Q4 2023 Evercore Inc Earnings Call

Good morning, and welcome to the Evercore fourth quarter and full year 2023 earnings conference call.

Today's call is scheduled to last about one hour, including remarks by Evercore management, and a question and answer session.

In order to ask a question. Please press the star key followed by the number one on your Touchtone stall at any time.

I will now turn the call over to Katie Heber, managing director of Investor Relations and ESG at Evercore.

Katie Heber: Please go ahead.

Katie Heber: Thank you operator, good morning, and thank you for joining us today on Evercore fourth quarter employer in 2023 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 Tim <unk>, our CFO after our prepared.

Katie Heber: Third remarks, we will open up the call for questions.

Katie Heber: Earlier today, we issued a press release announcing evercore fourth quarter and full year 2023 financial results. Our discussion of our results today is complementary to the press release, which is available on our website at Evercore Dot Com. This conference call is being webcast live in the for investors section of our website and an archive of it will be available for 30 days beginning approximately.

Katie Heber: One hour after the conclusion of this call.

Katie Heber: 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 a number of important factors that could cause actual outcomes to differ materially from those indicated in these statements. These factors include but are not limited to those discussed in evercore filings with the SEC.

Katie Heber: Including our annual report on Form 10-K quarterly reports on Form 10-Q, and current reports on form 8-K.

Katie Heber: To remind you that the company assumes no duty to update any forward looking statements.

Katie Heber: In our presentation today, unless otherwise indicated we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance for detailed disclosures on these measures and the GAAP reconciliations you should refer to the financial data contained within our press release, which is posted on our website. We continue to believe that it is important.

Katie Heber: Evaluate everquest performance on an annual basis as we have noted previously our results for any particular quarter are influenced by the timing of transaction closings.

Katie Heber: Now I'll turn the call over to John.

John S. Weinberg: Thank you Katie and good morning, everyone two.

John S. Weinberg: 2023 was a year of significant investment for Evercore and the firm gained momentum which has continued into 2024.

John S. Weinberg: Despite the challenging market environment, we've continued to strengthen our franchise by investing in and diversifying our business, we hired our largest class ever of advisory senior managing directors, and we expanded our client relationships and coverage universe, our competitive positioning and.

John S. Weinberg: <unk> focus provided us with the opportunity to hire this new group of exceptional talent and we expect to continue investing in our business in 2024.

John S. Weinberg: Over the past decade, we've broadened and deepened our capabilities, which have significantly transformed the firm.

John S. Weinberg: Aside from being a market leader in the M&A business, which has always been core to what we do we've invested heavily in virtually all of our businesses and which we've built real scale there.

John S. Weinberg: This build out has led to a significant diversification of our revenues in fact in 2023 more than a third of our revenues came from non M&A sources.

John S. Weinberg: This growth has provided us with the ability to comprehensively service our clients in nearly all areas of investment banking, which has positioned us once again as the fourth largest investment bank globally based on advisory fees.

John S. Weinberg: We believe we are better positioned today than in any other point in our history today, our internal backlogs continue to strengthen when coupled with a better market environment and our current and ramping SMB base comprised of both external hires and internal promotes.

John S. Weinberg: We expect to see higher activity levels, and an increase in our firms productivity over time.

John S. Weinberg: We are now a month into the new year and we are encouraged by what we see activity and confidence levels have continued to improve building off momentum we saw towards the end of last year.

John S. Weinberg: So far as a firm we've been very active involved in some of the largest and most notable transactions to date.

John S. Weinberg: We remain hopeful that 2024% and improved operating backdrop for the M&A and capital raising markets. However, it is still early days and we continue to closely monitor the geopolitical and economic uncertainties that could alter the timing and strength of an M&A recovery as a result.

John S. Weinberg: We expect the recovery to be a slow build before.

John S. Weinberg: Before I discuss our businesses I want to touch further on our hiring activities. We're pleased with our 11 newest advisory SMT additions, bringing onboard some of the highest quality bankers in their respective areas of expertise.

John S. Weinberg: These include technology in both U S and Europe sponsor coverage.

John S. Weinberg: Business services, Industrials real estate and capital advisory all areas of strategic significance to Evercore.

John S. Weinberg: Looking at 2024, we will continue to be active in the market and recruit talent based on our strategic needs, while maintaining our high standards. Additionally, developing talent from within remains critical to our strategic build out.

John S. Weinberg: We begin 2024.

John S. Weinberg: With seven newly promoted Smbs in our advisory business across various sectors and capabilities as well as one in our equities business. This expanding group of high quality bankers will allow us to provide enhanced coverage and service to our growing client base.

John S. Weinberg: About 40% of our advisory Smbs have been promoted from what's inside the organization and we are committed to further growing this group.

Let me now spend a couple of minutes on highlights from the quarter and year.

John S. Weinberg: As we previously discussed our full year financial results reflect a challenging operating environment, Tim will discuss our financial results and metrics in detail in a few minutes.

John S. Weinberg: In the fourth quarter confidence levels and credit availability started to improve M&A.

John S. Weinberg: M&A activity subsequently picked up notably with some large transactions. Nevertheless in 2023 industry wide M&A and.

John S. Weinberg: Announcement activity remained below historical levels, particularly among sponsors for the year Global announced M&A activity based on deal value was down almost 20%.

John S. Weinberg: Yes for Evercore, specifically announced global M&A activity as measured by deal value was up over 40% versus the year prior due in part to announcements late in 2023.

John S. Weinberg: In the fourth quarter, we advised on several transformative transactions, including Chevron on at $60 billion acquisition of Hess.

John S. Weinberg: U S steel on its sale to Nippon steel for.

For $14 9 billion.

John S. Weinberg: And N F P on its sale to a.

John S. Weinberg: For $13 4 billion.

John S. Weinberg: In 2023, we were involved in four of the 10 largest deals all of which were announced in the second half of the year.

John S. Weinberg: This momentum has continued into the first few weeks of 2024.

We've advised on three of the largest announced global strategic transactions, including synopsis on its $35 billion acquisition of answers, which is the largest deal year to date. Additionally, we advised global infrastructure partners on its sale to Blackrock for 12 point.

John S. Weinberg: $5 billion.

John S. Weinberg: In Chesapeake energy on its seven $4 billion merger with southwestern energy.

John S. Weinberg: As we mentioned in our last earnings call. We continue to make progress on our sponsor coverage efforts for the last several years, 30% to 45% of our advisory revenue has been sponsor related including deals in our private capital businesses.

John S. Weinberg: Our European Advisory group had a solid quarter and year. Despite continued macro and geopolitical challenges. The team has a very healthy pipeline as we enter 2024 yet.

John S. Weinberg: Execution in closing timelines remain elongated we continue to focus on further expanding in the region and we are excited about the opportunity set there.

John S. Weinberg: Our private capital advisory and fundraising businesses finished 2023 on a strong note.

John S. Weinberg: This was driven in part by robust continuation fund activity in which we are the market leader.

John S. Weinberg: In the fourth quarter, we also priced our first ever collateralized fund obligation security, which marks the successful addition of a new product capability.

John S. Weinberg: Additionally, our private fundraising group had its second best year ever.

Demand for our private capital advisory businesses continues to grow.

John S. Weinberg: Our strategic defense and shareholder advisory business had a strong year as activist campaigns continued near record levels. Both in the U S and internationally as markets remain challenged and interest rates elevated our restructuring business had another strong year activity in the fourth quarter continued at a robust pace.

John S. Weinberg: A large part driven by liability management activity amongst sponsors.

John S. Weinberg: We're beginning 2024 with a strong pipeline for opportunities.

John S. Weinberg: In underwriting the market and our business did not yield the level of activity or results. Many were hoping to see in the fourth quarter or for the full year.

John S. Weinberg: In the year, we were a book runner on nearly all of our underwritten equity offerings of note. We were the left lead book runner on a $2 $2 billion offering for GE healthcare technologies.

We remain focused on improving our market share by continuing to diversify across sectors and products as well as elevating our underwriting position on deals.

John S. Weinberg: Our equities franchise closed out the year with its strongest fourth quarter performance in the last five years. Despite continued low volatility and market volumes, we recently announced the additions of top ranked analysts in the biotech consumer and technology sectors as well as in public policy.

John S. Weinberg: <unk>.

Lastly in wealth management, our assets under management ended the quarter at $12 3 billion, which is the highest month end AUM point since the businesses inception.

