Evercore Inc (EVR) 2025 Q4 法說會逐字稿

Good morning, and welcome to Evercore's fourth quarter 2025 and full-year earnings conference call. Today's call is scheduled to last about one hour, including remarks by Evercore management and the question-and-answer session. (Operator Instructions)

I will now turn the call over to Katy Haber, Head of Investor Relations at Evercore. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today for Evercore's fourth quarter and full year 2025 financial results conference call. I'm Katy Haber, Evercore's Head of Investor Relations. Joining me on the call today is John Weinberg, our Chairman and CEO; and Tim LaLonde, our CFO. After our prepared remarks, we will open up the call for questions.

Earlier today, we issued a press release announcing Evercore's fourth quarter and full year 2025 financial results. Our discussion of our results today is complementary to the press release, which is available on our website at evercore.com.

This conference call is being webcast live in the For investors section of our website, and an archive of it will be available for 30 days beginning approximately one hour after the conclusion of this call.

During the course of this conference call, we may make a number of forward-looking statements. Any forward-looking statements that we make 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 SEC, 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 financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP reconciliations, you should refer to the financial data contained within our press release, which is posted on our website.

We continue to believe that it 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 John.

Thank you, Katy, and good morning, everyone. 2025 was a strong year for Evercore. We saw broad-based momentum across all of our businesses and ended the year with the strongest revenue performance in our history.

Firm-wide adjusted net revenue reached approximately $3.9 billion, up 29% versus the prior year and nearly 17% above our previous record in 2021. In fact, our fourth quarter represented the strongest revenue quarter in our history with nearly $1.3 billion in adjusted net revenue.

For the year, we generated approximately $14.56 in adjusted earnings per share, continued to return a meaningful amount of capital to shareholders and improved our margin profile. Our quarterly and full year record results reflect the improving market environment, the benefits of our diversified business model and the execution of our long-term growth strategy.

We're pleased with how we delivered for our clients and our shareholders in 2025, and we enter 2026 with strong momentum and optimism. Before getting into the details, I want to put our results in the context of the market environment. Industry-wide global M&A activity rebounded meaningfully last year.

Announced transactions totaled approximately $4.5 trillion, up 49% from the prior year and just 19% below record levels of 2021. Importantly, activity accelerated throughout the year. Deal volumes in the second half of 2025 were approximately 45% higher than in the first half, reflecting a clear shift in sentiment and decision-making.

That improvement was particularly evident in the large cap segment of the market, global M&A volumes for transactions greater than $5 billion were the highest ever and approximately 13% above 2021 levels. Taken together, these metrics reflect improving confidence among boards and management teams, constructive financing conditions across public and private markets and strong equity markets.

Now turning to Evercore. I want to highlight a few of our key accomplishments from the year across our market position, talent investment and platform expansion. We continue to serve clients on a number of the most complex and notable transactions, acting as financial adviser on five of the 15 largest global M&A deals for the year and ranked third for sell-side transactions in the US based on dollar value.

Relative to our largest global competitors, we continue to gain share. For the second year in a row, we ranked as the third largest investment bank globally in 2025 based on advisory fees across all public firms. Nearly all of our businesses posted record results, including our North America and EMEA Advisory businesses, Private Capital Advisory, Private Funds Group, our Equities business and Wealth Management.

Importantly, the benefits of our diversification were increasingly evident. For the fourth quarter and full year, approximately 45% of revenues were generated from non-M&A businesses.

Turning to talent. 2025 was a year of continued investment as we build out our senior advisory bench globally. We entered 2026 with 171 investment banking senior managing directors. We hired 19 SMDs across sectors, products and geographies, representing our largest class of new lateral SMDs to date and added 11 new promotes at the beginning of 2025.

We are also excited to announce the recent promotion of eight investment banking SMDs globally, which is in addition to the 171 SMDs, underscoring our continued commitment to developing talent from within. In fact, 40% of our investment banking SMDs have been promoted internally, the highest percentage in our history.

