Evercore Inc (EVR) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Partners fourth quarter and full year 2010 financial results conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference call will open for questions. (Operator Instructions). This conference call is being recorded today, Wednesday, February 2, 2011. I would now like to turn the conference over to your host, Evercore Partners' Chief Financial Officer, Robert Walsh. Please go ahead, sir.

Thank you. Good morning and thank you to everyone for joining us today for Evercore's fourth quarter and full year 2010 financial results conference call. I'm Bob Walsh, Evercore's Chief Financial Officer and joining me on the call today are Ralph Schlosstein, our President and Chief Executive Officer, and Roger Altman, our Chairman. After our prepared remarks we will open the call for questions. Earlier this morning we issued a press release announcing Evercore's fourth quarter and full year 2010 results. The Company presentation today is complementary to that press release, which is available on our website at www.evercore.com. This conference call is being Webcast live on the Investor Relations section of the website and an archive of it will be available beginning approximately one hour after the conclusion of this call for 30 days.

I want to point out that during the course of this call we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. These factors include, but are not limited to those discussed in Evercore's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. I want to remind you that the Company assumes no duty to update any forward-looking statements.

In our presentation today, unless otherwise indicated, we will be discussing adjusted pro forma or non-GAAP financial measures, which we believe are meaningful when evaluating the Company's performance. For detailed disclosures on these measures and their GAAP reconciliations, you should refer to the financial data contained within our press release. We will refrain from repeating the information included in the press release and focus instead on the key opportunities, challenges and changes in our business. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we've noted previously, our results for any particular quarter are influenced by the timing of transaction closings, both in our advisory and investment management businesses. I'll now turn the call over to Ralph.

Thanks very much, Bob. Before I talk about the quarter and the year, let me start by saying how pleased I am to be doing this call with Roger again. As all of you are aware, Roger was one of the finalists, one of two finalists to head the National Economic Council, which is the most senior economic policy job the in the White House. I won't say anything about the merits of President Obama's choice, but I definitely will say that while we were honored to have our founder and Chairman considered for this incredibly important position, the country's loss is definitely Evercore's gain. And while I definitely want to highlight that we have an extraordinarily diversified advisory business with no partner accounting for much more than 5% of revenues, there's no question that Evercore, with Roger, is a stronger firm than Evercore without him and I know that I speak for all of our partners and certainly for myself when I say that it's also a hell of a lot more fun here as well.

And that completes our earnings report this morning. Thank you very much for joining us.

Let's see. We did put up a little revenue, so let me talk about that as well. Fourth quarter was a good quarter for Evercore. Revenues $102 million, investment banking performed well.And that's despite the fact that a couple of deals, both of which are in the public domain, the restructuring of the [NAUS] and Qatar Holdings acquisition of a 9.1 stake, 9.1% stake in Hochtief spilled over into the first quarter and will be recognized then. Investment management reported record revenues of $26.4 million, up over 10% from the third quarter. Net income was $11 million, $0.27 a share. Our investment management business contributed to earnings for the first time this quarter and our early stage businesses achieved their objective of breaking even on a run rate basis on an operating basis in the fourth quarter, rather than at the end of the fourth quarter, so a quarter early.

The fourth quarter compensation ratio was 61.6%, down slightly from last quarter and consistent with the full year compensation ratio. And this was achieved despite the fact that we're making some pretty significant investments in our business. Non-comp costs increased 7% from the third quarter, driven primarily by higher professional fees, particularly search fees, and higher travel costs driven by what Roger will talk about as a higher level of activity. For the full year was a record, revenues both in terms of investment banking and investment management and obviously if our two businesses, both individually achieved record revenues, the firm as a whole also achieved record revenues. Full year net income was $38 million. That's up 15% from 2009. Earnings per share were $0.94. Within the investment bank, we advised General Motors on its IPO, the largest in the history of the equity capital markets.

