Evercore Inc (EVR) 2013 Q3 法說會逐字稿

Good evening ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Third 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 opened for questions.

(Operator Instructions)

This conference call is being recorded today, Wednesday, October 23, 2013. I would now like to turn the conference call over to your host, Evercore's Chief Financial Officer, Bob Walsh. Please go ahead, sir.

Thank you. Good evening, and thank you for joining us today for Evercore's Third 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 evening, we issued a press release announcing Evercore's third-quarter financial results. The Company's 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 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 to their GAAP reconciliations, you should refer to the financial data contained within our press release, which as previously mentioned, is posted 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. I will now turn the call over to Ralph.

Thanks Bob. Good afternoon, everyone. Our third-quarter was a good quarter for Evercore. Despite the flat, flattish M&A markets and environment generally, we delivered the best third quarter in our firm's history, and our third-best quarter ever in terms of revenues. These results are in contrast to the results of many of our most immediate competitors, both large and small, as they were accomplished in an environment in which global and domestic M&A deals closed were down for the quarter.

Our earnings growth was strong. Earnings per share were $1.54 for the first nine months of the year, an increase of 57% above the first nine months of last year. Our margins on a year-to-date and on a 12-month rolling basis continue to improve. We continue to make progress on our most significant and key strategic objectives. Our advisory businesses continued to gain market share among the 13 firms that are public and report their advisory fees separately. Roger will provide an update on our advisory business in a moment.

We earned more than $150 million from investment banking clients outside of the United States year to date, an increase of 37% in comparison to the same period in 2012. Of particular note during the quarter, we advised the government of Nuevo Leon in Mexico regarding the refinancing of a $33.6-billion Mexican peso loans.

We continue to have success broadening the services we deliver to our clients. For the quarter we participated in six underwriting engagements, bringing the total to 36 for the year. We advised on two equity and debt capital markets transactions where we were not an underwriter. We completed four capital raises for private equity firms, resulting in our best quarter so far in our private funds business. Collectively, these expanded capabilities enable us to serve our existing clients on a broader array of transactions. They also allow us to serve a broader group of clients, and to sustain our growth in revenues and market share.

Our institutional equities business was profitable and continued to gain market share. Our investment management businesses were profitable and continued to grow. We had $184 million of net in-flows for the quarter, supplemented by market appreciation of approximately $450 million; and we ended the quarter at $14.2 billion of assets under management. Our private equity investments continued to contribute, as we earned $2 million of performance fees from Trilantic. Finally, and very importantly, our Board increased our quarterly dividend by 14% to $0.25 per share, our fifth consecutive annual increase. The Board refreshed our share buy-back authority.

Let me very quickly go over the numbers. First, financial performance in the third quarter. Third-quarter net revenues were $187.1 million, up over 25% over the same quarter last year. Net income was $24.3 million for the quarter, with earnings per share at $0.53. These results are up more than 40% in comparison to the third quarter of 2012. Operating margins were 22.6% for the quarter, our comp ratio was 59.2% for the quarter, and the compensation ratio for the trailing 12 months was 58.9%. Non-compensation costs were 18.1% of revenues, down from 20.5% of revenues in the third quarter of last year.

For the nine months ending September 30, our results were also strong. Year to date 2013 net revenues were $547.2 million, up 28% from the first nine months of last year. Net income was $70.6 million for the first nine months of 2013, or $1.54 per share. These results are more than 60% higher than the income reported in the first nine months of 2012. Operating margins for the first nine months were 22.6%, compared to 17.5% for the first nine months last year. Our compensation ratio for the first nine months was -- of 2013 was 59.2%, compared to 60.6% for the first nine months last year. Non-compensation costs were 18.2% of revenue, down from 21.9% of revenue in the first nine months of 2012.

I will point out that as all of you know, the last quarter in 2012 was a record quarter for us, so it will be a tough comparable. Let me just conclude my remarks by reminding everyone that we believe our business is best judged over periods of time longer than one quarter, and I have made this point many times in connection with both good quarters and weaker quarters. Of course it's always nicer to make it -- when it is accompanied by a good quarter as this one is, but I just do want to remind everyone that we judge our business over a rolling 12-month period of time, where we continue to perform extraordinarily well. Let me now turn the call over to Roger to comment on our advisory performance and the M&A environment, generally.

