Evercore Inc (EVR) 2011 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Partners first-quarter 2011 financial results conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference call will be open for questions. (Operator Instructions). This conference call is being recorded today, Thursday, April 28, 2011.

I would now like to turn the conference call over to your host, Evercore Partners Chief Financial Officer, Robert Walsh. Please go ahead, Sir.

Thank you and good morning. Joining me on the call this morning are Roger Altman, our Chairman, and Ralph Schlosstein, our President and Chief Executive Officer. After our prepared remarks, we will open up the call for questions.

Earlier this morning we issued our press release announcing Evercore's first-quarter 2011 financial results. The Company's presentation today is complementary to that press release which is available on our website, 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 conference 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 identified 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 a 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 in our investment banking business.

I'll now turn the call over to Ralph.

Thanks very much, Bob. As you can see, both from our earnings release and our announced transaction activity, 2011 is off to a pretty good start for Evercore.

On our last earnings call, I concluded by saying that we were entering 2011 with a few modest breezes at our back. The first of those breezes was that we have continued to believe that there will be a pickup in M&A activity and that the independent firms like Evercore would continue to benefit from modest market share gains.

This has in fact happened. 2011 yield volume is picking up broadly and we are working on several of the largest M&A transactions announced to date in 2011, as Roger will discuss.

Our involvement has been broad-based with market-leading transactions in the US, Europe, Mexico and Japan. Recruiting is going well, we have announced four additions to our senior managing director team, and are working hard to close a couple more. We have promoted three of our rising stars inside the firm to senior managing director. Our investment banking backlog is growing in advisory and capital markets and in private funds.

The second breeze that I described was that investment management was that investment management would be a consistent contributor to earnings in 2011 rather than a detractor from earnings on a whole year basis, although it was a contributor to operating earnings in the fourth quarter of last year. This also is happening. Investment management increased assets under management for the 10th consecutive quarter, contributed to earnings for the second consecutive quarter, and is on track to contribute to earnings throughout 2011.

The third breeze that I described was that our early-stage investment banking businesses, institutional equities and private funds would be a smaller and smaller drain on earnings as the year progressed in 2011, with private funds being at least breakeven or a contributor to earnings this year, and institutional equities operating at breakeven run rate by the end of this year, and both of these businesses contributing to earnings in 2012. And we are on track for this as well.

In my view, this quarter begins to demonstrate the potential of our strategy of continuing to aggressively build our advisory business, both geographically and by industry, and to diversify into a very limited number of fee-oriented businesses in which we get paid for our ideas, our intellectual capital and our relationships, and not our balance sheet and not our proprietary activities. We are in the businesses that we expect to be in for the foreseeable future. So for Evercore, for the foreseeable future, it's really about the execution.

Let me talk briefly about the numbers. Net revenues were $106 million, up 4% from last quarter and 25% from the first quarter of last year. The timing of revenues as it always does in the advisory business remains choppy now and it's true to the underwriting business as well. So we did see a number of deals which were closed very early in the second quarter, which provides a solid foundation for that quarter as well.

Net income was over $11 million driving earnings-per-share up to $0.28 a share, up both from last quarter and from the same quarter last year.

Our expenses were mostly flat or slightly down from the last quarter with the comp ratio coming down slightly to a little less than 60%, and our non-comp ratio also dropping slightly to 21%.

In summary, the fundamentals of our business continue to improve as the markets recover and our strategic initiatives progress. Let me now turn it over to Roger who will provide an update on M&A environment and our advisory business broadly.

Good morning, everyone. The firm had a solid first quarter in advisory and in overall investment banking and we seem to be headed towards a good year. We generated just over $80 million of revenue during this quarter on the investment banking side. I believe that's the best first quarter in that business the firm has ever had. Compares to $75.5 million for the fourth quarter 2010 and $71 million for the first quarter a year ago. So 6% ahead of the fourth quarter and 12% ahead of the year ago quarter.

I would say that the real news, however, goes beyond this solid quarter as the firm has had a remarkable start to 2011 in terms of its participation in the global and US M&A markets. You all know the deals announced in the early months of 2011 don't close typically very quickly. So the revenue impact of this fast start hasn't shown up yet and isn't shown up in the results that we just announced.

