Evercore Inc (EVR) 2015 Q1 法說會逐字稿

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Evercore first-quarter 2015 financial results conference call. (Operator Instructions). This conference call is being recorded today, Wednesday, April 22, 2015. 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 and good morning. I am Bob Walsh, Evercore's Chief Financial Officer, and joining me on the call today are Ralph Schlosstein, our President and Chief Executive Officer, and Roger Altman, our Chairman. After our prepared remarks we will open up the call for questions.

Earlier today we issued a press release announcing Evercore's first-quarter 2015 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 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 is important to evaluate Evercore's performance on an annual basis. As we have 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.

Thank you, Bob, and good morning, everyone. Before I start let me make everyone aware that Roger and I and Bob are in different cities, so that if we are not perfectly orchestrated today, particularly during the question-and-answer period, it is simply the fact -- that fact, not rudeness or disrespect toward each other. Now to the review of the quarter.

Our first-quarter results, while always seasonally lower than other quarters, reflect our strong start -- our strongest start to the year since we went public. So we continue to be very pleased by the positive momentum in our business. Our risked and unrisked pipeline of Advisory opportunity continues to be strong and our pipeline of underwriting assignments is building quite strongly as well.

Assets under management in our Wealth Management and Trust business grew by 4% as the business continues to attract new clients and add assets from existing clients. Overall assets under management were essentially flat as the weak peso and the strong dollar reduced the reported value of assets under management in Mexico.

The integration of our equities business is on track producing operating margins from secondary activities of 14.2%, up from 6.2% in the first two months of the combined operation at the end of 2014.

And very importantly, we are having an unusually high level of success in recruiting this year, having already attracted eight senior managing directors and two senior advisors with several additional discussions still very active. And we have succeeded in getting early commitments this year. So, much of this new talent will be on board by the end of the second quarter.

Let me now briefly review our financial results. First-quarter 2015 net revenues were $238.2 million, up 60% versus the same period last year, although down 26% from the record fourth quarter of 2014. The increase versus the first quarter last year of course reflects our much larger equities business. But even without the equities business firm wide revenues would have been up 32% and our Advisory revenues were up even more.

Net income for the quarter was $29.7 million with earnings per share of $0.56. These results are up 102% and 81% respectively from the prior year but down from last year's record fourth quarter. Operating margins were 21.2% for the quarter.

Our compensation ratio was 57.4% for the quarter, lower than the same period last year, and our trailing 12 months compensation ratio was 58.6% compared to roughly 59% for both the prior period and for the period ending this time last year.

Non-compensation costs were $51.1 million, up from the first quarter of last year once again due to the larger equity business and to the expansion of our business generally, but down in comparison with the fourth quarter of 2014. Our cost per employee, the key metric to which we manage, declined 12% in comparison with the fourth quarter of last year.

We again returned significant capital to our shareholders, more than $100 million in this quarter, including repurchasing 1.7 million shares offering a substantial portion -- offsetting a substantial portion of the 2.2 million shares granted in conjunction with 2014 bonus awards.

Let me now turn the call over to Roger who will comment on our Investment Banking performance and the M&A environment more broadly.

Good morning, everyone. The firm had its best first quarter ever in Investment Banking. You all know about the seasonality of this business for us and everybody else in it who is a major factor. So for example, fourth quarters are always stronger than first quarters -- that's been the case with us for many, many years. I don't see any reason why it won't continue to be. So by first-quarter standards this was very good.

Investment Banking revenue was up 70% to $214 million on a year-over-year basis, up from $125 million a year ago. Operating income $47 million, more than double last year's first quarter. Of the $214 million in total first-quarter revenue Advisory fees were $155 million of that; we earned 35 fees in excess of $1 million which is about 10% above the year earlier level.

The number of fee paying clients increased to 151, which is a 30% increase from the 116 level of a year ago. We participated in 10 underwriting transactions during the quarter and 12 other capital raising transactions in the latter primarily represent fund raising for sponsors and secondary transactions for owners of LP interest.

35% of our total banking revenue was generated by clients outside the US with Europe being particularly healthy. Productivity of our partners -- as you know, we watch is very closely, we consider it one of the most important measures -- rose 20% year-over-year to $12 million, quite a good figure.