We also advised Swift on its IPO, which was the second largest IPO in the US last year. And our capital markets initiative continues to build momentum and we are involved in a number of interesting opportunities this quarter, which I look forward to talking about in April when we discuss this first quarter's earnings. We advised on the two largest -- two of the three largest M&A transactions in the US, CenturyLink Qwest and Sanofi-Aventis Genzyme. Those are announced transactions and Roger, obviously, will talk more about the M&A market shortly. European business improved significantly in 2010, advising on several prominent transactions, including Babcock VT and Nestle Vitaflo. And our institutional equities business has now launched coverage of more than 100 companies, has opened accounts with 110 institutional clients, had revenues from 75 of those, and we continue to manage this business with the objective of achieving breakeven on a run rate basis by the end of this year.

Within investment management, we now have over $17.4 billion under management, up from $4.3 billion at the end of 2009. Both of the acquisitions made in 2010, Atalanta Sosnoff and Trilantic, contributed to earnings for the year and as I indicated earlier our early stage businesses contributed to operating income in the fourth quarter. Expenses of $311 million increased 22% from last year, predominantly reflecting our growth and investments in the business. The full year compensation ratio was 65 -- 61.5%, excuse me, and non-comp expenses of $80 million. While they are up 51% from last year, this is driven predominantly by the addition of new businesses and the growth in our advisory business. Full year operating margins decreased slightly to 17% from 19% in 2009, reflecting the investments we are making this year. And we anticipate that this trend will reverse profoundly in 2011 as these investments start to produce more meaningful revenue. Let me now turn the call over to Roger, who will talk about the M&A environment and our business.

Investment banking generated $76 million of revenue for the quarter and in round numbers $300 million for the year. It was a fine quarter. It was a good year. And those results come against an environment which saw flat to down completed transactions in the M&A world for the year. Actually, completed transactions were down. Announced transactions, which is the more important sign, were up nicely and the outlook, as I'll talk about in a minute, for those was good, but as you know we're paid on completed transactions. So, for the market as a whole they were down 2010 over 2009, so I'm pleased that Evercore generated higher revenues than the year before and had by most historical standards for ourselves a good quarter. Yes, the quarter was a bit weaker than the third quarter and a bit weaker than last year's fourth quarter, but if you looked at the last three or four years, or even the last two years, for Evercore on a quarter by quarter basis in terms of our revenues, $76 million is really solid.

As Ralph mentioned, we had two transactions we thought were going to close this quarter which slipped into early part of January and now have closed. If those had been on schedule, it really would have been a very strong quarter. The breadth of our business continued to improve. We had 98 fee-paying clients this past quarter, up from 85 last quarter. We had 191 fee-paying clients for the year as a whole, up from 162 in 2009. Those are really important measures in terms of how our platform is spreading and our business is diversifying. During this past quarter we had 20 clients pay us more than $1 million. That's the best we've ever had in terms of any quarter. Geographically, the United States market continued to dominate our investment banking revenue, accounting for five-sixths of the total. But Europe, as Ralph said, improved quite a bit for us over 2009.

Mexico was a little bit down, but we're quite heartened by the recovery in Europe for us. We continued our leadership position among independent firms or, as some people call them, boutique. For the year we finished first in US M&A among boutiques as measured by completed transactions and second as measured by announced transactions. We finished tenth among all firms, all investment banks that is, on the completed side and 12th on the announced side. And as Ralph said, we advised on two of the three biggest US M&A transactions in the market last year, CenturyLink Qwest, Sonafi Genzyme, and we advised on the two largest IPOs. Those things are very important to Evercore because, as you know, historically we have a long record of advising on the largest and highest profile transactions in the market. So that continued in 2010.

And I expect it to continue again in 2011. Our average revenue per SMV in the US was $10 million on a round number basis. That's rolling 12 months. And that's essentially our standard. We don't want to do worse than that. That's what we seek to do. Globally it's lower at around $7 million because we're not as strong in Europe or in Latin America as we are here, but of course our goal is to change that. Our comp ratio on global investment banking was just over 62% for the quarter and just over 60% for the year. But keep in mind, our definition of investment banking these days includes two brand-new businesses. One is institutional equities, which we include in investment banking, and one is our private funds group, which means a fund raising business for private equity firms and the like. Both have been left with us for less than a year. Ralph talked about institutional equities.