Good afternoon, everybody. Hi. You can see through Ralph's comments that the firm's investment banking business performed strongly third quarter. It was the strongest third quarter which that side of the business has ever had. Revenues reached $161 million, up 26% from the quarter a year ago, and down 11% from the second quarter. Keep in mind that the second quarter of this year was the second-best quarter the firm ever had.

Advisory fees represented 94% of that total, with the remainder accounted for by institutional equities, Mexico equities, and our investment in G5 and Brazil. Our advisory revenues included 31 fees of $1 million or more. That compares to 30 such fees a year ago; and on this measure, it is the third-best quarter in the firm's history. The overall number of fee-paying clients was 136, down slightly from the third quarter of last year. That's our fourth-best quarterly total ever. For the nine months we received -- of this year -- we received fees from 269 clients. That compares to 255 for the first nine months of last year.

Revenues from underwriting transactions were $6 million for the third quarter and $24 million for the nine months. You can see this is starting to become a meaningful factor for the firm. Our private funds group, one of our relatively newer businesses, generated $6 million of revenue for the quarter, which is its best quarterly result ever.

Productivity per partner -- a metric which you know, those of you who follow us closely, we pay a lot of attention to -- productivity per partner for the rolling 12-month period, which is the way we always measure it and we discuss it with you, was $10.2 million, up quite sharply from $7.2 million a year ago at this time, and essentially the same as the second quarter. Many of you know that Evercore generally ranks number one on this metric among publicly-owned investment banking firms.

We had another strong year in partner recruiting, and I am referring to it that way because it is finished for 2013 now. For the year to date, we added five new partners from the outside -- Scott Cameron for software; Pat McCaskin for health care services; Keith Magnus for Singapore, a new office we have opened; Nigel Dawn, who will be running a very interesting business for us involving secondary market transactions involving financial sponsor interests, like LP interest, in some cases entire sponsor organizations; I'm sorry, Fernando Soriano, who is just now coming on board, who will be covering Latin American and Mexican multinational corporations for us, working with our colleagues in Mexico and Brazil.

In terms of our competitive position, the firm's share of the total fee pool, specifically all advisory revenues reported by publicly-owned firms, hit an all-time high of 5.2% during last quarter, meaning second quarter of 2013. We don't have all of the data for the third quarter yet, because of course we require other firms to report, and then we have to analyze what they do report; but it is likely that this share increased further during the quarter which just ended.

On the lead tables, we slipped some during the third quarter, mostly because of the $130-billion Verizon Vodafone transaction in which we did not participate. More generally, our position remains strong on that standard. Through nine months, for example, using ratings based on the number of transactions, the only independent firm in the world ahead of us was Lazard. As you know -- I'm sure you know -- our P&L, and everybody else's P&L, is more influenced by the number of transactions on which we advise than by how big or small they are.

Finally, let me say word on the broader environment. First on the numbers, global M&A volume in terms of announced deals, and in terms of completed deals -- those two totals are essentially flat over the nine months of 2013 versus the nine months of 2012. For the third quarter itself, announced volume was up substantially, and completed volume was down meaningfully.

Now you might ask, why is Evercore doing so well in a flat environment like this? There are two central explanations. Number one, we are gaining market share, as my statistic on the -- our share of the fee pool -- corroborates, gaining market share. Number two, the region of the world which is strongest in terms of overall M&A volume is the US market. US volume for the nine months was $776 billion on an announced basis, for example, versus $580 billion for the nine months of 2012, so up very nicely.

Now that is the market were Evercore is strongest, just because of our history. We have done a great deal of globalizing over the past 7.5 years, and have obviously now got 1,000 people and very substantial operations all around the world, but we do remain a US-centric firm in many respects; so we are strongest in the market that's strongest. Those two factors tell you a lot about why Evercore continues to steam ahead and grow very handsomely, even when the broader environment is flat.

