Evercore Inc (EVR) 2013 Q2 法說會逐字稿

Good morning ladies and gentlemen, thank you for standing by. Welcome to Evercore Partners Second Quarter 2013 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, Wednesday, July 24, 2013. I would now like to turn the conference call over to your host, Evercore Partners' Chief Financial Officer, Bob Walsh. Please go ahead, sir.

Good morning, and thank you for joining us today for Evercore's Second Quarter 2013 Financial Results Conference Call. I'm Bob Walsh, Evercore's Chief Financial Officer. Joining me on the call today are Ralph Schlosstein, President and Chief Executive Officer; and Roger Altman, our Chairman. After our prepared remarks, we will open up the call for questions.

Earlier this morning, we issued a press release announcing Evercore's second-quarter financial results. The Company's presentation today is complementary to that press release, which is available on our website at 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 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, which as previously mentioned, is on our website. 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 on the investment banking and investment management sides of our business. I will now turn the call over to Ralph.

Thank you, Bob, and good morning everyone. We are very pleased with our second-quarter operating results, as we delivered the second-best quarter in our firm's history. Our consolidated net revenues exceeded $200 million for the second time in our history. Our investment banking business generated $180 million in revenue during the quarter, and more than $300 million year to date. Our investment management business generated $26 million of revenues during the quarter, and nearly $50 million for the first six months for the year. Our operating margins and earnings continue to improve, as our earnings per share of $1.01 for the first half of the year increased by 75% in comparison to the first half of last year.

We continue to make progress against our strategic objectives. Our early-stage businesses continued to gain traction during the second quarter, as both the institutional equities and wealth management businesses contributed to profitability for quarter and year-to-date results. We earned more than $100 million from investment banking clients outside of the United States year to date, our best start in our history. In the 1st half of the year, 35% of our investment banking revenues came from clients domiciled outside of the US.

We continue to have success broadening the services we deliver to our clients. For the quarter, we participated in 18 equity and debt underwriting assignments, we provided advisory services on six equity and debt capital markets transactions where we were not an underwriter, we partially or fully completed four capital raises for private equity and infrastructure firms. Collectively, these expanded capabilities enable us to offer a broader array of services to our clients, and to sustain our growth in advisory revenues and market share. We continue to expand the capabilities of the firm, strengthening our advisory team in technology, committing to launch a private capital advisory business, establishing a presence in Singapore, and strengthening our health care advisory practice.

We continue to have discussions with additional SMD senior managing director and managing director candidates, and we continue to believe that we are well-positioned to add talent, perhaps in the remainder of 2013, and certainly in 2014.

We repurchased 1.5 million shares of our equity in the quarter, bringing our total for the year to 2.3 million shares and share equivalents, exceeding the buy-back commitment for all of 2013 that we recently made in our proxy.

Let me quickly go over the numbers -- first, the second quarter. Second quarter net revenues of $206.8 million were up 35% from last quarter, and up 20% from the same quarter last year. Net income was $29.5 million for the quarter, with earnings per share of $0.65. These results are 75% higher than the net income reported in the first quarter, and up more than 39% in comparison for the second quarter of 2012. Operating margins were 24.7% for the quarter. Our compensation ratio was 58.9% for the quarter, and for the trailing 12 months it was 59%. Non-compensation costs were 16.3% of revenue for the quarter, down from 20.7% in the first quarter of this year, and 19.1% in the second quarter of last year.

Let me now briefly talk about the year-to-date financial performance. First-half net revenues of $360.1 million were up 30% from the first half of last year. Net income was $46.4 million for the first six months of 2013. These results are 82% higher than the net income reported for the first half of 2012. Operating margins were 22.5% for the first six months of this year, compared to 16.3% for the first half of 2012. Our compensation ratio was 59.3% for the first half, compared to 61% for the first six months of 2012. Non-compensation costs were 18.2% of revenue, down from 22.7% in the first half of 2012.

