Q3 2019 Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome to record third quarter 2000, <unk> financial results Conference call.
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Following the presentation the conference call will be open for questions.
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This conference call is being recorded today Wednesday October 20, Threerd 2019.
I would now like to turn the conference call over to your hosts Evercores head of Investor Relations highly Elsner. Please go ahead man.
Thank you Dimitrios good morning, and thank you for joining us sniper Everquest third quarter nine month 2019 financial results Conference call I'm highly elsner Evercores, new head of Investor Relations. Joining me today on the call our Ralph Schlosstein, I, President and Chief Executive Officer, John Mine, but our executive.
Chairman and Bob Walsh, our CFO after our prepared remarks, we will open up the call for questions.
Earlier today, we released a press release announcing Evercores third quarter, and nine month, 2019 and answer where though.
The company's discussion about results today is complementary athletes, which is available on our website at <unk> Dot com.
Conference call is being webcast live on the floor Investor section of the website, an archive that will be available for 30 days beginning approximately one hour after the conclusion of this call.
Wanted to point out that during the course of this conference call. We may make a number of how we're looking statements. These forward looking statements are subject to various risks and uncertainties and they're important factors that could cause actual outcomes to differ materially from those indicated any statement.
These factors include but are not limited to so it's just gotten evercores filing with the Securities and Exchange Commission, including our annual report on Form 10-K quarterly reports on Form 10-Q , and current report on form 8-K.
I want to remind you that the company assumes no duty to update any forward looking statement.
And our presentation today, unless otherwise indicated we'll be discussing adjusted financial measures, which are non-GAAP measures that we believe a meaningful when evaluating the company's performance.
For a 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 is important to evaluate ever worth performance on an annual basis. As we've noted previously our results for any particular border are influenced by the timing of transaction closing.
Now turn the call over Carol.
Thank you Holly and good morning, everyone.
As many of you know Jamie Easton, our very first head of Investor Relations is fulfilling a long held entrepreneurial dream and starting around business.
We are rooting for Jamie to succeed in her new venture and we're very fortunate to have recruited halley.
To take on this important role going forward.
I read your recruiting how he was just one of our important accomplishments this quarter.
We have continued to grow our business.
Year to date revenues increased at a considerably slower rate and last year's rapid pace.
Despite slower growth we have had the best first nine months of net revenue in our history and our backlogs remain strong in each of our businesses I'm excited about the opportunities that we have to continue to take market share in each of our businesses in the coming months.
Throughout the year, we have continued to invest in talent and capabilities consistent with our long term growth objectives.
Seven advisory senior managing directors have joined the firm during 2019.
For Smbs added during the third quarter expand our coverage of financial sponsors and the retail sector and strengthen our global presence both in Canada, and Israel, where we recently opened our Twentyth Advisory office.
Our total number of active in announced advisory senior managing directors is currently 111.
We have one additional senior managing director committed to join in 2020, and our dialogue with potential recruits remains strong.
We also remain very active with developing and mentoring our current bankers across all levels and the promotion of our own talent will continue to be a growing source of new senior managing directors.
Our market position and advisory has never been stronger as we have gained market share climbed the league tables and advised on a high proportion of the largest announced transactions this year.
We believe that our business model abroad sector, and geographic coverage with highly valued and diverse advisory capabilities is well suited.
To the current environment and we remain optimistic that our long term momentum will continue.
John will review the current environment and our advisory performance in more detail in his remarks.
Our equities business has added four senior research analysts this year, reflecting our continued commitment to this business as well.
We are picked particularly proud of our standing in institutional investors recent annual survey, which Evercore ISI was recognized as the top ranked independent firm and U.S. equity research for the six consecutive year.
Overall, Evercore ISI place second on a weighted basis and number four in terms of number of ranked analysts marking the sixth year in a row that the team placed in the top five among all firms.
We also were tied for the most number one ranked analysts with JP Morgan.
At over 90% of our analysts dry roster was ranked which we believe is the highest percentage of any firm of size and demonstrates our commitment to excellence throughout our organization.
Our wealth management team once again grew assets under management.
Assets under management from our consolidated investment management businesses were 10.3 billion at the end of the quarter up 4% from this time a year ago.
