Q4 2019 Earnings Call
Good morning, ladies and gentlemen, thank you first any bye.
Them to the Evercore fourth quarter full year 2019 financial results conference call.
In today's presentation, all parties will be in listen only mode.
Following the presentation. The conference call will be open for question. If you have a question. Please press the star followed by the one on your Touchtone telephone.
Please press star zero for operators systems at any time.
Just for participants you can speak your equipment it may be necessary to pick up your handset before making your selection. This conference call is being recorded today Wednesday January 29, 2020, I would now like to turn the conference over to your host Evercores head of Investor Relations Halle Miller. Please go ahead ma'am.
Thank you Sonia good morning, and thanks for joining us today for Evercores fourth quarter and full year 2019 financial result pumping.
And how they know they're never quite head of investor relation.
Joining me on the call today around something I, President and CEO , John Weinberg, our executive Chairman and Bob Walsh, our CFO . After our prepared remarks, we will open up the call her question.
Earlier today, we issued a press release announcing evercores fourth quarter and full year 2019 financial recall.
The company's discussion of our results today is complementary to the press release, which is available on our website evercore.
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 one hour after the completion of this call.
Want to point out that during the course of this conference call. We may make a number of forward looking statements.
Forward looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially note indicated in these statements.
That does include but are not limited to those just asked in airports filings with the FCC, including our annual report on Form 10-K quarterly reports on Form 10-Q inherent effect on form 8-K.
I want to remind you the companies and no duty to update any forward looking statement.
In our presentation today, unless otherwise indicated we'll be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance for detailed disclosure on these measures and the Gatland affiliation you should refer to the financial data contained within our press release, which is posted on our website.
We continue to believe that is important to evaluate evercore is performing on an annual basis.
As we've noted previously a result for any particular quarter are influenced by the timing of transaction closed.
I'll now turn the call over there.
Thank you very much Ali and good morning.
2019 was a successful year for Evercore in many important strategic respect.
We served our clients with distinction in all of our businesses generated revenues in excess of $2 billion for the second consecutive year.
Second best year in our firm's history.
As John will describe in his remarks, our position in the M&A League tables has never been stronger.
Versus our independent from competitors and among all firms.
We maintained our position of number four in global advisory revenues and we believe that we again.
And market share among all publicly traded investment banking firms.
Not all firms have reported yet.
But based on consensus estimates, we projected our market share of advisory revenues increased from 8.2% in 2080.
8.4% in 29.
Our underwriting revenues grew by 25% to a record $89.7 billion and we were a book runner on a much higher percentage of our underwriting assignments.
While our secondary revenues were down about 5%.
We anticipate again that our market share grew in this business as well and we maintained our top rank among independent firms in the institutional Investor Annual survey, placing second on a weighted basis among all firms.
And we increased assets under management at Evercore wealth management by approximately 20% to a little over $9 billion.
We continue to invest in our future growth.
Adding more senior talent to our team that at any point in our history in 2019, an advisory we recruited seven senior managing directors promoted seven managing directors to senior managing director.
We also added significantly at the managing director level, providing essential operating leverage for senior managing directors and broadening the pool of talent that can be promoted to SMB, our advisory business in future years.
Our equities team added research coverage in consumer food information technology, and the public policy sector, and we built our future leadership team in this business and in wealth management, we began the transition to the next generation of leadership with the announcement of a new CEO for that business.
Our investments were not limited to investing in people. We also expanded our facilities and added materially to the technology required to sustain our operations at a larger scale.
We raised approximately $206 million in the third quarter in the private debt markets to finance these and other investments.
In summary, our brand and our market position and advisory equities add wealth management has never been stronger.
However, while our branded market position have never been stronger our revenues were down, 2%, which while better than many of our larger competitors was nonetheless disappointing to us.
As we said on our last earnings call, we experienced delays in the closing of advisory transactions in the third quarter and this trend continued into the fourth quarter affecting our fourth quarter and full year financial performance.
