2018 Annual Report

Sotheby's 2018 Performance by Numbers

Dear Fellow Shareholders

2018 was a great year for our company.

As a result of our entire team’s efforts and the continued trust placed in Sotheby’s by our clients, we fulfilled our objective to substantially improve upon last year’s good results, and we achieved a second straight year of 20%+ after-tax returns on equity1, a significant improvement from the average of just over 15% between 2014 and 2016.

Driven in part by 37% growth in Private Sales2 to $1.02 billion, Sotheby’s Consolidated Sales3 increased 16% to reach $6.4 billion in 2018. This growth contributed to a 9% improvement in Operating Income to $181.3 million, and an 18% improvement in Adjusted Operating Income4 to $198.1 million, when compared to 2017.

We achieved many milestones in 2018 – we led the market in Asia for the third year in a row with sales of approximately $1 billion, the highest total in our 45-year history in Asia; our global wine auctions crossed $100 million for the first time, highlighted by a new record set for a single bottle of wine; we set a new record for any wristwatch sold at Sotheby’s; our colleagues in France had their best year since the opening of the French market to international auction houses in 2001; and we sold Amedeo Modigliani’s Reclining Nude for $157.2 million, the highest auction price in Sotheby’s history, to name just a few.

And we also achieved many digital milestones in 2018 – online buyers spent $220.4 million in 2018, up 24% from the prior year; we rolled out a new ecommerce platform that helped drive $72.1 million in online-only sales, quadruple the previous year’s total; 37% of all lots sold in 2018 were purchased online; we saw a record number of new bidders in 2018 and 64% of those clients bid online; and we had more than 1,200 items consigned through our new online estimate platform, resulting in $56 million in sales in 2018.

We begin 2019 – a very special year for Sotheby’s – with a great sense of excitement about our company’s future. This year, we are celebrating our 275th birthday, and although we are the oldest company listed on the New York Stock Exchange, we are looking very fresh for our 275th birthday.

From the sale of Amedeo Modigliani’s Nu couché for $157.2 million – the highest auction price in Sotheby’s history – to the historic jewels of Marie Antoinette, please enjoy a look back at the major moments that helped define the year at Sotheby’s.

Our mission has not changed: we help people discover, buy, and sell precious objects. Our strategy in pursuit of that mission employs trusted expertise, technology and service innovation to make it easy and effective for clients to work with us and thereby for us to generate attractive returns for investors.

Many of our projects that we began two years ago have reached or will reach an inflection point in 2019 – our program to upgrade our content management system was completed in 2018; we have already been rolling out a new online auction engine with mobile bidding and other features this year, as well as deployed new digital tools for our private sales business; our digital advertising, customer relationship management programs, video and editorial creation, as well as our social media reach have grown rapidly in recent years, and this growth will continue; and Sotheby’s Home, Thread Genius, and our online consignment platform will build a powerful foundation to drive highly profitable middle market growth for many years to come.

Also this year, we will complete the most significant transformation of our physical space in many years: in May, we will unveil new galleries at our Manhattan headquarters, which will be the premiere commercial gallery space in the world; in October, we will unveil spectacular upgrades to our New Bond Street property in London; and in December, we will complete the refresh of our beautiful gallery space opposite the Elysée Palace in Paris.

What does all of this mean for investors? Let’s begin by saying that we are planning for another good year of 20%+ returns on equity1 and a very healthy balance sheet in 2019.

We acknowledge that, although the base case expectation for our company in 2019 is favorable, the range of outcomes has a bit more uncertainty than when we entered 2018. On the other hand, there is a great deal of property in the marketplace that we have already won, and still much being competed for right now, especially for the important New York sales in May.

Moreover, we do believe that our efforts in recentgyears to retool the company to make it easier to do business with us will be beneficial when we next face market headwinds. So we are quite pleased with our recent investment program and the one we are continuing in 2019.

At the same time, our attractive returns on equity and good sales growth in recent years have not masked the fact that our investment program has somewhat dampened our recent EBITDA margins as well as pushed up capital spending compared to the company’s historical norms.

Beginning in 2020, we believe that the results of our investments will be much more visible – due either to contribution growth or our increased efficiencies or both – and our EBITDA margins will begin to climb and our capital spending will return to a more typical level.

On the occasion of our 275th birthday we hope we have given investors reason for great optimism. Yes, we are a seasonal business. Yes, we are a cyclical business. But we have significant secular growth tailwinds, a superb team that has a proven capacity to innovate and perform, a commitment to excellence in capital allocation, and, by the end of 2019, we will have substantially retooled the company’s infrastructure for more returns to come.

We extend our thanks and appreciation to you, to our management team, clients and employees and to our Board of Directors for your support over the past year and to your continuing support in the year ahead.

Tad Smith

President and Chief Executive Officer

Domenico De Sole

Chairman of the Board


1. Adjusted Return on Equity is a non-GAAP financial measure. See non-GAAP financial measures that follow the 10-K on the last page for a reconciliation to the most comparable GAAP amount.
2. Represents the total purchase price of property sold in private sales we have brokered, including our commissions.
3. Represents the sum of Aggregate Auction Sales, Private Sales, and inventory sales.
4. Adjusted Operating Income is a non-GAAP financial measure. See non-GAAP financial measures included within the 10-K for a reconciliation to the most comparable GAAP amounts.

Year in Review Highlights


(Pictured Left) Damien Hirst, Beautiful Dreamer, 2008. Yellow Ball: The Frank and Lorna Dunphy Collection achieved a total of $13.7 million in London. © DAMIEN HIRST AND SCIENCE LTD. ALL RIGHTS RESERVED / DACS, LONDON / ARS, NY 2019 (Pictured Right) Zao Wou-Ki’s Juin-Octobre 1985 sold for $65 million, the most valuable painting sold by any auction house in Hong Kong.


Online buyers spent $220 million at Sotheby’s in 2018 – a 24% increase from prior year – including Joan Mitchell’s Untitled canvas from 1964 that sold in New York. Over 1,200 items were consigned through sothebys.com, which sold for a total of $56 million in 2018.© ESTATE OF JOAN MITCHELL


(Pictured Left) Lady Blue Eyes Online sale quadruples high estimate 143 lots, 300 bidders from 30+ countries, nearly 3,000 bids placed, 99% of lots sold. Sale achieved $1.5 Million. Above: Norman Rockwell, Sinatra: An American Classic (Portrait of Frank Sinatra) Sold for $687,000 in New York (Pictured Right) Victoria Beckham in her Dover Street store with Circle of Leonardo Da Vinci, Portrait of a Lady in Profile which sold for $727,000 in London.


(Pictured Left) A bottle of Romanée Conti from the Collection of Robert Drouhin sold for $558,000 in New York, a world record for a single bottle of wine of any size. (Pictured Right) Queen Marie Antoinette’s pearl sold for $36.2 million in Geneva, tripling the previous auction record for a pearl


(Pictured Left) Exhibition from Boundless India, Sotheby’s inaugural auction in Mumbai which achieved $7.9 million (Pictured Right) David Hockney, Pacific Coast Highway and Santa Monica, 1990, Oil on canvas, 78 x 120” sold for $28.4 million in New York. © DAVID HOCKNEY




Original video content has been an important part of the way that we tell the stories of the incredible objects that we are fortunate enough to have pass through our doors at Sotheby’s. Our video team took a look back at a few of their favorites from 2018.