Evercore Inc. (EVR) Q3 2013 Earnings Report, Transcript and Summary

Good evening, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Third Quarter 2013 Financial Results Conference Call. [Operator Instructions] This conference call is being recorded today, Wednesday, October 23, 2013. I would now like to turn the conference call over to your host, Evercore Chief Financial Officer, Bob Walsh. Please go ahead, sir.

Thank you. Good evening, and thank you for joining us today for Evercore's Third Quarter 2013 Financial Results Conference Call. I'm Bob Walsh, Evercore's Chief Financial Officer, 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 evening, we issued a press release announcing Evercore's third quarter financial results. The company's presentation today is complementary to that press release, which is available on our website at www.evercore.com. This conference call is being webcast live on the Investor Relations section of the website, and an archive of it will be available beginning approximately 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 our website. We will refrain from repeating the information included in the press release and focus instead on the key opportunities, challenges and changes in our business. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we've noted previously, our results for any particular quarter are influenced by the timing of transaction closings. I'll now turn the call over to Ralph.

Thanks, Bob. Good afternoon, everyone. Our third quarter was a good quarter for Evercore. Despite the flattish M&A markets and environment generally, we delivered the best third quarter in our firm's history and our third best quarter ever in terms of revenues. These results are in contrast to results of many of our most immediate competitors, both large and small, as they were accomplished in an environment in which global and domestic M&A deals closed were down for the quarter. Our earnings growth was strong. Earnings per share were $1.54 for the first 9 months of the year, an increase of 57% above the first 9 months of last year. And our margins, on a year-to-date and on a 12-month rolling basis, continue to improve. We continue to make progress on our most significant and key strategic objectives. Our Advisory businesses continued to gain market share among the 13 firms that are public and report their advisory fees separately. Roger will provide an update on our Advisory business in a moment. We earned more than $150 billion [ph] from Investment Banking clients outside of the United States year-to-date, an increase of 37% in comparison to the same period in 2012. Of particular note during the quarter, we advised the government of Nuevo Leon in Mexico regarding the refinancing of a MXN 33.6 billion loans. We continue to have success broadening the services we deliver to our clients. For the quarter, we participated in 6 underwriting engagements, bringing the total to 36 for the year. We advised on 2 equity and debt capital markets transactions, where we were not an underwriter. We completed 4 capital raises for private equity firms, resulting in our best quarter so far in our Private Funds business. Collectively, these expanded capabilities enable us to serve our existing clients on a broader array of transactions. They also allow us to serve a broader group of clients and to sustain our growth in revenues and market share. Our Institutional Equities business was profitable and continued to gain market share. And our Investment Management businesses were profitable and continued to grow. We had $184 million of net inflows for the quarter, supplemented by market appreciation of approximately $450 million. And we ended the quarter at $14.2 billion dollars of assets under management. And our private equity investments continue to contribute as we earned $2 million of performance fees from Trilantic. And finally and very importantly, our board increased our quarterly dividend by 14% to $0.25 per share, our fifth consecutive annual increase. And the board refreshed our share buyback authority. Let me very quickly go over the numbers. First, financial performance in the third quarter. Third quarter net revenues were $187.1 million, up over 25% over the same quarter last year. Net income was $24.3 million for the quarter, with earnings per share of $0.53. These results were up more than 40% in comparison to the third quarter of 2012. Operating margins were 22.6% for the quarter. Our comp ratio was 59.2% for the quarter, and the compensation ratio for the trailing 12 months was 58.9%. Non-compensation costs were 18.1% of revenues, down from 20.5% of revenues in the third quarter of last year. For the 9 months ending September 30, our results were also strong. Year-to-date, 2013 net revenues were $547.2 million, up 28% from the first 9 months of last year. Net income was $70.6 million for the first 9 months of 2013 or $1.54 per share. These results are more than 60% higher than the income reported in the first 9 months of 2012. Operating margins for the first 9 months were 22.6% compared to 17.5% for the first 9 months last year. Our compensation ratio for the first 9 months was -- of 2013 was 59.2% compared to 60.6% for the first 9 months last year. And non-compensation costs were 18.2% of revenue, down from 21.9% of revenue in the first 9 months of 2012. I will point out that, as all of you know, the last quarter in 2012 was a record quarter for us, so it will be a tough comparable. So let me just conclude my remarks by reminding everyone that we believe our business is best judged over periods of time longer than one quarter. And I have made this point many times in connection with both good quarters and weaker quarters. Of course, it's always nicer to make it in the -- when it's accompanied by a good quarter, as this one is. But I just do want to remind everyone that we judge our business over a rolling 12-month period of time, where we continue to perform extraordinarily well. Let me now turn the call over to Roger to comment on our Advisory performance and the M&A environment generally.