So I'll first make a few comments on the quarter and then I'll make a few comments on our broader performance. For the quarter, we had 18 transactions that generated $1 million or more in fees. And that's good diversification. Seven of the 18 involved are representing non-US clients, and that's good internationalization. The number of fee-paying clients increased again to 79. That compares to 70 for the first quarter a year ago.

Parenthetically, the comparison to the fourth quarter or any fourth quarter isn't very germane because fourth quarters are always the seasonal peak on this metric and every other metric. I might point out that -- I might point out two things about those 18 transactions which generated $1 million or more in fees. The very biggest one of them was a restructuring transaction. And I'll have a word or two to say further on restructuring. But that business continues to be an important one for us.

The second biggest fee came from a financial sponsor. We've made a big push here over the last couple of years in the organization of our efforts and the intensity of our efforts towards financial sponsors and that's an important priority here. On productivity, average revenue for partner on a rolling 12-month basis through the first quarter was essentially $7 million. A touch less.

That's essentially the same as last year's fourth quarter, but I would add that on a rolling 12-month basis through today, let's say the end of April, the figure is $10.2 million, which is just where it should be. The comp ratio for the quarter was 58.9% on the investment banking side, that's down from 62.5% in the fourth quarter, and has been 61% on a rolling 12-month basis.

On headcount, we finished the quarter with 50 banking senior managing directors or partners. 50, that's a high for us, up from 47 at the end of last year. And 345 total banking personnel, also a high up from 330 at the end of last quarter.

So having put the first quarter into that perspective, let me make a couple of broader observations. For the year-to-date, you really see some fascinating things emerging about Evercore and its merger business. We advised on the largest global merger of the year, AT&T T-Mobile, we have advised on three of the 10 largest global mergers so far this year. And including the Exelon announcement this morning, we have advised on five of the 10 largest US mergers of the year.

I want to say that again. We have advised on five of the 10 largest US mergers of this year so far. Has any other firm in the business done that? Yes. Morgan Stanley has done that. Has any other firm decides Evercore and Morgan Stanley done that? The answer is no. Goldman Sachs has not done that, JPMorgan has not done that, etc.

Among all investment banks, everybody, Evercore ranks fourth in the US on M&A through today. Among the independent firms, and we use the word independent in a very simple way, independent just means that the investment banking business is independent. It's not part of some giant labyrinth and complex structure.

Among the independent firms, Evercore has advised on approximately three times the M&A volume of any other like firm way the Thomson Financial accounts for them for this year-to-date. Three times. That's not surprising, because over the last decade, 2000 through 2010, not including this quarter here, the past 10 years, Evercore advised on 2.2 times the US M&A volume of any other so-called boutique.

What does that mean? That means that Evercore is the one independent firm, now 16 years old, which has broken away from its former peers and evolved into a major league investment bank. I would argue that the data is irrefutable to that degree.

Now you all know what our long-term goal is. The long-term goal is to create the highest quality, most elite investment banking firm in the world. A firm as Ralph said which doesn't lend, which doesn't trade, which is advice-centric. I think you can see that Evercore is on a good track, we have a long way to go, we have lots of work to do, lots of things that aren't working as well as they should, but on a pretty good track to achieve that.

Having talked about the M&A business, let me just say a word about our restructuring business. I said that our biggest fee of the quarter was a restructuring fee. While the restructuring cycle and the M&A cycle are countercyclical -- and yes, M&A is now rising, and yes, restructuring is waning -- there is still important restructuring activity going on. In fact we were just retained over the past two months on one of the potentially -- we will see -- but potentially most important restructuring assignments we've had in a very long time.

I want to say a word about recruiting. Ralph said we've added seven new partners for the year-to-date. Three promoted from within, [Dan Mindalow], Telecom, Jason Sobol, Media Entertainment Information, John [Haas], Healthcare. We've recruited four partners externally. Paul Deninger, formerly Vice Chairman of Jefferies, Technology. Eric Mandl, ex-UBS, Technology. Ray Strong, ex-Goldman Sachs, Energy, Lowell [Strung], [inaudible] Restructuring. And they will most likely be an eighth announced quite soon, also an external recruiter.

I want to say that Ray Strong joins Rob Pacha in our Houston office. We're focusing a lot on building up our energy platform, and you'll probably hear more from us on that.

The point is that Evercore has strong momentum on recruiting, we pay a great deal of attention to recruiting. It's the equivalent of planting the fields for a subsequent harvest.

