Evercore Inc. (EVR) Q4 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Partners Fourth Quarter and Full year 2012 Financial Results Conference Call. [Operator Instructions] This conference call is being recorded today, Wednesday, January 30, 2013. I would now like to turn this conference call over to your host, Evercore Partners Chief Financial Officer, Robert Walsh. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us today for Evercore's Fourth Quarter and Full Year 2012 Financial Results Conference Call. I'm Bob Walsh, Evercore's Chief Financial Officer; and joining me on the call today are Ralph Schlosstein, President and Chief Executive Officer; and Roger Altman, our Chairman. After our prepared remarks, we will open up the call for questions. Earlier this morning, we issued a press release announcing Evercore's fourth quarter and full year 2012 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 the 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, both in the Advisory and Investment Management sides of our business. I'll now turn the call over to Ralph.

Thanks very much, Bob, and welcome, everyone, and happy new year. The fourth quarter was a record for Evercore in every important respect, and 2012 was another record year, the fourth consecutive year of significantly increased net revenues and earnings. These results demonstrate the strength of our independent Investment Banking Advisory model, the receptivity of business leaders and Boards of Directors to our approach and the strength of our Advisory team. In Investment Banking, we continue to broaden our reach, completing the integration of our operations in Europe, adding an office in Canada and recruiting new Senior Managing Directors to strengthen our position in the consumer, transportation and restructuring sectors. We also continue to make progress in globalizing our business. Full year revenues from clients outside of the United States were $186.1 million, the highest level in the firm's history. And most importantly, our market share of all publicly reported Advisory fees increased significantly. In Investment Management, our Wealth Management business continued its steady organic and inorganic growth, expanding capabilities with the acquisition of Mt. Eden at the end of last year and ending the year with $4.5 billion of Assets Under Management. We returned $96.5 million of value to our shareholders through share repurchase transactions and dividends, and we made progress in expanding our operating margins despite the continued investment both in our Advisory business and in our early-stage banking business, investments that, as all of you know, flow right through our income statement. Let me quickly go over the numbers. First, for the full year. Full year net income was a record $78.1 million, up 24% from 2011. Earnings per share for the year was a record $1.78, up more than 20% from last year. Record revenues of $638.9 million exceeded 2011, which was also a record by 23% and further closed the gap between Evercore and our larger competitors and widened the gap between Evercore and the boutique advisory firms. Expenses of $507 million increased 22% from last year, reflecting our investments in the business, in particular, the full year results of our Lexicon acquisition. The full year compensation ratio was 59.7%, up slightly from last year, reflecting our continued investment in the business and a slightly higher cash payout of bonuses this year versus last year. Our non-compensation ratio declined during the year to 19.6% of net revenues. Full year operating margins for 2012 increased to 20.6%, our best margins since 2007. For the quarter, fourth quarter revenues were $212 million, up 90% from the same period last year at 42% from last quarter. It's the first quarter where our revenues exceeded $200 million. Net income was a record $35.3 million for the quarter, with earnings per share of $0.81, also a record. Operating margins for the quarter were 26.9%, and the compensation ratio for the quarter was 58%. As Bob said in the introduction, we are incredibly proud of our quarterly results, but we have said many times before, our revenues and earnings in any particular quarter are lumpy. This quarter happens to be a quarter in which almost everything of importance went right. This certainly will not happen every quarter, which is why we believe it is more insightful to focus on full year or trailing 12 months performance. Nonetheless, 2 things are very clear. First, 2012 ended with more momentum in the Advisory business globally than it began. And second, Evercore's market share gains in this business versus other publicly reporting firms continue to be quite strong. Our financial results were driven in almost every respect by our Advisory business. Let me now turn the call over to Roger to comment on the performance of our Advisory business and the M&A environment more broadly.

