Evercore Stock

Good morning, and welcome to Evercore's Second Quarter 2026 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore management and the question-and-answer session. [Operator Instructions].

I will now turn the call over to Katy Haber, Head of Investor Relations at Evercore. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today for Evercore's Second Quarter 2026 Financial Results Conference Call. I'm Katy Haber, Evercore's Head of Investor Relations. Joining me on the call today is John Weinberg, our Chairman and CEO; and Tim LaLonde, 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 2026 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 1 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 Evercore's 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 reconciliation, 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 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 closing.

I will now turn the call over to John.

Thank you, Katy, and good morning, everyone. Our record second quarter revenues capped off a record first half for the firm, underscoring the strength of our platform and strategy. For the quarter, we generated $1 billion of adjusted net revenues and adjusted diluted earnings per share of $2.91, up 19% and 20%, respectively, from the second quarter of last year. And for the first half, our revenues were $2.4 billion, up 56% year-over-year.

Performance in the quarter continued to be broad-based across nearly all of our businesses, with record second quarter revenues in our North American Strategic Advisory business, the Private Funds Group and the equities business. And it was the best quarter ever for underwriting and wealth management.

Our results reflect the strength of our client franchise, the benefits of our diversified business model and the continued execution of our long-term strategy despite pockets of market uncertainty experienced throughout the year. Global industry-wide announced M&A activity remains healthy and is currently tracking well above last year's year-to-date levels, which was the second most active year for M&A on record.

Large-cap strategic M&A remains the primary driver of activity, while middle market and sponsor-related deals, though active continue to run below historical levels. Equity markets have been resilient, reaching all-time highs in the quarter and broader financing markets remain active.

All in all, the building blocks are in place for a healthy dealmaking environment. As it relates to Evercore, we continue to see solid activity across a broad range of sectors, products and geographies.

Looking ahead to the second half of the year, client engagement remains strong. and our backlog currently sits near record levels. Though as is always the case, the timing of backlog conversion into revenue can vary from quarter-to-quarter, and it is best to evaluate our business on a longer-term basis.

We believe the M&A cycle has further room to run over the medium to longer term, supported by both large cap activity and increased participation from financial sponsors in the middle market. We are also seeing more companies pursue M&A to achieve scale and to respond to the technological transformation and disruption brought on by AI, which we expect to be a driver of activity across a number of sectors over time.

While the market backdrop remains dynamic, we are encouraged by the outlook for our business and expect to see continued activity in the latter part of this year and into next.

Turning to talent. Since our last earnings call, 4 senior managing directors have joined our investment banking practice in health care, industrials, private capital advisory and our private capital markets group, all based in New York. Further, 7 additional SMDs have committed to join our growing global investment banking franchise in key areas, including restructuring in the U.S. and Europe, health care, chemicals and equity capital markets as well as 2 new hires based in our Frankfurt office.

As of today, we have 19 new SMD additions year-to-date, 11 external hires including those that have committed but not yet joined and 8 internal promotions. That brings the total of SMDs in our global investment banking practice to 188 with more than 50 currently ramping. In addition, we had 1 SMD join our equities business and equity trading.

Investing in talent is core to our strategy, and we remain committed to thoughtfully expanding our platform over time.

Now let me turn to our businesses. In North America, strategic advisory activity was robust in nearly all sectors with particular strength in health care, technology and industrials. While industry-wide announcement trends among financial sponsors are still below historical average levels, our sponsor-related activity is up meaningfully year-over-year as we expand our coverage effort with that client base.

Our EMEA Strategic Advisory business had a strong quarter and a record first half. In 2025, we announced the Robey Warshaw transaction. and we also established local presence in new European markets. Our enhanced and integrated teams across the region are seeing a real pickup in activity. Our strategic defense and shareholder advisory group continued to be busy as activist campaigns push companies to explore sales and strategic reviews.

Globally, in the second quarter, we advised on a number of significant transactions, including Arcosa's $8.5 billion sale to CRH. Iridium Communications sale to Rocket Lab, National Grid's $1.75 billion investment in [ Celent ] and Victoria's Secret in its successful proxy fight against BBRC. We also continued to see strong performance across our non-M&A businesses, which generated more than 40% of total revenues over the last 12 months as of the second quarter.

Liability management and restructuring business maintained strong activity and dialogue levels consistent with trends we have seen over the last several quarters. Our private capital markets and debt advisory team remains active with particular strength in structured equity transactions and securitizations as clients continue to seek innovative capital solutions.

Private Capital Advisory maintained its position as the market-leading business in this space and delivered another strong quarter. Our Private Funds Group delivered a record second quarter even as the fundraising market remains subdued, driven by continued strong demand for the highest quality funds.

Our Equity Capital Markets business had its best quarter ever, supported by more receptive issuance markets and strong investor demand. We served as an active book runner on 19 transactions with a balanced mix of IPOs and follow-on offerings and benefited from a resurgence in health care activity as well as strength across several other sectors.

In the second quarter, we were active book runner on Paravalos, medicines, $771 million IPO, the largest biotech IPO of all time and lead left bookrunner on Red Cap's $259 million follow-on offering. Our equities business had record second quarter revenues as our team continues to deliver best-in-class content corporate access and execution services to our institutional client base.

And finally, our Wealth Management business delivered its best revenue quarter and finished with quarter end AUM of $16.2 billion.

In summary, our record first half results reflect the breadth and durability of our platform and the continued execution of our long-term strategy. We remain encouraged by the level of client dialogue and engagement we are seeing across our global franchise. We continue to invest in our business, positioning us to capture opportunities as they emerge.

With that, let me turn it over to Tim.

Thank you, John. We are pleased with our results, which reflect the progress we have made growing and strengthening our firm and diversifying our revenue streams. For the second quarter of 2026, net revenues, operating income and EPS on a GAAP basis were $990 million, $147 million and $2.32 per share, 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.

Our adjusted net revenues of approximately $1 billion were a record for the second quarter, up 19% versus a year ago. Throughout the quarter, activity levels and revenues strengthened relative to our expectations at the start of the quarter as the market environment experienced some improvement and deal activity increased.

We have consistently said that our business, both revenues and expenses should be evaluated across multiple quarters, and that continues to be the case.

For the first half of 2026, adjusted net revenues were approximately $2.4 billion, up 56% versus the first half of last year and represents a record first half for the firm. Adjusted operating income was $190 million for the second quarter and $544 million for the first half, up 21% and 99%, respectively, year-over-year. Adjusted earnings per share were $2.91 for the second quarter and $10.48 for the first half up 7% year-over-year, respectively.

Our adjusted operating margins for the second quarter and first half were 19% and 22.7%, respectively.

Turning to the businesses. Adjusted advisory fees were approximately $776 million in the quarter, up 11% year-over-year. For the first half, advisory revenues were up 61%. Our advisory revenues are a record for the second quarter with strength across nearly every area as well as increased productivity levels.

Underwriting fees of $97 million represented our best quarter to date, increased 21% from the prior year period. In the first half, underwriting revenues were up 76%. The strength was driven by robust follow-on and IPO issuance. Commissions and related revenue was $64 million, a record second quarter and up 9% year-over-year.

Adjusted asset management and administration fees were approximately $25 million, up 15% versus the prior year. Adjusted other revenue net was approximately $39 million with a little over half due to gains on our DCCP hedge portfolio as equity markets rallied in the quarter and a little less than half due to interest income.

Turning to expenses. Our adjusted compensation ratio for the quarter was 63.5%, down approximately 190 basis points from the second quarter of last year and down approximately 50 basis points from last quarter. We remain focused on making gradual progress over time and balancing that with continued investment in our business. Adjusted non-compensation expenses were $175 million, resulting in a 17.5% noncomp ratio. While this is up significantly from last quarter and from the year ago quarter, like revenues, noncomp expenses and ratios are best evaluated across multiple quarters.

Our noncomp expense ratio for the first 6 months is 13.5%. Nonetheless, the increase for the quarter was larger than normal and is primarily due to investments that are intended to yield near-term results for the firm, such as conferences and client events or expenses incurred in deal pitching and execution.

Also investments that are intended to build our business with medium- to longer-term results such as technology, including AI and data management strategies, search and placement fees related to SMD and non-SMD hiring and occupancy costs related to offices for our growing team of professionals.

Further, there is some element of seasonality or episodic costs, which we expect may be reduced in coming quarters. For the full year, we would expect to see a modestly higher growth rate in noncomps relative to what we have experienced over the last couple of years. We are striving to achieve an annual non-comp ratio that is approximately in line with what we achieved last year.

Our adjusted tax rate for the quarter was 29.4% and compared to 30% a year ago. We anticipate that our effective tax rate for the remaining quarters of the year will be similar to what we have experienced in those quarters over the last few years.

Turning to our balance sheet. As of June 30, our cash and investment securities totaled nearly $2.4 billion. In the quarter, we returned a total of $150 million of capital through the repurchase of approximately 330,000 shares and the payment of dividends.

For the first half of the year, we have returned a total of $823 million of which $734 million was through share repurchases at an average price of approximately $325 per share. We have already surpassed the full year record for share repurchases based on dollar amount.

Our second quarter adjusted diluted share count was 43.7 million shares, down over 730,000 shares from the first quarter. We continue to maintain a strong cash position which enables us to meet regulatory capital and operating requirements while providing us with the resources to implement our strategic plan.

As we enter the second half of the year, our business remains healthy. We are confident in our plan and optimistic about the opportunities that lie ahead as we remain committed to investing in our business and creating value for our shareholders over time.

With that, we'll now open the line for questions.

[Operator Instructions]. Our first question will come from Steven Chubak with Wolfe Research.

I was hoping to double-click into some of your comments around noncomps, just given the bulk of noncomps are newly or fixed. It's a big driver of operating leverage for you and peers historically. I recognize that some of the investments will be episodic but the headcount growth is up 10% year-on-year.

Senior FD count is up mid- to upper teens and the noncomps are up 30% year-to-date on a year-on-year basis. So thinking about all the areas that you're looking to invest more heavily. Still trying to understand given some of the items you cited might appear to be table stakes, why you're not seeing more non-comp leverage relative to your peers?

And is there anything we can infer about the second half ramp in activity given the near record backlog and the fact that you tethered it to deal pitches, which you referenced earlier.

Yes, sure. There's a lot packed into that, but happy to tackle it. First, let me take a moment to reiterate or a frame that people have heard often from us. including on this call, which is our business needs to be evaluated on a multi-quarter basis. And our comp ratio for the quarter is, of course, 17.5%. We're not happy with that.

For the first half, it's 13.5%, okay? That would be the first point. This compares to a pre-COVID noncomp ratio of more than 17%. Also, in my prepared remarks, I mentioned that we would expect the growth rate in noncomps this year to be modestly higher than what we experienced the last few years and that we are striving to finish with a noncomp ratio that's approximately similar or in line with what we experienced last year.

And then to remind folks last year, it was 14.2%. And so those are the first things, which is multi-quarter for the first half, and we're expecting something more in line with what we achieved last year.

Now let me double back on the increases we did have. First -- and this is important. The majority of this is investments in our company for growth. Some of that growth is realized in the very near term. That's related to things like conferences, client events, deal pitches, deal execution, which result in travel and professional fees. So some of that is just related to what we expect to be near-term revenue and near-term increased activity.

Second, investments that provide returns in the medium term. that's client hires. You mentioned senior MDs up. This year, we've added 11 through external hires. We promoted 8 internally. That's 19 more. We've got 50 who are ramping. That's a lot. And beyond that, we, of course, can hardly turn on the news or pick up a magazine without reading about AI and technology. And we have doubled down on our investment there.

We added a terrific new Chief Information Officer in 2025. We built out a senior team around him. We have a number of projects underway. And we expect that those projects will pay dividends for us over the coming years. And so that's the next point. And then as you mentioned and I mentioned in my prepared remarks, there are episodic items. And so -- or items that are seasonal in nature, and those include things like the arrival of our interns. And certain conferences and/or off-sites that are -- happen to be held in that quarter.

And so we're hopeful that those are not going to be things that we're going to either see or see in the same magnitude over the next several quarters. And so we should get some help there as well. And so there's nothing really overly complicated. It's really just that simple -- multi-quarter, 13.5% for the first half, something similar to last year, for the full year is what we're striving for.

And what we -- the increases you are seeing are primarily due to investments and then to a lesser extent, to things that we hope will either be smaller or not present. -- in some of the upcoming quarters. That's that. And I think you asked about second half ramp on revenues as well.

And John, I don't know if you want to maybe share some thoughts on that and then I can chime in, but...

Sure. On the second half, we are looking at really a very strong second half. We are seeing substantial client engagement. It remains very strong. Backlogs continue at near record levels. which were also echoed by engagement letters and conflict checks, and we're very encouraged by the business and the outlook for our business. And we expect continued strong performance through the year and into next year.

Yes. The only thing I might add to that is, as you're thinking about comparative results, just recall that 3Q and 4Q last year were both record quarters.

Our next question comes from James Yaro with Goldman Sachs.

So it feels like there's a 2-speed in investment banking or M&A market right now with large-cap strategics outperforming the mid-caps and sponsors. I was hoping you could perhaps provide a little bit of additional color around the mid-cap and sponsor component of the M&A market and what you think actually gets that to improve more fully and perhaps any sense of time line as well?

