Q3 2022 Evercore Inc Earnings Call
Sure I'll say its on hold we appreciate your patience and ask that you continue to standby.
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Starz here al.
Yeah.
Okay.
Good day and welcome to the Evercore third quarter 2022 earnings Conference call. Today's call is scheduled to last about one hour, including remarks by Evercore management and the question and answer session in order to ask a question. Please press the star key followed by the one key.
<unk> on your Touchtone phone at any time I will now turn the call over to Katie Haber, managing director of Investor Relations and ESG of Evercore. Please go ahead.
Great. Thank you operator good morning.
And thank you for joining us today for Evercore third quarter 2022 financial results Conference call I'm, Katy Haver Evercore as head of Investor Relations and ESG.
Joining me on the call today is John Weinberg, our chairman and CEO and so that's why our CFO . After our prepared remarks, we will open up the call for questions.
Earlier today, we issued a press release announcing Evercore third quarter 2022 financial result, our.
Our discussion of our results today is complementary to the press release, which is available on our website at Evercore Dot com.
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 conclusion of this call.
During the course of this conference call. We may make a number of forward looking statements any forward looking statements that we make are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements.
These factors include but are not limited to those discussed in everquest filings with the SEC, 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 is posted on our website.
To believe that it is important to evaluate evercore performance on an annual basis.
As we have noted previously our results for any particular quarter are influenced by the timing of transaction closing I will now turn the call over to John .
Thank you Katie and good morning, everybody.
Before I review our results I'd like to share the news that Celeste will be leaving Evercore in February to pursue an entirely different area of finance. She has been approached by a large private international alternative asset manager and she has decided to accept the position with her we've all been fortunate to have worked closely with solar.
And we wish her well on this next step in her career, we will commence a formal search process to identify her replacement and Celeste will stay on with us into February to help us and support us with this transition.
Now, let me talk about our quarter ever.
Evercore performed well in an increasingly challenging environment as we actively manage and monitor the current macroeconomic backdrop. We see continued uncertainty looking forward. However, we also see tremendous opportunities for our business stemming from these inherent cycles.
We've been through these types of cycles before and we have successfully navigated through them during the last significant downturn driven by the global financial crisis, Evercore emerged stronger our competitive positioning and strategic focus allowed us to hire exceptional talent and strengthen our business, which was evidenced in the growth of our mark.
Sure and marked a significant step in building our firm to where we are today.
A decade ago, we were much more reliant on traditional M&A.
Our M&A and strategic advisory businesses remain strong and very much at the core of what we do.
But we have also invested heavily in building capabilities and products beyond mergers, we built scale and restructuring debt advisory and private capital Advisory fund raising shareholder advice capital markets advice and execution for both equity and debt equity sales and trading and wealth management.
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In fact in each of the last three years, our M&A businesses accounted for.
East or not.
Two thirds of our businesses and our non M&A businesses accounted for at least one third of our revenue.
We've also fortified our balance sheet and have a strong cash position. This provides us the financial wherewithal to invest in our business and to take advantage of the current hiring environment. As we look forward through the cycle. We are optimistic about the opportunities at hand and remain focused on executing our law.
Long term strategy and investing in our future growth.
Before I review, our businesses I want to speak more about the current environment well market briefly stabilized in the late summer volatility returned in September as the overall economic outlook became more negative as global economies.
Continue to be faced with high inflation rates rising interest rates and energy challenges. These conditions led U S equity markets experienced their third consecutive quarter of negative return.
Debt markets have also been challenged and bank lending has become even more selective as credit.
And private credit.
Have turned more cautious.
All of these factors have led to a sustained slowdown in our merger markets.
Turning to backlog based on where it stands today, our backlog remains strong, but there is greater risk to execution transaction announcements continued to be slow relative to last year and the timing of transaction closings remains elongated.
Economic stability and market conditions will continue to influence deal activity as I mentioned earlier, we are committed to our strategy. Despite.
