NYSE:EVR Evercore Q3 2023 Earnings Report $184.34 +8.89 (+5.06%) Closing price 03:59 PM EasternExtended Trading$186.00 +1.66 (+0.90%) As of 07:55 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Evercore EPS ResultsActual EPS$1.30Consensus EPS $1.31Beat/MissMissed by -$0.01One Year Ago EPS$2.20Evercore Revenue ResultsActual Revenue$570.20 millionExpected Revenue$543.74 millionBeat/MissBeat by +$26.46 millionYoY Revenue Growth-1.20%Evercore Announcement DetailsQuarterQ3 2023Date10/25/2023TimeBefore Market OpensConference Call DateWednesday, October 25, 2023Conference Call Time8:00AM ETUpcoming EarningsEvercore's Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Evercore Q3 2023 Earnings Call TranscriptProvided by QuartrOctober 25, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to the Evercore Third Quarter 2023 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore Management and the question and answer session. I will now turn the call over to Katie Haber, Managing Director of Investor Relations and ESG at Evercore. Please go ahead. Speaker 100:00:34Thank you, operator. Good morning and thank you for joining us today for Evercore's Q3 2023 financial results conference call. I'm Katie Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO and Tim Lalonde, our CFO. After our prepared remarks, we will open up the call for questions. Speaker 100:00:56Earlier today, we issued a press release announcing Evercore's Q3 2023 financial results. Our discussion of our results today is complementary Press release, which is available on our website at evercore.com. This conference call is being webcast live in the For Investors section of our website and an archive of it will be available for 30 days beginning approximately 1 hour after the conclusion of this call. During the course of this conference We may make a number of forward looking statements. Any forward looking statements that we make are subject to various risks and uncertainties, and there are important factors that could cause Actual outcomes to differ materially from those indicated in these statements. Speaker 100:01:33These factors include, but are not limited to, Those discussed in Evercore's filings with the SEC, including our annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 ks. I want to remind you that the company assumes no duty to update any forward looking statements. In our presentation today, unless otherwise indicated, we will be discussing adjusted financial measures, which are non GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP Reconciliations, you should refer to the financial data contained within our press release, which is posted on our website. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. Speaker 100:02:15As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closing. I will now turn the call over to John. Speaker 200:02:25Thank you, Katie, and good morning, everyone. I want to start this morning by addressing the crisis in the Middle East and to acknowledge the profound sadness we are all feeling for the innocent victims. At Evercore, we live by our values, and I want to emphasize that terrorism and acts of hate must be condemned. Over the past quarter, we've seen a continuation of the improved market conditions that began over the summer. Internally, we see client activity level tracking at an elevated pace and moderately increasing confidence levels across management teams and in boardrooms, Greater financing accessibility, albeit at higher costs and a slow return to equity capital markets activity. Speaker 200:03:13The normalization of market activity takes time, but we believe these positive indicators are a first step towards an improving backdrop, which should provide a broad based benefit to many of our markets. Clearly, market uncertainty remains, driven by increased geopolitical tensions as well as higher rates. We do not expect the positive shift in activity levels And market sentiment seen over the past quarter to translate into meaningfully improved results in the near term. That said, barring an unexpected significant shift in the macro environment, we expect activity levels to continue to build in 2024. While it is still early days, we are seeing this reflected in stronger backlogs similar to our last quarter. Speaker 200:04:04As discussed last quarter, the current environment has presented one of the strongest hiring opportunities seen in our firm's history and we have capitalized on it. We've made significant investments in talent this year, our largest SMD hiring year ever. When paired with an improving market backdrop, We believe these investments as well as our ramping SMD hires and promotes from the last 2 years, all in more than 40 ramping SMDs Will drive significant productive capacity and help us build a stronger foundation for growth over the medium and long term. 9 of our 11 new SMD hires year to date have started and are working at Evercore. These new SMD hires Have joined areas which we have identified as strategically significant, including TMT, both in the U. Speaker 200:04:55S. And Europe, Sponsor coverage, business services, industrials, real estate and capital advisory. We will continue to engage in discussions with Other strong candidates, but we believe our 2023 new hire plans have largely been completed. As we build our recruiting pipeline for 2024, we remain steadfast in the execution of our strategic initiatives, which I've outlined on past calls. Now I will briefly discuss the quarter. Speaker 200:05:28Our 3rd quarter results, while up sequentially, reflect the muted market backdrop as merger activity has remained challenged and the recent improvement in market sentiment has yet to have a substantial impact on announcement and completion activity. In our Global Advisory business, we've advised on several transformative transactions, including notably this week Chevron's $60,000,000,000 acquisition of Hess and in the quarter WestRock on its $20,000,000,000 merger with Smurfit Kappa, Danaher on its spin off of Rialto as well as Bristol Myers Squibb's $4,800,000,000 acquisition of Mirati. Our European advisory group experienced strong activity levels, including in debt advisory. Additionally, we continue to make strong progress with our sponsor coverage efforts. We're excited for what this expanded group will accomplish over time, especially as the collaboration With our Private Capital Advisory and Fundraising businesses will continue to drive synergies. Speaker 200:06:33We see momentum building across our sponsor related businesses. The Private Capital Advisory and Fundraising businesses were resilient in the quarter, highlighting the strength of our market leading franchises. Continuation fund activity has persisted at an elevated pace and new business activity is strong. While the broader fundraising environment remained muted, our private funds business had a better quarter relative to a year ago. Our strategic defense and shareholder advisory business had another busy quarter as activist campaigns continued at elevated levels. Speaker 200:07:13Restructuring remains strong similar to what we saw in the Q2 with activity levels driven by liability management and distressed financing advisory assignments. In our underwriting practice, corporates continued with regular way follow ons, particularly in biotech and traditional cleantech energy. The Q3 saw an opening of the IPO market. In the quarter, we served as an active book runner on the 2nd largest biotech IPO year to date for Ray's Bio. We also were an active book runner on the largest biotech overnight follow on offering this year for Madrigal Pharmaceuticals. Speaker 200:07:55Our overall ECM market share continued to rise, a testament to the strength and growth of our business. In our equities franchise, we are pleased to have been awarded for the 2nd year in a row a number on the weighted basis in Institutional Investors All America Equity Research Survey. We also had the most number one Ranked analysts on Wall Street for the first time ever. Lastly, in Wealth Management, our assets under management declined modestly in the quarter. Both performance and client retention rates continue to be strong. Speaker 200:08:30Before I turn it over to Tim, I want to wrap up with a few thoughts. 