Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Evercore Partners Fourth Quarter and Full Year 2011 Financial Results Conference Call. [Operator Instructions] This conference call is being recorded today, Thursday, February 2, 2012. I would now like to turn the conference call over to your host, Evercore Partners' Chief Financial Officer, Robert Walsh. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us today for Evercore's Fourth Quarter and Full Year 2011 Financial Results Conference Call. I'm Bob Walsh, Evercore's Chief Financial Officer. And 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 the call for questions. Earlier this morning, we issued a press release announcing Evercore's fourth quarter and full year 2011 results. The company's presentation today is complementary to that press release, which is available on our website. 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 1 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 the website. We will refrain from repeating the information included in the press release and focus instead on the key opportunities, challenges and changes in our business. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we've noted previously, our results for any particular quarter are influenced by the timing of transaction closings both on the Advisory and Investment Management sides of our business. I'll now turn the call over to Ralph.

Thanks very much, Bob, and welcome, everyone. 2011 was a year of milestones for Evercore. Investment Banking and Investment Management each delivered record performance, both in terms of revenues and operating profit, and operating margins improved in both businesses. In Investment Banking, we expanded our ability to serve clients across the globe through the acquisition of Lexicon Partners in Europe, the recruitment of 7 highly talented senior managing directors, the promotion of 3 senior managing directors internally and through the expansion of our alliance partner network to include Kotak in India and Woori Bank in Korea. In Investment Management, we continued our strategy of organic and inorganic growth, most notably with the acquisition in the fourth quarter of a 45% stake in ABS Investment Management, a leading equity-focused hedge fund-of-funds manager. We finished 2011 with good momentum and we are well positioned as we enter 2012. As we said last quarter, after 6 years of hard effort, our EAM team, Evercore Asset Management, and we decided to discontinue our EAM operations in the fourth quarter, returning all assets to their clients. This was completed at the end of the fourth quarter. As a result, all results today are presented on a continuing operations basis, which exclude EAM from both the current and prior year periods. Let me quickly go over the numbers starting with the quarter. Fourth quarter of 2011 revenues were $112 million, up 10% from the same period last year, but down 32% from last quarter's record. The decline in revenues subsequent -- compared to prior quarters was primarily the result of the timing of transaction closings in our Advisory business. As we discussed at the end of last quarter, the timing of revenue in any particular quarter is caused by a number of factors, over which we…

Good morning, everyone. You can see that we had, in round numbers, $90 million of Investment Banking revenue in the fourth quarter. That was nicely up from the $75 million figure of the fourth quarter a year ago, yet, as Ralph said, it's down from our all-time record third quarter. But if you look back historically, Evercore has only had 4 quarters in its history that were better than the quarter we just completed. During this past fourth quarter, we generated 26 separate fees of $1 million or more, including a particularly strong contribution in this category from Evercore Europe. And that figure of 26 was identical to the figure we realized in the third quarter. In other words, in each quarter, we had 26 fees of $1 million or more. We also have revenue contributions, of course, in this quarter from both the Equities business and from our Private Funds Group. Our headcount in the quarter increased modestly by 12 bankers on a net basis. Our comp ratio came in, in banking at 55.6%. That's a reasonably good level as compared to last year, as Ralph described. Our operating margin was 21%, but keep in mind, we have 2 newer businesses which are still in the development stage and for the moment, are suppressing those margins. Those, of course, are the Equities business and the Private Funds Group. Without those businesses, our operating margins would have been 28%. Looking at the full year, Evercore had a record year in Investment Banking and it seems to me that we can do that again in 2012. We had net revenues of $421 million, operating income of $96 million. Those were essentially a 42% increase in each category over the previous year. Very big increases. The number of fee-paying clients for the…

