Evercore Inc. (EVR) Q1 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore First Quarter 2015 Financial Result Conference Call. During today’s presentation, all parties will be in listen-only mode. Following the presentation, the conference call will be opened for questions. [Operator Instructions] This conference call is being recorded today, Wednesday, April 22, 2015. I would now like to turn the conference call over to your host, Evercore’s Chief Financial Officer, Bob Walsh. Please go ahead, sir.

Thank you and good morning.I am Bob Walsh, Evercore’s Chief Financial Officer and joining me on the call today are Ralph Schlosstein, our President and Chief Executive Officer and Roger Altman, our Chairman. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore’s first quarter 2015 financial results. The company’s presentation today is complementary to that press release, which is available on our Website at evercore.com. This conference call is being webcast live on the Investor Relations section of the Website and an archive of it will be available beginning approximately 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 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 then 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 have 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.

Thank you, Bob and good morning everyone. Before I start let me make everyone aware that Roger and I and Bob are in different cities, so that if are not perfectly orchestrated today particularly during the question-and-answer period, it is simply the fact that fact not rudeness or disrespect toward each other. Now, with the review of the quarter. Our first quarter results while always seasonally lower than other quarters reflect our strongest start to the year since we went public, so we continue to be very pleased by the positive momentum in our business. Our risk and un-risk pipeline of advisory opportunity continues to be strong and our pipeline of underwriting assignments is building quite strongly as well. Our assets under management and our wealth management and trust business grew by 4% as the business continues to attract new clients and add assets from existing clients. Overall, assets under management were essentially flat as the weak Pesos and the strong dollar reduce the reported value of assets under management in Mexico. The integration of our equities business is on track producing operating margins from secondary activities of 14.2% up from 6.2% in the first two months of the combined operation at the end of 2014 and very importantly we are having an unusually high level of success in recruiting this year, having already attracted 8 Senior Managing Directors and 2 Senior Advisors with several additional discussions still very active and we’ve succeeded in getting early commitments this year, so much of this new talent will be on board by the end of the second quarter. Let me now briefly review our financial results. First quarter of 2015 net revenues were $238.2 million, up 60% versus the same period last year, although down 26% from the record fourth quarter of 2014. The increase versus the first quarter last year of course reflects our much larger equities business. But even without the equities business firm wide revenues would have been up 32% and our advisory revenues were up even more. Net income for the quarter was $29.7 million with earnings per share of $0.56, these results are up 102% and 81% respectively from the prior year, but down from last year’s record fourth quarter. Operating margins were 21.2% for the quarter. Our compensation ratio was 57.4% for the quarter, lower than the same period last year and our trailing 12 months compensation ratio was 58.6% compared to roughly 59% for both the prior period and for the period end this time last year. Non compensation cost were $51.1 million up from the first quarter of last year, once again due to the larger equity business and for the expansion of our business generally. But down in comparison with the fourth quarter of 2014, our cost per employee the key metric to which we manage decline 12% in comparison with the fourth quarter of last year. We again return significant capital to our shareholders more than $100 million in this quarter including repurchasing 1.7 million shares offering a substantial portion offsetting a substantial portion of the 2.2 million shares granted in conjunction with 2014 bonus awards. Let me now turn the call over to Roger, who will comment on our investment banking performance and the M&A environment more broadly.