Let me conclude my opening remarks by reminding everyone that we believe our business is best judged over periods of time longer than one quarter, and that I have consistently expressed this view in good quarters and weaker quarters, and particularly in good quarters. Taking this approach, and looking at our performance over a longer period of time, our revenues for the trailing 12 months ending June 30 were $721 million, a record for any trailing 12-month period of time. Let me now turn it over to Roger, who will comment on our advisory performance and the M&A environment in general.

Good morning, everybody. Ralph just described the strength of this past second quarter, so I'm not going to repeat the headline numbers. Let me just go into the investment banking results and the metrics that apply especially to them. You can see how strong our revenues were in banking. You can see the pre-tax income results very strong -- $44.5 million -- up from $26.7 million sequentially, and $34.5 million year over year, operating margins up over those two comparative periods,as well.

We had handsome improvements in the number of fee-paying clients and in productivity per partner. Fee-paying clients during the quarter increased to 157, that's up from 115 last quarter, 137 the year-ago quarter, and the second-best quarterly result the firm has ever had. For the six months, Evercore earned fees from 214 clients, up from 165 last year. We had 38 fees greater than $1 million during this past quarter, also the second-best quarterly results in our history. Our comp ratio in the quarter was 59.9%, essentially flat versus the first quarter, and a bit below -- in other words, better than -- the year-over-year comparison.

On productivity, a metric we watch always very carefully, average revenue per partner on the usual rolling 12-month global basis was $10.3 million, slightly higher than the second quarter, and way up from the $7.5 million figure of a year ago. That's a very strong result. Our backlog, we always look at it on both a risked and unrisked basis, remains solid.

Our market share rose again -- and I will come back and talk about that -- but it has been rising consistently for quite some time, especially during the past two years. On our equities business, that's beginning to show some strength. Evercore served as an underwriter on 18 offerings during the second quarter. The total amount of capital raised in those offerings was $10.5 billion. The 18 underwritings represents a 50% higher figure than our previous best quarter, although our revenues received from those underwritings was the second-best quarter ever, not the number one quarter. But of those 18 underwritings, it's interesting five REITs, four tech offerings, three telecom offerings, three transportation offerings, one oil and gas, and one [FIG], so you can see it's broad-based.

On head count, total bankers in the firm increased from 480 to 537, a healthy increase. Currently there are 62 banking senior managing directors, or partners in the firm. That number is about to rise, as we have announced several new partners in recent weeks who are currently on garden leave. These include Scott Cameron, who will be running our software banking effort within our overall tech group based in Silicon Valley. We also hired an important hire, a new senior managing director to run health care services for this firm. He's currently in the midst -- as all of these hires are -- of garden leave, and we will formally announce him when that leave is finished. We also added Keith Magnus, who will be based in Singapore, and joins Steve CuUnjieng as the two partners in Evercore for non-China Asia for the firm. Finally, Nigel Dawn, who will lead new business for the firm, namely one advising on secondary transactions in private equity and infrastructure, and in real estate funds.

This business will complement the fund-raising advisory services provided by our Private Funds Group. Now we will be in the so-called primary market in terms of raising funds for sponsors of various types, and in the secondary market in terms of transactions involving sellers of limited partnership interests and like interest from one holder to another. Between these four new partners, you can see that Evercore continues as we have for many years to add steadily a group -- to our group of very high quality partners, and we expect that consistent pattern of additions to continue over the foreseeable future. It's been going on, on this basis, for many years.

Let me say a few words about market share. Our strong P&L performance, as Ralph just discussed it, reflects among other things continued market share gains. When you look at the 10 most active firms in the world who report their results publicly, including their advisory revenue, and we follow what our share is of that total pool of advisory revenues reported, it's not a perfect measure, but it's a pretty reliable one. Without going off into the weeds about this, we believe that our share in the past quarter was the highest in Evercore's history, and roughly twice the share of two to three years ago. That's important on its face, but it's also important because the M&A and overall transaction environment in our view is fine, but it's not white hot or anything like that. If you look at total announced transactions for the first six months of 2013 -- and I'm speaking globally and in total dollars -- they were down 12.4% from the year over -- from the earlier-year six-month period.