Finally, just one or two comments on the overall environment. I'm referring to the M&A environment. We are in the midst of a classic upswing in M&A as we have talked about before.

History suggests that the last -- that these upswings last five years on the short side and seven years on the long side. So we are just about exactly two years removed from the low point of March 2009. Theoretically we're therefore -- we're 40% or so into this up cycle. So we are at -- we are in a period of strong overall market momentum.

I would remind everybody that the conditions which make for rising M&A are strongly in place. Those conditions are rising equity values, improving business conditions, powerful credit markets and robust availability of financing, and improving senior executive confidence. Those four elements are strongly established, and that's why global M&A is rising. Global M&A, by the way, on an announced basis year-to-date is up 50% over last year for the first four months of the year.

I'm going to turn this then back to Ralph.

Thanks very much, Roger. Let me just give a brief update on the institutional equities business and on the investment management business.

With respect to institutional equities, we're pleased with the progress we are making. The team is currently comprised of 48 professionals. We have research coverage on 133 companies now in the TMT, technology media and telecom, and financial institutions industries. And we have been adding new clients, trading clients daily.

By the end of the quarter we had done business with more than 100 institutional investors, and we are consistently making progress in our standing with those clients. We have been seeing a steady increase in our secondary trading volume, but still recognize, as I said at the beginning of the call, that in this business as in our others, we have still much to do.

This quarter, the business generated approximately $2.5 million of revenues as commissions increased nearly 40% while capital markets revenues actually declined with the falloff in underwriting activity. This is a lumpy business and it's purely a timing issue -- actually the second quarter, we are off to a very strong start there. Expenses for the second quarter were $6 million.

We have been selectively recruiting to fill in some gaps in our research and sales team and have been extremely pleased with the quality of professionals that we have been able to add. As I said in my opening remarks, we remain committed to our target for this business being breakeven on a run rate basis at the end of 2011 and a contributor to operating profitability in 2012.

Our private funds business was successful in raising funds for several mandates this quarter, and has been successful in winning important new assignments which bodes well for future revenues. Interest -- investor interest in private equity funds is starting to return slowly, and as I said in my opening remarks, despite the newness of this business for Evercore, and the challenging fundraising environment, we expect this business to breakeven at a minimum in 2011 and to be a contributor to operating earnings in 2012. And we remain convinced that this will be an important business for us in the future.

Our investment management business, right on track. Operating income for the business for the first quarter was $1.9 million. Fee-based revenues were $24 million, up 4% from the fourth quarter of 2010, and 124% from the first quarter of a year ago. This predominantly reflects growth in assets under management which increased by $400 million during the quarter, and now stand at $17.8 billion. That increase predominantly reflects market appreciation of approximately $500 million, partially offset by net outflows of $80 million which are primarily in our liquidity funds in PCB, our Mexican asset management business.

We continue to look for opportunities to invest in high-quality investment managers. As I have said in the past we will make only investments that are both strategically and financially attractive, and with the --. I have to say with the overall recovery and equity markets, pricing is definitely getting a little bit firmer in the investment management business.

Let me conclude by saying, and as Roger said earlier, we remain highly focused on continuing the globalization of our advisory business in both Europe and Asia. We are actively exploring growth in both of those markets both through additional hires, through strategic alliances, and inorganic ways of expanding our geographic footprint and our industry capabilities in those markets.

Let me now turn it over to Bob who will talk about our financials.

Just a few items to wrap up before we open the lines for questions. As Ralph mentioned our expenses are very much in line with last quarter. We continue to pay significant attention to managing our cost base, balancing our investments into the businesses with operating discipline. Losses allocated to the non-controlling interests declined this quarter as profitability in the institutional investment management and wealth management businesses improved. That improvement led to a decline in our tax rate for the quarter as well.

We continue to maintain a strong balance sheet, holding $174 million in cash and cash equivalents and marketable securities. During the quarter, we repurchased 400,000 shares, reflecting our strategic objective of offsetting the dilutive effect of equity bonus awards, and our Board declared a dividend of $0.18 per share.

We will now open the line for questions, please, operator.

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

From the outside looking in, European advisory activity still seems to be pretty close to a standstill. It's just been very slow. Can you give a little more color around maybe the level and types of conversations you guys are having with clients, and just maybe expectations for when we'll start to maybe see a pickup of activity over there?

Is your question about European advisory as a whole? For --

Yes.

