Evercore Inc.

Good morning and thank you for standing by. Welcome to Evercore's second quarter 2022 financial results conference call. During today's call, all parties will be in a listen-only mode. Following the presentation, the conference call will be open for questions. If you have a question, please press the star followed by 11 on your touchtone telephone. For participants using speaker equipment, it may be necessary to pick up your handset before making your selection. As a reminder, this conference call is being recorded today, Wednesday, July 27th, 2022. I would now like to turn the conference call over to your host, Evercore's Head of Investor Relations and ESG, Katie Haber. Please go ahead.

Thank you, Operator. Good morning, and thank you for joining us today for Evercore's second quarter 2022 financial results conference call. I'm Katie Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO, and Celeste Millay, our CFO. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore's second quarter 2022 financial results. Our discussion of our results today is complementary to the press release, which is available on our website at evercore.com. This conference call is being webcast live in the For Investors section of our website, and an archive of it will be available for 30 days beginning approximately one hour after the conclusion of this call. During the course of this conference call, we may make a number of forward-looking statements. Any forward-looking statements that we make 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 Evercourse filings with the SEC, 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 financial measures, which are non-GAAP measures that 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 is posted on our website. We continue to believe that it is important to evaluate every course performance on an annual basis. As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closings. I will now turn the call over to John.