Finally, and very importantly, we have continued to focus on returning capital to shareholders $336.5 million has been returned to shareholders. During the first nine months through dividends and repurchases of 3 million shares.
At an average price of $84 in 22 cents.
Our adjusted weighted average share.
Now for the quarter is down 5% relative to the third quarter of 28 team, reflecting our ongoing buyback activity.
Additionally, we completed a private placement.
Approximately $206 million aggregate principal amount of unsecured senior notes in the third quarter.
The proceeds of this offering will be used to fund investments in our business, including facilities and technology and for other general corporate purposes, Let me now turn to our quarterly and year to date financial results.
Our investments in our business continued to drive our growth.
Third quarter.
Third quarter 2019, adjusted net revenues were $408.5 million up 6% versus the third quarter of 2018, primarily driven by an increase in advisory fees as well as higher underwriting fees revenues for the first nine months were $1.36 billion up 4%.
Compared to the same period last year.
In investment banking advisory fees were 321.2 million in the quarter up 5% year over year for the first nine months advisory fees were 1.09 billion, an increase of 4% from last year, when our advisory revenues surpassed the $1 billion Mark for the first time.
For the first nine months.
Advisory revenues whenever that negatively affected as several transactions with meaningful fees were delayed and have closed or are expected to close in the fourth quarter, rather than the third quarter.
The good news is that in each case these were simply delays in closings not postponements or cancellations of previously announced transactions.
As we have discussed in the past our results in any given quarter are always affected by the timing of transaction closings something over which we ultimately have no control as a consequence, a longer term perspective, as we pointed out many times always provides a more complete view of our results.
Equity capital markets continued its momentum was 17.6 million of underwriting fees in the quarter, an increase of 54% year over year.
These of 61.4 million year to date declined 2% from the first nine months of 2018, despite the somewhat choppy issuance environment. Our SCM business remained solid and the diversity of client sectors continues to expand and our backlog continues to grow.
Commissions and related fees were 46.8 million in the quarter, a 3% increase versus the third quarter of 2018.
Year to date commissions and related fees were 137.4 million down 1% from the same period last year.
Our team continues to work hard in this challenging environment to ensure that we are compensated appropriately for the value that we delivered to our clients.
In investment management asset management and administration fees from our consolidated businesses of 14.9 million were flat versus the third quarter of 2018 and year to date fees of 43.9 million increased 2% compared to last year.
Our compensation ratio was 58.
Per cent for the quarter versus 57.5 for the same period last year non compensation costs for the quarter were 86.6 million up 12% versus the year ago period.
Non compensation costs for the nine month period were 253.9 million up 13% versus the prior period.
This increase reflects continued growth in personnel as well as investments made to support.
Over the long term.
Our growth, particularly around additional space and technology.
Net income was 60.5 million for the quarter, and EPS was $1.26 down, 4% and up 2% respectively versus the third quarter of 2018, the difference being caught caused obviously by the.
Reduced share count.
Net income for the first nine months was 243.2 million and EPS was $4, a 99 cents down 6% in 3% respectively versus the nine months of 2018.
The operating margin for the quarter was 20.8% compared to 22.6% third quarter of 2018, our operating margin for the first nine months was 23.4% compared to 25% for the first nine months of 2018, Let me now turn the call over to John to discuss the.
Element and comment further on our investment banking business. Thank you Ralph.
The current environment continues to drive demand for high quality independent advice that addresses a range of strategic and financial challenges as clients priorities and needs varied by sector and region.
The fundamental drivers of M&A remain in place equity valuations are strong credit is readily available activist engagement with corporates is high and disruption of traditional industries continues.
Client discussions and interest in pursuing strategic transactions remains high but closing of transactions has been taking longer than in the past. The us market remains the most active with the highest level of activity in the TMT industrial health care and energy sectors.
There is also strong demand for capital advisory services as companies seek additional equity and debt financing.
An elevated level of leverage debt outstanding overtime drive strong demand for liability management and restructuring advisory services, our debt advisory and restructuring team continued to be fully engaged and particularly strong levels in.
NRG retail and PMT exist.
Our broad range of capabilities and ability to advise clients with a differentiated teams positions us well to help clients with their most important strategic and financial issues.
The environment for cash equities remains challenged as we continue to see clients reduce the volume of research they receive and refine both how they pay for research and the level of payment.