Good afternoon, everybody. Hi. Well, you can see through Ralph's comments that the firm's Investment Banking business performed strongly in the third quarter. It was the strongest third quarter which that side of the business has ever had. Revenues reached $161 million, up 26% from the quarter a year ago and down 11% from the second quarter. Keep in mind that the second quarter of this year was the second best quarter the firm ever had. Advisory fees represented 94% of that total, but the remainder accounted for by Institutional Equities, Mexico equities and our investment in G5 in Brazil. Our Advisory revenues included 31 fees of $1 million or more. That compares to 30 such fees a year ago, and on this measure, it's the third best quarter in the firm's history. The overall number of fee-paying clients was 136, down slightly from the third quarter of last year, and that's our fourth best quarterly total ever. For the 9 months, we received -- of this year, we received fees from 269 clients. That compares to 255 for the first 9 months of last year. Revenues from underwriting transactions were $6 million for the third quarter and $24 million for the 9 months. And you can see this is starting to become a meaningful factor for the firm. And our Private Funds Group, one of our relatively newer businesses, generated $6 million of revenue for the quarter, which is its best quarterly result ever. Productivity-per-partner, a metric which you know, those of you who follow us closely, we pay a lot of attention to. Productivity per partner for the rolling 12-month period, which is the way we always measure it and discuss it with you, was $10.2 million, up quite sharply from $7.2 million a year ago at this time and essentially the same as the second quarter. Many of you know that Evercore generally ranks #1 on this metric among publicly owned investment banking firms. We had another strong year in partner recruiting, and I'm referring to it that way because it's finished for 2013 now. And for the year-to-date, we added 5 new partners from the outside: Scott Kamran for software; Matt McAskin for healthcare services; Keith Magnus for Singapore, the new office we've opened; Nigel Dawn, who will be running a very interesting business for us involving secondary market transactions, involving financial sponsor interests, like LP interest and, in some cases, entire sponsor organizations; Fernando Soriano, who's just now coming onboard, who will be covering Latin American and Mexican multinational corporations for us, working with our colleagues in Mexico and Brazil. In terms of our competitive position, the firm's share of the total fee pool, specifically all advisory revenues reported by publicly owned firms, hit an all-time high of 5.2% during last quarter, meaning second quarter of 2013. We don't have all the data for the third quarter yet because, of course, we require other firms to report, and then we have to analyze what they do report. But it is likely that this share increased further during the quarter which just ended. On the league tables, we slipped some during the third quarter mostly because of the $130 billion Verizon-Vodafone transaction, in which we did not participate. But more generally, our position remains strong on that standard. Through 9 months, for example, using ratings based on the number of transactions, the only independent firm in the world ahead of us was Lazard. And as you know, I'm sure you know, our P&L and everybody else's P&L is more influenced by the number of transactions on which we advise than by how big or small they are. Finally, let me say a word on the broader environment. First, on the numbers. Global M&A volume in terms of announced deals and in terms of completed deals, those 2 totals are essentially flat over the 9 months of 2013 versus the 9 months of 2012. For the third quarter itself, announced volume was up substantially and completed volume was down meaningfully. Now you might ask, why is Evercore doing so well in a flat environment like this? And there are 2 central explanations. Number one, we are gaining market share, as my statistic on the -- our share of the fee pool corroborates, gaining market share. Number two, the region of the world which is strongest in terms of overall M&A, the overall M&A volume, is the U.S. market. U.S. volume for the 9 months was $776 billion on an announced basis, for example, versus $580 billion for the 9 months of 2012, so up very nicely. Now that is the market where Evercore is strongest just because of our history. We've done a great deal of globalizing over the past 7.5 years and have -- obviously now got 1,000 people and very substantial operations all around the world. But we do remain a U.S.-centric firm in many respects, and so we're strongest in the market that's strongest. So those 2 factors tell you a lot about why Evercore continues to steam ahead and grow very handsomely, even when the broader environment is flat. Now going forward, my own view, macroeconomic conditions are neither strong -- oh, I'm sorry, macro -- I'm sorry, macro conditions for deals are neither strong nor weak, which is obviously another way of saying they're flat. But they're not -- they're just not red hot, but they're not poor either. And anybody who says they're poor, I don't quite understand that. Interest rates, of course, remain very low. They've moved back down, as you know, over the past few weeks. Ten-year treasury hit a high of 3.05%. It's now in the 2.50% range. Share prices, of course, are high, more or less at all-time highs. Historically, high share prices generate deals, low share prices don't. Yes, growth itself, economic growth itself is on the weak side, but seen as slowly, if not glacially, improving, but nevertheless improving. So the macro environment is reasonable. Will it get better? Well, of course, at some point, it will. But exactly when that is, I don't know. And if I did know, I could be phoning this in from my 400-foot yacht, which parenthetically I don't have. But the outlook for us remains, as Ralph said, a good one. Obviously, this is a strong year for the firm. Overall, when it's over, it will have been a strong year for the firm. And we're very pleased with the firm's progress on Investment Banking as a whole. I'm going to hand it back to Ralph.