We finished the quarter with 73 senior managing directors. Recall that we promoted six internally at the end of last year. As Ralph said, 2015 is shaping up as a particularly strong recruiting year. Nine senior bankers have committed to join the firm in 2015 and, to give you a flavor of this, yes, on the one hand Evercore is 20 years old as of last month, but we still have a lot of building out to do.

So we recruited a head of a new oilfield services group, a new chemicals group, a new power and utilities group, we added to our technology team in London, we added to our equity capital markets team both in New York and in silicon valley, added to our insurance team, added to our Restructuring team all so far in 2015.

Now, as in the past, if we have an outsized recruiting year there will be two P&L effects generically speaking. There will be a short-term bump in our comp ratio and there will be faster medium-term growth.

We feel good about 2015 as a whole, in other words the outlook for the whole year in terms of Investment Banking. It is possible it will be a little more seasonal than usual, meaning backend loaded, but we will see on that.

In terms of the environment, M&A volume levels are healthy; this is a good moment in the cycle. Both global announced volume, and I am referring to dollar volume and US announced volumes are up about 30% year over year. That is the right way to look at it. It may be down a bit from the fourth quarter, but just like our own results are seasonal M&A volume as a whole is seasonal.

Completed transactions volume was up 13% globally year over year, down interestingly about 5% in the US year over year. The number of announced deals -- not the volume of them in dollars, but the number -- was down about 3% year over year.

So when you put all that together you say to yourself the same thing which we said on the last earnings call, which is what is really going on in the M&A market is that the average deal size is increasing. When you see dollar volumes go up and the number of deals down are flat, then by definition the average deal size is going up. And it's an interesting dynamic because in a super strong market you would see both go up.

A couple of -- three final comments. Our energy business remains very strong, there is a shift in composition of it from what we call the A and B sector, which essentially means selling assets, for example like acreage; shifting over to corporate transactions, for example stock for stock mergers. But the energy side of the equation is really quite good. As I said a moment ago Europe is strengthening, both generally and for us, and our backlog remains quite healthy. Back to Ralph.

Okay, let me just talk briefly about the equities business which contributed revenues of $55.2 million in the quarter, including $2.7 million attributable to underwriting, earning operating margins of 15.8%. The operating margins excluding the effect of underwriting were in excess of 14%.

Secondary revenues are down quite modestly in comparison with the combined revenues for the predecessor businesses for the same period last year. Progress has been made in reducing non-compensation costs. Other cost savings initiatives will be implemented in the second and third quarters and will start to take effect in the second half of the year.

We continue to steadily improve in the votes of key institutional clients and are seeing continued positive momentum throughout the first voting cycle as a combined Company. And we hope and expect that that is a precursor for secondary trading activity as well.

Headcount reductions were made a few weeks ago to better align the size of the team on the combined platform with our current revenue opportunities. This was done in the ordinary course of our planned integration. We continue to invest in and grow the business to best serve the needs of our clients adding a senior analyst in the energy space who will join in the second quarter.

Investment Management -- our Investment Management business continues to contribute. On an overall basis net revenues were $23.5 million for the quarter, a 3% increase from the same period last year. But 13% below the fourth quarter which were aided by both yearend performance fees and marks in our PE business.

Operating income was $3.5 million for the quarter delivering a margin of 15.1%. Assets under management were essentially flat for the quarter, probably the highlight here is our Wealth Management business which is performing particularly well adding talent, clients and assets under management.

Our performance in Wealth Management in all of our products is ahead of their benchmarks and that is over any period of time, one, three and five years. And now that we have a five-year track record, which we recently passed from a chronological point of view, we are beginning to see early signs of a pickup in organic growth. And as you can see, our Wealth Management business finished the quarter with $5.9 billion of assets, an increase of 4% from the prior quarter.

Bob will now provide some further comments on our non-comp costs and on several financial matters.

Thank you, Ralph. Just a few quick points. Our adjusted results for the first quarter exclude certain costs that are directly related to our equities business and also the finalization of matters associated with the closing of the US private equity business.

