Evercore Inc. (EVR) Q2 2013 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, thank you for standing by, and welcome to the Evercore Partners Second Quarter 2013 Financial Results Conference Call. [Operator Instructions] This conference call is being recorded today, Wednesday, July 24, 2013. And I'd now like to turn the conference call over to your host, Evercore Partners' Chief Financial Officer, Bob Walsh. Please go ahead, sir.

Good morning, and thank you for joining us today for Evercore's Second Quarter 2013 Financial Results Conference Call. I'm Bob Walsh, Evercore's Chief Financial Officer. 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 up the call for questions. Earlier this morning, we issued a press release announcing Evercore's second quarter financial results. The company's presentation today is complementary to that press release, which is available on our website at evercore.com. This conference call is being webcast live on the Investor Relations section of the website, and an archive of it will be available beginning approximately 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 remind you that the company assumes no duty to update any forward-looking statements. In our presentation today, unless otherwise indicated, we will be discussing adjusted pro forma, or non-GAAP financial measures, which we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and their GAAP reconciliations, you should refer to the financial data contained within our press release which, as previously mentioned, is on our website. We will refrain from repeating the information included in the press release and focus instead on the key opportunities, challenges and changes in our business. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we've noted previously, our results for any particular quarter are influenced by the timing of transaction closings, both on the investment banking and investment management sides of our business. I'll now turn the call over to Ralph.

Thank you, Bob, and good morning, everyone. We're very pleased with our second quarter operating results as we deliver the second best quarter in our firm's history. Our consolidated net revenues exceeded $200 million for the second time in our history. Our Investment Banking business generated $180 million in revenue during the quarter, and more than $300 million year-to-date. Our Investment Management business generated $26 million of revenues during the quarter and nearly $50 million for the first 6 months of the year. And our operating margins and earnings continued to improve as our earnings per share of $1.01 for the first half of the year increased by 75% in comparison to the first half of last year. We continued to make progress against our strategic objectives. Our early-stage businesses continued to gain traction during the second quarter, as both the Institutional Equities and Wealth Management businesses contributed to profitability for quarter and year-to-date results. We earned more than $100 million from Investment Banking clients outside of the United States year-to-date, our best start in our history. In the first half of the year, 35% of our Investment Banking revenues came from clients domiciled outside of the U.S. We continued to have success broadening the services we delivered to our clients. For the quarter, we participated in 18 equity and debt underwriting assignments; we provided advisory services on 6 equity and debt Capital Markets transactions, where we were not an underwriter; we partially or fully completed 4 capital raises for private equity and infrastructure firms. Collectively, these expanded capabilities enabled us to offer a broader array of services to our clients and to sustain our growth in advisory revenues and market share. We continue to expand the capabilities of the firm, strengthening our advisory team and technology, committing to launch a private capital advisory business, establishing a presence in Singapore and strengthening our health care advisory practice. We still -- we continue to have discussions with additional SMD, senior managing director, and managing director candidates, and we continue to believe that we are well positioned to add talent, perhaps in the remainder of 2013 and, certainly, in 2014. We repurchased 1.5 million shares of our equity in the quarter, bringing our total for the year to 2.3 million shares and share equivalents, exceeding the buyback commitment for all of 2013 that we recently made in our proxy. Let me quickly go over the numbers. First, for second quarter. Second quarter net revenues of $206.8 million were 35 -- were up 35% from last quarter and up 20% from the same quarter last year. Net income was $29.5 million for the quarter, with earnings per share of $0.65. These results are 75% higher than the net income reported in the first quarter and up more than 39% in comparison to the second quarter of 2012. Operating margins were 24.7% for the quarter. Our compensation ratio was 58.9% for the quarter, and for the trailing 12 months, it was 59%. Non-compensation costs were 16.3% of revenue for the quarter, down from 20.7% in the first quarter of this year and 19.1% in the second quarter of last year. Let me now briefly talk about the year-to-date financial performance. First half net revenues of $360.1 million were up 30% from the first half of last year. Net income was $46.4 million for the first 6 months of 2013. These results are 82% higher than the net income reported for the first half of 2012. Operating margins were 22.5% for the first 6 months of this year compared to 16.3% for the first half of 2012. Our compensation ratio was 59.3% for the first half compared to 61% for the first 6 months of 2012. Non-compensation costs were 18.2% of revenue, down from 22.7% in the first half of 2012. Let me conclude my opening remarks by reminding everyone that we believe our business is best judged over periods of time longer than 1 quarter, and that I have consistently expressed this view in good quarters and weaker quarters, and particularly, in good quarters. Taking this approach and looking at our performance over a longer period of time, our revenues for the trailing 12 months ending June 30 were $721 million, a record for any trailing 12-month period of time. Let me now turn it over to Roger, who will comment on our advisory performance and the M&A environment generally.