Absolutely. So we're seeing increased activity, both in the middle -- mid-cap area as well as sponsors. It is not clear that this is going to drive and open the dams-type rally in these sectors. But clearly, there's real activity, and there's a lot of movement in terms of especially in sponsors, there's a lot of dialogue and thought about when is the opportunity going to come and when are people going to really start moving.

Our business is actually in a very good place. We've added substantial numbers of people in sponsors, in sponsor coverage. And our pitch rate is up substantially from where it was this time last year, and our win rate is also up. So we're seeing sponsor activity up in a material way. In addition, we've continued to invest in bringing together our private capital advisory businesses and our classic sponsor M&A business, and we're seeing some real fruit to that labor.

So our sponsor business seems to be in a very good place, and we're actually very optimistic about where that is going. In terms of middle market, we've added several players in the middle markets. And what we're seeing is that the dialogues are quite healthy. They certainly aren't following the very strong large-cap strategics, but there's a lot of dialogue and activity that we feel is going to continue to build the strength of that sector. So all in all, those 2 sectors we see as a build.

Our next question will come from Brennan Hawken with BMO Capital Markets.

Tim, and John, you spoke to the strength in the business. Tim, you spoke to tough comps in the back half of 25%. But typically, we see the second half revenue exceed the first half revenue for you just given the seasonality of the business. The first half was -- had the first quarter, which was remarkably strong, especially for the first quarter. Is it still reasonable to think that the back half revenues can exceed the first half? Or is that going to just be tougher comp in addition to the back half of '25 being tough?

Yes. are, thanks for the question. I think the way I think about it is -- it is the case if you look back at our historical quarterly revenues for the last, let's call it, decade. To the best of my recollection, I think the fourth quarter is just about always been the best of those 4 quarters. As you mentioned, first quarter also was an extraordinary quarter at $1.4 billion, which is the biggest quarter in the history of the firm and $100 million higher than our fourth quarter last year.

And look, we stopped short of giving revenue guidance. And so I don't want to go too much further than that other than to say, as John said in his remarks, we have new record levels of backlogs. Activity levels are good. We feel good about our business and a continued gradual build, particularly into the latter part of this year and next year. But particularly given uncertainties that always exist in the environment going to stop short of being any more specific than that.

But what I would say, Brendan, is that the dialogue levels, the deals that are in-house and the likelihood of these deals coming to fruition is all quite strong. And so we feel good about the tone of the business. As Tim said, we can't predict, and we're certainly not going to give guidance. But I think the business is healthy.

Our next question will come from Devin Ryan with Citizens Bank.

This is Neo Eloff on for Devin. The question we got is just kind of on how AI is impacting both buyer and seller expectations and kind of how that's maybe evolved over the past few months. Obviously, software in an area that's been heavily affected -- and so maybe you can discuss that as well as kind of some of the other verticals?

And then maybe if you can give some insight into how spreads are tightening or whether you're seeing that or not?

What was the last part of that question?

Whether spreads are tightening?

Okay. So let me start with software. Obviously, there was a pause in the market for software several months ago. And what we're seeing is that the software sector, especially in the M&A side and the dialogues connected with those have started to warm up again. And so whereas it is somewhat bifurcated in that the very high-quality software companies are actually in dialogue both to do M&A on the acquisition side as well sponsors who own software companies thinking about whether they sell them or not, that activity has picked up.

And what we're seeing in our really software coverage business is that the activity level looks to be quite healthy, and we anticipate that, that will continue to warm and there'll be more activity.

In terms of the activity level generally for AI. AI is a source of really a great deal of M&A discussion. Obviously, AI is driving strategic thought for lots of the big strategics, and that's why you're seeing some of the big strategics look to really do some much -- much stronger and bigger acquisitions. You're also seeing a lot of the big strategics look at capabilities they think they need and the view that they need to scale to be able to compete in AI with a lot of their competitors.

So on really all fronts, that's been a catalyst for continuing stronger dialogues. In addition, the AI software relationship has really driven more dialogue in the restructuring side of our business where there are some good software companies that need some support on the liability management side.

And so we're also seeing activity and expect some activity coming out of software and AI and the impact that AI will have on some of the software companies. So -- there are any number of places where those relationships, which you pointed out, will actually drive some investment banking activity.

Yes. The only thing I'd add to that is we are seeing green shoots of improvements in that space on the M&A side.

Our next question comes from Mike Brown with UBS.

Maybe just a quick clarification on that last point, and then I can ask my question, but is that comment and you said at the end, is that kind of sponsors and strategics when you talked about the green shoots in the software space?

Yes. We think that there is continuing activity. Our dialogues really are across the board. So with respect to sponsors, the sponsors, especially the ones that have have really been focused on software are seeing real opportunities, and we're in a number of dialogues for that.

And then on strategic, there has -- there is a very strong point of view that software is actually continuing to be powerful that the blip that happened several months ago was an overreaction. And there is real opportunity both in buying and selling software companies going forward.

Okay. Great. I did really want to ask you about Europe. So with the Robey Warshaw acquisition, that seems like it's really been a good strategic home run for you guys partnered together now. Maybe just discuss a little bit about what you're seeing in Europe, specifically on the M&A front. How is the the confidence levels for continued activity there and expectations for that market? Do you think that there's still a good pace of acceleration that can come through there? And then do you see that as an opportunity to continue to take share in the region? Just a quick update on what you're seeing on the hiring front as well.

Sure. So we see real strength in our European businesses. As you've seen and you've heard from us, we continue to add to our capabilities and also our coverage of companies in Europe. You mentioned Robey Warshaw. That has gone extremely well. The integration has been smooth, and we are really pleased with the way our 2 firms have come together. And we've been involved in several important and large transactions where Robey Warshaw and Evercore have worked together, and we're really pleased with that. As you know, we've also added capabilities throughout Europe. So for example, you've seen that that we've just added 2 very strong people in Frankfurt.

We have also added a Stockholm office. We are building out our Milan operation and our Paris operation, which is a couple of years old is actually doing extremely well. And so really across the board, joining Spain, we really have built out of business. And then what we've done is we've actually built in capability in terms of products that we can add.

So for example, whether it's Data Advisory, or whether it's restructuring, we've added to both of those also. And so on the restructuring side, which was a business which we were really, I think, underinvested in, we have actually put in some significant investments in European restructuring and liability management, and we're seeing real fruits to that also.

So we feel really enthusiastic and optimistic about the business that we've built. We feel really good about the recruited. And we feel like it's coming together really nicely. And so that is a business that we do expect to really compete even more effectively we think our [indiscernible] the ambitions we have for that business are well founded.

Our next question comes from Jim Mitchell with Seaport Global Securities.

Maybe just on ECM, a record quarter in the second quarter. So I guess -- how are you feeling about the pipeline in that business? How much of the quarter would you attribute to just a really strong environment versus sort of your efforts to diversify your sector coverage and gain share and maybe thinking about higher lows and higher highs from here? Just any broader discussion on ECM would be great.

We feel really good about our ACM operation. I think we're making real progress it's going to be -- it's going to be up and down. The market is clearly going to determine some of that. We did get the benefit of a very good market. And we see -- as we look out, we see good backlog and really significant business in the next couple of quarters as far as we can see.

We feel really good about the people that we've added. We also feel really good about the way that we are approaching the ECM business. Evercore has really taken seriously how we market ECM and really how we engage ECM and how we call on the corporates that we are dealing with really throughout. And so I'd say that you can expect our ECM business is going to continue to grow.

We have an aspiration to be a top 10 underwriter. I think personally, I'm very optimistic about that. I think we have some really high-quality people, both who are inside ECM and also people who are selling that product. So I think we feel that it's actually realizing some real potential.

Our next question will come from Ryan Kenny with Morgan Stanley.

I'm wondering if we can get more details on what your current dialogue with clients is around the potential for additional rate hikes. And what the resilience of the pipeline is if we get a surprise hike or if we get lingering uncertainty on future hikes, would that be a material headwind to any part of the business?

We do not think that the rates at this point are really going to determine merger activity or even the activity within other parts of our business. We think that that -- that the market is being driven by other forces right now and financeability is not really an issue in any of the M&A that we're seeing, nor is it really an issue with respect to the sponsor businesses, although, as we all know, if rates go up substantially, that may put some stress on some of the sponsor portfolio companies.

But we really think that the market is actually pretty noncommittal to really where rates are going to be. I think that it's not really going to impact really this market. We do -- in terms of you're asking us how are we thinking about rate hikes, right now, our projection in ISI is that it's going to be pretty neutral through the end of the year.

And so I think that's the way I think we're approaching it and thinking about it. But generally, we think that where rates are not really going to drive the merger market, at least in the near term.

[Operator Instructions] Our next question will come from Alex Bond with KBW.

Maybe 1 on PCA. Just from looking at the industry data and commentary, it suggests that secondary volumes may have slowed sequentially at the industry level in 2Q. But from your remarks, it sounds like it was another strong quarter for this part of the business.

But wondering if you can share with us your expectations for PCA through year-end and also to the extent you think your leading position in this space may help you weather periods where industry volumes may slow to a degree.

And then also it would be helpful to get any color around how what's happening in software is impacting both current activity levels across the secondary space as well as forward expectations here.

So our PCA business is actually performing well, and we feel really good about the prospects going forward. As you know, we have a a very large market share, and we really expect that we will be able to protect that market share.

And really, the activity level is very healthy right now, and we see that continuing through the end of the year. as we have discussions with them, there is a very strong inflow of business. They are seeing a lot, and it's really across the board. It's both CV as well as LPs and GP business.

We have some new products that we're also marketing and those are -- that's all going well. And so generally, that business is quite healthy. In -- the second part of the question was on software.

Software is a really important part of the business in terms of the way we run our business. In terms of software opportunities, I think that those opportunities are consistent with really what we've seen in the past, which is software is an asset that is being considered on all different levels. As you know, CBs are an option in terms of how you monetize.

There are there are many circumstances where the sponsor owner of a software set of software assets, and we're seeing this quite a number of times, where there's a real belief in that asset that the market may not be sharing. So the CV may be a very good alternative to kind of go to the next level and get some monetization in that asset.

So I think what we're seeing is that that software is really continuing to be a part of the PCA business. I think those dialogues are quite healthy around all the different aspects and I think we're feeling like this is going to provide some real fuel for that business going forward.

Our next question comes from Nathan Stein with Deutsche Bank.

I wanted to follow up on the non-comp side of the expense base. Is the higher growth rate expected in non-comp dollars this year all really from the episodic components in 2Q and investments into the business that you already highlighted? Or does this mean that non-comp expense dollars should overall be higher in the second half of the year versus the first half?

And separately, in the press release, you note there was a provision for credit losses that drove some of the increase in non-comp. Can you just talk more about what that was and how much this drove the overall increase?

Yes, sure. So that, of course, has multiple facets to it. But when you think about -- I mean, the crux of the question was noncomp growth and what we expect from that and what it's attributable to -- the way I would think about it is there's a baseline growth that will exist because we're a firm that's obviously grown quite substantially over the last 3 years, 5 years, 7 years, 10 years, whatever time frame you pick.

And so there is obviously some correlation between headcount growth and noncomps. And so -- what I -- in the past, what we had talked about with people a little bit was to think about headcount growth. And so that's on the order of 10% recently and then inflation. And then you've got certain elements that might appreciate at a cost faster than inflation.

But let me pause on headcount for a second because one of the things we've tried to do over the years, and I think have done a pretty good job of is making sure we grow our revenues faster than we grow our headcount.

Now given the cyclicality of the industry, that might not be true in any single year, but across any meaningful number of years, whether it's 1 year, 3 years, 7 years, 10 years, we've grown our revenues faster than we've grown our head count. That's important, and that's one of the things that helps give us leverage. So that accounts for some of it.

Then there are certain elements of non-comps that are going to grow faster than the cost of inflation. One of those is data or information. We're obviously living in the information age, data is at a premium. We see that all over the place. And there's a little bit of pricing power there. And so -- that's one element of our cost that's increased a little faster. An element that's increased a little more slowly would be certain parts of travel.

And so what COVID did, if there was perhaps one thing that was helpful that came out of it was that it accelerated the transition to video conference calls. And so if you look at the number of trips, for instance, we're only just now on an unadjusted basis, taking as many trips as we were taking pre-COVID to do our business on a headcount adjusted basis, we're actually still something around 30% lower per head.

And so we're seeing some benefits there. But along -- kind of partially offsetting that, you've got things like oil prices are higher, that translates to higher jet fuel costs and so flights are a little more expensive hotels are a little more expensive. And so we go through with each of these components and some of them are headcount related, some inflation related, some travel to the beat of their own drummer. And then you've got technology, right? And that's -- we're at an inflection point in the technology curve. And what we see as technology is obviously accelerating at a rate that's faster than it has historically.

And any management team worth his salt is doubling down there. and making sure they take advantage of the opportunities that are available. So some element of the increase is investing there. And then -- and so as long as the business is growing, the absolute dollar amount of noncomps will tend to grow.

The point is we want -- we'd like to grow revenues faster. And if you look at us over a sustained period of time, 3, 4, 5, 6, 7 years, I think we've done a pretty good job of that. And by the way, if you look at the question implicitly gets at the one of is their operating leverage in the business.

And if you look at our first half results, what you would see is revenues up 56% earnings of 77%. And okay? That's the definition of leverage. And we're striving to achieve more of it in the long run. In the short run, there are some investments to be made as we build out our business.

Our next question comes from [ Gabriel Angelini ] with Bank of America.