The near term challenges facing the global economy, we continue to invest in industry sector, and geographic and white with white space.
With a focus on our growth internationally as well as in the United States.
We also remain focused on expanding our product capabilities, including equity capital markets debt advisory and private capital Advisory an area in which we continue to see opportunities evolving through the cycles.
Moreover, we continue to believe there is significant upside for us as we expand our client coverage model. We continue to focus on enhancing our sponsor coverage efforts. We most recently added several senior bankers to our U S financial sponsors group, which will strengthen and catalyze our efforts.
I will now review our results in more detail, which underscore the strength and diversity of our model.
Evercore generated $583 million and adjusted net revenues $489 million and adjusted advisory revenues and $2 20 in adjusted earnings per share.
On a year to date basis total net revenues were $1 9 billion. These results represent the second best.
<unk> third quarter and nine months year to date on record for our firm.
In advisory M&A activity levels were lower in the third quarter that said year to date, the number of announced global transactions for Evercore is down only 8% versus the prior year that compares favorably to the overall market, which is down more than double that.
M&A activity in our U S business was down though.
And that was partially offset by our team in Europe , having a very strong quarter led by the financials.
Utilities and industrial sectors.
Our activist defense business is seeing significant activity as the number of activism campaigns in the U S is tracking last year's record levels and European activity remains high.
Restructuring activity continues to accelerate as uncertain markets spiking interest rates and limited access to new capital for highly levered companies increases the need for restructuring advice, we are seeing an uptick in traditional restructuring assignments and continued opportunities and special situations financings liability management and.
Out of court restructuring.
Our private capital businesses, which include fundraising buying and selling LP and GP Stakes and continuation funds have been impacted by the broader environment that said our market leading positions in fundraising in continuation funds continued to build momentum and drive new business opportunities Reese.
Recently, our private funds group was ranked number one in multiple categories in frequent 2022 service provider report for its fundraising efforts in private equity private debt and infrastructure space.
Underwriting experienced a slight pickup compared to the prior quarter as seen in both our business and in the overall market. Despite unfavorable market conditions. Some issuers in need of capital took advantage of select windows for <unk> opportunity.
Activity in the third quarter for Evercore was primarily driven by follow ons and at the market offerings.
Activity remains quite limited as it was the slowest third quarter for Ipos in over a decade. However, some first time issuers came to the market and Evercore served as a joint book runner on corporate financials, one 7 billion IPO, which is the largest IPO to date.
Healthcare, which is our strongest ECM sector has been quite active year to date, we participated in 25% of all market healthcare deals.
Our ECM pipeline remains diversified across products and sectors, and we would expect activity to pick up as the markets stabilize.
In our equities business market volatility continues to impact client portfolios and positioning.
Our client interactions are on pace to hit record levels and our research organization continues to perform at the highest level.
The team was once again recognized by institutional investor as the top independent research firm for the ninth straight year and ranked number one among all firms for analysts on a weighted basis for the very first time.
In our wealth management business AUM declined in September with broader market long term performance and client retention rates remained strong.
With respect to recruiting talent, we will continue to take advantage of today's recruiting environment. We've hired seven advisory Smbs year to date, all in areas of strategic significance to us such as TMT Tech.
Debt advisory ECM in Europe .
In addition to senior in addition, we have a senior adviser who is committed to join US in 2022, who will bring new expertise and capabilities to our technology franchise. We continue to have dialogues with potential candidates and have a strong pipeline of talent heading into next year.
Lastly, as it relates to our capital return strategy, we remain committed.
Two our goal.
Of returning excess cash not invested in the business to our shareholders through dividends and share repurchases, while we return less capital. This quarter. We brought we bought back a significant amount of stock this year and increased our dividend in the first quarter, we will continue to opportunistically buy back shares while maintaining a durable.
Balance sheet.
Despite the uncertainty facing the market today, we continue to see strong dialogue with our clients and believe that we are well positioned for the pickup in activity when markets stabilize and recover.
