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Edited Transcript of EVR earnings conference call or presentation 24-Jul-19 12:00pm GMT

Q2 2019 Evercore Inc Earnings Call

NEW YORK Jul 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Evercore Inc earnings conference call or presentation Wednesday, July 24, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jamie Easton

Evercore Inc. - Head of IR & MD

* John S. Weinberg

Evercore Inc. - Executive Chairman

* Ralph Lewis Schlosstein

Evercore Inc. - President, CEO & Director

* Robert Brien Walsh

Evercore Inc. - Executive VP, Senior MD & CFO

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Conference Call Participants

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* Brennan Hawken

UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst of Financials

* Devin Patrick Ryan

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* James Francis Mitchell

The Buckingham Research Group Incorporated - Research Analyst

* Michael Anthony Needham

BofA Merrill Lynch, Research Division - Associate

* Michael C. Brown

Keefe, Bruyette, & Woods, Inc., Research Division - Associate

* Steven Joseph Chubak

Wolfe Research, LLC - Director of Equity Research

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Second Quarter 2019 Financial Results Conference Call. (Operator Instructions) This conference call is being recorded today, Wednesday, July 24, 2019.

I would now like to turn the conference call over to your host, Evercore's Head of Investor Relations, Jamie Easton. Please go ahead, ma'am.

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Jamie Easton, Evercore Inc. - Head of IR & MD [2]

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Good morning and thank you for joining us today for Evercore's Second Quarter and First Half 2019 Financial Results Conference Call. I'm Jamie Easton, Evercore's Head of Investor Relations. Joining me on the call today are Ralph Schlosstein, our President and Chief Executive Officer; John Weinberg, our Executive Chairman; and Bob Walsh, our CFO. After our prepared remarks, we will open the call for questions.

Earlier today, we issued a press release announcing Evercore's second quarter and first half 2019 financial results. The company's discussion of our results today is complementary to that press release, which is available on our website at evercore.com. This conference call is being webcast live on the For Investors section of the website, and an archive of it will be available for 30 days beginning approximately 1 hour after the conclusion of this call.

I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements 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. These factors include, but are not limited to, those discussed in Evercore's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. 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 reconciliation, you should refer to the financial data contained within our press release, which as previously mentioned is posted on our website.

We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we noted previously, our results for any particular quarter are influenced by the timing of transaction closings.

I'll now turn the call over to Ralph.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [3]

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Thank you, Jamie, and good morning, everyone. We are pleased with our results for the second quarter and the first half of 2019 as Advisory revenues continue to drive our growth. In fact, our second quarter and first half Advisory revenues reflect the second best results for any quarterly or half year period in our history. We anticipate that these results will drive further market share gains in Advisory revenues among all publicly traded firms.

Our market position in Advisory has never been stronger. Among independent firms in the first half of 2019, we finished #1 in the dollar volume of announced M&A transactions both globally and in the U.S. In fact, globally, the volume of our announced M&A transactions was more than the next 5 independent firms combined. And in the U.S., it was larger than the next 8 firms combined. Among all firms, we were in the top 5 globally and ranked higher in the U.S., depending upon which data source you use. As John will discuss, we also were involved in many of the largest transactions announced year-to-date.

Strong revenue enabled us to deliver solid operating margins for the periods while simultaneously investing in the future growth of our business. Seven new Advisory Senior Managing Directors have committed to joining our Advisory business. Three have already started, with the remaining 4 expected to join in the third and fourth quarters. We expect to announce the remaining 4 bankers when they have completed their garden leave and are permitted to join us. We still have several active discussions underway, so we could end the year with a record number of new SMD hires in Advisory. Overall, we ended the quarter with 107 active or announced Advisory Senior Managing Directors.

We have also added 5 senior research analysts, strengthening our coverage in consumer retail, health care and technology as well as enhancing our coverage of U.S. public policy research. Our strong results supported significant capital returns to our investors, consistent with our long-term capital return objectives.

Through the first half of 2019, we returned $271.3 million to our shareholders through dividends and share repurchases. And our share repurchase activity represented 2.5 million shares at an average price of $85.23.

Let me now turn briefly to the quarterly and first half financial results. Second quarter 2019 net revenues were $535.8 million, up 18% versus the year ago period and a record for our second quarters. In Investment Banking, Advisory fees were $443.8 million in the quarter, up 22% versus the year ago period. Underwriting fees were $16.9 million, down 20% versus the year ago period. Commissions and related fees were $48.3 million, down also 5% versus a year ago.