I think the hiring backdrop has been quite competitive for some time now and you even called out search and placement fees, 1 of the drivers of both elevated non-comps. But maybe can you give us a mark-to-market around what your appetite on the hiring front has changed at all? And does just the degree of competition on hiring make it more attractive to do whole business acquisitions at this point?

Thanks, Gabriel. So we are not really in the business of doing big lift-outs. You've seen we've really only done a couple of situations in recruiting where we've done multiple people. We have the capacity to do it, and we have the appetite. But really, this question is really much more about how we think about talent and what we really do is we -- our production in terms of how many people we bring in is more -- is more an input -- I mean, output than an input, meaning that we really are in the market looking for highly talented people, A+ people, and we're continuing to do that.

And in fact, our pipeline is very healthy right now. You heard that we've brought in 11 new people this year. And we continue to be in the market and in several really important dialogues with some very talented people. So we will continue to build those. We're not really, though, looking at big lift-out type opportunities. There may be a couple where we have 2 or 3 people who we would bring in together. But really, it's much more a one by one.

We've always done it one by one. We've always done it in a very custom approach filling needs we have with A+ people. And frankly, it really all starts with the quality of the person. And so we're going to keep that consistent.

Next, we have a follow-up question from Steven Chubak with Wolfe Research.

John, I have a bit of a more nuanced question on comp leverage. Just given historically, you've recruited much more actively from both bracket peers versus some of the independents. As we think about the cost of buying out deferred for senior talent at the bulges, the cost has gone up meaningfully, just given the share price appreciation we've seen in the last 3 years, whereas the deferred equity appreciation at some of your smaller independent peers has been far less.

I was hoping you could speak to how you're evaluating the cost to recruit from bulges and whether you're still focusing more of your recruiting efforts there versus the independents and how that might inform the longer-term comp trajectory.

So Stephen, really, to be honest with you, we've never really considered focusing on the balls bracket versus focusing on independents. We really have done it 1 by one. And the way we do it is we look for the people who we've identified as highly talented A+ talent, who we think will fit culturally to the firm. And those are the people we focus on. The -- believe it or not, the way we recruit I don't really see a real material difference between the people we take out of the bulge bracket versus the people we get from the independent side.

Really, it's as much as anything how their business, the business they've constructed and how they go about it. So I think if you're really trying to figure out how we're going to really proceed in terms of growing the business with the external hiring process.

I think what you should assume is we're going to continue to look across the board -- it's going to be really both bracket and independents. We're going to be looking for the most highly talented people. We may have to pay for the most highly talented people, but I think we do it in a way where I think the firm really benefits the ROI on the talent that we bring in when they come into our platform and they start to really work in the Evercore system it's very good.

And if we go back and we do do this, we look at kind of how do we do in terms of the people we've recruited I think we feel really good about it, and that's why we continue to kind of move forward and drive growth this way.

Obviously, internal promotions are something that we share about, and we're spending a lot of time making sure that we are developing our programs to do it. But I think you can assume that we're going to continue the process of really looking broadly at the market and hiring the most important -- the most effective people who are going to drive our business the best.

Next, we have a follow-up question from James Yaro with Goldman Sachs.

I hope to just put a fine point on margins. So I think if we look back from 2016 to 2022, your annual adjusted operating margins were in the rough range of 24.5% to 34%. If I take out the outliers, specifically 2021 to elevated to 34% and the low in 2019 of roughly 2.5% the other years in that range, we're quite tightly clustered around 26% to 28.5%. That compares to 22.7% in the first half of this year.

So I was just hoping you might be able to comment a little bit on the operating margin more broadly from here and whether it could return to those historic levels or whether anything has changed structurally?

Yes, sure. By the way, though, we probably have at least a slightly different perspective on the way one looks at the historical margins and think about it being more in the kind of 24.5% to 25% range because it really has to be looked across full cycle without exceptions. And so -- but taking that into mind, I think what we've seen is that we are coming off in '23, what I would call probably the worst investment banking market in the last 15 years going back to the financial crisis.

And so we're coming back, the margins were tight. We've been improving them each year. I think if you look at -- I know people like to focus on comp ratios a lot and that has been higher. But as I pointed out, one of my previous answers, the noncomp has been lower. And so we're probably ballpark 300 basis points lower than we were in the pre-COVID years, and that offsets some of the higher level of comp ratio.

We've also talked a bit about investment. And so in my view, margins cannot be looked at in a vacuum. They have to be looked at hand in glove with growth, okay? And so what I would point out on that front is that we've just delivered a first half where the revenues are essentially the same as they were for the entire year in 2023.

And that if you go back a ways, I was looking at our revenues for a different exercise I was doing and I was reminded that a dozen years ago, our revenues were in the $800 million to $900 million range, a dozen years ago. okay? In the last 4 quarters, there are $4.7 billion. And so when we think about our business and about creating value for our shareholders, what we're really doing is looking at maximizing value, which is a combination of growth and margins. And on that measure, I would say I'm pretty happy with what we've accomplished these last several years.

Our last question will come from Brennan Hawken with BMO Capital Markets.

Just a real granular question, Tim. You flagged one-timers in the noncomp here in the second quarter. Could you just quantify them, please?

I'll quantify some of it. I mean, some of it gets down into levels of detail that are probably not appropriate for broad consumption. But there was bad debt expense, which was somewhat significant.

There are things like legal filing, audit types of fees which are somewhat significant. We had search and placement costs where an unusual number of the commission type arrangements that we pay on those happen to fall in the second quarter.

And then there's other seasonal things like conferences, off-site and some are interns arriving. All of that adds up to a number that I would say is -- hits into the double-digit millions, if you sum them all up. Those differences. And some of them, we expect to either not be there or to be there in smaller quantities as we move into the next couple of quarters.

And so I would not expect to -- this quarter, you saw a increase in noncomps. I would not expect to see a sequential increase like that this upcoming quarter.

Thank you. Ladies and gentlemen, this concludes today's Evercore Second Quarter 2026 Earnings Conference Call. You may now disconnect.

All right. We are pleased to have with us John Weinberg, Chairman and CEO of Evercore.

John, thanks so much for joining us.

Thanks for having me.

So let's start out by getting a view on the current environment. Deal activity seems to be picking up momentum. How have client discussions changed this year versus last year?

Well, this year started very much like last year where we really had a lot of enthusiasm. And just like last year, there was a little bit of a hiccup in the second or third month. We are now in an environment where there's very high activity. And from my standpoint, I think our firm is finding that we are at virtually -- close to record levels in terms of backlog.

Activity is extremely high in the boardrooms and really all the discussions that we're having. And in addition, replenishment rate is very healthy. And we're just feeling a lot of momentum really across most of our businesses.

So before we dive deeper into the market and the businesses, there's a lot of momentum, your recent results were very strong. You had your best quarter ever in the first quarter, $1.4 billion of revenue. And on the first quarter earnings call, you mentioned that you expect the second quarter revenues to be closer than what you experienced in the year-ago period. So how have near-term trends evolved since the earnings call about 6 weeks ago?

Well, as we said, we were comparing this second quarter to last year's second quarter, and we said that it was going to be pretty close, albeit that last year's second quarter was a record quarter. We are seeing a real pickup in our revenues and also our activity levels. So I'd say that we are seeing just a strengthening of the market in terms of our businesses.

Meaning better than expected?

Yes.

Better than expected. All right. Clear. And on the M&A trends, which sectors are using the highest activity levels?

Virtually, there are many sectors that are actually seeing a lot of activity, whether it's health care, industrial, energy and power, infrastructure. Really there are many, many different areas that are really seeing strength across the board, even in technology. Not all areas of technology. Software has had a little bit of a pause, although it's seeming to see activity starting to come back into it. But really across the board, we're seeing real activity and a lot of optimism.

And there is a narrative in the market right now that there's more of an appetite for the large deals rather than smaller deals. And that has been the case over the last 12 months or so. But you operate across the continuum at Evercore. Do you agree with the statement that large deals are where the momentum is?

Definitely. There's a lot of momentum in large deals. In terms of boardrooms and management teams, there is a tremendous amount of dialogue with respect to what are the deals that people are really trying to think about. There's an optimism that deals can get done. There's a view that there is market receptivity for larger deals. And so there is a real strength in the large deal part of the market.

We are seeing some stirring of activity in the middle market. We definitely think that's happening. Sponsors are still going slower than we would have expected. It's up, but it's not up as materially as we would have thought it might have been or hoped it would be.

And what about AI? It seems like the pipeline is across sectors. So to what extent is the pipeline driven by AI?

Well, AI has really driven quite a bit of opportunity, because there is really some dislocation both positive and negative from people's perception of what AI is going to do. It really has -- it has yielded real strategic dialogue and activity.

And so there's a lot of opportunities, both deals where companies are trying to gain in scale or trying to expand their reach, as well as companies that are looking at other adjacencies that could be involving AI. In addition, companies are looking at vulnerability to AI. So it's really yielded quite a bit of activity and dialogue, and I think that that will continue.

That's across sectors, thinking about AI, or more in the tech sector?

It's really across sectors. I mean I think it's in tech generally, but it is also across sectors. There's virtually no business that isn't looking at the impact of AI on their business. And in some cases, that really leads them to think about doing things a little bit different strategically. I think there's just no question that the AI impetus has really driven strategies and really driven boards to think more expansively and management teams to really be thinking about what they can be doing really around the opportunities and maybe challenges of AI.

And what about the midterm? How are clients thinking about the midterm? And are they even relevant to the M&A discussions?

I don't think midterms are really entering into the dialogue. I think for the most part, companies are really looking through the midterms and they're just continuing to go. I think that there is really a focus on the market and the strength of the market and the optimism of the market that is really driving the activity.

And what about 2028 Presidential election? Is that coming up at all? Is there a perception of a window that's open now for the antitrust, transparency perspective?

I don't think anybody in corporate is really thinking about that right now. It's a little bit too early to be focusing on it right now. I think companies, management teams, boards, they're all thinking about the level of activity, the optimism of the market, the resilience of the market, the fact that there is a lot of factors in play with respect to financeability and shareholders' acceptance of scale and scaling and really allowing companies to really think about things more aggressively than they have in the past.

Let's shift to sponsors. So you mentioned earlier that maybe the sponsor side was a little bit less than what would have been expected across the industry. To what extent are you seeing the reemergence of sponsor activity? And what does it really take to get that full breadth of sponsor activity going again, acknowledging that private equity holding periods have been extended?

I think to a large extent, sponsors are really right now thinking about what is the impact of AI, both in terms of their portfolios, and also those sponsors who hold software companies, what's the impact on value. And I think there's a little bit of a pause in the sponsor world looking at really what are those impacts. I think that for the most part, large sponsor deals are still going to get done. The highest-quality companies are actually coming out and getting done and getting done quite well.

There is a real thought process going on with respect to those companies that are not quite at the A+ level or the larger deals, where people are looking at them and saying, what is the impact going to be? And how does that really impact valuation, whether it's to impair valuation or whether those deals can get done?

Inside Evercore, we have a series of deals out there, both software and non-software, that are in the market right now, and will be really interesting to see how those come about and how they fare in terms of the market and how the values come out.

I think that for the most part, we're watching carefully. We're getting business. We're -- our pitch rate is up, our win rate is up. So we're seeing really good activity. I think we're going to really see how those deals fare in the market.

Would you say that growth in private capital advisory solutions is to some extent structurally delaying sponsor growth?

I don't think so. I think that private capital advisory businesses right now are a really viable opportunity for sponsors to think about how to monetize or certainly how to drive activity in their portfolios. The continuation vehicle is a very legitimate opportunity and option for private equity. And it really takes its place along IPOs and sales and other monetizations that really will allow sponsors to manage their portfolios.

I don't think it's really impairing the activity level coming out of portfolios. I think actually it's helping it and accelerating it, in giving the sponsors more to consider. And I think that you'll continue to see the presence of these continuation vehicles as well as other private capital alternatives really coming out of the portfolios.

So as investors think about the eventual return of sponsor activity, how is Evercore positioned to take advantage of that?

Well, we've really built our sponsor coverage effort. And we've also done a lot to bring together some of our businesses that were at one point quite independent, whether it's Private Capital Advisory, whether it's our PFG group, which is the fundraising group, whether it's our GP stakes group and also our general M&A group. We are covering sponsors very differently than we have in the past. It's a much more comprehensive approach. We're really seeing synergies in terms of how we cover those possibilities.

Each of the sponsors has a much different relationship with Evercore now that we've brought it all together. And I think we're more important to sponsors. And we're -- I think our dialogues, because of that, are higher quality and we have a much better insight into what the sponsors are thinking. And really, on an asset-by-asset basis, we have an understanding as to how they're positioning those and how they're thinking about them.

And as Evercore has leaned into private capital advisory, you are a major leader there, how sustainable is the growth in Private Capital Advisory? And how do you protect the moats that you've built?

Well, I think we have a very high-quality business in Private Capital Advisory. It's built on experience. It's built on really high-quality professionals who really know how to do this business. It's built on data. We're collecting a lot of data and we're using that data in terms of thinking about things.

And it's also reputation, the fact that over time we've done a very good job for a lot of clients. And those relationships matter. And so I think that we have a very strong, defensible and, I'd say, growing business. I think that the market shares are quite strong. And it's certainly hard to hold on to market shares, but we've really been able to do that over the last number of years. And so I really anticipate that that business will maintain its strength.

And we continue to invest in it. We're investing pretty much every year in making sure that we're positioned at the very top of the business in terms of technology and people and really access.