Our SMD base is 50% larger than it was at the end of 2021 and more than 40 SMDs are currently in a ramp mode, positioning us well for years ahead. Finally, expanding our platform across regions, sectors and products was a key area of focus for us in 2025.

We completed the acquisition of Robey Warshaw, a leading UK-based advisory firm. The acquisition represents a significant next step in our EMEA expansion strategy, and the integration is progressing well. We also continue to expand our footprint across key markets in EMEA, including significant investment in France and first-time offices in Italy, the Nordics and Saudi Arabia, and we remain focused on building those out over time.

We further strengthened our sector coverage globally, including health care, industrials and transportation, while continuing to deepen our sponsor coverage efforts. We remain focused on broadening our product capabilities, including debt advisory, securitization, private capital advisory, ECM and Ratings Advisory to name a few.

Before turning to the outlook, I'll briefly highlight a few key trends across our businesses from the quarter and the year. Our M&A advisory businesses finished the year with strong momentum. In North America, our team achieved a record year and activity was broad-based across sectors, while financial sponsor engagement continued to increase and broaden.

Industry-wide financial sponsor activity for 2025 was up 43% in dollar volume and 14% in number of transactions, excluding deals below $100 million, and we are expecting continued improved activity in 2026. In EMEA, advisory activity accelerated meaningfully in the second half of the year.

Our EMEA Advisory business delivered record results in the fourth quarter and year with strength across sectors and products. In the fourth quarter, we advised on a number of significant transactions around the globe, including Warner Bros. Discovery on its $83 billion sale of Warner Bros. to Netflix and the related spin-off, which was the largest announced transaction of the year.

Axalta's $25 billion merger with AkzoNobel, Cidara Therapeutics on its $9.2 billion sale to Merck and Sealed Air's $10.3 billion acquisition by CD&R. Our strategic defense and shareholder advisory group continued to be busy into year end as activist campaigns remained at elevated levels. The liability management and Restructuring group had a strong close to the year, generating its second best year for revenues and notably well above last year's performance.

Activity in the quarter and year reflected a more balanced mix of liability management and traditional restructuring activity. The private capital-related businesses remained a source of strength. PCA delivered another record year with strong performance across GP-led continuation funds, LP transactions and structured capital solutions, and we advised on nearly half of industry-wide secondary volumes in 2025.

The Private Funds Group also posted a record year, continuing to deepen relationships with our core client base while also expanding our reach. Equity capital markets activity continued to gain momentum into the year end, benefiting from an improving market backdrop for IPOs.

We were a bookrunner in all of our equity transactions across products, and we continue to be diversified across sectors. Our equities business delivered a record quarter and year and had nine consecutive quarters of year-over-year revenue growth.

Finally, our Wealth Management business had a record year and reached its highest quarter end AUM of approximately $15.5 billion. As we look ahead, we believe 2025 steady build of activity will continue into 2026 and beyond. We expect many of the themes from 2025 to continue, including sustained engagement on large strategic transactions alongside a further broadening of activity across deal sizes, sectors, products and geographies.

Given the investments we've made across our platform, we believe Evercore is well positioned to serve clients across the full spectrum of the market. We start the year with strong momentum and backlogs at record levels.

Overall, we are constructive on the environment. At the same time, we remain mindful of the geopolitical and macroeconomic risks and note that transaction timing can be uneven. Importantly, the strategy we've been executing over the last several years continues to deliver results.

We remain focused on delivering outstanding client service and intend to continue investing thoughtfully as new opportunities arise. We're confident in our position as we start the new year.

With that, let me turn it over to Tim.

Thank you, John. Evercore's fourth quarter and full year results reflect strong performance across all our businesses.

For the fourth quarter of 2025, net revenues, operating income and EPS on a GAAP basis were $1.3 billion, $312 million and $4.76 per share, respectively. For the full year, net revenues, operating income and EPS on a GAAP basis were $3.9 billion, $790 million and $14.05 per share, respectively. For the full year, net revenues, operating income and EPS on a GAAP basis were $3.9 billion, $790 million and $14.05 per share, respectively.

