Evercore Inc. (EVR) Q2 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Second Quarter and First Half 2015 Financial Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for question. [Operator Instructions] This conference call is being recorded today, Wednesday, July 22nd, 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.

Good morning. And thank you for joining us today for Evercore’s second quarter and first half 2015 financial results conference call. I am 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 today, we issued a press release announcing Evercore’s second quarter and first half 2015 financial results. The company’s presentation today is complementary to that press release, which is available on our Web site at evercore.com. This conference call is being webcast live on the Investor Relations section of the Web site and an archive of it will be available beginning approximately one 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 included 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 on our Web site. 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’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.

Thank you, Bob. Good morning everyone. I’ll start with a few introductory remarks. We are pleased with our second quarter and first half operating results as we delivered record revenues and earnings for each period. These results reflect our sustained investment in our advisory business, our commitment to broadening our capabilities to serve our clients and our commitment to expanding the markets that we serve. Advisory activity was strong in a number of sectors this quarter, including technology, healthcare and financial institutions. Importantly our energy team continued its strong run of transactions, reflecting contributions from both M&A and restructuring assignments. Despite the price volatility in the energy markets, we do not expect any material diminution in revenue in this important sector compared to last year. We had an especially strong quarter in equity underwriting, with strength in healthcare, transportation, real-estate and TMT. Our underwriting revenues for the quarter exceeded $21 million and very importantly our pipeline of underwriting mandates for the second half of the year is strong. In equities, we are nearly one year past the announcement of our decision to acquire ISI and eight months past closing. The team is building momentum, delivering operating margins of 18% for the quarter and 17% for the first half of the year. Our equity team continues to focus on delivering exceptional value to our clients, growing commission revenues and managing our costs. We've had an extraordinarily strong recruiting year having added 10 new SMDs so far this year, two in ECM and eight in our core advisory business, as well as one who will join us at the beginning of next year. So the positive impact that we had hoped for from the ISI acquisition, higher underwriting revenues, stronger advisory recruiting and much better margins in our equity business seem to be coming to fruition; still early days, but encouraging. Finally our wealth management business continues to deliver strong performance, increasing assets under management more than $6 billion for the first time in our history. Let me quickly go over the financial numbers and then turn it over to Roger. Second quarter net revenues were 268.5 million, up 24% versus the same period last year and a record for our second quarters. Net income also a record for the second quarter was $33.9 million with earnings per share of $0.65. These results are up 10% and down 2% with respect to the EPS respectively from the prior year. Operating margins were 21.9% for the quarter. Our compensation ratio was 57.4% for the quarter, lower than the same period last year. Non-compensation cost increased to 55.7 million, principally reflecting the addition of the Evercore's ISI equities business. Bob will discuss this further in his remarks. Revenues and net income for the first half were also a record, with revenues of 506.7 million and net income of 63.7 million, up 38% and 40% respectively. EPS for the first half increased 24%, to $1.20 the best first half in our history. Operating margins for the first half of 2015 were 21.6% slightly higher than the first six months last year, despite the drag of higher compensation and non-compensation expenses associated with the record number of SMD's new hires. In the first six months, we returned $148.5 million to our shareholders, including repurchasing 2.5 million shares in the first half of this year, offsetting the bonus equity awards made earlier this year completely and beginning to offset the shares used for new hires and for the ISI acquisition. Let me now turn the call over to Roger to comment on our investment banking performance and the M&A environment for general.