And it's a growing pie that you're maintaining share in.

It is a growing pie. And I think that we're going to continue to try and maintain that share as the pie does grow.

Great. Let's shift gears to liability management and restructuring. So what's your view on how long current elevated levels of liability management and restructuring can last?

Well, I think the liability management and restructuring business has actually changed a lot over the last number of years. When I first started, it was really just more restructurings. We were just looking at trying to restructure businesses that were really in trouble. Because there's been so much more of a need to really give advice on capital structures and liability management for all kinds of companies, it's really grown in terms of the reach that business has.

Our business is very strong. It's -- last year was I think our second strongest year ever. And we are running at a very good rate right now, feeling very good about that business. Backlogs are very strong there. And I think the activity level is very high. And we are dealing in a much, much broader sense with companies, whether it's dealing with companies that really are looking at trying to extend and amend, or whether it's sponsor portfolio companies that really want some help in kind of bulletproofing their balance sheet, we're doing a lot of business with sponsors at this point.

And so I think that the reach of that business, the extent of our opportunity to touch different companies and different sponsors has grown. And so that business is quite healthy. And I think that the applicability of that business or the opportunity for that business to impact clients has actually expanded.

And a lot of investors are thinking through perceived headwinds in the software space, business services space. Is that likely to drive up activity on the liability management, restructuring side?

There is no question that there is a lot of activity on restructuring and liability management on software companies. Those are very strong dialogues. And I think it will drive up the activity level in that sector. I think that those dialogues are right now very much a work in process, meaning that we don't know how those will go.

Frankly, we're not negative on exactly how software is going to go. Because in many respects, some software companies have been really kind of valued down, that may not end up being valued down as people start to really interpret how those businesses will interact with AI, and really the durability of those businesses. But for the most part, we have a lot of dialogues going on with software companies in that space. And I think those dialogues are quite healthy, and that will drive activity.

So putting it together, it seems like there's tailwinds potentially in both the liability management and restructuring side and on the M&A side?

Yes. Yes.

And is that atypical or, well, unusual to the cycle?

It used to be. But over the last 4 or 5 years, it hasn't been. They used to work in opposite directions. It used to be that when mergers was doing well, there wasn't really much need for liability management or restructuring. And when mergers was not doing well, there was a lot more of it.

Right now, we've seen both businesses doing well. And it's been that way for the last 2 or 3 years. And so from my perspective, I think that it's not a definite that those businesses will actually act in opposite directions anymore. Certainly, it's possible, there will be -- I'm sure there will be a period when that does happen. But I don't think it's inevitable that they will act in opposite ways.

All right. Let's shift to Equity Capital Markets. So what's the white space left in Evercore's Equity Capital Markets business. You've been gaining share. What's left?

Well, we are doing a lot more in Equity Capital Markets. And we've added products, whether it's converts or whether it's derivatives trading. What we're trying to do is to really extend our ability to serve clients in other -- in all sectors with respect to equity. It's a very important product, it's a real opportunity for us to build, and we're seeing that activity.

Over the last year, the biotech business has really picked up, and we've shared in that pickup on the ECM. But we've also done lots of energy, we are doing industrial, and so there is a real activity level. We think that there is a real opportunity to keep growing in that business, and we're continuing to invest in ECM. The more we do, the better we get and the more we are able to really do more business. It kind of feeds on itself.

And so we're seeing a really strong -- very good strength in that business, and we see a pickup. And recently, we've seen a real pickup in the business in terms of our connectivity with clients and also the opportunities we're being given to actually help them.

So it seems like opportunities in both sector and product.

Yes.

And you're seeing a pickup, I think the entire market is seeing a pickup in IPOs. How do you expect the market to continue to open or maybe broaden out as some of the large IPOs come to market?

Well, I think what we're seeing is that there's a lot of receptivity for some of these big IPOs, and that can't -- it can't hurt the market, although there is a lot of capital being pulled out of the market with some of these huge IPOs. I think there's, I'd say, a sense that there is opportunity in IPOs. And I think that whereas a year ago people weren't nearly as optimistic about IPOs and how they might be able to play out, I think now there's a much higher level of positivity with respect to IPOs.

And so I think what we're seeing is there's a much expanded view by issuers that it's a very legitimate thing to be looking at very intensively right now. And we're seeing that market actually strengthen in terms of activity levels.

Strengthen meaning broadening out?

Broadening out and beyond the big ones. So obviously, there are some very big deals that are coming down the pike, and everybody is watching those. But beyond that, I think there's a positivity in the second-level IPOs that aren't the really big ones that I think people are saying they're quite positive, and there's a constructive approach to those.

On the Equity, Sales & Trading and Research side, what do you see as the biggest avenues for growth for Evercore?

Well, we continue to focus on how we can serve the buy-side clients. And the better we do there, the more opportunity we have. It's a relationship-driven business. And we have a very high level group of research professionals who are driving one of the -- really the very best research business on the Street. And I think that what we're seeing is that there's a continuing relationship that is driving both our ability to help people think about their business as well as them wanting us to do more for them.

So we have the capability to help. The dialogues are getting stronger as we move forward. And that really does drive revenues. And so we're seeing good strength in that business.

So we talked about growth opportunities across the business lines, which brings us to hiring and expenses and how you're funding the growth. So Evercore continues to attract a lot of talent. MD head count is up around 60% from 2021 levels. So how much more capacity is there ahead to keep growing?

Well, I don't really know how much more we can do. All I know is that we don't see any limit at this point. We feel really good about the opportunities ahead of us. We think there's a lot of white space for us to build. We don't think that we are going to run out of room. We are seeing really high-quality talent.

Talent is very -- the talent market is very competitive. But we've been really competing well, and we feel really good about what we're able to add in terms of talent. And I think what we're really seeing is that the -- our opportunities grow with our reputation and the momentum of the brand, and we're continuing to see that. So I really don't see a limit to it at this point. I really think that we continue to see really good strength.

And you mentioned competition for talent. So given that the market seems to be at a cyclical upswing in terms of deal activity, has there been a noticeable increase in competition for new hires?

I think it's always been quite competitive. I think maybe it's more competitive now just because I think every -- all of the firms really who are in our business are looking at the fact that there's a real possibility that there could be a pickup and people are starting to really try and make sure that they're positioned for that. But I do think it's always been -- for the top talent, it's always been really competitive. And we continue to engage.

Our pipeline is very good right now. We've done 8 new hires this year so far, in addition to the number of hires we did at the end of last year that are starting to come online. So we're seeing real success in this. And I think we spend a lot of time on it. And it's, I think, something that we take pride in doing well, that we identify really strong A+ talent, and we work hard to make sure that we're a good place for people to go.

So then outside of hiring, you've also shown a willingness to grow through doing some M&A yourselves, recently with the Robey Warshaw deal. How is integration of that deal going? And should investors expect more M&A ahead in the near to medium term?

The Robey Warshaw deal is going really well. I think integration has gone even better than I would have hoped. I think that there's been an embrace by both the Robey Warshaw people coming in and our people to really look at the strengths and how we work together.

I think it's working together -- people are working together extremely well. It's seamless. I've been on many calls recently where we have Robey Warshaw and old Evercore together as a team. It's really one team at this point. I don't think anybody really thinks about it as 2 teams anymore.

And people are working really well. They are collaborating. They're joining and thinking about the strengths. The relative strengths of different relationships are being brought together. And I think that it's actually been quite impressive in terms of how the organizations have come together.

In terms of additional M&A, we -- I never say never. We'll look at anything. But we're not really looking to do anything like that in the near term. I think what we're really trying to do is run our business well, stay focused on really what our strategy is, growing and really continuing to recruit top talent and making sure that we're very focused on where we -- what we think we can do well, and to do it well.

All right. So compensation ratio, a question we have to ask. Any update on the comp ratio trajectory for the rest of the year or maybe further out?

As you know, we came in lower than where we went out on last year. In terms of what we are thinking now, we set the pace for the first quarter. We're working as we always are to bring that down, and we're going to do our very best to keep that coming down. So I'm not going to give any indication as that really -- what that order of that would look like, but we're going to work hard to try and keep it in a downward scenario.

And the word that Evercore has used before was gradual downward. Is that still the word we should be thinking about?

Yes. I think that's safe.

Yes. All right. Great. Clear. So AI is driving a debate in the market on how it will impact the investment banking model, the workforce. Do you see significant opportunity for Evercore to structurally operate more efficiently? Or do you expect expense savings with AI to be reinvested or maybe competed away?

Well, for us specifically, we're looking upon AI as an opportunity to serve clients better. And we're spending a lot of time and effort on making sure that our capability of using AI to serve clients is a high priority.

So we're doing a lot of that. And I think we're feeling good about the momentum we have in that. We're obviously working really hard to make sure that people throughout Evercore are really becoming literate in terms of how AI can be used appropriately for clients.

In terms of how we run our firm, we are absolutely looking at AI. It's still too early to tell how that's going to be. The way we think about people right now is that we're not really thinking that we're going to be reducing people because of AI. What we're hoping is that we're going to be able to cover more clients and cover more ground with clients as we integrate AI.

And the people of Evercore, if we do have AI, they're going to be more productive. So maybe we'll hire at a slower rate, but we're not looking to shrink.

And hire at a slower rate is more at the non-MD level?

It would -- yes, I would say that's right. But we're really not looking at shrinking the firm at all. I mean what we're looking at is we're looking at growing the firm and how do we grow responsibly.

All right. Let's turn to buybacks. So you've had a record quarter buyback in the first quarter. You increased the dividend. You did the Robey Warshaw transaction last year. So how are you thinking about the different capital allocation priorities?

Well, we're unchanged in terms of what our goal is, which is all capital that we don't need to really run the business and stabilize the business, we will return to shareholders. And our strategy is always to return capital to shareholders. So that will continue. And we always repurchase the equity that we put out for compensation, and we have no plan to change that. We also look at opportunities when the stock price shows an opportunity for us to invest, that we will look at that.

So I think it's really more of the same. And what we're going to try and do is continue to be opportunistic about how we repurchase equity and also to be predictable in how we're going to be returning capital.

So before we wrap up, what do you view as the most differentiated about Evercore's strategy?

Well, I don't know if it's really differentiated, but I can -- I mean our strategy is we invest in client relationships, we invest in the highest-quality people. We think a great deal about our culture. And we are working really hard to drive a brand where we are highly respected and valued by clients.

And I think we really stay to that. We stay very disciplined, and we're working really hard to make sure that when you see Evercore, clients know what to expect. And there's been a lot of momentum built. Our total revenues globally have grown, and we're in really the top group in terms of global revenues. And we expect that will continue, and we expect to continue to really invest in the business.

So it's really, as much as anything, we have a strategy which we really clearly articulate, and we try to stay -- stick to it.

Great. So a lot of growth opportunities ahead for Evercore. Anything else you wanted to get across before we wrap up?

No. I think we are actually very optimistic about where we stand and where the market is and where our firm is right now. And we're excited to continue to cover our clients and to deliver for clients.

Great. John, thank you so much for joining us.

Thank you.

Good morning, and welcome to Evercore's First Quarter 2026 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore management and the question-and-answer session. [Operator Instructions]

I will now turn the call over to Katy Haber, Head of Investor Relations at Evercore. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today for Evercore's First Quarter 2026 Financial Results Conference Call. I'm Katy Haber, Evercore's Head of Investor Relations. Joining me on the call today is John Weinberg, our Chairman and CEO; and Tim LaLonde, our CFO. After our prepared remarks, we will open up the call for questions.

Earlier today, we issued a press release announcing Evercore's first quarter 2026 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 1 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 may 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 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 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 closing.

I will now turn the call over to John.

Thank you, Katy, and good morning, everyone. Our record first quarter results reflect the strong momentum that built throughout the second half of 2025 as well as the benefits of our multiyear investment strategy. Firm-wide adjusted net revenues were $1.4 billion, double from a year ago and a newly quarterly record for the firm. Revenues increased 8% sequentially from the fourth quarter, marking the first time in 15 years, we've delivered growth from that period. We've now delivered 3 consecutive quarters of adjusted firm-wide net revenues over $1 billion.

Performance in the quarter was broad-based across all of our businesses with our strongest revenue quarter ever for our North American advisory business and a record first quarter for EMEA Advisory, PCA, PFG, Equities and Wealth Management. Further, our results continue to underscore the strength of our client franchise, the benefits of our diversified business model and the consistent execution of our long-term strategy.

First, I want to briefly discuss the current market environment. As we entered 2026, the backdrop for dealmaking was robust, supported by healthy levels of strategic activity and continued engagement from both corporates and financial sponsors with the expectation that these trends would carry into the year. We are seeing continued CEO and boardroom confidence, particularly around large-cap transactions, and financing markets are open. However, conditions have become more mixed in recent months.

Despite this, M&A activity experienced a strong quarter. Industry-wide, announced global M&A activity, excluding several large direct AI investments totaled over $1 trillion in the first quarter, up 11% from the prior year period with large-cap strategic transactions continuing to outperform.

At Evercore, client engagement remains strong. We continue to see healthy levels of activity across a broad range of sectors, products and geographies with particular strength in large-cap strategic M&A, including in areas where we have made recent investments. Many sectors, including health care, industrials, real estate, infrastructure, financials and certain areas of technology continue to operate at high levels. Our backlog remains strong and is replenishing at a healthy rate. This quarter was an exceptional quarter, demonstrating the breadth of the firm's capabilities, and we are pleased with our results.