Good morning, everyone. The firm had its best first quarter ever in investment banking. You all know about the seasonality of this business for us and everybody else and it was major factor. So for example fourth quarters are always stronger than first quarter so that’s been the case with us for many, many years and I don’t see any reason why it will continue to be. So by first quarter standards this was very good. Investment banking revenue was up 70% to 214 million on a year-over-year basis up from 125 million a year ago. Operating income 47 million more than double last year’s first quarter, of the 214 million in total first quarter revenue advisory fees were 155 million of that, the year-end 35 fees in excess of 1 million which is about 10% above the year earlier level. The number of fee paying clients increased to 151, which is the 30% increase from 116 level of year ago. We participated in 10 underwriting transactions during the quarter and 12 other capital rising transactions in the later primarily represent fund raising for sponsors and secondary transactions for owner of LP interest. A 35% of our total banking revenue was generated by clients outside the U.S. with Europe being particularly healthy. Productivity of our partners, as you know we watch this very closely we consider it one of the most import measures, rose 20% year-over-year to 12 million, about a good figure. We finished the quarter with 73 senior managing directors, a call that we promoted six internally at the end of last year. As Ralph said, 2015 is shaping up as a particularly strong recruiting year, nine senior bankers accumulated to join the firm in 2015 and to give the flavor of this, yes on the one hand of course 20 years old as of last month, but we still have a lot of building out to do. So, we recruited a head of the new oilfield services group, a new chemicals group, a new power and utility’s group. We added on our technology team in London, we added to our equity capital market’s team, both in New York and in Silicon Valley, added to our insurance team, added to our restructuring team. All so far in 2015. Now as in the past, if we have an outsized recruiting year there will be two P&L effects, generically speaking. There will be short-term bump in our comp ratio and there will be faster medium term growth. We feel good about 2015 as a whole, in other worlds the outlook for the whole year in terms of investment banking, its possible there will be a little more seasonal than usual, meaning backend loaded but we will see on that. In terms of the environment, M&A volume levels are healthy, this is a good moment in the cycle both global announced volume, and I’m referring to dollar volume and U.S announced volume are about 13% year-over-year, that’s a wide way to look at it. They maybe down a bit from the fourth quarter but just like our own results are seasonal, M&A volume as a whole as a seasonal completed transactions volume was up 13% globally year-over-year, down interestingly about 5% in the U.S. year-over-year. The number of announced deal, not the volume of them in dollars but the number was down about 3% year-over-year. So when you put all that together you say to yourself the same thing which we said on the last earnings call, which is what’s really going on in the M&A market is the average deal size is increasing. When you see dollar volumes go up and the number of deals down or flat then by definition, the average deal size is going up and it’s an interesting dynamic because in a super strong market you’d see both go up. I have three files comments, our energy business remains very strong. There is a shift in composition of it from what we call the A&D sector which essentially means selling assets, for example like acreage, shifting over to corporate transactions, for example stock-to-stock mergers but the energy side of the equation is really quite good. As I said a moment ago, Europe base strengthening both generally for us and our backlog remains quite healthy. Back to Ralph.

Okay. Let me just talk briefly about the equities business which contributed revenues of 55.2 million in the quarter including 2.7 million attributable to underwriting, earning operating margins of 15.8%. The operating margins excluding the effective underwriting were in excess of 14%. Secondary revenues are down quite modestly in comparison with the combined revenues for the predecessor businesses for the same period last year. Progress has been made in reducing non-compensation cost other cost savings initiatives will be implemented in the second and third quarters and it will start to take effect in the second half of the year. We continue to steadily improving the votes of key institutional clients and are seeing continued positive momentum throughout the first voting cycle as a combined company and we hope and expect that that is precursor for a secondary trading activity as well. Headcount reductions were made a few weeks ago to better align the size of the team on the combined platform with our current revenue opportunities. This was in the ordinary course of planned integration, we continue to invest in and grow the business to best serve the needs of our clients adding a senior analyst in the energy space who will join in the second quarter. Investment management, our investment management business continues to contribute. On an overall basis, net revenues were $23.5 million for the quarter, a 3% increase from the same period last year but 13% below the fourth quarter which were aided by both year-end performance fees and marks in our PE business. Operating income was $3.5 million for the quarter delivering a margin of 15.1%. Assets under management were essentially flat for the quarter probably the highlight here is our wealth management business which is performing particularly well adding talent, clients and assets under management. Our performance in wealth management in all of our products is ahead of their benchmarks and that’s over any period of time one year, three years and five years. And now that we have a five year track record which we recently passed on a chronological point of view, we are beginning to see early signs of a pick-up in organic growth. And as you can see our wealth management business finished the quarter with $5.9 billion of assets an increase of 4% from the prior quarter. Bob will now provide some further comments on our non-comp costs and on several financial matters.