Completed transactions year over year -- and that's the basis on which people get paid, of course -- were essentially flat -- not great, not bad. Same trends play out when you look at the number of transactions in the market instead of dollar volume. The number of global announced deals in the quarter just ended was also down from the year-ago quarter -- again, globally. But these global trends obscure some key geographical differences which are important in understanding our results. In particular, the US market currently is the strong one among the four global markets that are generally measured properly. Evercore is particularly strong in the US, although as Ralph said we've never had better results internationally than we're having right now.

On the US side, the total dollar value of announced transactions grew 28% the first half of 2013. So you can see the US market had a good performance. By the way, the US was about 30% of the global total in this period. This measure defines US as transactions where each half of it is US. In other words, US-US. There's a similar trend at work in terms of the total number of deals, where for the first six -- sorry, for this past quarter, the number of deals in the US was up modestly over the second quarter of 2012. My point is Evercore's market share is improving, which is -- improving strongly. The market in which we still are the strongest, the US, is the healthiest of those around the world. As a result, we are doing very well.

A final comment on market conditions in general. I find them to be just fine. Equity markets are right around all-time highs. Interest rates are very low by historical standards despite the recent increase. They are still extremely low. Credit availability is robust, and business conditions, at least in the US, are slowly improving. So market conditions, in our view, are satisfactory. Yes, there aren't many -- and we get asked this all the time -- there aren't many large strategic mergers. There have really been only four announced around the world this year, the way we look at it -- which happened to be Dell, Heinz, NBC, and Liberty Virgin. A lot of people look at the assets of those great big headline strategic deals and say, well market conditions must be weak; but actually, they are not. On that note, I'm going to stop and turn it back to Ralph.

Thank you, Roger. Our institutional equities business continues to add clients and grow revenues. We now have research coverage on 324 companies, and serve more than 340 institutional clients. Year-to-date, the business generated $21.2 million in revenues, a 79% increase in comparison to the first half of last year, and expenses were $20.5 million for that period, up 56%. The business was profitable for the second consecutive quarter, as secondary revenues continued to grow. Equity underwriting revenues, which were lower at the second quarter as Roger indicated than the first quarter, still are higher in the first half of 2013 than what we generated in all of 2012. We continue to expect that this business will contribute to profitability for the full year in the remaining two quarters of the year.

Our private capital business, the private funds business, we had the highest fundraising quarter in the short history of that business. As Roger indicated, with the hiring of Nigel Dawn and Nicolas Lanel we are adding a secondary capability, secondary advisory capability to our advisory skills broadly.

In investment management, the business for the second quarter, operating income was $5.5 million on net revenues of $26.5 million. Operating margins were 21%. These results benefited from the final close of a new equity fund in Mexico, which increased fees by about $1 million, and by marked-to-market gains on our private-equity investments. Assets under management were flat at $13.6 billion. We had modest in-flows -- out-flows, excuse me, in wealth management and institutional businesses. Those were offset by net in-flows in private equity.

Our investment performance continues to be strong at our key institutional platforms. As I have indicated previously, solid investment performance is typically a leading indicator of asset in-flows. Weaker investment performance is typically a leading indicator of out-flows. There are considerable lags until the actual flows occur. Our affiliates are working hard to continue the positive performance which began early last year.