John S. Weinberg: While 2023 was another challenging year for the industry and Evercore, we are proud of what we've accomplished as.

As we begin a new year, we're excited for the opportunities that lie ahead for the firm we remain focused on executing our strategic plan by continuing to invest and expand and deepen our capabilities and products as well as further enhancing our intellectual capital.

Operator: Good morning and welcome to the Evercore fourth quarter and full year 2023 earnings conference call. Today's call is scheduled to last about one hour, including remarks by Evercore management and a question and answer session. In order to ask a question, please press the star key followed by the number one on your touch-tone phone at any time.

John S. Weinberg: With that let me turn the call over to Tim.

Tim: Thank you John.

Tim: Our fourth quarter results reflect further stabilization in the operating environment and an increase in activity levels for several areas of our business as well as some seasonality.

Katie Haber: I will now turn the call over to Katie Haber, Managing Director of Investor Relations and ESG at Evercore. Please go ahead. Thank you. Thank you, Operator. Good morning, and thank you for joining us today on Evercore's fourth quarter and full year 2023 Financial Results Conference call. I'm Katie Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO, and Tim Lalonde, our CFO. After our prepared remarks, we will open up the call for questions.

Tim: In 2023, we generated over $2 $4 billion in net revenues and one of the most challenging financial markets since the global financial crisis.

Tim: As John mentioned, our diversified revenue streams have provided significant support and strong results in the last quarter and throughout much of last year.

Tim: We ended the year on a solid note and we continue to see activity levels strengthen particularly among larger situations. However.

Katie Haber: Earlier today, we issued a press release announcing Evercore's fourth quarter and full year 2023 financial results. Our discussion of our results today is complementary to the press release, which is available on our website at evercore.com. This conference call is being webcast live in the Foreign 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 a number of important factors that could cause actual outcomes to differ materially from those indicated in these statements. These factors include, but are not limited to, those discussed in Evercore's filings with the 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 statement.

Tim: However, it is important to note from a timing perspective that many of these larger transactions are not expected to close until the latter part of this year and into the following year.

Tim: The impact of financial results is not immediate but we will build and be recognized over time.

Tim: I will now discuss our fourth quarter and full year financial results for.

Tim: For the fourth quarter of 23, net revenues operating income and EPS on a GAAP basis were $784 million $118 million and $2 <unk> per share respectively.

Tim: For the full year net revenues operating income and EPS on a GAAP basis were $2 $4 billion 359 million and $6 37 per share respectively.

Katie Haber: In our presentation today, unless otherwise indicated, we will be discussing Adjusted Financial Measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP reconciliations, you should refer to the financial data contained within our press release, which is posted on our website. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. However, as we have noted previously, our results for any particular corridor are influenced by the timing of transaction closing. I will now turn the call over to John. Thank you, Katie.

Tim: My comments from here will focus on non-GAAP metrics.

Tim: Which we believe are useful when evaluating our results our.

Tim: Our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website.

Tim: Fourth quarter, adjusted net revenues of $790 million declined 6% versus the fourth quarter of 2022.

Tim: On a full year basis, adjusted net revenues of $2 4 billion declined 12% compared to last year.

John S. Weinberg: Good morning, everyone. 2023 was a year of significant investment for Evercore, and the firm gained momentum, which has continued into 2024. Despite the challenging market environment, we've continued to strengthen our franchise by investing in and diversifying our business. We hired our largest class ever of advisory senior managing directors, and we expanded our client relationships and coverage universe.

Tim: Fourth quarter, adjusted operating income of $124 million decreased 43% compared to the fourth quarter of 2022.

Tim: Adjusted earnings per share of $2 <unk>.

Tim: Decreased 42% versus the fourth quarter last year.

Tim: For the full year adjusted operating income of $385 million decreased 47%.

John S. Weinberg: Our competitive positioning and strategic focus provided us with the opportunity to hire this new group of exceptional talent, and we expect to continue investing in our business in 2024. Over the past decade, we've broadened and deepened our capabilities, which have significantly transformed the firm. Aside from being a market leader in the M&A business, which has always been core to what we do, we've invested heavily in virtually all of our businesses, in which we've built real scale. This build-out has led to a significant diversification of our revenue. In fact, in 2023, more than a third of our revenues came from non-M&A sources. This growth has provided us with the ability to comprehensively service our clients in nearly all areas of investment banking, which has positioned us once again as the fourth largest investment bank globally based on advisory fees.

Tim: And adjusted earnings per share of $6.46 decreased 46% versus the full year 2022.

Tim: Our adjusted operating margin was 15, 7% for the fourth quarter.

Tim: And for the full year.

Tim: Turning to the businesses.

Tim: Fourth quarter adjusted advisory fees of $660 million were down 6% year over year.

Tim: Adjusted Advisory fees were $2 billion for the full year, an 18% decline compared to 2022.

Tim: By our estimates we have increased our market share again this year.

Tim: Fourth quarter underwriting fees of $19 million were down 57% compared to the fourth quarter of 2022.

John S. Weinberg: We believe we are better positioned today than at any point in our history. Today, our internal backlogs continue to strengthen, and when coupled with a better market environment and our current and ramping SMD base comprised of both external hires and internal promotion, we expect to see higher activity levels and an increase in our firm's productivity over time. We are now a month into the new year, and we are encouraged by what we see.

Tim: For the full year underwriting revenues were $111 million down 9% versus last year.

Equity issuance for last year was well below normal levels and for the fourth quarter issuance activity did not experience the strong pickup that we had hoped for.

Tim: We have a strong team in place and believe we will see a pickup in our revenues as the markets begin to normalize.

Tim: Commissions and related revenue of $56 million in the fourth quarter were up 4% year over year.

John S. Weinberg: Activity and confidence levels have continued to improve, building off the momentum we saw towards the end of last year. So far, as a firm, we've been very active and involved in some of the largest and most notable transactions to date. We remain hopeful that 2024 will present an improved operating backdrop for the M&A and capital raising market. However, it is still early days, and we continue to closely monitor the geopolitical and economic uncertainties that could alter the timing and strength of an M&A recovery. As a result, we expect the recovery to be a slow build.

Tim: As John mentioned reflected our strongest fourth quarter in the last five years for the full year commissions and related revenue of $203 million were down 2% compared to 2022.

Tim: Fourth quarter, adjusted asset management and administration fees of $19 million.

Tim: Increased 13% year over year, while full year revenues of $73 million increased 3% compared to 2022.

John S. Weinberg: Before I discuss our businesses, I want to touch further on our hiring activities. We're pleased with our 11 newest advisory SMD additions, bringing on board some of the highest quality bankers in their respective areas of expertise. These include technology in both the U.S. and Europe, sponsor coverage.

Tim: Fourth quarter adjusted other revenue net was a gain of approximately $37 million, which compares to a gain of $18 million in the fourth quarter of 2022.

For the full year adjusted other revenues net was a gain of $98 million compared to a loss of $9 million last year.

John S. Weinberg: Business Services, Industrials, Real Estate, and Capital Advisory. All areas of strategic significance to Evercore. Looking at 2024, we will continue to be active in the market and recruit talent based on our strategic needs while maintaining our high standards. Additionally, developing talent from within remains critical to our strategic build-out.

Tim: As I mentioned on prior calls the significant swing year year over year was driven by two primary factors first approximately two thirds of the net gain we recognized was interest income due to higher short term rates in 2023 and 2022.

Tim: The balance was from gains in our investment funds portfolio, which is used as a hedge for our DCC P commitments as equity market values increased significantly in the year.

John S. Weinberg: We begin 2024 with seven newly promoted SMDs in our advisory business across various sectors and capabilities, as well as one in our equities business. This expanding group of high-quality bankers will allow us to provide enhanced coverage and service to our growing client base. About 40% of our advisory SMDs have been promoted from within the organization, and we are committed to further growing this group. Let me now spend a couple of minutes on highlights from the quarter and year, as we previously discussed. Our full-year financial results reflect a challenging operating environment. Tim will discuss our financial results and metrics in detail in a few minutes. In the fourth quarter, confidence levels and credit availability started to improve, and M&A activity subsequently picked up, notably with some large transactions. Nevertheless, in 2023, industry-wide M&A announcement activity remained below historical levels, particularly among sponsors. For the year, global announced M&A activity based on deal value was down almost 20 percent.

Tim: The large difference between last year's number and this years is primarily due to returns in the equity markets.