My comments from here will focus on non-GAAP metrics, which we believe are useful when evaluating our results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website.

Our fourth quarter adjusted net revenues of $1.3 billion increased 32% versus the fourth quarter of 2024, our best quarter to date. On a full year basis, adjusted net revenues of $3.9 billion increased 29% compared to last year and represent our strongest year on record.

Fourth quarter adjusted operating income of $337 million increased 55% versus the fourth quarter of 2024. Adjusted earnings per share of $5.13 increased 50% versus the prior year period. For the full year, adjusted operating income of $839 million increased 50% and adjusted earnings per share of $14.56 increased 55% versus the full year 2024.

Our adjusted operating margin in the fourth quarter was 26%, an improvement of 380 basis points versus the prior year period. For the full year, our adjusted operating margin was 21.6%, up 300 basis points from the full year 2024.

Turning to the businesses. Fourth quarter adjusted advisory fees of over $1.1 billion increased 33% year over year and represents a record quarter. Adjusted advisory fees were $3.3 billion for the full year, up 34% compared to 2024 and 19% above our prior record in 2021. Our advisory results for the quarter and year reflect strong client activity levels and momentum that built throughout the year.

Our fourth quarter adjusted underwriting fees were $49 million, up 87% from a year ago. For the full year, adjusted underwriting revenues were $180 million, up 14% versus last year, reflecting improved market conditions.

Commissions and related revenue of $66 million in the fourth quarter was up 15% year over year. For the full year, commissions and related revenue of $243 million was up 13% compared to 2024. Both the quarter and the year represented record results.

Fourth quarter adjusted asset management and administration fees were $24 million, up 10% versus the fourth quarter of last year. For the full year, adjusted asset management and administration were $91 million, up 8% versus 2024.

Fourth quarter adjusted other revenue net was approximately $30 million, which compares to $24 million a year ago. For the full year, adjusted other revenue net was $103 million compared to $105 million last year. Approximately 25% of the other revenue in 2025 was a gain on our DCCP hedge with the remainder predominantly from interest income.

Turning to expenses. The adjusted compensation ratio for the fourth quarter was 62%, down 320 basis points from last year's fourth quarter. Our full year adjusted compensation ratio was 64.2%, down 150 basis points from 2024 and down 340 basis points over the past two years.

Our increased revenue and the reduction in our full year comp ratio reflect the benefits of a strengthening in the investment banking environment, an increase in our market share, partially offset by our significant investment in talent, including our largest ever addition of external SMDs.

We are continuing to strive for additional gradual improvement in our comp ratio, balancing that with investment in our business and execution on our strategic growth plan. As I have said on past calls, our goals are to deliver excellence to our clients and to create value for our shareholders over the medium to longer term.

The latter is accomplished by investing in and building our business and managing our expenses in a way that maximizes the present value of our future earnings and cash flows. Adjusted noncomp expenses in the fourth quarter and full year were $156 million and $552 million, up 26% and 17%, respectively.

The noncomp ratio for the full year was 14.2%, down 150 basis points from 2024, driven by stronger revenues. For the quarter, the non-comp ratio was 12%. The 17% increase in our full year non-comp expenses was in line with the increase we saw in 2024.

The year-over-year increase reflects continued investment in the firm's technology infrastructure and increase in client-related expenses, particularly as deal activity accelerated throughout the year. The increase also reflects higher rent and occupancy costs associated with office expansion, including additional floors in and renovation costs related to our New York offices and additional occupancy costs related to our new leases in Paris, London and Dubai.

Client-related travel and entertainment spend also increased in the year as deal activity picked up. As we grow and continue to diversify our revenue streams, both geographically and with respect to lines of business, we must continue to invest in talent, technology and infrastructure.

We have discussed in some depth over the years our investment in talent. Some of our investment, such as in occupancy-related areas, is required to support our growth in the US and EMEA. And at the time of investment, we must obtain enough capacity to provide for planned future growth.