In Investment Management, asset management and administration fees were $14.7 million, up 3% versus the year ago period. Net income was $101 million for the quarter, up 21% versus the year ago period, and earnings per share was $2.07, up 25% versus the year ago period, indicative of our shrinking shareholder base.

The operating margin for the quarter was 25.8% versus 25.5% a year ago. Our compensation ratio was 58% for the quarter. Non-compensation costs for the quarter were $86.7 million, up 14% versus the year ago period. This increase reflects both the growth in personnel at the firm, as well investments being made to sustain growth over the longer term, particularly in additional space and technology. Bob will comment on this further in his remarks.

Turning to the first half results. Net revenues were $955.6 million, up 4% from last year. Operating income was $234.2 million, down 2.6% from last year caused by the higher compensation and non-compensation expenses. Net income was $182.7 million and EPS was $3.73, down 7% and 4%, respectively, reflecting a higher tax rate as well as higher compensation and non-compensation expenses. Our operating margins for the first half were 24.5%.

Let me now turn the call over to John to discuss the current market environment and comment further on our Investment Banking business.

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John S. Weinberg, Evercore Inc. - Executive Chairman [4]

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Thank you, Ralph. The elements that drive a healthy M&A market are still in place and supportive of strategic M&A and capital-raising transactions. The economic environment remains accommodative, particularly in the United States. Board and CEO confidence generally remain high. Further, capital is available and the potential for increased activity from both activists and sponsors remains high.

Technology, media and telecommunications and industrials and energy have been the most active sectors based on announced volumes. Our levels of engagement and activity continue at a strong level and most sector activity focusing on both M&A and strategic and capital advisory assignments.

We are pleased to have completed the first half of the year ranked fifth globally, #1 among independents in the league tables for announced transactions. Significantly, we have the privilege of advising clients on 4 of the 5 largest transactions announced.

Equity Capital Markets activity has been mixed given the equity market volatility. The second quarter saw a large -- saw a number of large IPOs come to market, particularly in technology, and our dialogue with issuers remains active.

In Equities, we continue to see clients reduce the volume of research they received and refined how they pay for research and the level of payment. Quality continues to be an important differentiator as we continue to assure that we are compensated appropriately for the value we deliver.

Let me now briefly comment on our Investment Banking results. As Ralph mentioned, our Advisory revenues are strong, a testament to our success in serving our clients with excellence and distinction. In the first half, we advised on some of the largest and most complex assignments globally, including 4 of the 5 largest transactions announced year-to-date and 10 of the top 25. Several of these transactions leveraged and showcased multiple capabilities, including debt and hedging advisory, tax advisory, strategic shareholder advisory and our Equities platform. Our broad range of capabilities allows us to more deeply serve our clients and contribute meaningfully to our growth. Advisory revenues for the quarter remain diverse and reflected contributions from multiple sectors and capabilities, including financials, energy, technology and media and telecommunications, health care, consumer retail and industrials.

In the second quarter, we had 225 fee-paying clients, up from 216 in the same period last year. We earned 81 fees greater than $1 million in the quarter in comparison with 85 in the period a year ago.

Underwriting fees for the quarter were $16.9 million as several large deals were postponed to the third quarter. During the second quarter, we participated in 16 transactions, 10 which we held the role of bookrunner. While we are still most active in health care, we are increasing participation in technology and real estate. We plan to broaden out our sector reach over time.

Our debt advisory and restructuring teams remain very productive as they continue to focus on refinancings, liability management and debt capital advisory globally. And we also continue to expand the breadth of capabilities we offer to the financial sponsor community.

As Ralph mentioned, our recruiting efforts have been very successful to date and our high level and careful investment in talent remain a strategic imperative. The announced and committed SMDs will not only strengthen our M&A bench and deep sector expertise but will also broaden our geographic presence in Europe and the Middle East. We remain active in discussions with additional candidates, and it is possible that 2019 will be the strongest recruiting year in our history.

Let me now turn the call to Bob to discuss our GAAP results and other financial matters.

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Robert Brien Walsh, Evercore Inc. - Executive VP, Senior MD & CFO [5]

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Good morning. Beginning with our GAAP results. Net revenue, net income and earnings per share on a GAAP basis of $531 million, $81.7 million and $1.88, respectively, were a record for our second quarter just as they were a record on an adjusted basis.