They are ramping up fast, but they are not profitable yet. So they, obviously, have the impact of raising our comp ratio above what it would be if we didn't have those businesses. In the core advisory business, meaning leading out the new ones, the comp ratio was 51% for the quarter and I think that's fine. Headcount for the fourth quarter in investment banking was flat at 330 people. It was up a lot from a year ago. The figure a year ago was 247 people at year-end. Approximately 60% of that increase came from the two new initiatives of institutional equities and private funds group and the balance came from continuing to build out our core advisory business. Let me close with a few comments on the market as a whole. The market in mergers and acquisitions is continuing to recover and strengthen. We've often pointed out to you on these calls that the up cycles, historically speaking, extend over five to seven years.

That meaning that if you look at them over a 40 to 50 year period that's what you see. The low point in this cycle was reached in the second quarter of 2009. Meaning if you just look at total M&A, either US or globally, that was the low point. So we are at best 30% into this new recovery cycle if it's only five years and obviously we're less along into it if it ends up being longer than five years. So there's obviously a lot of runway ahead. Now, for 2010, announced volume of M&A was up 22% on a global basis. In the US year-over-year up 12%. So you can see the way the market is taking off, because completed transactions, as I mentioned earlier, were actually down. What obviously speaks to the future is what's announced, because deals take three months, six months, nine months, 12 months to close, depending on the situation. So that's a very positive sign. In the fourth quarter, announced volume around the world was up 14%, in the US up 4%.

Now, we've often talked about the conditions which make for strong transaction markets and those which make for weak markets. On the strategic side, the conditions that you want to see present themselves for strong markets are four -- Rising equity levels; rising stock markets; improving business conditions; plentiful availability of financing and particularly credit; and all of those typically lead to the fourth factor which is rising senior executive confidence. All four of those pillars are firmly in place right now and that's why the market's rising and that's why the outlook is good. And I believe that global M&A volume for 2011 and for 2012 and US volume for those two years is going to be solidly up. In other words, 2012, 2011 will be better than 2010 on both of those accounts and 2012, in my judgment, will be better than 2011.

Finally, we're seeing the return of the sponsors in a great big way. You're going to see a very, very active year this year from the sponsors on both the buy side and the sell side. That's important to Evercore because we made a big push in the last three years towards sponsors and we're doing very well. And so you'll have strategic M&A rising. You'll have the sponsors returning to a much more active posture. By the way, at the peak in 2007, they accounted for 40% of global transaction volume. And that's why the outlook for the broad market we serve is quite a strong one.

Okay. Let me just talk briefly about investment management and institutional equities and then make a couple comments about 2011 for the firm as a whole. First of all, investment management, as I said, operating income for the fourth quarter was $2.5 million, including for a first time a positive contribution from our early stage businesses. Assets under management increased for the full year or for the quarter by $800 million and are now at $17.4 billion. The business had outflows of approximately $230 million, more than that amount, $250 million, were outflows in our cash management products in Mexico, which are seasonal, tied to year-end usage. And those modest outflows were offset by approximately $1 billion of market appreciation. Fee-based revenues were $23 million in the fourth quarter, up 4% from the third quarter and up 147% from the fourth quarter of last year.

And this growth reflects growth in both Atalanta Sosnoff and our early stage businesses. We continue to see opportunities to invest in high quality investment managers and are pursuing these opportunities when the characteristics of those businesses meet our stringent requirements and when the price at which we can acquire them creates value for our shareholders. The institutional equities business, we're pleased with the progress of that business. We have a strong team in place, 43 professionals in research, sales, and sales trading. We now cover approximately 110 companies in technology, media and telecom and financial institutions. We're signing up institutional clients at a very steady pace and, as I mentioned, we've generated revenues with 75 institutional clients so far.

For the full year, the institutional equities business was about a $0.10 a share drag on earnings, with the impact in the fourth quarter lower than the $0.05 a share loss in the third quarter. As I've said before, the success of this initiative will be driven by our ability to provide actionable investment ideas and high quality service to the largest institutional investors in the US and to provide capital markets advisory services to our core corporate and financial sponsor clients. We've built a really strong team here and we're now focused on executing our plan and the early results, even in the first month of this year, are encouraging with respect to that. Finally, let me make a couple comments about 2011. As we enter the year we begin, I believe, with a number of at least breezes, if not winds at our back.