Going forward, my own view, macroeconomic conditions are neither strong -- I'm sorry, macro conditions for deals are neither strong nor weak, which is obviously another way of saying they are flat. But they're not -- they're not red hot, but they're not poor either. Anybody who says they're poor, I don't quite understand that. Interest rates, of course, remain very low. They moved back down, as you know, over the past few weeks. Ten-year treasury hit a high of 3.05%, it's now in the 2.50% range. Share prices, of course, are high, more or less at all-time highs. Historically, high share prices generate deals, low share prices don't. Yes, growth itself -- economic growth itself -- is on the weak side, but seen as slowly, if not glacially, improving; but nevertheless improving.

The macro environment is reasonable. Will it get better? Of course at some point it will. But exactly when that is I don't know. If I did know, I could be phoning this in from my 400-foot yacht, which parenthetically, I don't have. The outlook for us remains, as Ralph said, a good one. Obviously, this is a strong year for the firm. Overall when it's over, it will have been a strong year for the firm. We are very pleased with the firm's progress on investment banking as a whole. I'm going to hand it back to Ralph.

Thanks, Roger. Let me talk very briefly about our institutional equities business first, and then investment management. The institutional equities business continues to add clients and to grow revenues. We now have research coverage of 332 companies and serve more than 350 clients. Year to date, the business generated $29.7 million in revenues, a 74% increase in comparison to the nine months of last year. Expenses were $28.7 million for the period, up 43%. Business was profitable for the third quarter, as our market share continued to grow, although only marginally. We remain committed to our goal for the business to contribute to operating profits on a full-year basis.

Investment management, operating income for investment management for the third quarter was $4.1 million on net revenues of $25.8 million. Operating margins were 15.8%. For the first nine months of the year net revenues were $75.3 million, up 20% from last year. Operating income was $11.9 million, up approximately 170% percent from last year. Margins year to date are 15.8%. Assets under management increased 5% to $14.2 billion. We had net in-flows in both the wealth management and the institutional asset management businesses.

Investment performance continues to be strong this year at our key institutional businesses and in our wealth management businesses. As I indicated previously, solid investment performance is often the leading indicator of asset in-flows, and our affiliates are working hard to continue the positive performance which we began last year. Bob, let me now turn it over to you to make a couple comments on non-comp costs and other financial matters.

Thank you, Ralph. Just a few points. Our press release highlights that we have recorded an impairment charge of $2.7 million related to Evercore Pan Asset Management as a special charge in our US GAAP results. This charge, which is excluded from our adjusted pro forma results, arose when we determined that the fair value of the business was below its carrying value, in conjunction with an ongoing strategic initiative.

Pan is a UK asset management affiliate that was first consolidated in the first quarter of 2013; however its results have not had a significant impact on the consolidated group, as its revenues were less than $1 million for the quarter, and the business operates at near break-even levels. Pan's AUM was approximately $1 million at the end of the third quarter.

On non-compensation costs, we continue to be disciplined, and the costs are essentially flat in comparison with the prior quarter. Our cost per person in Q3, which is a key measure that we manage to, was approximately $31,000 -- again, comparable to prior quarters. Our adjusted pro forma tax rate is 38% for the quarter, comparable to prior quarters and to 2012. As we have indicated before, 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 United States.

Our share count for adjusted pro forma earnings per share was 45.9 million shares, an increase of about 0.5 million shares. This increase was due principally to the effect that a rising share price has on both the Mizuho warrants and unvested restricted stock units from recruiting and compensation. Our average share price for the quarter increased by nearly 20%.

As Ralph mentioned, our Board declared a dividend of $0.25 per share for the quarter, a 14% increase, and refreshed our share buy-back program so that we now have $250 million, or 5 million, of share buy-back authorization. Our cash position remains strong, as we hold $285 million of cash and marketable securities. Finally, as we noted briefly at the end of our last call, we have repurchased the 14% of the equity in Evercore Trust Company that was previously owned by the principles of that business. With that, we will open the line for questions.

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

(Operator Instructions)

Douglas Sipkin, Susquehanna.

Two questions. First, just curious to get your pulse on -- I know it's early, but the outlook for head count growth into 2014? Do you get the sense it's going to be better than the trend in '13? Is it too early to tell? Obviously the business showing a lot of momentum, does that maybe accelerate the efforts? The second question, obviously you guys did a good job of pointing out the success this year. I guess what I would ask, sort of digging in, is it more a function of the market share and the hiring, or more a function of the geographies, considering maybe some of the other geographies may pick up the slack in '14, whereas maybe the US slows down? Thanks again.