Good morning, everybody. You can see that the firm's investment banking business was strong once again. And revenues in investment banking were 243 million, up 29% from the second quarter a year ago and up 13% sequentially. Those are all time records for any second quarter that Evercore has had. Operating income was 53 million, an 18% increase over the second quarter a year ago and up substantially on a sequential basis. This also is a second quarter record. And both, revenues and operating income for the first half, our records for any first half 457 million of revenue and in around numbers a 100 millions of operating income. For the quarter we earned 42 fees exceeding $1 million, each up to 5% increase year-over-year, the total number of fee paying clients increased to 179 which is a 20% increase year-over-year. Those two metrics on fees, both represents historic quarterly highs for the firm; as well as historic highs for the six months on both scores, in other words fees exceeding a million in total revenue producing client. And productivity, which is you know, you watch carefully; our average revenue per S&P was 12 million on a trailing 12 months basis, is up from 10 million year-over-year. It’s the same as we had in the first quarter. That's a good number. In the global diversity of our business remain good, is 27% of our quarterly revenues originated from outside of United States and in that regard Europe was especially strong. And our equity capital markets business as Ralph said also did especially well. We participated in 26 underwriting transactions in the quarter that makes 37 total underwriting transactions year-to-date. Of those 37, 12 of them were book-run transactions, which is more than we did all of last year. So, we did more in the first half this year and we did all of last year in total. We also advised on 18 other capital raising transactions in the quarter and that represents primarily, primary and secondary transactions for financial sponsors and other alternative asset managers. We also had a good quarter advising on larger transactions among other things Broadcom Avago, the largest technology M&A deal ever done. CVS Omnicare, Tokio Marine HCC Insurance and the DuPont proxy body which is the largest proxy file ever done. On recruiting, Ralph spoke to this, we had a very strong year in 2014 and that’s continuing at least as strongly this year. Seven advisory SMD’s and three senior advisors have already joined the firm in 2015. Their names are listed in our release. Three additional SMD’s are committed to joining us for the next second half of this year, one for the first quarter of next year. Our total investment banking headcount at the end of the second quarter was 971, I would also say that our advisory backlog is good. One or two comments about the environment, the second quarter was largely a mirror image of the first. Global announced M&A volume in dollars -- total dollars was up 41% year over year for the quarter and 65% sequentially. The U.S. announced volume, the U.S. piece of that was up 55% year-over-year, and 58% sequentially. So you could see, very strong in total dollars. Now getting around -- that these are strong trends, and of course we like them. It is important to put them in context though. There's quite a difference between the gross dollar volume of transactions as we have noted before, and a number of deals, quite a difference. So the number of global announced deals in the first half, not again, not measuring them in dollars but just number of transactions, was up marginally, 3% year-over-year, 8% sequentially. In the U.S. which is still the biggest market, the number of announced deals was flat for year-over-year and sequentially. So you can see that the major change during this most recent phase of the cycle is in dollar volume and therefore average deals size was changed here at the average deal size, not at the number of deals. And that reflects primarily, although there is a number of factors that work here; primarily reflects that the percentage of total transactions which are -- what we would call strategic, corporate to corporate, in other words, or the equivalent has gone up quite a bit. Moreover -- and this is a healthy trend, M&A buying is becoming a bit more balanced globally. Activity in Europe and Asia is beginning to pick up as we see it. Now, at the moment at least, if things could change on a dime given financial market condition, but at the moment we don't see anything over the short term that would change this picture. It's a very healthy one from a macro point of view, macro M&A environment point of view. Happy to talk about, and it's the reasons why this seems to be the case if people would like to do so on the call but the bottom line is a very healthy macro environment for our business, and I would like to hand this back to Ralph

Thanks, Roger. In our equities business, it contributed revenues of $62.4 million in the quarter including 9.7 million attributable to underwriting. Overall, the business produced operating margins of 18% in the quarter and 17% in the first half of the year. Our team remains intensely focused on helping clients and improving our position in client votes which have improved quite materially over the last year. We are working hard to translate that momentum in client votes into revenue growth in the second half of 2015. In our investment management business, it continues to contribute to the firm as a whole. On an overall basis, net revenues were 25.9 million for the quarter, a 9% decrease from the 28.5 million for the same period last year. Management fees increased 4% to 21.9 million, but private equity and marks and performance fees which are inherently lumpy declined versus last year. Operating income was $6.1 million for the quarter delivering an operating margin of 23.4%. Assets under management were essentially flat at 14.1 billion in comparison with the end of the first quarter. Wealth management business continues to do well adding talent, clients and assets under management. Evercore's wealth management's assets increased 2.5% quarter-to-quarter, ending the second quarter of 2015 with $6.1 billion of assets under management. Bob will now provide further comments on our non-compensation cost and several other financial matters.