Specifically our US GAAP results include $6.1 million of special charges relating to a variety of matters including the employee separations that Ralph mentioned, termination of contracts and certain acquisition and transaction costs.

In addition, our adjusted results exclude the costs associated with expensing the equity consideration granted in conjunction with the ISI acquisition. The charge is larger this quarter as we have begun to amortize the costs associated with the G and H LP interests in the first quarter in addition to the costs of the E units.

Non-compensation costs were lower in the first quarter, even though the results of the combined equities business were included for a full quarter versus two months in the prior period. As Ralph mentioned, firm wide non-comp costs per employee were $37,000 for the quarter, which is 12% lower than Q4. And as he mentioned, we continue to focus on cost reduction opportunities not only in our equities business but across the entire firm.

The adjusted pro forma tax rate for the quarter is 37.25%, up slightly in comparison with the first quarter of last year. That is principally due to the elimination of the minority interests in our equities business.

The share count for adjusted pro forma earnings per share was 53.4 million shares, an increase of approximately 2.1 million shares from the fourth quarter of last year. This increase reflects the inclusion of the LP units associated with ISI for a full period, an additional 2.2 million share equivalents. The offsetting decrease is due to the net effect of share repurchases offset by normal growth from RSUs.

Our average share price for the quarter was $50.82, which is up slightly from the fourth quarter. As Ralph noted, we repurchased 1.7 million shares in the quarter. At March 31 we had remaining authority to purchase 6.1 million shares for approximately $303 million in value.

And finally, our cash position remains strong as we hold approximately $258 million in cash and marketable securities with current assets exceeding current liabilities by approximately $271 million. Let me turn it over to Ralph for closing comments.

Okay, let me conclude by saying that we are very encouraged by the momentum in our business. Our first quarter, as measured by any metric, was materially stronger than any first quarter in our history. And as Roger indicated, our backlogs in both the Advisory business and in equity underwriting are strong.

We already have had our strongest recruiting year ever and we have additional important discussions still underway. We are finding that we increasingly are the destination of choice for the high-performance Advisory bankers who we work so hard to recruit.

As Roger indicated, our recruiting success to date, depending on our revenues, may have a slightly greater effect on our comp ratio and our operating margins than in prior years. And we still need of course to successfully execute both the growth in our Advisory business and the integration of our equity business. But assuming we make progress on those we believe that this recruiting success does bode well for the future value of the Company.

Thanks very much and we will now take any questions.

(Operator Instructions). Douglas Sipkin, Susquehanna.

Just wanted to drill down on a couple of things. Obviously it looks like a tremendous start to recruiting, it seems like the pace is a good amount above your average so to speak. And I just wanted to drill down -- I mean anything that you guys can sort of tie it to? Is it the ISI and the potential for underwriting or is it just the great 2014 for Advisory growth?

I am just curious because obviously it has gotten -- the business has gotten better, and, guys, the bigger firms are still looking to get bigger in the business again, but yet you guys have still managed to recruit incredibly well. So I am just curious, what are you guys linking it to?

I would say it is probably a number of factors. Number one, I think we do stand out a little bit in terms of the momentum that we have and the breadth of things that bankers can do with their clients from a strategic point of view. So that is one factor.

I think second, having the equity underwriting capability has been important to maybe one or two of these recruits. So, on the margin it has helped us as well.

And then finally, I think from the point of view of the people involved, there just seems to be a little bit more willingness to consider alternative ways of doing business, the Advisory model versus the full-service model, than existed in the past.

And I am not quite sure how to explain that. A hypothesis might be people have had a few more years of earnings under their belt from the financial crisis and maybe feel a little more financially secure. But it is hard to say exactly what is happening on that side.

Okay, great, that is helpful. And then maybe a follow-up for Bob. See obviously the improvement in the margin at ISI on the expenses and you guys sort of indicated there is a little bit more to do.

Can you sort of maybe frame up where we are in that process in terms of taking out -- how much have you taken out so far and how much is maybe left? And when we would expect -- I know you guys indicated the second half, so I'm going assuming third or fourth quarter. But where are we and that in terms of taking out cost process?