Thank you, Katie, and good morning, everyone. Since we last spoke a quarter ago on our earnings call, macroeconomic uncertainty and market volatility have intensified. The outlook from here remains clouded given numerous macro challenges including historically high inflation, supply chain constraints, rising interest rates, geopolitical tensions, and the current regulatory environment. With this backdrop, the equity markets too continue to experience instability. The S&P 500 suffered its worst first half decline in over 50 years. In addition, financing markets have also continued to tighten, making it harder to access capital and now at higher rates and wider credit spreads. This is a notable change from where we were just a few months ago. All of these macroeconomic and market factors have impacted our businesses as uncertainty is never good for M&A or capital raising. However, with all that said, Evercore generated a solid second quarter. For the second quarter, we generated $637 million in adjusted net revenues, $576 in adjusted advisory revenues, and $2.46 in adjusted earnings per share. These results underscore the breadth and depth of our franchise, coupled with our focus on managing the firm for the long term. Consistent with last quarter, our backlogs remain strong, but with more risk as we continue to face headwinds that I just noted. These headwinds have led to a continuation of the slowing of the pace of announcements and an elongation of the timing of transaction closings. Looking at the overall M&A market year to date, global and U.S. M&A announced dollar volume decreased 20% and 28%, respectively, compared to the first half of 2021. Also, the number of announced deals decreased 17% globally and 21% in the U.S. versus the first half of 2021. For the largest deals, those above $5 billion, global activity remains below the record levels in 2021 with dollar volume down 8% and the number of announced deals down 24% as compared to the first half of last year. That said, When comparing volumes to a more normalized year and not last year's records, M&A activity is still quite solid. We continue to have high levels of dialogue and activity with clients. This is seen across a broad spectrum of sectors and capabilities. It is in environments such as this one when interaction, connectivity, and thoughtful advice are most valued. It is critical that we remain deeply engaged with our clients. This is when they need our advice and support the most. We believe we are well positioned to address our clients' needs and to help them plan for the dynamics of this environment, highlighting the significant investments that we've made over time. And although some of the conditions needed for a strong M&A environment in the short term are not in place, the fundamental themes that drive M&A activity in the intermediate to long term remain intact. Turning to the quarter, The previously mentioned macroeconomic and industry forces impacted investment banking revenues. However, our business diversity enabled us to achieve solid results for the firm, indicative of the revenue-generating power of this franchise. In advisory, we saw continued strength in some of the largest sectors, including technology, media and telecom, healthcare, industrials, and the beginnings of an improved environment for energy, driven both by our corporate and sponsor clients. In addition, our European advisory team had a very strong quarter as a result of investments that we have made over time, and we continue to fill white spaces both geographically and from a sector perspective in the region. In capital advisory, we saw continued activity in our GP-led transactions, fundraising, secondary investments, continuation fund opportunities, and real estate capital advisory. In terms of restructuring, we are starting to see an increase in dialogues as it is becoming harder for companies to access the public debt markets, in addition to the cost of debt rising materially. That said, corporate balance sheets generally remain healthy, default rates are still low historically versus averages, and the environment is setting up differently than the restructuring cycle seen in 2020. We believe we are well positioned to advise our clients as activity picks up. Underwriting experienced a difficult quarter. Activity continued to be impacted by the significant spikes in volatility and macro headwinds that weighed on issuers and kept them on the sidelines. Away from traditional IPO and follow-on activity, which has been extremely quiet, we've seen a strong uptick across our platform in at-the-market offerings, also known as ATMs, as well as private placements. Overall, our ECM business is becoming more diverse from a sector and product perspective. We continue to build our pipeline and would expect to see the conversion of the pipeline when markets stabilize and as financing needs in some sectors become more acute into the year end. In our equities franchise, while the market volatility has had varied impacts on our business and our clients, our team is deeply engaged with clients, guiding them through the volatility. The business continues to consistently deliver market-leading research and differentiated client service. The firm also successfully hosted 10 conferences and symposiums in the second quarter, including our inaugural Global Clean Energy Summit. That was a cornerstone event for Evercore's ISI and advisory energy transition efforts and was well-received by our clients. And lastly, in wealth management, long-term performance remains strong, and we continue to generate new businesses in quarter despite some shrinkage in AUM linked to market performance. We remain optimistic about our future and continue to invest in our business by opportunistically adding A-plus talent in areas of targeted growth. Across our advisory teams, we are pleased to have added seven senior managing directors so far this year, all in key strategic areas, which we have previously identified, including TMT, debt advisory and placement, ECM, and Europe. As it relates to compensation, we are mindful of the environment and are focused on building our franchise prudently as we continue to invest in the key areas of growth that support our medium to long-term strategy. Celeste will discuss the compensation financial matrix in more detail shortly. Lastly, our capital return strategy. We remain committed to our goal of returning excess cash not invested in the business in the form of dividends and share repurchases to our shareholders. Even in this less certain environment, we've bought back a significant amount of stock and will opportunistically buy back shares while maintaining a durable balance sheet. As we look ahead, we remain optimistic about our future, and we have a clear strategy for the firm. Despite today's uncertain environment, we are confident that we have the team and capabilities to serve our clients throughout all environments, and we will continue to drive towards achieving our long-term goals. Now, let me turn the call over to Celeste.