Thank you, Ralph. Our adjusted results for the second quarter exclude certain costs that are directly related to our equities business. The nature of these cost are comparable with those we reported in the first quarter, most significantly the costs associated with divesting of equity granted in conjunction with the ISI acquisition. We began to amortize the costs associated with the G and the H units in the first quarter. Year-to-date we have expensed 44.1 million of costs related to these awards in our GAAP results. In the quarter we expensed $18 million. As a reminder of our adjusted pro forma presentation includes all of the shares we expect to issue for the equities business acquisitions in the EPS denominator. Our forecast to drive the number of shares expected to be issued did not change in the quarter. With regard to non-compensation costs, they were higher in the second quarter reflecting three principal factors; professional fees increased reflecting recruiting costs associated with experienced hires. As Roger noted five Senior Managing Directors started in the second quarter and also an increase in client related costs that are currently not covered by engagement letters. Information services costs associated with both advisory and equities business increased reflecting increased headcount and rate increases from selected providers. And finally travel and entertainment costs increased including costs associated with conferences hosted by our equities business which are seasonally higher in the second quarter. With regard to our equities business, the adjusted operating margins which govern the ultimate payout for the G and H units for that business are 12% for the second quarter and 13% for the first half of the year. In terms of costs for that business, long-tailed projects are on track; for example, with the conversion to a new clearing broker completed this past weekend. Our adjusted pro-forma tax rate for the second quarter and for the first half was 37.25% have unchanged in the second quarter which is up in comparison with 2014, principally due to the level of earnings and businesses with minority owners and earnings generated outside of the U.S. Our share count for adjusted earnings per share was 52.5 million, for the second quarter, a decrease of approximately 0.9 million shares reflecting our repurchase activity. The average share price for the quarter was $51.71, essentially flat compared to $50.82 in Q1. Ralph mentioned the number of shares repurchased in the quarter, at the end of the second quarter we had remaining authority to repurchase 5.3 million shares or $267 million. And finally our cash position remained strong as we hold $282 million of cash and marketable securities with current assets exceeding current liabilities by approximately $287 million. With that we’ll open the line for questions.

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions]. Our first question is from the line of Ashley Serrao with Credit Suisse. Your line is open.

So I just want to gain update on where you are seeing opportunities today to make the incremental higher? And if you are seeing any increase competitive pressures as far as the tension grows?

No, the answer is we have over the last six years, literally unblemished record of retention, you can barely count it on one finger the number of people who have left Evercore. And this is really pretty much at all levels, not just the senior levels to go practice their craft in another firm and or industry and we do have from time to time people who go often and retire or go work in industry, but in terms of leaving Evercore and going to another investment banking firm, it just doesn’t happen, fortunately for us. And I think [indiscernible] was asking of about whether other employers are intensifying their overall retention effort at the expense of our recruiting? And the answer to that is no. I don’t know if they are intensifying their retention efforts or not, that's a case by case matter sometimes but in terms of whether that's impacting our recruiting and our ability to recruit in our momentum there, the answer is really just no.

Okay I hear you there. And then I noted that you guys are seeing trend across broad variety of industries but maybe if you just focusing on an issue and just give us an update on what you are hearing on the ground and what CEOs are telling you today?

Well, I have been in Houston in last week and I am sure Roger has a lot to add here But no he does not, I am not going to say anything either. I think earlier in the year we were asked about this and we of course said we did not really know, but we expected that after a period of volatility, if the price of oil and gas settled down into a range that even though that was a lower range that would encourage a pick up again ROE up of strategic activity in two areas, one; strategic combinations M&A and also restructuring activity. And that's in fact happened and we do not generally comment on individual sectors and we are certainly not going to give any information on revenues and individual sector, but based on meetings I had with our team in Houston last week I guess I would repeat what I said in my opening remarks that we do not expect material diminution if revenues this year versus last year changing a little bit but not a fuller.

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

May be just coming back of the theme that Roger discussed, M&A volumes on track that potentially hit a record this year, if you back out, kind of the largest mega deals above 10 billion, your volumes are actually looking like they are down a little bit year-over-year and as Roger mentioned, the number deals was down. So I think the question keeps coming up, is this just around timing of when the middle markets get going? Is it financial sponsor related, and you mentioned strategic activity has been strong or is it a function just the middle market companies are lagging the larger companies in their business recovery? Just trying to get some better sense of what may spark a recovery and kind of outside of that the largest deals?

That's a good question and it hard to say. Historically you'd see a pickup in medium size deals after the pickup in large deals. I really can’t say whether that's going to happen any time soon or not. That would just be the historical pattern. Overall condition, as we traditionally think of them; availability of credit, cost of credit, share prices, broadly speaking business outlook tend to be quite good, by past standards as they correlate to deal volume. So it might be better just to kind of stretch here, if the business outlook itself -- and I mean the underlying economic outlook was a little better outside the US that it is. But fundamentally conditions are quite good. So good question hard to say, I don't have a precise answer because we just don't know.

