Great. Thank you, Chelsea.

Good afternoon and thank you for joining us today. With me on this call are Tad Smith, Sotheby's' President and Chief Executive Officer; and Mike Goss, Chief Financial Officer.

GAAP refers to generally accepted accounting principles in the United States of America. In this earnings call, financial measures are presented in accordance with GAAP and also on an adjusted non-GAAP basis.

An explanation of the non-GAAP financial measures used in these earnings call as well as reconciliations to the comparable GAAP amounts are provided in Appendix B to the first quarter 2018 earnings release as well as the company's Form 10-Q for the period ended March 31, 2018. 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 this company files periodically with the Securities and Exchange Commission, specifically the company's most recently filed Form 10-Q and Form 10-K.

These documents identify important factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements. Please see our Investor webpage for a transcript of our prepared remarks.

Now I'll turn the call over to Tad.

Thank you for joining us this afternoon. Today, we are reporting a first quarter 2018 loss per share of $0.12 compared to a $0.21 loss per share in the prior year period.

For only the sixth time in 30 years since we went public, our adjusted diluted earnings per share in the first quarter of 2018 was a positive $0.09, which is a $0.30 improvement from an adjusted diluted loss per share of $0.21 in the first quarter of 2017. The calendar of our Spring Hong Kong sales resulted in $130 million in net auction sales, shifting from the second to the first quarter this year.

Let's take a closer look at our sales in the first quarter as well as the sales we've held, thus far, in the second quarter before looking ahead to our important May auctions. I will then provide a brief update on a few of our key initiatives before turning things over to Mike to review the financials in more detail.

Even excluding the calendar shift in Hong Kong, our aggregate auction sales were up 18% to $667 million. Private sales increased to 70% to $246.6 million versus a year ago and are up 73% for the trailing 6 months, showing that we're beginning to see real traction from our efforts to build our private sale capabilities.

As we look to continue this momentum, we've expanded the team around the world and appointed leadership for private sales within the Fine Art division. We began the year with our annual Masters Week auctions of Old Master Paintings, Drawings and Sculpture in New York, which achieved a total of $82.5 million, nearly double the results of the same series of sales in 2017.

Moving to London at the end of February and beginning of March, our Impressionist, Modern and Contemporary art sales brought a total of $398.9 million, with an 83% sell-through rate. The series was highlighted by a stunning portrait by Pablo Picasso that's sold for $69.2 million, leading our $215.6 million Impressionist & Modern art sales.

Our Contemporary Art sales in London totaled $183.4 million, achieving one of the highest totals for a Contemporary Art evening sale at Sotheby's in London and the highest day sale in a decade. Those auctions were immediately preceded by impressive results achieved by our contemporary team in New York: a $26.4 million contemporary curated sale, the best result since 2014; and a new benchmark for an online-only sale at Sotheby's, with our Contemporary Art online sale totaling $2.2 million with over 550 registrants and an average of more than 10 bids per lot.

In mid-March, our Asia week sales in New York brought an overall total of $78.4 million, a 49% improvement on the prior year. The series of 11 auctions was led by a monumental scroll painting by Zhang Daqian that's sold for $6.6 million, the top lot sold at any auction house in New York that week; as well as a group of Indian and South Asian art sales that achieved $15 million, the highest total for a decade.

As I mentioned earlier, our major spring auctions in Hong Kong straddled our first and second quarters. Not only did we add $130 million in net auction sales into the first quarter due to the timing shift, but those auctions of wine and modern and contemporary art performed 88% better than the equivalents last year.

The overall results of auctions from both quarters were the second best in our more than 40 years' operating in Asia with a total of $466.5 million, a 15% increase year-over-year. The sales included a record-breaking series of wine auctions that achieved $29.1 million.

Of the 1,758 lots offered, every single one found a buyer for a 100% sell-through rate. Our results for Modern and Contemporary Art were also strong, totaling $164 million and setting 17 new records.

And sales of Chinese work of art totaled $138.1 million. Turning now to our important auctions this month.