Net revenues for the first half were $946.4 million, up 4% from last year. Net income and earnings per share for the first half were $149 million and $3.40, respectively.

Consistent with prior periods, our adjusted results for the quarter exclude certain items that principally relate to our acquisitions and dispositions and also include the full share count associated with those acquisitions. Specifically, we adjusted for costs associated with divesting of Class J LP Units granted in conjunction with the ISI acquisition. For the quarter, we expensed $3.7 million related to the Class J LP Units.

Our adjusted results for the quarter also exclude special charges of $1 million related to accelerated depreciation for leasehold improvements in our New York headquarters.

Turning to other income. Other revenues were up significantly from the second quarter and first half of 2018. This increase primarily reflects gains on the exchange-traded funds we use as a hedge for our deferred cash compensation program obligations. This amount will move around a bit in volatile markets.

Looking at non-compensation costs. Firm-wide non-compensation costs per employee were [$49,100] for the quarter, up 5% from the prior quarter and 3% higher on a year-over-year basis. The increase in per-employee cost principally reflects the addition of office space to accommodate future growth and investments in software targeted at enhancing operating efficiency in the intermediate term. We had approximately 1,800 employees at the end of the second quarter, a 9% increase versus the prior year.

Just to note again on the fourth quarter of 2018, we revised our adjusted presentation to eliminate the netting of revenue and non-compensation expenses related to client expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables. This adjustment brought our results more in line with our U.S. GAAP presentation and the presentation of our peers and had no impact on operating income, net income or earnings per share.

Turning to taxes. Our GAAP tax rate for the quarter was 24.8% as compared to 23.8% in the same period last year. Our share count for the second quarter for adjusted earnings per share was 48.7 million shares, lower in comparison with the prior quarter driven principally by share repurchases. And on a GAAP basis, the share count was 43.4 million shares.

Finally, looking at our financial position. We hold $591.4 million of cash and marketable securities at June 30, 2019 with current assets exceeding current liabilities by $651.6 million. We continue to carefully evaluate the composition of our liquid assets in light of both investments to support growth and our deferred cash compensation program commitments.

As a reminder, we adopted the new accounting guidance on leases during the first quarter, which replaced existing lease guidance. This resulted in the recognition of $217.9 million of lease liabilities on the balance sheet as of June 30 2019 along with associated right-of-use assets. There was no meaningful impact to our income statement as a result of this adoption.

I will now open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from the line of Devin Ryan with JMP Securities.

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Devin Patrick Ryan, JMP Securities LLC, Research Division - MD and Senior Research Analyst [2]

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So first question is, when I look at the Senior Managing Director footprint today relative to where it was heading into 2018, it's up over 20%. And based on your comments, the market backdrop for Advisory remains favorable. Yet when I look at forward expectations, there's virtually no revenue growth implied, particularly in this year. And it seems that after a great 2018, people are maybe having a hard time seeing that repeated even though there's significantly more producers in the system. So I just wanted to get some reactions to this perception that seems -- implied an expectation that Evercore's growth is going to lag maybe even some of your peers even though you've grown your producer headcount by more than most.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [3]

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Well, first of all, you know we never make any forward-looking statements, so your question is one that we normally don't answer. But let me try to be responsive. Last year, obviously, we had a terrific year. Our Advisory revenues were up 32%. They were up by more than anyone else in the industry. And I might have everybody remember that at the beginning of 2018, the hypothesis about Evercore versus the other independent firms was that we would grow more slowly because we were quite a bit larger. And certainly, in 2018, that was disproved not by a little, but by a lot.

Our backlogs, which we do comment on, are strong. They remain strong. I -- in anecdotal discussions with law firms with whom we work and some of our friendly competitors, it seems that some of them have similar backlogs to us and some of them are saying that things are a little bit weaker. So the honest answer is I couldn't tell you whether what we are experiencing in the first half of the year, until everyone has reported, our market share gains for Evercore versus all firms or market share gains for the independent firms versus the larger firms. But it's pretty clear to me that in the first half of the year, we are experiencing further market share gains.