Thank you, John. For the second quarter of 2022, Net revenues, net income, and EPS on a GAAP basis were $631 million, $96 million, and $2.33, respectively. My comments from here will focus on non-GAAP metrics, which we believe are useful when evaluating our results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website. Second quarter adjusted net revenue was $637 million, down 8% year over year. Second quarter adjusted advisory fees of $576 million were 3% higher year over year, driven primarily by an increase in the average fee size. Consistent with market trends, our underwriting business continued to be adversely affected by broad market volatility that drove a significant decline in issuance resulting in 14 million in revenue, down 72% from the year-ago period. Our equities business continued to perform well with commissions and related revenue of 52 million, up 3% year-over-year, driven primarily by higher trading volumes. In wealth management, adjusted asset management and administration fees were 18 million, down 5% versus a year ago, primarily driven by market depreciation on AUM. Second quarter adjusted other revenue, net, was a loss of $23 million, largely reflecting losses on our investment funds portfolio, which is used as an economic hedge against a portion of our deferred cash compensation program. This amount fluctuates with market values, and the significant market decline during the quarter drove the losses. In any given quarter, while the hedge has an impact on revenue, The change in market value does not have an immediate corresponding impact on expenses. In accordance with relevant accounting principles, our revenue includes approximately $67 million of advisory fees, driven primarily from transactions that closed in early July. To compare, we recognize $45 million in the first quarter of 2022 and $59 million in the second quarter of 2021 in accordance with the same accounting principles. Adjusted net income was $108 million for the quarter, down 30% versus the year-ago period. Adjusted EPS of $2.46 decreased 22% from the prior year. Our second quarter adjusted operating margin was 24% versus 30.4% in the second quarter of last year. Turning to our expenses, our adjusted compensation ratio for the second quarter was 61%. In this environment, compensation will be a function of revenue. The second quarter compensation ratio is our estimate for the full year as of today, but is subject to change depending on how the balance of the year progresses. As we always do, we will continue to evaluate the key drivers of our compensation expense, including hiring levels. We are mindful of the environment and being thoughtful and prudent as we look ahead to the second half of the year by balancing the short and medium term with our long-term goals. Second quarter adjusted non-compensation costs of $95 million were up 30% from a year ago, driven by several factors. First, higher travel expenses as our teams return to more normalized travel, as well as inflationary pressures on travel costs. In addition, we also hosted some large in-person conferences and events in the quarter. Second, increased search and placement fees driven by our recruiting efforts. as well as other operating expenses related to higher headcount, including a larger real estate footprint, as we have grown the firm and costs of operating that space as employees continue to return to office. And third, there were a couple of episodic items in the quarter, including a fee-sharing agreement with sub-advisors, as well as an increase in bad debt expense versus a reversal in a prior year period. Going forward, non-comp expenses will be reflective of business activity levels, as well as inflationary pressures, a return to business as usual as it relates to travel and entertainment, and continued investment in our businesses. We are consistently reviewing our expense practices. Our adjusted tax rate for the quarter was 27%, which was in part affected by the stock compensation benefit, as well as non-deductible expenses, including meals and entertainment, which have increased as activity has picked up. Turning to our balance sheet, as of June 30th, our cash and investment securities totaled over $1.5 billion. Our excess cash is a percentage of our total cash and investment securities within the low teens. As a reminder, our cash generation and needs are dynamic and are heavily influenced by our business needs, expected compensation obligations, and timing of capital return, which can result in a fluctuation of our relative excess cash positions. In addition, in the quarter, we successfully completed a refinancing of our Series B notes that were due in the first quarter of 2023, with the issuance of $67 million of 4.61% senior notes due in November 2028.

Please stand by or conference will begin momentarily. Please stand by. Thank you. Hello?

Yes, you're still on an open line. We're still in the main room.

Hello? Hello? Can you hear me?

Yes, you're coming in loud and clear. The participants can hear you as well.

Okay, good.

Sorry about that, Josh. Okay, I think it's time for we're switching the Q&A now.

Okay, I'll go ahead and give the Q&A instructions. Thank you. We will now begin the question and answer session. As a reminder, if you have a question, please press the star key followed by 11 on your touchtone telephone. If you're using speaker equipment, you may need to lift the handset before making your selection. Please limit to one question only. You are welcome to rejoin the queue for additional questions, time permitting. One moment for questions. Our first question comes from Richard Ramsden with Goldman Sachs. You may proceed.

Okay. Good morning. Can you hear me?

Yes, I can, Richard.

Okay, great. So, you know, obviously the strength in the advisory business was particularly impressive this quarter, and at least based on what we can see, it doesn't look as if it was driven by M&A, just given volume levels. So could you talk about the nontraditional advisory products that drove the strength this quarter and perhaps help us think through the sustainability of those as we head into the second half of the year? Thanks.