The exhibitions for our sales of Impressionist & Modern and Contemporary Art open tomorrow in New York, and we are very pleased with what our teams have assembled this season. The combined low estimate for the series is up 34% compared to the same sales last year.

We begin with our Impressionist & Modern Art evening sale on May 14, which is a low estimate of $327.4 million. The sale is led by a spectacular masterpiece by Amedeo Modigliani from 1917 that is estimated to sell for more than $150 million.

We took the innovative step of unveiling this painting through a live stream from Hong Kong that was distributed on our website, Instagram, Facebook Live, Weibo and WeChat, generating nearly 250,000 views. We will also be offering a beautiful painting by Pablo Picasso of his golden muse, Marie-Thérèse Walter, from 1932 that is estimated to sell for $25 million to $35 million.

Our Contemporary Art evening and day sales are estimated to bring $354.1 million and will begin on the night of May 16, with a dedicated auction of 26 works from the collection of pioneering businessman and philanthropist, Morton Mandel, and his wife, Barbara. The group features outstanding examples by artists including Joan Miró, Mark Rothko, Roy Lichtenstein, David Smith and Donald Judd and spans many of the most important artistic movements of the 20th century.

Later that evening, we will offer Jackson Pollock’s Number 32, 1949, one of the artist's signature drip paintings. Acquired in 1983, the work has been in the same distinguished New York private collection for over 35 years and is estimated to sell for $30 million to $40 million.

Moving on to our categories outside of fine art. On the 13th and 15th of May in Geneva, we will hold our sales of Important Watches and Magnificent Jewels and Noble Jewels, respectively.

Our sale of Magnificent Jewels and Noble Jewels carries a low estimate of $64.7 million, which is smaller than the sale we held a year ago. But you may recall that last May, we sold a pair of earrings for a record $57 million, which accounts for much of the difference.

This May, we have a number of outstanding highlights, including 2 impressive white diamonds, each weighing over 50 carats, with a combined low estimate of more than $15 million. The diamonds are both perfect according to all the criteria by which diamonds are measured, and each of them is also the second largest of its shape ever to have come to auction.

The sale will also include The Farnese Blue, a highly important historic blue diamond given to Elizabeth Farnese, Queen of Spain in 1715, before being passed down through 4 of Europe's most important royal families, and it's estimated at $3.6 million to $5.2 million. Our sale of Important Watches has a low estimate of $5.6 million, an improvement compared to last year's result.

The sale is led by an extraordinarily rare Rolex Daytona Paul Newman wristwatch, reference 6239, with a highly coveted tropical dial. Fresh to the market, having been cherished by a single owner, the watch is estimated to sell for $208,000 to $416,000.

While the big evening sales grab all of the headlines, we have exciting auctions across a number of categories and price points this spring. Just today in Paris, we held a very successful design sale that exceeded the high estimate to total $13.9 million, and we will continue with an outstanding series of design auctions in New York at the end of May that is expected to bring more than $15 million.

Moving away from sales results, I will provide a brief update on one of our key strategic initiatives, embracing technology and increasing the pace of our company's innovation. In the first quarter of 2018, 49% of Sotheby's' clients used our online bidding platform, an increase of 15 percentage points over 2017 and the first time that this method of participation has been more popular than bidding by telephone.

Just as our clients are changing their behavior, our work digitizing Sotheby's continues and accelerates. And as we expand our reach in this area, we maintain our focus on user experience.

Let's consider a possible journey taken by someone from first hearing about Sotheby's to successfully purchasing a work of art. Our new media programs are the most effective tool we have to reach new clients.

That might be through video, where first quarter views are up 12% year-over-year; and our production team has just won a prestigious Webby Award for Treasures from Chatsworth, our first original series and was nominated for 2 additional Webby's in animation and virtual reality. Or perhaps clients first hear about Sotheby's through one of our social media channels, where our 1.5 million followers, the most engaged in the auction business, generate shares and retweets that reach millions more.