Quality remains an important differentiator for Evercore ISI and we believe that clients will compensate us appropriately for the value we deliver in our research as Ralph mentioned, the recent annual institutional Investor Survey results demonstrate our commitment to quality across our research footprint.
I'd like to highlight some more details on our advisory and underwriting businesses.
We continue to be pleased with the results of these businesses and their ongoing momentum.
We finished the nine months ranked fifth globally and first among independents in the league tables for announced transactions based on dollar volume our GAAP relative to other independent firms is substantial.
We are projected to once again increase our market share of advisory revenues among publicly reporting firms on both a trailing 12 month basis and a year to date basis. We currently estimate our year to date market share to be 7.7% relative to 7.1% at the end of the first nine months of 2000.
In 18, and 8.2% for the full year 2018.
We have maintained our number for global ranking in advisory fees on both a trailing 12 month basis and a year to date basis.
Year to date, we advised on four of the five largest global transactions and all five of the largest five transactions.
In the United States. Additionally, we advised on 10 of the 25 largest transactions globally.
One key to the success is our ability to bring the many resources the firm to help our clients to achieve their strategic and capital structure objectives.
Complex transactions, often require both strategic and financing expertise or collaboration across multiple sectors and we've continued to invest expands its expertise.
Three revenues for the quarter were diverse and reflects contributions from multiple sectors and capabilities, including TMT energy financials and capital advisory.
We continue to see significant momentum from our newer industrials and consumer teams.
Additionally, we made further progress this quarter on a number of initiatives focused on increasing penetration with large cap and financial sponsor clients.
Our M&A teams remain busy inactive activism and capital advisory remains strong which has resulted in increased mandates for us.
Our debt advisory and restructuring team and their industry and financial sponsor partners continue to be fully engaged an active in helping companies solve their capital structure challenges.
As the market for these services has evolved we've continued to expand the scope of our capabilities offering a broad range of debtor in creditor advisory services to our clients both in court and very frequently out of court.
Our underwriting business continues to gain momentum and we are encouraged by the scope of the business.
In the third quarter, we were an underwriter on 18 transactions of which we were the Bookrunner on 10.
Our business is increasingly diverse as these transactions that spanned eight different industries.
Equally importantly, we are increasingly active across the capital structure was underwritings and private placements, including.
Equity convertible debt and debt capital raises.
The increase we saw in commissions and related fees in the third quarter reflects both the quality of our product, but also the management team is focused on achieving a return on our investment in the business.
We remain excited about the opportunities in front of us our ability to continue to take market share and our two major businesses and our vision for the from going forward.
I will now turn the call over to Bob to discuss our GAAP results and other financial matters.
Thank you John and good morning.
Beginning with our GAAP results for the third quarter net revenues net income and earnings per share on a GAAP basis were 402.2 million 43.3 million and one dollar and one cents respectively.
For the first nine months net revenues were 1.35 billion a record for the year to date period, just as they were a record on an adjusted basis net income and earnings per share were 192 point threemillion and $4.43 respectively.
Net revenues of 2.3 million was recognized in the third quarter or transactions that closed in the fourth quarter.
Consistent with prior periods, our adjusted results for the quarter exclude certain items that principally due 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 Jay LP units granted in conjunction with the ISI acquisition for the quarter, We Expensed 4.6 million related to these class Jay LP units, our adjusted results for the quarter also excludes special charges of $1 million.
Related to accelerated depreciation for leasehold improvements and point 4 million of acquisition and transition costs turning to other income other revenues were down for the third quarter, but up significantly for the first nine months.
In comparison with 2018.
These changes primarily reflect gains or losses on the exchange traded funds, we use as a hedge for our deferred cash compensation program obligations. This amount will continue to fluctuate in volatile markets.
Looking to non compensation costs Firmwide noncompensation costs were per employee were $46800 for the quarter down 5% from the prior quarter and up 1% on a year over year basis, as Ralph mentioned the increase in non compensation costs.
Principally reflects the addition of office space and related depreciation to accommodate future growth and investments in saw future growth and investments in software targeted at enhancing operating efficiency and the security over the intermediate term.
We had approximately 1900 employees at the end of the third quarter.
Our GAAP tax rate for the quarter was 28% as compared to 22.8% in the same period last year.