Good morning, everyone. You can see that the firm had a very strong fourth quarter on the Advisory side and a very strong full year. As Ralph said, we have record results in both categories. Net revenues for the full year in Investment Banking, $555 million, 32% increase over 2011. Operating income full year, $127 million, 33% increase year-over-year. For the quarter, you can see net revenues $192 million and operating income $57 million and a 30% operating margin. These results are especially noteworthy because the transaction environment was just fair in 2012. Announced M&A volume increased only 2% for the year on a global basis in dollar terms, and the U.S. portion of that announced volume actually decreased by 4% year-over-year. More relevant, completed M&A volume globally declined 15% year-over-year. The U.S. portion of that was down 1%. As you all know, we are largely paid on completed transactions rather than announced ones. So for us to do as well as we did, with completed transactions around the world down 15% year-over-year, is not bad. Now it's important to note, and I'll come back and talk about this at the end, that the fourth quarter did see a turnaround in transaction volume trends. M&A volume was higher around the world in the fourth quarter, higher compared to quarter 4 '11 and quarter 3 '12 and by quite a bit, 56% above the fourth quarter of 2011, in other words, year-over-year, and 53% above the third quarter of 2012, sequentially. So while the year as a whole came in tepid, the fourth quarter did show a marked upward trend. Now let's talk about the composition of our results. For the full year 2012, we earned fees of $1 million or more in 125 separate transactions. That represented a 33% increase in this metric over 2011. In the fourth quarter, we received 48 separate fees exceeding $1 million, and that was by far our best quarter ever on that metric. In terms of total clients, we have 324 fee-paying clients in 2012 compared to 245 in 2011. A word on our competitive standing. Based on data for the full 9 months -- I'm sorry, for the first 9 months of 2012, Evercore's market share grew to 4.3% of the fee pool as disclosed by 13 of our largest competitors, and I want to give you some perspective on that statistic. We track that very closely. And to put it in perspective, our market share using that measure was 0.3% in 2001, 1.0% in 2005, 2.5% in 2010 and as I just said, 4.7% in 2012, not 4.3%, 4.7%. So for obvious reasons, we like that trend, which we, as I say, follow very closely. In terms of the increments lead standing, we were again the most active of the independent firms in the U.S. merger and acquisition market on announced transactions, ahead of Lazard and other firms. Once again, the only firms ahead of us in that standing were the universal banks and the bank holding companies. We all know who they are. On completed transactions, we were sixth among all firms in the United States, ahead of Citigroup and Bank of America, among others. Now you all know that Evercore is 18 years old. It's not 58 years old or 118 years old. So we have a little bit of pride in those results. On a global basis among independent firms, we were third behind Rothschild and Lazard, in that order. Since those 2 firms were each founded overseas and each founded more than 100 years ago, we're catching up at a pretty good rate when you take into account the global totals. Let me turn to productivity. The average revenue per Senior Managing Director on a rolling 12-month global basis was $8.9 million. That's up from the $7.2 million rolling 12-month total at the end of the third quarter and $8 million on the same basis at the end of 2012. In the United States, average revenue per Senior Managing Director for 2012 was slightly over $10 million, which we regard as the gold standard. And I think as you know, if you compare us to any peer on that basis, any publicly owned peer where data is available, we're the highest. And as managers, there's probably no better measure of efficiency than that statistic. The comp ratio, 57.5% for all of Investment Banking for the fourth quarter, that's down from 60.3% in the third quarter, 59.7% for the full year, slightly higher than 2011's 59.3%. And you all know our point of view on the comp ratio which is as long as the firm continues to expand, there'll be a tension between the cost of adding new people who tend to join midyear and aren't productive until their second year and what the comp ratio would be if you stop dead and didn't add any new people. I guess [ph] would be lower and in the long run, it will be lower in Evercore, but you also wouldn't be expanding and growing and so forth. Our headcount, total Investment Banking headcount, 482, essentially equal to the 490 at the end of the third quarter. The Advisory component of that is 391, and total headcount was up from the 437 figure at 2011 year end. So 482 versus 437 year-over-year. Advisory was up to 391, as I said, from 357 a year ago. As you know, we don't release the breakdowns on backlog. I'll just say, we like our backlog. Now let me close with a word on the environment. You all know that there is a renewed enthusiasm on the environment for M&A and related transactions. That's evidenced by equity market trends in terms of share prices of the firms involved and so forth. You all know, as I said at the beginning, that the fourth quarter saw a turnaround in the global trend in transaction volume. In other words, it rose against the year-over-year levels, unlike the first 9 months of the year, and you just saw that we ourselves had a very strong 2012 despite a tepid overall M&A environment. So in light of those factors, we expect 2012 to be an environment which facilitates another strong performance by the Advisory side of our firm and the whole firm, and we expect the environment to be better as a whole for everybody than 2012 was. Now what has changed in the environment? I think one ingredient is changing, and that is the North American economic outlook. 2012 was another weakish year in the U.S., essentially the fourth weak year in a row after the 2008 credit market collapse. And that type of economy restrains transaction volume because it restrains confidence, and the single most important element in confidence is what decision-makers think about the outlook for demand. 2013 isn't likely to be a bang up economic year in the United States, but it's probably a transitional year, transitioning from all the headwinds that originated through the 2008 crisis and into a period where those headwinds have largely, if not entirely, died out. So as the year goes on, there's an expectation we're finding that it will strengthen. Maybe the first half of the year will be another tepid period, but the end of the year will be a bit stronger. And then we'll transition into a stronger 2014, 2015 and 2016, with key elements being housing, oil and gas, manufacturing and the end of household deleveraging and therefore an improved consumer sector. And I think some of these expectations are evident just in the way the equity market is performing. I just myself returned from being in Davos for a week, the center of humility on the Earth. And what was noteworthy about Davos was that the Americans were surprisingly optimistic, economically speaking. And I might add, the Europeans were relieved, but still rather glum. And so I think that optimism, and there was an enormous collection of CEOs over there, is reflective of what I just talked about. So we think the environment will be better in 2013 and 2012, although it's impossible to quantify. On that basis, I'm going to turn it back over to Ralph.