Good morning, everyone. Ralph just described the strength of this past second quarter, so I'm not going to repeat the headline numbers. Let me just go into the investment banking results and the metrics that apply especially to them. You can see how strong our revenues were in banking. You can see the pre-tax income results, very strong, $44.5 million, up from $26.7 million, sequentially, and $34.5 million year-over-year. Operating margins up over those 2 comparative periods as well. We had handsome improvements in the number of fee-paying clients and in productivity per partner. Fee-paying clients during the quarter increased to 157, that's up from 115 last quarter and 137 a year-ago quarter, and the second best quarterly result the firm has ever had. For the 6 months, Evercore earned fees from 214 clients, up from 165 last year. We had 38 fees greater than $1 million during this past quarter, also the second best quarterly result in our history. Our comp ratio in the quarter was 59.9%, essentially flat, versus the first quarter, and a bit below, in other words, better than the year-over-year comparison. On productivity, a metric we watch always very carefully, average revenue per partner on the usual rolling 12-month global basis, was $10.3 million, slightly higher than the second quarter and way up from the $7.5 million figure of 1 year ago. And that's a very strong result. And our backlog, we always look at it on both the risked and unrisked basis, remains solid. Our market share rose again, and I'll come back and talk about that, but it has been rising consistently for quite some time, especially during the past 2 years. On our Equities business, that's beginning to show some strengths. Evercore served as an underwriter on 18 offerings during the second quarter. The total amount of capital raised on those offerings was $10.5 billion. The 18 underwritings represents a 50% higher figure than our previous best quarter. Although our revenues, received from those underwritings, was the second best quarter ever, not the #1 quarter. But of those 18 underwritings, it's interesting, 5 REITs, 4 tech offerings, 3 telecom offerings, 3 transportation offerings, 1 oil and gas and 1 FIG, so you can see it's broad-based. On headcount, total bankers in the firm increased from 480 to 537, a healthy increase. Currently, there are 62 banking senior managing directors, or partners, in the firm. That number is about to rise as we have announced several new partners in recent weeks who are currently on garden leave. These include Scott Kamran, who will be running our software banking effort within our overall Tech Group based in Silicon Valley. We also hired an important hire, a new senior managing director to run health care services for this firm. He's currently in the midst, as all of these hires are, of garden leave, and we will formally announce him when that leave is finished. We also added Keith Magnus, who will be based in Singapore, and join Steve CuUnjieng as the 2 partners in Evercore for non-China Asia for the firm. And finally, Nigel Dawn, who will lead a new business for the firm, namely: one, advising on secondary transactions in private equity and infrastructure and in real estate funds. This business will complement the fund-raising advisory services provided by our Private Funds Group. So now, we will be in the so-called primary market in terms of raising funds for sponsors of various types and in the secondary market in terms of transactions involving sellers of limited partnership interests and the like interests from one holder to another. So between of these 4 new partners, you can see that Evercore continues, as we have for many years, to add steadily a group -- to our group of very high quality partners, and we expect that consistent pattern of additions to continue over the foreseeable future. It's been going on, on this basis, for many years. Let me say a few words about market share. Our strong P&L performance, as Ralph just discussed it, reflects, among other things, continued market share gains. We look at the 10 most active firms in the world who report their results publicly, including their advisory revenue, and we follow what our share is of that total pool of advisory revenues reported. It's not a perfect measure, but it's a pretty reliable one. And without getting often to the weeds about this, we believe that our share in the past quarter was the highest in Evercore's history and roughly twice the share of 2 to 3 years ago. That's important on its face, but it's also important because the M&A and overall transaction environment in our view is fine, but it's not white-hot or anything like that. If you look at total announced transactions for the first six months of 2013, and I'm speaking globally and in total dollars, they were down 12.4% from the year over -- from the earlier year 6-month period. Completed transactions year-over-year, and that's the basis on which people get paid of course, were essentially flat. Not great, not bad. Same trends play out when you look at the number of transactions in the market instead of dollar volume. The number of global-announced deals in the quarter just ended was also down from the year-ago quarter, again globally. But these global trends obscure some key geographical differences, which are important, in understanding our results. In particular, the U.S. market currently is the strong one among the 4 global markets that are generally measured properly. And Evercore is particularly strong in the U.S., although as Ralph said, we've never had better results internationally than we're having right now. So on the U.S. side, the total dollar volume of announced transactions grew 28% in the first half of 2013. So you can see, the U.S. market actually had a good performance. And by the way, the U.S. was about 30% of the global total in this period, and this measure defines U.S. as transactions where each half of it is U.S. In other words, U.S., U.S. And there's a similar trend at work in terms of the total number of deals where, for the first 6 -- sorry, for this past quarter, the number of deals in the U.S. was up modestly over the second quarter of 2012. So my point is, Evercore's market share is improving, which is improving sharp -- strongly. The market in which we still are the strongest, the U.S. is the healthiest of those around the world. And as a result, we're doing very well. A final comment on market conditions in general. I find them to be just fine. Equity markets are right around all-time highs. Interest rates are very low by historical standards, despite the recent increase. I mean, they're still extremely low. Credit availability is robust and business conditions, at least in the U.S., are slowly improving. So market conditions, in our view, are satisfactory. Yes, there aren't many -- and we get asked this all the time, there aren't many large, strategic-to-strategic mergers. There've really been only 4 announced around the world this year the way we look at it, which happened to be Dell, Heinz, NBC and Liberty-Virgin. So a lot of people look at the absence of those great big headlines, strategic deals and say, "Well, market conditions must be weak." But actually, they're not. So on that note, I'm going to stop, and turn it back to Ralph.