Let me now briefly talk about our financial performance.
On a full year basis, adjusted net revenues of 2.03 billion declined 2% versus 2018.
Advisory fees of 1.65 billion for the full year declined 5% compared to 2018.
While the M&A market remains active the number of deals declined globally by 7% last year and transactions generally took longer to close both of which contributed to our modestly lower advisory fees.
SCM continued its momentum with an 89.7 million of underwriting fees for the full year, an increase of 25% compared to 2018 and another record for the firm.
Commissions and related fees of 189.5 million for the full year declined 5% versus 2018, although we anticipate we again gained market share in this business.
Asset management and administration fees from our consolidated businesses were $60.7 million in 2019, an increase of 6% versus 2018.
Our full year compensation ratio was 58.2% as delays in anticipated advisory fees and our significant investment in talent.
Drain the compensation leverage that we typically have realized in previous fourth quarters.
Compensation costs were 351.3 million up 13%. This increase reflects continued investments to support growth over the long term, particularly in additional space and technology and higher expenses associated with increased headcount.
Adjusted operating income and adjusted net income of 498.5 million at 373.3 million declined 16 at 18%, respectively and adjusted earnings per share were $7.70 down 15% versus 2018.
Despite these declines 2019 was our second best year in our history in virtually all of these firm wide financial metrics.
Our 2019, adjusted operating margin was 24.5% and Bob will speak more about that.
We remain focused on returning capital to our shareholders have returned $391.6 million to shareholders through dividends and repurchases 3.4 million shares at an average price of 83.2 $8.
Our adjusted weighted average share count for the year declined 4% relative to 2018. The result of our ongoing buyback activity. It was our fourth straight year of reducing our share count and also I would point out that again we.
Delivered to return to shareholders more than our reported net income.
For the quarter adjusted net income was $130.1 million at adjusted earnings per share were $2.72 in each case, the second strongest quarter in our history.
In response to these financial results, we have undertaken an initiative to ensure that our resources are focused on our greatest growth opportunities and that our entire team as is performing at the high standards that we and our clients expect we began this initiative at the end of 2019.
Identifying markets sectors and people that.
That exhibited at productivity below our expectations, we are reducing our commitment to those areas redeploying personnel, where feasible and realigning certain operations to better position the firm for future growth.
We anticipate that this realignment will affect our 2019 headcount by approximately 6%.
We also continue to manage our non compensation expense as aggressively as it is our objective to achieve operating margins of 25% are greater in market like these in markets like these.
All of which we felt modestly short and 2090.
Bob will have more on this in his remarks.
After this realignment, we believed that our farm is well position to capitalize on whatever opportunities the markets offer in the future.
After the completion of our realignment initiative, we will have a 112 advisory smbs, including seven Smbs, who were just promoted in our advisory business. This month and Joe Todd who joined US from Goldman Sachs in early January .
We have a total of 14 advisory Smbs, who have been promoted in 2019, and 2020 and 16 advisory SMB recruits who have been with us for less than two years a record number of 30 advisory Smbs, who are still in their ramp up phase.
We believe this augurs well for our future growth.
We also have a deeper bench of Mds, who will be considered for promotion in the coming years, and we're still seeing opportunities to add additional advisory smbs and sectors geographies and capabilities, which we still have growth opportunities.
In in advisory we now have the right team on the field, which we believe will facilitate continued growth in market share in coming years, our strong backlog at year end support this view.
And finally, we also have the right team in place in our equities business and we believe that selective additions to our research platform and support future market share gains.
Our equity underwriting business, and an equity commissions and related fees at Evercore ISI.
Let me now turn the call over to John to discuss the current market environment and to comment further on our investment banking business.
Thanks Ralph.
The market environment in 2019 was broadly constructive for our business.