Okay. Let me talk briefly about our newer Investment Banking businesses and also Investment Management. Now our Institutional Equities business continues to add clients and grow revenues. We now have research coverage of 284 companies and serve almost 300 clients. This quarter, the business generated $7.1 million in revenues as commissions increased 39% from the last quarter. Expenses were $9.2 million for the quarter reflecting, in the fourth quarter, almost all of the full year effect of our second half headcount growth, most particularly the REITs team that we added in September. Quarterly costs are expected to decline in 2013 just as they did a year ago, as the compression of new hire expense is eliminated. Moreover, we don't anticipate adding to our overall headcount in this business in 2013. 2013 is a year of producing earnings. Although the new issuance business was exceptionally quiet during the fourth quarter, we have increased our pipeline and are working with clients to launch offerings in 2013 as the equity markets become more active. And as we look at the pipeline, it's quite possible that our revenues from new issuance in the first quarter could be close to those for the entire year last year. We remain committed to our goal for this business to contribute to operating profits in 2013 and ultimately, to produce margins comparable to our more mature Advisory business. Our Private Funds team was successful in closing 3 capital raises during the quarter and is actively working on a number of mandates with closing targets during the first half of 2013. Our Investment Management business delivered a mixed year. On an overall basis, net revenues were $83 million for the year, a 16% decline from last year's record of $99 million. Operating income was $4.5 million and operating margins, 5%. Operating income for the Investment Management business for the quarter was $200,000 on net revenues of $20.4 million. Assets Under Management increased 4% to $12.1 million (sic) [$12.1 billion] in comparison with the end of the third quarter. The growth reflects the addition of $644 million due to the acquisition of Mt. Eden Investment Advisors within our Wealth Management business. Net outflows for the quarter were substantially less than previous quarters. They were $307 million, and they were partially offset by appreciation of $156 million. Our affiliated asset managers continue to focus on investment performance and their clients, and we are encouraged by the fact that the pace of outflows has abated and that investment performance has improved. Nevertheless, much work remains to be done to maintain good investment performance and serve our clients in these businesses. Our Wealth Management business is performing well, adding talent, clients and Assets Under Management. And as I said, Assets Under Management, they're increased 18% to $4.5 billion at the end of the year. And Evercore Trust Company continues to be a solid contributor to earnings. Let me now turn it over to Bob who will talk about a couple financial items.