Thank you, Roger. Our Institutional Equities business continues to add clients and grow revenues. We now have research coverage on 324 companies and serve more than 340 institutional clients. Year-to-date, the business generated $21.2 million in revenues, a 79% increase in comparison to the first half of last year, and expenses were $20.5 million for that period, up 56%. The business was profitable for the second consecutive quarter, as secondary revenues continued to grow. Equity underwriting revenues, which were lower in the second quarter as Roger indicated than the first quarter, still are higher in the first half of 2013 than what we generated in all of 2012. And we continue to expect that this business will contribute to profitability for the full year in the remaining 2 quarters of the year. Our private capital business, Private Funds business, we had the highest fundraising quarter in our -- in the short history of that business. And as Roger indicated, with the hiring of Nigel Dawn and Nicolas Lanel, we are adding a secondary capability, secondary advisory capability, to our advisory skills broadly. In Investment Management, the business for the second quarter, operating income was $5.5 million on net revenues of $26.5 million. Operating margins were 21%. These results benefited from the final close of a new equity fund in Mexico, which increased fees by about $1 million and by mark-to-market gains on our private equity investments. Assets Under Management were flat at $13.6 billion. We had modest inflows -- outflows, excuse me, in Wealth Management and Institutional businesses, and those were offset by net inflows in private equity. Our investment performance continues to be strong at our key institutional platforms. As I have indicated previously, solid investment performance is typically a leading indicator of asset inflows, and weaker investment performance is typically a leading indicator of outflows, and there are considerable lags until the actual flows occur. Our affiliates are working hard to continue the positive performance, which began early last year. Let me conclude by saying -- making one point. As Roger indicated, we are in a flattish M&A environment today. The statistic that I look at most is the trailing-12-months announced transactions. Since the first quarter of 2010, where for 14 straight quarters, trailing-12-months announced deals have been between $2 trillion and $2.6 trillion. For the last 7 quarters, that same measure has been between $2.2 trillion and $2.5 trillion. So the environment, as Roger indicated, is pretty flattish. Notwithstanding that general environment, the data very clearly suggest that the independent firms as a group continue to take meaningful market share from the larger balance-sheet-oriented investment banking firms, and that Evercore is benefiting to a much greater extent from this trend than any of our independent advisory firm competitors. While we certainly expect, at some point, that the environment will improve, for the reasons Roger cited, we also believe that we can continue to grow more rapidly than the overall market by taking share from our competitors. Let me now turn it over to Bob.