Part of our non-comp expense is for information services, for which the costs increase at a rate faster than the rate of inflation. In addition, as is broadly known, there are significant improvements in the rapidly evolving technology landscape, and we must make investments and incur costs today that we believe will provide benefits in the medium term.

In the past, we have discussed noncomp growth drivers such as headcount growth, inflation and some upward pressure beyond that related to the items I have just discussed, and they will continue to influence non-comp costs in the near term.

As a reminder, the non-comp expense line consists of a mix of fixed and variable expenses, of which a significant portion would be considered variable and will fluctuate with transaction activity and headcount, both in our businesses and in our corporate area to execute on our increased transaction activity and growth initiatives.

Nonetheless, as you can see from the improvement in both our full year comp and non-comp ratios, we demonstrated leverage in 2025. We maintain a disciplined focus on our expenses, balancing that with investment in order to execute our strategic plan. Our adjusted tax rate for the quarter was 29.4%, up from the fourth quarter of last year.

Our full year adjusted tax rate was 19.8%, down from 21.8% in 2024. The full year adjusted tax rate was significantly impacted by, among other things, the appreciation of the firm's share price upon vesting of RSU grants above the original grant price, generating a benefit which was larger than the prior year's tax benefit.

As a reminder, the majority of this impact typically occurs in the first quarter. Turning to our balance sheet. As of December 31, our cash and investment securities totaled $3 billion. In 2025, we returned the second largest amount of capital in the firm's history, totaling $812 million. This included approximately $151 million through dividends and $661 million through the repurchase of 2.4 million shares at an average price of $275.42.

Our fourth quarter adjusted diluted share count was approximately 45 million shares, modestly higher than the third quarter. For the full year, our weighted average share count ended at 44.4 million shares, approximately 225,000 shares higher versus the year prior. We remain committed to repurchasing shares to offset dilution from our year-end RSU bonus grants.

And for the fifth year in a row, we have repurchased a number of shares greater than that, and we expect to do so again in 2026. We also repurchased shares sufficient to cover the number expected to be issued in both 2025 and 2026 in relation to the Robey Warshaw acquisition.

We continue to maintain a strong cash position and take into consideration our regulatory requirements, the current economic and business environment, cash needs for the implementation of our strategic initiatives, including hiring plans and preserving a solid financial footing.

We are pleased with our performance in 2025. And as John mentioned, we began the year with strong momentum in all of our businesses. We believe we are well positioned for 2026 and are approaching this year with optimism.

With that, we will now open the line for questions.

(Operator Instructions) James Yaro, Goldman Sachs.

This is Songqing Jiang, step in for James. 2025 was a heavily mega cap M&A-driven market. So could you help us think through the outlook for the large deals to continue or even accelerate from here?

Thank you very much for the question. We think that we will continue to have a healthy environment. All of the things that have really existed to fuel the merger recovery still exists, whether it's business prospects for many of the large companies, the strategy outreach from the companies, access to capital and in many respects, a relatively benign environment with respect to the regulatory side.

We are in -- our backlogs are very strong, but those backlogs really incorporate both large cap and mid-cap and small cap really at all sizes. We are very optimistic about this year. We continue to believe that it's going to be a constant and steady build. And we think that the -- if our backlog is any indication, we are going to see a continuation of large-cap deals as well as deals really of all shapes and sizes.

Mike Brown, UBS.

So in 2025, we had a bit of a Goldilocks environment with the strong performance from restructuring and also M&A. As we look to 2026, can both continue to remain elevated here? Can restructuring revenue actually grow in 2026 versus 2025? And if the restructuring market itself stays somewhat flat, how much additional share do you think you can get in liability management and restructuring?

We think that the environment where restructuring and M&A coexist, both strong, is highly likely to persist. Our backlogs in each of those areas are high and really in most respects, record levels. We think that with respect to restructuring, our backlog is very diversified. So we're looking at whether liability management, we're looking at restructurings, we're looking at bankruptcies.

All of those things are quite full in our backlogs, and we think that those will continue. And really, we feel very good about the restructuring environment for our business. On the M&A side, it's the same. And we have very strong backlogs. We have real activity.