Just several quick comments. You all have noted that non-compensation costs rose approximately 5% for the quarter, reflecting both costs associated with the acquisition in our Wealth Management business as well as slightly higher operating costs. Our operating costs per person on a full year basis were flat in comparison with the prior year. Our effective tax rate for the year ended modestly below our prior estimate, actually almost flat on the prior estimate of 38% for the year, reflecting a number of items: the results of businesses that are not wholly owned, attribution of income from international state and local jurisdictions, the small adjustment to reserves and other items. The balance sheet remains strong, with working capital in excess of $200 million. And again, our board declared a dividend of $0.22 per share for the quarter, and we repurchased 66,000 shares and LP units during the quarter. Ralph?

Okay. Let me just make a couple of comments in conclusion. Both our quarterly and full year results reflect the strength of our business model and our franchise. As we begin this year, our priorities remain the same. We wish to continue to add top talent, which over time will drive further market share gains. We will continue to focus on the productivity of our Advisory team. In 2012, as Roger said, it improved somewhat in the U.S. and Europe, and it is a performance that we believe is at the absolute top of our industry. We are committed to controlling our costs, reducing our compensation ratio over time as well as reducing the non-compensation cost per person. And we remain committed to returning our earnings to our shareholders through dividends and share repurchases, more than offsetting the dilutive effect of employee equity branded as compensation. As we look ahead into 2013, we see a number of opportunities to add to our team of highly talented Senior Managing Directors. We began the year with the promotion of 3 new Senior Managing Directors and expect to recruit additional talent during the course of the year. These additions fuel growth and value creation in the firm, and we organize ourselves to take advantage of these opportunities. We entered 2013 with some momentum, both from some recovery in the M&A activity, which Roger described, and from our continued market share gains, and we remain quite busy across the firm. Now that's the conclusion of our introductory remarks. So we're now prepared to take any questions you may have.

[Operator Instructions] Your first question comes from the line of Devin Ryan with Sandler O'Neill. Devin Ryan - Sandler O'Neill + Partners, L.P., Research Division: Appreciate the color on the Advisory environment and the outlook there. But when you guys think about the potential risks, I guess, to the recovery and risks to renewed improvement in Advisory activity, what are the things that actually concern you and that you think could actually derail the positive momentum? Is it things that we currently know about like renewed concern over Europe or budget issues in the U.S.? Or do you believe there have to be something more exogenous that maybe we're not aware of at this point?

Well, first, an exogenous shock. And you can imagine what that might be as much as any of us can. I don't think that Europe is likely to deter the expectation I discussed because absent some surprise, while Europe is working through its sovereign debt and banking crisis, which ultimately will be a multi -- it is a multi-year process and they're only partway through, is a very widespread view from, as far as people, that the worst is past there. And you can see all that in terms of investment and capital flows in Europe, including on the periphery, and you can see it in terms of, obviously, yields on sovereign debt and so forth. As far as Washington is concerned and the influence of Washington, most CEOs we speak to really have very high percentage, and I think this is also true of investors, but you would have as good a judgment on that as I do, are looking through that. They're looking through the issues of debt limit, sequester, continuing resolution, and don't see those as impeding the type of outlook that we discuss here, at least at the moment. So the bottom line is an exogenous shock. Devin Ryan - Sandler O'Neill + Partners, L.P., Research Division: Okay. Great. Appreciate the color. And Roger, you've also recently mentioned that Board of Directors are more often hiring their own advisors on transactions. So just love to get a little bit color around that dynamic and just how Evercore is positioned or that trend for Evercore?