Maybe just with respect to having conversations with companies that are not that kind of larger side of the spectrum, is there anything that you hear from them specifically to makes you feel like they are not as comfortable and their business outlook, or their willingness to do something transformational? Or is it more just one-off and we're not -- there is not a great conclusion at this point?

I think it's important. The answer to that question, Devin, is no; as there anything in those conversation that indicates, they are not as confident or hesitant and the answer is no. But it's important to keep in mind that on any given month or any given quarter, any given year, for us and all of our competitors most deals are what we would generally call midsize deal. If you look at the number of transactions the number of deals that are say north of 10 billion, very few. They get a lot of attention, they drive the volume totals and they’re important. We care a lot about them, but they are not that the percentage of total deals, it is represented by that. Again number of deals is not very large, never is. So it's important to keep this whole picture in perspective for us and for most, I would say all of our competitors. In any given quarter you have, if you are fortunate two or three or four large deals out of -- as I said we had 179 revenue producing transactions, and we have a strong mix on the large deal side as you can see from our average S&P productivity, we're just 12 million, probably the highest in the industry. But don’t get -- if you read the press, you end up thinking that the only thing going on is large deal, but that just not true, it never is true. So the mid size sector is not unhealthy it just isn’t showing the same kind of growth that the large deal sector is. But I would say it's quite solid, and if it wasn’t just speaking for us we wouldn’t have the very strong results we have just reported and have generally been reported.

Got it, I appreciate the color. And then maybe on recruiting, you guys have set the stage for a strong year, this year just with all the conversations you are having with the back half of last year so with that said, should we think about this year’s recruiting, in fact being done in terms of bring someone in for this year and then how active are conversations today with folks that you think could be in the 2016 class?

First of all we are always having conversations with people who are expressing an interest in joining the independent advisory business model, so those conversations are generally underway and we do have a number of conversations underway with very senior people in the business and we had those underway last year and nothing materialized. It's possible that it's a little bit like wildcatting in Texas. You drill a bunch of holes and you can have a bunch of dry holes or you can hit a couple of active wells and at this point, we're in the drilling stage, so it's really impossible to comment. And in terms of laying the ground work for next year, that tends to happen throughout the fall. So I think it's fair to say that with respect to what I would call sort of regular way recruiting, filling in industry or geographic holes that we have; we're -- to the best of our knowledge, we're pretty much done for the year. And we're a little early to be developing the pipeline for next year other than the higher that has been in the media which obviously we're not in the position to confirm it at this point which would be a very early next year start.

And just last one real quick, with respect to equity underwriting, phenomenal quarter, great to see -- you highlighted your healthcare having a lot of traction, transportation, real-estate, TMT. Is there kind of a next push year where you will look to hire ECM bankers this way? Do you feel like there's a big opportunity that you expect to be doing more business there?

I think we added two new senior managing directors in the ECM and for the time being, I think that's going to fill our requirements in that area. What really will drive hopefully continue growth there is a number of things. Number one, we had a -- as I said last quarter, it takes a while for the message to get out into the issuing community about our distribution capabilities, our research capabilities and our banking capabilities. We are a relatively unique firm. We're the only independent advisory firm that has both equity and M&A and restructuring advisory capabilities. So there is definitely a spread the gospel element to this in the outside world and that process is really in its early stages. There is also a spread the gospel element even within Evercore and that -- we have bankers and teams that have varying histories and comfort with the equities business, so it quite honestly takes a while for even that to happen within the firm. Obviously we're pleased with our quarter, the second quarter. I will as I always do caution, you never want to annualize one quarter's results in our business whether it's the M&A business or the equities underwriting business. So -- but yes, look as I said in my opening remarks the things that we had hoped that the ISI transaction would accomplish for us, a significant wind at the back of our underwriting revenues, a reinforcement and hopefully a breeze at the back of our recruiting activities and significantly enhanced margins in our equities business; at least as of the moment these are all coming to fruition which is encouraging to us.

Our next question is from the line of Dan Harris with Goldman Sachs. Your line is open.