Tim: These gains were partially offset by minor foreign currency adjustments.

Turning to expenses.

Tim: The adjusted compensation ratio for the fourth quarter was 78% our full year reported adjusted comp ratio was 67, 6%.

Tim: Our full year comp ratio is consistent with the commentary I provided on last quarter's earnings call. When I mentioned, we expected the second quarter ratio of 67% in the third quarter ratio of 68% would be generally representative of our full year estimates.

Tim: Yes.

Tim: As I mentioned on last quarter's earnings call the increase in our compensation ratio as a byproduct of the weaker revenue environment amortization.

Tim: Amortization of prior year Awards.

Tim: The on boarding of our new senior hires and the market level for compensation.

John S. Weinberg: Yet ForeverCore specifically announced global M&A activity as measured by deal value was up over 40 percent versus the year prior due in part to announcements late in 2023. In the fourth quarter, we advised on several transformative transactions, including Chevron on its $60 billion acquisition of Hess, U.S. Steel on its sale to Nippon Steel for $14.9 billion, and NFP on its sale to Aon for $13.4 billion.

Tim: We had a strong recruiting year in 2023, and we do not begin accruing for our new hires until they arrive.

Most of our new advisory SMT additions joined late in the year and we recognize their compensation from the start date through year end, which contributed to the higher fourth quarter ratio.

Tim: We will continue to strive to make improvements on our compensation ratio.

Tim: Ultimately it will depend on the timing and magnitude of improvement in the environment and our revenues among other factors.

John S. Weinberg: In 2023, we were involved in four of the ten largest deals, all of which were announced in the second half of the year. This momentum has continued into the first few weeks of 2024. We've advised on three of the largest announced global strategic transactions, including Synopsys on its $35 billion acquisition of Ansys, which is the largest deal year to date.

Tim: Shifting to non compensation expenses fourth quarter non comp cost of $107 million.

Tim: Up 11% from a year ago.

Tim: For the full year non comp costs of $407 million also were up 11%, primarily driven by increases in travel and related expenses.

Tim: License and research fees as well as other operating expenses.

John S. Weinberg: Additionally, we advised global infrastructure partners on its sale to BlackRock for $12.5 billion, and Chesapeake Energy on its $7.4 billion merger with Southwestern Energy. As we mentioned in our last earnings call, we continue to make progress on our sponsor coverage efforts. For the last several years, 30 to 45 percent of our advisory revenue has been sponsor-related, including deals in our private capital business. Our European advisory group had a solid quarter and year, despite continued macro and geopolitical challenges.

Tim: As a reminder, our.

Tim: Our non comp expenses from a year ago reflected a reversal of a liability which meaningfully decreased our non comp expense in 2022.

Tim: Resulting in a larger increase year over year.

Tim: With that the net impact of this the increase in non comp expense would've been approximately 8%.

Tim: The other significant impact was travel expense, which accounted for about four percentage points of the 11% increase these two items the expense reversal and the travel expense normalization accounted for the majority of the increase.

John S. Weinberg: The team has a very healthy pipeline as we enter 2024, yet execution and closing timelines remain elongated. We continue to focus on further expanding in the region, and we are excited about the opportunity set there. Our private capital advisory and fundraising businesses finish 2023 on a strong note. This was driven in part by robust continuation fund activity in which we are the market leader. In the fourth quarter, we also priced our first-ever collateralized fund obligation security, which marks the successful addition of a new product capability. Additionally, our private fundraising group had its second best year ever.

Tim: While our non comp expenses per head were higher relative to the prior year.

Tim: They still were about 4% lower than in 2019, the pre COVID-19 year.

Tim: Our adjusted tax rate for the quarter was 25, 3% down versus last year.

Tim: Full year adjusted tax rate was 23, 4% also down slightly relative to the prior year.

Tim: Turning to our balance sheet.

Tim: As of December 31, our cash and investment securities totaled about 2 billion.

Tim: Which is up from $1 6 billion at the end of last quarter.

Tim: We continue to maintain a strong cash position taking into consideration the current economic and business environment.

John S. Weinberg: Demand for our private capital advisory businesses continues to grow. Our strategic defense and shareholder advisory business had a strong year as activist campaigns continued near record levels both in the U.S. and internationally. As markets remained challenged and interest rates elevated, our restructuring business had another strong year. Activity in the fourth quarter continued at a robust pace, in a large part driven by liability management activity among sponsors.

Tim: Cash needs for the implementation of our strategic initiatives, including hiring plans and preserving our solid financial footing.

Tim: For the full year, we returned a total of $523 $5 million to shareholders through dividends and repurchases of 3 million shares at an average price of $129 four.

Tim: Our fourth quarter adjusted diluted share count increased to $43 4 million.

John S. Weinberg: We're beginning 2024 with a strong pipeline for opportunities. In underwriting, the market and our business did not yield the level of activity or results many were hoping to see in the fourth quarter or for the full year. Throughout the year, we were a bookrunner on nearly all of our underwritten equity offers.

Tim: Relative to a year ago, our share count is down slightly.

Tim: Our capital return philosophy has not changed.

Tim: We remain committed to repurchasing shares to offset the dilution from our rsum yearend bonus grants.

Tim: Beyond that we strive to return capital through dividends and share repurchases based on our cash needs and strategic goals, coupled with our ability to maintain a durable balance sheet.

John S. Weinberg: Of note, we were the left-lead bookrunner on a $2.2 billion offering for GE healthcare technology. We remain focused on improving our market share by continuing to diversify across sectors and products, as well as enhancing our underwriting position on deals. Our equities franchise closed out the year with its strongest fourth-quarter performance in the last five years. Despite continued low volatility and market volumes, we recently announced the additions of top-ranked analysts in the biotech, consumer, and technology sectors, as well as in public policy. Lastly, in wealth management, our assets under management ended the quarter at $12.3 billion, which is the highest month-end AUM point since the business's inception.

As John mentioned, our backlogs are strong.

Tim: We are seeing strength and momentum across a number of our business lines.

Speaker Change: And we look forward to what this next year will bring with that we'll now open the line for questions.

Speaker Change: Thank you.

We will now conduct the question and answer a question of the conference.

Speaker Change: Please limit yourself to one question only you are welcome to rejoin the queue for additional questions time permitting.

Speaker Change: Again in order to ask a question. Please press the star key followed by the one on your Touchtone phone.

Speaker Change: Our first question comes from James <unk> with Goldman Sachs.

John S. Weinberg: While 2023 was another challenging year for the industry and Evercore, we are proud of what we've accomplished. As we begin a new year, we're excited for the opportunities that lie ahead for the firm. We remain focused on executing our strategic plan by continuing to invest in, expand, and deepen our capabilities and products, as well as further enhancing our intellectual capital. With that, I will turn the call over to Tim. Thank you, John.

James: Good morning, and thanks for taking my question. So if I look at completed revenue this quarter versus the Dealogic. The magnitude that's not explained by the geologic did reaching fairly large magnitude in the fourth quarter. So maybe you could just speak to which of the non M&A advisory businesses performed so well in the quarter and then the sustainability.

James: All of these and then specifically just on the restructuring backdrop obviously.

James: Financing and financial conditions have improved towards the year end and into January so how should we think about the ability for restructuring to remain at an elevated level into 2024.

Speaker Change: Sure so.

Speaker Change: So let me start with the Dealogic question.

Speaker Change: And so that.

Speaker Change: The way they calculate that as they look at deal announcements and then they have an algorithm that.

Tim Lalonde: Our fourth-quarter results reflect further stabilization in the operating environment and an increase in activity levels for several areas of our business, as well as some seasonality. In 2023, we generated over $2.4 billion in net revenues in one of the most challenging financial markets since the global financial crisis. As John mentioned, our diversified revenue streams have provided significant support and strong results in the last quarter and throughout much of last year. We ended the year on a solid note, and we continue to see activity levels strengthen, particularly among larger situations. However, from a timing perspective, it is important to note that many of these larger transactions are not expected to close until the latter part of this year and into the following year.

Speaker Change: That estimate revenue.

Speaker Change: And so there's two areas for potential discrepancy.

Speaker Change: One is to the extent the algorithm.

Speaker Change: First from the actual revenue.

Speaker Change: And that's of course going to happen in almost every case, although I know theyre, hoping for a portfolio effect where across a large number of transactions is relatively close but it's not always as you've seen second thing is it doesn't pick up our capital advisory business and so the capital advisory business.