Thank you, Ralph. Just a few quick points. Our adjusted results for the first quarter exclude certain cost that are directly related to our equities business and also the finalization of matters associated with the closing of the U.S. private equity business. Specifically our U.S. GAAP results include 6.1 million of special charges relating to a variety of matters including the employee separations that Ralph mentioned, termination of contracts and certain acquisition and transaction costs. In addition our adjusted results exclude the costs associated with expensing, the equity consideration granted in conjunction with the ISI acquisition, the charge is larger this quarter as we’ve begun to amortize the costs associated with the G and H LP interests in the first quarter in addition to the costs of the E units. Non compensation costs were lower in the first quarter even though the results of the combined equities business were included for a full quarter versus two months in the prior period. As Ralph mentioned firm-wide non-comp costs per employee were $37,000 for the quarter which was 12% lower than Q4 and as he mentioned, we continue to focus on cost reduction opportunities not only in our equities business but across the entire firm. The adjusted pro forma tax rate for the quarter is 37.25% up slightly in comparison with the first quarter of last year that’s principally due to the elimination of the minority interests in our equities business. A share count for adjusted pro forma earnings per share was 53.4 million shares, an increase of approximately 2.1 million shares from the fourth quarter of last year. This increase reflects the inclusion of LP units associated with ISI for a full period and addition 2.2 million share equivalents. The offsetting decrease is due to the net effect of share repurchases offset by normal growth from RSUs. Our average share price for the quarter $50.82 which is up slightly from the fourth quarter. As Ralph noted, we repurchased 1.7 million shares in the quarter. At March 31st we had remaining authority to purchase 6.1 million shares or approximately $303 million in value. And finally our cash position remains strong as we hold approximately 258 million in cash and marketable securities with current assets exceeding current liabilities by approximately $271 million. Let me turn it over to Ralph for closing comments.

Hey let me conclude by saying that we are very encouraged by the momentum in our business. Our first quarter as measured by any metric was materially stronger than any first quarter in our history. And as Roger indicated, our backlogs in both the advisory business and in equity underwriting are strong. We already have had our strongest recruiting year ever and we have additional important discussions still underway. We are finding that we increasingly are the destination of choice for the high performance advisory bankers who we work so hard to recruit. As Roger indicated, our As Roger indicated our recruiting success to date depending on our revenues may have a slightly greater effect on our comp ratio and our operating margin than in prior years and we still need the course to successfully execute both the growth and our advisory business and the integration of our equity business. But assuming we make progress on those, we believe that this recruiting success does go well for the future value of the company. Thanks very much and we’ll now take any questions.

Thank you, sir. We will now begin the question-and-answer session [Operator Instructions]. Our first question is from the line of Douglas Sipkin of Susquehanna. You may begin.

Just wanted to drill down on couple of things, obviously it looks like a tremendous start to recruiting it seems like the pace is a good amount above your average so to speak in and I just want to drill down I mean anything that you guys can sort of tie to. Is it the ISI and the potential for underwriting or is it just the great 2014 for advisory growth? I’m just curious because obviously the business has gotten better and the bigger firms are still looking to get bigger in the business again. But yes you guys have still managed to recruit incredibly well. So I’m just curious what do you guys linking it to?

I would say there are probably a number of factors. Number one: I think we do stand out a little bit in terms of the momentum that we have and the rest of things that bankers can do with their clients from a strategic point of view. So that’s one factor and then second having the equity underwriting capability has been important to maybe 1 or 2 of these recruits. So on the margin it helped us as well and then finally I think from the point of view of the people involved they are just seems to be a little bit more willingness to consider alternative ways of doing business, the advisory model versus the full service model, then existed in the past and I’m not quite sure how to explain that, the hypothesis might be people have had a few more years of earnings under their belt from the financial crisis and maybe feel a little more financially secured but it’s hard to say exactly what’s happening on that side.

That’s helpful and then maybe a follow up for Bob. Obviously the improvement in the margin at ISI and the expenses and you guys sort of indicated there is a little bit more to do. Can you sort of maybe frame up where we are in that process in terms of taking out? How much of you taken out so far and how much is maybe left and when we would expect? I know you guys indicated the second half, I’m assuming third or fourth quarter. But where are we in that in terms of taking out cost process?

Doug, as we’ve said I think reasonably consistently. We attacked the easier costs initially and we had in our sites some information services contracts. A good chunk of that is done, some of that we completed at the end of the first quarter. But we won’t see any benefit from it until the second and third quarter because literally the conversions were completed right at the end of the first quarter. Right now we’re engaged in the long-tailed projects, looking at our clearing brokers, looking at our core systems and dealing with some of the more in trendy and travel and entertainment challenges. So I would say we’re probably sort of 2/3rds of the way into the actions we have to take and seen a little bit closure to half of the reduction in the numbers.