Just wanted to follow up a little bit I mean it looks like the ISI deal like you just mentioned this before very well on the ECM side helping with recruiting and the operating margins are all improving and strong. I think the one thing that caught me is we haven’t seen a big pick in the equity. It's trading in line relative to kind of the legacy ISI run rate. So wanted to hear your thoughts on how much of that might be seasonal in the -- and how much might be related to cost reduction plan that might weighing a little bit on that business.

Well, we really do not know the answer to that Dan, and if you look at the, as you know the major institutional investors effectively provide us with a report card every quarter on how we are doing versus all of our competitors. And if you look at collectively where we stood or where ISI alone stood or where ISI and Evercore together stood; because we were still a part in the second quarter a year ago, literally investor by investor, our position has improved. I am not talking going from up one position. They have generally been more that which is quite encouraging. At the same time commission volumes in the cash equities business have been declining. So what we do not know the answer to is, are we in a period where there is a lag in the effectively conversion of our improved recognition by the institutional investors and is that the revenue recognition of that or them paying for it, lagging a little bit or not. We are running the business in a way that we can, as you can see generate quite attractive margins in the slow environment and capturing the market-share that we are capturing today. Obviously if things get better either our market share or the overall activity in the market that would be quite constructive for our margins. But I have to say that predicting equity commission volumes, is not any easier than predicting the overall level of M&A activity.

Understood, and that's very helpful. And maybe just one quick follow up. I know you mentioned that performance target associated with the G&A -- kind of tracking in line with expectations so far. What are the markers we should be looking for to see whether share count ultimately gets kind of revised up or down; is this the right way to look at it, kind of just that 12% margin that was mentioned relative to I think it was 17% operating margin target over a longer period of time?

Looking at the adjusted margins which I mentioned in my remarks?

Yes.

What you should be tracking. And yes, 12% is the first threshold that you look at for 2015.

Alright. Thank you.

Our intention Bob, correct me if I am wrong, to share that information with you on a regular basis.

Yes. We will disclose that every quarter.

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

Just a quick one on middle market weakness; sort of following up on Devin's question; do you think maybe that it might have to do with availability financing? I mean we are seeing capital markets wide open yet, regulatory pressure on -- loan markets balance sheets, bank balance sheets under pressure. Do you think that might be having an impact on middle market velocity in the M&A market?

Well, I think it's important -- as I would try to say with regards to Devin's question, to cause this as follows. A mid-sized deal in our requirement, just Evercore, might be a billion or two billion, maybe for the industry as a whole that's an upper mid-sized deal. But if you are talking about that definition of midsize, I don't think its questions on availability of financing to explain it, no I don't. As you yourself think, financing availability today is robust. But I think the larger point is it's not that weak. This idea that the middle market is really-really weak, no its not; I am looking at [indiscernible] as the COO of our investment banking, would you say it's weak. No its not weak, it's not just powerfully upward as the big cap deals although again, I don't have the numbers on the tip of my tongue. But the percentage of total deals for us than anybody else that would qualify for large cap, especially somebody’s observation that deals below 10 million, or deals above 10 billion are large cap. That's a very small percentage for anybody, I don't care who it is. So I think it's important to set the picture correctly that the M&A market as whole is solid. I would not say that the mid cap or let's call it upper midcap sector is weak. It just isn’t. So I just want to try to reset that picture.

Okay. That's helpful. Quickly we're transitioning over the underwriting. I know before Ralph cautioned against to annualizing the quarter, but as we start to think about what we should expect from the new franchise, is this reasonable, should we be looking at a range somewhere around here, how should we -- what’s the right way to think about expectations going forward? Is there a right way?

Well, I think that first of all, we’ve avoided making forward looking statements like that in any…

We are going to continue to avoid it.

We provided information to you and we announced the transaction that shows that firms with -- that were not the bulge bracket firms, it was not unusual to see once they were fully up and running, $75 to $100 million of underwriting activity. And this is not a forward looking statement it's a hope, which I expressed before, that once we are up and running we would be hopefully in that range. There is certainly no reason why given the strength of our banking business and the quality of our research and the breadth of our relationships that we shouldn’t be able to be in the same zip code as those other firms. How long that takes is question of how long the issues that I discussed before, how long does the market recognize, that how long does it take for clients to recognize that we have those very strong capabilities. And also obviously the meter of issuing activity, you know both of those are requisite for getting there. I did say earlier this year that in our last call that our hope was that we would do $40 to $50 million of underwriting activity this year. We’ve done $27 million at the first half of the year and so I wouldn’t really change that statement at this point of time.