Thanks, Roger. Let me talk a little bit about our newer businesses and the Investment Management business. Our Institutional Equities business continues to add clients and grow revenues. We now have research coverage on 227 companies and have earned revenues for more than 200 clients. This quarter, the business generated $4.7 million in revenues as commissions increased 22% from last quarter in an environment where industry commissions were down approximately 15% to 20%, and there was virtually no Equity Capital Markets activity. Expenses were $10.5 million for the quarter, reflecting the full quarter effect of our second half headcount. And as I explained last time, when we hire people in midyear, we have to expense their full year compensation in the remaining quarters. So that bumps up both the third and fourth quarter expenses. Quarterly costs are expected to decline in 2012 as the second half compression of new hire expense is eliminated. And in 2012, the cost of this business will be increasingly correlated with revenues, so we don't expect cost in any quarter this year to approach last year's fourth quarter, unless there is a concomitant increase in revenues. Although the new issuance environment was exceptionally quiet during the fourth quarter, we have increased our pipeline and are working with clients to launch offerings in 2012 as the equity markets have reopened, and we're starting to be a little bit more optimistic about that. We remain committed to our goal for this business to begin to contribute to operating profits in the first quarter of this year and are hopeful that the market activity increases as the quarter progresses so that we achieve that goal. We are quite confident the business will contribute to earnings over the full year. Our Private Funds team was successful in closing 3…

Thanks, Ralph. Just a few comments to wrap up. And as Ralph had mentioned, all of the results we've discussed today exclude the historic results for Evercore Asset Management, for context, that discontinued operations that contributed revenues in the range of $2 million to $3 million in each of the last several years for a loss of about $0.01 per year. We will add a schedule to the Investor Relations section of our website, which provides that historic information for all periods. In terms of non-compensation costs, the full quarter addition of Lexicon increased our costs by about $2.5 million. That increase was offset by declines in other expense areas, principally professional fees. As we have mentioned before, as we look at coming quarters, there will be some upward pressure on non-compensation costs relating to the relocation of our facilities in the U.K. Finally, relating to the financial matters, our tax rate was lower in the quarter, which added a few cents to earnings. That is principally the result of a release of some tax reserves which go back to the time of the IPO as well as to some positive tax effects from increased international earnings. In the quarter, we maintained a consistent capital management policy, again deferring a dividend of $0.20 and repurchasing approximately 366,000 shares during the quarter. So now, operator, if you could open the line for questions.

[Operator Instructions] Our first question comes from the line of Patrick Davitt with Bank of America Merrill Lynch.

So It looks like announcements were, industry-wide, fairly weak in January, but the markets have clearly been doing very well. Are you starting to see that creep into the discussions that you're working on in terms of people getting more comfortable pulling the trigger on transactions?

Well, I really don't have anything to add to what I said already about the environment. It's, at this very instant, a good environment. Our own backlog reflects that. So you could extrapolate the current trends for the full year will be a very good year.

Right. Right. Okay. And are you still seeing, I guess, any uptick in restructuring conversations?

Well, the restructuring business remains quite active, and we didn't participate in either of these 2 particular ones, but you saw a couple of very large bankruptcy filings, obviously, with American Airlines and Kodak. And they're just symbolic of a pretty high level of activity in restructuring. I mean, it's, of course, not near anywhere near all-time highs because restructuring is fundamentally counter-cyclical vis-à-vis M&A. But the restructuring business is quite healthy.

And did Lexicon have a capability in that business, or is that really just the legacy Evercore franchise that have the restructuring capability?

The answer is no.

No. Okay. Great. And finally, Bob, you mentioned non-comp picking up because of the relocation of the U.K. facilities. How long will that take? And then I assume that there would be some sort of net reduction once that process is over.

That's right. It will take 2 quarters, Patrick.

2 quarters. Okay.

2 more quarters.

Our next question comes from the line of Devin Ryan with Sandler O'Neill.

So you guys had a nice back half of 2011 for deal announcements, which should bid well for the first half of 2012, even though the industry did see a decent drop in activities. So I just like to get your view of maybe why your business has seemed at least to us a bit disconnected from the overall industry trends. Is it your client list is just generally better positioned and their M&A plans are less tied to market conditions? Is it just market share gains that we're seeing now? Or am I just reading in too much to maybe a short window of time here?

