I mean you have a range of them actually, Auctionata, Paddle8, Artsy, 1stdibs, just to name a few, and we know them all very well and we think very highly of them and we think they provide a useful service.

But the question that I think about from the perspective of investment is, is the online channel a net positive for Sotheby's investment profile or is it a net negative? There are many retail businesses right now, and I think several of you cover them, where the online channel is the potential net worry for the retail business because they have a dramatically large installed base in asking people to go into locations and they have significant capital deployed that way.

Sotheby's, when you come right down to it, has the online only as a net positive. Why?

Because we have a very, very capital-light approach, we've got a strong brand, we've got a very, very strong promise with our brand, that creates a significant moat between us and others who are doing online sales. We provide promises to clients when we do them.

We're a safe place to do business online. There's just one thing which has been a real issue for Sotheby's, which is, our tools aren't very good, which is that our marketing isn't very good.

And that's why you see with David Goodman and his team in Marketing and Digital Development dramatic efforts to ramp that up, with Scott Henry on the tech side and operations, dramatic efforts to improve that, because we look at it and we say, as far as we can see, the online channel for us is not about disruption, except perhaps that we might disrupt, it's actually about playing offense. And that's a really great place to be, which is why we're playing as much offence as we can there and growing it as fast as possible.

And by the way, for me it's a special pleasure because I've spent nearly three decades, certainly more than two decades, in businesses where we were playing defence on the digital side, and let me tell you, offence feels better.

Okay. And then just secondly for me, I think you guys – it's likely you do some pretty strong free cash flow in 2017.

How will you think of usage of that, whether it'll be returning to shareholders or whether you see kind of tuck-in acquisition opportunities, how we should think about that?

The good news is, we're at a spot in our development where we have lots of good options. It's not that we don't have any, which are some companies' problems.

The default would be perhaps more stock buybacks, but I think our preference would be to invest in the business. You know we're not a terribly capital-intensive business model.

So, we don't have a huge long list of CapEx requirements that a manufacturing company might have or something like that. And even on the acquisition side, there's not a long list of acquisitions that we're interested in.

So, we'll be watching this throughout the course of the year, but like all the alternatives we have. I mean we could even pay down debt if we so choose.

Great. Thank you very much.

The only thing I'll say is, I want to thank the members of Sotheby's team who did a great job in 2016 and have gotten us off to a good start in 2017. I want to thank the investors and the analysts who have covered us.

We appreciate it. And we strongly encourage you to check out either online or using the [indiscernible] fashion catalogue, or walking into London our sale office.

We've got beautiful stuff coming up and we wish the team well. Thanks very much.