Let me start with the second -- take the first question first. Hiring, we have been very consistent. We have said that we -- our hope is to hire four to seven new senior managing directors, assuming that we can find the highest-quality people. We have been successful in doing that over the last four or five years. That's certainly the hope and expectation that we would have for next year, as well. We have lots of active dialogue, maybe a little bit more active dialogue than we've had at this time of year in previous years; but I don't think there's anything yet of enough consequence to suggest that what we would do next year would be materially different from what we have done historically.

On the second one, the answer I think is the following -- there is no reason to think the US is going to slow down. If you look at the M&A statistics over a long period of time, we are in the mid-stages, perhaps, of a long-term up-swing. It has been compromised, so to speak, by factors like -- in particular, the very slow recovery following -- involving all the head winds from 2008. But still the secular outlook is strong. I don't think the US is going to slow down. I think it will be the opposite. It should be the case that other regions of the world, which have been notably weak this year, do pick up; but we're not smart enough to know exactly when and by -- at what rate. But on a US slow-down, I think the answer is not -- very unlikely.

I would just add two points. Number one, as I indicated in my opening comments, our exposure to -- well, we still remain -- the majority of our revenues, a significant majority of our revenues, roughly 65% or so, come from US-based clients. The proportion that has come from non-US clients has grown -- is growing more rapidly than our revenues in total, despite the fact that it is the US market, as Roger indicated, that is leading right now, in terms of whatever strength there is in M&A.

The second thing I would point out -- I think there are too many factors to give a definitive answer as to what this means, but in an environment that is essentially flattish, our revenues are growing somewhat because we are growing our number of partners; but they are also growing because our productivity per partner has gone up fairly consistently over the last three years. That, in what has been essentially a flattish environment. That would suggest, at least, that there's a reasonable probability that some of what is happening here is we are getting a few more at-bats, and that our batting average is a little bit better over the last two or three years. Getting market share improvement from productivity enhancement is an encouraging thing.

Great. That's helpful, thanks.

Brennan Hawken, UBS.

Following up on that productivity point, just a quick question. It has been surprisingly good, just given how weak the cycle is. If this cycle gets going -- if and when, I should say; it's been so long I almost feel like I've got to say if -- but when this cycle gets going, can you help us think about where that productivity number can go? To me, it almost feels like that's a great way to try to think about the up side for Evercore shareholders.

No, we can't help you (laughter).

Okay.

Look back at history.

I know, but at this point given how weak the cycle is, you're not all that far from where you peaked out in the last cycle.

That's not true. The most honest answer to that question is we don't know ourselves. We focus a lot on it, obviously, but we don't know ourselves. Any speculation on our part would be dumb, because it would be grasping at straws. I would love to answer it better than either of us can do, but we can't.

I figured I would give it a shot. Fair enough.

Not that we're avoiding it. We do not know the answer.

We look forward to it when it happens (laughter).

Fair enough. Then revenues were surprisingly good here this quarter. Just curious, in light of that, or with that in mind, the idea that you guys are going to be in investment mode here for a while, as long as the cycle stays similar to where it at least has been, we should basically think about comp and this upper 50s range until we can really get going?

I think that first of all, I think what we've said pretty consistently is that we expect over a period of time our comp ratio to make steady progress from where we have been to the sort of the mid-50s or so. If we were in a total stasis environment, we would be pretty close to that today. But what is happening in our business is that first of all, our early-stage businesses -- the equities business, the private funds business, Evercore Wealth Management -- are getting each year a little bit more mature. So each year, and so far this has been the case, our margins get closer to the norm for the business as a whole, which provides a slight breeze at the back in the reduction of that comp ratio.

Second, the other investments that we make, which are basically in adding both to our partner and below partner level, which we have done some not inconsequential amount of this year. Those also, as you point out, tend to make the comp ratio a little bit more sticky. The point I would make, though, is that if you -- the simple math of this is, four to seven partners on a base of 30 or 40 has a bigger percentage effect than four to seven partners on a base of 65, as we have right now. All of those things suggest that if the environment stays exactly as it is, we should be able to make each year a little bit of progress on the comp ratio, and on our operating margins. That is certainly very much what we are seeking to do.