As we have said I think reasonably consistently, we attacked the easier costs initially. We had our target -- we had in our sites some information services contracts, a good chunk of that is done. Some of that we completed at the end of the first quarter, but we won't see any benefit from it until the second and third quarter because literally the conversions were completed right at the end of the first quarter.

But right now we are engaged in the long tailed projects, looking at our clearing brokers, looking at our core systems and dealing with some of the more intransient travel and entertainment challenges. So I would say we are probably two-thirds of the way into the actions we have to take, and seeing a little bit closer to half of the reduction in the numbers.

Great. And then just finally on the capital management, obviously a nice return this quarter. Anything sort of different in your thought process as we look out through the year or even in this first quarter? Or it does look like first quarter is the quarter where you often tend to do a lot. So I am just wondering if there's any sort of moderation -- excuse me, not moderation, any modification I should say to your capital management policy?

Let me take that first and then Ralph may want to amplify it. Yes, as you have noted, we are always strong in the first quarter. Part of that is the natural benefit of net settlement of bonus awards. And we saw some opportunities this quarter where we thought we could accomplish a good part of our basic goal, which is to offset the 2.2 million shares from bonus equity.

So we are going to remain committed to absolutely offsetting the dilutive effect of the bonus equity awards, and then opportunistically offsetting the shares we use for new hires. And as we have indicated, over the five-year period we are going to look to offset -- target half of the dilution from the ISI equity award.

So I would say no change in the strategic plan and the timing from here -- we'll have the opportunity to be a little bit opportunistic having made a good start in the first quarter.

All right, great.

I think that sums it up.

Joel Jeffrey, KBW.

In terms of just thinking about the comp ratio, it certainly came in a bit lower than what we were looking for. Just wondering how much of that was an impact of managing the ISI business to a 55% comp ratio?

That certainly is an important contributor to it. We didn't really experience much of a change, if any, in the comp ratio of our Advisory business. And given the commitments that are made in the agreement in the equities business, it actually has a very modest downward effect on our comp ratio for the firm as a whole.

Okay, great. And then sort of just thinking about the Advisory business during the quarter. Were there any verticals or geographies where you guys saw sort of an unexpected weakness or just a business that dropped off a little bit more than you had anticipated?

No.

Okay. And then just lastly maybe a bit of a housekeeping issue here. Just when you think about the terms surrounding the G and the H units tied to the ISI deal, when we think about the margin requirements to achieve those is that with or without underwriting?

Without.

Okay, so it would be the 14% margin we should be looking at?

That is correct.

Thanks for taking my questions.

Hugh Miller, Macquarie.

So a question on the ISI franchise in kind of looking at that. As you have the business now for a few months and you look at kind of where you would like it to be, and you mentioned seeing some progress on the underwriting side of the business, what other investments as you look out over the next year or so do you guys feel you have to make within that franchise in order to continue to gain traction and grow it further?

In terms of investments really nothing. We did have a hole in the E&P part of our energy coverage and we filled that with a very strong analyst. So, in terms of headcount or hiring, which is obviously the principal driver, we feel we have the right team on the field right now.

In terms of the underwriting activity, we shouldn't forget that we literally closed this transaction at the end of October. And sort of the lifecycle of when managers are book runners and senior managers are picked for offerings is very often 6 to 12 months before they actually become visible to all of us.

So it wasn't surprising to us that the level of underwriting activity in the first quarter, which is the first quarter that we -- full quarter that we have had since closing, would be less than -- dramatically less than what we would expect for an average quarter of this year.

And based on the backlog that we are looking at now, we would expect that the impact of the franchise on our underwriting activity would begin to show up in a way that I think most of you would consider somewhat meaningful even next quarter -- this quarter.

The only thing I would add to that is that this is a long-term build. It is really going to take years to ultimately build this all the way out. So one example that is very prominent in this regard is technology. We have now put an equity capital markets capability in silicon valley, as I might've mentioned.

If you know the technology community you know that it is a show me, quote unquote, show me community. So our view on the tech ECM business, for example, is it is going to take four, five, six, seven, eight years to get to where we need it to. Hopefully that will be a steady, consistent build out. But this is a really long-term effort, that is the point.