Global M&A volumes and transaction count declined longer view shows a fairly stable market as the fundamental drivers of M&A activity strong equity valuations readily available credit substantial activities engagement with corporates and disruption of traditional industries remain in place.
Men for restructuring and more broadly debt advisory advice remained elevated as a comment that give credit markets are driving higher levels of financial leverage.
Growing companies and investment funds continue to need capital raised both in the public and private market.
The cash equities business remain challenged as clients continue to consolidate their research providers reduce the volume of research they consume and refine both their method and level of payment.
Volatility was lower than we experienced in 2018 further constraining our clients kopin capacity to pay for research.
As we begin 2020, we see these trends continuing.
And there is room for some improvement has.
Dialogue regarding strategic matters remains high activism continues to be a catalyst for change financial leverage continues to increase while default rates remain low and the need for capital to drive growth company.
As I prepared my remarks for this morning reflected on our investment banking performance for 2019.
In summary, I'd say our performance was good in many respects in some cases very good we're never satisfied and we continue to have high expectation for our performance.
Among them independent firms for the first time, we were number one both globally and in the United States by volume of announced transactions in fact.
Dollar volume of our announced M&A transactions more than the total volume of the next three independent firms combine both globally and in the U.S.
Among all firms we were number six globally and number four in the U.S., our hyatt position ever.
We advised on a large number of the most prominent M&A spin off and re restructuring and activists assignment of the year, including seven of the 10 largest global M&A transactions and all of the five largest U.S.
Transaction.
Demand for our activism and our capital advisory businesses remain strong.
We advise clients on five at the eighth largest U.S. activism and Hustler campaign in 2019.
Our capital Advisory business had a very strong year working with several of our top tier GPS and it with a meaningful year from a volume perspective.
Our debt advisory and restructuring team continue to engage with companies looking to address their capital structure challenges, we've expanded the scope of our capabilities as the market has evolved.
Today, our platform has a broad array of debtor and increasingly more creditor advisory services that can serve our clients both in court and more frequently out of court.
Our underwriting business achieved another record revenue year, we're pleased with the breadth and diversity of the business of the nine sectors. We cover eight of them experienced growth in revenues. In 2019 also in 2019 were an underwriter on 71 transaction an increase of more than 40%.
From 2018, we were the Bookrunner on 53 of those transactions.
Ralph mentioned, our 2019 advisory recruit and promote earlier.
These talented individuals improve our coverage in technology metals, and mining real estate financial sponsors and retail and expand our global presence, including a new office in Israel.
With our recent 2020 promotions and advisory we're continuing to position the firm to best address markets with strong growth opportunities. These additional promotion strengthen our coverage of technology financial sponsors and fig and in our capabilities in restructuring and capital advisory.
We remain enthusiastic about our ability to continue to take market share and our strategy to deliberately invest in sectors geography and capabilities with the most attractive growth opportunities.
Let me now turn the call over to Bob to discuss our GAAP results and other financial matters.
Thank you John .
As Ralph commented earlier, we expect to generate reductions of approximately 6% of our 2019 year end headcount.
Principally in the first quarter of this year, we anticipate that these actions will result in charges on a GAAP basis of approximately $38 million a portion of which has been recognized in the fourth quarter of 29 team. The timing of these charges will ultimately depend on the final dates of departure, we plan to exclude these costs below.
Our adjusted results.
In addition, we're exploring restructuring all operations in certain smaller markets. These restructurings could result in additional charges and 2020 if pursued to completion finally be above estimate as of course based on a number of assumptions actual results may differ materially and as I noted additional charges may occur.
Turning to our GAAP results were 2019 that revenues net income and EPS on a GAAP basis were 2.297 billion and $6.89 respectively.
For the fourth quarter net revenues net income and earnings per share on a GAAP basis were 660 million 105 million and $2.48 respectively.
Net revenues of approximately $34 million were recognized in the fourth quarter for transactions that ultimately closed in the first quarter of 2020 .