As we have noted in the past, investors should not place too much emphasis on any one quarter. This holds true in very strong quarters as well as challenging ones. And we would encourage you not to extrapolate these results. We are constructive on the outlook of our business and believe we are well positioned to serve our clients across a range of market environments. While ongoing geopolitical and macroeconomic certainty could extend transaction time lines if it persists throughout the year, we believe the underlying conditions for a strong M&A environment remain, albeit with some bumps along the way.

Turning to Talent. Since our last call, 3 senior managing directors have joined our investment banking practice in health care, equity capital markets and private capital advisory. All 3 committed in 2025 and were included in our year-end SMD count of 171. 3 additional SMDs have committed to join our franchise in key areas, including health care, industrials and private capital advisory this year. In addition to our externally hired talent, we started the year with a class of 8 promoted investment banking SMDs. In total, we now have 182 SMDs in investment banking with more than 45 ramping, positioning us to drive sustained growth in activity over time.

Let me -- now let me turn to our businesses. In North America Strategic Advisory, we achieved a new quarterly record for revenue reflecting strong transaction announcements, trends carrying on from 2025 and strong activity levels across both corporates and financial sponsors. While exit activity among financial sponsors has been mixed recently, we continue to see increased engagement from a year ago.

Our EMEA Strategic Advisory business delivered a record first quarter with strong activity across a number of sectors and geographies. In the first quarter, we advised on a number of significant transactions globally, including Warner Bros. Discovery on its $110 billion sale to Paramount Skydance, Devon Energy on its $58 billion merger with Coterra Energy Jetro Restaurant Depot, on its sale to Sysco for $29 billion, Apellis on its sale to Biogen for approximately $5.6 billion and Beazley, on its recommended cash offer by Zurich Insurance Group for 8.2 billion pounds.

Industry-wide activist campaigns declined in the first quarter. Although our strategic defense and shareholder advisory group continue to be busy. The liability management and restructuring business maintained robust activity levels in the quarter with continued strength in client dialogues in recent months.

Our private capital advisory -- our private capital markets and debt advisory team remained active, particularly with structured minority deals despite some lengthening in transaction time lines. The private capital advisory business delivered a record first quarter New deal activity continues to be elevated, particularly on the LP side, while GP-led continuation funds remain active. We are also seeing strong momentum in newer product areas, including private credit and secondaries.

The Private Funds Group also delivered a record first quarter despite a challenging environment for fundraising. Our Equity Capital Markets business had a solid quarter with revenues in line with the prior year. The business experienced strength across health care and energy as IPO and follow-on issuance trends are -- were very healthy.

In the quarter, we led -- we were lead left bookrunner on Diamond Energy's $2.2 billion follow-on for the third largest U.S. E&P follow-on offering ever. Our Equities business delivered a record first quarter driven by healthy levels of volatility, which contributed to strong performance across our trading businesses. Our teams continue to provide differentiated insights and thought leadership to clients amid increased market volatility.

And finally, our wealth management business had record first quarter revenues. While we saw some moderation in performance and AUM relative to the year-end, reflecting weaker markets, client engagement remains strong. Overall, our performance in the quarter highlights the progress we've made in scaling our platform and expanding our capabilities as we continue to support clients in an increasingly complex environment.

We remain encouraged by the level of dialogue and activity we are seeing across our global franchise. Looking ahead, we recognize the potential for continued uncertainty in the near term. we believe the underlying long-term drivers for growth remain intact and position us well to navigate the environment and capture opportunities over time.

Let me now turn it over to Tim.

Thanks, John. As John mentioned, we are pleased with our strong performance in the first quarter. Before I get into the details, I want to highlight some factors that drove the outperformance including several large transactions that looked as if they might close in the fourth quarter and then slowed and closed in the first quarter of this year.

In addition, there were other large transactions that were on track for a second quarter closing this year and then accelerated into the first quarter. Given this and the strong environment of the last several quarters, we experienced the greatest number of large transaction closings in any quarter in our history.

Accordingly, we would expect our second quarter to be closer to what we experienced in last year's second quarter, which was a record. And in aggregate, we believe our first half will reflect continued strong performance and we remain enthusiastic about the outlook for our business.

Now turning to the quarter. For the first quarter of 2026, net revenues, operating income and EPS on a GAAP basis were $1.4 billion, $331 million and $7.20 per share, 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.

Our first quarter adjusted net revenues were approximately $1.4 billion, up 100% versus the first quarter of 2025 and up 8% sequentially, representing a new record quarter for the firm. Adjusted operating income for the quarter was $354 million, up 205% year-over-year and adjusted earnings per share was $7.53 and up 116% versus the prior year period. Our adjusted operating margin for the quarter was 25.3%, up from 16.6% a year ago, an improvement of approximately 870 basis points, reflecting a combination of the strong environment and our high first quarter revenues.

Turning to the businesses. Adjusted advisory fees were approximately $1.2 billion in the quarter, up 123% year-over-year, representing a record quarter. The growth was driven by a significant increase in large transaction closings as mentioned at the start of my remarks as well as a continued increase in productivity across our platform. Underwriting fees were $55 million, in line with the prior year period.

Commissions and related revenue was $63 million, up 14% year-over-year driven primarily by higher trading volumes. Adjusted asset management and administration fees were approximately $24 million, up 8% versus the prior year. Adjusted other revenue net was approximately $15 million, reflecting higher interest income, partially offset by losses on our DCCP hedge portfolio as equity markets modestly declined in the quarter.

Turning to expenses. Our adjusted compensation ratio for the quarter was 64% down approximately 170 basis points from the first quarter of last year and down 20 basis points from the full year of 2025. The decline in our compensation ratio was driven by continued improvement in revenues, reflecting market share gains, partially offset by our continued investment in talent which is core to our growth strategy.

We are striving to make additional progress on our compensation ratio over time. balancing that with investment in our business and the competitive market environment. While compensation expense and our ratio depend on numerous factors, including some for which we have limited visibility at this point. As I mentioned last quarter, we expect compensation ratio improvement this year will likely be meaningfully more modest than what we achieved in each of the last 2 years. Our goals are constant to deliver excellence to our clients, and to create value for our shareholders over the medium to longer term.

Adjusted non-compensation expenses were $150 million, up 21% year-over-year. The non-compensation ratio was 10.7%, an improvement of approximately 700 basis points versus the first quarter of 2025, driven by stronger revenues. The increase in noncomp expenses year-over-year was primarily attributable to: first, higher technology and information services costs reflecting increased licensing costs and investment in development and technology, which are intended to yield future benefits.

Second, higher professional fees, including certain costs related to higher client activity levels, some of which may be recoverable and a variety of other general corporate costs. And third, increased travel and related expenses driven by higher levels of client activity and engagement. In order to support our growth, business diversification and technology initiatives, we would expect to see a similar growth rate in noncomps in 2026, in line with what we experienced in the last couple of years.

Our adjusted tax rate for the quarter was 3% compared to a negative 39.7% a year ago. Our tax rate in the first quarter is primarily impacted by depreciation of the firm's share price upon vesting of RSU grants above the original grant price, generating a substantial tax benefit. We anticipate that our effective tax rate in the remaining 3 quarters of this year will be more similar to what we have experienced in those quarters during prior years.

Turning to our balance sheet. As of March 31, our cash and investment securities totaled nearly $2 billion. Similar to past years, our cash balance is down from year-end due to the payout of bonus compensation in March and share repurchases. In the quarter, we returned a total of $673 million of capital, which is a new quarterly record amount. through the repurchase of 1.9 million shares and the payment of dividends.

Consistent with historical practice, we bought back stock through net settlements of RSU vesting and in the open market, offsetting the dilution from the RSU grants that were issued in the quarter as part of our annual bonus compensation process. It is important to note that as the 1.9 million shares we repurchased in the quarter, approximately 900,000 were through net settlements of vesting RSUs in early February, at an average price of approximately $345 per share, which has been our historic practice.

The remaining approximate million shares were repurchased in the open market at an average price of approximately $302 per share. Altogether, the blended price per share was $322. Separately, our Board declared a dividend of $0.89 per share, an increase of 6% from the prior dividend declared. Our first quarter adjusted diluted share count was 44.4 million shares, down over 500,000 shares from the fourth quarter, driven by share repurchases in the quarter partially offset by the vesting of RSUs.

We remain committed to repurchasing shares to offset dilution from our bonus-related RSU brands. For the sixth year in a row, we have repurchased a number of shares greater than RSUs issued as part of our bonus process. We continue to remain -- maintain a strong cash position and take into consideration our regulatory requirements. The current economic and business environment, cash needs for the implementation of our strategic initiatives, including hiring plans, and preserving financial flexibility.

We are pleased with our record performance in the first quarter. And while we continue to be mindful of the continued market uncertainty, we remain optimistic about our medium- and longer-term prospects.

With that, we will now open the line for questions.

[Operator Instructions] And our first question comes from Alex Bond with KBW.

I guess to start, it would be great to get your thoughts around what's happening in the software space at the moment and how stress and lower valuations in the public market there. have impacted both deal activity and sentiment on the M&A side? And then also, it would be great to get your thoughts around what the potential opportunity could be there.

On the longer term, on the restructuring side, if stress persist in that market? And any of that -- if you view that as an opportunity just given the scale of your tech M&A practice. So yes, just any thoughts there would be helpful.

Sure. On software, there's definitely a slowdown, but it's not a standstill. And it really does depend on the companies themselves. We're seeing, on the one hand, there are some certain situations that we are working on that have actually slowed substantially.

There are other situations that we're in the middle of right now where we're seeing real opportunity in discussions with respect to consolidation as well as other opportunities that people are looking for. As you know, software is very different in terms of how it really is applicable to the market that it's in. And not everyone is going to be really responding the same way to what looks like a hesitation in the software markets.

On the M&A side, we're seeing -- as I said, we're seeing activity. On the public offering side, we are in discussions, and we just have to see how that plays out. I think in many respects, and it won't surprise you that I say this, we're going to have to see some of this play out. In terms of restructuring, we are seeing a lot of activity really across the board, multiple sectors. We definitely are seeing software opportunities on the restructuring side. But our business is so diverse with so much opportunity, and we are really seeing an expansion.

As you know, we had a record year last year, and we are on a very good pace this year. So I'd say that we're seeing it, but it's not really dominating the business or lots of other things. There's a lot of liability management opportunities out there that we're participating in. We are doing a lot of business with corporates as well as sponsors. So from our perspective, the restructuring business is strong, but software is not dictating it, but there is software opportunities within it.

Our next question comes from Ryan Kenny with Morgan Stanley.

I want to dig in a little bit on the Europe side. So you've been focusing on expanding into Europe and you do have the EU weighing overhauling the merger rules. So are you seeing any uptick in demand? Or is there a pause and kind of wait and see what happens with the merger rules and any impact from energy prices in Europe is viewed kind of as disproportionately impacting Europe versus U.S. So what are your thoughts on Europe right now?

Well, as you saw or as I said, our European business had a record first quarter. And as you know, a big part of our experience in Europe right now is that we've been in a real build mode, and we've added substantial people and assets throughout Europe. We feel really good about those people, and we feel like we've really been able to build a much more diverse and deep business. So we're seeing a lot of activity. And our dialogues are up. And I think because we have such high-quality people, we're in a lot of the boardrooms and really having the opportunity to really have really consequential conversations.

So from our perspective, what we're seeing and maybe this is limited more to us because we're growing it so much, but we're seeing a lot of activity, and we're in the middle of some really consequential strategic discussions. Do I think that Europe will slow down because of the examination of merger rules? I really don't right now until people really decide that they don't think they're going to be able to get things done. And that, from our experience is not the case at this time.

Our next question comes from Jim Mitchell with Seaport Global Securities.

John, maybe just a follow-up question on financial sponsors, I guess, particularly as it relates to the middle market, which has been kind of the slowest in rebounding. We understand the AI and software valuation impact. But outside of that, it still seems sluggish. So can you discuss how much of a pause maybe the IR wars caused and other factors still holding sponsors back and how you see activity levels shaping up for the remainder of the year, just particularly in the middle market side.

Well, I think you nailed it, which is the larger large-cap market in financial sponsors where they have big high-quality assets, there is -- we're still in the art of the possible. There's a lot of activity there when there's a really good big asset. There is a lot of activity and a lot of interest. Middle market has slowed. There's no question. It's a slowdown. It's not a standstill. There are business -- there are transactions getting done.

Our experience is that we are seeing a real pickup in our opportunity to pitch. Our pitch rate is higher now than it was this time last year. So we're seeing a lot more in us. Some of that, I think, is that we've really built out our sponsor business. And as you know, our -- one of our big objectives was to take what we thought were several really powerful sponsor-related franchises and bring them together to really have a coherent offering to financial sponsors generally. And we actually see the fruits of that and that we're seeing a lot more.

So our pitch rate is up -- actually, our win rate is up. And so we're feeling momentum in that business. Having said that, your original premise is what we are feeling and what I've been seeing, which is smaller deals, middle market things are really slowed. And it's not to say they won't happen but I think that it's not nearly as buoyant as we hoped it would be in the beginning of the year.

Our next question comes from Daniel Cocchiara with Bank of America.

In your prepared remarks, you mentioned that some deals were accelerated from 2Q and to the end of 1Q, just given added uncertainties within the market, I would think that would be more likely to see those conversations extended rather than shorten. So I would love to hear maybe just like some of the nature of those conversations in terms of why they may accelerate them? And is this a trend that's continued into the second quarter?