Well, first of all, this is a very long-term development. It's not a development of last week or last year. It reflects a lot of -- I mean, it's another very consequential development that stems from the 2008 credit market collapse. And what you find is a greater sensitivity to fiduciary issues and responsibilities on the part of Boards of Directors and their advisors. And the result is that increasingly -- and of course, every single situation is different, but increasingly, you see Boards of Directors engaging their own advisors when a major transaction is underway. And you increasingly see the rise of special committees. Special committees are essentially formed because there's a potential conflict of interest between management interest and shareholder interest. And both of those developments, of course, give rise to additional advisors and in particular, a trend towards engaging independent firms as advisors. And in the United States, where these 2 trends on boards and special committees are particularly prominent, Evercore is the leading independent advisor, as we discussed. So this is benefiting our business. I don't want to give you the impression that this is a revolution, but it's an important evolution, and it's definitely boosting us. Having said that, Devin, still the vast majority of our revenues come from representing companies on the buy side or the sell side as has always been the case. Devin Ryan - Sandler O'Neill + Partners, L.P., Research Division: Sure. Okay. Great. And then just on the comp ratio, understand the comments that you guys made and understand fiduciary, higher cash payouts would impact that and hiring. Could you try to think about the flexibility, particularly since SMD headcount was actually flat year-over-year? I know that there were hires within that. And then just similarly on the same topic, the $2.2 million in higher Institutional Equities expenses, are all of that permanent? Because that seem to impact the comp ratio by about 100 basis points in the quarter.

All right. Let me take those in reverse order. The hires are permanent, but the effect on the financial statement is not. So as we've discussed in the past, if we hire someone, and in this case it was the REITs team that we hired in September, if we hired them in September and we wind up paying full year compensation, that compensation has to be expensed over the remainder of the year, in that case 4 months. So the hires are permanent. But just as we had last year, we said if our fourth quarter expense in this business was higher than our first quarter expense would be, we will have the same phenomenon in the first quarter of next year. So the fourth quarter does not reflect a run rate level of expense is the point. With respect to the impact on our comp ratio of new hires, I think a couple of points. Number one, while our SMD headcount was flat at the end of the year, we have had, as we've said in the past, some moving on of some Senior Managing Directors and replacement with new ones. Our productivity measure should be an indication to you of the fact that even with a constant SMD headcount last year, we can still grow our earnings if our -- the quality is constant or improves. So that's really what's at work there. Obviously, as we indicated in our press release, we had 3 promotions in January. We expect to have a number of hires during the course of the year. So I would expect our year-end SMD headcount to be somewhat above what it is today.

Our next question is from the line of Alex Blostein.

I wanted to kind of get your thoughts on how you think about SMD productivity over the course of the cycle. So if you go back to, I guess, the last cycle, call it early 2000 [ph] through 2007, I think the average productivity was, call it, like $11 million to $12 million per Senior Managing Director. When you think about the current cycle, and I know things could be lumpy but it does feel like the backlogs are up, is there any reason, I guess, why we can't, over the course of the cycle, achieve a similar level of productivity? Or how do you think the cycle could evolve relative to what we've seen in the past?

Well, there's a lot of subtleties here. As I said in my comments, ever since we started the firm, we've tended to think of $10 million per U.S. SMD as the gold standard, which is the term I used. And if we're achieving that, we're really operating at a high degree of efficiency. Whether this cycle allows that number to get higher, I don't know. But I do think that is a really very high bar and to be surmounting it is very good achievement. As I've said before, if you look at data on comparable firms, you won't see anybody else doing that among the comparable, among the comparable firms which are publicly owned. Second, of course, SMD productivity outside the U.S. is lower. It's lower really because the markets outside the U.S. are either sluggish like Europe or less developed like Asia. So one hopes that eventually, the non-U.S. SMD productivity levels will compare to the U.S. ones, and I don't see any reason over the very long run why that might -- won't happen. But short term and medium term, there's going to be continuing differential. Whether the cycle allows those numbers to rise a lot is also unknowable at least in my view. So I don't know if that's a helpful or not a helpful answer, but that's the best one I have.