Speaker Change: Of course includes PCA.

Speaker Change: And PFG and real estate capital advisory as well.

Speaker Change: And those businesses really had a very strong year.

Speaker Change: Particularly strong quarter and that would perhaps have it have widened any normal discrepancy you might have seen.

Speaker Change: Let me, yes, no let me pick up because the question on our restructuring business structure.

Tim Lalonde: The impact of financial results is not immediate but will build and be recognized over time. I will now discuss our fourth quarter and full year financial results. For the fourth quarter of 23, net revenues, operating income, and EPS on a gap basis were $784 million, $118 million, and $2.03 per share, respectively. For the full year, net revenues, operating income, and EPS on a gap basis were $2.4 billion, $359 million, and $6.37 per share, respectively. My comments from here will focus on non-GAAP metrics, which we believe are useful when evaluating our results. Our standard GAAP reporting and a reconciliation of GAAP-to-adjusted results can be found in our press release, which is on our website. Fourth quarter adjusted net revenues of $790 million declined 6% versus the fourth quarter of 2022. On a full year basis, adjusted net revenues of $2.4 billion declined 12% compared to last year. Fourth quarter adjusted operating income of $124 million decreased 43% compared to the fourth quarter of 2022. Adjusted earnings per share of $2.02 decreased 42% versus the fourth quarter last year.

The restructuring business had a very good year last year.

And bookings going into 2024.

Speaker Change: Quite strong also we actually feel very good about our prospects going forward.

Speaker Change: The business is really diversified it's its liability management and also we've built out our creditor business as well as our strong traditional better business.

Speaker Change: So generally we think that that business will continue its momentum its one of the businesses that we think will have.

Speaker Change: Strength going into the year and through the year.

Speaker Change: Our next question will come from Jim Mitchell with Seaport Global.

James Mitchell: Oh, Hey, good morning.

James Mitchell: Just maybe a question on the head count and investments you guys. It was a heavy investment year, but if you look at net head count growth I think it was sort of on the SMB side mid single digits total head count.

4%, so how do we think about the implication for productivity and.

James Mitchell: And how are you thinking about net hiring in 'twenty four.

James Mitchell: Well.

James Mitchell: The way, we think about hiring is that we are looking at all the areas, where we think we have strategic imperatives and we move into that.

James Mitchell: Have a very strong pipeline going in with respect to hiring.

James Mitchell: We will make decisions as we go.

We're also trying very hard to make sure that we are being responsible about head count and so we're really.

Tim Lalonde: For the full year, adjusted operating income of $385 million decreased 47%, and adjusted earnings per share of $6.46 decreased 46% versus the full year 2022. Our adjusted operating margin was 15.7% for the fourth quarter and for the full year. Turning to the businesses, fourth quarter adjusted advisory fees of $660 million were down 6% year over year. Adjusted advisory fees were $2 billion for the full year, an 18% decline compared to 2022.

James Mitchell: Making sure that we managed people coming in and also there are some that are leaving in the process I think the best way to think about our head count is that we're going to actually grow where we think it's actually going to be productive for the firm and we are definitely in the market and we're going to continue to be responsible in managing our numbers.

James Mitchell: Forward, we clearly are trying to make sure that we grow commensurate with our opportunity.

James Mitchell: Okay.

James Mitchell: Our next question will come from Ryan <unk> with Morgan Stanley.

Ryan: Hey, Thanks, good morning.

Ryan: So just wanted to clarify on the comp ratio comments. When you said that you expect to continue to improve on the comp ratio is that against the 67, 6% number for the full year or against the 78% number for the fourth quarter and any thoughts on where you want that ratio to head towards this year. Thanks.

Tim Lalonde: By our estimates, we have increased our market share again this year. However, fourth quarter underwriting fees of $19 million were down 57% compared to the fourth quarter of 2022. For the full year, underwriting revenues were $111 million, down 9% versus last year. Equity issuance for last year was well below normal levels, and for the fourth quarter, issuance activity did not experience the strong pickup that we had hoped. We have a strong team in place and believe we will see a pickup in our revenues as the markets begin to normalize. Commissions and related revenue of $56 million in the fourth quarter were up 4% year over year, which, as John mentioned, reflected our strongest fourth quarter in the last five years. For the full year, commissions and related revenue of $203 million were down 2% compared to 2022.

Speaker Change: Yes sure. Thanks Ryan.

Speaker Change: The short answer is both.

Speaker Change: I think the 78.

Speaker Change: 8% fourth quarter number.

Speaker Change: Unusually high and that was due to some extent to the backend loading on the arrival of our new Smbs.

Speaker Change: With respect to the 67 six.

Speaker Change: We're absolutely striving to improve on that and.

And as we all know there are a number of factors that feed into what the comp ratio is.

Speaker Change: Most important of all is the revenue environment. So certainly.

Speaker Change: To the extent that the law.

Speaker Change: Landscape, we think is improving and hopefully our revenues along with that we would expect to see some improvement there.

Tim Lalonde: Fourth quarter adjusted asset management and administration fees of $19 million increased 13% year-over-year, while full-year revenues of $73 million increased 3% compared to 2022. Fourth quarter adjusted other revenue net was a gain of approximately $37 million, which compares to a gain of 18 million in the fourth quarter of 2022. For the full year, Adjusted Other Revenue Net was a gain of $98 million compared to a loss of $9 million last year.

Speaker Change: Okay.

Speaker Change: Our next question will come from Steven <unk> with Wolfe Research.

Speaker Change: Okay.

Steven: Thanks, Good morning.

Wanted to start off with just a question on the election.

That's impacting willingness for both strategics and sponsors to transact and maybe just more broadly what are some of the biggest potential risks that could derail the M&A recovery in 'twenty four weather geopolitical election or macro in terms of what you're hearing from <unk>.

Steven: C suite.

Steven: To date, we don't think that there is really anything regarding the election that is putting a damper on peoples.

Tim Lalonde: As I mentioned on prior calls, the significant swing year over year was driven by two primary factors. First, approximately two-thirds of the net gain we recognized was interest income due to higher short-term rates in 2023 than in 2022. Second, the balance was from gains in our investment funds portfolio, which is used as a hedge for our DCCP commitment as equity market values increased significantly in the year. The large difference between last year's number and this year's is primarily due to returns in the equity market. These gains were partially offset by minor foreign currency adjustments.

Willingness or interest in strategic dialogue and doing deals, we think that that in effect in the past elections haven't really had a major impact we don't know what's going to happen. This year, obviously, it's a different year and it's certainly a different election as it is every election, but we don't really see anything.

Steven: Right now with respect to the election.

Steven: The really big concern is actually more than anything else geopolitical, obviously, there could be economic <unk>.

Steven: Impacts also if the economy somehow backs up but I think the thing that people would classify as the biggest risks going into this market right. Now is the geopolitical risk, which I think is heightened in many respects I think most people would would actually agree with that and I think thats. The thing that we're all watching.

Tim Lalonde: Turning to expenses, the adjusted compensation ratio for the fourth quarter was 70.8 percent. Our full-year reported adjusted comp ratio was 67.6 percent. Our full-year comp ratio is consistent with the commentary I provided on last quarter's earnings call. When I mentioned we expected the second-quarter ratio of 67 percent and the third-quarter ratio of 68 percent would be generally representative of our full-year estimates. As I mentioned on last quarter's earnings call, the increase in our compensation ratio is a byproduct of the weaker revenue environment, the amortization of prior year awards, the onboarding of our new senior hire, and the market level for compensation. We had a strong recruiting year in 2023, and we do not begin accruing for our new hires until they arrive.

Speaker Change: Thank you.

Speaker Change: Next we have Brennan hawken with UBS.

Speaker Change: Hi, guys. This is Ben Rubin filling in for Brandon Congrats on a strong close to the year Mike.

Ben Rubin: My question is related to the incremental hires from last year. So the 11 advisory SMB is that you've added what is the best way to think about the incremental operating leverage from your successful recruiting campaign last year and.

Ben Rubin: And how should we think about the corresponding impact of revenue growth.

Ben Rubin: As a result of those hires as well as the increase in your baseline comp.

As a result, so for example, if advisory revenue is up X percent, what type of impact to comp growth could we expect as.

Ben Rubin: As a result, thank you.

Speaker Change: Well, let me take the first part of the question I'll, let Tim take the second.

The people we've hired we're really excited about and.