We remain committed to executing our long term strategy and when the market returns. We believe we will emerge even better position than where we are today.
Now, let me turn the call over to Celeste.
Thank you John before I get into the numbers I want to express has been a privilege.
So I've been at Evercore and to have worked with all of you.
I have greatest team for this incredible firm.
With mixed feelings line moving on.
Well I will be here for the next few months to help with the transition Evercore is in a very strong position financially and its finance leadership.
Yes.
Susan and expenses positioning the firm for continued success.
For the third quarter of 2022, net revenues net income and EPS on a GAAP basis for 577 million $82 million and $2.03 respectively.
My comments from here, we will focus on non-GAAP metrics, which we believe are useful in evaluating our results.
Our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website.
Third quarter, adjusted net revenues of $583 million down 30% year over year.
Third quarter, adjusted advisory fees of $489 million or 31% lower year over year.
<unk> a decrease in the number of fees and the size of fees earned as market volumes remained low.
Our underwriting business generated revenue of $29 million down 47% from the year ago period, reflecting the decline in overall market activity.
Our equities business continued to perform well with commissions and related revenue of $49 million.
5% year over year, driven primarily by higher trading volumes and increased revenues from research subscription.
Wealth management, adjusted asset management, and administration fees were $17 million down 14% versus a year ago, primarily driven by market depreciation on AUR.
Third quarter adjusted other revenue net with a loss of approximately $1 million, reflecting lower performance of our investment fund portfolio, which is used as a hedge for our DCC P commitments due to overall market decline.
In accordance with relevant accounting principles. Our revenue includes approximately $32 million of advisory fee driven.
Driven primarily from transactions that closed in early October .
You compare we recognized $67 million in the second quarter of 2022 and $93 million in the third quarter of 2001 in accordance with the same accounting principles.
Adjusted net income was $95 million for the quarter down 49% versus the year ago period adjust.
Adjusted EPS of $2 20 decreased 44% from the prior year.
Third quarter adjusted operating margin was 23, 4% versus 31, 5% in the third quarter of last year.
Turning to expenses, our adjusted compensation ratio for the third quarter was 61% unchanged from the second quarter.
The compensation ratio is our estimate for the full year as of today, which is subject to change depending on how the year ends.
As John mentioned, there is greater risk to execution in today's environment and visibility is limited.
Third quarter, adjusted non compensation cost $91 million were up 9% versus a year ago, primarily driven by an increase in travel and related expenses as well as higher professional fees.
First travel and related expenses were higher as a travel has picked up materially from this time last year contributing to the trend we have seen all year. In addition to inflation inflationary pressures have driven our travel expenses higher.
Second professional fees were driven higher by consulting and search and placement fees.
And third communication and information services were higher than the year ago period relating to increased information service fees from higher license fee renewals.
We are very focused on our expense management practices, both comp and non comp, we are limiting incremental and replacement hires and driving efficiencies across our non coffee.
We are regularly rigorously reviewing how and where we spend with a focus on balancing between the near term and the long term.
Our adjusted tax rate for the quarter was 27, 4% versus last year, largely reflecting nondeductible expenses, including meals and entertainment and stock compensation expenses.
Turning to our balance sheet as of September 30, cash and investment securities totaled about $1 8 billion.
Our excess cash as a percentage of our total cash and investment securities was in the mid teens.
We are constantly reviewing our excess cash position with respect to the current business environment.
We are currently holding more than more cash than the prior quarter as market and economic uncertainty persists.
Our third quarter adjusted diluted share count declined to $43 2 million from $43 8 million in the second quarter of 2022, primarily reflecting the reduction due to the lower share price employed in the treasury stock method and our continued buybacks partially offset by vesting.
In total we have repurchased three 9 million shares year to date at an average price of $118 and 28.
Including dividends and share repurchases, we have returned $565 million to shareholders. This year to date.
We remain committed to returning all excess capital not invested in the business to our shareholders over time.