Thanks, Roger. Let me just talk very briefly about our Institutional Equities business first and then Investment Management. The Institutional Equities business continues to add clients and to grow revenues. We now have research coverage of 332 companies and serve more than 350 clients. Year-to-date, the business generated $29.7 million in revenues, a 74% increase in comparison to the 9 months of last year. And expenses were $28.7 million for the period, up 43%. The business was profitable for the third quarter as our market share continued to grow, although only marginally. And we remain committed to our goal for the business to contribute to operating profits on a full year basis. Investment Management. Operating income for Investment Management for the third quarter was $4.1 million on net revenues of $25.8 million. Operating margins were 15.8%. For the first 9 months of the year, net revenues were $75.3 million, up 20% from last year, and operating income was $11.9 million, up approximately 170% from last year. And margins year-to-date are 15.8%. Assets Under Management increased 5% to $14.2 billion. We had net inflows in both the Wealth Management and the Institutional Asset Management businesses. Investment performance continues to be strong this year at our key institutional businesses and in our Wealth Management business. As I indicated previously, solid investment performance is often a leading indicator of asset inflows, and our affiliates are working hard to continue the positive performance which we began last year. Bob, let me now turn it over to you to make a couple of comments on non-comp costs and other financial matters.

Thank you, Ralph. Just a few points. Our press release highlights that we have recorded an impairment charge of $2.7 million relating to Evercore Pan-Asset Management as a special charge in our U.S. GAAP results. This charge, which is excluded from our adjusted pro forma results, arose when we determined that the fair value of the business was below its carrying value in conjunction with an ongoing strategic initiative. Pan is a U.K. asset management affiliate that was first consolidated in the first quarter of 2013. However, its results have not had a significant impact on the consolidated group as its revenues were less than $1 million for the quarter and the business operates at near-breakeven levels. Pan's AUM was approximately $1 billion at the end of the third quarter. On non-compensation costs, we continue to be disciplined, and the costs are essentially flat in comparison with the prior quarter. Our cost per person in Q3, which is a key measure that we manage to, was approximately $31,000, again, comparable to prior quarters. Our adjusted pro forma tax rate is 38% for the quarter, comparable to prior quarters and to 2012. As we have indicated before, changes in the effective tax rate are principally driven by the level of earnings in our early-stage businesses and earnings generated outside of the United States. Our share count for adjusted pro forma earnings per share was 45.9 million shares, an increase of about 0.5 million shares. This increase was due principally to the effect that a rising share price has on both the Mizuho warrants and unvested restricted stock units from recruiting and compensation. Our average share price for the quarter increased by nearly 20%. As a Ralph mentioned, our board declared a dividend of $0.25 per share for the quarter, a 14% increase, and refreshed our share buyback program so that we now have $250 million or 5 million of share buyback authorization. Our cash position remains strong as we hold $285 million of cash and marketable securities. And finally, as we noted briefly at the end of our last call, we have repurchased the 14% of the equity in Evercore Trust Company that was previously owned by the principals of that business. So with that, we'll open the line for questions.

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

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