Our adjusted results exclude certain items that relate to our acquisitions and dispositions, including the full share count associated with those acquisitions as well as costs, resulting from the execution of our realignment plan during the quarter.
Specifically, we adjusted for costs associated with divesting of the class Ajay LP units granted in conjunction with the ISI acquisition for the quarter, we expensed $5.8 million related to these units, bringing the full year charge to approximately $18 million.
Our adjusted results for the quarter also exclude special charges of 1.3 million related to accelerated depreciation for leasehold improvements and 2.9 million related to the impairment of goodwill in the institutional asset management reporting unit.
Additionally, in conjunction with the plan the company recorded a special charge of 2.9 million in the fourth quarter related to separation benefits and the acceleration of deferred compensation for the full year special charges were approximately $10 million.
Looking at other income full year and fourth quarter other revenues increased significantly compared to 2018. The increase primarily reflects gains on the investment fund portfolio, which is used as a hedge for our deferred cash compensation program obligations.
As we've mentioned before this amount fluctuates as the market values change.
Looking at non compensation costs firmwide non compensation costs, our employee were approximately $194000 for 2019 up 2% compared with 2018 and for the fourth quarter. These costs per employee who are approximately $51000.
Which would be up 1% on a year over year basis.
The fourth quarter results were impacted by reserves for prior year receivables of approximately $8 million an unprecedented amount. When these reserves are excluded the fourth quarter non compensation costs per employee who approximately $47000.
As Ralph indicated we are looking.
Carefully and aggressively at Noncompensation expenses with the goal of achieving improved operating leverage.
Taxes on a GAAP basis for the full year.
It was 21.2% compared with a tax rate of 19.7% in 2018, our fourth quarter 2019, GAAP tax rate was 41.7% compared to 23.9% one year ago.
The share count on a GAAP basis was 43.2 million shares for the full year and 42.5 million shares for the fourth quarter, our full year share count for adjusted earnings per share was 48.5 million and for the fourth quarter was 47.8 million down versus.
Both comparable periods as Ralph mentioned.
Finally, with regard to our financial position, we hold approximately $634 million of cash and 624 million of investment securities at the end of year with current assets exceeding current liabilities by approximately $1 billion.
Investment Securities include funds from our third quarter debt raise.
As well as holding a portion of our minimum cash requirements and funds for upcoming bonus obligations.
With those remarks, Don will now open the call for questions.
Thank you Sir you will now begin the question answer session. As a reminder, if you have a question. Please press the star I like I said, one key I know Touchtone telephone if you would like to withdraw your question press the pound key.
If you're using this speaker equipment, you may need to lift the handset before making your selection.
Our first question is from the line of manner failure of Morgan Stanley . Your line is that open.
Hi, good morning.
Can you give us some more color on any of the south and hot indicate as for M&A activity that you've spoken to Rob before.
You've spoken about like the frequency dialogue with flying Sariska Nonres backlog.
The new engagement levels et cetera. So.
You can provide a little color on that and also if you can provide color on.
Whether these metrics defar for large deals with us as midsized sales.
Yes.
They're all strong.
We obviously.
I.
I would tell you if they weren't.
And.
The Theres really no.
Bias in.
Large deals small deals.
But as I said in my opening remarks, we think were.
Very well positioned to take advantage.
What.
As has generally certainly historically been a good M&A environment.
And.
Certainly our.
Unrisk backlog our risk backlog are.
New engagement letter sign and new conflicts clearances.
I would all support that view.
I would just say that that as our profit our backlog remains strong and it and as we look at the quality of the dialogue that we're seeing with our clients both geographically and also sector by sector, we really don't see any impairment at all with respect to those dialogues and.
The market and so what we are looking at right now is that.
A strong a strong level of activity and dialogues that would truly support that so we are we're feeling like this is going along as one would want.
Got it.
And also just the the areas where you are restructuring.