Thank you, Ralph. Just a few items to wrap up. Non-compensation costs for the quarter increased 6%. However, our cost per person, which is a key measure that we manage, too, was approximately $31,000, comparable to the first quarter. Our adjusted pro forma tax rate is 38% for the quarter, comparable to 2012. As we've indicated, changes in the effective tax rate are principally driven by the level of earnings at our early-stage businesses and earnings generated outside of the U.S. Our share count for adjusted pro forma earnings per share was 45.4 million, a decrease of approximately 0.5 million shares. This decrease is due to the repurchase of 1.5 million shares in LP units in the quarter, offset by the normal increase in shares relating to our restricted stock units, which results from a passage of time. Our average share price for the quarter was comparable to Q1, and therefore, did not have a significant impact on the change in the share count. Our board has declared a dividend of $0.22 per share, consistent with prior quarters. Our cash position remains as strong, as we hold $184 million in cash and marketable securities. At the end of the quarter, we obtained a line of credit in an aggregate principal amount of up to $25 million. As we noted, our primary objective for the facility was to create greater flexibility to opportunistically repurchase shares. The Assets Under Management that we've reported include assets from Pan-Asset, which is now consolidated. The opening balance was adjusted to include Pan's AUM as of March 31. And finally, just a footnote for the third quarter, in early July, we repurchased the 14% of our controlled subsidiary Evercore Trust Company, that was owned by management. So with that, we'll open the line for questions.

[Operator Instructions] Our first question is from the line of Douglas Sipkin with Susquehanna.

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

I would say that the data we talked about, both in terms of dollar volumes and number of transactions, really speak for themselves. You're right that the European data is particularly weak, and I talked about the U.S. data being particularly strong. Just speaking for myself, I wouldn't say we have seen any change in marketing conditions for Europe.

I would say, though, that the -- that it's pretty broadly acknowledged that once there is some stabilization in Europe, there is a fair amount of restructuring of their economies and industry that's required. As a general matter, they have been less inclined to take out cost, merge, raise capital in their financial sector. And if we do get some stabilization and perhaps even some return to growth in Europe, that should be supportive of a little bit of a pickup in merger activity there as well.

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

I'm sorry, what's your question?

Well, I guess, what I'm saying is, to raise that sort of trailing M&A-announced range that you guys focus on, I mean, for me, it looks like Europe is one area, are there other areas where -- are required to sort of boost the global M&A pool, or no?

No, let me answer it this way. You can see the firm had great results. You can see the firm's market share is going up. I don't think we're smart enough to tell you where the market is going, at least speaking for myself, I'm not. And are market conditions in Europe going to improve over next 6 months? You may know the answer to that, but most people don't. Are they going to improve in Asia? None of us knows. We're just dealing with the environment we're in. We're doing very well. I don't like speculating about where it's going because I don't know where it's going. So I don't think it's a productive exercise.

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

I think since -- over the last 3 or 4 years, if you look back historically, we have consistently grown the dividend consistent with the growth in earnings. Obviously, this is a decision that the Board of Directors makes. They generally reexamine that issue toward the end of each year, and I'm sure they'll look at it again this year. I think the more important point is that we've had a policy that we've stuck to pretty consistently of returning 100% or more of our earnings to our shareholders in the form of dividends and share repurchases. And we would expect that we would probably achieve that, or close to that, this year as well.

Our next question comes from the line of Alex Blostein of Goldman Sachs.

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

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

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

Which is why we consistently say to you that you should look at our results over a longer period of time than just 1 quarter.

Yes, makes sense. And I guess along those lines, if I look at the first half of the year, our productivity per senior MD, it looks like you guys are doing about $9 million. I think in the past, you talked about kind of 10-ish million...

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

So if we just look at the Advisory Investment Banking revenues on the basis of MDs, I think it comes out to be about $9 million per MD. And I think in the past, you talked about $10 million as probably achievable even without a material pickup in the cycle. So -- which I guess, kind of gets back to your argument about same-store sales, so to speak, getting better as the folks you bring in get up to their full potential. So I guess, is that still relevant in today's environment? And if the cycle ever does get better, shouldn't we think that $10 million plus, in the better time, is achievable for you guys?