The third quarter share count for adjusted earnings per share was 48.1 million shares lower in comparison with the prior quarter, principally driven by share repurchases on a GAAP basis, the share count was 42.8 million shares.
Finally, looking to our financial position, we hold at $304.7 million of cash and 620.1 million of investment Securities at September Thirtyth.
With current assets exceeding current liabilities by approximately $894 million investment securities include funds from our recent debt raise and investing a portion of our minimum cash requirement and requirements for upcoming bonus payments.
With that operator, we'd now like to open the line for questions.
Thank you Sir we will now begin the question answer session.
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Our first question.
It's from the line of Brennan Hawken CBS .
Please proceed.
Good morning, Thanks for taking my questions.
So I understood your comments on the business being a lumpy.
Is what we saw here in the third quarter or just to say a plainly is it similar to what we saw last year right I seem to remember third quarter of 18 timing was also an issue made the quarter look a little bit Soffe now of course, you guys followed that up with a pretty remarkable.
Fourth quarter and finished the year.
So is it similar to that or is there is there something else happening, where we're starting to see a little bit of slowing velocity in the market.
And the timing of deal is getting getting slowed down I'm, just trying to delineate here, whether or not this is normal lumpiness or.
Maybe a little bit of slowdown mixed into thanks, Okay, well I think the.
The M&A date data for the year to date are available to everyone.
Yes, they're off.
Low double digits.
Both in the dollar volume of transactions.
In the number.
Of transactions.
So there's definitely a little bit less activity in the market as a whole.
Evercore.
Continues to take market share.
So the story.
The advisory business I think is very similar to the story that we discussed.
Last year in the first quarter as it pertains to our equity business, where we said that.
The wallet.
That will shrink a little due to method, but we expect because of our the quality of our research.
That our market share will gain so.
I think thats whats happening and with respect to the third quarter specifically.
It's exactly what happened in the third quarter last year.
We had a number of.
Transactions that.
We expected to close.
In the third quarter or.
You know.
Right on the cost.
And.
As I said in my opening remarks.
Those were.
Delayed.
And.
Our.
Have closed or are expected to close.
In the fourth quarter. So it's very much a timing issue as we see it.
And not a serious fundamental change.
In the.
Activity in our primary business.
Okay. Thanks for that Colorado, and then Bob you might have mentioned this.
I could have missed it but what was the the pull forward from October into.
The third quarter.
Revenue this quarter.
2.3 million.
2.3, thanks, so much.
And our next question comes from the lives of Devin Ryan. Please JMP Securities you May proceed.
Great. Good morning, everyone. So my questions over to follow up just on some of that.
Maybe to the overarching kind of use around M&A backdrop, I mean, there's a lot of macro effects. The market's watching right now and you're trying to think about what you guys would maybe point too as a catalyst to either.
Improved activity or what would be bigger concern we have the Brexit situation in Europe .
You have trying to trade deal.
Central election.
Closer here, so I'm curious kind of what the biggest topics are that you're talking to clients about maybe what the factors are there that you think of slowed activity a bit and what could drive maybe.
Reacceleration or changed kind of for the broader backdrop.
Well I think that.
What we have found is that CEO confidence has is down slightly but we found that are dialogues have been.
Every bit as frequent and and robust as they've been in the past and we've we've really found that there continues to be real activity.
To look for growth and Thats, what companies are doing and so.
There is still a real desire from companies to be thinking aggressively about how they move forward and how they grow having said that there are occurrence crosscurrents in the market and I think everyone is aware of them and focused on them and terms of catalyst for activity certainly see.
Something dramatic that happened would slow things down.
Right now what we're seeing in terms of our activity levels is that that things are as as Ralph described which is we feel like the activities are every bit what they were and are our our dialogues and the frequency and the number of dialogues are are where they have been and so.
Our activity levels continued to be.
Strong and we feel like we continue to have a lot of activity that we're serving right now.
The only thing I would add.
One is is that.
You know the.
Yes uncertainty or is obviously the.
The enemy.
M&A and it activity and ultimately advisory.
Revenues and we've had.
Two.
Sources of uncertainty that you identified Brexit and trade they seem to be on the path to resolution and I would point out that and this is building on John's remarks that a slow growth economy is a real good environment for M&A activity because of.