2023 has undoubtedly been a challenging year for our industry. Despite the operating backdrop, we've remained focused on purposefully Executing on our strategic plans by continuing to invest in our franchise, pushing to strengthen and broaden our coverage and geographic reach, Building out our product and execution capabilities and continuing to enhance our intellectual capital. We are hopeful that 2024 will be a better year for the market and in turn Evercore. Our client contact remains active and robust across our businesses. Speaker 200:09:11We're excited for the opportunities and improving environment will present for us. With that, let me turn it over to Tim. Speaker 300:09:19Thank you, John. Our 3rd quarter results show sequential improvement compared to the 2nd quarter, Do not yet meaningfully reflect the early stage improvements in the environment. We are seeing internal client Activity levels discernibly picking up from earlier this year. However, as I mentioned on our last quarterly call, The road to significantly improved financial results is a gradual one as there is a time lag that exists between client dialogues and announcements and then between announcements and completions. Additionally, we have taken advantage of an attractive partner recruiting market with a record SMB hiring year. Speaker 300:10:00Yet coupled that with disciplined headcount management across all areas of the firm as we For the Q3 of 2023, net revenues, net income and EPS on a GAAP basis were $570,000,000 $52,000,000 $1.30 per share respectively. My comments from here on will focus on non GAAP metrics, which we believe are useful when evaluating our results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website. Our 3rd quarter adjusted net revenues of $576,000,000 declined 1% versus the Q3 a year ago, but were up 14% sequentially. 3rd quarter adjusted operating income and adjusted net income of $83,000,000 $55,000,000 decreased 39% and 42%, respectively, versus the Q3 of 2022. Speaker 300:11:12Adjusted earnings per share of $1.30 decreased 41% versus the prior year period. Our adjusted operating margin was 14% for the 3rd quarter. Turning to the businesses. In Investment Banking, 3rd quarter adjusted advisory fees of $468,000,000 Sequentially, advisory revenues were up 25% as market activity levels across our various advisory businesses We're modestly stronger compared to last quarter. 3rd quarter underwriting fees of $31,000,000 were up 7% compared to the Q3 of 2022. Speaker 300:12:02We are seeing some improvement in the market with a number of significant transactions more recently. Commissions and related revenue of $49,000,000 in the 3rd quarter was down slightly year over year, which is a respectable Given that market trading volumes and volatility have been lower than last year's levels. 3rd quarter Asset Management and Administration fees of $19,000,000 increased 9% year over year. This is primarily due to a 3rd quarter AUM of $11,300,000,000 which is up 13% year over year. 3rd quarter adjusted other revenue net was a gain of approximately $10,000,000 reflecting approximately $15,000,000 of interest income earned on our cash balance due to higher short term rates, partially offset by a $5,000,000 loss in our investment funds portfolio, which is used as a hedge for our DCCP commitments, driven by a decline in equity market Values in the quarter. Speaker 300:13:08Turning to expenses, the adjusted compensation ratio for this Q3 is 68%. As I discussed at some length on last quarter's earnings call, our compensation ratio continues to be meaningfully impacted by The revenue environment, the amortization of prior year deferred compensation awards, the onboarding of our new senior hires, 5 of whom have joined the firm since the middle of Q3, as well as the market level for compensation. Given that many of these new SMDs have joined late in the year and we recognize their 2023 compensation from their start through year end, we would Expect to see additional upward pressure on the 4th quarter compensation ratio. Based on what we know today and incorporating our current best estimates about 4th quarter revenue and market compensation rates. We would expect the comp ratios of these past two quarters to be generally Note that variations in the actual 4th quarter revenues or market compensation levels Could impact our future quarter and year end comp ratios in either direction. Speaker 300:14:24Shifting to non compensation expenses. In the Q3, our non comp expenses were $102,000,000 up 12% from a year ago. The year over year increase reflects Some increased rent expense for new lease space related to required relocation of part of our corporate group and higher information services fees. Additionally, our non comp expenses from a year ago reflected an expense reversal, which decreased our non comp expense materially at that time, resulting in a larger increase year over year. I would note that our non comp expense on a per head basis is still modestly below where it was in 2019, the pre COVID year and modestly above a year ago. Speaker 300:15:12We expect our non comps to be similar to our second and third quarter levels for the remainder of the year. We are continuing to diligently monitor and manage our non comp expenses. Our adjusted tax rate for the quarter was 27.6%, virtually identical to the 27.4 percent tax rate from a year ago. Turning to the balance sheet. As of September 30, our cash and investment securities totaled approximately $1,600,000,000 which is up from 1,500,000,000 at the end of last quarter. Speaker 300:15:48We continue to maintain a strong cash position, taking into consideration the current economic and business environment, Cash needs for the implementation of our strategic initiatives, including hiring plans and preserving a solid financial footing. Year to date, we have returned a total of $490,000,000 to shareholders through dividends and repurchases of 3,000,000 shares at an average price of $128.97 Our 3rd quarter adjusted diluted share count is 42,800,000. As a reminder, That is down about 5,000,000 shares from where we were 2 years ago. In the past 3 years, we have returned to shareholders Cash equating to more than 1 third of our market cap. We continue to maintain a strong capital position And we remain committed to our philosophy of returning to shareholders cash not needed to implement our strategic plan and to provide financial stability for our stakeholders. Speaker 300:16:50As John mentioned, we are encouraged by the early signs of an improved market backdrop. That coupled with the SMBs who joined us in the Q3, those still to join and SMBs who were promoted or hired in the last couple of years Position Evercore for greater revenue and earnings leverage over the medium to longer term. With that, we will now open the line for questions. Operator00:17:17Thank you. We will now conduct the question and answer portion of the conference. Please limit to one question only. You are welcome to rejoin the queue for additional questions time permitting. Our first question is from Devin Ryan with JMP Securities. Operator00:17:43Your line is open. Devin, please make sure that you're not self muted. Speaker 400:17:55Sorry about that. Good morning, John and Tim. Sorry about that. Yes, first, I guess, question, maybe make it 2 parts since I have one here. So I guess first off, the advisory SMD count declined by 5. Speaker 400:18:08So just wanted to get any color there since you guys are hiring, Make sure I understand that dynamic. And then the other part of the question, we're getting a lot from your clients recently. It's just about expense inflation and what That means for normalized margins for Evercore and the industry more broadly. And obviously, appreciate the biggest driver that's going to be Revenues were not in a normal revenue environment today, but how are you guys thinking about kind of normalized margins over Have we structurally shifted higher or should I guess structurally shifted lower because of some of the expense inflation? Or do you think Speaker 200:18:55Let me take the first question. Okay. Go ahead, John. I'll take the second. In terms of the advisory SMBs, what we have said to the market and what we've said to you all is that we are in the mode Of hiring very high quality talented people. Speaker 200:19:09But at the same time, we're managing our headcount. And there are people who are shifting out And there are people who we are bringing in. We've obviously been aggressive