Evercore Partners Inc. Q1 2013 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Chubak - Autonomous Research - Analyst : Hi. Good morning. Recently one of your competitors flagged faulty valuations as a key impediment to deal activity. Have you heard such concerns begin to emerge in some of your discussions with senior management?

Question: Steven Chubak - Autonomous Research - Analyst : Okay. That's very helpful.

Question: Steven Chubak - Autonomous Research - Analyst : Okay. And then transitioning to the recruitment side, have recruitment pressures eased at all in Europe due to the proposed changes to incentive compensation structure particularly at some of the big banks?

Question: Steven Chubak - Autonomous Research - Analyst : Yes.

Question: Steven Chubak - Autonomous Research - Analyst : Thanks. That detailed commentary was very helpful. And finally on the Institutional Equities business, you've indicated in the past that you feel as though you're appropriately sized for the opportunity, but given signs improved momentum in that business of late, Are there additional verticals that you're potentially considering to add to that business potentially this coming year or beyond that?

Question: Steven Chubak - Autonomous Research - Analyst : Okay. Thanks for taking my questions.

Question: Alexander Blostein - Evercore Partners - Analyst : Can you guys hear me? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Alexander Blostein - Evercore Partners - Analyst : Sorry. So going back to the broader discussion of M&A, I guess, every time we get on these calls it always helps to hear you guys's perspective on the backdrop. And it feels like for the last couple of quarters there are kind of visible signs of why M&A's sort of been on the holdback despite the fact that corporate balance sheets are healthy, revenue growth is slow, and margins are peaking. So all the reasons why M&A should happen and hasn't happened in a bigger way are kind of clear. Now it feels like we're through the election, through the debt ceiling issues, and a lot of the talents are off the table? What do you think needs to happen for a more robust M&A cycle to unfold?

Question: Alexander Blostein - Evercore Partners - Analyst : Got it. That's very helpful. Thanks for the additional color there. One quick question for Bob on the buy back and share counts. Clearly the creep up on share counts is warrants on is this quarter maybe some of it solves itself in the quarter, maybe not. But as you think about it longer term are you still committed to keeping the share count flattish on a fully diluted basis? And how do you I guess balance that if, you know, with I guess with the tertiary method of accounting and if the stock kind of hangs there, you know, the warrants continue I guess kind of weigh in on the share count would you consider offsetting that with more buy backs as well or the buy backs are more kind of RSU-related?

Question: Alexander Blostein - Evercore Partners - Analyst : Got it. Thanks a lot again.

Question: Brennan Hawken - UBS - Analyst : Good morning, guys.

Question: Brennan Hawken - UBS - Analyst : So quick question here on revenues this quarter. When we look at the revenue versus publicly available data, this quarter seems to be tracking sort of worse than the recent history and not just with you guys. You know, we saw it at a boutique last week and we saw it amongst many of the large (inaudible) firms. Was there anything specifically this quarter in your experience that caused that?

Question: Brennan Hawken - UBS - Analyst : That's great. And actually following up on that addendum. So I mean given sort of your commentary here so far, my guess is that -- the pipeline from what you guys can see has remained pretty solid. You guys have still continued to announce, be involved in a bunch of announced deals. So your continued outlook for revenue here this year is not waning at all. Right?

Question: Brennan Hawken - UBS - Analyst : Yes. No doubt. I'm just looking for stuff beyond what I can see. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Brennan Hawken - UBS - Analyst : Cool. That's helpful. And Roger, I can -- we put a note out with some of those -- that public data so you can take a look. We were just trying to point to the data that was all.

Question: Brennan Hawken - UBS - Analyst : I can relate.

Question: Brennan Hawken - UBS - Analyst : Last one for me. On Institutional Equities, I know it's a small piece of the business and I certainly don't want to dig in on something that's a small impact to the bottom line, but I think it was on the fourth quarter on the expense side that you guys indicated that you had some investments that caused the expenses to be higher. But yet, this quarter expenses I think took even a step up from that. I know revenues were better. But how should we think about profit margins in that business? Were there any unusual items in the expense line item? How do we think about profitability as you guys continue to grow there in the near term?

Question: Brennan Hawken - UBS - Analyst : Okay.