Once a client's interest is piqued and they spend time on sothebys.com or one of our apps, they can sign up to receive personally relevant e-mails. Our marketing e-mails are now more timely and targeted, so we're sending half as many, but we've seen a significant increase in their effectiveness.

It's also worth remembering that an item might have been consigned as a result of our online estimate tool, where potential consignors can very simply request an estimate from wherever they are in the world. In the first quarter of 2018, we received 16,000 estimate request submissions, nearly double the number from last quarter.

And since launch, 91% of the consignors who came to us through the tool have been new to Sotheby's. We recently sold a rare Ming vessel that came through the tool from a completely new client for $3.1 million, an indication of the opportunity we have to optimize both demand and supply through these digital tools and initiatives.

We continue to create opportunities for clients to engage with us whenever they wish to buy and sell. In the first quarter of this year, we announced the acquisition of the Viyet, the fixed price online marketplace for interior design specializing in vintage and antique furniture, decorative objects and accessories; and we launched a new ecommerce platform for our retail wine business, Sotheby's Wine.

We have nearly tripled the number of online-only auctions we're presenting compared to a year ago and continue to see success with an average sell-through rate of 85% and performance against low estimate of 130%. When a client is ready to take the step to bid, they can do what 57% of our clients chose to do in the first quarter, register online.

In March, we launched the first phase of improved online registration platform to make the experience far more seamless. An important measure of the effectiveness of all our efforts is the percentage of online users we convert from expressing initial interest by registering for a sale to making a purchase.

For the most recent quarter, 20% did convert, an improvement from 18% last year. In closing, I want to take a moment to welcome a number of new shareholders to this call, the employees of Sotheby's.

In March, the Board of Directors and senior management were thrilled to launch a program, where all eligible employees were entitled to receive restricted stock units or a restricted cash unit mirroring our stock for those in locations where we're unable to issue stock. We believe that serving clients around the world consistently and superbly is a crucial component of growing our business in the future.

And extending an ownership stake to all eligible employees is a great way to achieve that objective. Whenever a client is dealing with a member of the Sotheby's team, they will be dealing with an owner of our firm, someone who has the service commitment of an owner, further aligning the interest of our employees with those of our shareholders.

Sotheby's has three assets superior team, great global brand and plentiful capital. But the most important one, by far, is our superior team.

Engaging and rewarding employees with a stock award is part of the company's commitment to our team and a key differentiator for us as an employer. I will now turn it over to my colleague, Mike, to go through our financials before we take your questions.

Thanks, Tad. We have a lot of good news to report this afternoon, much of which could be overlooked if one starts with the overly simplistic premise that our earnings resulted exclusively from the shift in timing of our Hong Kong sales.

I'd like to call attention to a few of those drivers, starting with the strength of our sales and what it portends for the immediate future. As Tad discussed throughout his comments, we had a strong quarter from a sales perspective.

Net auction sales on a reported basis were up 46%, including the scheduled shift in Hong Kong, but they were still up an excellent 18%, even if one excludes the Hong Kong sales from the first quarter of 2018. Investors should also look at trailing six-month results to size up the health of our business.

And in this regard, we were up a strong 14% versus the same period a year ago, again even when excluding Hong Kong from this year's numbers. Importantly, of those selling categories with significant auctions in Q1, we saw strong sales and relatively high sell-through rates across nearly all of them.

So, the market tailwinds we've been discussing since the second half of 2017 have continued, particularly in our fine art categories. In addition, we are encouraged by excellent results from our Hong Kong wine business as, in addition to being a high-margin area, this can often serve as a leading indicator of demand in Asia as well as good things to come more broadly.

We expect to see momentum continue in this second quarter, even without the Hong Kong sales we'll be comparing against in last year's second quarter. With respect to our auction commission margin for the quarter, we reported 17.3% against 18% last year; and for the six-month period, 17.1% against 18% last year.

The inclusion of the big Hong Kong evening sales in this year's numbers explains most of this change. We also saw a modest impact from our guarantee hedging strategy, which has the effect of moderating our margin when expressed in percentage terms.