We are in very serious and strong dialogues with corporations and management teams, and also boards. And we think that this is going to persist. So the answer to your question is we believe that both will coexist and both really will be quite strong if our backlogs and our activity levels are any indication.

In terms of market share, I think that we, I think, are continuing to pick up market share in liability management and restructuring. We feel really good about how we're covering clients. And really, the new activity coming in is very diversified. So we feel really good about really where we stand.

Brennan Hawken, BMO Capital Markets.

So Tim, you talked a little bit about investing making hay when the sun is shining on the tech side, which makes a lot of sense. Could you help us maybe understand -- is that going to be calibrated to revenue, right?

So you almost start to think about the non-comp ratio, not -- obviously, it's not going to be the same as the comp ratio inherently, but maybe think about the growth rate with an eye to that and then maybe help us think about guardrails about how you manage it?

And also, are there any particular businesses that are tech heavy? I know like the PCA business is a very data-driven business. So any color on that would be great.

Yes. Sure, Brennan. Thanks for the question. Look, I think the way to think about it is we feel like we've made significant strides with respect to growing the business and diversifying the business, both with respect to lines of business and geographically. And in order to build a first-rate corporation and then a foundation upon which to continue that growth, we do need to invest in our infrastructure and part of that is technology.

And we -- I mentioned in my comments about how there's a a rapidly evolving landscape. And I don't need to go into that because it's well covered in the news. But I think that you've seen a pickup probably in the investment in our non-comp over the last couple of years.

And so the increase in '24 was 16%, increase in '25 was 17%. And I think in order to support the growth and the diversity and the technology initiatives and so on, I wouldn't be surprised to see something somewhat similar as we head into '26. I would note, though, I think that the good news is the growth in the non-comps is less than the growth in our revenues.

And so the corresponding revenue growth rates over those last two years were 23%, 29% -- and hence, we have made pretty significant progress on the non-comp ratio, bringing it down from 16.6% two years ago to 15.7% last year and 14.2% this year. And so I think we're going to continue to invest in our infrastructure and -- but we're pleased with the fact that we're able to make some progress on the noncomp ratio.

Sure. But the businesses that drive the noncomp, any color on that -- sorry?

Yes. I would say that it's -- yes, PCA is certainly one, but we're also for our standard and traditional M&A and restructuring businesses, we're using it in equities. It's really -- and frankly, in corporate as well as we seek to drive efficiencies in the corporate side of our business. And so it's really, I would say, comprehensive.

And then aside from the technology, as we expand, and I am pleased with the progress we've made in our geographic expansion, particularly in Europe. And that, of course, leads to both in Europe and in the US, increased occupancy costs as well, which are part of the underlying growth you're seeing in the non-comp expense.

And well done on the comp ratio, by the way.

Devin Ryan, Citizens Bank.

Question just on the broader outlook. Obviously, a lot of, I think, enthusiasm in there just around the momentum into 2026. And I think we can see a lot of that even from the outside in terms of M&A backlogs and just where the types of deals that Evercore is currently involved in. So great to see that.

And then you hit on some of the momentum you're still seeing in restructuring. It would be great if you could just hit on some of the other non-M&A businesses, whether that's private capital or capital markets advisory and just where all these stack together. So I think people are trying to put it all together, the non-M&A businesses have clearly grown in a bigger contribution -- you've got this M&A business that's on fire right now.

Where are these other businesses in that mix in terms of like growth expectations over the next 12 to 18 months? Can they keep up at a similar pace? Or are they ballast in the market? Maybe M&A grows faster, but these other businesses can provide a little bit more stability. Just good to get some directional color there.

Sure, Devin. We really continue to see strength throughout our system. I think as we said, virtually all of our businesses are at or very close to record levels. In terms of the businesses which you specifically highlighted, private capital advisory, let me start with that.

PCA had a record year this year. PFG, which is our -- as you know, is our fundraising business, they had a record year. Our debt advisory/private capital markets businesses, which really were new two years ago or three years ago, have actually performed at a very high level and are setting records also.