I guess another way of saying I don't know, which is if you look back at 2006 and 2007, as you said, actually our productivity per partner was considerably higher. In fact, in one year, it was in the $13 million, $14 million range. In another year, it was above $15 million. I would say a couple things. Number one, we were substantially U.S. firm at that point in time, and the U.S. is, as Roger said, the best M&A market, still both in terms of size and fee-paying willingness. And second of all, as we get larger and have more SMDs, if you think about the fee pool in which each individual SMD is fishing, is may be a little bit smaller. We do believe that we're still hiring the same quality of SMDs that we had when we had a smaller number. So how all of that shapes out is really just unknowable at this point in time.

Got it. No, that's actually helpful color. Appreciate it. Bob, quick question for you on capital deployment. Obviously, your cash levels remain pretty high. You mentioned around, I guess, $200 million net of debt. You guys have been good deploying capital and returning capital back to shareholders this year. But I guess if you look at the share count, it's still creeping up slightly year-over-year. Help us, I guess, think about how you think about capital deployment in 2013 with respect to both dividends and buybacks?

First of all, I think the -- Bob, correct me if I'm wrong, any creep up in share count is a result of the warrants that we have outstanding on the Mizuho debt with warrants transaction, which as you know as they become warrant, the money effectively increases the share count. So the last 3 years we have -- we purchased more shares than we have issued in compensation. So the only increase in share count over that period of time would've been associated with business expansion, the acquisition of Lexicon or the couple transactions that we had in the Investment Management business. Going forward, as I said on the last call, given the opportunities that we have in the Advisory business, we expect, other than tuck-in acquisitions like Mt. Eden, that our capital will be returned to shareholders in the form of dividends and share repurchases. And we will continue the policy of repurchasing, at least if not more shares than we issue in terms of year-end compensation, and it will be used to grow our Advisory business. So if you look over the -- I think this is true that over the last 3 years, we've actually returned to shareholders in the form of dividends and share repurchases more than our earnings, and I suspect we will continue to have the capacity to do that.

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

So revenue was obviously terrific this quarter. And it seems like as outsiders, publicly available data just is less and less indicative for you guys over the last few years. Can you -- I know you've talked about it in the past, but should we just count on that? Is this a new -- do we need a model you all based on a new multiple of publicly available data just because of the shifts that you've been able to achieve? Can you help us may be understand and model that out a little bit better?

Brennan, it's Bob. I think the answer to that is, yes, particularly when you look at the firm, as we've said, on a full year or trailing 12 months basis. In any quarter, there is also timing which can impact publicly available data, but they may not have the quarter right and then that would be a secondary factor. But, yes, the visibility of our revenues from publicly available data diminishes as we grow globally and add some new businesses.

And I would say also that as one -- as you look at the nature of our revenues, they're just not purely M&A league table-driven revenues. I mean, our restructuring business, for example, there's really very limited publicly available information of utility to you in trying to forecast our revenues for any quarter or even for the year. We're also -- we have expanded the Advisory capabilities that we offer to our clients, equity capital markets advisory capabilities. We've added in our restructuring group debt advisory capabilities. So in any given quarter, we may have revenues from those sources as well, which may be very difficult for you to capture in your own analysis.

Okay. That's helpful. And then question here on -- you guys mentioned you got like over $200 million working capital in the balance sheet. Is there a chance, given the amount of liquidity you're holding, that you all might be able to work out a deal with partners where the company could buy back a chunk of stock that they may have that they might be considering selling? It's been a while since there's been a secondary. So is it possible that going forward, you all might actually be able to take some of that down directly? Is that legally feasible?