Well, first of all as a small point, Evercore actually had a good first quarter on the European side. We had two important transactions, the Lafarge transaction and the Qatar transaction, which really were quite important to us. So we feel kind of good about how our first quarter was from a European point of view.

All I can really say, and Ralph may want to add to this, Europe as a whole, not just in M&A or advisory, but just looking at Europe as a whole, is obviously struggling to a greater degree than the United States is, even though the recovery here is also slow by historical standards. But if you just look at growth rates, the US is expected to grow about 3% this year; Europe expecting to grow by 1.5% to 1.7%, essentially half.

We all know about the sovereign debt overhang, and Portugal, Greece, Ireland, Spain and so forth and the difficulties Europe is experiencing. And there is a relationship, as I pointed out before, in terms of those types of factors as they play into confidence, and as that in turn plays into transaction volume.

Now Europe is recovering, albeit in a struggling way. But I think you're going to see M&A in Europe improve more slowly in the same fashion that Europe as a whole going to improve more slowly.

And I don't know to say, really, beyond that. Global M&A is pretty strong, as I said. It's up 50% on an announced basis year-to-date through April. And Europe M&A is doing better.

But is it going to be as robust as it is in the US? For that matter probably in some of the big emerging markets? I would say no.

Okay. That's helpful. I guess I'm just trying to think generally, so right now even though we've seen improvement just global activity, from at least the data sources I track, is still running at about half the levels achieved during the last peak. So just want to get a sense of as you look at prior M&A cycles and look at how this one is developing, do you think it's going to continue to be this very slow and gradual climb back up to the levels reached in the prior cycle?

Our point of view has been consistently that the peak in this cycle, whenever it is reached, let's say two, three years from now, will exceed the prior peak. And it will exceed the prior peak because of the relentless globalization of the M&A market. And if you -- I don't have the data in front of me, but if you look at the 20 largest announced deals of 2010, and then compare that to 2009,2008, 2007, go back 10 years. You see one powerful trend, which is a higher and higher share of them, every year, is non-US -- increasingly, neither half being US. I looked at this chart a couple months ago -- this is before the end of -- right around the end of 2010. Although the data for the full year wasn't in. Only three of the 20 largest deals globally, let's say that was through October or something 2010, were US-US. And 17 of them therefore were either US and some non-US country, or neither half was US.

This is the way the world is going. China is entering the M&A market in a big way, Brazil, India and so forth. You just look at the battle over Equinox involving Barrick Gold and China [Mid-metal], and so forth, or what happened earlier last year on Potash Corporation.

So the big difference between this cycle and the previous cycle is the role of those big emerging markets, and that's why we are convinced that the peak of the cycle will exceed, probably meaningfully exceed, the prior cycle.

That's helpful. I'll pop back into queue, just one more. In terms of capital, you guys are paying a dividend, buying back stock, you've done some acquisitions. Just given what appear to be pretty strong capital levels today, and maybe moving further away from the financial crisis, at some point do you guys think about getting a little more aggressive, returning some of the capital to shareholders?

Last year we returned more than 100% -- significantly more than 100% of our earnings through dividends and share repurchases. I think we have said that on average, we expect to run this Company in a way that our returning to shareholders most, if not all, of our earnings in any given year through dividends and share repurchases. And that hasn't changed. So it's hard for me to imagine how we could be more aggressive than 100%.

That's fair. Thanks, guys.

Daniel Harris, Goldman Sachs.

It was interesting to hear your commentary around the addition of senior managing directors this quarter. I'd love to get some historical view on how much of the growth has come from promotions from within. But as you guys look forward sort of three promotes and the four externals, is -- I guess is your view on what the promotes will bring in in terms of revenue similar to what the external hires bring in?

We don't have great data on that. It's just the truth of it. We maybe promoted -- just guessing from memory, this number may be off -- five or six partners from within in the firm's history, because we've been building the firm in a way that required us to rely primarily on external hires. Now we are obviously shifting toward a more balanced mix, and that's the sign, I think, of a healthy growing organization, that we plan to do a lot more promoting from within.

But as to how to measure anticipated productivity from one source as compared to the other source, we don't have the data. Our basic point of view is Evercore SMDs ought to produce $10 million or more once they are fully integrated into the firm. By that, I mean if someone joins us tomorrow from the outside we don't expect that person in the first 12 months to produce $10 million plus because it takes six or nine months to close any deal you do.