Got it out.
When companies have relatively low organic growth and keep in mind revenues are driven by.
The comp by nominal growth in GDP not.
Inflation adjusted real growth and we're in an environment, where real growth is low and inflation is low so nominal growth is is very low.
Compared to historical levels and that kind of environment as John pointed out causes companies to look for growth Inorganically, which obviously we are a beneficiary.
Got it helpful.
And then just a quick follow up maybe for Bob if possible just any way to get any more context around or quantify.
The level of business that was expected in the third quarter that that ended up slipping into the fourth quarter.
To provide their perfect would be helpful credits from questions on it and.
Whether I guess also you're seeing any deals that were maybe expected in the fourth quarter slipping into the first quarter next year based on.
Same dynamic.
Well clearly on the last question I don't have a clue.
Because its October .
As we said in our remarks there were.
Several.
Larger fees.
That we had expected would close in the third quarter and they did not so.
No I can't give to more than several or large, but hopefully a good run with it.
I will try thanks, Bob.
Yeah.
And our next question comes from the Lion Steven.
You bet.
With Wolfe Research you May proceed.
Good morning.
So looking at the results through the first nine months. Despite mid single digit revenue growth. Some of the share gains you cited the operating margin did contract about 160 Bips I recognize there are some investments you're making a non comps in new personnel I was hoping you can speak to your philosophy around.
Commitment to managing profitability, while continuing to invest and in particular, we're getting a bunch of questions on how to think about on the handicapping are managing the risk of deferral headwinds if the environment softens further.
Okay, Let me.
Take a crack at that.
First of all when do you have.
We've said consistently on these calls for the last 10 years, plus hers, Roger and I am now John and I.
That we will continue to invest.
The to create.
Long term value in our.
The per share value of the company.
And.
We intend to do that.
Yes.
Through.
Good environments and more challenging environments, because ultimately that's what we'll create the greatest per share value, which is the only thing we focus on.
Over the intermediate.
To longer term.
So.
We are in an environment where.
Topline revenues have grown.
More slowly.
We've had to.
Make investments in.
Both.
Space in technology to accommodate at the.
The investments that we are making.
And.
I think what we've always said is that.
In.
In reasonably good environments, we expect to be able to to manage this business in a way that the margins.
In the.
The mid Twentys.
And.
Thats for full year is obviously not for.
Part years and weaker environments, obviously it will be.
Somewhat lower than that in and strong environments. As we had last year when advisory revenues grew 32%.
We were right as I believe 28%.
North of 28.
Percent so.
Obviously, we're not immune.
From.
Lesser activity in either of our businesses.
But.
As as I said at the beginning of.
In response to Brennan's question, we do.
See that we are.
Continuing.
To take market share and certainly.
The long term per share value of the company.
Is the growth of that is is predicated on us continuing.
To invest.
In talent.
Our business. So we will continue to do that.
It's also true that.
When you have a.
It's it's taught a logical that when you have a consistent.
Deferral policy, which we've had over the last many years.
And you have a growing business, it's taught a logical that the amount of deferral.
In each subsequent year.
Grows a little bit.
We certainly.
Do have that.
Phenomenon here.
I don't know Bob if you want to add anything no.
Okay very helpful color, Ralph and just one follow up for me I think we previously you had alluded to an expectation that on there could be lumpiness and individual quarters, but that revenues should there be higher in 19 versus 18, recognizing it has been a softer environment can you update.
Yes, and your confidence that you should still be able to deliver on that objective well first on virtually certain I never said that and so therefore I'm not going to provide an update on something I never said.
Okay, I guess, we innovate that later on but thanks for taking my questions Ralph Okay.
Our next question comes from the line of Michael Brown with KBW. Please proceed.
Hi, good morning, guys.
Morning.
I just wanted to.
A follow up on the timing related issues this quarter.
Can you just kind of speak to what the factors where that drove drove some of the timing issues. There was it just kind of the market volatility.
Some of the market dislocations that we saw during the quarter.
I'm really as you would anticipate each was be spoken unique to the.
Transaction.
Ranging from.
Factors precedent to to closing public deals.
To private companies prioritizing transactions versus other other actions they were taking so.
Each was bespoke nothing systemic and as we've always said.