Let me conclude by saying -- making one point. As Roger indicated, we are in a flattish M&A environment today. The statistic that I look at most is the trailing 12-months announced transactions. Since the first quarter of 2010, where for 14 straight quarters trailing 12 months announced deals have been between $2 trillion and $2.6 trillion. For the last seven quarters, that same measure has been between $2.2 trillion and $2.5 trillion. So the environment, as Roger indicated, is pretty flattish. Notwithstanding that general environment, the data very clearly suggests that the independent firms as a group continue to take meaningful market share from the larger balance-sheet oriented investment banking firms; and that Evercore is benefiting to a much greater extent from this trend than any of our independent advisory firm competitors. While we certainly expect at some point that the environment will improve for the reasons Roger cited, we also believe that we can continue to grow more rapidly than the overall market by taking share from our competitors. Let me now turn it over to Bob.

Thank you, Ralph. Just a few items to wrap up. Non-compensation costs for the quarter increased 6%. However, our cost per person, which is a key measure that we manage to, was approximately $31,000 -- comparable to the first quarter. Our adjusted pro forma tax rate is 38% for the quarter, comparable to 2012. We have indicated changes in the effective tax rate are principally driven by the level of earnings in our early-stage businesses, and earnings generated outside of the US.

Our share count, or adjusted pro forma earnings per share, was $45.4 million, a decrease of approximately 0.5 million shares. This decrease is due to the repurchase of 1.5 million shares and LP units in the quarter, offset by the normal increase in shares relating to restricted stock units, which results from the passage of time. Our average share price for the quarter was comparable to Q1, and therefore did not have a significant impact on the change in the share count. Our Board has declared a dividend of $0.22 per share, consistent with prior quarters. Our cash position remains strong, as we hold $184 million in cash and marketable securities. At the end of the quarter, we obtained a line of credit in an aggregate principal amount of up to $25 million. As we noted, our primary objective for the facility was to create greater flexibility to opportunistically repurchase the shares.

The assets under management that we reported include assets from Pan Asset, which is now consolidated. The opening balance was adjusted to include Pan's AUM as of March 31. Finally, just a footnote for the third quarter in early July, we repurchased the 14% of our controlled subsidiary Evercore Trust Company that was owned by Management. With that, we will open the line for questions.

Thank you, sir. We will now begin the question-and-answer session.

(Operator Instructions)

Our first question is from the line of Douglas Sipkin with Susquehanna. Please proceed.

Thank you, good morning, and congratulations guys. Just had a couple of follow-ups, focusing really on the outlook. I know it's a little preliminary, but I guess the most recent set of economic news from Europe -- I guess people are sort of thing it's a little bit better than it's been in quite some time. I'm curious if you guys are seeing any signs of life from a broader perspective in Europe? Obviously that's really weighed on those global announced numbers that you just highlighted?

I would say that the data we talked about, both in terms of dollar volumes and number of transactions, really speak for themselves. You are right that the European data is particularly weak. I talked about the US data been particularly strong. Just speaking for myself, I wouldn't say we have seen any change in market conditions for Europe. I would say, though, that it's pretty broadly acknowledged that once there is some stabilization in Europe, there is a fair amount of restructuring of their economies and industry that's required. As a general matter they have been less inclined to take out costs, merge, raise capital in their financial sector. If we do get some stabilization, and perhaps even some return to growth in Europe, that should be supportive of a little bit of a pick-up in merger activity there, as well.

Great. I guess essentially I'm just trying to drill down on that trailing 12-month number that you guys focus on, which is obviously very important. I'm just trying to figure out what are sort of the segments and categories that are required to lift it above that sort of range. Obviously, Europe is one. Is another that comes to mind for you guys that's really been lagging historically versus what it's been to get that sort of $2.2 trillion, $2.5 trillion range up to $3 trillion at some point?

I'm sorry, what's your question?

Well, I guess what I'm saying is to raise that sort of trailing M&A-announced range you guys focus on -- for me, it looks like Europe is one area. Are there other areas where are required to sort of boost the global M&A pool?

No, let me just answer it this way. You can see the firm had great results. You can see the firm's market share is going up. I don't think we are smart enough to tell you where the market is going -- at least speaking for myself, I'm not. Our market conditions in Europe going to improve over the next six months? You may know the answer to that, but most people don't. Are they going to improve in Asia? None of us knows. We're just dealing with the environment we are in, we're doing very well. I don't like speculating about where it's going, because I don't know where it's going. I don't think it's a productive exercise.