But that's our view as to what we expect fully integrated partners to do. We have the same expectation for our internally promoted ones as we do externally.

That's perfect. That's what I was wondering. Coming back to your last comment, Roger, on the growth in non-US M&A, especially China, Brazil, India as you mentioned. Obviously very different markets than you historically have served, you have some joint ventures in some of these markets now. Is that the strategy you're going to continue to go forward with on a joint venture side, or do you see over the next five years trying to have more feet on the ground employees of Evercore?

We will not have boots on the ground in Libya. No, I think our present strategy is the one we are on for the foreseeable future. Evercore does not want to become a firm with 65,000 employees. I think I said the other day that one of our biggest competitors had 65,000 employees.

Not including tellers.

Well, that's just not -- we are not interested in that. So we don't have the luxury, if you can put it that way, or I might argue that -- the weakness of being able to approach some big emerging market and say, Why don't we open 20 offices and have several thousand people there? That's not Evercore. So the joint venture route in some places like China, or the acquired acquire it and build it route, which is the way we went about it in Mexico and are going about in Brazil, some mix of those two is going to be our style going forward.

And it is more subtle, and more --. It requires a more skillful navigation than just saying, Why don't we put several thousand people over there and have 20 offices, and be all things to all people? That's just not what we're going to do.

I would add just a couple very small points. First of all, as Roger said, in each of these markets we make a judgment as to whether it's an alliance market or a plant the flag market. And that's driven 100% by what we think is the highest profitability strategy for that particular market.

The second thing I would add is that having this global capability is important in two respects. First of all, as Roger went through in his description of our advisory business, we are in the largest deals. And we typically are working with many of the largest multinational companies. Their ambitions are global. And in order for us to serve them as much as we would like to, we have to be able to have an ability to understand what's going on in the markets that they care about and to execute in those markets. So the globalization of our business is important to our clients.

Second thing that's important is in recruiting. Most of the people we hire from the outside come from firms that have presences in all of the major markets that their clients are interested in. So having a capacity for them to continue to serve their clients in those markets is an important feature of our attractiveness to recruits.

Sure. Fair enough. All that makes sense, I guess as I wonder more about the deals as you mentioned, there were US-US and you've had US-international. But for instance the China deal is China-China or China-India, would the joint venture benefit you guys, if it's not impacting the US as well, which is where your stronghold is?

For the time being, our focus is not China-China. Our joint venture with Citic Securities which, as you know, is the largest securities firm in China, is on cross-border. Cross-border M&A and related strategic investment. That's the focus of the joint venture and that's where we are putting all our efforts into. Most of the major deals that China is involved in are China on the buy side these days.

I was going to say that the inter -- inside a country deals we would only be involved in almost certainly in places where we own our business. So in the US, in Mexico, in Brazil, in Europe, it's very -- if you think about it, where we have an alliance, why would Citic Securities turn to us for a China-China deal? Very unlikely.

Thanks a lot, guys.

Eric Bertrand, Barclays Capital.

Good morning. Roger, how are your corporate clients reacting to the macro uncertainty? As you commented in the prepared remarks, US growth remains hesitant, Q2 is coming to a close, European sovereign issues remain, Japan --. What matters to your clients? How are they actually adapting to the shifting outlook?

As I said in the closing part of my own presentation this morning, the four things that make for rising M&A are solidly in place in the US, and in certain other parts of the world. Not maybe everywhere, but they are in places -- on a widespread basis. As I said, they are rising equity values, improving business conditions. Maybe they are not skyrocketing business conditions but they are improving. Extraordinary capital availability, credit markets are generally white-hot. And all that means the fourth element, which is improving CEO and senior management confidence.

Those are the factors that historically -- I've been doing this for 42 years -- make for a rising levels of M&A, and those are the factors today which once again are explaining why global M&A is up 52% year over year so far in 2011. Remember that the financial markets themselves obviously are a leading indicator. And M&A volume itself to some degree is a leading indicator.

In other words, the equity market is obviously ahead as it always is, always has been since the dawn of time, of the actual recovery. That's the nature of equity markets. And to some extent the equity markets have a strong role, as I said, in M&A, and they're playing that role now.

So yes, the recovery in the US is modest by historical standards, but we are recovering and the recovery as Chairman Bernanke said yesterday, I thought very ably is durable, it's strengthening itself, and so in general, levels of optimism in the business community are on the rise.