Let me start with the second -- or take the first question first. Hiring, we've been very consistent. We've said that we -- our hope is to hire 4 to 7 new senior managing directors, assuming that we can find the highest-quality people. We've been successful in doing that over the last 4 or 5 years. That's certainly the hope and expectation that we would have for next year as well. We have lots of active dialogue, maybe a little bit more active dialogue than we've had at this time of year in previous years. But I don't think there's anything yet of enough consequence to suggest that what we would do next year would be materially different from what we've done historically.

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

I would just add 2 points. Number one, as I indicated in my opening comments, our exposure to -- well, we still remain -- majority of our revenues, significant majority of our revenues, roughly 65% or so, come from U.S.-based clients. The proportion that is -- come from non-U.S. clients has grown -- is growing more rapidly than our revenues in total despite the fact that it is the U.S. market, as Roger indicated, that is leading right now in terms of whatever strength there is in M&A. Second thing I would point out, and I think there are too many factors to give a definitive answer as to what this means, but in an environment that is essentially flattish, our revenues are growing somewhat because we are growing our number of partners. But they're also growing because our productivity per partner has gone up fairly consistently over the last 3 years. That -- in what has been essentially a flattish environment. That would suggest, at least, that there's a reasonable probability that some of what is happening here is we're getting a few more at-bats, and then our batting average is a little bit better over the last 2 or 3 years. So getting market share improvement from productivity enhancement is an encouraging thing.

Our next question is from the line of Brennan Hawken with UBS.

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

We can't help you. You could look back at history.

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

That's not true.

I mean, the most honest answer to that question is we don't know ourselves. We focus a lot on it, obviously, but we don't know ourselves. And so any speculation on our part would be dumb because that'd be grasping at straws. I'd love to answer it better than either of us can do, but we can't.

I figure I'd give it a shot. Fair enough.

Not that we're hiding it. We don't know the answer. We look forward to it when it happens.

Right, exactly.

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

I think that -- first of all, I think what we've said pretty consistently is that we expect, over a period of time, our comp ratio to make steady progress from where we have been to sort of the mid-50s or so. If we were in a total stasis environment, we'd be pretty close to that today. But what is happening in our business is that, first of all, our early-stage businesses, the Equities business, the Private Funds business, Evercore Wealth Management, are getting each year a little bit more mature. So each year, and so far, this has been the case, our margins get closer to the norm for the business as a whole, which provides a slight breeze at the back in the reduction of that comp ratio. And second, the other investments that we make, which are basically in adding both to our partner and below-partner level, which we've done some not inconsequential amount of this year, those also, as you point out, tend to make the comp ratio a little bit more sticky. The point I would make, though, is that if you -- the simple math of this is 4 to 7 partners on a base of 30 or 40 has a bigger percentage effect than 4 to 7 partners on a base of 65, as we have right now. So all of those things suggest that if the environment stays exactly as it is, we should be able to make each year a little bit of progress on the comp ratio and on our operating margins, and that is certainly very much what we are seeking to do. A long-winded answer, apologize for that.