Well, first of all, we do buy a certain amount of shares in the normal course of business when RSUs best with the net settlement of those RSUs. So that is something that happens year in and year out and is 100% within the bounds of good practice. I guess I would make 2 comments. One, as more and more of the shares that were owned at the time of the IPO best and are available for sale, we simply have less shares that people want to sell, which is probably as much a production of the fact that we haven't had a secondary, if anything else. We just don't have enough-sized sellers among our partner base or employee base anymore. And anything else, I think we’re -- generally over -- as that selling overhang has dissipated substantially, this positions Evercore basically in open market sales, and I would expect that's most likely what will happen in the future.

Okay. That's helpful color. And then the last questions for me are on comp. So can you -- I know you said that over time, you're looking to lower the comp ratio. But I guess, in this hurt competitive environment, it seems as though -- I would have at least expected that there would be some operating leverage given how strong the revenue was. And even if we adjust for the increase in equities, we had a comp ratio that was basically flat year-on-year, which I would've guessed that they just might have been more leveraged there given the 20-plus percent revenue growth, which was obviously terrific. So could you maybe help me understand what I'm not thinking about correctly there? And if it's possible, maybe give a breakdown of GAAP versus committed comp because you said you're changing your cash allocation, too?

Yes, sure. First of all, the growth in the top line is highly correlated to growth in headcount and the expense of the team that we have. So a quite modest amount of the growth globally came from productivity per partner and productivity per Investment Banking professional. Those were essentially close to flat when you look across our geographies. So normally, you would get leverage if you have productivity growth rather than growth coming from headcount. The second thing is that we are, as we've said earlier, making still material investments in our -- in the future value-creation of the business. Those occur, in an adjusted regular way, hiring of Senior Managing Directors. We hired 6 last year. I would expect that we will do at least as well this year. Second, our Institutional Equities business and private funds business which are still drags, lesser than the year before, but still drags on the comp ratio. And third, as we indicated in our comments, we do have a lower deferral rate this year, which also contributes to the comp ratio being essentially flatter or ticked up a little bit.

I mean, those are the 3 factors. That's it.

Our next question comes from the line of Joel Jeffrey with KBW. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: I apologize, I jumped in a little late, so I apologize if you've touched on some of these already. But -- and just in terms of the level of revenue on the Advisory side this quarter. I mean, were there deals that kept bumping in the fourth quarter that you'd thought might have closed in the first quarter?

You always have a little bit of that. But I think it's -- we've said many times, don't look at one quarter, and I think we said that at the beginning of this call. It's an extraordinary strong quarter. I wouldn't annualize it. But there wasn't a…

Yes, there was nothing dramatic in that regard, whether there were some of that, it's even hard for us to know. So as Ralph just said, just don't take it as the perpetual outlook. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. So there's -- so just basically, there's nothing that happened in the fourth quarter that you feel would negatively impact your first quarter?

No. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, okay. And how much do you have remaining on your current repurchase authorization?

Virtually all of it.

Yes, we just recently...

The board approved the latest round that -- and we announced it in the last call, Joel, and we bought back very little in the fourth quarter. Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. Great. And then just lastly, in terms of thinking about the comp -- the comp issue in the Institutional Equities business last quarter, if you took that out or annualized that out over the year, would Institutional Equities business made money this quarter?

I haven't done that analysis actually.

Our next question is from the line of Steven Chubak from Autonomous Research.

Since your last update, has the competitive landscape...

You're going to have to speak up a little bit. We can't hear you.

So since your last update, has the competitive landscape for new hires changed given what looks to be an improving M&A backdrop?

No.

No. Okay. And I guess the other question I had was regarding potential...

And by the way, it hasn't changed as in it has been good for Evercore and it remains good.

Okay. That's helpful. And regarding the potential opportunities in Asia, while you have forged some key strategic alliances in the region, your commitment hasn't really extended much beyond that. And while we've seen some of your [indiscernible] competitors begin to downsize fairly aggressively given -- I guess the revenue growth hasn't materialized as some of them initially envisaged. So in light of these trends, can you may be provide a strategic update just to how you plan on positioning yourself in the region?