Well, I'm not sure, Devin, that it actually is disconnected in the sense that the M&A business as a whole in 2012 -- 2011 was pretty good. And of course, Evercore itself had a very good year. So we did better than -- I mean, we grew more than the industry grew. But it was a fine year for the industry. Now why are we doing so well? As trite as it may sound, there is a one-word answer to that, which is people. We've had, really, a quite extraordinary recruiting performance over the past several years. 2011 was a particularly strong year, but it's been building for years. The firm now has, Bob can correct me on this, I want to say, 50-plus banking partners.

That's 60 SMDs in banking.

Okay. 60 SMDs in banking. And I know you will think that this is a just beating, but I think we have the best group of banking partners in the world. There's no firm, however big it is and however well known it is, that has a better group of banking partners than Evercore, and that's why we've been doing well. As long as our recruiting record and trend continues, that should bode well for the firm. But look, we have a strong brand. We obviously have a completely unblemished history in a world where there aren't many of those. I'd like to think, looking at Ralph, we have very good management. And...

I think it's our Chairman actually.

And I think just like the firm has all the fundamentals in place. Of course, we have a lot of work to do, including particularly globalization. And there are still some verticals that we really aren't where we need to be, quite a few of them actually. But in general, Evercore has all the fundamentals in place. And when you add all that up, it does actually add up to not inconsequential market share gains over the last couple of years. And you can -- I want to just make -- repeat one point I made in the -- my own comments here. We've moved a long way from the boutique category. Evercore today is the most active independent investment banking firm in the United States, second most active globally. And that's a category that fundamentally includes just 3 firms, Lazard, Rothschild and Evercore. So that's the group that we effectively are in. And we don't care how people compare us. They can do whatever they want. But comparing us to some of the authentic boutiques, many of whom, by the way, are quite good, it's comparing an apple and an orange now. We're so much bigger.

Okay. I'll move on from that. You mentioned a couple high-profile deals getting blocked by regulators. I just want to get your sense, are regulators getting tougher in how they're looking at deals? Have you felt that? Or do you think that's just -- it's more a function of just specific deals and specific details of those deals?

No, I think there has been a change in both the U.S. and in Europe on the -- on competition policy as they refer to in Europe, and there's been a tightening of criteria in both areas over the past year. I wouldn't describe it as the difference between night and day, but there's been a notable tightening of criteria.

Okay. Great. And then just lastly for me. On the comp ratio, I just want to dig into that a little bit. It obviously dropped quite a bit in the quarter and was down both within Investment Banking and the Asset Management segments. So within Investment Banking, should I look at that more as truing up the full year just given how strong the revenues were? And then was the majority of the improvement within the Asset Management division just related to the shutting down of EAM? Or is there anything else going on in either of the segments...

Well, the shutting down of the EAM because both the prior -- since we've taken that out of all periods, it's not really related to that. I think both of them are related to exactly what you said, a truing up. We do our best to estimate compensation over the course of the year. And as we got to the end of the year, both our hiring was a little lower and just aggregate levels of compensation in the industry were off a touch. So a little bit of what you see in the fourth quarter is a truing up or a catch-up to make the full year compensation match what we were actually paying.

Our next question comes from the line of Joel Jeffrey with KBW.

In terms of the Private Funds Group, I mean, you closed 3 deals during the quarter. Can you get just a little bit more specific on about how much that might have contributed to revenues and what your expectations are for that business going forward?

We don't really give specific information on individual businesses. It's a relatively small business at this point. I mean, in terms of annual, high single digits, low double digits in revenues, but expected to grow quite comfortably this year.

Okay. Great. And then just thinking about sort of the geographic composition of your revenues in the Advisory business, 50% coming from outside the U.S. I mean, is that driven more by a combination of pullback in U.S. activity, or do you expect sort of these elevated trends to continue going forward?

It's somewhat anomalous. The mix -- the geographic mix is obviously in the future going to be quite a bit stronger non-U.S. versus U.S. that has been historically by virtue of the acquisition that we've made of Lexicon and also a little bit of a buildout in our office in Hong Kong and the success of our business in Brazil as well. Having said that, the mix in the fourth quarter was a function of both strong activity outside the United States. And this is one of the side effects of the point that we made at the end of the third quarter of a number -- a couple of large fees. Those happen to be in the U.S., falling in the third quarter rather than in the fourth quarter. So you have somewhat a very strong quarter outside the U.S. and unusually lower activity in terms of revenues in the U.S. in that particular quarter.