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John S. Weinberg, Evercore Inc. - Executive Chairman [4]

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I'd like to follow on that comment from Ralph and say that one of the things that we are very focused on is the fact that when we add senior talent, it takes time for that talent to ramp up. Our goal is really not to drive growth in a particular next quarter or the next 2 quarters or 3 quarters, but our goal is long-term sustainable growth. And we really see the potential for that. And therefore, when we see top talent, we add the top talent because we have a genuine belief that there is real opportunity for us if we grow with the right people in the right spaces. And really, that's what we've done. So as we add, you will not see a mathematical equation between when we add and actually where those people start to kick in at full strength. In fact, it takes time for people to ramp up. So the comment I'd make is that our goal is to add top talent and to continue sustained growth, and it may not show itself in the next quarter or 2 quarters.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [5]

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And just to add, to put a number on that, Devin. Of the 107 SMDs that were referred to, 27 of them are at some point in their first 2 years either after joining the firm or after promotion. And we do find that there is a couple year period of time before they get to full productivity. So when we're adding people today, so for example, the 7 people that would have committed to us this year, we would expect the revenues to show somewhat next year, more fully the year after or 2021 and then very fully in 2022. So there's a lag.

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Devin Patrick Ryan, JMP Securities LLC, Research Division - MD and Senior Research Analyst [6]

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And so my follow-up is a little bit more of Evercore versus the big banks because you're now in the top 5 advisory firms today with some large full-service balance sheet banks ahead of you and actually a number of them behind you as well. So I guess the question is, is there a ceiling just given the capability set? I mean it seems there's always been a perception of that given kind of lack of balance sheet and the importance of that and some of the certain other big bank capabilities. Or are there actually some advantages that allow you to do more in certain circumstances or are giving you some competitive advantages? Just trying to think about whether that historical thinking is flawed especially as you're overtaking some of these big balance sheet banks in terms of market share.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [7]

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Well, 2 things I would say. First of all, if you'd asked me this question 3 or 4 or 5 years ago, I would have significantly underestimated what I would have thought would be the ceiling. You may recall 5 or 6 or 7 years ago, I got asked that question. And I said, "Well, I know Lazard did $1.4 billion at their peak, so I know that can be done." And we did obviously $1.740 billion last year in Advisory revenues. I think our business model has some real advantages versus the large firms: complete lack of conflicts with our clients, financial or otherwise, complete confidentiality and senior people doing the work. So we're actually winning share, I think partly because of our business model in the pure M&A business, which is what your question refers to.

I would also add that over the last few years, we have added very materially to our capabilities. We have the very best, among all firms, Activist Defense practice. We have a strong debt and Equity Capital Markets advisory business. We also advise our clients on hedging. We're the only independent firm with an equity underwriting business. We have real tax expertise. We're adding expertise in corporate restructuring as opposed to financial restructuring.

So when John and I sit down with potential recruits from the large firms, the one thing that we assert, which we get absolutely no pushback on, is that you will do more revenue with your client base at Evercore than you can at any other independent firm. And that's because of the broad range of capabilities that we have here. So I think -- and I think we believe there's still a fair amount of room to run not only in our market share in the M&A advisory business but also in the growth of these other more corporate finance advisory activities.

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John S. Weinberg, Evercore Inc. - Executive Chairman [8]

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My perspective on this is very similar to Ralph's. And what I would say is that, as you know, this is really a talent business. And it's a business where if you have highest quality people and you are setting them up to be successful on calling on clients, that you will get -- you will be able to win advisory assignments. Because at the end of the day, it's about experience, expertise and trust. And if we sustain our calling efforts with high talented people who have very good values, we think we can be involved in more and more situations.

As we look at the environment, as we look at the opportunity set, we think there's a lot of white space for us. There's a lot of places where we can actually be effective at calling on more clients and providing more service to those clients. So from our perspective, we -- whereas we don't have a balance sheet, we certainly have a lot to offer, and it seems like and it feels like that clients are more and more willing and demanding of actually having our involvement. So we're seeing a real opportunity set in front of us, and so we don't feel limited at all.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [9]

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Yes, I would just conclude by saying that in any given year, and this applies to the first question as well, whether our revenues go up or down is a function of 2 things: the environment and our market share. And I would say there's a very high degree of confidence here that our market share will continue to grow. We are not particularly expert at predicting what the overall pie will be in any given year.

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Operator [10]

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Our next question is from the line of Jim Mitchell with Buckingham Research.