Okay.

Long-winded answer, I apologize for that.

No, I appreciate the color. Is it possible to get some appreciation of the comp base, how much breaks down fixed versus variable?

We do not give that but --

Nor are we going to (laughter).

And we're not going to. I think philosophically, we run our business to have as low of salaries as we can have that are competitive in the market place; and we have absolutely none of the regulatory pressures which cause to play games with the mix of salary and bonus, which would -- which I believe in some of these large firms is going to dramatically alter the mix of fixed and variable costs. We are still very much oriented toward keeping our fixed costs as low as possible, consistent with market and having as much of our compensation be in variable compensation.

Cool. Last one for me. How do you feel at this point about your position in Europe? We've heard some folks make constructive comments that I'm sure means that -- doesn't exactly mean things are off to the races. Do you feel as though you're at this point positioned to benefit if activity picks up there; or if not, how much more time do need to get the beachhead more fully established?

Well, I was just there last week. I would say that the story in Europe this year, I think across the industry, was one of challenge in getting not conversations going and even real discussions going, but in getting things to the finish line and getting them announced and closed. Europe has been very much a story of stuff drifting or not getting off the ground. We actually will have -- we expect to have a decent year in Europe. Most of our competitors are down this year, we're not necessarily expecting that, so on a relative basis we've done very well.

If one looks at our backlog there now versus a year ago, it would suggest that at least there's some early stage of certainly bottoming, whether that actually leads to a pick-up in activity, I think, is still speculative. I do think as you saw, we consciously made a decision this year not to add to our senior managing director head count in London. I think in retrospect that probably looks like a reasonable decision. We're certainly not entering next year with a view that we would absolutely, even if we can find great people, not do that.

Terrific. Thanks a lot.

Hugh Miller, Sidoti.

You guys have given us some interesting color around the rate environment and share price and the economic outlook and growth there. I was wondering if you could make some comment about what you're hearing with discussions with CEOs and CEO confidence levels. It seems like from some of the third-party research firms we've heard about, with some of the uncertainty and noise surrounding Washington, that that has pulled back a bit during the third quarter. How are your conversations going? What are you hearing from the CEOs you're speaking with about overall conviction and confidence in their respective markets?

We've answered that or a version of that many times over the years. I always say, and I would repeat it here, that the most -- the biggest factor affecting CEO evidence is demand. I know it's fashionable, and as somebody who has spent a lot of time in Washington still does, I understand it; but it's fashionable to say, oh, Washington's dysfunctional so we need to hide under the desk. But it's driven much more by demand, strength or lack of it, than it is by political factors. Number one.

Number two, of course there was a temporary fixation on Washington during the shutdown and default discussions; because it was the number one topic of discussion in the country, whether you were running a very large company or working out of your home or garage. Notice that the -- that period, the 16-day shutdown, all the discussion about default, had virtual -- had negligible effect on financial markets. As you know, the market was up 2.6% during the 16 days of the shutdown itself, and indices, most of them were right around all- time highs, as I said in my comments.

That's a bit of a proxy for corporate attitudes. It's just not correct that most CEOs, for example right this minute, are getting up in the morning and thinking about Washington. They're thinking about their businesses, they're thinking about demand, they're thinking about investment, they're thinking about competition, and so forth. So is it a factor? Yes. Is it the dominant factor? No.

Where is CEO confidence? It's slowly improving together with the growth factor. When this year is said and done, the US economy will probably have grown in the vicinity of 2.25% to 2.5%. That's very modest, and so confidence is a bit in line with that. There are widespread expectations, but we will see as to -- that next year we'll see a somewhat better year, 3% growth, or something in that vicinity. Confidence will improve if that is the way the year actually unfolds. Summing up, I don't find confidence to be poor or great. It's middling, just like M&A totals are middling, and just like the macroeconomic environment is middling.

Okay. Yes, I certainly appreciate your insight, very helpful. It seems as though post the Verizon deal early in September that there seemed to be a bit of investor buzz around the potential for these larger deals which have been missing from the market for a while to potentially start to come back in and become exciting, but is there anything that you are seeing that would give you an indication that we might get to an environment like that, where the larger deals start to come back in and become more of a meaningful factor?