Yes. Thanks for the question, Daniel. Look, Really, I would say don't read too much into that, the acceleration. I mean at any one time, we're working on a very large number of transactions and each 1 has its own story. And this -- there is some element of randomness and lumpiness to our business. It's always been that way. And it just so happened that this quarter, there were a couple of them that got on a little faster track and went a little more smoothly than anticipated, and they happen to have significant fees attached to them. And that's all. This is -- there's not some broader trend at play here.

And I guess just kind of one follow-up. Like in a saturated market with so many different players spanning from the pure-play investment banks to bulge brackets, what exactly does Evercore do to differentiate themselves? And what is it about your franchise that really makes want to -- make clients want to work with you over the competition on these larger-scale transactions?

Well, I think what we hopefully are able to communicate to clients is that we understand their business, that we put their interests first and that we are highly capable. What we've tried to build as a firm that has extraordinarily capable and competent people who really know the business and know their sectors. But at the same time, are serving the clients in every respect and that we've been able to engender confidence in both management teams and boards. And that's really what we aspire to do.

We've hired some really high-quality people. I think the people of Evercore in today's world are top-notch and A+ level, and that's what we really have worked really hard to do. And we hope we have given them a culture, which has them working together so that we have everybody pulling on the same or in the same direction. And so I'm hoping that really what really is our competitive edge is we're able to deliver better results for our clients in an ethical and client-oriented fashion. And that's what we -- that's really what we hope our clients see and hopefully, why they choose us.

Our next question comes from Brendan O'Brien with Wolfe Research.

I just want to drill down on the dynamics in the PCA business. On the one hand, volatility and valuation concerns could impact price discovery and potentially weigh on activity. But on the other, you could also argue that the slower pace of exits could prove to be a tailwind for the business. So just wanted to get a sense as to what you're seeing and hearing from clients.

And also if you could potentially just provide some color on what's driving the relative strength in LP-leds relative to GP-led?

Well, as I think we said in the call, PCA had a record year last year and has had a record first quarter this year so far. So there's real momentum to the business. We have a pretty equal balance between LP and GP were quite balanced. I think the dynamics of the business is that it continues to be able to present clients with real alternatives in terms of how they want to get liquidity to move assets to an ownership position that they're comfortable with and really allows people the flexibility beyond the pure merger or IPO market to really monetize and to actually assign ownership.

And so what we're seeing is there is just a continued interest in the flexibility that PCA is able to offer. In addition, there are lots of different new products that our PCA Group is undertaking. They're very creative in how they think about the market. And as secondaries grow and becomes more powerful, they are doing better and better. As you know, they have a very high market position, and they are really, I think, presenting to the market highest quality advice.

And so really, what we're seeing is that this is a very powerful growth engine for our firm. And I think we feel really comfortable with the way they're defining their market and how they're addressing that market.

Our next question comes from Nathan Stein with Deutsche Bank.

Was hoping you could break down the advisory revenue split across M&A and non-M&A businesses broadly? And how do you expect that to trend from here?

Yes, sure. I think what we've seen in the past as it's been about kind of 45-ish percent. I would say it's still over 40%. And by the way, the non-M&A businesses are doing great. We're really pleased with the strength of their performance, the backlog, the outlook. And having said that, we may be at a point in the cycle where M&A is strengthening a bit relative to some of the other businesses.

And so it's possible that as we move forward, you could see that statistic come down a bit due to the strength of the M&A market. But those businesses continue to perform well, and we're really pleased with both their performance and their outlook.

Yes. And what you probably have seen is that we continue to invest in our M&A business, which clearly is a very important part of what we offer clients. But we've also been allocating capital and investing in non-M&A businesses to diversify what we're able to provide to clients and really what we're able to deliver for shareholders, which is some diversification.

We are not a balance sheet bank, which all of you know. So there are certain things we're not going to be in. But everything that is not really balance sheet driven, we're thinking very aggressively about how do we participate and can we really create a position where we have some competitive edge. I think we really feel good about the people who come to Evercore and the people we hire. And therefore, I think we have real opportunity across the board.

[Operator Instructions] We'll go next to Brennan Hawken with BMO Capital Markets.

I wanted to drill into the lesser comp leverage expected this year versus recent years. So recognizing it's probably a question poll, you guys also said that you don't expect all that much revenue growth year-over-year in the second quarter. So the sort of strong note we're starting on here is not indicative. But could you talk about the different factors and how much of a factor it is maybe tougher comps and therefore slowing revenue growth versus the continued elevated market -- competitive market for talent, both acquisition and retention out there.

Yes. Sure, Brennan, I'm happy to answer that. The first thing I would do is point out -- you did characterize my comments correctly. But I'd point out that in the last couple of years, I would say we made by my measure, pretty strong improvement, meaning we went from 67.6% down to 65.7%. So that was 190 basis points. And then as we move from '24 to '25, we went from 65.7% to 64.2%. That's another 150. And so that's 340 basis points, then we reduced another 20 basis points this quarter.

So that's 360 basis points in just a little over 2 years, which at least by my measure, is pretty strong improvement. And we're striving to continue to make improvement and we're hopeful that we can and we will I think what I intended to convey is that it just won't be the same magnitude, we don't think, as we saw in the last couple of years because it's just hard to keep it going at that rate.

And then you raised the question is -- whether my comments based on outlook for revenue or and/or outlook for the continued competitiveness in the environment for hiring and retention. And I think it's the -- on the revenue, as you heard in John's comments, I think we remain optimistic and enthusiastic about our outlook. The backlogs, pipelines continue to look good. activity levels remain high. And we're hopeful that this recovery has -- and our performance in it has some real legs to it. And so I wouldn't interpret anything I've said as a reflection of our views on the revenue outlook.

It is the case, I think that competition remains high for the best talent. We're, of course, committed to obtaining the best talent. And as you've seen these last couple of years and into the early part of this year, we've continued to be pretty proactive. And augmenting our partner ranks and really strengthening that in a way that looks like it's earning positive returns for us, and we're continuing to attempt to do that.

So I think I think the key takeaways here is we are striving to make continued progress, although it might not be the same magnitude we've seen in the last couple of years, where we remain optimistic about the outlook. And -- but yes, the market for talent remains competitive.

Got it. I know it's one question, I can re-queue for sure, but you mind if I ask a follow-up? With operator just on hold, so I'm guessing we're towards the end here.

Sure. Please.

Right. So it's sort of a related -- it's actually a real follow-up, Tim, on that point, like you guys -- and clearly, the revenue rate, your productivity numbers have been great. So the hiring is very effective, like this is not a criticism. It's just a question of like mocking facts. Is sort of the competition for Talent, has it like scaled to a level? And is it that the talent you guys are hiring has also scaled to a level where maybe a return to the sub-60% comp ratio is going to be more challenging. And therefore, like you guys are driving the business and you want to make sure that you're not compromising on standards and whatnot. So that's just sort of like reality and a lot of nature now. Or is that the way we should think about it?

Yes. So Brennan, thanks again for the follow-up question. I think it's interesting as part of -- as you can imagine, we're always doing internal exercises that analyze our results and our returns and where we can do better and so forth. And I've just been through some exercises recently to look at the returns on our partner hiring. And I would say that the NPVs and the IRRs have been pretty good. And what we're focused on, first and foremost, is serving our clients with excellence. But secondarily, building value for the firm. And I'm wanting to be careful that when we're doing what I would call positive NPV partner hiring and partner hiring that has pretty good IRRs associated with it. I don't suboptimize by focusing solely on the comp ratio and thereby foregoing certain hires or additions that are clearly adding value. And so that would be the first point.

Look -- and on the sub-60% what I've been, I think, saying hopefully, pretty consistently over these last quarters and even years is we're focused on making improvement next quarter and the quarter after and the quarter after that. And I -- we're still a ways from sub-60. And so I'm just trying to do better than we did last year. And then at the end of next year, you can ask me how much improvement I think I can make in '27. But for now, we're just trying to improve from where we are.

Let me make one comment about the marketplace for talent. Your presumption, which is that it's more competitive and it's hard to get people is absolutely true. The ante has been raised. Spending virtually every day in the market talking about it, you -- I'm sure you know that a big piece of our strategy is bringing in A+ players. And an A+ player will without doubt, create value for the firm. And so we're spending a lot of time on really bringing the high-quality people.

And I think what's happening for our firm is that because we have really been able to create momentum for our franchise that we are seeing more and more highly talented people who actually are interested in coming to us because we have a firm, I think that people really think has momentum and really is going to provide them an opportunity to work with other talented people and to provide even better service for their clients. And so I think that as it's getting more competitive as difficult as it is, I think it's not easier for us, but I think that we are actually finding real success with high-quality people continuing even as the market gets more competitive.

Yes. That's clear in the numbers, too.

Our next question comes from James Yaro with Goldman Sachs.

So 2025 was a heavily large strategic M&A driven market. I'd just love to get your thoughts on a few things as it relates to that particular part of the market. To what degree do you believe the large strategic deals could actually accelerate from here, which is already a fairly strong base.

Maybe within the answer, could you speak to the ingredients that you hear in the boardroom that are driving a large cap activity? And could you also comment on considerations around the antitrust backdrop in the U.S., perhaps ahead of and after the U.S. midterms?

Okay. Well, with respect to the M&A market generally and large cap, there is no question that large cap has been a major part of the market probably for the last 18 months or so, maybe even more. And part of that is that companies and managements are seeing that it is more and more acceptable and actually welcomed by shareholders.

As you know, throughout the time that certainly I've been on Wall Street, there are times when the market is really excited about big strategic deals and there are other times when the market really is looking for something else. And right now, amidst uncertainty and some instability, big deals are actually welcomed. And there is an opportunity in the current regulatory environment to get deals done, whereas there have been other regulatory environments that are not as friendly to larger deals.

And I think there is a perception that if you're going to do a larger deal and a management team and a Board, you better put it on the agenda and be looking at it and make a decision if you want to do it because this is a good time. Not every deal is going to be waved in but there is a willingness to consider these on the regulatory side that I think is quite promising and positive. And so we see this continuing. We see that there is going to continue to be strength.

Some of the factors -- you asked what the factors are. Well, clearly, there are some factors that really exist that really have existed before, but they're quite strong right now. Number one, CEO confidence is very sound and quite high. Number two, the economy despite the fact that there is a dislocation and there is some uncertainty geopolitically, the economy is quite resilient. Number three, the financing markets are not just open, but they're really abundant. And so there's real financing opportunity. And so there is a real can-do attitude.

And I think finally, I think Boards are very comfortable that scale is good right now for lots of different reasons whether it has to do with how do you deal with AI? How do you deal with the world around you? How are you thinking about your supply chains and things. Scale is actually looked upon as a positive, not a negative. And so that's another reason.

So I think all those factors are pointing to the fact that not that everybody is going to do a big deal, but there's a lot of very large companies that are thinking about deals, and we're seeing those in the boardrooms that we're in.

Our next question comes from Mike Brown with UBS.

So cash continues to really run at high levels here and the buyback activity was accelerated in the quarter. How are you thinking about maybe that cash level? And can you just give us an update on capital allocation here as you think about share buybacks? And then is it possible that we could see more inorganic M&A here? You've got some quite good success here with Robey Warshaw. Could we see more deals in the future?

Yes, sure. So Look, we've always been committed to returning capital to our shareholders. And I think if you look back, we're pretty proud of our track record, which includes consecutive years of dividend increases, 6 consecutive years of repurchasing shares at least equivalent to our RSU issuance as part of the bonus process and, in fact, in many years, significantly more. And so we're very cognizant of the return of capital to shareholders and committed to it.

And then with respect to acquisitions, look, we're always seeking to create value, whether it's through developing our people internally, hiring people externally. We certainly evaluate situations from time to time. But I would say we've not been a serial acquirer, and we're highly selective.

Yes. And what I'd say about the strategic acquisition side is Robi Warshaw was a unique opportunity for us. and we were really excited to do that. We're not looking to use our capital by doing acquisitions. In fact, to do an acquisition is a very high bar for us.

So I would just say, if you're thinking about how we're going to use our capital, it's going to be in terms of we're going to return capital. We're going to be looking at really high-quality talent to bring in and really drive our base businesses. We're going to look at new businesses and talent that can help us drive those and build those out. And I think probably last on the agenda is we are looking at the landscape and we're always open to thinking about something strategically.

But you can -- I think what I'd like to make sure you understand is it's not a priority for us. Where we do it if something really came along that was really exciting for our franchise, but I think it's a very high bar.

Our next question comes from Devin Ryan with Citizens Bank.

Neil Eloff on here for Devin. Our question is on AI and the impact of the business model. There have been a lot of headlines suggesting that AI will eventually lead to some decompression. So would love to get your thoughts on the narrative and maybe that protects the sector? And then also if you guys could quickly touch on like AI implementation at the firm and what productivity gains you're already seeing?

Why don't I start and let Tim carry it through in terms of implementation of the firm. We think that AI provides tremendous opportunity. And we're spending a lot of time understanding both how it impacts us internally as well as how it's going to impact businesses in the longer term. There is no question that there is an investment theme that having AI as a part of business, there are going to be certain businesses that are going to do a lot better because they have AI and they're doing -- using AI.

There are other businesses, they're going to feel impaired by what AI can do to basically somehow undermine what they actually do and what they bring to the market. And both of those possibilities create value to -- if you're looking at the strategic side and the M&A side. So we think that we have to be very cognizant of what's happening in the market, the impact that AI has on different companies and really how that's going to change the competitive landscape sector by sector, business by business.