In the markets or industries, where youre doing your own internal restructuring.
How is that spread between.
Advisory underwriting and trading and would you be able to provide us with maybe the revenues and expenses associated with that restructuring activity.
Let me talk about the.
Restructuring activity and.
As it was basically focused as I said in my opening remarks on.
Areas, where we were getting a subpar contribution.
To our margins.
We're where we felt that the future growth opportunities.
Where.
Less.
And what we would hope for.
And then of course as we always do.
We also focused on.
Individuals who are not performing.
Up to our.
Expectations.
The adjustments.
Occurred.
In all of our.
Major businesses.
Certainly we're not concentrated in one or the other of those.
And.
I'll, let first John add anything if he wants and let Bob talked about the money.
Yes, what I would just like that as this was really an opportunity to realign our focus and our resources on the places where we think there is real growth going forward and we see great growth and really because of that we decided we really needed to make sure that we were actually putting.
Our full intellectual focus as well as our capital.
Side by side with those opportunities and so that was really what this was about.
In a in a very real way so it's about making sure that we're investing in the areas and the sectors that really have that growth and also that there were there were places where employees were not as strong.
Where we could actually.
Back from those people and then reinvest in others and growth in the areas, where we think we go forward. So it was really a realignment and a reinvestment in the release strong growth areas.
Yes.
As Ralph and John at both emphasized a key factor in the thought process here was was looking at productivity.
Both current and future prospects so.
Well.
There isn't any meaningful way to say, what a revenue number would be.
Implicitly.
We're not this was not the place where the significant revenue generation is occurring it's the opposite but in terms of the cost we think.
We currently estimate the cost of separating.
About $38 million.
Got it I was I was thinking more about the ongoing cost.
That would be any our annual adjusted earnings.
Well, we will with the cost here heavily influenced by compensation I won't say exclusively because we've always said heads drive non comps.
Yes, this is going to give us.
The flexibility we need to run the business and get the margins were looking for in 2020 .
Yes, we don't.
Set what our expectations are for a comp ratio for 2020.
In January that's something we work hard on over the next couple of months.
But it's designed to get us back to the operating margins as Ralph said.
Of 25% or better in a market like this so we're going to a key piece of that has to be the comp ratio for next year you should.
Certainly assumed that the actions that we've taken.
We were on low no negative margin business.
Got it Thats helpful. Thank you.
Thank you and your next question comes from Devin Ryan of JMP Securities. Your line is open.
Hi, Thanks, this is Brian but kind of for Devon.
Are you highlighted that some deal completions got pushed to 2020 and you also flagged a similar dynamic last quarter. So I'm curious if there if there are any underlying themes going on here. Yeah. I was it more of a broader industry dynamic or is it just a couple of large larger one off deals that got pushed.
Thank you.
Talk to it.
Good number of our bankers or their counterparts in both.
Our independent from competitors and large from competitors.
They would generally say to you.
That things are just a little bit harder to get done.
Or to get.
Finished in.
A short period of time than they were before.
And there.
There's all sorts of factors that contribute to that in some cases as regulatory in some cases, the financing is a little more challenging in some cases.
The.
Yes.
Performance of the business drift, a little bit which causes a discussion about.
Pricing and risk so.
As we said on the third quarter. So far the very good news is that none of these are okay. We give up let's throw it in the trashcan, they're just taking longer.
And.
We saw that phenomenon.
Continue.
In the fourth quarter, and certainly we havent seen a reversal of that as we sit here today my observation would be that Theyre actually is no real underlying theme other than.
As we go to close every one of these things it just seems to take longer and there is no real reason other than thing just our strung out more and maybe that is to do with when markets are really flying people move faster at the end, but we don't see any underlying theme.
I think also if you look at some of the larger transactions.
They often require regulatory approval in.
20, 530, 30 540 markets.
And that just takes a little on.
Got it helpful. And then I believe you said advisory SMB headcount stead stand at 112, which is up from I believe 98 at the end of 2018.