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [11]

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Maybe, Bob, just a quick accounting question was, was there any pull forward this quarter? You guys did close quite a bit on the first couple days of July. I just want to make sure what we're -- we can understand what we're looking at.

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Robert Brien Walsh, Evercore Inc. - Executive VP, Senior MD & CFO [12]

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We recognized about $81 million of revenue related to transactions that ultimately closed legally in the third quarter. There was sort of -- I understand there was sort of a particularly large amount of clients we simply chose for cut-off reasons to close in early July, as you noted.

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [13]

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Okay. So that was in the second quarter. Okay. And when we think about buybacks, you guys were pretty active this quarter. Looks like over $100 million put to work. Can you just remind me what the authorization remaining is and sort of out to think about using that up over the next 12 months or not?

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Robert Brien Walsh, Evercore Inc. - Executive VP, Senior MD & CFO [14]

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Jim, I don't have the numbers in front of me, but we have substantial runway in terms of what the Board has authorized.

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James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [15]

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And how do you feel about -- I mean you bought a lot in the mid-80s. The stock is still there. So still kind of feel good about buying it at these levels? And don't have any constraints?

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Robert Brien Walsh, Evercore Inc. - Executive VP, Senior MD & CFO [16]

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I mean Ralph and I have always talked about how we think about buybacks, but our objective is to offset the dilution from our bonus equity grants as well as new hires. And we accomplished much of that year-to-date.

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Operator [17]

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Our next question is from the line of Brennan Hawken with UBS.

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Brennan Hawken, UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst of Financials [18]

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Just, Bob, sorry to clarify there. You had said that you guys have achieved a good deal of the 2 of the primary goals. Does that mean we should think that probably, if anything, all else being equal, buybacks will slow the pace from here?

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [19]

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I think what you should think is that we have a bunch of uses of cash. We're making a fair amount of investments for the longer-term growth of the business and some of which are long-term oriented like space and technology. We also, as we've reported in the first half of the year, purchased an interest in our Wealth Management business, 17%, in total up to 75%. We purchased the remainder of our Private Capital Advisory business. So we have uses of cash that add to the earnings of the business beyond just dividends, share repurchases, and so we weigh those as well. And as you have seen, there are many years that in the past, when our share repurchases have significantly exceeded the minimum that we promise our shareholders, which is the amount that we need to offset any dilution that requires -- that occurs as a result of RSUs issued or as a result of shares issued to new hires. But the amount by which we do that obviously depends, one, on the opportunity to buy stock attractively; and two, as we get larger, we have more uses of cash to build our business.

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Brennan Hawken, UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst of Financials [20]

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Terrific, Ralph. Thanks for that detailed walk-through. Since you touched on some of the investments you're making, I figure why not transition to noncomp. Bob, I think you referenced that it was up per employee about 5% quarter-over-quarter, and it sounds like the drivers to that are sustainable, especially, Ralph, given some of your comments there. So is that a fair level as far as noncomp per employee that we should be thinking about from here? Will there be a little bit of upward pressure as you continue to invest, Ralph, as you highlighted? At least we should think about it that way until some of these recruiting efforts that you guys have highlighted start to turn into SMDs and others that you could actually add to your headcount. Is that fair?

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Robert Brien Walsh, Evercore Inc. - Executive VP, Senior MD & CFO [21]

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So Brandon, as you know, that number has been very stable for several years now at about $47,000 on average per employee. As I said in the last call, it is elevated because some of these costs related to facilities and technology, by design and necessity, are out ahead of the number of people we have today. I think that, that's a reasonable number as we move forward. And obviously, we're going to work very hard to have that come down as a function of leveraging that cost over more employees, but it will take some time before we have that meaningful number of employees.

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Operator [22]

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Our next question is from the line of Steven Chubak with Wolfe Research.

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Steven Joseph Chubak, Wolfe Research, LLC - Director of Equity Research [23]

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So I wanted to start off with a question on election risk. There are a lot investors that are starting to work through election game theory, trying to anticipate different outcomes and how that could impact deal activity. I'm just wondering what you guys have heard from corporates in terms of how the election and political uncertainty is impacting deal appetite, if at all, particularly in some areas of strength that you've had historically such as health care and TMT.