Okay. You all referenced, desired to try to convert these positive momentum you are seeing on the votes into revenue. Does that mean that we should count on further investment into maybe trading capabilities and such down the line for the equities business, because like revenues for equities isn’t always just about research, sometimes it's about trading right? So does that mean we should think about maybe further investments from here?

I think, we’ve said earlier this year that we are pretty much -- this was a year of consolidation and non-comp cost reduction and other than a strategic hire that we made earlier this year in this energy, E&P area to fill in a hole that we had. I think that's the correct statement. There are some things that we're doing which are net neutral from an expense point of view, maybe investing a little bit more in electronic and a little less in i-touch. But those are not things that are going to affect the expenses either compensation or non-compensation in the business.

Last thing, just confirmation, it seemed as though you all said with the margin sort of tracking where you had initially expected that you were not revising your outlook for the deal and corresponding performance share issuance has not changed even though there was a maybe a bit of a downtick in the pace of the amortization that Bob walked through tied to the deal. Is that correct that there's no change in the outlook for performance share issuance investing?

As I said, the assumptions that drive the earn-out shares are unchanged. The downtick in the GAAP expense, Brennan, is really a function of the GAAP accounting in the fourth quarter of last year. We did not take any expense. Our view was we had no basis, so we do not have sufficient experience to make a probable judgment. When we had sufficient information in the first quarter, GAAP required us to record five months of expense in the first quarter essentially catching up on that change in ability to make a probability assessment. So if you take the expense that you've seen recorded in six and think about it over eight months, it's pretty smooth.

And then also no change to fully diluted shares tied to the deal at all at this point too, is that right?

There is a very modest change in terms of the fully diluted shares, but that has to do with people who've exited the business.

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

Just a quick question, on the comp ratio, I mean given the recruiting that you've done this year and I'm assuming there was some offset there just because ECM revenues were pretty strong as well. I mean, should we be thinking about 57-5 is a good comp ratio for the remainder of the year?

Till the way -- and we've been very consistent about this. When we set the comp ratio at the beginning of the year, we formed an expectation as to how we think the year will progress and then we continually revise the comp ratio up or down as we get better information, so consistent with all of the prior years. We'll true it up again in the third quarter and ultimately the fourth quarter based on the evolution of both costs and revenues.

And then just in terms of some of the advisory revenues you guys generated this quarter. I mean you had a very large number of big sized deals in the quarter, just wondering if you give us a sense for how much fees from announcements might have impacted this quarter's revenues?

Wait a minute, what do you mean by that?

Well it looks like if you look at the difference in the publicly disclosed pipelines that a large number of very meaningful deals were announced during this quarter and I'm just wondering in terms of if you were paid at the time of the announcement of any of these? And what kind of impact that might have had on revenues during the quarter?

I appreciate the question, but it's a little bit off. It's rare to be paid anything at the time of announcement and if you are, it tends to be a very small percentage of the total compensation which you receive upon closing. So the answer to your question essentially is, no that had nothing whatsoever to do with. And I do mean nothing.

And then just lastly for me there has been some talks about some change in the U.S. tax code where the earnings from multinational corporations based in the U.S. would -- their non-U.S. earnings would no longer be taxed. Can you give a comment on how that could impact M&A positively or negatively?

Well I haven’t heard a single word of discussion about that issue as far as it affects M&A, so at least so far any anticipation or lack of it is having absolutely no effect, at least in my experience. Most people, most of the decision makers do not sit around trying to calibrate whether the xyz legislation has a 21.4 chance of happening or 41.7 chance or less -- they just take conditions as they are and make decisions on that basis. I haven’t heard a single word of discussion about that.

Our next question is from the line of Jim Mitchel with Buckingham Research. Your line is open.

Could you just talk -- I appreciate the comments earlier around Europe and Asia, how it picked up in the quarter. But as we got to the end of the quarter, obviously there were some concern around Greece, and slowdown in China and the volatility in the market, has that had any impact on conversations in your mind as you think about the trajectory and potential recovery in the international M&A markets?