Got you. No, that's very helpful. Then just focused a little bit on the balance sheet. Do you guys have any sort of systematic way you think about the dividend? I know just looking at some of your comps, historically you guys are normally in a tighter band with them on a dividend. Obviously, your stock is done a lot better, so the yields obviously are way down by that. I'm just curious how you're thinking about the dividend for yourself, and then relative to sort of the peer group?

I think since over the last three or four years if you look back historically, we have consistently grown the dividend consistent with the growth in earnings. Obviously, this is a decision that the Board of Directors makes. They generally re-examine that issue toward the end of each year, and I'm sure they will look at it again this year. I think the more important point is that we've had a policy that we've stuck to pretty consistently, returning 100% or more of our earnings to our shareholders in the form of dividends and share repurchases, and we would expect that we would probably achieve that, or close to that, this year as well.

Great. Thank you for taking the questions, and congrats again.

Thank you.

Thank you. Our next question comes from the line of Alex Blostein of Goldman Sachs. Please proceed.

I was wondering if you guys had any sort of a pull-forward, maybe from some of the deals that you thought could've closed in the back half of the year -- they got pulled forward into the second quarter. Then maybe just a little bit more clarity around the backlog. I know you guys had solid backlog, both on a risk-adjusted basis as well as in absolute terms; but when you think about that number relative to maybe where we were in the beginning of the year or even last quarter, just to kind of help us understand with the back-drop looks like for the second half of the year would be helpful?

Well, at the risk of sounding curmudgeon-like, which is not an adjective that any of my colleagues ever attribute to me -- I think we -- as you know, our policy on backlog -- we don't announce what our backlog is, and we don't describe the components of it. I'm going to leave it where I -- the same place that I described it, because that's how we've historically dealt with this question. As to your first question, Bob Walsh or Ralph can correct me. I'm not aware that there was any particular pulling forward of deals into this quarter in any way that distorts it.

I agree with that, Roger. As we noted at the end of the first quarter, we had a little bit of slippage from Q1 into Q2, but nothing since then.

Which is why we consistently say to you that you should look at our results over longer period of time then just one quarter.

Yes, makes sense. Along those lines, if I look at the first half of the year, productivity per senior MD, it looks like you guys are doing about $9 million. I think in the past you talked about kind of a tennish --

Hold on a second. What -- how are you coming up with that number?

If we just look at the advisory investment banking revenues on the basis of MDs? I think it comes out to be about $9 million per MD. I think in the past you talked about $10 million as probably achievable, even without a material pick-up in the cycle -- which I guess kind of gets back to your argument about same-store sales, sort of speak, getting better as the folks you bring in get up to their full potential. Is that still relevant in today's environment? If the cycle ever does get better, should we think that $10 million-plus in a better time is achievable for you guys?

Well, that factor is still relevant, because as we talked about the four partners we announced in recent weeks and months, not one of them has actually arrived for work yet, and it's late July. Expecting any of those four to have a meaningful or any impact on the firm's revenue for 2013 is unrealistic, and they likely won't. It would be great if some of them did, but they likely won't.

The phenomenon we talked about for many years where given when individuals are paid by this industry, and then garden leave practices; therefore when the arrive, our own planning is such that newly arrived SMD's in the year that they come are not -- we don't expect them to generate any revenue. That's why we measure SMD productivity excluding partners in the year that they arrive here, because they don't generate any revenue. That factor is just as alive and well as it's always been. If some day the firm has a lot bigger number of SMDs, the meaning of this factor will diminish and diminish and diminish, but right now it is still relevant.

Got it. Just to be clear, the folks that you've highlighted are not in the 63 percentile?