Very, very helpful color there. And just a quick follow-up on that. As you mentioned, the buildup of the backlog in ECM and you gave some color on the technology side, are there other sectors where you're kind of seeing a more immediate benefit based on the ISI franchise and you are gaining kind of traction earlier in other sectors?

Well we are getting --.

I personally think it is kind of steady across -- steady build out across the board. I mean we are going to be -- if we do things right we should be doing each year more business than we did the year before for the next many years. Maybe Ralph has a view on that. I think the answer to that is not really.

I agree with that.

Okay. And then just transitioning a little towards the Advisory business. And as you look at the energy segment, obviously a meaningful portion of your business. What is the tone with the conversation you are having with clients? Are people getting kind of concerned looking out with where oil prices have remained and concerned about covenant issues on the horizon and are there people that are getting excited about the potential for consolidation in the space or what are you hearing from clients?

Well, I mentioned in my own comments that there is, in effect, a shift in mix from what we call A and B where in substance, at least, you are selling acreage or producing properties or, quote, assets, unquote, towards corporate transactions like stock for stock mergers. There is also some build up in Restructuring backlog, as you allude.

But in my own experience, and I'm fairly active with our team there, every party in the energy sector has a different point of view about oil prices. Some people think we are going to see a short -- a relatively short period of lower oil prices and other people, if you saw, for example, the public comments of ExxonMobil, think it is going to be a rather long period. So there is no uniform view on that at all. And that is really all I could intelligently say about it.

It's helpful color, thank you. And then you guys --.

The only thing I would add is you also -- we are seeing a little bit of pick up in the Restructuring area and energy as well, which is not surprising.

Sure, sure. And then you guys had alluded to kind of the dynamics of the average deal size, that it has been increasing and somewhat I guess surprising with where we are right now in the cycle. What do you think needs to happen in order to kind of see a pickup more in the middle market space?

Well, the increase in deal size, average deal size is -- I would say is subtle. It is not that the middle market space is weak. It is nothing more than saying if you look at two facts -- A, that dollar volume is up; and B, that the number of transaction isn't -- then you come to only one conclusion, average deal size has risen.

But it is not a comment about the weakness of the Middle Market. Keep in mind that in any given year there are relatively few, in fact quite -- very few megadeals. And the vast proportion of the activity for any firm in the business, not just Evercore, is in what you might call the Middle Market or upper middle Market. That is just where the transactions are.

Megadeals get all the attention -- and they are important, don't get me wrong. But there is nothing weak about the Middle Market or the upper Middle Market.

Okay, that is helpful. And the last question I had was just with regard to the asset management segment. I think you guys had mentioned that you have seen kind of positive relative performance and that you are starting to see some traction with the ability to see some positive flows there. I was wondering if you could maybe provide us with a little bit more insight there.

Sure. The remarks there were really directly apropos our Wealth Management business which closed the quarter with $5.9 billion of assets, up about 4% from the prior quarter. And we basically are a comprehensive wealth manager but we provide internal management of equities and of municipal and taxable fixed income.

If you look at our equity performance over one, three-year and five-year period of time, if you look at our fixed income performance over a one-year, three-year and five-year period of time or our balanced for mixed accounts, all of them are ahead of benchmark.

The Company is just a little over five years old. So as I often have said before about the asset management business, it is very hard to have a five-year track record if you haven't been in business for five years. Well now we have and now we have that track record and it is a good one. And that normally is a bit of a precursor for more organic or positive flows and we started to see the beginnings of that in the first quarter and hopefully it continues.

Thank you for answering my questions.

Devin Ryan, JMP Securities.

Maybe just bigger picture here, clearly I think a debate going on right now around where we are in the current M&A cycle. And as we're talking about dollar volumes, they're looking pretty good relative to the history particularly in the US. But then there hasn't been much of an uplift in the number of deals.

So when you look at your business sector by sector or region by region, does it feel like there is still a lot of room to improve within those? And areas that really aren't turned on yet? I'm just trying to get some additional perspective around maybe where you guys think we are in the cycle.

That is a very difficult question to answer because there are so many sectors. I don't think we can say anything particularly helpful on that. And I would really say that, and I was asked this earlier on this call -- there are no sectors that are usually important which are now extremely weak.