Our real estate advisory businesses have really picked up dramatically. So across the board, we're seeing momentum to our businesses. So in terms of the breakout between M&A and other businesses, it's actually still continuing to be very high.

Even when M&A running as hot as it is, we still have 45% of our businesses are non-M&A. And I think that's going to persist no matter really how strong M&A gets. Now obviously, if M&A really hits the tsunami, that may be hard to pick up -- keep track -- to keep on top of that because the M&A business, as you know, has great leverage in our system.

But I think really, what you're seeing is a real diversification. We've worked really hard to diversify. We've built out these very, very strong businesses, and we continue to see that. On the PCA side, which had, as I said, had a record year, they had a very high market share this year. I think it was over 45%.

They continue to be looking at a very diversified product set, whether that is LP-based or the GP-based businesses. As you know, the GP is a continuation fund business, which has actually really been on fire. But we have significant new products in that business also.

So I think really what we've -- what we're really building and working hard to do is to keep our very strong businesses and performing at the highest level, but also making sure that we are investing in the diversification, which we have promised shareholders that we will do. And I think so far, we're working hard and it's going quite well.

Daniel Cocchiara, Bank of America.

Given the sell-off in software yesterday and as well as your stock's reaction, there seems to be some fears just about the potential impact AI may have on advisory businesses in 2026. I was wondering if you could talk to us about the potential disruption risks AI may pose to your pipelines? And if you can provide any color on sector exposures in your backlogs, both on the public and private side, that would be very helpful.

Sure. Obviously, we've taken a strong look at that, certainly, especially over the last 24 hours. And honestly, we have -- in our backlogs and really our business activities, we are very diversified. There is no question that AI is influencing the world. As we look at our business in the near and medium term, we really don't see disruption.

Now obviously, the markets could be significantly seeing further disruption. And I think it would be unrealistic to say if the markets got very disruptive that it wouldn't impact our business. Certainly, it can.

But right now, we look at what we're working on, our backlogs, really what we're seeing, as I said, near term and medium term. And given our diversification really along products, geographies and sectors, we actually feel quite good about where we stand and really the stability of our business.

(Operator Instructions) Alex Bond, KBW.

I have a question on the expectations for ECM in 2026. So the IPO sentiment continues to improve and seems like there could be a strong lineup of large deals coming to market sometime in the near future. Can you just give us an update on your backlog here and maybe high-level outlook for the year?

And then also on the equities front, if this environment that we're in now in terms of heightened volatility becomes more entrenched or persists, can you just help us think about maybe what the right -- or what the revenue potential is for that area of the business?

Sure. In terms of our backlog, our backlogs are good and they're building. We really saw a really healthy build through the fourth quarter, and I think that has just continued. We will absolutely be involved in what I think is a very healthy IPO business going forward here.

And I think we're feeling quite good about really our activity levels. As you know, we've really diversified. We're not just in health care, but we're looking -- we are very involved in many different sectors now, and we've really spent a lot of time and effort building out our capabilities in those areas.

And I think also really with respect to our activity levels, having strong research with ISI really has helped us to stay involved in thinking about a lot of different sectors. The bottom line is that I think the equity capital markets business is actually healthy and growing. We expect that it's going to continue along the lines of where it was in the fourth quarter and strengthening from there. So we're feeling quite good about that.

Jim Mitchell, Seaport Global Securities.

Tim, I guess I'll ask the question that you probably don't want to answer, but you highlighted, I think, over the last two years, comp ratio improvement of 340 basis points. Is that your definition of gradual and a decent way to think about the next couple of years, assuming the environment continues to improve as we expect? Just any help on how you're thinking about the evolution of the comp ratio from here?

Yes. Jim, sure, happy to share some thoughts. And yes, as you mentioned, we have made some progress these last couple of years, 340 basis points over the last two years as we came down from 67.6% to 65.7% and now 64.2% this year. And look, and I don't want to make this answer sound too much like a disclaimer, but there are really a lot of things that go into determining the comp ratio, and it has to do with absolute revenues, revenue growth, market comp and competitive environment, number of SMBs and non-SMBs hiring.