Sure. Thank you, Richard. Well, the first thing I'd say is that advisory did have some weight in terms of the performance in this quarter, and so I think it's important to recognize that. We have a diversity of sources of income, which are both product-driven as well as sector-driven and geographically driven. And so, for example, we had strong performance in the U.S., obviously. As always, it's an important driver for us. but also Europe had a very good quarter. And some of the things that we've done in the past, like added a significant amount of talent into Spain really started to generate returns. Capital advisory businesses were very solid. We have seen our sponsors business continues to produce In addition, our activism business has been quite active as the activists have continued to move forward. And so generally, we have a number of sources that kick in, and I think that's one of the things that we have striven for, which is to try and balance out our business revenues and our capabilities. In terms of sustainability, you know, it's a very uncertain environment. And I don't think there is any business that we have that is immune to what I think are the shocks that are being felt in the system, whether it's macroeconomic, the geopolitical concern about interest rates. And I think, frankly, a view on what's happening with respect to inflation. So I think that we feel that we are in a decent place. but I think there is real uncertainty and volatility in the system. So it's very hard for me to give you any guarantee that these are sustainable. I will say that our backlog is strong. It remains strong, but there is elevated risk of conversion of that backlog.

Okay, that's very helpful. Thank you very much. Thank you.

One moment for questions. Our next question comes from Jeff Hart with PSC. You may proceed.

Hey, good morning, guys, or I suppose everyone. So on more a macro thinking level, it is so historically unusual to see strong strategic dialogue in the face of plummeting confidence, spiking financing costs, and recession expectations. I mean, I'm glad to see this, but I can't shake the feeling it's just a matter of when, not if, kind of the next shoe drops. John, you've been through a number of cycles. How do you view the current environment versus kind of prior recessionary times?

Well, you know, I think your question is a really good one. And we've been thinking about this a lot as we look out into the future. And I would say that there are certain things that are still in place. And I think it's why there are still some strong dialogues going on in corporate boardrooms and with management teams. companies still have good leverage levels in that they have quite a bit of cash. I would say that while this could change, a very large number of companies are really well capitalized and have cash. There's a sense that there is a growth long-term in the market driven by a number of the factors that we've had in the past, which could be technology disruption. It could be clean energy. It could also be the fact that we just see that companies believe that their businesses will expand over time. And as a result, I think when companies get together and when boards speak, they really are talking about what are the prospects. I think in addition, there is an acceptance across companies that M&A is an acceptable topic. And I think that you've seen the slowdown because we've seen that in the merger stats. But the slowdown is not necessarily a slowdown in dialogue. It's a slowdown in actual activity. And I think that there is definitely a view at the corporate board level. I've been in several corporate board meetings in the last two weeks where we've had this conversation, which is companies may not want to set out into something that is really out out in a transaction in a market that is so volatile. But I think there is a view that being ready if the market turns is smart. And so I think you're seeing real dialogue. I think that there is a view that there is just so much uncertainty that people just don't know at this point. So your question, which is, when will the shoe drop? None of us know. We definitely see the volatility. We definitely see the uncertainty. I think corporates and their boards and CEOs are all evaluating this just as we are, and we're all watching. And by the way, the interesting thing is it's hard to be really smart about this because some of this is just going to occur and we're not going to know about it. Geopolitical risk, we just can't predict any of that. And as we all know that if we go into a significant recession, that will actually also impact M&A activity and advisory activity generally.

Okay, thank you. Thank you. One moment for questions. Our next question comes from Steven Chuback with Wolf Research. You may proceed.

Good morning. This is Brendan O'Brien filling in for Stephen. So on sponsors, after they were key in stabilizing M&A activity during the COVID crisis, there was a belief that this dynamic would repeat in the next downturn. However, commentary from some of the larger PE firms and their peers suggest that deployment is likely to remain slow until early next year. Based on your conversations, have you felt like there's a change in tone slash willingness of sponsors to transact? And what is your outlook for sponsor activity in the near to immediate term?