And the big sectors, the really big sectors -- energy, tech, FIG, and so forth, general industrial of course -- they are all operating at around the same level of activity. So it is not a case where you have -- if you had 15 lights on your screen, 10 of them are bright green and five of them are bright red, it is not that kind of environment. I would say you don't have huge weaknesses and outsized strength, no.

Okay, that is great, thanks. And then maybe just drilling back down into energy a bit more. I just want to frame out that sector and, as you guys mentioned, diverging views on energy prices in different areas within the sector.

So the comments about feeling good right now, I mean should we take that as a reference to the tone of activity and there's a lot of conversations? Or is that a remark around the revenue outlook? Just I know the last couple of years have been very strong in that sector, so I'm trying to get some more perspective there.

And then to the extent energy starts to stabilize or energy prices start to stabilize, if that was going to be necessary to actually bring kind of this activity together to actually get deals to announcement? Just trying to get some more perspective around those comments.

Well, I would give you a very simple answer. We don't see any -- as I just mentioned in the context of your other question, we don't see in our own business a meaningful fall off in energy-related revenue. The mix is changing but the totals are not particularly changing. I can't speak for what it will be nine months from now, but I'm just giving you the sense of the tone right now.

Okay, helpful. And then just lastly with respect to ISI, in looking at the revenues from this quarter, is that a pretty good run rate to think about just we model out over the next year? Or should we think about some seasonality there, just looking for some color there as well?

There is a little bit of seasonality in. The first quarter generally is a little bit below the average for the year. But to be honest, I don't think we have enough experience with a large business and the combined business to reach a conclusion about that yet. In a couple years I think we will be able to give a better answer to that.

Okay, great. Thanks very much.

Brennan Hawken, UBS.

So quick question on the hiring. Given how robust the hiring has been for you guys and with a few more likely to be put on the Board here soon, I kind of get the idea of some margin -- potential margin pressure. But should we think about maybe the potential for share creep too beyond the ISI-related share noise?

No, I don't think so. I mean first of all the -- we have actually been trying to minimize the amount of shares that we put out to new hires. Generally we wind up replacing their leave behinds probably on an average with half cash, half stock. And as you have seen, I think that we have made the commitment in our proxy that we will buy back always enough shares to offset the amount of shares issued for bonuses each year.

Over the last five years we have bought back enough shares to also exceed the amount that we issued for new hires. We certainly hope to continue to be able to do that.

And then on top of that we said when we announced the ISI transaction that it is our expectation that we will buy back roughly half of the shares that will be issued in that transaction over the five-year period that it pays out. I think that's probably the best summary of our intention that is our expectation that the business will continue to form that we can fulfill that.

Okay, all right, great, thank you. And then when you think about some of the adjustments in your -- to get to operating earnings from GAAP, it looked like the adjustments were impacted this quarter by ISI deal-related performance shares. Should we just expect those deltas to be larger as you work through those performance periods or were some of these adjustments more one time in nature?

You should expect those to be larger for the next several years, Brennan, so long as the business is performing.

Excellent, okay. Thanks, that is clear. And then last one, had the rounds of layoffs that you guys had in the ISI business, can you help us understand what drove having a second round of layoffs six months after an acquisition? And whether or not that had to do with the fact that I think you had indicated that the revenues were tracking a bit lower versus the combined legacy business and whether or not that had to do with the cuts, what was (multiple speakers)?

Now look, it is important that we correct this. That -- if we caused that misimpression then it is our fault, but I don't think we did. This is part of the original integration plan, this is not a decision made since we decided to acquire ISI. This is part of the original plan at the time the deal was signed up let alone closed.

Yes, that is exactly --.

All part of the original integration plan.

Yes, if you go back to the presentation that we made the day that we announced the transaction, you'll see an expected reduction of headcount. And we, with the latest adjustments that we made, we are now -- we are not exactly where we said we would be, but we are closer to where we said we would be.

And we made a decision, which I think we discussed on the last call, that we wanted a little bit of time to live with the people that we had. We knew we had a few too many, but we wanted to live with them for a while to see what was muscle so that we didn't cut any. And after the first four months together we felt we had enough information to make the very surgical adjustments that we had always planned to make.