This businesses lumpy so in any normal period, there will be transactions that that do.
Spanned over a quarter just because of the lumpiness of the business and really the timing in which they fall and so it's always going to be the case that that that there's going to be an even assess to how some of the big closings happening.
Okay, Great and then the incremental senior note borrowing this quarter can you just give us some additional color as to how that will views. So I understand it's mainly for investments spend but can you just give us some color as to where where that spend will go towards.
Particularly on the tech side and then.
This is also imply a bit of a shift in the capital return strategy. When you take out 5% of shares year over year is there potential for that continue or even accelerate from here.
I'll, let I'll, let Rob Ralph respond to we're not going to use borrowings to change the capital return strategy, but.
In terms of the deployment of the funds as we've been talking about really all year.
Made significant and are making significant investments in the expansion of facilities.
To accommodate growth in personnel.
Most significantly in New York City, but in Houston, Menlo Park and other cities in both the United States and in Europe .
And in terms of technology, we're working on.
A number of projects to enhance the efficiency of that business.
From analytic tools for our most senior bankers to.
Enable them to provide advice to clients on a on a more accelerated bases to tools that make our younger people more efficient so a range of technology projects.
Yes.
I would say that.
You can.
Look at the first nine months of the year.
See a continuation of our capital return strategy historically.
Weve.
Ended two.
Hey out.
Either in the form of dividends or share repurchases.
And amount at least equal to our net income we didn't do that I think last year, because we funded some.
Investments, including the.
The year end purchase of.
Of our.
Part of art.
Wealth management business and our private capital advisory.
Business, which we now on 75 and 100% up.
But as a general matter.
It has been our policy too.
To return at least.
What we make in adjusted reported.
Net income we've done that as well for the first.
Nine months of the year.
And we expect that to continue to be our our policy absent some inorganic investment, which we don't really anticipate.
Which would you be us use of cash.
Okay, great. Thank you for taking my questions.
And our next question comes from the line of Jim Mitchell.
Buckingham Research you May proceed.
Okay. Thanks, Good morning, maybe just.
Discussion around SMB head count.
I think over the last less than two years, you're up 28%.
Every business.
That's a lot of new Smbs can you talk to that's still in terms of the distribution I think in your presentation you talk to how 19% of current Smbs are outside of strategic M&A is that.
The distribution of as Smbs, becoming more and more outside of strategic M&A and maybe you can describe some of the areas, where that's going or are we still seeing opportunities across the board. Thanks.
I would say that if you if you look back.
Five or seven years ago, we.
Would have had a smaller portion portion of.
Our SM these in the advisory business outside of industry groups.
Or a smaller proportion in what we might consider product capabilities that we do have today.
But I would.
We expect that.
Over the last couple of years that probably hasn't changed very.
Very much and I would not expect that it would change.
Tremendously in the future I, often say that.
We are in every business that large firms are in.
Where are you.
Compete.
Solely on the basis of ideas intellectual capital and relationships and the only source of revenue is fees.
And to the best of our knowledge we're in.
All are almost all of those businesses.
That are not industry coverage today. So we have debt advisory we've always had a restructuring business. We have equity capital markets Advisory we have hedging advisory we have tax we have activists defense.
The person were adding early next year is a specialist in.
Corporate.
Restructuring as opposed to financial.
Restructuring split spins Mars Trust reverse Morris Trust et cetera.
But.
With that addition.
I think where.
Unless John you have a different view.
He filled up in terms of our.
Our product for expertise capabilities I completely agree with Ralph and I would just.
State that if you really look at how Weve grown our SMB you can look at the consumer retail group.
The industrial group, which Weve recently over the last three years or so grown substantially the new addition to adding.
An SMB in Israel. Those are all production areas. Those were all M&A advisory type situations and if you really if you really look at the activity and and our deal flow you'll see that those that those those partners and those groups have begun to generate real activity and revenue.
For us and so we've we've continued to invest in the areas, where we are advising clients and were able to execute transactions. So Ralph absolutely right in in terms of the fact that we have thought about the content businesses and making sure that we have the content and the service.
Really provide a balanced diverse set of of advice for our clients. But also we continue to be very focused on adding people, who can get right to the industry sectors and actually give direct advice on M&A.
I would add one other thing that.
The.