We will remain prudent and nimble and we will opportunistically buy back shares while maintaining a terrible durable balance sheet.
Similar to what we have done this year, we will continue to offset the dilution from the <unk> that are granted as part of our annual bonus compensation process in future periods.
With today's macro challenges. It is critical we protect and grow our franchise, while also executing on our long term capital return strategy.
Before we turn to your questions as John said, we have been through cycles like this before and have emerged stronger our diverse business model and financial position and sure. We are well positioned to capitalize on the current environment and we are excited for the opportunity ahead with that we will now open the lines.
For questions.
Yes.
Thank you we will now conduct a question and answer portion of the conference. Please limit to one question only youre welcome to rejoin the queue for additional questions time permitting.
Again in order to ask a question. Please press the star key followed by the one on your Touchtone phone.
We'll take our first question from Steven <unk> with Wolfe Research.
Good morning, This is Brendan O'brien filling in for Steven.
Yes.
Start was nice to see you able to hold the line on the comp ratio this quarter I understand that its your best estimate at this point in time, it could change, but wanted to get a sense of sort of around what your assumptions are on deal timelines and might deal elongation relative to what you would expect to see in a more normal environment.
Last quarter.
Say that deal has gotten worse or stay the same over the past three months.
I'll just start with really is how we're seeing the environment and then I'll, let <unk> answer the question more specifically about the comp ratio.
I think that the environment has slowed somewhat but really when we were looking at things. The last quarter. We saw a lot of this and actually articulated it and from our perspective.
We are seeing deals.
That are being discussed widely in boardrooms, and we think that there is activity, but we don't think it's speeding up and we see that it has slowed slightly.
But really what we what we articulated last time and what we believed last time was our reflection for the year and it remains so we really believe that this is this is where we will end up for the year.
But.
Things are changing as you know day by day, there are different views on recession, and what that will mean and we're actually following it we don't really have a crystal ball at this point there is more uncertainty than I've seen in a long time, but we feel pretty comfortable with where we are.
Thanks for the question so.
To give you a little insight into how we forecast and a short term basis, we look at.
Our.
We look at the quarter in particular on a on a deal by deal basis.
And we have standards in terms of where.
The likelihood of deals closing and when they close.
On the margin.
We were unsure as to whether or not a deal would close in the current period were generally assuming it will not.
It's not that we're saying, we're adding a certain period of time because it is very specific on a deal by deal basis, but.
Our approach is more conservative and just given what we've seen we think that is the right approach to.
Thinking about how the year will end up for us, particularly as we're doing our planning.
For 2022, and 2023 as it relates to our comp ratio.
For the past 10 years, the fourth quarter has been our largest quarter for us.
And hopefully we will continue to be the same and while we.
Our comfortable with with our estimate for the year as of today. It really really will depend on what closes in December versus what closes in.
In January most of.
The fluidity in the environment is really about when deals are closing more than anything so.
The December will be a really important one for us the whole quarter will be important for us as it relates to the comp ratio.
That's great color. Thank you both.
Turning to advisory business My results for this quarter were once again surprisingly strong relative to what we've seen in the public data, which.
Your commentary suggests.
This is driven by our non M&A advisory businesses could.
Could you speak to what your go forward outlook is for these businesses in light of all of the year.
The choppiness in the market and potential down further slowing global economy.
Additionally, specific to the private capital Advisory business I know you noted that the fund raising environment.
Slowed and is expected to continue to slow over the next six to 12 months, but at the same time demand for liquidity from LP and GP is expected to have the other direction I was hoping you could speak to your outlook for that business in particular as well.
Well.
Yeah.
Our view of those businesses is that they are continuing to move along and we are seeing activity.
There is there is no question, though that the current environment does impact those.
We do have significant non merger revenue and the reason the forgiving that was that we wanted to make sure that we articulated the fact that the strength of our financial performance is really the M&A market plus all of our other markets.
Prospectively, we believe that those markets will continue.
To be.