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John S. Weinberg, Evercore Inc. - Executive Chairman [24]

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I'll start with that given that, that's not an easy answer. I'm sure Ralph will have something to say on this also. We obviously are talking to our clients all the time. And when we talk to our clients, there are always things that we're talking about with respect to the outside environment and the impact of that on how both shareholders and other stakeholders will react to deals. To date, we've not seen any overhang with respect to the election, with the deal discussions that we're having. Having said that, there obviously is -- continues to the sensitivity about the economic environment, about trade, about other factors that people are looking at and putting into their calculations.

So my short answer to your question is we're not seeing any election concern in those conversations as we see them. But clearly, as we get closer, I'm sure that it will enter into some of the narrative and discussion. But right now we don't see it acting as a damper at all on activity.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [25]

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I agree with that. The only other thing I would add would be off the record, so I'm not going to add it.

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Steven Joseph Chubak, Wolfe Research, LLC - Director of Equity Research [26]

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All right. Fair enough. Well, just sticking to the economic backdrop, John, you've -- one of the things we've been hearing from a lot of folks is just general concern that if the Fed starts cutting more aggressively, how that's going to impact corporate confidence and increase expectations for a more meaningful economic slowdown. I was hoping you could also give some perspective since you touched on how the election could potentially inform people's views. Talk about the rate backdrop since that's changed pretty dramatically since your last public remarks, how that informs the outlook for corporates and their appetite to do deals.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [27]

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It's pretty clear there's a global effort on the part of central banks and the international monetary institutions that are multilateral to sustain the recovery that we have underway right now. And I think you can look literally across the board, whether it's the ECB, the Bank of Japan, Australia, U.S., anticipating a 25 basis point cut next week. There is a general policy toward sustaining recovery. And I would add, in this country, we have a reasonably accommodative monetary policy about to become a little bit more accommodative. And we certainly have a stimulative fiscal policy considering where we are in the economic cycle and the number of years into the recovery. We're -- the budget agreement that was reached this week added a little bit more stimulus for next fiscal year. The compromises always seem to be more for defense and more for domestic without any revenue support. So I think if you had Ed Hyman on the phone with us, he would tell you that they don't see signs of recession yet and they don't see them for next year either. And they -- that's about as far as they can see. So and I would say that view is pretty widely held by our client base as well.

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Operator [28]

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Our next question is from the line of Michael Brown with KBW.

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Michael C. Brown, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [29]

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So I just wanted to ask one quick one on the comp ratio. So I mean this quarter, [you may have] 58% that was in line with last quarter, but obviously a much stronger revenue result. So as we sit here about halfway through the year, I guess how are you thinking about kind of the full year comp ratio compared to last year?

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Robert Brien Walsh, Evercore Inc. - Executive VP, Senior MD & CFO [30]

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Michael, it's a little early to get into the comparison of year-end last year. As we always do, we look at it carefully every quarter, both in light of reported revenue and where we think the year is going as well as our comp costs, which are particularly impacted by recruiting a new hire. So as both John and Ralph have mentioned, the backlogs are strong for both revenues and the recruits. We're going to carefully look at the numbers again in the third quarter, and of course, at year-end. But too soon to gauge what the outcome will be.

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Michael C. Brown, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [31]

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Okay. And then just when we're looking at the industry trends for announcements, I mean clearly, what we're seeing is Europe and cross-border activity continue to remain really weak year-over-year. Are you seeing any early indications of that kind of bottoming out from here? Or just kind of given the uncertainty in both of those types of transactions, is it expected to kind of remain weak? Just interested to get any color from what you're seeing in your discussions.

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John S. Weinberg, Evercore Inc. - Executive Chairman [32]

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I think generally, the discussions that we're having with clients have been quite robust. We certainly see and feel what you see and feel with respect to Europe and other areas in terms of the weakness. Our general view is that we are at a place where we're going to continue to generate activity. And I think whereas we would not predict a tremendous strengthening, we see sustained levels and maybe some strengthening over time. But I don't think we can make any broad statements that we have bottomed out or that we are seeing a strong recovery. But we generally feel good about the dialogues that we're having. So on an anecdotal basis, I could say to you that we really like the activity levels that we're seeing, but it's very hard to make some prediction about exactly where it's going to go from here. But we feel generally optimistic about our business at least.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [33]

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And Europe has been negatively affected obviously by slower growth there and by the uncertainty associated with Brexit, which not only affects the U.K., but Continental Europe in terms of its interaction with the U.K. So I think a resolution of that will be helpful certainly in removing uncertainty.