about promoting high quality talented people. We've Promoted 24 people to SMD internally in the last 2 years. And as you know, this year, We're hiring from the outside 11. Speaker 200:19:35What we've really done is we've basically tried to be disciplined. And so this is just a Really an execution of what we said we were going to do, which is we are making sure that we are bringing in high quality people And those people who are who for all different reasons may not be the right fit, they're shifting out. Speaker 300:19:58Sure. And let me just add one thing to that and then I'll comment a little bit on the expenses. And that's that we've always Guided research community and our investors to look at our firm on a multiple quarter and multiple year Time span in order to assess what we're doing. And so if you look at our partner headcount and the most recent number is of course 130 7 in the advisory business. That number 3 years ago would have been 107, so it's plus 30 and up about 28%. Speaker 300:20:36If you look at that number compared to where we were in 2021, our peak revenue and earnings year, We're up about 20 percent now. On John's commentary about also being disciplined about headcount management, over that same period of time, while our headcount Over that same period of time, while our headcount increased pardon me, our partner headcount increased 20%, Our overall headcount increased 13.6%. And so what you can see there is some evidence of our striving to increase Our productivity per person and per banker. Now turning for a moment to the expenses, What you would see in our numbers is a modest amount of inflation impact. But interestingly, if you look at our non comps, for instance, on a per head basis, they're actually slightly lower Still on a per head basis than they were in 2019 and only marginally higher than a year ago. Speaker 300:21:44And so, we're optimistic about what we've been able to and may be able to continue to do with respect to inflation. And in terms of returning to normal margins, Certainly in our business, the largest impact on our margins is generated by revenues. And so when you see the market turning with respect to transaction announcements and subsequently increasing revenues. You can expect significant margin improvement, But I think it's too soon to predict exactly when that will occur and what the And the timeframe for returning to a more normalized margin structure. Speaker 400:22:39Got it. Okay, terrific. Thanks guys. Operator00:22:44Thank you. Our next question will come from Brennan Hawken with UBS. Your line is open. Speaker 500:22:53Good morning, John. Good morning, Tim. Thanks for taking my questions. Good morning. Hi. Speaker 500:22:59I'd love to start, Tim, on your Comment on the comp ratio. I think I got it, but just want to clarify and based on Bloomberg chat, I think there's a A few other people who are a little confused too. So I believe what you suggested was that full year is going to look like the last couple of quarters, which would mean given 1Q in the low 60s that we're going to be looking probably at the 4th quarter at a comp ratio in excess of 70%. Did I hear that correctly? Speaker 300:23:31Well, hi, Brennan. And I certainly didn't say in excess of 70%, but I understand the mathematics That might lead you to that conclusion. And so the first point I'd make is, it's impossible for us to precisely predict what the comp ratio will be in the Q4 or for the full year because it's so dependent on the revenues. And as we all know, as one approaches year end, sometimes there are certain significant fees that fall inside the quarter and Sometimes they fall outside the quarter. And so I want to be careful about providing guidance that's too precise. Speaker 300:24:13It is the case that there's some natural upward pressure on the latter part of this year, which of course It's the Q4 and that's due to the fact that, as you know, we've announced 11 partner hires this year, 10 of which will arrive before year end. And of those 10, 6 are arriving anytime from mid August through year end. And as we need to we don't start accruing for those people until they arrive at the firm. What that does do is put some additional pressure on the 4th quarter. But I still I would say our best estimates are what I said in my prepared remarks, Which is something that would look generally like what we saw in the second and third quarter for the full year. Speaker 500:25:11Yes, yes. All that's totally and completely fair. And it's going to make answering my next question even more challenging. But I'm going to try anyway. So you guys do have the benefit of having a decent forward look just Given how long it takes to close deals and how what a great franchise you have in large cap M and A in particular. Speaker 500:25:35So given what you're Seeing and at least based upon expectations for the beginning of 2024, When I go through the model and take my best guess at where your fixed comp base works out at And all of this, it's hard for me not to see continued upward pressure, even giving a pretty substantial ramp Revenues and a decent recovery here in 2024. And I continue to kind of like shake out at an upward And an above historical range comp ratio for 24. Of course, there's a ton of uncertainty still embedded in 24. We have no idea what the magnitude of the And maybe even given maybe I'm not giving enough of a ramp, which could end up helping to drive that comp ratio down. But Is it reasonable to think that at least for the first half of the year, we'd probably be continuing to deal with an elevated comp ratio Until we can get these revenues really moving strongly and back to the potential that you can achieve? Speaker 300:26:44Right. And so, look, we, of course, as a matter of practice, don't provide guidance. And so I want to be very careful about what I say, but the right there's a mathematics behind all of this. And the mathematics are that the prior year amortization awards hit you in a larger than normal way On a percentage basis, when you're in a market where revenues are declining and when you're in a market where revenues Are improving, sometimes that can provide some tailwind. In addition, as you pointed out, It's too soon to know what the ramp rate will be for the new hires. Speaker 300:27:33All we know is we're really glad they've joined us and we're really positive about their prospects, but too soon to really say more than that. Speaker 500:27:45Okay. Thanks for taking my questions. Operator00:27:49Thank you. Our next question will come from James Yarrow with Goldman Sachs. Your line is open. Speaker 600:27:57Good morning and thank you for taking my question. So it does feel like the M and A recovery continues to be pushed out. Obviously, you've had some In the past few months, and that's been positive. But overall, the industry continues to recover quite slowly, this doesn't appear to be the 2020 to 2021 recovery. So I guess what is your view of the likelihood that this MA recovery ends up taking A number of years to build back to a more robust level like we saw post 2,008. Speaker 200:28:29Thanks, James. It's really hard to call the pace of a recovery. I would just say that if you look at really some of the Firm indicators internally, our backlogs are building, our other internal indicators seem to be strengthening. And I would just say anecdotally inside the firm, the activity level and the client dialogues are very robust. But as you said, it does take time. Speaker 200:28:59And the fact that activity takes time to lead to announcements, Which then take time to lead the closings. That is absolutely true. And there's no question that there's an elongation with respect to deals right now. We feel optimistic about the activity level we have right now. I think it's probably safe to say That there is going to be a ramp in 2024. Speaker 200:29:26We just don't know exactly what the pace will be. It's very hard to call. But I think that if our indicators say that we have a very healthy amount of And we'll just see how that translates. Speaker 600:29:42That's very helpful. Thanks, John. Operator00:29:47Our next question will come from Steven Chubak with Wolfe Research. Your line is open. Speaker 700:29:55Hi, good morning. Speaker 200:29:57So, good morning. Speaker 700:29:58I was hoping to unpack Some of the commentary you made on 24, really trying to distinguish