Thanks for the question, Brendan. I think sponsors, to a large extent, are sitting on the sidelines right now and watching. There is no question that the that the markets themselves, whether it's leveraged loan market, high yield market, those are markets that actually have been chilled a bit because of the activity levels. And obviously there's some hung bridges out there. And I think that it's less easy to finance sponsor deals. So on the buy side, you're seeing sponsors taking a look and watching. I think the buy side is also watching carefully to see whether the prices that are being looked at are going to come down and whether there's going to be a matching of buyers' and sellers' expectations for price. I don't think that you're going to see the sell side of sponsors turn quickly until they really believe that prices are going to come down. I would say then that your premise, which is that there is a slowing of sponsor activity, is true, but that definition of activity is really whether they're going to actually do things specifically. There's a lot of activity going on at sponsors right now. We're having a lot of dialogues. There's a lot of people talking about what is possible, and a lot of the thematic investments where sponsors have a thematic point of view, they're looking very carefully at what could be happening in terms of price, especially those who are looking to purchase to see whether prices come down. So I would say that the sponsor activity right now is moderate. It's going to be difficult to really call the turn for them. they happen to often be more agile and move faster. And so we're just going to have to watch. So I would say that your premise that right now we're having a slowing and we don't exactly know when that's going to turn is true.

Great. Thank you for taking my question. Thank you. One moment for questions. Our next question comes from Brandon Hawkin with UBS. You may proceed.

Good morning. Thank you for taking my question. Just wanted to start on, I guess, sorry, I delimited to one question. So for mine, I wanted to focus on the comp. Celeste, I believe you had indicated that you expect a 61% comp ratio for the rest of the year. Typically, you guys have reasonably good visibility about six months out on the revenue side. And of course, the comp ratio is informed by both the numerator and the denominator. So just would want to confirm that that would be the case. And what components underpin your assumption around the comp ratio? How about recruiting? Do you expect to stay active in the back half of the year? And Is it considering some of the continued upward pressure from recruiting? And how are you thinking about recruiting right now? Is the market attractive? Evercore's gotten active in prior downturns and it's definitely helped in the long run, even though sometimes it can add some near-term pressure. So any call would be helpful. Thank you.

Let me start with the recruiting question and then I'm going to turn to Celeste to really speak specifically about how we set that comp ratio. But in terms of recruiting, we intend to stay active. As you heard, we've made seven hires in the senior level so far this year. We are continuing to talk to A-plus talent. And if we have the opportunity to hire A-plus talent, we're going to continue to do that because we do believe that it's always an opportunity when there is a lull in the market to really see whether there is talent who really fit what we need to bring over. So you will always see us in the market for age plus talent. We may get more active or less active given what the opportunity set is, but we are going to stay in the market. We continue to watch carefully in terms of the activity levels. Frankly, I'll just make one other comment and then turn to Celeste, which is there's more uncertainty and volatility in what we see as the outcomes for earnings than you could see in the past. So when we say we look six months out, I think that there is just more uncertainty now that we're dealing with than at most times that we've spoken to you in our earnings calls.

Thanks, John. Brennan, look, given the environment, the comp ratio really is going to be a function of revenue. The 2Q ratio is based on our estimate as of today for the full year, and it will change depending on how things progress. And as John said, we have less visibility than we do versus past stronger periods, and we do have a strong backlog, but there is a lot of risk associated with that. It's really driven by the outlook for the business. Last year had a significant amount of operating leverage. To some extent, you're seeing that reverse this year. So we obviously pay for performance, but when we have really, really excellent years that accrues and we're able to reduce our comp ratio, and this year you're seeing a bit of the reverse. So it's really driven by revenue in this environment.

I guess the one thing I'll say to reemphasize, because I think it bears reemphasizing, which is We have a strong backlog, but the way we're thinking about it right now is that there's an elevated risk of conversion, and that's really what needs to be evaluated.

Oh, that's really fair. Thanks a lot for the color.