Well, I wish I knew the answer to that but I just don't. But I would remind everybody, deal flow remains perfectly good. You can see the number of transactions on which we advised this year was up nicely. No firm for the last two years, four years, five years, and so forth, has had a better niche than Evercore in the large-cap multinational sector in larger deals -- it's out there in the public record. But our bread and butter, just like every other firm in the business -- large, small, medium -- is the mid-cap and upper mid-cap market. That's where 95%-odd of transactions are.

You are right that there have been only a few big deals this year -- Dell, Heinz, Verizon-Vodafone, and so forth, about five of them. But the day in, day out deal flow is perfectly reasonable. That's where most of the deals are, and that's where most of the fees are. I don't know when you will see more mega-deals, I really don't know, but you shouldn't take that as a sign that the market as a whole is poor, because it isn't.

Okay. I certainly understand that, I do. The last question I had was with regards to capital allocation priorities. Obviously you have raised the dividend here. You have restocked the share buy-back program, and you talked about investment in the recruiting side and how that should be relatively similar to what we have seen in the past. Can you talk about, as you think about dividends versus share buy-back, does one seem more compelling at this point as a use of capital, and what your thoughts are there?

I think that -- first of all, I think that we believe that a prudent dividend policy is, assuming that your business supports it, is to increase the dividend annually. If you look back over the last four or five years, we have generally done that in a 10% to 15% range, certainly over the last three years or so. This falls right into that range -- that happens to be at the upper end of the range, because we obviously are having a pretty good year this year.

We have also said publicly many times that we intend to repurchase at a minimum a number of shares to offset the issuance that occurs in our year-end compensation plans, the restricted stock units that we issued in those plans. This year, we issued 2.05 million shares in the year-end compensation round. We have purchased so far this year, either in open-market purchases or in net settlement, 2.4 million shares, roughly. So we have actually purchased enough shares not only to cover the RSUs issued at year-end compensation, but also to cover all the shares that we issued for hiring this year, and actually then some above that.

We would love to be able to do that every year, and certainly at a minimum we are going to purchase what we have assured our investors a number of times, that we will repurchase. Certainly we hold open the option of doing more than that as cash earnings exceed the amount that would be required for our dividend, plus that minimal amount of share repurchases.

Okay, thank you for answering my questions.

It's our pleasure.

Devin Ryan, JMP Securities.

Most of my questions have already been asked, but just one on the private funds business. I know you guys have made some investments there, and highlighted the improving contribution in your comments. Just like to get a sense of expectations there, based on current head count how much bigger that business can be? Is that an area where you feel like there's still a lot of capacity to expand? Obviously asking that because it's a little bit more difficult for us to get our arms around the contribution there.

That business has had steadily increasing revenues. This year will be no exception. We added no head count this year. I would expect very limited, if any, increase in head count next year; and I would expect another increase in revenues next year. Next year I would expect that the margins in that business would be comparable to our other advisory businesses.

There is some chance that we get, depending upon what the fourth quarter looks like, a little closer to that this year but we are not planning for that. There is a fair amount of -- this is very fresh in my mind, because I just had the quarterly review with the person who runs that business two hours ago. There is definitely a fair amount of revenue runway before we sit here and say we have got to add materially to our head count.

Got it, thanks for that color. In the restructuring business, it appears that activity's really been troughing out here. Love to get some thoughts on whether you see any change to that? What are you seeing in the restructuring business, and is there any reason to believe that activity or the pace of activity could improve from here?

Certainly not here in the US, no reason to believe that it would pick up. Maybe there is modest opportunity for a little bit of a pick-up in Europe, primarily because maybe we are getting to the point where the banks are starting to be a little more willing to recognize the real value of some of the loans they have, but we are still a ways away from that, I think.

The bankers that I guess are more restructuring focused, can they be put on other assignments or go after different business, just given the fact that maybe the activity in that side of the business is a little bit slower?