Investment management, while it was a contributor to earnings in the fourth quarter, was a drag on earnings in 2011 for the full year. Clearly, will be a contributor to earnings in 2011. Our new initiatives, the institutional equities business and the private funds business, while they were drags on earnings in 2011, in the case of the institutional equities business will be a declining drag on earnings throughout the year until it gets to run rate breakeven by the end of this year and private funds business we expect to have a much stronger year than it did in its first when it was getting up and running. And I think in the institutional equities business each successive quarter, certainly in terms of trading and CSA revenue, will intensify as we penetrate the institutional accounts to a greater degree.

We should expect still some lumpiness as a result of underwriting activity, because that tends to be more variable quarter by quarter. And finally, as Roger described, M&A activity continues to recover at a measured pace and that recovery is manifest both in the aggregate announced and closed deal statistics and in Evercore's own backlog. Finally, let me make one comment about the globalization of the advisory business. As Roger indicated, that business is becoming increasingly global, with a growing portion of all transactions and large transactions occurring across countries and more frequently across continents.

We are very focused on continuing to globalize our advisory business, so that we are well positioned to participate in these trends. Our acquisition last year of a 50% interest in G5, the premier independent advisory firm in Brazil, was part of that effort and, as you know, we're on a path to acquiring all of that business over the next few years. Our ventures with CITIC Securities in China and Mizuho in Japan also position us to advise clients interested in those countries. And we will continue to explore both hiring individual additions to our partnership and inorganic opportunities that allow us to intensify our geographic footprint in areas in which we are under-represented, such as Europe, and in important areas in which we are not yet present. Let me now turn it over to Bob for a few comments on the financials.

Just if I can to wrap up, Ralph commented on the growth in non-comp costs for the quarter, so I won't elaborate on that further. When you look at that growth on a full year basis, a couple of numbers to break it down. Costs related to acquisitions were $8.7 million of the full year growth, $5.3 million of that relates to intangibles. The new businesses in the aggregate, that's our institutional equities, private funds group, and Atalanta for the period that we owned that business, contributed $7.4 million. That number excludes the intangibles, of course, and then the overall growth of our core businesses contributed another $11 million. Our balance sheet remains strong with $234 million of cash, cash equivalents and marketable securities. Of course, that number will decline in Q1 as it always does with the seasonal payment of bonuses. And finally, with respect to Treasury stock transaction, activity was nominal this quarter on the back of substantial activity in the third quarter as we have discussed and a rising share price during Q4. So with that, operator, if we can open the line for questions.

(Operator Instructions). Devin Ryan with Sandler O'Neill.

When we're trying to size the opportunity for M&A revenues as this recovery hopefully continues, we can go back and look at your advisory revenue, production per banker over the past cycle and it's clear that we're still, obviously, much closer to the bottom of the range than the average. Do you still think it's reasonable to compare Evercore and its revenue potential based on average banker production in the prior cycle or is there anything that's changed in your view with the firm or the cycle's maybe potential or this cycle's potential that would make these prior revenue comparisons less relevant?

I think they're fair. That's the way I think about it for better or worse. We expect our partners to do at least $10 million of revenue a year and we're trying to get our global -- our non-US totals there up to the US standards. Obviously there's a lot of variation around the mean. And so I don't think there's anything wrong with looking at -- and we do ourselves -- at the past productivity results as indicative of the future. There's certainly nothing that suggests that they should be lower going forward than they've been. If they are, we've screwed up. We're bad.

Okay, got it. Okay, that's helpful. And then just you commented on Europe and it's obviously been a bit better for you, but pretty stagnant for the industry. Just want to get a sense of how conversations and maybe behind the scene conversations that we can't see are going and if you have any sense on the timing of what we could see maybe a more noticeable acceleration there.

I think first of all, the magnitude of our European business, just like the magnitude of our US business, has to be tied to the number of producing partners we have in the environment. We actually, in a very gracious way, reduced that a little bit last year to the point where we now have five partners in our London office. So in order for us to have material expansion in our activity in Europe, you need both some recovery in Europe M&A, which is in fact happening, and as we look at our activity levels going into 2011, as I commented earlier and it's certainly true of Europe as well as the US, the backlog is meaningfully more robust than it was entering last year. But the bottom-line is that one, either through hiring of partners or inorganic activity, we need to expand our footprint in Europe and we're very hard at work on doing that.