No hiring an internal promotions are more idiosyncratic, but what are your expectations for SMB growth over the intermediate term I can you just give us an update on where are you still see white space to expand into.
Well we have.
Yeah.
Lots of.
White space.
We have white space in Europe .
Typically on the continent and in some important industries.
We have I.
Yes, I would much I'd call white space by Great space, we have.
Sectors, where the opportunity is very high and we if we could find them, we would add an SMB or to software as a good example of that we now to software Smbs, there's 750 companies with market.
Cash in excess of half a billion dollars in the software industry. That's just the public companies.
No.
Obviously with two folks were not covering them with the intensity each of them with the intensity that we might like.
To have so there's plenty of opportunity for us.
You look back over the last few years.
We've hired four to seven Snps externally, we've hired one already Joe Todd.
And the only thing I would say is.
We will continue to have a.
Very high bar for our external hires because each year.
As I described in my opening remarks.
We have a.
More internally promoted talent and a stronger bench.
That is.
Our candidates for promotions in future years the.
As as as we've talked about before one of the places that we really see growth and find growth is when we hire talented people who are ramping up and we have 30 SMB in various stages of ramping up right now so we see real growth. There. In addition, with respect to white space we.
We see opportunity in restructuring, where we can continue to grow we certainly have opportunity to grow and how we cover sponsors and really how we leverage our franchise with respect to the sponsor business and as you all know theres a tremendous amount of.
Of dry powder with the sponsors and we're continuing to intensify our coverage there and improve those relationships.
Equity capital markets as you've seen has been of growth area for us. We think that we're just scratching the surface in terms of how we can grow that business that advisory. We continued looked at more content that we're bringing bringing on Joe Todd is really allowing us to continue to two to improve our corporate finance content as we give advice to clients.
And we really feel like there across the board with all the different new industry sectors that we built whether its industrial or whether its consumer we're just getting into covering that the bigger and more active companies and so we feel like our client franchise is also creating some real growth in lift for us.
Thank you guys.
Thank you and then next question comes from at Cone of Autonomous Research. Your line is now thanks.
Hey, good morning, guys.
So thank you for taking the question I just had one more on the M&A outlook I. So recently, we haven't seen the same level a big ticket M&A activity in the U.S. and I'm just curious based on your conversations with clients why there it's late cycle fears election risk.
Or maybe a lack of willingness to increase leverage that might be halting this type of activity.
In terms of our out of our our dialogue and our discussions.
Thank you.
[noise] that there is anything other than people are watching and looking and trying to decide what the right strategic moves are clearly the environment ahead is somewhat more uncertain benefit in the past we have a presidential election coming up.
With clearly does create uncertainty and also there's there's trade uncertainty and there are many other aspects that we would look at.
I would say that that's not stopping the quality dialogues and even the size of the transactions that are being discussed.
So from our perspective, we just see those kinds of transactions as a matter of time I'm not.
Your observation that certainly right in that there aren't any really large transactions that have happened very recently, although we definitely see that there. There are discussions that are taking place that are those kinds of of transactions in those has the dialogue. So from our perspective, there maybe some more uncertainty as you look at the way this year plays out because.
Some of that Zogenix factors, but we don't see that really.
Getting in the way of the strategic satellites that are creek that are that companies are looking at in terms of consolidating and growing.
Awesome. Thank you and then one more just on the recruiting outlook as you guys kind of shuffle your talent base here.
So we've seen a good amount of crush regarding the depressed bonus pools at the IB divisions of the European Bulge brackets.
And I'm just curious as you look to to fill that white space that you've mentioned if you see on a specific opportunities that you want highlight.
I'm not sure we would have reduced on this call is that Steve.
Okay.
I'd say.
We're constantly in dialogue, we're always looking for a plus talent.
To that to the extent that people.
Meet our standard for for productivity and quality and and.