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Operator [34]

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Our next question is from the line of Mike Needham with Bank of America.

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Michael Anthony Needham, BofA Merrill Lynch, Research Division - Associate [35]

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So the first question I have is just on -- another follow-up on Europe and market share potential. Can you help us understand where you are with your Europe business relative to kind of your aspirations? Sort of what inning you're in, particularly as it pertains to Continental Europe? It does seem like the environment is a little tough, but if you're thinking -- if your plan is long term, maybe you can pick up some really strong people.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [36]

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I think if you look at Evercore's business versus the 2 large global independent investment banking advisory competitors, Lazard and Rothschild, both of them were born in Europe and their businesses there are considerably larger than ours. None of us report geographic revenues, so I don't know whether that's -- they're 1.5, 2x, 2.5x or 3x us, but they're definitely quite a bit larger in Europe. And going back to a question that was asked earlier, that is certainly one of the areas where we have real growth opportunity.

Having said that, our addition of talent is always in response to the availability of A+ and A talent. So for -- I think since I joined the firm over 10 years ago, consumer and retail was a high priority for us as was general industrials. And it was in 2017, as opposed to a start date of 2009, that we added our first senior bankers in industrials, and it was last year that we added our first senior bankers in consumer and retail. So even though we do believe there's a growth opportunity there and there's an obvious gap between us and our 2 large competitors, it's a question of availability of talent as to when that gets built.

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John S. Weinberg, Evercore Inc. - Executive Chairman [37]

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Yes. And just to respond, we are very much watching that environment. We're in dialogue with people all the time, especially people who we think are highly talented and could actually fit our needs. And in Europe, we're looking opportunistically. So we will do exactly as Ralph said, which is to the extent we find people who we think fit us culturally and are outstanding in terms of how they are commercially, we will act. And we're -- and because there is weakness in that environment, there may be some very good people out there, and we're going to try and be very opportunistic about that.

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Michael Anthony Needham, BofA Merrill Lynch, Research Division - Associate [38]

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Okay. And as a follow-up, on doing more for financial sponsors, I think you mentioned in the prepared remarks. What do you mean by that? Is it kind of more financial sponsor coverage, bankers helping out with transactions, is it financing?

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [39]

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I think if you look at our business with financial sponsors, it's, I think the largest among all of the independent firms. But we've done that predominantly on an industry-banker-by-industry-banker basis, interacting with their counterparts at the private equity firms. And so what John was referring to was a multiyear effort because, once again, it's dependent upon finding the right talent, of lifting up our broader relationship management and coverage of these very important sources of business for our industry. And I think that's -- it's not something that's going to have an immediate impact. But my guess is 3, 4, 5 years from now, we'll be talking about a considerably more intense coverage effort that isn't simply dependent upon the individual industry bankers here following the assets that are relevant to them at the private equity firms, but also has us identifying those that might have fallen through the cracks either because our bankers in that particular industry aren't necessarily as focused on private equity firms, or alternatively, they're assets that don't fit perfectly into one of our industry groups.

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John S. Weinberg, Evercore Inc. - Executive Chairman [40]

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Said differently, we think there is real opportunity because we have some really outstanding people in our industry sectors. And as Ralph said, we're not -- we don't think we're connecting in every point we could with those sponsors who have big businesses in each of those industry groups. And our goal is to bring more of Evercore to more of those financial sponsors and to really make sure the places where we have expertise, where we have opportunities to discuss with them, where we have capabilities that we can provide to them, that we try and connect in those places so that where we have something to offer and where they have a demand, we can actually connect those. And that's about staffing ourselves appropriately, organizing ourselves so that we can actually call on those accounts effectively and to make sure that we're really investing in those relationships, which we think is a real opportunity for us. We think we can do more in that space.

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Operator [41]

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Thank you. There appear to be no questions at this time. I would now like to turn the floor to Ralph Schlosstein for any closing comments.

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Ralph Lewis Schlosstein, Evercore Inc. - President, CEO & Director [42]

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Thank you very much for your time and attention, and we look forward to talking to you in roughly 3 months. Thanks.

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Robert Brien Walsh, Evercore Inc. - Executive VP, Senior MD & CFO [43]

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Thank you.

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Operator [44]

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Thank you. This concludes today's Evercore's Second Quarter 2019 Financial Results Conference Call. You may now disconnect.