First of all, while restructuring activity is light in the market, here again we are a bit of a beneficiary of market share gains, and we happen to be involved in certainly the largest restructuring situation under way at the moment. Second, what we have done is we actually call our restructuring business restructuring and debt advisory, and we have found opportunities to deploy our expertise beyond just the pure traditional restructuring business.

Then of course, if we do get people who are underutilized, we will move them back and forth between advisory and restructuring, recognizing that -- I think I have said this in the past -- it's really not a bright line between these two. It's a grey line. Probably what we did more of is when restructuring was really hot, we took people out of the M&A business who were underutilized at the time, and used that as the search capacity to handle restructuring.

Got it. Thanks very much.

Joel Jeffrey, KBW.

Just to follow up on your capital plans, you guys have been clearly very good at returning capital through increasing the dividend and repurchases. Given how the stocks performed this year, is there any reason you guys could think of to potentially do a secondary offering to raise capital?

No, we have no expectations of that.

Okay, fair enough. Then thinking about the underwriting business, we have gotten some comments from one of your competitors this morning talking about how strong the IPO markets have been. Any color you could give us on where you're seeing particular strength, and how you see that market developing for the rest of the year and into next year?

As we've said, our research tends to be concentrated in financial institutions, technology, media, telecom, and transportation. There is probably a little bit of bias toward those sectors compared to firms that have universal research coverage. What we are finding is in sectors where we have broad industry knowledge and deep industry knowledge, we can get involved in the underwriting activity.

For private equity firms, IPOs are increasingly becoming a source of exit for them. Their portfolios tend to be pretty broad in terms of the industries in which they have participated in. Other than the tech area, which is a constant source of IPO business, we don't see a particular sector that's going to be a source of the vast majority of volume. I guess energy is another area, because there has been so much private equity activity, there is a lot of calendar there, as well.

Great. Lastly for me, just a follow up bit on Devin's question. On the fund placement business, it's my understanding that business tends to be more fourth-quarter weighted, typically, and you guys posted a very strong quarter this quarter. Was there any acceleration into this quarter, or should we expect it again to be more of a fourth-quarter dominated business?

Well, it hasn't been a fourth-quarter dominated business for us to date, and I wouldn't expect that it would be this year either.

Great. Thanks for taking my questions.

Yes, sure enough.

Michael Wong, Morningstar.

Looking at your original revenue breakdown for Europe and other, it appears that your European senior managing directors are already producing around $10 million of revenue each. Is this business doing better than you would expect in this environment, or is there still lots of upside there?

I think our European business, like the rest of our business, is doing better than we or others would expect, given the environment that we are in today; and we feel very fortunate that that's the case.

Quickly, is there any material Asian strategic alliance revenue along with the European and other geographic segment, or is that more or less pure European revenue?

We have an office in Hong Kong which is -- has the same levels of productivity that we experience in Europe and in the US. We have just opened an office in Singapore. It's obviously too early to tell, but certainly our hope and expectation is that productivity there will be comparable. Those are the two principal -- and obviously Brazil and Mexico. Mexico is going to have a record year this year. Brazil, notwithstanding the economy there, is doing okay. The revenues from the non-Europe, non-US businesses where we actually have offices are much larger than revenues attributable to our alliances, where there is a hard revenue there.

I would point out that the alliances are not unimportant in getting certain types of business where, for example, sell-side assignments, where the potential buyers are broadly distributed around the globe, some in places where we have offices, and some in places where we have alliances. Having that broad coverage of more than 90% of the world's GDP allows our -- allows us to serve our clients really in whichever markets they care to implement strategic transactions. Even if there isn't a hard revenue in the alliance, it definitely adds to our ability to do business, in our view.

Okay, thank you.

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

The only thing I would say in conclusion is we are now far enough into the year to know that we have had a reasonably good, one could even say quite good nine months. Sitting here today, we don't see anything that is going to prevent us from talking to all of you three months from now and talking about a reasonably good or quite good 12 months.

If you look at the nine months, our success has been driven by market-share gains which are partly driven by productivity improvement in the face of a flattish M&A environment. I expect at the end of the year will be able to say similar things about how we have done. Obviously, we never give any forward guidance, but we are -- we happen to be in a reasonably good spot vis-à-vis our competitors, large and smaller right now. We've got to go back to work to make sure we deliver that to you. Thanks very much.

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