Okay, that helps. Thanks very much.

Ashley Serrao, Credit Suisse.

So historically you have asked us to look at a ratio for non-comp, but just given that you are in the midst of integration, should we expect the absolute dollar amount of non-comp to trend down putting travel aside? Or said another way, do have a target for the year of putting travel aside?

Ashley, the main metric that we look to is cost per head. As we continue to invest in the growth of the business, and you can see this over the last five years, the absolute amount of costs have gone up, but the cost per head has gone down or remained flat. The ISI acquisition has taken that statistic up and we are working hard now to bring it back down to a level more consistent with history.

Okay, that makes sense. And just another question on hiring. It looks like these private boutiques are ramping up hiring efforts, you have been very active. So I'm just hoping you could just talk about your hiring ambitions and whether the cost of talent is beginning to become a limiting factor at all?

The answer to that is no. And there is nothing whatsoever different about Evercore's hiring approach today than there was five years ago. We have a strong hand on recruiting. As Ralph said, people like Evercore as a place to work. We have worked very hard on our culture over 20 years. But there is nothing new going on. Costs are not rising and the ease or difficulty of recruiting is not changing.

Okay, thanks for taking my questions.

Vincent Hung, Autonomous.

What was the total headcount in SMD count this quarter?

The total headcount for the firm at the end of the quarter is 1,275 and the Advisory SMDs was 73.

Okay, thank you.

Steven Chubak, Nomura.

So, Roger, you spoke earlier of the seasonality in the Advisory business. I just wanted to maybe clarify some of your comments. I suppose I can't help but have this strong sense that we've seen this movie before where 1Q fees are generally lower; the public backlogs and [deal logic] look a bit light; we hear constructive commentary on both risked and unrisked backlogs; and then in 2Q we see that ramp in announcements as well as fees.

And just given the constructive outlook that you have delivered on the call, is there any reason why we shouldn't expect that same seasonal pattern to hold? And maybe just as a quick follow-up, whether I should read into the fact that in the year ago quarter you did talk about record backlogs and this time, while it is strong, it is still not operating at record.

You shouldn't read anything from that comment, that was a miss speaking by the CEO -- a year ago.

I'm making plans to punish him for that. If you saw the quality of his lunches in the interim since he made that observation you would notice the change (laughter).

Somehow I seem to have fattened up on bread and water, nonetheless.

Right, right. All I said in my comments was essentially the following. In preparing for today I went back and looked at the last five years. And in each of the last five years our first quarter was smaller in terms of revenue than our fourth quarter, which is just the seasonality of the business.

I've been in the business -- I started 46 years ago and it has been seasonal ever since. So that is all I was referring to in terms of that factor. I mean we had a very good first quarter by standards of first quarters. In fact, as we said, the best ever.

And this is inherently a back-end loaded business. People try very hard to get transactions and projects closed by year end for tax reasons, accounting reasons, legal reasons and so forth. Always have, probably always will. So it is a back-end loaded business. And maybe this year will be, as I said, a little bit more than usual, hard to tell. But it might. And so, that is the long and the short of it.

Okay, but, Roger, having the pleasure of covering some of your larger competitors, I would say that the seasonality in your numbers is certainly more pronounced than others. It certainly exists in terms of the broader industry trend, but I just didn't know if there was anything that you could speak to maybe in terms of transaction mix, what have you, that drives that more pronounced seasonal uptick in the back half of the year.

I am not aware of any. And I don't know whether our business is a touch more seasonal than anybody else's, but it is a seasonal industry. So I mean you take a more precise view I am sure to evaluating other firms than I would, but it is not exactly revelatory to say Investment Banking is seasonal.

I mean it has always been (multiple speakers) I'm getting up there and, in terms of experience, and it has been seasonal ever since I started. So, maybe I am missing something. But to me it is a little bit analogous to which direction the sun comes up in. It seems to come up in the East and this seems to be a seasonal business.

Okay, fair enough. Thank you for taking my questions.

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

Thank you very much for your time and attention and we will see you next quarter. Take care.

This concludes today's Evercore first-quarter 2015 financial results conference call. You may now disconnect.