Thank you. One moment for questions. Our next question comes from Michael Brown with KBW. You may proceed.

Hi, good morning. Good morning. Celeste, in your prepared remarks when you were covering expenses, you made a statement. You said we are consistently reviewing our expense practices, which seems like a purposeful statement. But of course, it's not surprising to hear in this challenge backdrop So assuming that the revenue environment does remain challenged here, can you kind of expand on the levers that you see in the expense space to help manage the margins relative to this backdrop?

We're not sure where the call dropped off, so I'm going to give more detail than you're asking for on the expenses just to make sure that everybody is on the same page with what we think we told you. We've said all year non-comps will continue to run above 2021 levels, which was very much reduced by, you know, people not doing normal things because they were at home. And there are a number of factors that, including the ones we talked to you about at the beginning of the year, but other factors that drove this quarter. So we are seeing an increase in travel as people are getting back to sort of business as usual post-COVID. Bankers are on the road seeing clients. And that, as John said, it's really important for us to get out to see our clients, so we're going to continue to encourage that. And we're also seeing, you know, the big increase, the increases in in-person conferences, like the Clean Energy Summit, which was really a great event for us, as well as other events. So, you know, we've talked to you about over time, we'd probably get to 70 to 80% of, you know, the sort of pre-COVID trips. We still think that's a good level. you know, domestically, our trips as a percentage of trips pre-COVID, so the same quarter in 2019, we're around 69%. And then as we look, you know, including all the global travel, it was about 64%. So you're seeing a lot more domestic trips, less of the international stuff yet. So still some room, a little bit of room to ramp up, but people are really getting back out there. And, of course, you know, everybody has read about and maybe has experienced the increase in travel costs given the inflation there. We also saw an increase in professional fees. Those move up and down. They are related to the ones that you would expect, like legal and things like that, but the movement from quarter to quarter for us is typically driven by search and placement. There's one thing I'll call out in a minute that was more episodic. And then generally our costs, associated with the growth over time drives a bigger footprint, or you're seeing increase because of our bigger footprint. So we have more people in the past, we need more space, and then frankly, as people come back to the building, it costs more money to run the building. So we added some space in New York. At the end of June, we added some space in London earlier in the quarter. You saw some of that flow through this past quarter. You'll see some flow through in the third quarter. They're not huge numbers, but they add up. I want to call out the episodic items in the quarter. In professional services, there was a very much larger than normal sub-advisory fee share that flowed through. We usually have those, but they're typically very small. And then we had, you know, our bad debt tends to be very lumpy. We don't, you know, it's not like a big balance sheet company where you have a sort of consistent estimate. So we did see bad debt increase, you know, based on just one very old deal in the quarter. Last year was a reversal of bad debt. So excluding these items, our non-comps would be closer to where the street was. To your question, We are looking at, uh, and we always do look at all of our expenses. Um, I, you know, I always say Bob ran a very tight ship. Um, but in this environment, you know, we're always going back and looking at, um, you know, policies and data spend and areas, um, beyond the sort of what you need to really invest in your business. So, but, but as a reminder, and you can see it in our income statements, the bulk of our expenses are in compensation. and they will move up and down with revenue. So we have non-comps. A lot of them are fixed, and we're really focused on the ones that, you know, where we don't need to spend or we can defer or we can reduce or just do things differently, and, you know, especially as we get bigger. So that is what we're focused on, and it's a continuous improvement generally even in better periods.

Thank you. Very, very fulsome answer. Appreciate all the callers last.

Thank you. One moment for questions. Our next question goes from James Mitchell with Seaport Research Partners. You may proceed.

Hey, good morning. You have, maybe just on buybacks, you have a large buyback program. On the one hand, your stock is down and cheaper. But on the other hand, it's an uncertain environment. So how do we think about your, I guess, ability, sort of the excess cash position you have, and how you're thinking about the risk and reward of buybacks in the second half?