Question: Brennan Hawken - UBS - Analyst : No. Absolutely. Fair enough. Thanks.

Question: Hugh Miller - Sidoti - Analyst : Good morning.

Question: Hugh Miller - Sidoti - Analyst : I had a question within the asset management segment, which hasn't been touched on as much. It seems like from the industry we did see kind of a shift in sentiment towards money coming back from equity use and while you guys did see net inflows with the market appreciation, it seems like you're still seeing some challenges there on the redemption side. I was wondering if you could just talk about how conversations are going you know just given that change in the dynamics versus relative performance, and whether or not if the sentiment continues we can see assets becoming equities, do you anticipate that we will start to see that being a benefit for you, as well?

Question: Hugh Miller - Sidoti - Analyst : Sure. Yeah. I'm sorry. The question certainly was focused on the Institutional Equities portion of the business with Atalanta Sosnoff, and I understand it there. Probably to get up to the three and five-year metrics in order to kind of get some benefit on the flow side. But so it just kind of running the course you guys and continuing to wait until the relative performance improves?

Question: Hugh Miller - Sidoti - Analyst : Okay. And the other question I had was you had kind of talked about the disparity between kind of some of the headlines for M&A announcements versus the reality and how those dynamics had kind of shifted over the last several months versus the reality being somewhat stable. Have you noticed any change in kind of CEO confidence levels, you know, and are they kind of, would you say, tracking more the reality of it being somewhat stable, or are you seeing kind of them following the headlines and with the discussions you're having?

Question: Hugh Miller - Sidoti - Analyst : Okay. I appreciate the input. Thank you. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Joel Jeffrey - KBW - Analyst : Good morning, guys.

Question: Joel Jeffrey - KBW - Analyst : Just thinking about your comments of the strength of your international business. Can you talk a little bit about which markets you see the strength in and if you see this continuing throughout the year?

Question: Joel Jeffrey - KBW - Analyst : Is this something you think is a trend that's going to continue for the remainder --

Question: Joel Jeffrey - KBW - Analyst : Okay. And on the Investment Management side, the gains you guys had during the quarter were a little bit higher than what we were looking for. And I'm trying to think about what was driving that and maybe if there's a higher run rate we should think going four or are these one-time issues

Question: Joel Jeffrey - KBW - Analyst : and what was driving them? Sorry.

Question: Joel Jeffrey - KBW - Analyst : Okay. Great. And then just lastly for me, and possibly risking getting an acidic answer from Roger on this -- in terms of the overall health of the market, I understand certainly deal volumes have held up a little bit better, but we continue to see a decline in the number of deal announcements. I know your guys pipeline is holding up nicely, but is there a point in which that becomes a concern for you guys?

Question: Joel Jeffrey - KBW - Analyst : Great. I appreciate the color. Thanks for answering my question.

Question: David Trone - JMP Securities - Analyst : Good morning gentlemen. I just wanted a qualification real quick -- you mentioned four and seven SMD adds this year. Was that just banking or was that Evercore-wide?

Question: David Trone - JMP Securities - Analyst : Okay. Are you giving any thoughts on the other units?

Question: David Trone - JMP Securities - Analyst : and you mentioned earlier the deferred issue, the pickups. In a base case, I know they're all probably different but in a typical case, are you picking up a hundred percent?

Question: David Trone - JMP Securities - Analyst : Yes. Right.

Question: David Trone - JMP Securities - Analyst : Okay. Great. That's good color. Thank you.

Question: Michael Wong - Morningstar - Analyst : So what amount of scale do you think your need in your asset management business? And are you still generally keeping away from institutional investment management acquisitions?

Question: Michael Wong - Morningstar - Analyst : And just talk to me about operating leverage. I was wondering if you can go into a little more detail into the potential increase in expenses related to institutional equities and maybe a split between expenses layered to the higher revenue and maybe a drop-off of compensation from last quarter due to expensing of your REIT team that was hired mid-year?

Question: Michael Wong - Morningstar - Analyst : And just a quick last question -- is there any particular reason for the high number of capital raises in the quarter that you participated on?

Question: Michael Wong - Morningstar - Analyst : Okay. Thank you.

Question: Michael Wong - Morningstar - Analyst : Okay. That's great. Thanks.