between strategic and sponsor activity. And we've seen A number of large strategic transactions announced, most recently in the energy space. At the same time, sponsor activity has remained fairly muted And the commentary from the public all suggests that's likely to remain subdued at least in the call it the near to intermediate term. And I was hoping you could speak to The dialogue you're having with sponsors and strategics and any differentiation would be really helpful. Speaker 200:30:34Sure, Steve. And by the way, I don't want to frustrate you, but it's very hard to call what's going to happen with sponsors. The interest rates are higher, which does really impact kind of the economics of sponsor deals. But sponsors really want to get going. They've got a lot of dry powder. Speaker 200:30:56They've got real need to actually monetize and return capital. And so there is pressures at the sponsor level to really get going. And I think that on the other hand, They don't want to capitulate and take lower prices on their assets. But sponsors are in business to do transactions that they can monetize and then bring back to their investors. And so there's a real pressure going on there. Speaker 200:31:25And I think that what you'll really see is you'll see You'll see deals start to happen, but we don't think that there will be a massive rash of deals immediately coming from sponsors. Having said that, If you look at some of the other activities and sponsors that we engage with, which is continuation funds and Fundraising, we see the fundraising environment feeling a little bit better. We see the continuation fund Activity building. And I'd say that the way that we're seeing sponsors on that side of the business seems to be building. And so in general, we think sponsors have, on the one hand, So I'm concerned with respect to going that it hasn't gone faster. Speaker 200:32:18On the other hand, we do see what we think is A strengthening and we do think that there will be activity that builds. On the strategic side, as you've seen, There has been quite a bit more activity publicly. You've seen some deals which have come out that are Somewhat larger relatively recently. It's hard to say whether that will continue and build at this point, but I think it's safe to say that activity levels, dialogue levels are at quite a high pace. As I said earlier in the call, If you look at us anecdotally, we think that there's a lot of dialogue inside that is that's not just in terms of Number, but also quality. Speaker 200:33:06So I'd say that the strategic side is starting to begin to build some momentum. It will take time. As I said, it's hard to call the timing. And I do think sponsors will start to move forward, but it may take a little bit longer. So that's what I think. Speaker 700:33:26Very helpful. Thanks for taking my Operator00:33:30Thank you. And our next question comes from Ryan Kimmy with Morgan Stanley. Your line is open. Speaker 800:33:43Hey, good morning. Thanks for taking my question. So you talked about encouragement from leading indicators. And just when we think about the last few weeks specifically where we've seen 10 year yields briefly spike above 5%. Is that recent volatility enough to have any significant impact on moving deals forward? Speaker 800:34:02And does that push things out a quarter? Or is the impact more limited? Speaker 200:34:07I think that interest rates certainly impact the way people think about financings for deals. It has a bigger impact, I think, on sponsors. Will it push it out? It could. I do think though that the deal activity will move forward if, for example, there tends to be a Stabilizing of what I think are the risk conditions existing in the market. Speaker 200:34:36I think one of the things that is holding back some of the deal environment Is that we have real uncertainties, both geopolitically and economically. And I think people are watching that really carefully. So I think it's not necessarily I think rates will impact to a degree, but I think the bigger impact is people watching what's happening in the environment And really how the equity market is going to look at deals generally. So I think that's the case. I mean, from our standpoint, we think that The dialogues that have been high quality are continuing to move forward. Speaker 200:35:14So I don't necessarily think that The interest rates are going to materially impact exactly the fact that things that get done, but I do think it will moderate To a degree, and I think people are watching it carefully. Speaker 800:35:30Thank you. Operator00:35:33Thank you. Our next question comes from Jim Mitchell with Seaport Global. Your line is open. Speaker 200:35:42Hey, good morning. Maybe we can talk a little bit about restructuring. It seems like it's been pretty active increasingly so. I think a lot Out of court restructurings. Can you just sort of discuss the impact in the quarter and how you're looking at activity and your thoughts going forward? Speaker 200:35:57That would be great. Sure. Restructuring is quite robust right now and our business is doing quite well. We're very busy. And as you said, there's some a lot of liability management going on and there is out of court restructurings As well as from our standpoint, both the debtor and the creditor side advisory work. Speaker 200:36:23I think That velocity continues and will continue. Interest rates going up does actually impact And we think that there is as you know, there's a maturity wall coming in 2024 2025. And also with higher rates, if there is there are more companies that have capital structures that will need to basically get advice And to actually restructure some. So I think our restructuring business is quite robust And we think the prospects of it will that will continue even if the merger market picks up. Okay, great. Speaker 200:37:06Thanks. Operator00:37:09Thank you. Our next question will come from Brennan Hawken with UBS. Your line is open. Speaker 500:37:18Good morning. Thanks for taking my follow-up. I was curious about the non M and A revenue. Previously running around, I believe it was at least Speaker 300:37:30a third of Total advisory, Speaker 500:37:33so if you could give an update there and then also speak to maybe the private And how that's doing in an environment like this? Speaker 300:37:44Yes, sure. And If you look at the non M and A revenue, I think we've said that for the past 4 years, It's represented more than a third of our overall revenue. And during periods of challenging M and A, It tends to be even higher. And I think it's reasonable to assume that's the case currently. And so On the PCA and PFG, as John mentioned a little earlier, we feel that The PFG fundraising environment is returning to a more normalized fundraising environment and we think The results reflect that. Speaker 300:38:33And with respect to PCA, we would characterize it as a Strengthening market for PCA, where we're seeing increased certainly increased activity levels, And we're hopeful that those will continue for a while. Speaker 200:38:52And just to make sure everybody knows, PCA is more our secondary business And PFG is our fundraising business. Yes, that's helpful. Thanks for clarifying. Appreciate the color. Operator00:39:07Thank you. Ladies and gentlemen, this concludes today's Evercore Third Quarter 2023 Financial Results Conference Call. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallEvercore Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Evercore Earnings HeadlinesEvercore to Announce First Quarter 2025 Financial Results and Host Conference Call on April 30, 2025April 16, 2025 | gurufocus.comEvercore Inc (EVR) Trading 3.66% Higher on Apr 14April 14, 2025 | gurufocus.comSilicon Valley Gold RushA new technology has sparked a modern-day gold rush in Silicon Valley. OpenAI’s Sam Altman invested $375M. Bill Gates has backed four companies in this space. The World Economic Forum calls it “the most exciting human discovery since fire.” Whitney Tilson believes this trend could mint a new class of wealthy investors—and he’s sharing one stock to watch now, for free.April 22, 2025 | Stansberry Research (Ad)JMP Securities Upgrades Evercore (EVR)April 9, 2025 | msn.comEvercore price target lowered to $180 from $199 at Wells FargoApril 8, 2025 | markets.businessinsider.comEvercore upgraded to Outperform from Market Perform at Citizens JMPApril 8, 2025 | markets.businessinsider.comSee More Evercore Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Evercore? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Evercore and other key companies, straight to your email. Email Address About EvercoreEvercore (NYSE:EVR), together with its subsidiaries, operates as an independent investment banking advisory firm in the United States, Europe, Latin America, and internationally. It operates through two segments, Investment Banking & Equities, and Investment Management. The Investment Banking & Equities segment offers strategic advisory services, such as mergers, and acquisitions, strategic, defense, and shareholder advisory, special committee assignments, and real estate strategic advisory; private capital advisory and fundraising, market risk management and hedging, private capital markets and debt advisory, liability management and restructuring, and equity capital markets execution and advisory services; and research, sales, and trading professionals services on a content-led platform to its institutional investor clients. The Investment Management segment provides wealth management services to high-net-worth individuals, foundations, and endowments; and manages financial assets for institutional investors. The company was formerly known as Evercore Partners Inc. and changed its name to Evercore Inc. in August 2017. Evercore Inc. was founded in 1995 and is headquartered in New York, New York.View Evercore ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Breaking Down Taiwan Semiconductor's Earnings and Future UpsideArcher Aviation Unveils NYC Network Ahead of Key Earnings ReportAlcoa’s Solid Earnings Don’t Make Tariff Math Easier for AA Stock3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to the Evercore Third Quarter 2023 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore Management and the question and answer session. I will now turn the call over to Katie Haber, Managing Director of Investor Relations and ESG at Evercore. Please go ahead. Speaker 100:00:34Thank you, operator. Good morning and thank you for joining us today for Evercore's Q3 2023 financial results conference call. I'm Katie Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO and Tim Lalonde, our CFO. After our prepared remarks, we will open up the call for questions. Speaker 100:00:56Earlier today, we issued a press release announcing Evercore's Q3 2023 financial results. Our discussion of our results today is complementary Press release, which is available on our website at evercore.com. This conference call is being webcast live in the For Investors section of our website and an archive of it will be available for 30 days beginning approximately 1 hour after the conclusion of this call. During the course of this conference We may make a number of forward looking statements. Any forward looking statements that we make are subject to various risks and uncertainties, and there are important factors that could cause Actual outcomes to differ materially from those indicated in these statements. Speaker 100:01:33These factors include, but are not limited to, Those discussed in Evercore's filings with the SEC, including our annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 ks. I want to remind you that the company assumes no duty to update any forward looking statements. In our presentation today, unless otherwise indicated, we will be discussing adjusted financial measures, which are non GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP Reconciliations, you should refer to the financial data contained within our press release, which is posted on our website. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. Speaker 100:02:15As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closing. I will now turn the call over to John. Speaker 200:02:25Thank you, Katie, and good morning, everyone. I want to start this morning by addressing the crisis in the Middle East and to acknowledge the profound sadness we are all feeling for the innocent victims. At Evercore, we live by our values, and I want to emphasize that terrorism and acts of hate must be condemned. Over the past quarter, we've seen a continuation of the improved market conditions that began over the summer. Internally, we see client activity level tracking at an elevated pace and moderately increasing confidence levels across management teams and in boardrooms, Greater financing accessibility, albeit at higher costs and a slow return to equity capital markets activity. Speaker 200:03:13The normalization of market activity takes time, but we believe these positive indicators are a first step towards an improving backdrop, which should provide a broad based benefit to many of our markets. Clearly, market uncertainty remains, driven by increased geopolitical tensions as well as higher rates. We do not expect the positive shift in activity levels And market sentiment seen over the past quarter to translate into meaningfully improved results in the near term. That said, barring an unexpected significant shift in the macro environment, we expect activity levels to continue to build in 2024. While it is still early days, we are seeing this reflected in stronger backlogs similar to our last quarter. Speaker 200:04:04As discussed last quarter, the current environment has presented one of the strongest hiring opportunities seen in our firm's history and we have capitalized on it. We've made significant investments in talent this year, our largest SMD hiring year ever. When paired with an improving market backdrop, We believe these investments as well as our ramping SMD hires and promotes from the last 2 years, all in more than 40 ramping SMDs Will drive significant productive capacity and help us build a stronger foundation for growth over the medium and long term. 9 of our 11 new SMD hires year to date have started and are working at Evercore. These new SMD hires Have joined areas which we have identified as strategically significant, including TMT, both in the U. Speaker 200:04:55S. And Europe, Sponsor coverage, business services, industrials, real estate and capital advisory. We will continue to engage in discussions with Other strong candidates, but we believe our 2023 new hire plans have largely been completed. As we build our recruiting pipeline for 2024, we remain steadfast in the execution of our strategic initiatives, which I've outlined on past calls. Now I will briefly discuss the quarter. Speaker 200:05:28Our 3rd quarter results, while up sequentially, reflect the muted market backdrop as merger activity has remained challenged and the recent improvement in market sentiment has yet to have a substantial impact on announcement and completion activity. In our Global Advisory business, we've advised on several transformative transactions, including notably this week Chevron's $60,000,000,000 acquisition of Hess and in the quarter WestRock on its $20,000,000,000 merger with Smurfit Kappa, Danaher on its spin off of Rialto as well as Bristol Myers Squibb's $4,800,000,000 acquisition of Mirati. Our European advisory group experienced strong activity levels, including in debt advisory. Additionally, we continue to make strong progress with our sponsor coverage efforts. We're excited for what this expanded group will accomplish over time, especially as the collaboration With our Private Capital Advisory and Fundraising businesses will continue to drive synergies. Speaker 200:06:33We see momentum building across our sponsor related businesses. The Private Capital Advisory and Fundraising businesses were resilient in the quarter, highlighting the strength of our market leading franchises. Continuation fund activity has persisted at an elevated pace and new business activity is strong. While the broader fundraising environment remained muted, our private funds business had a better quarter relative to a year ago. Our strategic defense and shareholder advisory business had another busy quarter as activist campaigns continued at elevated levels. Speaker 200:07:13Restructuring remains strong similar to what we saw in the Q2 with activity levels driven by liability management and distressed financing advisory assignments. In our underwriting practice, corporates continued with regular way follow ons, particularly in biotech and traditional cleantech energy. The Q3 saw an opening of the IPO market. In the quarter, we served as an active book runner on the 2nd largest biotech IPO year to date for Ray's Bio. We also were an active book runner on the largest biotech overnight follow on offering this year for Madrigal Pharmaceuticals. Speaker 200:07:55Our overall ECM market share continued to rise, a testament to the strength and growth of our business. In our equities franchise, we are pleased to have been awarded for the 2nd year in a row a number on the weighted basis in Institutional Investors All America Equity Research Survey. We also had the most number one Ranked analysts on Wall Street for the first time ever. Lastly, in Wealth Management, our assets under management declined modestly in the quarter. Both performance and client retention rates continue to be strong. Speaker 200:08:30Before I turn it over to Tim, I want to wrap up with a few thoughts. 