So there's an awful lot of things that go into that. And what I'd say is we're striving to make continued progress. Now whether we can continue to decrease it every year at the same pace and magnitude that you've seen over the last couple of years might be a bit challenging, but we're striving to make continued improvement as we head into '26.

Brendan O'Brien, Wolfe Research.

I guess I just wanted to ask on the sponsor backdrop and specifically just how you'd characterize the conversations that you're having with your sponsor clients at the moment and whether there's been any notable shift in the tenor of those discussions and how we should be thinking about the trajectory of sponsor activity throughout the remainder of this year?

Thanks for the question. As you have seen, we've had a very interesting set of circumstances with sponsors. We have a lot of dry powder. We have LPs that really want liquidity. and we have markets that seem to be recovering.

And in many respects, the sponsor business has really started to gain momentum in terms of that activity level on the M&A side with size being a dictator, the bigger, the more active you're seeing in the market. I think what we're seeing on the M&A side that the market is starting to really start to diversify some and that some of the middle market assets or even the B assets are becoming more liquid.

And we're seeing, in some respects, a capitulation where sponsors are trying to really look carefully at their portfolios and start to move things out because they really want to create more movement. And so I think there will be a growing momentum in the sponsor business.

Obviously, the big highest quality assets will continue. And then I think you're going to see assets throughout really the spectrum. Now one of the very important things in terms of sponsor activity for us is, as we've said, we have a very strong set of businesses which service sponsors, whether it's PCA or PFG or LP stake sales. And those businesses are very healthy.

The dialogues are very strong. We're seeing that activity level continue. And so from that perspective, the sponsor business for us continues to build. As we've articulated in many calls before this, one of the things that we're spending a lot of time focusing on is how do we bring together all of the strengths of our businesses, the M&A side and the coverage side of the sponsors themselves, the PCA business and how we really interact with GPs on that business.

The fundraising business with PFG and really how we think about advising the senior people in these businesses about liquidity. And I think we're making a lot of progress on that, and we're feeling momentum there. So I'm hoping that, that will lead to even more dialogue activity and opportunities for us to serve this very important client base.

Nathan Stein, Deutsche Bank.

So large mega deals really fueled the deal-making recovery in 2025, and we're all monitoring the industry data to see when this could really start to widen out down market. Could you talk about the -- are you seeing an uptick in the core upper middle market transactions within your business lines?

We are definitely seeing more activity. We are definitely seeing more in our backlog. We do have diversification in our backlog. So we are seeing -- we have a significant number of what you classify as middle market. And frankly, if you think about our investment as a firm, we are investing in coverage of the middle market.

And so we're seeing more of those types of assignments coming into our backlog as the people who we've hired over the last two or three years begin to mature and to hit their stride. So we're seeing it building out. In terms of the market itself, which I think is what your question is, is there really continued or increasing activity in the middle market? We think there is. We think that there is a very healthy build in that side.

And we're seeing a lot of that. Our pitch -- our numbers of pitches, both sponsors in the middle market companies as well as nonsponsor is up significantly. And so we're seeing a very strong level of pitch activity and dialogue activity in that middle market sector.

Ryan Kenny, Morgan Stanley.

So on the private capital advisory side, you are a market leader in secondaries, and we've seen some peers lean in recently. We've seen some of the money center banks doing more. So what's your sense of competition ramping up? Are you feeling that? And how do you protect your share?

There is definitely a lot of activity in people trying to build these businesses. And I'm certain that there's going to be very worthy competition and it's going to grow. We have a very good business, and we have a really well-established base. We have a group of clients who are very happy with the service that we've been providing them.

And I think there's a level of advantage for having been in this business for a long time and done it well, whether it's data that we've been able to capture and it's very strong data, an experience level that people recognize and I think in many respects, clients appreciate, a track record of success and the relationships themselves.