No. The way we do this calculation is we take senior managing directors who have been here a year. It is at that point that they start to count in the number of SMDs. That's why there is a difference between the $10.3 million that Roger cited and the $9 million that you cited, because you're basically taking the SMD head count at the beginning of the year -- some of who we're here for a month or two -- and we would not -- then taking the six-month revenues and annualizing it. That is not how we do the calculation. By the way, we don't think that -- the measure you articulated as particularly accurate relative to the one that we do.

Right. I guess all I was trying to say is it just feels like the productivity per MD still has room to go up in the environment that we are currently in without waiting for the cycle to get better.

Here again, we are not foresightful. We can only tell you what has happened.

Yes. Okay, understood. Thanks, guys.

Your next question comes from Brennan Hawken with UBS.

Good morning, can you hear me?

Yes, we can hear you. Good morning.

Terrific. It sounds as though the pipeline for future hires in your view is constructive. At this point, given we're half-way through the year, you all have laid out five to seven adds of SMDs as a way of thinking about 2013. Is that still how you would recommend we think about it at this point?

I think historically we've added four to seven, we are very comfortable with that. I think we are at the point in the year where the bar gets quite high to add someone this year. Because if you think about it, even if they were to quit their current job tomorrow -- we have nobody in the pipeline who is prepared to do that at this moment -- they would be leaving at the end of July and would be off August, September, October, joining us in November, and we would still be responsible for their full-year compensation. It's the certainly the exception in which we would pay a full year's compensation for two months worth of work.

We do have quite a few discussions under way. It is conceivable that some of those might materialize this year because of certain circumstances related to that particular individual. At this point, the discussions that we have underway, which are probably as consequential as they've ever been at this point in the year, are in large measure focused on future timetables.

I would just say -- what I tried to say on my own comments was Evercore's pattern on adding SMDs has been very consistent now for many years. Again, we are not smart enough to tell you that next year it will be five instead of four or seven instead of six or any of those things. We put quality ahead of quantity, but our pattern is very consistent, and none of us sees any basis for believing it will change.

Okay. Thanks, that's helpful. Roger's description of the M&A environment as fine -- it was certainly not glowing. Maybe, could you -- while I know you guys don't like to comment too much on pipelines and such -- based on what you are seeing and discussions that you are seeing at the CEO level, has the move in interest rates had any kind of impact on folks and the options on the table, as far as funding transactions, that might cause some people to hold off and see how things shake out on that front?

Two comments in response to your question. First, by saying it's fine, all I'm trying to convey is that it's neither hot nor cold. It's not the best environment any of us has ever seen, and it's not at all a weak or bad environment. It's kind of right in the middle. Then on your question as to interest rates, you can really give a simple answer to that, and that answer is no. CEOs, CFOs, and so forth know that interest rates remain rock bottom by historical standards, that ultimately there will be a regression to the mean. They look upon interest rates still as highly attractive.

Okay. Well, there's another side to the coin, too, where if the Fed is finally getting out of the market and maybe we can have some return to more quote, unquote normal, right -- which you might even be able argue could get people a little bit more constructive? Is that fair?

We will see.

Sure. Then last one for me. The average price you guys paid in the quarter, looking at what the stock did, was certainly pretty impressive. Are you all -- is there a price where you get more aggressive on the shares? Do you have a view on that, or was it just luck that allowed that $37-ish and change dollar average price?

I would say that first of all, we take very seriously the commitment that we made in our proxy to purchase at a minimum the number of shares that we issue for compensation purposes at the beginning of each year, for compensation for the prior year's service. This year, that number was 2.05 million shares, as I recall -- RSUs that we issued -- and we purchased at this point 2.3 million, is it Bob? That commitment we take very seriously. You should expect that we will continue to do that year in and year out. When you make a commitment like that, I won't shock anybody if I tell you it's better to buy it lower rather than higher. We try to do that, but once again we are not Sears. The fact that we bought it at a lower place than it is trading today is a combination of some amount of luck and some amount of reasonable care when we do our share repurchases.