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

Let me take that first and then Ralph may want to amplify it. Yes, as you’ve noted we’re always strong in the first quarter part of that is the natural benefit of net settlement of bonus awards and we saw some opportunities this quarter where we thought we could accomplish a good part of our basic goal which is now set at the 2.2 million shares from bonus equity. So, we’re going to remain committed to absolutely offsetting the dilutive effect of the bonus equity awards and then opportunistically offsetting the shares we use for new hires and as we’ve indicated over the five year period where to look offset target half of the dilution from the ISI equity awards. So, I would say no change in strategic plan and the timing from here we’ll have the opportunity to be a little bit opportunistic having made a good start in the first quarter.

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

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

That certainly is a important contributor to it. We didn’t really experienced much of the change if any in the comp ratio of our advisory business and given the commitments that are made in the agreement in the equities business it actually has a very modest downwards affect on our comp ratio for the firm as a whole.

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

No.

Okay. And then just lastly a bit of housekeeping issue here. Just when you think about the terms running the G and the H unites tided with the ISI deal. When we think about the margin requirements to achieve those is that with or without underwriting.

Without.

Okay. So it would be the 14% margin we should be looking at?

That’s correct.

Our next question is from the line of Hugh Miller with Macquarie. Please begin.

So, a question on the ISI franchising kind of looking at that, I mean as you have the business now for few months and you look at where you’d like it to be and you mentioned seeing some progress on the underwriting side of the business. What are the investments as you look out over the next year or so you guys feel you have to make within that franchise in order to continue to gain traction in growth further?

In terms of investments really nothing. We did have a whole in the E&P part of our energy coverage and we feel that with a very strong analyst. So, in terms of headcount or hiring which is obviously the principle driver, we feel we have the right team on the field right now. In terms of the underwriting activity, we shouldn’t forget that we literally closed this transaction at the end of October and sort of the lifecycle of when managers are book runners and seniors managers are picked for offerings is very often 6 to 12 months before they actually become visible to all of us. So, it wasn’t surprising to us that the level of underwriting activity in the first quarter which the first quarter that we – full quarter that we’ve had since closing would be less than – dramatically less than what we would expect for an average quarter of this year and based on the backlog that we’re looking at now we would expect that the impact of the franchise on our underwriting activity would began the show up in a way that I think most of you would consider somewhat meaningful even next quarter – this quarter.

The only think I would add to that is that this is a long term build build it’s really going to take years to ultimately build this all the way out. So one example that is very permanent in this regard is technology, we have now put equity capital markets capability in Silicon Valley, as I might have mentioned. If you know the technology community you know that it’s a show-me, what unquote show me community. So, our view on the tech ECM business for example where this is going to take four, five, six, seven, eight years to get to where we needed to. Hopefully that will be a steady consistent build out, but this is a really long term effort that’s the point.

Very, very helpful color there and just a quick follow up on that I think as you mentioned that the build up for the backlog in ECM and you gave some color on the technology side are there other sectors where you kind of seeing a more immediate benefit based on the ISI franchise and you need kind of traction earlier in other sectors.

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

I agree with that.

Okay. And just transitioning little bit towards the advisory business and as you look at the energy segment obviously a meaningful portion of your business, what’s the tone with the conversation you having with clients, are people getting kind of concerned kind of looking out with where oil pricing is [indiscernible] and concerned about covering issues on the horizon and are there people that are getting excited about the potential for consolidation in this space or what are you hearing from clients.

I mentioned in my own comments that there is an effective shift in mix from what we call A and D where in substance at least your selling acreage or producing properties or quote assets unquote towards corporate transactions like stock-for-stock mergers. There is also some build up in restructuring backlog as you look but in my own experience and I’m fairly active with our team there, every party in the energy sector has a different point of view about oil price. Some people think we’re going to see – rather a short period of lower oil prices than other people if you saw for an example the public comments on Exxon Mobile I think it’s going to be rather long period. So there is no uniform view on that at all. And that’s I could intelligently say about it.

It’s helpful color. Thank you.

The only think I would add is that, you know, also we are seeing a little bit of pick up in the restructuring area in energy as well which is not surprising.

Sure, sure. And then you guys have eluted on kind of the dynamics of the average deal size that it’s been increasing and somewhat I guess surprisingly where we are right now. In the cycle what do you think needs to happen in order to kind of see a pick up more in the middle market space?