Is it the highest level of optimism we've ever seen? No. But they are rising.

Okay. That's helpful. Last quarter, you commented on significantly rising competition for the top talent that your firm specializes in. How have you continued to be successful in not only recruiting, which I can definitely get, but also the extraordinarily high retention of your top professionals, which surely your competition must also envy (multiple speakers).

You're going to think this is a very Boy Scout-like or syrupy or sophomoric answer. But when we founded the firm, we only had a couple of ideas. Maybe that's being generous, to say there were a couple. But one of them was that no matter what we did, we were going to have a positive culture in an industry which we all know is notorious for the opposite.

And that no matter what else we did or did not do, we were going to achieve that, because the three of us who founded the firm had worked in successful organizations that they were not happy ones. We were not going to do that with our new firm.

And I would say that Evercore which is a credit to every single person in the firm, all 610 of them -- has been slavish in its dedication to that. And it's something you have to -- you have to eat, sleep and breathe and believe. You just can't talk about it. If you don't believe it, and you don't -- like tending a garden -- water it every day and nourish it, and so forth, all the talk in the world is meaningless.

But the bottom line is people like to work here. So this past year we made offers that I believe, from memory, 17 MBAs. And obviously we shot as high as you can shoot. 16 of the 17 took our offer. Why did they do that? Because we don't offer more money than anybody else, we pay the same.

If you talk to the 16 of them, they would say, Because we checked around and we thought that Evercore would be the best place to work. And there's nothing better than you can say about a firm than that the people think it's the best place to work. And that's what's true about Evercore today, that's why our retention is so high. That's why our recruiting is doing so well.

And yes, competition is fierce. I think Citigroup said two days ago they were going to add 500 bankers and traders over the next year. And that's just a metaphor for the environment.

But this is the best place to work in the industry. I absolutely believe it. We have the best people in the industry, we have super exacting standards on recruiting, only recruit AAAs, never have deviated from that and never will. And if you really believe those things fiercely, and we work every single day to put them -- to make them a living reality internally, then you can have the kind of culture we have, and you'll have the kind of retention and recruiting successes we do have.

Frankly, most firms don't do a very good job at that. And the battlefield is littered with the corpses of Wall Street firms that never cared much about their culture. I wouldn't give this industry very high grades on it, but that's very important to Evercore, and I'd have to say we've done a good job on it.

That's a helpful bit of color. Just to put a tack on it, have you are regrettably lost any senior managing directors in the last handful of years, or ever?

The short answer is no. We have not had a single person leave the firm over the past -- I'll say five years -- who --. I'm trying to remember who has left the firm to start with. But the number of people who have left the firm is very small. Anybody we really were just bitterly disappointed on in terms of having left, the answer is no.

But the real point is, nobody has left. I mean -- I don't literally mean nobody. We have 610 people. Obviously, some people change their lives and things like this. There is a person in the firm who soon is going to go into industry and leave investment banking. People do that.

But the real point is, for all practical purposes, nobody has left. And obviously, given the momentum we have right now in our business, and Ralph's survival has made a big difference, because for the first time the firm is really well-run. I think we're going to have a good period here on recruiting and retention. You can't look ahead more than a year or two in this business, but the next year or two, I must say I'm optimistic on that.

The one measure I would use, and I can only comment on a couple years of history, but when we recruit a really high-quality senior managing director, you can tell how valued they are, because the firm that they are leaving generally -- and certainly it's been our experience -- always aggressively goes about both financially and in other means trying to keep them. And certainly since I have been here, I don't remember a single situation, even at the most junior levels where someone walked in here and we said, Okay, we've got to figure out how to keep them.

So -- and people do leave if they are generally not achieving at the levels that are expected in the organization that they are in.

Okay. Shifting gears a little bit to the asset wealth management business, Ralph, could you comment on the AOM balance and recent flows in the wealth management business and generally provide an up-to-date on the development and progress relative to goals?

Yes. The business is doing extremely well, had a very strong first quarter in terms of inflows, as I recall they're roughly $300 million of net inflows, which when you think about it off a -- that's more than 10% increase off of a base that we entered the year for a quarter. And it's a pretty substantial --. It's more than a quarter's worth of what we had hoped for for the year. So that business is, if anything, more than on track.

Great to hear. Thank you for taking my question.

David Trone, JPM Securities.