However, this strategy is clearly important to our overall profit levels, and it brings the additional benefit of offering more predictability to our earnings as well. On the expense side, the reported numbers are again higher, but a closer look will reveal that we're trending in line with what we discussed on our last call.

First, if one excludes from adjusted expenses, the agency direct costs, which are 100% variable with increased auction and private sale activity, the rest of our expense structure, which contains the all-important investment spending behind our growth initiatives, was up versus last year by a more modest 13% for the quarter and 15% for the trailing six-month period. However, if you look at these expenses on a sequential basis and take into account that we record significantly lower incentive compensation expense in Q1 and, therefore, excludes such expense for comparative purposes, you will see that our spending level was slightly down quarter-to-quarter.

This keeps us in line with our goal of finishing the year with a significantly lower spending increase in calendar 2018 versus calendar 2017. Finally, the news around our balance sheet continues to be good.

Our inventory level is down to $65 million, and we know of several transactions waiting to settle in Q2 that will meaningfully reduce this number yet again by June 30. Our capital position remains strong.

On last quarter's call, we estimated that we had $325 million in excess capital, and we pointed out that our board had authorized us to buy back up to $200 million in stock. Since that time, we have repurchased nearly 980,000 shares at an average price of approximately $52 per share, and we still have approximately $145 million remaining on our existing authorization.

Importantly, this also means we have approximately $125 million in additional excess capital to deploy. While we look for the right opportunity, we have applied this idle cash to our revolving credit facility against which we now have only $65 million outstanding while we have nearly $500 million in available borrowing base capacity should we need it or choose to use it.

What does all of this mean for the second quarter? We have previously said that we expect a good solid year in 2018 in terms of auction sales growth, progress in private sales, stability in auction commission margin, a more moderate increase in spending and further optimization of our balance sheet.

So, in most material respects, we are entering the second quarter right where we expected to be and are very much in line with our previously expressed expectation for the first half. Let's now turn the mic over to you for your questions.

This is Jonna on for Oliver today. The first question is, what is driving the strong performance in masterpieces?

And what are you seeing in terms of confidence from sellers? And the second question is, you mentioned your auction commission margin was down partly due to the Hong Kong sales.

But as you add more, it seems like the higher end of pricing tends to be strong. How do you see that trending next couple of quarters and for the year?

Mike, why don't you take the commission margin question second? And Adam, why don't you give some thought while he's answering to the market for masterpieces, what's driving it and how things are going?

Okay?

Okay. So, I'll deal with the auction commission margin question.

Well, to have an average auction commission margin of 17.1% versus 18% last year is largely explained because when you pull in $130 million of Hong Kong sales, which were most successful at the evening sale level, those margins tend to be below 18%. So, they will bring down the average a little bit.

We acknowledge that mix does create a headwind for us in that the more the masterpiece and that the market prospers, the lower is likely to be the auction commission margin. We have forecasted that and expected that accordingly.

I think our prior guidance has said investors should not improve dramatic improvements on an annual basis beyond this 17% that we did in 2016 and 2017 because of the pressure from the greater mix. Still, I think investors are well-served to have a lower percentage margin on a much higher robust art market than a higher auction commission margin on a market that doesn't see much action at the high end of the market.

We've also benefited from better deal making and a higher rate card that we implemented last November, so that's helped to offset some of that mix question. But I think we stand by our guidance that for the full year, we hope to see an auction commission margin in line with 2016 and 2017.

And this will be Adam Chinn, our Chief Operating Officer, who spends his entire day with clients. Adam?

Yes. So, look, it is very dangerous to make predictions about the masterpiece market when, within the next two weeks, there will be more pictures with estimates in excess of $70 million than I think the auction market has ever seen before, which may, in some sense, answer the question.

I think the masterpiece market has led the strength of the overall market. We have a lot of confidence in it, and it's very helpful to the market as a whole.