Okay. Well, I guess just following up on that, when you think about your presence outside the US, how time sensitive is it to really be bigger in Europe and outside of that in some of the more emerging markets and just could we expect more deals like you did with G5 advisors or are you open to doing more deals along those lines to maybe get in some of these areas faster than you could do it organically?

Eventually the transactions follow GDP. And as the composition of world GDP shifts, and it's shifting very rapidly, transactions are going to follow that. So the developed world, US, Europe, Japan, is going to be slowly but surely less central to the world of M&A than it's historically been. Now, right now the US is the strongest economy of those three and looks like it's going to be for quite some time and certainly the strongest M&A market, but in the long, long run, or medium run, China, Brazil, India and other like markets are going to ultimately become just as important as the developed world. For Europe, we all know the economic outlook for Europe, GDP and so forth is not very good for the short to medium term. So we have to be very judicious as to how we build there.

And in general, Europe is probably not the brightest spot in the future. I'm not talking about Evercore, I'm talking about our entire industry. So you have a tectronic shift going on, whether you're talking about how AT&T or Procter & Gamble and companies like that look at their business or whether you're talking about the transaction market. From the developed world to the developing world, it's slow. The developed world is slow shift I mean. The developed world is still more important. But, we need to be on it in terms of China, Brazil, and so forth, and that's why you've seen us in our joint venture with CITIC and our deal with G5 and we're going to be doing everything we can to improve our positioning in those markets.

And, Devin, with respect to Europe or just the smaller firms generally, we're definitely seeing a pickup in inquiry from these geographically constrained firms that are in one market or two markets, because of the globalization of M&A activity. If they serve large global firms, they're missing more business when their clients are going outside of country or outside of continent. And just as we are affiliating with places like -- firms like Mizuho and CITIC Securities to expand our geographic footprint, they are light years behind us and are making inquiries as to whether an affiliation with a firm like Evercore expands their footprint. And I'd say there's definitely been a pickup of that type of inquiry toward us and we represent, I would say, probably the firm with the most attractiveness and cache for many of those firms because we are substantial and prestigious, but unlike, for example, a Lazard which is everywhere, we have much less overlap than Lazard would have with these other firms.

Okay. Great. Thanks for taking my questions.

Mark Lane with William Blair & Company.

I have a follow-up to the last question and then just a question about comps. So, on the hiring environment, is the hiring environment getting better? Is it imminent that we'll see some more hires over the next few months in the US following the typical seasonal pattern? That's the first question. The second question is on comps you highlighted the comp ratio excluding some of the startup businesses. What sort of revenue growth do you think we need to see in 2011 to see that comp rate -- to see some improvement in that comp ratio and potentially something below 50%?

Okay. Let me, Mark, take the second question and I think we've consistently said that we expect to make consistent progress in our comp ratio, measured on a trailing 12 month basis, toward ultimately being in the range of 50% to 55%. To get to the range of 50% to 55%, all of our businesses have to be at a point where they are not making large investments relative to the size of their business. I think in our advisory business, which is why the comp ratio that Roger reported is where it is, we're certainly at that point or close to that point here in the US and so the comp ratio that we have is in that 50% to 55% range.

In our other -- in investment management we're getting closer to that point as well. We're probably I would guess a year, maybe a year to two years away from that. In the institutional equities business it probably takes a little bit longer and the private funds business I would guess is probably a next year type event as we build up that business. So the answer is not a simple what's the growth rate in 2011. The way we measure ourselves is we want to make steady progress until we get to that 50% to 55% basis. We measure it on a trailing four quarter basis and the only thing I will say is that, look, if a phenomenal opportunity comes along to hire a large team of people that sets us back a little bit but that is highly value-creating over a three to five-year period of time, we're going to seize that opportunity and you should want us to.

On hiring, I would say the market is mixed and what I mean by that is Evercore is in a very strong position. You can see that by the way in terms of our record on analysts and associates. We had the best year we've ever had. Right now, as you know, the recruiting season essentially is the fall and the very beginning of the new year. So we've just completed our analyst and associate hiring and we never did better than we did this year. I think we, from memory this might be wrong, but I think we made offers to 16 associates and hired 15 of them. And obviously these are from Harvard, Chicago, Stanford and so forth on the MBA side. That's the good news.