Tim Lalonde: Most of our new advisory SMD additions joined late in the year, and we recognized their compensation from the start date through year-end, which contributed to the higher fourth quarter ratio. We will continue to strive to make improvements in our compensation ratio. Ultimately, it will depend on the timing and magnitude of improvement in the environment and our revenues, among other factors. Shifting to non-compensation expenses. Fourth quarter non-comp costs of $107 million were up 11% from a year ago.

Speaker Change: In some cases, they're already hitting the ground running and revenues coming in as a result of their presence inside the firm for the most part you should think of people coming in in a ramp.

Tim: And usually it takes between a year and a half to two years for a full ramp up.

Tim: Some of the people that we've brought in.

Tim: As I said are not going to take nearly that long, but I think you should think about it is that as a consistent ramping of.

Tim: These talented people coming in and so the revenue growth will happen.

Tim: As you also know this business is somewhat lumpy you bring in a couple of big deals and then Theres a little bit of time between the next couple of deals and so I think that for the most part what you should be looking at is the consistent addition of talented people and over time that should lead to.

Tim Lalonde: For the full year, non-comp costs of $407 million also were up 11 percent, primarily driven by increases in travel and related expenses, higher license and research fees, as well as other operating expenses. As a reminder, our non-comp expenses from a year ago reflected a reversal of a liability which meaningfully decreased our non-comp expense in 2022, resulting in a larger increase year over year. Without the net impact of this, the increase in non-comp expense would have been approximately eight percent. The other significant impact was travel expense, which accounted for about four percentage points of the 11 percent increase. These two items, the expense reversal and the travel expense normalization, accounted for the majority of the increase. While our non-comp expenses per head were higher relative to the prior year, they were still about 4% lower than in 2019, the pre-COVID year. Our adjusted tax rate for the quarter was 25.3 percent, down versus last year. The full-year adjusted tax rate was 23.4%, also down slightly relative to the prior year.

Tim: Building our revenue base.

Tim: In terms of revenue per banker.

Tim: That all very much depends on really the market itself and how busy and how active the market is our levels of revenue per banker go up materially as the revenue goes up.

Tim: Aggregate sure.

Speaker Change: Sure I can just expand on that a little bit.

Speaker Change: Putting a few numbers around it.

Speaker Change: One would be if you look at our advisory partner head Count and you compare it to 2021, which was our peak revenue year.

Speaker Change: You will see the advisory partner head Count has increased almost 20% and that's a reflection of a potential increase in productive capacity.

Speaker Change: If you were to go back three years to 2020, you will have seen our advisory partner head count has increased about 27%.

Speaker Change: So.

Speaker Change: That's we think good news for us.

Speaker Change: When the market returns to more normal activity levels.

Speaker Change: Beyond that I would point out that.

Speaker Change: While we were doing those 11 partner head count adds this year.

Tim Lalonde: Turning to our balance sheet, as of December 31st, our cash and investment securities totaled about $2 billion, which is up from $1.6 billion at the end of last quarter. We continue to maintain a strong cash position, taking into consideration the current economic and business environment, cash needs for the implementation of our strategic initiatives, including hiring, and Preserving a Solid Financial Footing. For the full year, we returned a total of $523.5 million to shareholders through dividends and repurchases of 3 million shares at an average price of $129.04.

Speaker Change: Our overall head count firm wide.

Speaker Change: Up three 7%.

Speaker Change: Which is by historical standards for us a relatively modest amount.

Speaker Change: And both of those statistics speak a little bit to productivity, we look at productivity two ways.

Speaker Change: One is on a revenue per partner basis, and another is on a revenue per banker.

Speaker Change: <unk>, both of which ultimately impact margins throughout a cycle and so we think what we've done there is hopefully in the process of of rigorously managing our head count.

Operator: Our fourth-quarter adjusted diluted share count increased to $43.4 million; relative to a year ago, our share count is down slightly. However, our capital return philosophy has not changed. We remain committed to repurchasing shares to offset the dilution from our RSU year-end bonus grant. Beyond that, we strive to return capital through dividends and share repurchases based on our cash needs and strategic goals, coupled with our ability to maintain a durable balance sheet. As John mentioned, our backlogs are strong. We are seeing strength and momentum across a number of our business lines, and we look forward to what this next year will bring. With that, we'll now open the line for questions. Thank you. We will now conduct the question and answer portion of the conference. Please limit yourself to one question only. You are 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 number on your touch-tone phone.

Speaker Change: Increased productivity as we head into hopefully a more favorable environment. If you look at the partner revenue statistics.

Productivity, what you would see is generally across the cycle you would see those ranging anywhere from ballpark 15 or $16 million per advisory partner head on the lower end to the low Twenty's 2021 was an outlier in was north of $25 million per partner head, but generally.

Speaker Change: And a good market.

Speaker Change: The peak somewhere in the low twenties for us per partner head and.

Speaker Change: And so we feel like we're well positioned for when the market returns.

Speaker Change: Okay.

Speaker Change: And as a reminder that.

Speaker Change: One to ask a question.

Speaker Change: And our next question will come from Devin Ryan with JMP Securities.

Speaker Change: Okay.

Tim Lalonde: Our first question comes from James Yarrow with Goldman Sachs. Good morning, and thanks for taking my question. So if I look at completed revenue this quarter versus the deal logic, the magnitude that's not explained by the deal logic did reach a fairly large magnitude in the fourth quarter. So maybe you could just speak to which of the non-M&A advisors and everybody else. Sure, so let me start with the Dealogic question.

Devin Ryan: Okay. Thanks, so much good morning, John and Tim.

Devin Ryan: Just wanted to dig in a little bit on the strategics versus sponsored dynamic in 2023 sponsor announcements were down about 40% year over year that was the slowest year since 2013 corporate from our data were roughly flat year over year, and so I know evercore does quite well with corporates, and perhaps corporates or having a moment with the sponsor.

Devin Ryan: As being.

A little bit out of the market, but just love to get a little sense from you around.

Tim Lalonde: And so, you know, the way they calculate that is they look at deal announcements, and then they have an algorithm that de-estimates revenue. And so there's two areas for potential discrepancy. One is to the extent that the algorithm differs from the actual revenue, and that's, of course, going to happen in almost every case, although I know they're hoping for a portfolio effect where, across a large number of transactions, it's relatively close. But it's not always that way, as you've seen.

Devin Ryan: Whether a sponsor recovery.

Speaker Change: It is necessary for kind of a broader recovery for evercore or you're seeing that right now or can you continue to do quite well with corporates, which maybe as I mentioned seem to be behaving better in this backdrop. Thanks.

Speaker Change: Sure Devin.

Speaker Change: We believe that the full recovery of the market is going to require that sponsors really start to engage we see are warming up of the sponsors but as you said.

Speaker Change: Yeah.

In 2023, it was slow and we think 2024, we think there will be as there will be an strategy. The <unk> side, we think there will be a ramp.

Tim Lalonde: Second thing is it doesn't pick up our capital advisory business, and so the capital advisory business, of course, includes PCA and PFG and real estate capital advisory as well. And those businesses really had a very strong year and a particularly strong quarter. And that would perhaps have widened any normal discrepancy you might have seen.

Speaker Change: We have.

Speaker Change: Gotten ourselves off to a very good start on the strategic side, we've done some very strong strategic type transactions.

Frankly inside the firm the dialogues are very good the backlogs are building.

Speaker Change: I think that the sponsors may be delayed, but we really do believe they will begin to start kicking in there is a lot of pressure at the sponsor level to start making some doing some activity.

John S. Weinberg: Let me pick up because there's a question about the restructuring business. The restructuring business had a very good year last year, and bookings going into 2024 are quite strong also. We actually feel very good about our prospects going forward. The business is really diversified. It's liability management.

Speaker Change: <unk> capital back Theres, just a whole series of of flows that need to happen. So we think it'll happen.

Speaker Change: We believe that we will get off to a decent start on strategics, we think that there will be <unk>.

Speaker Change: Satisfactory activity really keep us busy and productive I think though that the.

John S. Weinberg: And also, we've built out our creditor business as well as our strong traditional debtor business. So generally, we think that that business will continue its momentum. It's one of the businesses that we think will have strengths going into the year and through the year. Our next question will come from Jim Mitchell with Seaport Globe. Hey, good morning.

Speaker Change: Sponsor side, it's going to be important for the overall market.

Speaker Change: As you May know or I'm sure you do 30% to 45%.