Hi, Jim. Thanks for the question.

Sure.

So we remain committed to returning all of our excess capital that we don't need to run the business to shareholders. We've returned over $500 million year-to-date between dividends and share purchases. We increased the dividend, as you know, in the first quarter. We've offset all of the RSUs that were issued as a part of bonuses and then bought back about another 1.1 million shares, so 3.6 million in total. The way we're thinking about the back half of the year is we do look at a share price, and we'll be opportunistic in terms of buying back stock, but we really want to focus on maintaining a durable balance sheet Given the uncertainty of the environment, we want to ensure that we can invest in our franchise and do the right thing for our franchise over time. So we're trying to balance those things with an emphasis on making sure we have what we need to get through this uncertain period. But over time, we will return all of our excess capital to shareholders, again, as we go forward from here opportunistically from a buyback perspective.

Okay, thanks. Thank you. One moment for questions. Our next question comes from Devin Ryan with JMP Securities. You may proceed.

Great. Good morning, John and Celeste. Most have been asked, but I just want to dig in a little bit more here on some of the M&A Outlook commentary, you know, hearing a lot about the elongation of deals. But, you know, I think as you announced, I mean, volumes down 20 percent, but from a record year last year. So, you know, in absolute, it's actually still pretty good number. So if you were able to close on on kind of what's in your backlog, I'm assuming it's still a pretty good year. But there's a lot of uncertainty. So my question is, are you seeing anything? break off yet, you know, where deals are actually falling apart versus just, you know, the timing being pushed and uncertainty there. So maybe a 2022 fee actually kind of falls into 2023. So that's what's creating the uncertainty at the moment. And then just the follow-up within that is, you know, so the environment has slowed. Is it still slowing at kind of real time here? So that's what's hard to gauge or, you know, I just feel like we've kind of slowed to a lower level and now it's relatively stable. Thank you.

Thanks, Dylan. In terms of the way the flow of the deals go in the backlog, I think your observation that the deals are being pushed out is a reality. And that's this whole discussion on elongation, which is that deals come in and then there is there is a much longer period. We haven't seen things basically terminate. What we've really seen is things get pushed out. Now, honestly, I don't know whether when you see these things get pushed out, whether eventually they will go away. Certainly, the way we manage our backlog, we wouldn't allow something to stay in the backlog unless we thought it was legitimately still of a live activity. And so there is a view that our backlog is sound. Having said that, and we really believe that, but having said that, things are moving out. And I think it would be unrealistic to think that if activities are taking so long that some of them might not go away. At this point, the way we're looking at things and we scrub this hard, we don't see anything like that. In terms of your view that things are still, whether they're still slowing or whether we're kind of at a constant rate, my own view is we're kind of at a constant rate right now. I just, I don't think things are gonna go down unless if we have a significant recession, I think then you really have to reevaluate what's happening because then the big companies and sponsors and the markets go into a little bit more of a distressed situation. But right now, I think we are at a constant place, and I don't see it deteriorating from here unless there is another shock. And the shock could come, as I said, from a recession. It could come from a geopolitical problem. It could come in any number of ways. And I think one of the things that we've tried to articulate on this call is that the level of uncertainty and the risk is much higher right now. So interest rates are going to go higher, and that's something – Inflation is going to basically impact the way people feel about their businesses. The market volatility will be a reflection of these things, and there's always the geopolitical risk. So I just think in all of these scenarios, you have to put more risk into it, which really does make it more difficult to predict.

Yeah, appreciate it's fluid, but thanks for all the context. Thank you.

Thank you. One moment for questions.

Our next question comes from Anand Gasalia with Morgan Stanley.

You may proceed.

Hey, good morning. John, you've been pretty constructive on the business in Europe, and it looks like that delivered this quarter. You called that out. Can you share how much Europe contributed to revenues this quarter relative to historical levels and how widespread that was, whether that was limited to a few deals that was pretty broad-based? and what would attribute this strength to, just given the macro headwinds, do you think the stronger performance has to do entirely with share gain, or is deal activity there just holding up better than expected?