The other news, though, is that of course some of the firms which were down and out a couple of years ago, we all know who they were, especially the big guys, have gotten back on their feet, dusted themselves off and are trying very hard to retain the people they have. And to hire new people. So competition has rebounded. So I would say I don't think anybody in the market has -- (technical difficulty) we will announce shortly, but we only -- our standards are very high. We only hire people that we think pass our test. Paul Denninger, whom we just announced, joining our tech group as a partner is an example of the type of partner we love to recruit. So we expect to add a few this year laterally, as well as a few internally. But I'm not going to prejudge the number.

Okay. Good enough. Thank you.

Joel Jeffrey with KBW.

Can you guys talk a little bit about what you're hearing from managements regarding some of the unrest going on in the Middle East and any impact that could have on global M&A?

CEOs get up in the morning like the rest of us and they, as they like to say about sports, put their pants on one leg at a time. They're no different than any of us. Their reactions to it are the same as yours or anybody on this call. They're watching it with fascination and interest. They're watching the impact of it on markets, commodity markets, equity markets, fixed income markets and the like. I don't think they know what the -- I'm pretty sure that they don't know what the impact is going to be on their business. Because, of course, this has all sprung up in the past several days.

(technical difficulty) and it really remains to be seen, of course, how this is resolved. So it's an object of enormous interest and concern, but I don't think you would find many CEOs today, apart from those who may have a serious business in Egypt itself, that's another matter, who could tell you with confidence what the ultimate impact of Egypt will be, because A, they don't know how it's going to be resolved, B, they don't know how it will affect markets, both financial markets and markets they themselves serve. Obviously, from a very, very broad point of view global markets, financially speaking, have not been destabilized by this. The US equity market has been relatively strong through this, so far. But, anyway, it's too soon to judge would be my short answer.

Okay. Great. Thanks. And then just on the investment management side, looks like you clearly had some slight outflows which appear to be mostly tied to your Mexico business. Is there a target you guys look for on an annual basis in terms of inflows and what you think could be achievable?

More rather than less, obviously. I think that that's a hard thing to answer because we're not in that many product lines and so, for example, if you look at our largest investment management business, Atalanta Sosnoff, it's in large cap US equities. That was a sector that for the industry as a whole had outflows last year. Actually, not small outflows. And a function both of people moving from or institutions and people moving from equities to fixed income and within equities, outside of the developed world, that Roger described earlier, into the developing world. So, for the year, we had inflows in equities against an outflow of US equities generally in the market. So, you'd like to think that you get double-digit growth in your assets under management each year, maybe half of that from flows and half of that from appreciation, but clearly that's more of an average than an every year type phenomenon.

Great, thanks for taking my questions.

Eric Bertrand with Barclays Capital.

Asking the flow question a different way. Considering your relative size and the youngness of your business, having solid inflows relative to an industry that is outflowing is to be expected. Would you say that the magnitude of your net inflows was satisfying or are you looking to get more out of that business?

I'd say 2010 was a good year. Obviously, you always look for more, but I would say 2010 was a satisfying year when you look at the combination of our early stage businesses and the businesses that -- the two businesses that we acquired.

Okay. And then coming at the recruiting question a different way, you guys commented that the higher professional fees in the quarter were principally driven by search fees, at least on a 3Q versus 4Q basis, that is a pretty sizable step up than we've seen in prior years. Is this a reflection that you expect to have a higher amount of hiring in 2011 than we saw in 2009 and 2010.

No, it means that we've really got our pedal to the metal. Evercore hasn't historically used search firms to a great degree. We have sometimes, but not really as much as most of the counter part firms. So we have two very major ones working for us right now on advisory hiring, each handling different verticals that we're seeking to expand in. And our search fee expense right now is definitely higher than it's ever been because of that. I'm very centrally involved in that, working with Bob Walsh and others and we're just -- in respect to my comment earlier about how the market's become more competitive than it was a year or two ago, although it's essentially returned to where it was, say, four years ago or five years ago. Nevertheless, we're bigger now and it's not -- our view is we have to be increasingly more systematic about it, so we've brought onto the best search firms and we're paying for it.