Okay. Great. And then just lastly, in terms of the outflows in the Investment Management section, I know you talked about in terms of the financials that EAM has been stripped out. Was the AUM number also excluding historical EAM numbers?

Yes, it was.

Okay. And then just thinking about that business a little bit going forward, I mean, you had a couple of quarters of outflows and you talked about it being primarily performance-related. I mean, is there anything you guys can do to sort of stem the outflows, or is it really just market-related?

Better investment performance. And this is a very difficult thing that every investment manager has to deal with. And particularly with active concentrated portfolios, they have periods of strong outperformance and sometimes periods of underperformance. And you work very carefully with them on what they're doing from an investment point of view, but you certainly cannot go in and alter the investment process or you wind up disrupting the relationship that they have with their clients. So I dealt with this for many years at BlackRock, and it's very frustrating because you always want to try and figure out can you fix it yourself and the answer is it's very difficult to do.

And our next question comes from the line of Eric Bertrand, representing Barclays.

Touching on the recruiting, how do you look at the environment today as your universal banking's competitors have been pretty challenged of late and is experiencing another tough compensation year? Is Evercore positioned against share again after a bit more amount of hires in the coming year?

Well, we've been positioned well for -- on recruiting for several years, and you've seen the results. And we probably never have been better positioned than we are right now, and we expect to make every effort to continue to capitalize on it. We had a strong recruiting year in 2011. We expect to have a strong recruiting year in 2012. Are the events of the past several years beginning with 2008 at the largest institutions contributing to the opportunity for us to recruit? Of course, they are.

Okay. That sounds fair. On the Institutional Equities business, how much of the plan to get to profitability depends on higher commissions and underwriting revenues as opposed to the clearing out of that new hire expense headwinds that you had in the back half of the year?

The key to the success of the business is top line growth. And we've had -- if you look back over the 4 quarters of last year, we had roughly 25% to 30% commission growth quarter-over-quarter every quarter last year. The business is effectively a 4- or 5-quarter old business, and we've really been fully operational in terms of full research for 1 quarter. So we would expect to continue to see a ramp-up in both commissions and obviously, you couldn't have less equity underwriting activity than you had in the fourth quarter of last year. So ultimately, what will drive the profitability of this business is revenue growth as the business ramps up and we become more important to institutional investors and we build a pipeline and actually execute Equity Capital Markets activity.

Okay. That's helpful. Lastly, the broader market's firmed up a fair amount in the last couple of months. Has your Private Funds Group seen an uptick in the amount of interest on behalf of investors getting closer to closing on new fund acquisitions? Asked more simply, what does the pipeline look in that business compared to the back half?

Now I would say, I guess, 2 things: number one, that we're quite confident given the backlog of activity there that will have quite substantial revenue gains in that business this year; and second, that what was a modest loss will turn into a contributor to our earnings.

Our next question comes from the line of Hugh Miller with Sidoti & Company.

Most of my questions were asked and answered, but I just wanted to touch back a little bit further on the tax rate and thinking about that going forward. You mentioned both reserve release and also the mix of global revenue. Can you give us a better sense of which was a bigger driver? How should we think about the tax rate going forward? I realize longer-term, as you see the shift towards greater revenue abroad, that, that will be a benefit, but I'm just trying to better assess that.

Quantitatively, the reserve was a bigger driver in the quarter. But as you look forward, there are 2 factors that should result in the tax rate coming down: one is the greater contribution of revenues from our overseas businesses; and second, a significant factor keeping the tax rate where it was, was the losses associated with the businesses that we don't have 100% -- we don't own 100% of. As those businesses move to profitability, which, as Ralph has said, we expect this year, that will have a favorable effect on the tax rate.

Got it. I guess, do you have kind of an expected range for the tax rate for '12?

It's too early to talk about that, but I think in the first quarter, we'll be able to give you some more insight.

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

Just thank you all for your -- joining us, and we'll look forward to talking to you next quarter. Thank you.

This concludes today's Evercore Partners Fourth Quarter and Full Year 2011 Financial Results Conference Call. You may now disconnect.