2023 has undoubtedly been a challenging year for our industry. Despite the operating backdrop, we've remained focused on purposefully Executing on our strategic plans by continuing to invest in our franchise, pushing to strengthen and broaden our coverage and geographic reach, Building out our product and execution capabilities and continuing to enhance our intellectual capital. We are hopeful that 2024 will be a better year for the market and in turn Evercore. Our client contact remains active and robust across our businesses. Speaker 200:09:11We're excited for the opportunities and improving environment will present for us. With that, let me turn it over to Tim. Speaker 300:09:19Thank you, John. Our 3rd quarter results show sequential improvement compared to the 2nd quarter, Do not yet meaningfully reflect the early stage improvements in the environment. We are seeing internal client Activity levels discernibly picking up from earlier this year. However, as I mentioned on our last quarterly call, The road to significantly improved financial results is a gradual one as there is a time lag that exists between client dialogues and announcements and then between announcements and completions. Additionally, we have taken advantage of an attractive partner recruiting market with a record SMB hiring year. Speaker 300:10:00Yet coupled that with disciplined headcount management across all areas of the firm as we For the Q3 of 2023, net revenues, net income and EPS on a GAAP basis were $570,000,000 $52,000,000 $1.30 per share respectively. My comments from here on will focus on non GAAP metrics, which we believe are useful when evaluating our results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website. Our 3rd quarter adjusted net revenues of $576,000,000 declined 1% versus the Q3 a year ago, but were up 14% sequentially. 3rd quarter adjusted operating income and adjusted net income of $83,000,000 $55,000,000 decreased 39% and 42%, respectively, versus the Q3 of 2022. Speaker 300:11:12Adjusted earnings per share of $1.30 decreased 41% versus the prior year period. Our adjusted operating margin was 14% for the 3rd quarter. Turning to the businesses. In Investment Banking, 3rd quarter adjusted advisory fees of $468,000,000 Sequentially, advisory revenues were up 25% as market activity levels across our various advisory businesses We're modestly stronger compared to last quarter. 3rd quarter underwriting fees of $31,000,000 were up 7% compared to the Q3 of 2022. Speaker 300:12:02We are seeing some improvement in the market with a number of significant transactions more recently. Commissions and related revenue of $49,000,000 in the 3rd quarter was down slightly year over year, which is a respectable Given that market trading volumes and volatility have been lower than last year's levels. 3rd quarter Asset Management and Administration fees of $19,000,000 increased 9% year over year. This is primarily due to a 3rd quarter AUM of $11,300,000,000 which is up 13% year over year. 3rd quarter adjusted other revenue net was a gain of approximately $10,000,000 reflecting approximately $15,000,000 of interest income earned on our cash balance due to higher short term rates, partially offset by a $5,000,000 loss in our investment funds portfolio, which is used as a hedge for our DCCP commitments, driven by a decline in equity market Values in the quarter. Speaker 300:13:08Turning to expenses, the adjusted compensation ratio for this Q3 is 68%. As I discussed at some length on last quarter's earnings call, our compensation ratio continues to be meaningfully impacted by The revenue environment, the amortization of prior year deferred compensation awards, the onboarding of our new senior hires, 5 of whom have joined the firm since the middle of Q3, as well as the market level for compensation. Given that many of these new SMDs have joined late in the year and we recognize their 2023 compensation from their start through year end, we would Expect to see additional upward pressure on the 4th quarter compensation ratio. Based on what we know today and incorporating our current best estimates about 4th quarter revenue and market compensation rates. We would expect the comp ratios of these past two quarters to be generally Note that variations in the actual 4th quarter revenues or market compensation levels Could impact our future quarter and year end comp ratios in either direction. Speaker 300:14:24Shifting to non compensation expenses. In the Q3, our non comp expenses were $102,000,000 up 12% from a year ago. The year over year increase reflects Some increased rent expense for new lease space related to required relocation of part of our corporate group and higher information services fees. Additionally, our non comp expenses from a year ago reflected an expense reversal, which decreased our non comp expense materially at that time, resulting in a larger increase year over year. I would note that our non comp expense on a per head basis is still modestly below where it was in 2019, the pre COVID year and modestly above a year ago. Speaker 300:15:12We expect our non comps to be similar to our second and third quarter levels for the remainder of the year. We are continuing to diligently monitor and manage our non comp expenses. Our adjusted tax rate for the quarter was 27.6%, virtually identical to the 27.4 percent tax rate from a year ago. Turning to the balance sheet. As of September 30, our cash and investment securities totaled approximately $1,600,000,000 which is up from 1,500,000,000 at the end of last quarter. Speaker 300:15:48We continue to maintain a strong cash position, taking into consideration the current economic and business environment, Cash needs for the implementation of our strategic initiatives, including hiring plans and preserving a solid financial footing. Year to date, we have returned a total of $490,000,000 to shareholders through dividends and repurchases of 3,000,000 shares at an average price of $128.97 Our 3rd quarter adjusted diluted share count is 42,800,000. As a reminder, That is down about 5,000,000 shares from where we were 2 years ago. In the past 3 years, we have returned to shareholders Cash equating to more than 1 third of our market cap. We continue to maintain a strong capital position And we remain committed to our philosophy of returning to shareholders cash not needed to implement our strategic plan and to provide financial stability for our stakeholders. Speaker 300:16:50As John mentioned, we are encouraged by the early signs of an improved market backdrop. That coupled with the SMBs who joined us in the Q3, those still to join and SMBs who were promoted or hired in the last couple of years Position Evercore for greater revenue and earnings leverage over the medium to longer term. With that, we will now open the line for questions. Operator00:17:17Thank you. We will now conduct the question and answer portion of the conference. Please limit to one question only. You are welcome to rejoin the queue for additional questions time permitting. Our first question is from Devin Ryan with JMP Securities. Operator00:17:43Your line is open. Devin, please make sure that you're not self muted. Speaker 400:17:55Sorry about that. Good morning, John and Tim. Sorry about that. Yes, first, I guess, question, maybe make it 2 parts since I have one here. So I guess first off, the advisory SMD count declined by 5. Speaker 400:18:08So just wanted to get any color there since you guys are hiring, Make sure I understand that dynamic. And