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

We don't give that, but...

Nor are we going to.

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

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

Well, I was just there last week. I'd say the story in Europe this year, I think, across the industry was one of challenge in getting not conversations going and even real discussions going, but in getting things to the finish line and getting them announced and closed. So Europe has been very much a story of stuff drifting or not getting off the ground. We actually will have a -- we expect to have a decent year in Europe. And most of our competitors are down this year. We're not necessarily expecting that. So on a relative basis, we've done very well. If one looks at our backlog there, now versus a year ago, it would suggest that, at least, there are some early stage of, certainly, bottoming. Whether that actually leads to a pickup in activity, I think, is still speculative. I do think -- as you saw, we consciously made a decision this year not to add to our senior managing director headcount in London, and I think in retrospect, that probably looks like a reasonable decision. And we're certainly not entering next year with a view that we would absolutely, even if we can find great people, not do that.

Our next question is from the line of Hugh Miller with Sidoti. Hugh M. Miller - Sidoti & Company, LLC: So you guys had given us some interesting color around the rate environment and share price and the economic outlook and growth there. I was wondering if you could make some comments about what you're hearing with discussions with CEOs and CEO confidence levels? It seems like from some of the third-party research firms we've heard about kind of -- with some of the uncertainty and noise surrounding Washington, that that has kind of pulled back a bit during the third quarter. But how are your conversations going? What are you hearing from the CEOs you're speaking with about overall conviction and confidence in their respective markets?

Well, we've answered that or a version of that many times over the years, and I always say, and I would repeat it here, that the most -- the biggest factor affecting CEO confidence is demand. I know it's fashionable -- and as somebody who has spent a lot of time in Washington still does, I understand it. But it's fashionable to say, "Oh, Washington's dysfunctional, so we need to hide under the desk." But it's driven much more by demand, strength or a lack of it, than it is by political factors, number one. Number two, of course, there was a temporary fixation on Washington during the shutdown and default discussions because it was the #1 topic of discussion in the country, whether you are running a very large company or working out of your home or garage. But notice that the -- that, that period, the 16-day shutdown, all the discussion about default, had virtual -- I mean, it had had negligible effect on financial markets. As you know, the market was up 2.6% during the 16 days of the shutdown itself, and indices, most of them are right around all-time highs, as I said in my comments. And that's a bit of a proxy for corporate attitudes. It's just not correct that most CEOs, for example, right this minute, are getting up in the morning and thinking about Washington. They're thinking about their businesses. They're thinking about demand. They're thinking about investment. They're thinking about competition and so forth. So is it a factor? Yes. Is it a dominant factor? No. Where is CEO confidence? It's slowly improving together with the growth factor. When this year is said and done, the U.S. economy probably will have grown in the vicinity of 2.25% to 2.5%. That's very modest. And so confidence is a bit in line with that. There are widespread expectations, but we'll see as -- next year, we'll see a somewhat better year, 3% growth or something in that vicinity. Confidence will improve if that's the way the year actually unfolds. So summing up, I don't find confidence to be poor or great. It's middling, just like M&A totals are middling and just like the macroeconomic environment is middling. Hugh M. Miller - Sidoti & Company, LLC: Okay, yes, certainly appreciate your insight. Very helpful. And it seems as though, post the Verizon deal early in September, that there seemed to be a bit of investor buzz around the potential for kind of these larger deals, so it should have been kind of missing from the market for a while, to potentially start to come back in and become exciting. But is there anything that you're kind of seeing that would give you an indication that we might get to an environment like that, where the larger deals start to kind of come back in and become more of a meaningful factor?