Because as certain pictures become unreachable in terms of price for all but a small handful of people, the overall population of art buyers has only expanded. And therefore, focus changes now to other areas of the market, and the pricing starts coming up there.

So, I think the tailwinds -- as Mike and Tad said, the tailwinds continue. And I think if they're strongest anywhere, they're probably strongest at the very top end of the market.

First question would be on the private sales. So private sales continue to ramp up pretty impressively, and I know that it's been a huge focus for you guys.

Where do you expect that market to go? Is that you taking from other dealers?

Is that the market kind of growing? Is that just like an appetite of strength of the overall art market?

And how do you see your positioning changing in that market?

We believe that the opportunity for us in private sales is quite significant. We've made, over the last sort of 1.5 years, significant personnel process, organizational improvements to what we do.

A lot of it comes from focus. Importantly, the technology that is the underpinning of it isn't expected yet for another couple of months.

So, the irony at this step is happening without the robust platform that we think will further accelerate our growth. At the same time, our private sales business is lumpy.

It goes up and down. There are big ones that will move through.

But the encouraging thing about this quarter is that the number of transaction is significantly up above last quarter's transactions as well as the dollar value is up significantly, and the revenue is up significantly. You look at those, and those are good things that are happening.

So, our expectation going forward is that progress on private sales will continue to be strong. However, it will also be lumpy.

There will be quarters where we have very strong private sales, and there will be quarters where potentially things shifted to 1 quarter or up and down. But the overall secular trajectory should be good.

With respect to how that fits into the marketplace, our experience is that the dealers are many of our closest clients, and that we are providing more liquidity, more opportunities for them to move inventory or their clients' inventory by our global reach and a new and a more-focused approach in this space. So, we're serving clients and dealers both, and we think it's a very, very happy confluence of events going forward for our clients, oh, and for our shareholders.

Of course, of course, for the shareholders. One more question on the online market.

A couple of years ago, there were some other platforms that were gaining a lot of momentum. You don't really hear about them as much anymore, but you guys continue to talk about the online market.

Those players are still there. Do you feel that the online market is gravitating towards the bigger players?

Or just you're taking kind of more attention away from some of those other threats that were coming up?

Well, I think there are many, many very innovative companies in the digital market. And more of our -- more and more of tech plays in the art and luxury products market every day, whether it's digital demand side, digital supply side using machine learning, applications that are being considered on block chain.

I mean, it's a robust and fertile area for technology and innovation. Our focus is to find out the best way that we can embrace these technologies and configure them in ways that will support our clients to do really, really great things and potentially provide a benefit, again, to the industry, our clients and, of course, our shareholders.

And that is -- we're making good progress, but that remains in early innings, and we like the trajectory there.

Hoping to summarize all of those details you gave of the new capabilities, whether digital or sales personnel. If you could bucket what's driving the business.

Is more of this doing more for existing clientele? Or is that a new pace of new clientele?

Or like the example you gave us, somebody looking for an estimate and then sold a $3 million piece. Can you give some sense of 1/3, 2/3 or 1/2 and 1/2?

That would help, I think, to follow all of that for folks.

Well, there are two parts, David, to your -- the way I heard your question. Maybe I didn't hear it correctly, I apologize.

But part of it was you sort of -- were close to private sales, and then part of it was the digital side. So, let me address both, if I may.

On the private sales, it's a significantly greater focus and organization that's making it much easier and a process that is working well to increase the number of transactions principally among existing clients, but also, by the way, that has a happy ability to increase the number of clients. On the digital side, it's mainly about making it really easy to do business with us.

So, it's easier for new clients to come in and try to bid, and sort of classic threshold resistance is lower. And at the same time, for some clients, in terms of finding out information, that is also much, much easier because it's rapid, it's interesting, it's compelling, it's exciting, they can experience it in all sorts of digital ways.

So, it's hard to bucket new versus existing because we're getting greater penetration in existing clients, and we're opening up Sotheby's to make it far more welcoming to many, many, many new clients.

Well, that helps us to think through that either way.