First of all, I apologize, but we really can't break that out for you. But we did, the reason we emphasized it was because there was real productivity from Europe, and in terms of market share versus activity level in the market. I think it's probably that because that activity levels are what they are and lower, the fact that some of our very talented bankers have landed some pretty interesting situations has really allowed the business to really show results. And so I think that it's too early to say that it's a real market share. win from any respect. I think it is safe to say, though, that if you put really talented people against interesting situations, you're going to be able to create some real value for the firm by really being able to deliver value for clients. And I think that's what's happening here. We have some very talented people who are applying themselves toward challenges and problems for clients. And that is actually evidencing itself in some results.

Appreciate it. That's helpful. Thank you.

Thank you. One moment for questions. As a reminder, to ask a question, you will need to press star followed by 1-1 on your touchtone telephone. Our next question comes from Brennan Hawken with UBS. You may proceed.

Good morning again. Thanks for the follow-up. So I was curious, you guys often talk about the non-M&A portion of your advisory revenue. As we enter a period where deal closing timeframes are elongating, restructuring outlook is picking up, increasingly important to try to think about and keep in mind these different sources of revenue because they have different drivers and different levels of cyclicality. Is there any way in which you could help us frame where these different sources of revenue run proportionally or at least give us an idea about how to think about those different sources and how they might behave in an environment like this? Thank you.

Sure, Brennan. Let me just start with restructuring because I think that's a good place to start. It's a really important business for us and has been one of the stellar performers over a long period of time at this firm. Our restructuring business is very, very active right now. Having said that, do I think that there is a wave of big-time restructuring assignments coming down the pike? I think there will be eventually, but not right now, and certainly there has not been that wave to date, we're active. We're active in liability management. We're active in out-of-court bankruptcy discussions and restructurings. We are active in really thinking and serving both debtor and creditor groups and giving them advice. There's just a lot of activity, and we think we're really well positioned, but right now, The bankruptcy rate is, as we said in our comments, relatively low. And so we're waiting for a change there. And I think we're going to see over time what happens. And as we've said, there's so much uncertainty in the market right now. But we feel very well positioned there. And it's a very important business for us. Obviously, private capital advisory businesses are very important to us. They're really excellent businesses. they continue to generate activity. And so those are businesses that I think are important to us and we have a good sense for. Our activism business is a business that really is not necessarily market cyclical, although activists get active in different scenarios. But there's quite a bit of activity in that business right now. And then, you know, the equity capital markets business. We have a very good number of assignments lined up in our backlog there. And we believe that if that market opens up, that's going to have real activity for us. So those are just a series of businesses that are non-M&A. Obviously, we're building our sponsors business. It's a very important effort for us. To the extent that the markets begin to turn, sponsors may start sooner. than some of the big corporates. That has happened in the past. We're not predicting that, but it could be. But building out that business, I think, is going to help us also. So I think we have a number of places that are quote unquote non-traditional M&A oriented businesses. But at the end of the day, I do want to make sure that I'm clear about one thing, which is the merger business is a very important business for us. And obviously, it's very impactful for us. I hope that helps, Brennan.

It does. I know in the past you all have avoided helping us understand the proportion of advisory revenue that might come from some of these, so I just wanted to click back on that part of the question in case it was missed to give it another shot.

No, unfortunately it wasn't missed, and I'm sorry that I'm not responsive on that. I like to try and be responsive on everything, but at this point we can't do that.

All right. That was worth a shot. Thank you.

Thank you. I would now like to turn the floor over to John Weinberg for any closing comments.

I want to thank all of you for tuning in today and look forward to speaking to you in our next earnings call.

Thank you. This concludes today's Evercore second quarter 2022 financial results conference call. You may now disconnect.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1.