then the other part of the question, we're getting a lot from your clients recently. It's just about expense inflation and what That means for normalized margins for Evercore and the industry more broadly. And obviously, appreciate the biggest driver that's going to be Revenues were not in a normal revenue environment today, but how are you guys thinking about kind of normalized margins over Have we structurally shifted higher or should I guess structurally shifted lower because of some of the expense inflation? Or do you think Speaker 200:18:55Let me take the first question. Okay. Go ahead, John. I'll take the second. In terms of the advisory SMBs, what we have said to the market and what we've said to you all is that we are in the mode Of hiring very high quality talented people. Speaker 200:19:09But at the same time, we're managing our headcount. And there are people who are shifting out And there are people who we are bringing in. We've obviously been aggressive about promoting high quality talented people. We've Promoted 24 people to SMD internally in the last 2 years. And as you know, this year, We're hiring from the outside 11. Speaker 200:19:35What we've really done is we've basically tried to be disciplined. And so this is just a Really an execution of what we said we were going to do, which is we are making sure that we are bringing in high quality people And those people who are who for all different reasons may not be the right fit, they're shifting out. Speaker 300:19:58Sure. And let me just add one thing to that and then I'll comment a little bit on the expenses. And that's that we've always Guided research community and our investors to look at our firm on a multiple quarter and multiple year Time span in order to assess what we're doing. And so if you look at our partner headcount and the most recent number is of course 130 7 in the advisory business. That number 3 years ago would have been 107, so it's plus 30 and up about 28%. Speaker 300:20:36If you look at that number compared to where we were in 2021, our peak revenue and earnings year, We're up about 20 percent now. On John's commentary about also being disciplined about headcount management, over that same period of time, while our headcount Over that same period of time, while our headcount increased pardon me, our partner headcount increased 20%, Our overall headcount increased 13.6%. And so what you can see there is some evidence of our striving to increase Our productivity per person and per banker. Now turning for a moment to the expenses, What you would see in our numbers is a modest amount of inflation impact. But interestingly, if you look at our non comps, for instance, on a per head basis, they're actually slightly lower Still on a per head basis than they were in 2019 and only marginally higher than a year ago. Speaker 300:21:44And so, we're optimistic about what we've been able to and may be able to continue to do with respect to inflation. And in terms of returning to normal margins, Certainly in our business, the largest impact on our margins is generated by revenues. And so when you see the market turning with respect to transaction announcements and subsequently increasing revenues. You can expect significant margin improvement, But I think it's too soon to predict exactly when that will occur and what the And the timeframe for returning to a more normalized margin structure. Speaker 400:22:39Got it. Okay, terrific. Thanks guys. Operator00:22:44Thank you. Our next question will come from Brennan Hawken with UBS. Your line is open. Speaker 500:22:53Good morning, John. Good morning, Tim. Thanks for taking my questions. Good morning. Hi. Speaker 500:22:59I'd love to start, Tim, on your Comment on the comp ratio. I think I got it, but just want to clarify and based on Bloomberg chat, I think there's a A few other people who are a little confused too. So I believe what you suggested was that full year is going to look like the last couple of quarters, which would mean given 1Q in the low 60s that we're going to be looking probably at the 4th quarter at a comp ratio in excess of 70%. Did I hear that correctly? Speaker 300:23:31Well, hi, Brennan. And I certainly didn't say in excess of 70%, but I understand the mathematics That might lead you to that conclusion. And so the first point I'd make is, it's impossible for us to precisely predict what the comp ratio will be in the Q4 or for the full year because it's so dependent on the revenues. And as we all know, as one approaches year end, sometimes there are certain significant fees that fall inside the quarter and Sometimes they fall outside the quarter. And so I want to be careful about providing guidance that's too precise. Speaker 300:24:13It is the case that there's some natural upward pressure on the latter part of this year, which of course It's the Q4 and that's due to the fact that, as you know, we've announced 11 partner hires this year, 10 of which will arrive before year end. And of those 10, 6 are arriving anytime from mid August through year end. And as we need to we don't start accruing for those people until they arrive at the firm. What that does do is put some additional pressure on the 4th quarter. But I still I would say our best estimates are what I said in my prepared remarks, Which is something that would look generally like what we saw in the second and third quarter for the full year. Speaker 500:25:11Yes, yes. All that's totally and completely fair. And it's going to make answering my next question even more challenging. But I'm going to try anyway. So you guys do have the benefit of having a decent forward look just Given how long it takes to close deals and how what a great franchise you have in large cap M and A in particular. Speaker 500:25:35So given what you're Seeing and at least based upon expectations for the beginning of 2024, When I go through the model and take my best guess at where your fixed comp base works out at And all of this, it's hard for me not to see continued upward pressure, even giving a pretty substantial ramp Revenues and a decent recovery here in 2024. And I continue to kind of like shake out at an upward And an above historical range comp ratio for 24. Of course, there's a ton of uncertainty still embedded in 24. We have no idea what the magnitude of the And maybe even given maybe I'm not giving enough of a ramp, which could end up helping to drive that comp ratio down. But Is it reasonable to think that at least for the first half of the year, we'd probably be continuing to deal with an elevated comp ratio Until we can get these revenues really moving strongly and back to the potential that you can achieve? Speaker 300:26:44Right. And so, look, we, of course, as a matter of practice, don't provide guidance. And so I want to be very careful about what I say, but the right there's a mathematics behind all of this. And the mathematics are that the prior year amortization awards hit you in a larger than normal way On a percentage basis, when you're in a market where revenues are declining and when you're in a market where revenues Are improving, sometimes that can provide some tailwind. In addition, as you pointed out, It's too soon to know what the ramp rate will be for the new hires. Speaker 300:27:33All we know is we're really glad they've joined us and we're really positive about their prospects, but too soon to really say more than that. Speaker 500:27:45Okay. Thanks for taking my questions. Operator00:27:49Thank you. Our next question will come from James Yarrow with Goldman Sachs. Your line is open. Speaker 600:27:57Good morning and thank you for taking my question. So it does feel like the M and A recovery continues to be pushed out. Obviously, you've had some In the past few months, and that's been positive. But overall, the industry continues to recover quite slowly, this doesn't appear to be the 2020 to 2021 recovery. So I guess what is your view of the likelihood that this MA recovery ends up taking A number of years to build back to a more robust level like we saw post 2,008. Speaker 200:28:29Thanks, James. It's really hard to call the pace of a recovery. I would just say that if you look at really some of the Firm indicators internally, our backlogs are building, our other internal indicators seem to be strengthening. And I would just say anecdotally inside the firm, the activity level and the