No particularly. I think there is a widespread view, right or wrong that Greece is not a major event as it relates to global financial market condition or for that matter economic conditions outside of that country. I do not think Greece is a big factor is decision making. China is a different story, a very different story. But in many respects, the question isn’t whether China is continuing to grow at what rate and even the downside cases tend to be at pretty decent rate -- China to the rest of the world. So I can't say yes or no as to whether uncertainty about the growth rates for China going forward is affecting that deal here or a deal there. But international, the outlook for non-US deal is better than it was quarter ago and six months ago, even taking into account any of those facts.

Okay. That's helpful. And just maybe on the non-comp side, it was little bit elevated this quarter as you noted. It's particularly in professional fees with the new hire. If the hiring pace slows down should we expect that to slow or to come back down going forward? And I guess same with communications and technologies; you have worked through the integration of ISI and Evercore, should we expect sort of those to kind of tail off at the second half of this year or no?

In terms of professional fee, yes, the recruiting costs for the senior hires has always introduced volatility or put upward pressure on that number, and I think as Ralph or Roger said there are three additional SMDs which will join us in the second half of the year. So I would not expect that to reverse entirely until we have them on-boarded. In terms of the communication and the information costs, prime driver there is headcount increase. Roger mentioned the total headcount investment banking which is another record. So that drove a significant amount of that increase in absolute terms. There will be some opportunity to take further costs out there as we complete the integration of the equities business into our processes, but a lot of that has happened already.

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

So it seems like trying to engage the backlog [indiscernible] these days is like to trying to read the FED. In the release you said your advisory team is extremely busy.

Thanks for the compliment.

And then Roger you said the advisory backlog is good, so how do I corroborate the two, because in the last quarter you said the backlog was just strong.

Well, then I will rephrase what I said because I didn’t mean to differentiate it. Backlog is strong.

And then next question, on underwriting; you noted that you have been quite a lot more book run deals on this half. Can you just talk about the economics of that business, just in terms of running through the different economics and different deals and fee differentials et cetera?

Yeah. I think I said last quarter our hope and expectation was that underwriting revenues would increase overtime, driven by two things; number one that we would be a participant in more transactions. And number two, given the dramatically increased strength in our distribution capabilities and I would say in some sectors the quality of our research that our hope would also be that our economic participation in those transactions would increase as well, which is -- and book one is an important label which reflects an increase in economic participation and the numbers in the second quarter in underwriting reflected that both of those things were happening. In terms of the actual percentage participation, it's all over the lot with the high single digits to well into the double digits. But there's really no consistent seen there at all.

Ok, and just lastly, I think you said you had 971 people employed in investment banking this quarter. How much of that and how many of those in just the value business?

We don't break that up.

Our next question is from the line of Douglas Sipkin, Susquehanna. Your line is open.

Thank you and good morning to all. Firstly, I just want to congratulate you guys, definitely at least from my perspective, a validating quarter for the transaction with the underwriting revenues, so very encouraged to see that. Just sticking with that a little bit, I know you guys were not looking to make forecasts or run rates or anything like that, but, I guess, is that your opinion that with some of the success here in some of the pockets is going to probably in your opinion, make it easier to one, motivate other sectors to really aggressively pursue equity underwriting capabilities. And secondly, give maybe CEOs or CFOs in different sectors more confidence to go to you guys for equity underwriting given the strength that you showed in a couple of spots this quarter.

I don't think we've seen anything that would cause us to be more optimistic or pessimistic on the pace of adoption. You know, and getting the word out to clients, you also have to have a capital raising need. They can think those are the greatest thing about Evercore ISI's equity capabilities, but they don't need to raise equities. Our revenues will be zero in that sector. So, you know, I think that there's, you know, a broadening interest and knowledge among our bankers of our capabilities here. They're letting their clients know of that and the pace of adoption will, be where it will be. But we're encouraged.

Ok, that's helpful. And then, second question, I mean now that it looks like, I'm just observing the markets, it looks like maybe energy is taking another dip down. You guys', how close are we to sort of seeing traditional sort of restructuring, not just like asset sales but more or like bankruptcy type work that potentially could sort of add to the advisory revenue pool for the industry.

We don't really know the answer to that. Right, as Ralph said in his comment, our energy revenue days are next to traditional M&A like work and restructuring, but we don't really have an ability to forecast that.

There appear to be no questions at this time. I will now turn the call over to Ralph Schlosstein for any closing comments.

Thank you very much for your attention and we'll speak to you on next quarter. Thank you.

This concludes today's Evercore second quarter and first half 2015 financial results conference call. You may now disconnect.