For us internally, I'll let Tim answer it, but we're spending a lot of time on it.

Yes, sure. Look, echo John's comments about the landscape, which is we're excited about AI in 2 ways. And one is what John just described because we think it may change the very structure of certain industries or types of businesses. And that type of structural change is good for a firm like ours, which advises on situations like that. So we do think that over time, AI with respect to our market will create opportunities, and we're, of course, in the middle of that and doing what we can to assist our clients in evaluating all of that.

And then internally, we're also excited. We -- by the way, in the past year, we have a new Chief Information Officer who has joined us. And then we've also continued to augment that team at the top levels. And it's an area in which we're investing. And we think that in the shorter run, what one is likely to see is productivity enhancements, and those could be both with our banking team and possibly with the way we run our business inside of corporate.

And then in the longer term, I think you could see opportunities for continued deal efficiencies, and I'm talking about processing now and potentially idea generation. And so we're working hard at this, as I'm sure many firms are. And we think there's some real opportunity. But I think I'll leave it at that and...

And we'll take a follow-up from Alex Bond with KBW.

Just wanted to ask around the ECM outlook for the remainder of the year. It does seem like there's a decent amount of pre-IPO activity at the moment, especially with some of the larger deals rumored to launch later this year. So could you just share how you're thinking about the ECM opportunity through year-end? And also maybe help us size up the potential there maybe relative to last year's full year results.

Well, we see that the ECM business looks quite healthy. There's some very high-quality large companies that would like to get to market. And we don't see any reason why that's not going to happen. As you all know, there -- if geopolitical gets really difficult, that could interrupt some of the equity market opportunities. But we don't really see that right now. And we think that it's very possible that this could sustain itself. We do a lot in the biotech side, and we see real opportunities there throughout the year.

So I think our point of view is that equities is going to continue to be strong, that the ECM opportunities will actually play out quite nicely and that some of these big deals will be successful and they will fuel the market and create excitement. So we think that for the most part, unless there's a real interruption we could easily see a healthy ECM market that compares quite well to last year.

And our final question is a follow-up from James Yaro with Goldman Sachs.

I just want to clarify one of your comments. And then thinking about the run rate further afield. So I just want to confirm that you expect the second quarter revenues this year to be closer to 2Q '25 levels. And then is that in part because of your comments around certain larger deals closing faster in the first quarter. So then if I sort of run that out further, that would mean that maybe a more normal cadence of deal closings not impacted by deals closing faster would be sort of the back half of the year? Is that a fair way to think about it?

Yes. I think the first part of your question, I think you characterized things appropriately. We did talk about some deals that look like they would close in 4Q being a bit prolonged in closing in 1Q and then other deals that were significant that look like they were going to close in 2Q accelerating and therefore, ended up with a quite large 1Q. And then we're -- we would encourage people to look at our business and evaluate it across a multi-quarter time frame. And that's kind of always -- our business, the nature of our business has been that it's a little bit lumpy, and that's been true for years. And so we're encouraging a multi-quarter outlook.

And then secondly, I think -- and you heard it quite strongly from John, and I have exactly the same view, which is we think business is good. We are coming off a record year last year, a record quarter this quarter. Activity levels remained strong across essentially all of our businesses. And so we're enthusiastic about the outlook. And that's probably, I think, if you take all of those comments in totality, that's a fair representation of what we think.

Yes, I agree with that. And one thing that I'm sure that you're aware of and seeing as we are, the fee environment, there are lots of -- there are more large fees and big deals that are in and around than really I can remember. And I think what that does is it does create lumpiness. So I don't think that's going to be something that we're going to be rid of in the near future, and maybe I hope we don't.

I think that we are seeing really high-quality big things inside the firm right now. We anticipate that some of those will not happen. But we believe that some will happen. And I think that there is a -- it's a very healthy market right now. And I think we feel really good about the fact that we're participating in a very tangible way. How that translates into quarter by quarter by quarter, I think we've always said it's going to actually play out and there will be lumpiness. And -- but I'm sure that you're used to that, and you've seen it and maybe there's even more lumpiness if the fees are big.

Thank you. This does conclude today's question-and-answer session as well as the Evercore First Quarter 2026 Earnings Conference Call. You may now disconnect.

Good morning, and welcome to Evercore's Fourth Quarter 2025 and Full Year Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore management and the question-and-answer session. [Operator Instructions] I will now turn the call over to Katy Haber, Head of Investor Relations at Evercore. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today for Evercore's Fourth Quarter and Full Year 2025 Financial Results Conference Call. I'm Katy Haber, Evercore's Head of Investor Relations. Joining me on the call today is John Weinberg, our Chairman and CEO; and Tim LaLonde, our CFO. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore's fourth quarter and full year 2025 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 1 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 Evercore's 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 Evercore's performance on an annual basis. As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closings. I will now turn the call over to John.

Thank you, Katy, and good morning, everyone. 2025 was a strong year for Evercore. We saw broad-based momentum across all of our businesses and ended the year with the strongest revenue performance in our history. Firm-wide adjusted net revenue reached approximately $3.9 billion, up 29% versus the prior year and nearly 17% above our previous record in 2021. In fact, our fourth quarter represented the strongest revenue quarter in our history with nearly $1.3 billion in adjusted net revenue. For the year, we generated approximately $14.56 in adjusted earnings per share, continued to return a meaningful amount of capital to shareholders and improved our margin profile. Our quarterly and full year record results reflect the improving market environment, the benefits of our diversified business model and the execution of our long-term growth strategy.

We're pleased with how we delivered for our clients and our shareholders in 2025, and we enter 2026 with strong momentum and optimism. Before getting into the details, I want to put our results in the context of the market environment. Industry-wide global M&A activity rebounded meaningfully last year. Announced transactions totaled approximately $4.5 trillion, up 49% from the prior year and just 19% below record levels of 2021. Importantly, activity accelerated throughout the year. Deal volumes in the second half of 2025 were approximately 45% higher than in the first half, reflecting a clear shift in sentiment and decision-making. That improvement was particularly evident in the large cap segment of the market, global M&A volumes for transactions greater than $5 billion were the highest ever and approximately 13% above 2021 levels.

Taken together, these metrics reflect improving confidence among boards and management teams, constructive financing conditions across public and private markets and strong equity markets. Now turning to Evercore. I want to highlight a few of our key accomplishments from the year across our market position, talent investment and platform expansion. We continue to serve clients on a number of the most complex and notable transactions, acting as financial adviser on 5 of the 15 largest global M&A deals for the year and ranked third for sell-side transactions in the U.S. based on dollar value.

Relative to our largest global competitors, we continue to gain share. For the second year in a row, we ranked as the third largest investment bank globally in 2025 based on advisory fees across all public firms. Nearly all of our businesses posted record results, including our North America and EMEA Advisory businesses, Private Capital Advisory, Private Funds Group, our Equities business and Wealth Management. Importantly, the benefits of our diversification were increasingly evident. For the fourth quarter and full year, approximately 45% of revenues were generated from non-M&A businesses.

Turning to talent. 2025 was a year of continued investment as we build out our senior advisory bench globally. We entered 2026 with 171 investment banking senior managing directors. We hired 19 SMDs across sectors, products and geographies, representing our largest class of new lateral SMDs to date and added 11 new promotes at the beginning of 2025. We are also excited to announce the recent promotion of 8 investment banking SMDs globally, which is in addition to the 171 SMDs, underscoring our continued commitment to developing talent from within. In fact, 40% of our investment banking SMDs have been promoted internally, the highest percentage in our history. Our SMD base is 50% larger than it was at the end of 2021 and more than 40 SMDs are currently in a ramp mode, positioning us well for years ahead. Finally, expanding our platform across regions, sectors and products was a key area of focus for us in 2025.

We completed the acquisition of Robey Warshaw, a leading U.K.-based advisory firm. The acquisition represents a significant next step in our EMEA expansion strategy, and the integration is progressing well. We also continue to expand our footprint across key markets in EMEA, including significant investment in France and first-time offices in Italy, the Nordics and Saudi Arabia, and we remain focused on building those out over time. We further strengthened our sector coverage globally, including health care, industrials and transportation, while continuing to deepen our sponsor coverage efforts. We remain focused on broadening our product capabilities, including debt advisory, securitization, private capital advisory, ECM and Ratings Advisory to name a few.

Before turning to the outlook, I'll briefly highlight a few key trends across our businesses from the quarter and the year. Our M&A advisory businesses finished the year with strong momentum. In North America, our team achieved a record year and activity was broad-based across sectors, while financial sponsor engagement continued to increase and broaden. Industry-wide financial sponsor activity for 2025 was up 43% in dollar volume and 14% in number of transactions, excluding deals below $100 million, and we are expecting continued improved activity in 2026. In EMEA, advisory activity accelerated meaningfully in the second half of the year.

Our EMEA Advisory business delivered record results in the fourth quarter and year with strength across sectors and products. In the fourth quarter, we advised on a number of significant transactions around the globe, including Warner Bros. Discovery on its $83 billion sale of Warner Bros. to Netflix and the related spin-off, which was the largest announced transaction of the year. Axalta's $25 billion merger with AkzoNobel, Cidara Therapeutics on its $9.2 billion sale to Merck and Sealed Air's $10.3 billion acquisition by CD&R. Our strategic defense and shareholder advisory group continued to be busy into year-end as activist campaigns remained at elevated levels. The liability management and Restructuring group had a strong close to the year, generating its second best year for revenues and notably well above last year's performance. Activity in the quarter and year reflected a more balanced mix of liability management and traditional restructuring activity.

The private capital-related businesses remained a source of strength. PCA delivered another record year with strong performance across GP-led continuation funds, LP transactions and structured capital solutions, and we advised on nearly half of industry-wide secondary volumes in 2025. The Private Funds Group also posted a record year, continuing to deepen relationships with our core client base while also expanding our reach. Equity capital markets activity continued to gain momentum into the year-end, benefiting from an improving market backdrop for IPOs. We were a bookrunner in all of our equity transactions across products, and we continue to be diversified across sectors. Our equities business delivered a record quarter and year and had 9 consecutive quarters of year-over-year revenue growth.

Finally, our Wealth Management business had a record year and reached its highest quarter end AUM of approximately $15.5 billion. As we look ahead, we believe 2025 steady build of activity will continue into 2026 and beyond. We expect many of the themes from 2025 to continue, including sustained engagement on large strategic transactions alongside a further broadening of activity across deal sizes, sectors, products and geographies. Given the investments we've made across our platform, we believe Evercore is well positioned to serve clients across the full spectrum of the market.

We start the year with strong momentum and backlogs at record levels. Overall, we are constructive on the environment. At the same time, we remain mindful of the geopolitical and macroeconomic risks and note that transaction timing can be uneven. Importantly, the strategy we've been executing over the last several years continues to deliver results. We remain focused on delivering outstanding client service and intend to continue investing thoughtfully as new opportunities arise. We're confident in our position as we start the new year. With that, let me turn it over to Tim.

Thank you, John. Evercore's fourth quarter and full year results reflect strong performance across all our businesses. For the fourth quarter of 2025, net revenues, operating income and EPS on a GAAP basis were $1.3 billion, $312 million and $4.76 per share, respectively. For the full year, net revenues, operating income and EPS on a GAAP basis were $3.9 billion, $790 million and $14.05 per share, respectively. For the full year, net revenues, operating income and EPS on a GAAP basis were $3.9 billion, $790 million and $14.05 per share, 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. Our fourth quarter adjusted net revenues of $1.3 billion increased 32% versus the fourth quarter of 2024, our best quarter to date. On a full year basis, adjusted net revenues of $3.9 billion increased 29% compared to last year and represent our strongest year on record. Fourth quarter adjusted operating income of $337 million increased 55% versus the fourth quarter of 2024. Adjusted earnings per share of $5.13 increased 50% versus the prior year period. For the full year, adjusted operating income of $839 million increased 50% and adjusted earnings per share of $14.56 increased 55% versus the full year 2024.

Our adjusted operating margin in the fourth quarter was 26%, an improvement of 380 basis points versus the prior year period. For the full year, our adjusted operating margin was 21.6%, up 300 basis points from the full year 2024. Turning to the businesses. Fourth quarter adjusted advisory fees of over $1.1 billion increased 33% year-over-year and represents a record quarter. Adjusted advisory fees were $3.3 billion for the full year, up 34% compared to 2024 and 19% above our prior record in 2021. Our advisory results for the quarter and year reflect strong client activity levels and momentum that built throughout the year. Our fourth quarter adjusted underwriting fees were $49 million, up 87% from a year ago.

For the full year, adjusted underwriting revenues were $180 million, up 14% versus last year, reflecting improved market conditions. Commissions and related revenue of $66 million in the fourth quarter was up 15% year-over-year. For the full year, commissions and related revenue of $243 million was up 13% compared to 2024. Both the quarter and the year represented record results. Fourth quarter adjusted asset management and administration fees were $24 million, up 10% versus the fourth quarter of last year. For the full year, adjusted asset management and administration were $91 million, up 8% versus 2024.

Fourth quarter adjusted other revenue net was approximately $30 million, which compares to $24 million a year ago. For the full year, adjusted other revenue net was $103 million compared to $105 million last year. Approximately 25% of the other revenue in 2025 was a gain on our DCCP hedge with the remainder predominantly from interest income. Turning to expenses. The adjusted compensation ratio for the fourth quarter was 62%, down 320 basis points from last year's fourth quarter. Our full year adjusted compensation ratio was 64.2%, down 150 basis points from 2024 and down 340 basis points over the past 2 years.