Well, that factor is still relevant. Because as we talked about before, partners, we've announced in recent weeks and months, not one of them has actually arrived for work yet, and it's late July. So expecting any of those 4 to have a meaningful, or any impact, on the firm's revenue for 2013 is unrealistic. And they likely won't. It'd be great if some of them did, but they likely won't. So the phenomenon we've talked about for many years where given when individuals are paid by this industry and then garden leave practices and, therefore, when they arrive, our own planning is such that newly arrived SMDs and the year-to-date comp are -- we don't expect them to generate any revenue. So that's why we measure SMD productivity excluding partners in the year that they arrive here, because they don't generate any revenue. So that factor is just as alive and well as it's always been. I mean, if someday, the firm has a lot bigger number of SMDs, then this -- that the meaning of this factor will diminish and diminish and diminish. But right now, it's still relevant.

Got it. And just to be clear, the folks that you highlighted are not in the 63%...

No, the way we do this calculation is we take senior management directors who have been here 1 year, and it is at that point that they start count in the number of SMDs. So that's why there is a difference between the $10.3 million that Roger cited and the $9 million that you cited because you're basically taking the SMD headcount at the beginning of the year, some of whom were here for 1 month or 2 months, and we would not -- and then taking the 6-month revenues and annualizing it, that is -- that's not how we do the calculation. And by the way, we don't think that the measure that you've just articulated is particularly -- particularly accurate relative to the one that we do.

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

Well, here, again, we're not foresightful. We can only tell you what's happened.

And your next question comes from Brennan Hawken with UBS. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: So it sounds as though the pipelines for future hires, in your view, is constructive. At this point, given we're kind of halfway through the year, you all had laid out 5 to 7 adds of SMDs as a way of thinking about 2013. Is that still how you would recommend we think about it at this point?

I think, historically, we've added 4 to 7. We're very comfortable with that. I think we're at the point in the year where the bar gets quite high to add someone this year. Because if you think about it, even if they were to quit their current job tomorrow, we have nobody in the pipeline who's prepared to do that at this moment. They would be leaving at the end of July and would be off August, September, October, joining us in November. And we would still be responsible for their full year compensation. So it's the -- certainly the exception in which we would pay a full year's compensation for 2 months' worth of work. So we do have quite a few discussions underway. It's conceivable that some of those might materialize this year because of certain circumstances related to that particular individual. But at this point, the discussions that we have underway, which are probably as consequential as they've ever been at this point in the year, are, in large measure, focused on future timetables.

You know what? I would just say -- what I tried to say in my own comments was, Evercore's pattern on adding SMDs has been very consistent now for many years. And again, we're not smart enough to tell you that next year, it will be 5 instead of 4, or 7 instead of 6 or any of those things. We put quality ahead of quantity. But our pattern is very consistent and none of us sees any basis for believing it will change.

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

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

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

We'll see. We'll see.

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

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

Your next question comes from Joel Jeffrey with KBW. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Just thinking about the Investment Banking business, I know you guys, sort of longer-term, target a 55% comp ratio in that and kind of 25% margins. But I mean, you generated 25% margins this quarter with a 60% comp ratio. Just wondering, I mean longer term, could there be upside of the pre-tax margin line or is this kind of a maybe a 1 quarter anomaly just based on deal volumes?

First of all, the basic math of this is that the noncomp expenses tend to be reasonably stable on an absolute basis and they tend to just grow along with headcount. That's kind of what drives them. And so the ratio of noncomp expense to revenue is driven more by the top line than by the noncomp expenses themselves. So in a quarter like this quarter, where revenues are a little bit stronger than history or trend, that ratio tends to go down and the operating margins tend to go up a little bit. I think this is, once again, the reason that we don't look at our business on a quarter-by-quarter basis. If you look at the first half of the year, as I recall, our operating margin's around 22.5% and -- which is -- and that number, that ratio of noncomp expense to revenues was a fair amount higher in the first quarter because revenues were a little lower, not because noncomp expenses were so much higher in the first quarter. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Got it. And then just lastly for me, can you just -- I'm sorry if I missed it earlier, but how much remaining do you have on your current share repurchase authorization?