The increase in deal size, average deal size is I would say is saddle, it’s not that the middle market space is weak. It’s nothing more than saying, if you look at two facts A, that dollar volume is up and B, that the number of transactions isn’t then you come to only one conclusion, average deal size has risen. But it’s not the comment about the weak that sort of middle market, keep in mind that in any given year there are relatively few, in fact very few very good deals. And vast proportion of the activity for any permanent business not just Evercore isn’t what you might call the middle market or upper middle market that’s just where the transactions are. Then the deals get the all the attention and they are important, don’t get me wrong but there is nothing weak about the middle market or the upper middle market.

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

Sure. The remarks there were really directly to our wealth management business which close the quarter with $5.9 billion of assets up about 4% from the prior quarter and we basically are a comprehensive wealth manager. But we provide internal management of equities and municipal and taxable fixed income. If you look at our equity performance over 1-3 year and 5 year period of time, if you look at our fixed income performance over 1 year 3 year and 5 year period of time were are balanced or mixed accounts. All of them are ahead of bench mark. The company is just the little over 5 years old. So as I often have said before about the asset management business is very hard to have a 5 year track record, we have been in business for 5 years. Well, now we have and now we have that track record and it’s a good one and that normally is a bit of a precursor or more organic or positive flows and we started to see the beginnings of that in the first quarter and hopefully it continues.

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

Maybe just bigger picture here clearly I think the debate going on right now around where we are in the current M&A cycle and as we are talking about dollar [indiscernible] pretty good relative to the history, particularly in the U.S. but then there have been much uplift in the number deals. So when you look at your business sector by sector or region by region, does it feel like there is still lot of room to improve within those in the end areas that really aren’t turned on yet and I’m just trying to get some additional perspective around maybe where you guys think we are in the cycle?

That’s a very difficult question to answer because there are still many sectors. I don’t think we can say anything particularly helpful on that and I would really say that and I was asked this earlier on this call there are no sectors that are usually important which are now extremely weak in the big sectors the really big sectors, energy check and so forth, general industrial of course. They are all operating at around the same level of activity. So it’s not a case where you have, if you had 15 lights on your screen 10 of them are bright green and 5 of them are bright red. It’s not that kind of environment. I would say you don’t have huge weaknesses and outside strength. No.

Thanks and then maybe just drilling back down at the energy a bit more to frame out that sector and as you guys mentioned the verging views on energy prices from different areas within the sector. So the comments about feeling good right now I mean should we take that as a reference to the tone of activity and then there is a lot of conversations or is that a remark around the revenue outlook. Just I know last couple of years have been very strong and I’m trying to get some more perspective there and then to the extent energy starts to stabilize or energy prices start to stabilize. Is that would going to be necessary to actually bring kind of this activity together to actually get deals to announcement to trying to get some more perspective around those comments?

I would give you a very simple answer. We don’t see any, as I just mentioned in the context of your other question. We don’t see in our own business a meaningful fall off in energy related revenue. We mix this changing but the totals are not particularly changing. I can’t speak for what it’ll be 9 months from now. But I’m just giving you the sense of the tone right now.

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

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

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

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

I don’t think so. I mean first of all the we have actually been trying to minimize the amount of shares that we put out to new hires. Generally we wind up replacing their leave behinds probably on average with half cash half stock. And as you’ve seen I think that we’ve made the commitment in our proxy that we will buyback always enough shares to offset the amount of shares issued for bonuses each year. Over the last five years, we have bought back enough shares to also exceed the amount that we issued for new hires. We certainly hope to continue to be able to do that. And then on top of that we said when we announced the ISI transaction that it’s our expectation that we will buyback roughly half of the shares that will be issued in that transaction over the five year period that it pays up. I think that’s probably the best summary of our intention, that’s our expectation that the business will continue to form and we come to fill that.

And then when you think about sort of the adjustments in your – to get to operating the earnings from GAAP, it looked like the adjustments were impacted this quarter by ISI deal related performance shares. Should we just expect those [doses] to be larger as you work through those performance periods? Or were some of these adjustments more one time in nature?

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

And then last one, had the rounds and layoffs that you guys had in the ISI business. Can you help us understand what drove having a second round and layoffs six months after an acquisition and whether or not that had to do with the fact that I think you had indicated that the revenues were tracking a bit lower versus the combined legacy business and whether or not that had to do with the [indiscernible]?

[Indiscernible] corrective. That’s – if we caused that misimpression then it’s awful but I don’t think we did. This is part of the original integration plan. This is not a decision made since we decided to acquire ISI. This is part of the original plan at the time the deal was signed up let alone close. [Indiscernible] integration plan.