Uptick in the.
Growth in the number of senior managing directors.
Is driven more by internal promotions than it is by.
External hires we've been pretty consistent over the years in hiring.
Four to seven.
External smbs this year as I indicated we we hired seven in the advisory business.
But the last two years, we've had I believe it was eight and seven.
Internal.
Promotions, which is.
Quite a bit higher than we've averaged over the years before that and those of course don't have the same.
Impact on investment.
Dollars.
That the external hires.
Jim It's Bob just just to make sure.
We are clear on the point, though as you look at the teams in terms of capabilities.
There's significant opportunity to expand our footprint.
Across all of those we've invested significantly in restructuring we're seeing this the results of those investments and.
Im confident of Ralph for John found several more exceptionally talented restructuring bankers.
We'd be looking for an office for them.
Right.
I think.
The question again, a lot from investors is.
Thanks, John mentioned in terms of the balance is there any way to help us think about.
Within the strategic advisory revenue.
How much is sort of some of these non traditional restructuring.
Markets advisory to think about the size of that business relative to though.
We've never broken that out we have given you head count.
As a means to think about that.
Productivity is staying reasonably constant.
Across the different environments and.
Jim as you know and as we've talked about with investors for all these years.
Our approach to serving clients is teams.
Bring together coverage steam sector, James Almond specialists to work together to.
To meet the business needs. So we don't spend time.
Tracking our restructuring number a debt advisory number.
We want everyone to work together to not break it into pieces. So the number of heads we've given you as a good proxy for that with productivity being constant and again, there's there's opportunity to grow those capabilities right in parallel as we grow our sector and coverage teams.
Okay. Thanks for taking my questions.
Our next question comes from the line of Jeff Harte with Sandler O'neill, Sir you May proceed.
Hey, Good morning, guys. A couple from me one you commented a few times about the backlog remaining strong can you give us any color on where the backlog stands kind of to where it has been and the relative pass because the the visible pipeline. We can look at it looks like it slowed so.
Yes.
I will repeat what we said John said the backlog remains strong.
We.
We.
Very consciously resist.
Pointing out ups and downs.
The only thing I will say is that we track a number of things.
Our.
These risks backlog, which is the value of.
If everything that we were working on.
Would happen.
The risks backlog, which assigns a probability to each one of those matters.
Which.
It sounds I know I think I've said this before when I first came here I thought the myself and probably articulated publicly that.
We're in a business, where things happen or don't happen. So at 20, 550% probability on something.
Doesn't.
Our.
If you add them all up doesn't seem to make a whole lot of sense, but it tends to be a pretty good.
Predictor of future activity.
And then of course, the most leading indicator indicators that we track our.
New engagement letters.
And the most leading his new conflict clearances.
Those are all.
Remained strong.
Okay and secondly.
Just on deal size I mean, you guys have been really killing it on mega deals, especially to any other non bulge bracket player.
But when we look at your market share ranking kind of that 1 billion to 10 billion dollar size transaction bucket.
It's been stickier and kind of sitting in the in the mid teens.
Can you talk a bit to how important is improving the market share in that kind of 1 billion to $10 billion bucket is to the next leg up and revenue growth for you guys.
Well.
We clearly are investing time and effort in making sure that we cover companies that are going to be in that zone with respect to deal size and we've spent a lot of time, making sure that we cover the companies in a comprehensive way that we're giving them advice that we're thinking about strategy with them and so we cleared.
We are focused on it and.
Goes with the implication for your question. We do believe that's important so we are definitely in investing time and effort on that and clearly we would very much like to continue to grow our business in that category.
With respect to the large deals we feel we feel very fortunate and happy about where we've been on those there is absolutely no way to predict that you will continue to be able to do that other than the fact that we think the quality of our calling efforts and the quality of our relationships continue to improve we spend more time on it.
Spend more effort on it and ice we believe that we are making progress and so.
Your questions well taken and we're very much focused on it.
Okay. Thank you.
There appears to be no questions at this time I would now like to turn the floor.
Ralph slashed for any closing comments.
Thank you all for being on board and we very much look for it to.
Seeing or hearing you and.
Talking to you on the fourth quarter call. Thanks very much.
This concludes today's Evercore third quarter 2019 financial results Conference call you may now disconnect.