Sure. I would say that quite frankly, we're benefiting from our -- I don't know if I'd call it extreme, but substantial financial caution in the way that we have approached Asia and some of the more rapidly growing parts of the world. And our approach has been pretty simple. We have opened offices that were in Evercore offices in places where we thought we could attract the very best advisory talent on our platform and make money. So in Asia, we have 1 office. It's in Hong Kong, and it's profitable. And in the markets that are -- where we don't believe at this point, these are all judgments, that we can attract the very best advisory talent to Evercore platform and make money but that are still very important to our clients, we have chosen to ally ourselves with the largest and best financial institutions in our business in those markets. So securities in China, Mizuho Bank in Japan, Woori Securities in Korea, Kotak in India and BTB in Russia. Those alliances allow us at very low cost to give our clients the benefits of access to those markets, both by buyers and sell side opportunities that are important to serving our global client base. And so we face none of the travails that our competitors face in terms of the production of business in Asia versus commitment and expense.

Okay. That's very helpful. And I guess last one for me, I know obviously there is some noise in the comp figure. And obviously, you guys have maintained the 55% comp ratio target for the seasoned SMDs, in particular. And I didn't know if that was a figure that maybe you could disclose sort of, I guess, net of investments, what the comp ratio was for the, I guess, for the Advisory practice?

We don't disclose that. But I think you should assume that we don't discuss a target like that without having some rational basis for doing it.

Our next question is from the line of Hugh Miller with Sidoti. Hugh M. Miller - Sidoti & Company, LLC: Most of my questions were asked and answered. I just had one with regards to -- you talked about the 3 promotions that you've already kind of accomplished in early January, and you've talked about target goals for advisory recruiting. Does that kind of change your outlook here? Should we be thinking about kind of more modest recruiting relative to what you'd normally be targeting, or potentially stronger than expected recruiting for this year given those promotions already?

First, let's be very clear. We've never set a number target. We are -- we try to hire people who we believe are equal to the quality of people that we have. If there are 4 available to our [ph] client to come here, we'll hire 4. If there are 7 or 8, we will do everything in our power to try to figure out how to do that financially. And I think what Roger said earlier is the market -- the environment for our business model among clients and boards and among the people who serve them is very good right now. So we have many discussions. Hugh M. Miller - Sidoti & Company, LLC: Okay. And are there any areas in particular that are of interest for you guys to be able to fill in at this point?

Well, listen. We have been on a rapid expansion path since going public 6.5 years ago, a little more than that. At that time, we had 21 partners, 250 people. We covered 7 verticals. Today, we have -- you saw our totals in terms of total people, around 900, 60-plus partners. We cover 22 verticals. We're obviously not finished. These things take a lot of time. So there are still plenty of white spaces, so to speak, to fill in, in terms of making some of our verticals more global. There's a lot of work to do on that in terms of adding certain verticals, in terms of fleshing them out more broadly by subsector. And we have plenty of work ahead in terms of blocking and tackling of that type.

Our next question is from the line of David Trone with JMP Securities.

You mentioned the Private Funds Group, I think, closed 3 capital raises during the quarter. I didn't hear anything about how many capital raising deals your Institutional Equities guys were on. I'm looking at the external source. That's about $3 million in fees in the quarter. It seems a little high. Can you...

That's too high.

Okay. Do you want to give the number or not so much?

Not really, no.

No.

Okay. But we can reasonably assume that based on your answer, the substantial portion of the $7 million in revenues, commissions?

It's almost all commissions.

Okay. And can you talk about that directionally versus the third quarter?

Yes, we did in the opening comments. It's up 39%.

Just the commissions part?

Yes.

There 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. As I said internally this morning with the reporting of this, we're not enjoying last year, and we'll try to make as much money as we can for all of you this year. Thanks very much.

This concludes today's Evercore Partners Fourth Quarter and Full Year 2012 Financial Results Conference Call. You may now disconnect.