client dialogues are very robust. But as you said, it does take time. Speaker 200:28:59And the fact that activity takes time to lead to announcements, Which then take time to lead the closings. That is absolutely true. And there's no question that there's an elongation with respect to deals right now. We feel optimistic about the activity level we have right now. I think it's probably safe to say That there is going to be a ramp in 2024. Speaker 200:29:26We just don't know exactly what the pace will be. It's very hard to call. But I think that if our indicators say that we have a very healthy amount of And we'll just see how that translates. Speaker 600:29:42That's very helpful. Thanks, John. Operator00:29:47Our next question will come from Steven Chubak with Wolfe Research. Your line is open. Speaker 700:29:55Hi, good morning. Speaker 200:29:57So, good morning. Speaker 700:29:58I was hoping to unpack Some of the commentary you made on 24, really trying to distinguish between strategic and sponsor activity. And we've seen A number of large strategic transactions announced, most recently in the energy space. At the same time, sponsor activity has remained fairly muted And the commentary from the public all suggests that's likely to remain subdued at least in the call it the near to intermediate term. And I was hoping you could speak to The dialogue you're having with sponsors and strategics and any differentiation would be really helpful. Speaker 200:30:34Sure, Steve. And by the way, I don't want to frustrate you, but it's very hard to call what's going to happen with sponsors. The interest rates are higher, which does really impact kind of the economics of sponsor deals. But sponsors really want to get going. They've got a lot of dry powder. Speaker 200:30:56They've got real need to actually monetize and return capital. And so there is pressures at the sponsor level to really get going. And I think that on the other hand, They don't want to capitulate and take lower prices on their assets. But sponsors are in business to do transactions that they can monetize and then bring back to their investors. And so there's a real pressure going on there. Speaker 200:31:25And I think that what you'll really see is you'll see You'll see deals start to happen, but we don't think that there will be a massive rash of deals immediately coming from sponsors. Having said that, If you look at some of the other activities and sponsors that we engage with, which is continuation funds and Fundraising, we see the fundraising environment feeling a little bit better. We see the continuation fund Activity building. And I'd say that the way that we're seeing sponsors on that side of the business seems to be building. And so in general, we think sponsors have, on the one hand, So I'm concerned with respect to going that it hasn't gone faster. Speaker 200:32:18On the other hand, we do see what we think is A strengthening and we do think that there will be activity that builds. On the strategic side, as you've seen, There has been quite a bit more activity publicly. You've seen some deals which have come out that are Somewhat larger relatively recently. It's hard to say whether that will continue and build at this point, but I think it's safe to say that activity levels, dialogue levels are at quite a high pace. As I said earlier in the call, If you look at us anecdotally, we think that there's a lot of dialogue inside that is that's not just in terms of Number, but also quality. Speaker 200:33:06So I'd say that the strategic side is starting to begin to build some momentum. It will take time. As I said, it's hard to call the timing. And I do think sponsors will start to move forward, but it may take a little bit longer. So that's what I think. Speaker 700:33:26Very helpful. Thanks for taking my Operator00:33:30Thank you. And our next question comes from Ryan Kimmy with Morgan Stanley. Your line is open. Speaker 800:33:43Hey, good morning. Thanks for taking my question. So you talked about encouragement from leading indicators. And just when we think about the last few weeks specifically where we've seen 10 year yields briefly spike above 5%. Is that recent volatility enough to have any significant impact on moving deals forward? Speaker 800:34:02And does that push things out a quarter? Or is the impact more limited? Speaker 200:34:07I think that interest rates certainly impact the way people think about financings for deals. It has a bigger impact, I think, on sponsors. Will it push it out? It could. I do think though that the deal activity will move forward if, for example, there tends to be a Stabilizing of what I think are the risk conditions existing in the market. Speaker 200:34:36I think one of the things that is holding back some of the deal environment Is that we have real uncertainties, both geopolitically and economically. And I think people are watching that really carefully. So I think it's not necessarily I think rates will impact to a degree, but I think the bigger impact is people watching what's happening in the environment And really how the equity market is going to look at deals generally. So I think that's the case. I mean, from our standpoint, we think that The dialogues that have been high quality are continuing to move forward. Speaker 200:35:14So I don't necessarily think that The interest rates are going to materially impact exactly the fact that things that get done, but I do think it will moderate To a degree, and I think people are watching it carefully. Speaker 800:35:30Thank you. Operator00:35:33Thank you. Our next question comes from Jim Mitchell with Seaport Global. Your line is open. Speaker 200:35:42Hey, good morning. Maybe we can talk a little bit about restructuring. It seems like it's been pretty active increasingly so. I think a lot Out of court restructurings. Can you just sort of discuss the impact in the quarter and how you're looking at activity and your thoughts going forward? Speaker 200:35:57That would be great. Sure. Restructuring is quite robust right now and our business is doing quite well. We're very busy. And as you said, there's some a lot of liability management going on and there is out of court restructurings As well as from our standpoint, both the debtor and the creditor side advisory work. Speaker 200:36:23I think That velocity continues and will continue. Interest rates going up does actually impact And we think that there is as you know, there's a maturity wall coming in 2024 2025. And also with higher rates, if there is there are more companies that have capital structures that will need to basically get advice And to actually restructure some. So I think our restructuring business is quite robust And we think the prospects of it will that will continue even if the merger market picks up. Okay, great. Speaker 200:37:06Thanks. Operator00:37:09Thank you. Our next question will come from Brennan Hawken with UBS. Your line is open. Speaker 500:37:18Good morning. Thanks for taking my follow-up. I was curious about the non M and A revenue. Previously running around, I believe it was at least Speaker 300:37:30a third of Total advisory, Speaker 500:37:33so if you could give an update there and then also speak to maybe the private And how that's doing in an environment like this? Speaker 300:37:44Yes, sure. And If you look at the non M and A revenue, I think we've said that for the past 4 years, It's represented more than a third of our overall revenue. And during periods of challenging M and A, It tends to be even higher. And I think it's reasonable to assume that's the case currently. And so On the PCA and PFG, as John mentioned a little earlier, we feel that The PFG fundraising environment is returning to a more normalized fundraising environment and we think The results reflect that. Speaker 300:38:33And with respect to PCA, we would characterize it as a Strengthening market for PCA, where we're seeing increased certainly increased activity levels, And we're hopeful that those will continue for a while. Speaker 200:38:52And just to make sure everybody knows, PCA is more our secondary business And PFG is our fundraising business. Yes, that's helpful. Thanks for clarifying. Appreciate the color. Operator00:39:07Thank you. Ladies and gentlemen, this concludes today's Evercore Third Quarter 2023 Financial Results Conference Call. You may now disconnect.Read morePowered by