I wish I knew the answer to that, but I just don't. But I would remind everybody, deal flow remains perfectly good. You can see the number of transactions on which we advised this year was up nicely. And no firm for the last 2 years, 4 years, 5 years and so forth has had a better niche than Evercore in the large-cap, multinational sector and larger deals. It's out there in the public record. But our bread and butter, just like every other firm in the business, large, small, medium, is the mid-cap and upper mid-cap market. That's where 95-odd percent of transactions are. And so you're right that there've been only a few big deals this year, Dell, Heinz, Verizon, Vodafone and so forth, about 5 of them. But the day-in, day-out deal flow is perfectly reasonable, and that's where most of the deals are and that's where most of the fees are. So I don't know when you'll see more megadeals. I really don't know. But you shouldn't take that as a sign that the market as a whole is poor because it isn't. Hugh M. Miller - Sidoti & Company, LLC: Okay. No, I certainly understand that. I do. And the last question I had was just with regards to capital allocation priorities. Obviously, you've raised the dividend here. You've restocked the share buyback program, and you talked about investment in the recruiting side and how that should be relatively similar to what we've seen in the past. Can you talk about, as you think about dividends versus share buyback, does one seem more compelling at this point as a use of capital and what your thoughts are there?

Well, I think that, first of all, I think we believe that a prudent dividend policy is, assuming that your business supports it, is to increase the dividend annually. If you look back over the last 4 or 5 years, we've generally done that in a 10% to 15% range, certainly, over the last 3 years or so. This falls right into that range. It happens to be at the upper end of the range because we, obviously, are having a pretty good year this year. We've also said publicly many times that we intend to repurchase, at a minimum, a number of shares to offset the issuance that occurs in our year-end compensation plans, the restricted stock units that we issued in those plans. This year, we issued 2,050,000 shares in the year-end compensation round. We have purchased so far this year, either in open-market purchases or in net settlement, 2.4 million shares roughly. So we have actually purchased enough shares not only to cover the RSUs issued at year-end compensation but also to cover all the shares that we issued for hiring this year and actually, then some above that. We'd love to be able to do that every year. And certainly, at a minimum, we're going to purchase what we have assured our investors a number of times that we will repurchase, and certainly, we hold open the option of doing more than that as cash earnings exceed the amount that would be required for our dividend plus that minimal amount of share repurchases.

Our next question is from the line of Devin Ryan with JMP Securities.

So most of my questions have already been asked, but just one on the Private Funds business. I know you guys have made some investments there and highlighted the improving contribution in your comments. So I'd just like to get a sense of expectations there, just based on current headcount, how much bigger that business can be. And then is that an area where you feel like there's still a lot of capacity to expand? And obviously, I'm asking that because it's a little bit more difficult for us to get our arms around the contribution there.

Right. That business has had steadily increasing revenues. This year will be no exception. We added no headcount this year. I would expect very limited, if any, increase in headcount next year, and I would expect another increase in revenues next year. And next year, I would expect that the margins in that business would be comparable to our other Advisory businesses. There's some chance that we get, depending upon what the fourth quarter looks like, a little closer to that this year, but we're not planning for that. And so there's a fair amount of -- this is very fresh in my mind because I just had the quarterly review with the person who runs that business 2 hours ago. And there's definitely a fair amount of revenue runway before we sit here and say we've got to add materially to our headcount.

Got it, okay. And then just in the Restructuring business, it appears that activity has really kind of been troughing out here. I'd love to just get some thoughts on whether you see any change to that. What are you seeing in the Restructuring business, and is there any reason to believe that activity or the pace of activity could improve from here?

Certainly not here in the U.S. No reason to believe that it would pick up. Maybe there's modest opportunity for a little bit of a pickup in Europe primarily because maybe we're getting to the point where the banks are starting to be a little more willing to recognize the real value of some of the loans they have. But we're still a ways away from that, I think.