Cool. Thanks for sharing your thoughts.

Thank you. Your next question comes from Joel Jeffrey with KBW.

Just thinking about the investment banking business. I know you guys sort of longer-term target a 55% comp ratio in that kind of 25% margin, but you generated 25% margin this quarter with a 60% comp ratio. I'm just wondering longer term, could there be upside to the pre-tax margin line, or is this kind of a one quarter anomaly based on (inaudible - multiple speakers)?

First of all, the basic math of this is that the non-comp expenses tend to be reasonably stable on an absolute basis, and they tend to just grow along with head count. That's kind of what drives them. The ratio of non-comp expense to revenue is driven more by the top line than by the non-comp expenses themselves. In a quarter like this quarter, where revenues are a little bit stronger than history or trend, that ratio tends to go down, and the operating margins tend to go up a little bit. I think this is once again the reason that we don't look at our business on a quarter-by-quarter basis. If you look at the first half of the year, as I recall our operating margin's around 22.5%, which is -- that number, the ratio of non-comp expense to revenues, was a fair amount higher in the first quarter because revenues were little lower, not because non-comp expenses were so much higher in the first quarter.

Got it. Lastly for me, I'm sorry if I missed it earlier, but how much remaining do you have on your current share repurchase authorization?

Roughly 3.5 million shares is remaining, Joel.

Great, thank you.

Thank you, our next question comes from Steven Chubak, Autonomous Research. Please proceed.

Hi, good morning gentlemen. Ralph, I actually had a question regarding your Asia growth strategy. On the fourth-quarter earnings call, you noted that your conservative or measured approach to growth in the region had served you well, just given the challenging investment banking backdrop. What we saw actually at the very end of the year is that the slow-down in activity forced many of your large peers to re-trench. Recently, you unveiled your plan to open a Singapore office under the leadership of Keith Magnus. I just wanted to get a sense of what prompted the decision, given your measured approach to growth in the region previously?

Well, first of all, what prompts a decision like that in Evercore's entire history is the availability of a talent who we believe can meet our financial objectives of generating on average $10-million-plus of revenue per year, once they are up and running. That's really effectively what happened here. I would not call what we're doing a massive commitment to Asia. Obviously, activity there is becoming more important relative to global-announced M&A transactions, but it is still a relatively small part of the overall market. We have 15 people in Hong Kong. A year from now we might have six or so in Singapore. I don't think -- I don't consider that a massive financial commitment for a firm of our size. We are profitable in Hong Kong. Our Hong Kong business has margins comparable to our advisory business generally, and we would expect to achieve the same in Singapore.

That's helpful, thank you. Moving to the restructuring business, one of your peers noted on their earnings call that they've actually seen some additional opportunities emerge, which I believe they attributed to higher interest rates, as well as more volatile credit markets. Historically you've been quite active in the space. I wanted to hear your thoughts on the outlook for that particular business?

It's really good business. We're big believers in it, and we have been steadily expanding our restructuring group in recent years, including this year. Likely, we'll continue to carefully expand it. I can't say that Evercore has seen any pick-up in activity on account of this move in interest rates. As I said a moment ago, most decision makers of all kinds view interest rates as still extremely low by historical standards. I don't believe that factor's driving any increased activity. But our business remains in good shape there, and quite active.

Thanks. Lastly, I just had a quick question on seasonality. I know as a couple of people pointed out on the call that you don't like to speak too much about the backlog, but the guidance -- or at least the outlook -- that you provided for the industry was quite helpful. One of the consistent trends that we have seen over -- probably every year excluding 2008, on average, we have seen your revenues grew 35% in the second half versus the first half. Clearly that seasonal pattern has been fairly consistent. I just wanted to get a sense given your visibility on the backlog which you noted is solid and some of the share gains that are clearly evident in your reported revenues, whether you think that another seasonal pick up will likely occur this year.