I think also it bears reminding everyone that our approach to hiring is somewhat different from our competitors. So for example, we identify an industry that we're looking for and in this case we hired one or another head hunter to pursue that. And we go after the top one or two or three names in that sector and if we can't get one of those people to join the firm and the key test being can they generate on average $10 million plus of revenues a year, then we pass, because the truth is that productivity in this business is by far the most important driver of operating margins and comp ratios and ultimately your success in the business. So, I think we've said before an A plus is worth one and-a-half, two times what an A is worth and an A is worth one and a-half, two times what an A minus is worth and if you have an A minus you probably made a mistake. And we try, we don't bat 1,000, but we try very hard to avoid that.

Okay and that's fair. Understanding the expense itself, you are paying these search firms ahead of successful hiring?

Yes, it's a retainer.

In contrast to the actual advisory business where you get paid when the deal is done. That's correct.

You have to put these people on retainer.

Okay. I'm just understanding how they do business. Getting to the comments earlier about how no partner is more than 5% of your advisory revenue. Do you count Roger in that definition of partner, he's more a founder?

Very simple, yes.

Okay. And how much, using a broader definition, how much would you say that Roger touches in a material way? Certainly must be more than 5%.

Yes. We don't really count that, keep that statistic. And by the way, Roger's not the only senior person that we have here that touches different things. We're blessed to have three or four very senior generalist bankers who literally, if they're involved in any situation, the client is getting a benefit that they can't get from any other firm. And we use that capability as you would expect on a regular basis with our clients.

I generally agree with it. The direction I was going with this is I think that, no offense to Roger, I think that percentage is actually smaller than most shareholders fear, because you do have such a broad bench. So that's helpful color.

Also, I'm in the gym six or seven hours a day, so I'm only working a couple of hours and my impact on the firm is diminishing for that reason and last night I went to the Rangers Game and in the shootout I was the sixth guy, I guess, that was in the shootout. So I have a lot of stuff going on. Banking's important, but it's not the end of the world.

Very productive on a per hour basis. (multiple speakers) (laughter) Maybe I missed in the prepared remarks, but do you have a general comment on the size of your advisory backlog as of the end of the quarter versus the end of the third quarter?

We never quantify our backlog. I would just say it's strong and it's improved.

Okay. And then my last question will be on your corporate cash balance. You mentioned some interest in some inorganic opportunities to buy some advisory businesses or investment management businesses. You've also got the Treasury stock purchase program. How would you balance those priorities and where are you in the thought process of net repurchasing?

Well, in terms of -- first of all Treasury stock, we've said that it is our objective each and every year -- we said two things. One, it's our objective each and every year to repurchase at least the amount of stock that we issue in year-end compensation. And the second thing we have said is we generally expect to operate this business, since other than inorganic activities we have no businesses that are cash users, that we expect to operate the business in a way such that dividend plus share repurchases will be roughly equal to our earnings in any given year. Both of those tests we exceeded fairly materially in 2010. If you look at dividends plus share repurchases, they were somewhat more than earnings, because in the third quarter of this year we got an opportunity to buy what we thought was a significantly undervalued equity and we did.

And we certainly exceeded, by virtue of that, the repurchase of the number of shares by any measure that were issued for compensation. Those policies guide us in 2011 as well. And obviously, one of the things that -- in any acquisition, whether it's in money management or in the advisory business, we're extremely disciplined in terms of the effect on our shareholders. And while, for example, Brazil we believe is a very attractive market, we did that in a way that was non-dilutive to our shareholders, which if you look at most acquisitions by US companies in Brazil, that's not necessarily the case. And so that's something that we will continue and that makes us very selective first on quality and second on -- there are lots of good businesses out there where the gap between what we're prepared to pay and what the sellers are prepared to sell their business at is too wide.

Great. Thank you for taking my questions.

Hugh Miller with Sidoti & Company.

Just looking at the institutional equities business, you guys mentioned that you're finishing the year with 13 analysts covering just over 100 companies. Obviously, we should see some continued benefit in that business with the additional roll-out of new coverage from those analysts. Can you talk about how you're viewing that, though? Should we see a pause here for you to digest what you've currently invested in that business or do you anticipate that in 2011 you'll continue to look at additional opportunistic expansion here and there?