Yes if you go back to the presentation that we made today that we announced the transaction, you will see an expected reduction of headcount and we with the latest adjustments that we made, we’re now – we’re not exactly where we said we would be, but we’re closer to where we said we would be. And we made a decision which I think we discussed on the last call that we wanted a little bit of time to live with the people that we had. We knew we had a few too many, but we wanted to live with them for a while to see what was muscle so that we didn’t cut any. and after the first 4 months together we felt we had enough information to make the very surgical adjustments that we had always planned to make.

Our next question is from the line of Ashley Serrao with Credit Suisse.

So historically you’ve this look at a ratio for non comp, but just given that you in the mix of integration. Should we expect the absolute dollar amount of non comp to trend down putting travel aside or I’ll say another way, do you have a target for the year putting travel aside?

Ashley, the main metric that we look to is cost per head. As we continue to invest in the growth in the business and you can see this over the last 5 years. The absolute amount of cost has gone up, but the cost per head has gone down or remained flat. The ISI acquisition has taken that statistic up and back down to a level more consistent with history.

Okay, that makes sense and just another question on hiring. It looks like these private boutiques around hiring. If it’s you been very active. So I was just hoping you could just talk about your hiring ambitions and whether the cost of town is become a eliminating factor at all?

The answer to that is no and there is nothing whatsoever different about Evercore’s hiring approach today than that was 5 years ago. We have a strong hand on recruiting as Ralph said people like Evercore as a place to work. We’ve worked very hard on our culture over 20 years. But there is nothing new going on. Cost are not rising and they did the ease or difficulty of recruiting is not changing.

Our next question is from the line of Vincent Hung with Autonomous.

Hi, just a quick question. What’s the total headcount in S&B count this quarter?

The total headcount for the firm at the end of the quarter is 1,275 and the advisory S&D was 73.

Our next question is from the line of Steven Chubak with Nomura.

Roger, you spoke earlier of the seasonality and the advisory business. I just wanted to maybe clarify some of your comments. Suppose I can’t help it have this strong sense that we’ve seen this movie before where one are generally lower the public backlogs and their logic look of that life. We hear constructive commentary on both risk and under this backlogs and then 2Q we see that ramp announcement as well and this given the constructive outlook that you deliver on the call is there any reason why we shouldn’t expect that change seasonal pattern to hold and maybe just there is a quick follow up whether I should read into the fact that in the year ago quarter you did talk about record, backlogs and this time well it’s strong it’s still not operating at record.

We shouldn’t read anything from that comment. That was the misspeaking by the CEO, a year ago.

Planning to punish him for that.

You saw the quality of this lunch in the interim since he made that observation that you noticed the change.

Somehow I seem to fatten up on bread and water none the less.

Right, all I said in my comments was essentially the following and preparing for today I went back and look that last 5 years and in each of the last 5 years our first quarter was smaller in terms of revenues in our fourth quarter which is just the seasonality of the business. I’ve been in the business, I started reporting 6 years ago and it’s been seasonal ever since. So that’s all I was referring to in terms of that factor I mean we had a very good first quarter by standards of first quarters factor as we said the best ever and this is inherently back and loaded business. People try very hard to get transactions and projects closed by year end for tax reasons, accounting reasons, and legal reasons and so forth. Always have probably always will. So it’s a back end loaded business. and maybe this year it will be as I said a little bit more than usual, hard to tell, but in my -- and so that’s the long and the short of it.

Okay, but Roger having the pleasure of covering some of your larger competitors I would say that the seasonality in your numbers is certainly more pronounced than others. It certainly exist in terms of the broader industry trend by [indiscernible] if there was anything that you could speak to maybe in terms of transaction mix what have you that drives that more pronounced as seasonal uptick [toe] in the back half of the year.

I’m not aware of any. And I don’t know whether our business is a touch more seasonal than anybody else’s, but it’s a seasonal industry. So I mean you take a more precise view I’m sure to evaluating other firms than I would, but it’s not exactly regulatory to say investment banking is seasonal. I mean it’s always been [indiscernible] I’m getting up there and in terms of experience and it’s a seasonal ever since I started. So maybe another thing something but to me it’s a little bit analogous to which direction the sun comes up in. Seems to come up in the East and that seems to be a seasonal business.

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

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