For the 43rd time, we are not going to prognosticate about next quarter or the second half of the year -- either revenues or earnings or activity or anything of that nature. Okay?

All right. I thought if I framed it in the context of seasonality I might have a shot. Understood.

Nice try.

We do expect it will be colder in December than in August.

Okay. That's it for me. Thanks for taking my questions. (laughter)

Hugh Miller, Sidoti and Company.

You guys gave some great color on the recruiting environment into the firm. I was wondering, if we look at things just on the surface, you had very strong top-line growth in the advisory business, yet the comp ratio was relatively flat quarter over quarter. We did see kind of a net reduction, I think, of one director in the quarter. Are you guys noticing a higher level of recruiting activity for other firms looking at the talent at your firm, or has that really not change much?

Not at all. Basically, the reduction in the senior managing director is a function of someone going to a senior advisor, not someone leaving here to go to another firm. Our statistics on that over the last four years are remarkably low, and we haven't seen any indication that those are going to change.

Sure, okay. It was more from the lack of an improvement in the comp ratio quarter over quarter, given the top-line strength. I was wondering if you guys felt the need to pay a bit more for the productivity that you are getting, just give an up-tick in any type of recruiting activity?

No, look. I think we start to see as you get through the year, the impact of the hires that we are making fall into the comp ratios. As a general matter as we've discussed in the past, there tends to be a little bit more of the new hire costs. As you get into the second quarter it starts to show up, and it starts to show up more in the third and the fourth quarters. That's a little bit of what you are seeing here.

Yes, the investment banking head count, as I said in my comments, increased by 57 people quarter over quarter. That's a pretty substantial increase. That is one of the factors that is keeping the comp ratio for the moment from improving, despite the top-line strength. We grew a lot in terms of our people.

That's helpful. Thank you for the color there. It does look like equity industry volumes started to improve in the month of June, both on a month-over-month and year-over-year basis. I was wondering if you guys noticed a pick-up in the institutional equities business towards the latter part of the quarter, and if you've seen anything kind of flow over into the much of July, so far. Any insight there?

Nothing that would be worth commenting about.

Okay. Thank you very much.

Our next question comes from the line of Michael Wong, Morningstar.

You mentioned that your international revenue had been fairly decent despite general international weakness. Is mostly your non-US revenue cross-border from international to international, or from international to let's say a US-based target?

It's both. We have a fair amount of within-region activity -- for example, Europe to Europe, or Asia to Asia, or Brazil to the Brazil, or Mexico to Mexico. We also participate in cross-border activity. The 35% figure I cited is the domicile of the client.

Okay. Going back to your Asia strategy. Are you actively looking for talent to create more of your own offices in Asian countries, or are you generally satisfied with the strategic partnership strategy that you've mainly pursued in the region?

We are very satisfied with the strategic partnership strategy. Our strategy is really simple. We only open an office in a market when we believe we can number one, find talent that will produce at the levels of productivity that we have in the firm today. Number two, that it's possible to make money and earn good margins with the advisory-only model that we have in that market. It is, for better or worse, our opinion that it is very difficult to find that talent and to have the advisory-only model produce the margins that we expect in China, Japan, Korea, India, where we have set up alliances. For the foreseeable future, that's the way that we will continue to attack those markets.

I might add that we've had some experience now with people joining us from large firms that have significant presences or offices of their own in those markets, and it's not unusual for those who recently joined us to comment that through our alliances, we have at least as good if not better access to the businesses and pools of capital that our clients want to access; that we have better access to those alliances than we would if we had our own office.

Very interesting. Thank you.

Thank you. There appear to be no questions at this time, so I'd now like to turn the floor to Ralph Schlosstein for any closing comments.

Thank you very much, and we look forward to talking to you all next quarter, at which point we will actually be prepared to talk about the third quarter.

Thanks, everybody.

This concludes today's Evercore Partners Second Quarter 2013 Financial Results Conference Call. You may now disconnect.