To be active but really trying to take out and really give a specific view as to how theyre going to perform it is very difficult and we can't do that but I would just say that.
Clients are still very busy we're still seeing a lot of dialogue and really in those businesses as well as the merger business. There is a lot of of activity and dialogue and I think that there is a there's a significant amount of business that's being discussed now whether those actually transitioned quickly into revenues.
Is another thing and I think that one is a lot of that is going to be.
Economies and also the financial market stability.
So, let's do you want to say anything more than that I think just to add to your question on fundraising.
The team has really focused on raising capital for the very vast.
So that.
The ability for the very best to raises is greater than that for others in this environment, though.
Everyone's facing the same challenges with Lps in terms of liquidity and things like that so.
There there have still very strong demand and very good receptivity for the deals that they are bringing to market.
Okay.
Thank you.
As a reminder, please limit to one question only will.
We will take our next question from Richard Ramsden with Goldman Sachs.
Hey, good morning, everyone and plus congratulations on the new role.
John can you just expand a little bit on what you're seeing on the restructuring side. I know you said last quarter that the dialogue was very active but it hasn't translated into assignments at that point.
That started to change as we head into the year and given the equity and debt capital is not widely available and there is obviously a very significant refinancing requirement for a lot of companies that went public over the last few years.
Thank you Richard for the question and yes, we did see real activity beginning in restructuring and I would say that has continued unabated.
There is just a significant amount of dialogue and our and our restructuring group is very busy right now with really giving advice on liability management as well as out of court bankruptcy discussions. The dialogues are very strong and we are seeing increasingly.
Activity coming in both on that end.
Very traditional restructurings.
We think that default rates are going to begin decline, we think that there have been significantly a pickup in downgrades, which is also.
Is.
Contributing to this so what we're seeing is that the activity levels are really climbing do I don't know exactly when that is going to translate into actual revenue, but our activity level continues to increase and there is a very very healthy buzz to the to the restructuring group's floor because.
They are actually very very active right now.
Okay. Thanks, a lot.
We will take our next question from Brennan Hawken with UBS.
Good morning. Thank you for taking my questions and also would echo Richard Congrats to last sorry to see you go so quickly, but I'm sure it's a great opportunity.
So after you touched upon slowing hiring we saw the SMT head count drop here versus 630.
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And yet you talked about <unk>.
An opportunity to add talent, so could you help us.
Consider how youre managing the head count the expense space in this uncertain environment.
And how should we think about.
The.
The comp ratio you had said, 61% for the year, but year to date, you're at like 66 point to something like that so should we expect.
A higher comp ratio in the fourth quarter to bring the full year to 61 or was the 61 indication more of a suggestion of a go forward from there where it would be 61 for the remainder of the year.
Thanks.
The last question Brennan in your one question Youre limiting me to one so I have to do a multi partner come on now.
Let me take the F&B question first and James and John May want to add on that.
He is really driving a lot of the work on the recruiting side, but what you see in our recorded reported F&B numbers there is a decline sequentially.
That is not indicative of I think anything there are a number of SMB.
That are.
Not included in that number I mean, we only include the ramp number there.
Very high number of on ramps Smbs I think over 35.
Now.
That is.
That would include the people we've hired much more recently.
As it relates to head count overall.
We have been working very carefully.
Outside of the strategic hires to limit.
Replacement hires incremental hires very very focused on sort of the value versus the cost of each incremental higher.
Excuse me and.
And on non comps.
Comp is our biggest expense we've been reviewing our non comp line by line.
At how and where we spend we have found some.
Good cost savings, but.
Travel continues to ramp.
This year to date, we've only been running around 50% of tricks.
<unk> 2019 levels. So there continues to be.
Hi.
More and more trucks, which will cost more money and as you know that cost that they inflate that inflation on travel is higher as well.
And we have delayed certain projects that long term, we think will be very beneficial, but short terminals that will cost money. So.
We're managing our costs as tightly as we can as it relates to the comp ratio again, the fourth quarter is going to be really drive the outcome for the quarter and for the year.