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

Well, first of all, while restructuring activity is light in the market, here, again, we're a bit of a beneficiary of market share gains, and we happen to be involved in, certainly, the largest restructuring situation underway at the moment. And second, what we have done is we actually call our Restructuring business Restructuring and Debt Advisory, and we have found opportunities to deploy our expertise beyond just the pure traditional Restructuring business. And then, of course, if we do get people who are underutilized, we will move them back and forth between Advisory and Restructuring, recognizing that, I think I've said this in the past, it's really not a bright line between these 2. It's a gray line. And probably, what we did more of is when restructuring was really hot, we took people out of the M&A business who were underutilized at the time and used that as the surge capacity to handle Restructuring.

Our next question is from the line of Joel Jeffrey with KBW. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Just to follow up on your capital plans, I mean, you guys have been clearly very good at returning capital through increasing the dividend and repurchases. I guess given how the stock has performed this year, I mean, is there any reason you guys can think of to potentially do a secondary offering to raise capital?

No, we have no expectations of that. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, fair enough. And then just thinking about the underwriting business. We've gotten some comments from, I guess, one of your competitors this morning, talking about how strong the IPO markets have been. Just any color you could give us on where you're seeing particular strength and how you see that market developing for the rest of the year and into next year.

As we've said, our research tends to be concentrated in financial institutions, technology, media, telecom and transportation. So there's probably a little bit of bias toward those sectors compared to firms that have universal research coverage. But what we're finding is in sectors where we have broad industry knowledge and deep industry knowledge, we can get involved in the underwriting activity. And look, I mean, for private equity firms, IPOs are increasingly becoming a source of exit for them, and their portfolios tend to be pretty broad in terms of the industries in which they have participated in. So other than the tech area, which is a constant source of IPO business, we don't see a particular sector that's going to be a source of vast majority of volume. I guess energy is another area. Because there's been so much private equity activity, there's a lot of calendar there as well. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, great. And then just lastly for me and just to follow up a bit on Devin's question. On the fund placement business, I mean, it's my understanding that business tends to be more fourth quarter-weighted, typically, and you guys posted a very strong quarter this quarter. Was there any acceleration into this quarter, or should we expect it again to be more of a fourth quarter-dominated business?

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

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

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

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

Okay. And just quickly, I mean, is there any material Asian strategic alliance revenue along with the European and other geographic segment, or is that more or less just pure European revenue?

We have an office in Hong Kong, which is -- has the same levels of productivity that we experience in Europe and in the U.S. We've just opened an office in Singapore, it's obviously too early to tell. But certainly, our hope and expectation is that the productivity there will be comparable. So those are the 2 principal -- and obviously, Brazil and Mexico. Mexico's -- going to have a record year this year. Brazil, notwithstanding the economy there, is doing okay. So the revenues from the non-Europe, non-U.S. businesses where we actually have offices are much larger than the revenues attributable to our alliances, where there's a hard revenue there. But I would point out that the alliances are not unimportant in getting certain types of business, where -- for example, sell-side assignments, where the potential buyers are broadly distributed around the globe, some in places where we have offices and some in places where we have alliances. And having that broad coverage of more than 90% of the world's GDP allows our -- allows us to serve our clients, really, in whichever markets they care to implement strategic transactions. So even if there isn't a hard revenue in the alliance, it definitely adds to our ability to do business in our view.

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

All right. I guess the only thing I'd say in conclusion is we're now far enough into the year to know that we've had a reasonably good, one could even say quite good, 9 months. Sitting here today, we don't see anything that's going to prevent us from talking to all of you 3 months from now and talking about a reasonably good or quite good 12 months. And if you look at the 9 months, our success has been driven by market share gains, which are partly driven by productivity improvement in the face of kind of a flattish M&A environment. And I expect at the end of the year, we'll be able to say similar things about how we've done. So obviously, we never give any kind of forward guidance, but we are -- we happen to be in a reasonably good spot vis-a-vis our competitors, large and smaller, right now. And we've got to go back to work to make sure we deliver that you. So thanks very much.

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