Roughly 3.5 million shares is remaining, Joel.

Our next question comes from Steven Chubak with Research.

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

Well, first of all, what prompts a decision like that in Evercore's entire history is the availability of a talent who we believe can meet our financial objectives of generating, on average, $10-plus million of revenue per year once they're up and running, and that's really effectively what happened here. I would not call what we're doing a massive commitment to Asia. Obviously, activity there is becoming more important relative to global announced M&A transactions, but it's still a relatively small part of the overall market. We have 15 people in Hong Kong; 1 year from now, we might have 6 or so in Singapore. I don't think -- I don't consider that a massive financial commitment for a firm of our size. We are profitable in Hong Kong. Our Hong Kong business has margins comparable to our advisory business, generally, and we would expect to achieve the same in Singapore.

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

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

Thanks. And then, I guess lastly, I just had a quick question on seasonality. I know there's a couple of, I guess, people pointed out on the call that you don't like to speak too much about the backlog. But the guidance or obviously the outlook that you've provided for the industry was quite helpful. But one of the consistent trends that we've seen over probably every year, excluding 2008, on average, we've seen you revenues grow 35% in the second half versus the first half. So clearly, that seasonal pattern has been fairly consistent. And just wanted to get a sense of, given you're visibility on the backlog, which you noted, is solid and some of the share gains that are clearly evident in your reported revenues, whether you think that a, I guess, another seasonal pickup will likely occur this year.

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

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

Nice try.

Understood.

We do expect it will be colder in December than in August, okay?

Your next question comes from Hugh Miller of Sidoti. Hugh M. Miller - Sidoti & Company, LLC: I guess, you guys gave some great color on the recruiting environment into the firm. I was wondering if we look at things just on the surface, you had very strong top-line growth in the Advisory business, yet the comp ratio was relatively flat quarter-over-quarter. And we did see kind of a net reduction, I think, a one director in the quarter. Are you guys noticing a higher level of recruiting activity for other firms, looking at the talent at your firm or has that really not changed much?

Not at all. I mean, basically, the reduction in the senior managing director is a function of someone going to a senior advisor, not someone leaving here to go to another firm. Our statistics on that over the last four years are remarkably low, and we haven't seen any indication that those are going to change. Hugh M. Miller - Sidoti & Company, LLC: Sure. Okay. And I guess -- it was more, I guess, from the lack of an improvement in the comp ratio quarter-over-quarter, given the top line strength. I was wondering if you guys just felt the need to pay a bit more for the productivity that you were getting just given an uptick in any type of recruiting activity? But I guess...

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

Yes, investment banking headcount, as I've said in my comments, increased by 57 people quarter-over-quarter. That's a pretty substantial increase. And that's one of the factors that is keeping the comp ratio, for the moment, from improving despite the top line strength. We just -- we grew a lot in terms of our people. Hugh M. Miller - Sidoti & Company, LLC: That's helpful. And it does look like equity industry volumes started to improve in the month of June, both on a month-over-month and the year-over-year basis. I was wondering if you guys noticed a pick up in Institutional Equities business towards the latter part of the quarter? And if you've seen anything kind of flow over into the month of July so far, any insight there?

Nothing. Nothing that would be worth commenting about.

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

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

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

Okay. And just kind of going back to your Asia strategy. So are you actively looking for talent to create more of your own offices in Asian countries? Or are you generally satisfied with the strategic-partnership strategy that you've mainly pursued in the region?

We're very satisfied with the strategic-partnership strategy. Our strategy is really simple. We only open an office in a market when we believe we can: number one, find talent that will produce at the levels of productivity that we have in the firm today; and number two, that it's possible to make money and earn good margins with the advisory-only model that we have in that market. It is, for better or worse, our opinion that it is very, very difficult to find that talent and to have the advisory-only model produce the margins that we expect in China, Japan, Korea, India, where we have set up alliances. So for the foreseeable future, that's the way that we will continue to attack those markets. And I might add that we've had some experience now with people joining us from large firms that have significant presences or offices of their own in those markets. And it's not unusual for those who recently joined us to comment that through our alliances, we have at least as good, if not better, access to the businesses and pools of capital that our clients want to access, that we have better access through those alliances than we would if we had our own office.

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

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

Thanks, everybody.

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