JMP Securities. Happens all the time. The question on AT&T, I know that's a legacy relationship, and of course you'd expect the CJM -- JPMorgan on the league table has given the financing position. But I was really pretty surprised to see Greenhill involved on your side. And I wanted to see what was the dynamic going on there?

Well, AT&T has always used multiple advisors. When we advised AT&T on BellSouth, which is still the largest merger of the past 10 years, there were three advisors. AT&T's had that approach very often in the past. So nothing new about that. And Gil Ha and Lawrence Chu of Greenhill have a very close relationship with AT&T over lots of years, and they are very good bankers, and we were happy to work with them.

It's never been the case that AT&T -- I mean, we have done, let's see, five major mergers, I believe, for AT&T. Aggregating I think it is $200 billion. And we're proud of that and we are extremely grateful to AT&T for that. Not once have we been the sole advisor.

Okay, great. Are you willing to say whether you were maybe the lead, or is it a co or --?

No, you'd have to ask the company that. The team worked together, it worked as one team. Very seamless, very harmoniously. And I wouldn't say there was a lead and a secondary guy. It was just one team.

Thanks. And then, second question on your equity startup, you had $8.6 million in expenses last quarter, and then this -- in 1Q it's held to $6 million, even though you continued to expand. So I'm just trying to understand why the expenses went down that much.

Let me try and answer it, and if I answer inaccurately, Bob will correct me. I think a lot of that has to do with last year we had hires during the course of the year. So that their compensation was expensed over much shorter than a full year period of time.

So what you see now is more the steady-state expense level of the business without clogging a lot of expense into one -- comp expense into one quarter or two quarters. Is that accurate?

That's right.

Got it. Thank you very much.

Ken Worthington, JPMorgan.

This is Funda Akarsu for Ken Worthington. You've added further debt to your technology, energy, and restructuring banking teams with hires this quarter. Could you please give us an up-to-date on your expansion plans for different sectors?

When Evercore went public in 2006, we had 21 partners, 250 people and we covered seven verticals. Today we have 60 partners firm-wide, 50 of whom are banking partners. We have 610 people. We cover 20 verticals. And we tend to hire into those areas which we are expanding in, where we feel we have needs to expand. So technology has been an important area for us. We added two technology partners this year, so far, Eric Mandl and Paul Deninger. Energy is a big focus for us so we've added Ray Strong on top of Rob Pacha, who joined us two years ago. We're going to be making additional hires in energy for Houston. That's a big priority. We promoted John Haas on Healthcare because Healthcare has been such a successful business for us and we need more firepower there. Same with Dan Mindalow in Telecom, one of our biggest areas.

So we hired toward where the need is. And we'll continue to do that.

Okay, thank you. My second question is about the equity capital markets. Have you seen any cross-sell between your advisors and capital markets businesses? Meaning, has any of your ECM business been originated as a result of your advisory relationships? Separately, do you have plans to launch a debt capital markets business?

The answer to the first is, clearly, yes. The reason -- the strategic reason for being in the equity capital markets and underwriting business is that if you're a CEO or a CFO or President of a public company, the two things that you care about most in your interactions with the financial community with Wall Street are your strategy and the transactions to execute that strategy, the advisory business, M&A, and the value of your equity, how its value, why it's valued.

Having the capacity to be relevant to our clients on that second point allows us to be -- to have a stronger, deeper relationship with them. And also, there are many situations where, because of robust capital markets, the execution of the strategic decision could take more than one form. It could take a sale or an IPO, for example. And having the capacity to advise clients on both tracks of that dual track process is also very important.

In the other direction, there are substantial private companies out there for whom the next and probably only thing they are focused on right now is accessing the equity markets, doing their IPO. And without an equity capability and an equity capital market's capability, there is a limited amount that we can -- could have talked to those clients. So it goes in both directions.

Debt capital markets, I think we consider ourselves already to be in the advisory part of that business. The capabilities we have in our restructuring business are very similar to the advisory part of the debt business. But in terms of underwriting, trading, we will not be in those markets or in those businesses, because you cannot be in those businesses without committing significant amounts of your own capital, and that's not the business we're in.

That's helpful color. Thank you for taking my questions.

You're welcome.

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

Thank you very much, everyone. I look forward to talking with you next quarter.

This concludes today's Evercore Partners first-quarter 2011 financial results conference call. You may now disconnect. Have a wonderful day.