We have obviously, we're very comfortable with our forecast, but it could easily go either way we've looked at a lot of sensitivity. So.
I think the comp ratio is really the comp ratio will be dependent on what the fourth quarter revenue looks like.
You guys have year forecast, we have ours and hopefully.
For the it will see things closed quite well in the fourth.
We go into the end of December .
So Brendan the spirit of the multi question question I'll, just just spend a minute on recruiting.
<unk> said we.
We are very much still in the market for high high grade extraordinary talent and.
This year as I said, we've hired seven smbs with one.
Senior advisor coming on but we also have a really good pipeline for next year and we intend to continue to build we think that the opportunity in this market is quite extensive and in the areas that we are thinking about and trying to build there are some very very talented people who are very much.
In the mindset of thinking about coming over and so we're we're very much investing in that having said that we are really trying to be responsible about head count.
We're trying to be slow on replace on replacement.
We're trying to make sure that we're managing our costs as tightly as we can we're trying to really be sensitive to the fact that this is a difficult environment. We don't know how much it will slow so we're trying to be on the one hand very careful with our costs.
Very careful and thoughtful about our head count.
But at the same time, we are very much thinking that this is a good time to be investing.
Okay. Thanks for the color and the patients with the multi partner I did get.
So as you made reference to the fact that not all the smbs are in the SMB head count.
I can re queue, if you would rather but.
I think thats. The first we've heard of that could you. If you don't mind expanding on that policy that might be helpful to understand follow up with IR for sort of for all of that.
Yeah.
We will take our next question from Michael Brown with K B W.
Hi, good morning, John and it's less than <unk>.
Congrats and best of luck to you.
Yes.
So.
I guess I wanted to you called out the strength in Europe in terms of the advisory results this quarter.
Could you expand on that a bit and what's your expectations for the regions in terms of.
The outlook there for M&A, but also for restructuring and if you could add any comment specifically about the U K and the continent that would be that'd be helpful. Thanks.
Sure.
The.
The European business has actually had a very good first nine months and there have been some very significant deals that have come through with some very good fees.
The areas that have been very busy over there for us have been financial institutions utilities and the industrial side.
And we think that those areas will continue with some activity.
I think that really the prospects of that market are going to actually impact.
How robust that business continues.
If theres a significant recession over there things will flow.
And.
The one thing I would say is that the narrative for the activity levels and the discussions have been quite full.
We have a very good team over there.
In the U K and we have several really strong relationships and very good players over on the continent, and so I'd say that from our perspective, we're watching carefully.
But I wouldn't I wouldn't say that that you should expect that there is going to be robust growth over there I think what you should expect though is that we're going to continue to consistently cover those clients and I think that if there are transactions to be done we're going to hopefully get our fair share and we feel very comfortable where we are building and investing in that.
And that that sector of the world.
We plan to continue to do that it's a strategic priority for US we think that there is real opportunity for us and our brand if we do invest over there and so we're really looking at those opportunities and I would expect that we will we will grow our business there over the cycle can't say exactly that it will grow.
From a revenue standpoint, just because so much right now is determined by the market and the market uncertainties that I think that we're all watching that carefully.
Thanks, John and I'd also just asked about the restructuring activity in Europe as well have you seen any seeing any trends playing out there.
Well, it's very much the same as what we have in the U S and I'm, sorry, I missed that.
We are seeing the activity levels build there now our European restructuring business is not as big as our U S restructuring business, but we have some very very high quality people over there and we are actually seeing some quite promising activity levels, there and some interesting assignments. So we are definitely seeing that area develops.
But right now we don't know exactly when that's going to translate into revenues for the firm.
Okay, great. Thank you for taking my questions.
We'll take our next question from Manila, Australia.
Hi, Good morning, John until last time last all the very best in your new role.
My question was on.
What are you hearing from clients on the impact of the rate outlook on their ability to do deals so with the expectations for the terminal fed funds rate moving to four 5% plus leverage lending markets youre seeing a lot of pressure.