And so I think that we're going to be able to compete very adequately as new people -- new entrants come into the market. But as you know, on Wall Street, competition can be intense. The competitors are always very worthy and good. So we're going to have our hands full, but I think we're ready for it. And I think we're actually competing extremely well right now.

Daniel Cocchiara, Bank of America.

Just when thinking about private, we've seen alt struggle in terms of price action. Do you think LPs are recalibrating how they allocate to private markets? And on the non-M&A revenues, is there a high correlation between M&A activity? Or should we think of these two as entirely uncorrelated?

Well, I don't think you can ever have something be entirely uncorrelated with the flow of funds going back and forth through asset classes. I don't think that we're going to see what I would call as a rethinking or maybe somewhat of a discussion on alt to be changing what's happening on the M&A side.

So I think that what you'll see is you'll see flows of funds going back and forth. There always is. We don't see any major impact right now in our business. But obviously, we're watching it just like you are. And -- but we don't anticipate it's going to have a big impact.

Nathan Stein, Deutsche Bank.

I was hoping you'd provide some additional color on the capital allocation strategy in 2026. You called out doing buybacks again this year, net of the employee comp program. Is the 4Q repurchase level a good run rate for buybacks for the rest of the year? And just how are you thinking about capital allocation this year?

Yes, sure, Nate, and thanks for the question. We -- I would not take any particular quarter of buybacks that you see from us and apply an annualization to it. I think just to give you some color on it. First, what I would note is that the $812 million that we returned last year was our second highest return of capital ever trailing only 2021 and trailing that number by not much.

And so that would be the first point. Second is -- each year, we've indicated to the market that we strive to acquire at least a number of shares equivalent to the number of RSUs we grant as part of our bonus cycle. So that's probably the second point I would make.

And then thirdly, we're sitting right now on -- as of year end, about $3 billion of cash. And some of that, of course, is required for regulatory purposes and for underwriting capital and for operating capital. But there's still some excess there.

And we intend to be repurchasing shares, not only for the last five years, not only have we repurchased a number equivalent to the RSUs issued as part of our comp cycle, but we've acquired a number in excess of that. And I think we certainly strive to do that this year as well.

Jim Mitchell, Seaport Global Securities.

Sorry, apologies for keeping you. But maybe just, John, can you speak about the recruiting environment, whether or not it's getting tougher to get people to leave their seats in this environment? And is it getting more expensive? And just overall, what's your take on your recruiting pipeline?

Thanks, Jim. The recruiting environment is heated up a lot, and it's very intense and it's very competitive. We feel good about the pipeline of people that we're talking to. There is no question that getting people to move is harder than it was two or three years ago.

But I think what's happening is there's a lot of momentum at Evercore, and we have a pretty compelling story for people. But I do think your -- the premise of your question, which is it's harder and it's going to take more work and it may even be more expensive. Those -- that premise is correct.

There is definitely going to be more competition. It's probably going to be more expensive. We're going to be having to work harder to get people to make the move, especially if they're very busy in a recovering environment. So I do think it's going to be hard.

We spent a lot of effort and time finding the right people and going after A+ candidates. I think one of the things that we're really happy about is that a lot of the people that we really have worked hard to get over the last three or four years, many of them have ramped hit their stride and they're starting to really kick in. And some of the results that we're showing now is that group.

So our incentive to continue to go even if the environment is harder, maybe more expensive, will still be there. We're going to continue our aggressive recruiting efforts throughout the cycle here.

Right. One thing I might add to that, Jim, is the good news is that we've made a lot of progress in these past three years. We've added 41 through external means and promoted 25 internally. We've got 40 that are in ramp mode.

And so while, as John said, we're always out there working hard, trying to implement our strategic plan and talking to a lot of people, though we never know in any given year exactly how many will cross the finish line. The good news is I think we're really well positioned based on the success we have had over the past three years.

And there are no further questions in the queue at this time. With that said, this does conclude Evercore's Fourth Quarter 2025 and Full Year Earnings Conference Call. You may now disconnect.