I just wanted to ask a little bit about some -- your efforts in the Middle East. I know that you opened an auction in Dubai last year.

I think you held some first-time auctions in that market as well. Reading a lot about there's a lot of demand there for high-profile works.

And so being over $70 [Indiscernible] somebody tells me some of that continues. So, could you just talk about how you feel as you're may be better positioned to benefit from what should be pretty strong demand coming out of that part of the world?

We put a lot of resources into that market. More resources are going into it.

More focus is going into it. It's an area of our most senior management's attention, where -- as well as our specialist attention.

We are very, very excited about the prospects. We think there's robust growth for us, and we're playing offense.

And those are all really good things.

Is there anything you could share about those initial auctions that took place in, I think, November from Dubai, if I can -- I realized they were small, but just do they hit your expectations? Are you seeing some feedback that you're hoping for there?

Yes, they were fine. I mean, when you open a new market and you do some early sales, what you really want to do -- what they are -- first of all, you want to make sure that the thing sells well for the client to consign.

That's for sure. But secondly, it's really an opportunity to engage new clients to come in and see stuff and bring them into the Sotheby's orbit.

So -- and also, it's a great way to focus our team on serving new clients, understanding the needs of a particular region and then executing against it, as well as, by the way, identifying business development opportunities there. So, on all of those measures, both hardware and soft, we're quite pleased.

Just wanted to talk a little bit about capital allocation, specifically M&A. Obviously, it's been a part of your ongoing strategy.

What does the pipeline look like today? And what areas are you still sort of focused on, either technologies, ancillary categories?

What are the areas where'd you like to continue to flesh out?

Yes. Dan, it's Mike.

We're not going to comment on our pipeline when it's full or when it's empty. But I can tell you a little bit about our approach to finding interesting acquisitions.

You can probably tell from the two-week close in the first quarter. One, I would -- well, they both kind of fall in to the category of acquiring capabilities.

One called Viyet. It gives us kind of a clever way to experiment with an e-commerce platform in -- that is right now largely focused on home goods.

We think they have some interesting approach to the business that we can experiment with and, perhaps, add some of that consignment flow that we get into their pipeline and significantly improve the economics of that business. It was, again, a relatively small immaterial acquisition from a financial standpoint to the point that we didn't -- it didn't even disclose the purchase price.

The same is true of our second acquisition called Thread Genius. It was a machine learning, artificial intelligence-based company that does some very clever things with image recognition that can be applied to our business.

Again, relatively small in the overall scheme of things but jump starts a lot of our activities here. In the past, we've acquired a few other things.

Almost all of them are about acquiring capabilities rather than acquiring product lines or other auction houses, consolidating the auction industry through acquisition. None of that is really ever considered.

It's more about can we bring interesting people, interesting capabilities into the company at a relatively low cost and expedite some of the change we're trying to make.

Excellent. And one more, and I'll jump out.

But any additional color on kind of what we've learned so far, changes or tweaks to methodology in terms of leveraging the new folks that you are bringing into the fold via online and technology and converting those to collectors, bidders, et cetera?

Well, we have pretty strong evidence that once you register online at Sotheby's, most of you are new, and most of you account for the majority of new transactors. So, we like what we're able to do in bringing new bidders and buyers into the stream through the online platform.

It's one reason why we're investing so much there. Bringing in those kinds of new people is critically important to our future growth.

We don't see that leveling off anytime soon, and we will continue to make investments along those lines.

I would like to thank the outstanding employees of Sotheby's, who are doing really great job. We, at the management team and the board level, are tremendously impressed with the execution and the performance of our strategy, and that's very encouraging.

And for our analysts, friends, I'd like to say I appreciate you're joining us in the afternoon. I hope it was no inconvenience.

It was the confluence of trying to fit it in without having to do it on a Friday. So, we'll probably back to morning next time, and we look forward to seeing you in the next quarter.

And very hopefully, we'll have very exciting things to talk about in May because we feel good about our business and good about our prospects. We wish you all a very good evening.

Thank you.