I guess in this environment do we just need to see certainty on where rates are going whether it's four 5% or 5% or whatever the number is and then then we know what.
The rate is so we can underwrite and get evaluation and do the deal or our clients, saying that they need to see lower rates before before they do with some of the large deals and those largely will come back in a big way.
And then it's an interesting question and I've actually been in several boardrooms over the last 10 days or so.
Discussing the action ability of deals in what I would say my observation would be that for deals that really makes sense strategically companies are not really as sensitive to rates as they are about access to the markets and as you know right now.
Some of the margin leverage loans and high yield and others are backed up some and there is some real congestion and I think that.
That is in my mind the biggest issue.
Rates are much higher than they've been but they're not they're not.
Higher than they've ever been and I think the companies that have really good prospects will be watching carefully to see when the markets will give them access and then they'll run the numbers to make sure that the strategic.
Deals that Theyre looking at still makes sense my own point of view is it's going to be more driven by the markets opening up and Theyre being access I think it does as you said and I agree with it is that it's a lot about certainty and about some stability and once that does begin to play you'll see.
Companies beginning to be more aggressive clearly it's more.
It's more opportune to do a deal in an upmarket in a down market. Because then by definition and things are going to look better, but I think companies that really have.
Important strategic needs are going to look at those as soon as they think that there is action ability in the market.
Great. Thank you so much.
We will take our next question from Devin Ryan with JMP Securities.
Thanks, Good morning, John and Celeste.
Wes congratulations.
Most questions have been asked here. So just one question and one partner.
Love to dig a little bit more into <unk>.
Sponsor.
<unk> outlook I know, there's been a lot of talk around.
Sponsors, having kind of record dry powder on the flip side.
<unk> are kind of looking wounds on recent investments that have been made over the last year or so with kind of record.
<unk> activity, so love to just dig a little bit more into kind of what breaks that dam.
With sponsors and is it just.
Good ask spreads coming closer together or.
More.
Confidence in the economic outlook, but just when they can kind of more aggressively reengage with the record dry powder.
Kevin.
I actually think it's as much as anything stability in the market I think right now a lot of the sponsored discussions which continue.
Really about what is the art of the possible to actually do deals now clearly sponsors are often more sensitive to actual rate levels and big strategics might be who have a lot of cash on hand.
And real strong debt capacity.
The leveraged loan market the high yield market does impact what sponsors are willing to do and they're looking at it carefully.
In a situation like now when the markets are much more back up that is really going to back off of with respect to sponsors doing the traditional deals now as you know there's been a lot of private debt and private debt complexes that are willing to put money to work I think those two degree.
<unk> has slowed down some because theres been a lot of private debt. That's been put to work already in terms of your question, which is what breaks the logjam I actually think stable stability of the market and really the market.
Having.
The capacity to actually put more.
More money back in and so theres been several of the big banks and others, who have have some some things that they need to absorb once that starts to have finished absorbing people are going to be starting to in earnest run these numbers and see what makes sense and works and so I think the first step is working through some of the.
Issues that are in the market right now and then the second step is going to be.
Whether buyers and sellers have expectations that are closer I actually think that that.
The expectations between buyers and sellers are actually coming.
Much closer together for the simple reason that people are starting to to really absorb really what this market actually is and I think there is a view that this may not overnight turn and as a result, I think that's what's made people's conscious mentality b that this may be what were dealing with for the.
Year, and anybody who really wants to look at a dealer put their money to work that's going to have to except where the market is.
Okay, great. Thank you.
Kevin.
We are approaching the end of the allotted time.
Now I'd like to turn the floor to John Weinberg for any closing comments.
Thank you all for joining we very much look forward to seeing you next quarter.
Obviously, we're open to any interactions you might want to have with us going forward.
You so much.
This concludes today's Evercore third quarter 2022 financial results Conference call you may now disconnect.
Good morning.
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