Valued.
We're we would we talk to them and I think we're really as we always have been and continue to be arc.
The open and able to recruit hi talent, when when and if they become available.
Awesome guys. Thanks, Thanks for the time.
Thank you and our next question comes from Michael Brown of KBW. Your line is now open.
Hi, good morning.
So just wanted to start on the advisory revenues.
So clearly a.
Good result, this quarter.
Just wanted to check was there really any impact from revenue recognition this quarter.
And.
Also is there kind of a greater contribution from the non non traditional M&A advisory mandate you guys had kind of talked about the strength and debt advisory restructuring capital Advisory. So has the contribution from those.
Area has been increasing in recent quarters and kind of can you just remind us what the contribution is from that non traditional M&A.
Out of the business.
So the accounting driven pull forward was 34 approximately $34 million for the quarter.
We've never disclosed a mix.
Of the different of revenue contributed by the different capabilities because much of our philosophy as about bringing teams together in serving the client as best as best as the client needs.
You know clearly overtime as we have.
Invested in these capabilities, whether its underwriting or restructuring that advisory.
They have made a greater contribution but in the quarter. There's nothing I would highlight really all of the businesses.
Contributed quite strongly as Ralph noted, it's the second best quarter, you sort of need everything working and just to be clear that our goal here is not the opposite skate.
It's just the fact that in any given quarter or even any given year.
Certain.
Type so.
Product capabilities might.
Either tick up for tick down.
And also.
The lines between.
Some of the things that we do with clients.
Our not.
Clearly delineated.
For for example, we have clients that.
Yeah.
May be reasonably Levered company for whom we might be doing M&A.
Debt advisory equity capital markets Advisory may be doing in underwriting and perhaps doing some restructuring.
And so we look at that as a client with a bunch of different revenue advisory revenues. We don't this aggregate those into five different product bucket.
So it's not that we're trying that.
The opposite skating, it's just that it doesn't really work.
Great I appreciate the color on that.
In Europe , obviously, we've seen kind of the activity improving over the last couple of months and more certainty following Brexit certainly seems to be helping the region.
I appreciate the color on kind of what you're seeing kind of your outlook for 2020, there and.
You mentioned, some white space potential to add in their European franchise can you remind us of what your recent expansionary investments have been in the region, maybe over the past couple of years and.
You know how that translates into potential growth going forward.
So first of all.
This is just.
Fact based statement if you look at the three larger global independent firms.
Evercore.
Lazard Rothschild.
Evercore was born in the U.S. Lustgarten Rothchild were born in Europe .
And I think it's safe to say that.
My strong suspicion would be all than none of Us report.
Revenue advisory revenues by region that our advisory revenues relative to the two of them would be stronger.
In the United States, and North America, and their advisory revenues would be stronger than ours.
In Europe , I think thats it.
College.
We've been among the independent U.S. firms are those that were born in the U.S.
We're virtually certain that we have by far the largest.
Advisory business in Europe and.
But still it is my guess would be considerably.
More than Lazard.
And rothschild's.
We have offices in London and in Frankfurt, we have a small office and.
Madrid, which is really an extension of our utilities and infrastructure team.
So they are obvious places.
What we could.
Expand but wholly dependent 100% dependent as John indicated earlier on finding the right people.
And.
Our approach has always been to hiring if we can't find at eight plus or in a we wait.
So.
We bid on this call five years ago, and you asked as what are the opportunities in Europe . We would have said some of the same thing.
And well look there are important sectors in Europe .
The telecom sector.
Yes.
Continental based banking banks that we we don't have.
Deep expertise inside the firm.
At the moment, so they are clear opportunities there.
It's all.
You know tied to.
Finding the right people.
We've never been affirm that just says.
We need an office in Paris over and over one and less by divestitures.
Great. Thank you I appreciate the color just one last one if I could squeeze one.
So how is kind of the competition for hiring Ben is are you kind of seeing that its.