Speaker Change: Our revenues come from sponsor related activities that as private capital advisory type activities as well as the M&A side. So.

Speaker Change: It clearly is important to us as I think it is too many firms.

Speaker Change: Okay.

Speaker Change: Our next question will come from Mike Brown with K B W.

John S. Weinberg: Just maybe a question on headcount and investment. You guys, it was a heavy investment year. But if you look at net headcount growth, I think it was sort of on the SMD side, mid single digits total headcount. 4%.

Michael Brown: Great Hi, good morning, Thanks for taking my question good morning.

Michael Brown: <unk>.

Michael Brown: On restructuring you had mentioned that you feel good about the restructuring in our liability management activity.

John S. Weinberg: So how do we think about the implication for productivity? And what do you think about net hiring in 24? Thanks.

Michael Brown: Take a step back what do you think this cycle will look like I think over a multiyear horizon with central banks looking like theyre going to shift to easing it looks like the opportunity set is maybe a little softer than we thought.

John S. Weinberg: Well, the way we think about hiring is that we are looking at all the areas where we think we have strategic imperatives, and we move into that. We have a very strong pipeline going in with respect to hiring. We will make decisions as we go.

Michael Brown: Three months ago, or six months ago, so it'd be great to get some more color on how you think this activity could progress over the coming years and how you think the revenue potential could compare to 2023.

Michael Brown: As we've looked at how we're looking at the year ahead, we actually think that it's going to be quite a strong year in restructuring granted if rates come down there will be less distress in the system, having said that rates are still pretty high maturity walls are out there in 'twenty four 'twenty five.

John S. Weinberg: We are also trying very hard to make sure that we are being responsible about headcount. And so we're really making sure that we manage people coming in, and also there are some that are leaving in the process. I think the best way to think about our headcount is that we're going to actually grow where we think it's actually going to be productive for the firm. And we are definitely in the market, and we're going to continue to be responsible for managing our numbers going forward. We clearly are trying to make sure that we grow commensurate with our opportunities. Our next question will come from Ryan Kenney with Morgan. Hey, thanks. Good morning.

Michael Brown: And we see a lot of activity not necessarily in bankruptcies, although there will be bankruptcies and there'll be some larger bankruptcies, but.

Michael Brown: The activity of liability management, and helping companies to structure themselves to grow and increasingly we're getting involved in the general course of helping people think through their balance sheet and their liabilities and so as we look at what we're expecting for our restructuring business, it's actually going to be.

Tim Lalonde: So I just want to clarify on the comp ratio comments. When you said that you expected to continue to improve the comp ratio, was that against the 67.6% number for the full year or against the 70.8% number for the fourth quarter? And, you know, any thoughts on where you want that ratio to head towards this year? Yeah, sure. Thanks, Ryan. The short answer is both.

Michael Brown: Quite a healthy year, and we think that that will extend itself in the future also we really feel quite positive about how the the market is.

Michael Brown: <unk> defined by our group and really their impact.

Speaker Change: Right. The only thing I would add to that is if you put this in historical context.

Speaker Change: Years ago, it used to be.

Tim Lalonde: I think the 70.8% fourth-quarter number was unusually high, and that was due to some extent to the back-end loading on the arrival of our new SMDs. With respect to the 67.6%, we're absolutely striving to improve on that. And, as we all know, there are a number of factors that feed into what the comp ratio is.

Speaker Change: Restructuring M&A cycle was kind of feast for one family for the other.

Speaker Change: It feels like and in more recent years, what we've really seen.

Speaker Change: Is that restructuring has an opportunity to perform reasonably strongly.

Speaker Change: Throughout the cycle and I think the points Jon raised about.

Speaker Change: Higher rates, we're still in a higher rate environment. So a lot of companies put on a lot of debt at very low interest rates that were variable and are now experiencing.

Tim Lalonde: Most important of all is the revenue environment. So certainly, to the extent that the landscape we think is improving, and hopefully our revenues along with that, we would expect to see some improvement there. Our next question will come from Steven Chubak with Wolfe Research. Thanks. Good morning.

Speaker Change: Rates or alternatively, having to refinance at higher rates and.

And so even in an economic environment, which is reasonable in our capital raising and deal environment, which is reasonable we could still have a very solid restructuring environment for some period of time.

Speaker Change: Okay.

John S. Weinberg: I wanted to start off with just a question on the election and how that's impacting the willingness of both strategics and sponsors to transact. And maybe just more broadly, what are some of the biggest potential risks that could derail the M&A recovery in 24, whether geopolitical, election, or macro, in terms of what you're hearing from. To date, we don't think that there is really anything regarding the election that is putting a damper on people's willingness or interest in strategic dialogue and doing deals. We think that, in effect, in the past, elections haven't really had a major impact. We don't know what's going to happen this year. Obviously, it's a different year, and it's certainly a different election, as it is every election.

Speaker Change: Our next question will come from John <unk> with Goldman Sachs.

John S. Weinberg: Thanks, a lot for taking my follow up so I think it's very constructive that 40% of our Mds are promoted.

John S. Weinberg: Internally.

John S. Weinberg: And I also thought it was interesting that you gave the one five to two years ramp for MTS hired externally maybe you could just talk about the differences in the ramp between those that are promoted internally.

John S. Weinberg: Versus hired externally.

Speaker Change: Well I think that the ones who are promoted internally.

Speaker Change: Takes a little bit longer to really get to the high productivity level, because quite frankly, and obviously they are growing and they are learning a lot of times with what we're looking for in a lateral sense and people coming in laterally there.

Speaker Change: Already really at the height of their powers they come in with a with a fully developed client base and in many cases, they have transactions, which they've been talking about and dreaming about and really pushing for quite some time and so it takes it takes longer and I think.

John S. Weinberg: We don't really see anything right now with respect to the election. The really big concern is, actually, more than anything else, geopolitical. Obviously, there could also be economic impacts if the economy somehow backs up. But I think the thing that people would classify as the biggest risk going into this market right now is the geopolitical risk, which I think is heightened in many respects. I think most people would actually agree with that.

Speaker Change: Hard to really put a number as to how much longer but I think it's safe to say that.

Speaker Change: But the one five to two.

Speaker Change: Is really a may be conservative for the people, who come and laterally and probably about right for the people who are ramping.

John S. Weinberg: And I think that's the thing that we're all watching. Thank you. Next, we have Brennan Hawken with UPS. Hi guys, this is Ben Rubin filling in for Brennan.

Speaker Change: Who have been promoted from within.

Speaker Change: Right and.

Speaker Change: Addition to that I think yes, if we were to open our books to the public what you would see as a very.

John S. Weinberg: Congratulations on a strong close to the year. My question is related to the incremental hires from last year. So the 11 advisory SMDs that you've added, what is the best way to think about the incremental operating leverage from your successful recruiting campaign last year? And how should we think about the corresponding impact of revenue growth as a result of those hires, as well as the increase in your baseline comp as a result? So, for example, if advisory revenue is up X percent, what type of impact on comp growth could we expect as a result? Thank you. Well, let me take the first part of the question, and I'll let Tim take the second.

Speaker Change: Healthy proportion of our highest producing partners are actually people who have been promoted internally.

Speaker Change: And I think that speaks a little bit to two things one is the strengthening of our franchise. So they've got a better calling card than they might have had five or 10 years ago.

Speaker Change: And the second is I think an improved ability over time.

Speaker Change: To develop our people and to productive partners one of the most important parts of really growing the firm is to create a culture.

Speaker Change: Of aspiration and to really allow people to think that they have real opportunity to grow and so hiring from within.

John S. Weinberg: The people we've hired, we're really excited about, and in some cases, they're already hitting the ground running, with revenues coming in as a result of their presence inside the firm. For the most part, you should think of people coming in on a ramp. And usually, it takes between a year and a half and two years for a full ramp up. Some of the people that we've brought in, as I said, are not going to take nearly that long, but I think you should think about it as a consistent influx of these talented people coming in. And so revenue growth will happen. But as you also know, this business is somewhat lumpy.

Speaker Change: Promoting from within.

Speaker Change: Growing our people is really a critical part of what the culture of Evercore is and should be.

Speaker Change: In addition, creating an environment, where people who do come in laterally have.

Great opportunity to grow and really find their way and fulfill themselves is also a very important part so it all ties in culturally.

Speaker Change: Alright, and we do have another question from Steven <unk> with Wolfe Research.

Steven: Hi, Thanks, so much for taking the follow up.