Well, the first thing -- there are still a couple of subsectors, both in TMP and in insurance or in financial institutions, most specifically in insurance, that we're not covering yet. So if you look at what we did in -- if we went from zero to 43 in 2010, the amount of hiring that you should expect in this business this year might be more on the order of 10 to 15 rather than another 40 or another 30. And so the number one priority is to fill out those couple sectors or subsectors in TMT and FIG that we aren't covering today. And then it's possible that we would have a sector or two where either the -- and these would be one or two type hires, where there are particularly strong either investment, institutional investor interest or capital markets opportunities that match up well with our banking capabilities. But we're talking about low double-digits in terms of incremental hires in that business this year.

Okay. And does there seem to be kind of a threshold with the, I guess, the client relationships you have to have in that business before you'll start to see maybe a ramp or an enhancement to your ability to underwrite deals, because you obviously have those strengthened relationships on the placement side.

First of all, I think --

Underwriting deals, first and foremost you have to have the relationship with the issuer, right?

Sure.

The banking relationship. You don't have that, you could have the world's greatest underwriting franchise and you have no business. Evercore is very good at that, as everybody knows. So it's a matter of matching our growing research and sales capability with those strong banking relationships and turning them into underwritings. That's a mighty measure that takes time, but has to start with the issuer relationship.

Sure. Okay. And maybe moving into the investment management segment, an area that really didn't touch upon as much. It seems as though on the private equity revenue side that the management fee performance was down on a sequential basis, but that you guys realized some strong gains during the quarter on a sequential basis. Can you just talk about the dynamics in the quarter, what kind of happened there?

Bob, why don't you do that.

Sure. In terms of the management fees, as we've discussed on prior quarters, our US business is charging fees based on the amount of invested capital and as we have realizations and returned capital to the US investors, those management fees go down. Some of the gains you're seeing in the quarter are realizations in our US funds for those investors and of course then fees will go down. We've also had some unrealized gains in the portfolios in Mexico.

Okay. And then the last question, just with regards to the G5 deal, was there any enhancement to AUM in the quarter from that transaction?

No, G5 we currently account for that on the equity method of accounting, because we don't have control of the business and as we've said before, when we only have an equity method or an equity interest, a noncontrolling interest, we don't include those numbers in AUM.

Okay. So at some point down the road as you acquire more, a greater portion of that business, then you'll bring it on.

We will convert, that's right.

Thank you very much.

Ken Worthington with JPMorgan

Good morning, this is from Funda Akarsu. How would you characterize the state of the restructuring business? What was the approximate share of restructuring revenues in 2010 and where do you see it going in 2011? Do you think there are meaningful opportunities in Europe?

First of all, we don't break out and never have the division between restructuring and non-restructuring revenue on the banking side. Everybody knows that restructuring and M&A are essentially counter cyclical. As restructuring strengthens, historically, M&A tends to weaken, because restructuring centers around periods of economic weakness. And as M&A strengthens on the other side, restructuring tends to weaken. And that's what we're seeing now.

2009 was far and away the best restructuring year we ever had. 2010 really was a good year by any historical standard. 2011 is likely to be not as good, although I might say there's still plenty of restructuring business out there. So, as the M&A market strengthens, restructuring is weakening just in line with the historical cycles. As for Europe, we have had some situations in Europe which have benefited us. Ralph talked about the NAUS restructuring, which we completed in January, one of our -- actually our biggest overall assignment firm-wide in 2010. But the legal structures in Europe, the role of bankruptcy and so forth very different than the United States and fundamentally the restructuring business in Europe has always been less robust than it is in the US. So are there opportunities? Yes. Is that market as important as the US market? (technical difficulty) .

Ladies and gentlemen, please stand by.

So, for example, if you look at the transactions, the restructuring Roger just discussed, the NAUS, which is a Greece based Company for our representation of Sonafi in the Sonafi Genzyme transaction, those are all European-based companies where we're representing them, but doing that with the leadership of the team happens to be New York-based.

Thanks for the color.

Thanks, Linda.

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

Nothing to add other than thank you very much for your time and attention and we'll talk to you next quarter.

Thank you all.

This concludes today's Evercore Partners fourth quarter and full 2010 financial results conference call. You may now disconnect.