Becoming a little bit more expensive to entice bankers to join given kind of the competitive landscape out there.
Not really I mean, I think that we have it.
You know if you look at compensation this year in the larger firms.
Which is where.
Most of our external hires come from.
It was.
Generally.
Down somewhat maybe the best people were flat.
So I Wouldnt say that.
They become more expensive and then John and I have a big advantage.
When we're talking to people who are considering the independent for our model and.
That is because of.
The breadth of capabilities that we have.
Which we've talked about at various points on this call.
We can.
In arguably sit in front of any.
Recruit.
And say if you're interested in the independent for our model you can do more business and more revenue with your clients at Evercore. Then you can it any other independent firm.
And we won't go through the litany of things, we can do again, but.
That gets no pushback.
From anyone with whom we speak I think also the fact that the firm has has momentum and we continue to pickup ground in market share has an impact on people because I think a lot of very strong senior bankers. They are attracted to the independent model where.
There is there's a focused there's an intensity.
And there is an opportunity that they may not have in other places and so what we're seeing is people are actually very interested in talking with and hearing the story and understanding what the opportunity might be for them and so my observation would be that it. It did it at least as easy and may be easier to find people who are really.
Interested in sitting down with us.
And that often leads to act discussion of getting more serious about coming together and and working together.
Okay.
Okay. Thanks, guys.
Thank you.
Thank you know and their last question comes from Richard Lam, then of Goldman Sachs. Your line is that open.
Good morning. This is self funding on furniture today, you recently promoted senior managing director and your restructuring business could you just take a moment and characterize the restructuring environment as you see it today and then in addition, how well positioned do you think you ought to take advantage of any growth Miss restructuring opportunity set.
So.
That promotion was actually.
One of the two co heads of our business in restructuring business in Europe .
We.
Had a very good year last year in restructuring.
I would say quite honestly surprisingly good given the low default environment.
We think we have.
Really fantastic team on the field.
And.
And they were pretty much full out.
All year and.
The results.
Demonstrated that there are.
Even though it's a very low default environment. There clearly are sectors that have experienced consistent distress energy shipping.
Retail.
And.
Certainly our backlogs would suggest that theres not going to be.
Diminution of that in 2020 .
Yes, as we said Weve continued to grow our content and our capability, we do debtor and creditor now in and out of bankruptcy and I think the momentum of that group is is very high and we really feel very good about the talent level, we've got it in there.
Both senior and junior so we feel like there it's real potential in that area for for real growth and we feel very well positioned we've got good relationships. We're doing high quality assignments. Those assignments are leading to other assignments. So I think we feel very optimistic about the growth there.
Okay. Thank you very helpful. And then separately on your non comp ratio it looks like it picked up around 250 basis points this year relative to 2018.
As you kind of look at that meeting or exceeding this 25% operating margin target going forward could you just provide a bit more detail on how you intend to manage your non comp expenses aggressively.
Really in particular, just what levers you have at your disposal that you can pull.
So we've we've as as we've discussed really during the course of this past year and beyond those two areas, where we've we've made some investment and we've committed.
Ourselves to slightly higher levels of cost, that's our facilities and related to technology.
Yes technology will overtime.
Yes, we can lever that a number of different ways.
One of which will be efficiency, which would be lower heads lower heads would.
Overtime.
Drive down both comment on times.
But there's a number of other areas beyond that.
Our market data across our business development costs.
Cost of running to shop.
And pretty much.
Next week with with 2900 behind US we're going after.
Most of them to find ways to constrain growth if not reduce them.
Okay. Thank you very much.
There appears to be no question at this time I would now like to turn the floor to Ralph last time for any closing comments.
Oh, Thank you very much for your.
A thoughtful and constructive questions and we look forward to talking to you at the end of the first quarter. Thank you.
This concludes todays evercore fourth quarter and full year 2019 financial results Conference call you may now disconnect.