Steven: First just on ECM. The performance as you noted was a bit challenged this year I was hoping you could just speak to your outlook, whether you envisage a meaningful ramp in 'twenty four as the range of revenue outcomes just over the past few years has been incredibly wide.

John S. Weinberg: You bring in a couple of big deals, and then there's a little bit of time between the next couple of deals. And so I think that, for the most part, what you should be looking at is the consistent addition of talented people. And over time, that should lead to a build-up in our revenue base. In terms of revenue per banker, that all very much depends on, really, the market itself and how busy and how active the market is.

Steven: And any specific sectors that you anticipate will be more or less active.

Speaker Change: We agree Stephen that.

Speaker Change: 2023 was disappointing.

Speaker Change: We actually see 2024 are off to a reasonable start we actually have a good book of business. That's building we've been in in a few deals starting off the new year and we see it building and so it's hard to really predict exactly where it's going to come out, but we think theres a real strengthening and.

Tim Lalonde: Our levels of revenue per banker go up materially as the revenue goes up in the aggregate. Sure, and I can just expand on that a little bit by putting a few numbers around it. One would be, if you look at our advisory partner headcount and compare it to 2021, which was our peak revenue year, you would see the advisory partner headcount has increased almost 20 percent, and that's a reflection of a potential increase in productive capacity. If you were to go back three years to 2020, you would see our advisory partner headcount has increased about 27 percent, and so that's, we think, good news for us when the market returns Beyond that, I would point out that while we were doing those 11 partner headcount ads this year, our overall headcount firm-wide was up 3.7 percent, which is, by historical standards for us, a relatively modest amount, and both of those statistics speak a little bit to productivity.

Speaker Change: We are.

Speaker Change: Quite optimistic that this will actually continue.

Speaker Change: Thank you.

Speaker Change: We do have a follow up from Jim Mitchell with Seaport Global.

James Mitchell: Hey, good morning, Thanks for the follow up maybe just Tim any thoughts on the non comp outlook for growth this year.

James Mitchell: Given the puts and takes we're trying to be efficient versus the head count growth.

Tim: Yes, sure and so I guess the way I'd think about it is and by the way.

Speaker Change: For full clarity on the call.

Tim: Our non comps increased from 365 last year $4 seven this year, which was by 11% as you heard in my comments really due to two things.

Tim: Which were the reversal at last years.

Tim: Non comp expense of about $12 million.

Tim: And the increase in normalization of travel and the two of those combined would have taken if you remove them would've taken that a lot of 11 plus percent increase down to the 4% area, where do I think we are for the outlook. This year I think there's a few things one is we will probably.

Tim Lalonde: We look at productivity in two ways. One is on a revenue-per-partner basis, and another is on a revenue-per-banker basis, both of which ultimately impact margins throughout a cycle. And so we think what we've done there is, hopefully, in the process of rigorously managing our headcount, increased productivity as we head into, hopefully, a more favorable environment. If you look at the partner revenue statistics productivity, what you would see is, generally across a cycle, you would see those ranging anywhere from ballpark 15 or $16 million per advisory partner head on the lower end to the low 20s. 2021 was an outlier and was north of $25 million per partner head, but generally, in a good market, they peak somewhere in the low 20s for us per partner head, and so we feel like we're well-positioned for when the market returns. And as a reminder, that is star number one to ask a question. And our next question will come from Devin Ryan with J&P Securities. Okay, thanks so much.

Tim: See some.

Tim: Continued normalization of travel and so I would expect to see some additional increase there. We also are living in an environment, where we've got a very data driven world and of course the data providers.

Tim: Our.

Tim: Able to have some influence on pricing power and so there could be some some modest increase there some modest increase.

Tim: With respect to head count as non comps are highly correlated with head count.

Tim: And a little bit of increase with in relation to lease expense.

As we continue to grow the firm what I would note, though is if you look at our non comps on a per head basis, what you would see is that.

Tim: They are up.

Tim: A little bit over last year, probably about 4%.

Tim: Still below pre COVID-19 levels.

Tim: And so I feel like on a per head basis.

John S. Weinberg: Good morning, John and Tim. I just want to dig in a little bit on the strategics versus sponsors dynamic. In 2023, sponsor announcements were down about 40% year-over-year. That was the slowest year since 2013. Corporates, from our data, were roughly flat year-over-year.

Tim: Done a pretty good job of controlling those over these last four or five years.

Tim: Okay.

Tim: Next we have Devin Ryan with JMP Securities.

Tim: Okay.

Devin Ryan: Hey, Thanks, Thanks for the follow up just wanted to ask about the deal timelines and I heard the prepared remarks that they are still on the more long dated side and so I just wanted to hear if that's been improving at all just with some of the improvement in Pearland and activity. So really is that just kind of a typical dynamic here that.

John S. Weinberg: And so I know Evercore does quite well with corporates, and perhaps corporates are having a moment with sponsors being a little bit out of the market. But I'd just love to get a little sense from you around whether a sponsor recovery is necessary for kind of a broader recovery for Evercore. Are you seeing that right now, or can you continue to do quite well with corporates, which may be, as I mentioned, seeming to be behaving better in this backdrop? Sure, Devin.

Devin Ryan: As recovery occurs.

Devin Ryan: Timelines are elongated, but inevitably will shrink or is there something else going on with this recovery or just in the broader kind of macro or M&A market that may continue to keep deals moving slower than they otherwise would in prior recoveries.

John S. Weinberg: We believe that the full recovery of the market is going to require sponsors to really start to engage. We see a warming up of the sponsors, but as you said, in 2023, it was slow. And we think in 2024, we think there will be, as there will be on the strategic side, we think there will be a ramp. We have gotten ourselves off to a very good start on the strategic side. We've done some very strong strategic-type transactions, and, frankly, inside the firm, the dialogues are very good, and the backlogs are building. I think that the sponsors may be delayed, but we really do believe they will begin to kick in. There's a lot of pressure at the sponsor level to start doing some activity. LPs want their capital back.

Speaker Change: I think that.

Speaker Change: That the.

Speaker Change: The timelines will continued to be elongated for the foreseeable future.

Speaker Change: Financing is something that is taking more time to really get that sorted out as companies go forward.

Speaker Change: As always the concern at this point regarding the regulatory side and antitrust and people are taking longer to really do that analysis.

Speaker Change: I think that that honestly.

Speaker Change: The strategics arent feeling tremendous urgency to to run to the finish so I think it's going to take some time I think the elongated process will continue.

Speaker Change: Don't see it really accelerating.

John S. Weinberg: There's just a whole series of flows that need to happen, so we think it'll happen. We believe that we will get off to a decent start on strategics. We think that there will be sufficient activity to really keep us busy and productive. I think, though, that the sponsor side is going to be important for the overall market. As you may know, or I'm sure you do, 30 to 45 percent of our revenues come from sponsor-related activities.

Speaker Change: To a deal frenzy for quite some time and I think what we ought to we all we all ought to actually expect is that it will continue to be.

Speaker Change: In the in a slightly elongated way for the foreseeable future right.

Speaker Change: Aspect. So that's at least is at least modestly favorable is that.

Speaker Change: One of the elements of.

Speaker Change: Elongated closing time in 2022 and 2023 was.

Speaker Change: Very challenged capital raising environment, and we do see some improvement there and would hope that that might be helpful. As we move forward.

John S. Weinberg: That is private capital advisory-type activities, as well as the M&A side. So it clearly is important to us, as I think it is to many firms. Our next question will come from Mike Brown with KPW. Great. Hi. Good morning.

Speaker Change: Our next question will come from Ryan <unk> with Morgan Stanley.

Speaker Change: Hey.

Ryan: Thanks for taking the follow up so one of the big macro changes that's happened since last quarter's call as the amount of rate cuts expected this year.

Ryan: Can you help us understand how Ceos and boards are thinking through.

John S. Weinberg: Morning. On restructuring, you had mentioned that you feel good about the restructuring and the liability. If we take a step back, this cycle, central banks are looking like they're going to shift. It looks like the opportunity is set, and is softer than we thought, to go. It's great to get some more color on how you think this actually works, in years, and how you think revenue works. Thank you.

Potential rate cuts are companies waiting at all to get more clarity on the size of the pace of rate cuts too.

Ryan: Transactions through or is there more momentum to get things through the finish line now that the forward curve has come down.

Ryan: I think those deals where they are far along and the strategy makes sense I don't think people are going to wait for rates I think people are going to move forward I do think that as rate cuts start to kick in people will look at them and certainly appreciate that rates are going to go lower than that.

Ryan: That the markets will may be become even more liquid.

Ryan: But I don't think theres going to be any deals that are actually in process, they're going to be sitting and waiting for.

John S. Weinberg: As we've looked at how we're looking at the year ahead, we actually think that it's going to be quite a strong year in restructuring. Granted, if rates come down, there will be less distress in the system. Having said that, rates are still pretty high. The maturity walls are out there in twenty four and twenty five.

Ryan: The rate cut that may be coming next.

Speaker Change: Alright, thank you.

Speaker Change: This does conclude the question and answer a question of today's call. So I'd like to turn the floor back over to our speakers for any additional or closing remarks.

John S. Weinberg: And we see a lot of activity, not necessarily in bankruptcies, although there will be bankruptcies, and there will be some larger bankruptcies. But in the activity of liability management and helping companies to structure themselves to grow. And increasingly, we are getting involved in the general course of helping people think through their balance sheets and their liabilities. And so as we look at what we're expecting for our restructuring business, it's actually going to be quite a healthy year. And we think that that will extend itself, you know, in the future also. We really feel quite positive about how the market is being defined by our group and its real impact. Right?

Speaker Change: Yeah.

Speaker Change: Thank you all for joining us today, we really appreciate it.

Speaker Change: This concludes today's Evercore fourth quarter and full year 2023 earnings conference call.

Speaker Change: May now disconnect.

Speaker Change: Hum.

Speaker Change: [music].

Tim Lalonde: The only thing I would add to that is, you know, if you put this in historical context, years ago, it used to be that the, you know, restructuring M&A cycle was kind of feast for one famine for the other. It feels like, in more recent years, what we've really seen is that restructuring has an opportunity to perform reasonably strongly throughout the cycle. And I think the points John raised about higher rates; we're still in a higher rate environment. So a lot of companies put on a lot of debt at very low interest rates that were variable and are now experiencing higher rates or, alternatively, having to refinance at higher rates.

Speaker Change: Yes.

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Hmm mm.

Tim Lalonde: And so even in an economic environment which is reasonable and a capital raising and deal environment which is reasonable, we could still have a very solid restructuring environment for some period of time. Our next question will come from James Yarrow of Goldman Sachs. Thanks a lot for taking my follow-up. So, I think it's very constructive that 40% of your MDs are promoted internally, and I also thought it was... You gave the 1.5 to 2 years ramp for MDs hired externally. Maybe you could just talk about the differences in the ramp between those that are promoted internally versus those that are hired externally.

John S. Weinberg: Well, I think that the ones who are promoted internally take a little bit longer to really get to the high productivity level because, quite frankly, and obviously, they're growing and they're learning. A lot of times, with what we're looking for in the lateral sense and people coming in laterally, they're already really at the height of their powers. They come in with a fully developed client base, and in many cases, they have transactions which they've been talking about and dreaming about and really pushing for quite some time. And so it takes longer, and I think, you know, hard to really put a number as to how much longer, but I think it's safe to say that the one and a half to two is really, maybe, conservative for the people coming laterally and probably about right for the Right. And, you know, in addition to that, I think if, you know, we were to open our books to the public, what you would see is a very healthy proportion of our highest-producing partners are actually people who have been promoted internally. And I think that speaks a little bit to two things.

Tim Lalonde: One is the strengthening of our franchise, so they've got a better calling card than they might have had five or ten years ago. And the second is, I think, an improved ability over time to develop our people into productive partners. You know, one of the most important parts of really growing the firm is to create a culture of aspiration and to really allow people to think that they have real opportunities to grow. And so, hiring from within, promoting from within, creating a culture of aspiration, and growing our people is really a critical part of what the culture of Evercore is and should be. In addition, creating an environment where people who come in laterally have a great opportunity to grow and really find their way and fulfill themselves is also a very important part. So it all ties in culturally.

John S. Weinberg: All right, and we do have another question from Steven Chubak with Wolf Research. Thanks so much for taking the follow-up. First, just on ECM, the performance, as you noted, was a bit challenged this year. I was hoping you could just speak to your outlook, whether you envisage a meaningful ramp-up in 2024, as the range of revenue outcomes just over the past few years has been incredibly wide, and any specific sectors that you anticipate will be more or less... We agree, Steven, that... 2023 was disappointing. We actually see 2024 off to a reasonable start.

John S. Weinberg: We actually have a good book of business that's building. We've been in a few deals starting off the new year, and we see it building. And so it's hard to really predict exactly where it's gonna come out, but we think there's a real strengthening, and we're quite optimistic that this will actually continue. Thank you. We do have a follow-up from Jim Mitchell with Seaport Global. Hey, good morning

Tim Lalonde: Thanks for the follow up. Maybe just Tim, any thoughts on the non-comp outlook for growth this year? Given the puts and takes of trying to be efficient versus headcount growth, yeah, sure. And so I guess the way I think about it is, and by the way, just for full clarity on the call, our non-comps increased from $365 last year to $407 this year, which was about 11%, as you heard my comments, really due to two things, which were the reversal of last year's non-comp expense of about $12 million and the increase in normalization of travel. And the two of those combined would have taken, Where do I think we are for the outlook this year? I think there are a few things.

Tim Lalonde: One thing is we will probably see some continued normalization of travel. And so I would expect to see some additional increase there. We also are living in an environment where we've got a very data-driven world.

Tim Lalonde: And of course, data providers are able to have some influence on pricing power. And so there could be some modest increases there, some modest increases with respect to headcount, as non-comps are highly correlated with headcount, and a little bit of an increase in relation to lease expense as we continue to grow the firm. What I would note, though, is that if you look at our non-comps on a per-head basis, what you would see is that they're up a little bit over last year, probably about 4%, but still below pre-COVID levels. And so I feel like, on a per-head basis, we've done a pretty good job of controlling those over these last four or five years. Next, we have Devin Ryan with J&P Securities. Hey, thanks.

John S. Weinberg: Thanks for the follow up. I just want to ask about the deal timelines, and I heard the prepared remarks that they're still on the more elongated side. And so I just wanted to hear if that's been improving at all, just with some of the improvement in tone and activity.

John S. Weinberg: So really, you know, is that just kind of a typical dynamic here that, you know, as recovery occurs, the timelines are elongated, but they inevitably will shrink? Or is there something else going on with this recovery or just in the broader kind of macro or M&A market that may continue to keep deals moving slower than they otherwise would in prior recoveries? Thanks.

John S. Weinberg: I think that the timelines will continue to be elongated for the foreseeable future. Financing is something that is taking more time to really get that sorted out as companies go forward. There's always the concern at this point regarding the regulatory side and antitrust, and people are taking longer to really do that analysis. I think that, honestly, the strategics aren't feeling tremendous urgency to run to the finish.

John S. Weinberg: So I think it's going to take some time. I think the elongated process will continue. I don't see it really accelerating into a deal frenzy for quite some time. And I think what we all ought to actually expect is that it will continue in a slightly elongated way for the foreseeable future.

Tim Lalonde: One aspect, though, that is at least modestly favorable is that one of the elements of the elongated closing time in 2022 and 2023 was a very challenging capital-raising environment. And we do see some improvement there and would hope that that might be helpful as we move forward. Our next question will come from Ryan Kenney with Morgan. Hey, thanks for taking the follow-up.

John S. Weinberg: So one of the big macro changes that have happened since last quarter's call is the amount of rate cuts expected this year. Can you help us understand how CEOs and boards are thinking through potential rate cuts? Are companies waiting at all to get more clarity on the size and pace of rate cuts to put transactions through, or is there more momentum to get things through the finish line now that the forward curve has come down? I think those deals where they are far along and the strategy makes sense, I don't think people are going to wait for rates. I think people are going to move forward. I do think that as rate cuts start to kick in, people will look at them and certainly appreciate that rates are going to go lower and that the markets will maybe become even more liquid. But I don't think there's going to be any deals that are actually in process. They're going to be sitting and waiting for the rate cut that may be coming next.

John S. Weinberg: All right, thank you. This does conclude the question and answer portion of today's call, so I'd like to turn the floor back over to our speakers for any additional or closing remarks. Thank you all for joining us today. We really appreciate it. This concludes today's Evercore fourth quarter and full year 2023 earnings conference call. You may now disconnect. Bye! Thank you.