Our increased revenue and the reduction in our full year comp ratio reflect the benefits of a strengthening in the investment banking environment, an increase in our market share, partially offset by our significant investment in talent, including our largest ever addition of external SMDs. We are continuing to strive for additional gradual improvement in our comp ratio, balancing that with investment in our business and execution on our strategic growth plan. As I have said on past calls, our goals are to deliver excellence to our clients and to create value for our shareholders over the medium to longer term. The latter is accomplished by investing in and building our business and managing our expenses in a way that maximizes the present value of our future earnings and cash flows.

Adjusted noncomp expenses in the fourth quarter and full year were $156 million and $552 million, up 26% and 17%, respectively. The noncomp ratio for the full year was 14.2%, down 150 basis points from 2024, driven by stronger revenues. For the quarter, the non-comp ratio was 12%. The 17% increase in our full year non-comp expenses was in line with the increase we saw in 2024. The year-over-year increase reflects continued investment in the firm's technology infrastructure and increase in client-related expenses, particularly as deal activity accelerated throughout the year. The increase also reflects higher rent and occupancy costs associated with office expansion, including additional floors in and renovation costs related to our New York offices and additional occupancy costs related to our new leases in Paris, London and Dubai.

Client-related travel and entertainment spend also increased in the year as deal activity picked up. As we grow and continue to diversify our revenue streams, both geographically and with respect to lines of business, we must continue to invest in talent, technology and infrastructure. We have discussed in some depth over the years our investment in talent. Some of our investment, such as in occupancy-related areas, is required to support our growth in the U.S. and EMEA. And at the time of investment, we must obtain enough capacity to provide for planned future growth. Part of our non-comp expense is for information services, for which the costs increase at a rate faster than the rate of inflation.

In addition, as is broadly known, there are significant improvements in the rapidly evolving technology landscape, and we must make investments and incur costs today that we believe will provide benefits in the medium term. In the past, we have discussed noncomp growth drivers such as headcount growth, inflation and some upward pressure beyond that related to the items I have just discussed, and they will continue to influence non-comp costs in the near term. As a reminder, the non-comp expense line consists of a mix of fixed and variable expenses, of which a significant portion would be considered variable and will fluctuate with transaction activity and headcount, both in our businesses and in our corporate area to execute on our increased transaction activity and growth initiatives.

Nonetheless, as you can see from the improvement in both our full year comp and non-comp ratios, we demonstrated leverage in 2025. We maintain a disciplined focus on our expenses, balancing that with investment in order to execute our strategic plan. Our adjusted tax rate for the quarter was 29.4%, up from the fourth quarter of last year. Our full year adjusted tax rate was 19.8%, down from 21.8% in 2024. The full year adjusted tax rate was significantly impacted by, among other things, the appreciation of the firm's share price upon vesting of RSU grants above the original grant price, generating a benefit which was larger than the prior year's tax benefit. As a reminder, the majority of this impact typically occurs in the first quarter.

Turning to our balance sheet. As of December 31, our cash and investment securities totaled $3 billion. In 2025, we returned the second largest amount of capital in the firm's history, totaling $812 million. This included approximately $151 million through dividends and $661 million through the repurchase of 2.4 million shares at an average price of $275.42. Our fourth quarter adjusted diluted share count was approximately 45 million shares, modestly higher than the third quarter. For the full year, our weighted average share count ended at 44.4 million shares, approximately 225,000 shares higher versus the year prior. We remain committed to repurchasing shares to offset dilution from our year-end RSU bonus grants. And for the fifth year in a row, we have repurchased a number of shares greater than that, and we expect to do so again in 2026.

We also repurchased shares sufficient to cover the number expected to be issued in both 2025 and 2026 in relation to the Robey Warshaw acquisition. We continue to maintain a strong cash position and take into consideration our regulatory requirements, the current economic and business environment, cash needs for the implementation of our strategic initiatives, including hiring plans and preserving a solid financial footing. We are pleased with our performance in 2025. And as John mentioned, we began the year with strong momentum in all of our businesses. We believe we are well positioned for 2026 and are approaching this year with optimism. With that, we will now open the line for questions.

[Operator Instructions] And our first question will come from James Yaro with Goldman Sachs.

This is Songqing Jiang, step in for James. 2025 was a heavily mega cap M&A-driven market. So could you help us think through the outlook for the large deals to continue or even accelerate from here?

Thank you very much for the question. We think that we will continue to have a healthy environment. All of the things that have really existed to fuel the merger recovery still exists, whether it's business prospects for many of the large companies, the strategy outreach from the companies, access to capital and in many respects, a relatively benign environment with respect to the regulatory side. We are in -- our backlogs are very strong, but those backlogs really incorporate both large cap and mid-cap and small cap really at all sizes. We are very optimistic about this year. We continue to believe that it's going to be a constant and steady build. And we think that the -- if our backlog is any indication, we are going to see a continuation of large-cap deals as well as deals really of all shapes and sizes.

We'll take our next question from Mike Brown with UBS.

So in 2025, we had a bit of a Goldilocks environment with the strong performance from restructuring and also M&A. As we look to 2026, can both continue to remain elevated here? Can restructuring revenue actually grow in 2026 versus 2025? And if the restructuring market itself stays somewhat flat, how much additional share do you think you can get in liability management and restructuring?

We think that the environment where restructuring and M&A coexist, both strong, is highly likely to persist. Our backlogs in each of those areas are high and really in most respects, record levels. We think that with respect to restructuring, our backlog is very diversified. So we're looking at whether liability management, we're looking at restructurings, we're looking at bankruptcies. All of those things are quite full in our backlogs, and we think that those will continue. And really, we feel very good about the restructuring environment for our business.

On the M&A side, it's the same. And we have very strong backlogs. We have real activity. We are in very serious and strong dialogues with corporations and management teams, and also boards. And we think that this is going to persist. So the answer to your question is we believe that both will coexist and both really will be quite strong if our backlogs and our activity levels are any indication. In terms of market share, I think that we, I think, are continuing to pick up market share in liability management and restructuring. We feel really good about how we're covering clients. And really, the new activity coming in is very diversified. So we feel really good about really where we stand.

Our next question comes from Brennan Hawken with BMO Capital Markets.

So Tim, you talked a little bit about investing sort of making hay when the sun is shining on the tech side, which makes a lot of sense. Could you help us maybe understand -- is that going to be calibrated to revenue, right? So you almost start to think about the non-comp ratio, not -- obviously, it's not going to be the same as the comp ratio inherently, but maybe think about the growth rate with an eye to that and then maybe help us think about guardrails about how you manage it? And also, are there any particular businesses that are tech heavy? I know like the PCA business is a very data-driven business. So any color on that would be great.

Yes. Sure, Brennan. Thanks for the question. Look, I think the way to think about it is we feel like we've made significant strides with respect to growing the business and diversifying the business, both with respect to lines of business and geographically. And in order to kind of build a first-rate corporation and then a foundation upon which to continue that kind of growth, we do need to invest in our infrastructure and part of that is technology. And we -- I mentioned in my comments about how there's a kind of a rapidly evolving landscape. And I don't need to go into that because it's well covered in the news. But I think that you've seen a pickup probably in the investment in our non-comp over the last couple of years. And so the increase in '24 was 16%, increase in '25 was 17%.

And I think in order to support the growth and the diversity and the technology initiatives and so on, I wouldn't be surprised to see something somewhat similar as we head into '26. I would note, though, I think that the good news is the growth in the non-comps is less than the growth in our revenues. And so the corresponding revenue growth rates over those last 2 years were 23%, 29% -- and hence, we have made pretty significant progress on the non-comp ratio, bringing it down from 16.6% 2 years ago to 15.7% last year and 14.2% this year. And so I think we're going to continue to invest in our infrastructure and -- but we're pleased with the fact that we're able to make some progress on the noncomp ratio.

Sure. But the businesses that drive the noncomp, any color on that -- sorry?

Yes. I would say that it's -- yes, PCA is certainly one, but we're also for our kind of standard and traditional M&A and restructuring businesses, we're using it in equities. It's really -- and frankly, in corporate as well as we seek to drive efficiencies in the corporate side of our business. And so it's really, I would say, comprehensive. And then aside from the technology, as we expand, and I am pleased with the progress we've made in our geographic expansion, particularly in Europe. And that, of course, leads to both in Europe and in the U.S., increased occupancy costs as well, which are part of the underlying growth you're seeing in the non-comp expense.

And well done on the comp ratio, by the way.

Our next question comes from Devin Ryan with Citizens Bank.

Question just on kind of the broader outlook. Obviously, a lot of, I think, enthusiasm in there just around kind of the momentum into 2026. And I think we can see a lot of that even from the outside in terms of M&A backlogs and just kind of where the types of deals that Evercore is currently involved in. So great to see that. And then you hit on some of the momentum you're still seeing in restructuring. It would be great if you could just hit on some of the other non-M&A businesses, whether that's private capital or capital markets advisory and just kind of where all these stack together.

So I think people are trying to kind of put it all together, the non-M&A businesses have clearly grown in a bigger contribution -- you've got this M&A business that's on fire right now. Where are these other businesses kind of in that mix in terms of like growth expectations over the next 12 to 18 months? Can they keep up at a similar pace? Or are they kind of ballast in the market? Maybe M&A grows faster, but these other businesses can provide a little bit more stability. Just good to get some kind of directional color there.

Sure, Devin. We really continue to see strength throughout our system. I think as we said, virtually all of our businesses are at or very close to record levels. In terms of the businesses which you specifically highlighted, private capital advisory, let me start with that. PCA had a record year this year. PFG, which is our -- as you know, is our fundraising business, they had a record year. Our debt advisory/private capital markets businesses, which really were new 2 years ago or 3 years ago, have actually performed at a very high level and are setting records also. Our real estate advisory businesses have really picked up dramatically. So across the board, we're seeing momentum to our businesses.

So in terms of the breakout between M&A and other businesses, it's actually still continuing to be very high. Even when M&A running as hot as it is, we still have 45% of our businesses are non-M&A. And I think that's going to persist no matter really how strong M&A gets. Now obviously, if M&A really hits the tsunami, that may be hard to pick up -- keep track -- to keep on top of that because the M&A business, as you know, has great leverage in our system. But I think really, what you're seeing is a real diversification. We've worked really hard to diversify. We've built out these very, very strong businesses, and we continue to see that.

On the PCA side, which had, as I said, had a record year, they had a very high market share this year. I think it was over 45%. They continue to be looking at a very diversified product set, whether that is LP-based or the GP-based businesses. As you know, the GP is a continuation fund business, which has actually really been on fire. But we have significant new products in that business also. So I think really what we've -- what we're really building and working hard to do is to keep our very strong businesses and performing at the highest level, but also making sure that we are investing in the diversification, which we have promised shareholders that we will do. And I think so far, we're working hard and it's going quite well.

Our next question will come from Daniel Cocchiara with Bank of America.

Given the sell-off in software yesterday and as well as your stock's reaction, there seems to be some fears just about the potential impact AI may have on advisory businesses in 2026. I was wondering if you could talk to us about the potential disruption risks AI may pose to your pipelines? And if you can provide any color on sector exposures in your backlogs, both on the public and private side, that would be very helpful.

Sure. Obviously, we've taken a strong look at that, certainly, especially over the last 24 hours. And honestly, we have -- in our backlogs and really our business activities, we are very diversified. There is no question that AI is influencing the world. As we look at our business in the near and medium term, we really don't see disruption. Now obviously, the markets could be significantly seeing further disruption. And I think it would be unrealistic to say if the markets got very disruptive that it wouldn't impact our business. Certainly, it can. But right now, we look at what we're working on, our backlogs, really what we're seeing, as I said, near term and medium term. And given our diversification really along products, geographies and sectors, we actually feel quite good about where we stand and really the stability of our business.

[Operator Instructions] And our next question will come from Alex Bond with KBW.

I have a question on the expectations for ECM in 2026. So the IPO sentiment continues to improve and seems like there could be a strong lineup of large deals coming to market sometime in the near future. Can you just give us an update on your backlog here and maybe high-level outlook for the year? And then also on the equities front, if this environment that we're in now in terms of heightened volatility becomes more entrenched or persists, can you just help us think about maybe what the right -- or what the revenue potential is for that area of the business?

Sure. In terms of our backlog, our backlogs are good and they're building. We really saw a really healthy build through the fourth quarter, and I think that has just continued. We will absolutely be involved in what I think is a very healthy IPO business going forward here. And I think we're feeling quite good about really our activity levels. As you know, we've really diversified. We're not just in health care, but we're looking -- we are very involved in many different sectors now, and we've really spent a lot of time and effort building out our capabilities in those areas.

And I think also really with respect to our activity levels, having strong research with ISI really has helped us to stay involved in thinking about a lot of different sectors. The bottom line is that I think the equity capital markets business is actually healthy and growing. We expect that it's going to continue along the lines of where it was in the fourth quarter and strengthening from there. So we're feeling quite good about that.

Our next question comes from Jim Mitchell with Seaport Global Securities.

Tim, I guess I'll ask the question that you probably don't want to answer, but you highlighted, I think, over the last 2 years, comp ratio improvement of 340 basis points. Is that sort of your definition of gradual and a decent way to think about the next couple of years, assuming the environment continues to improve as we expect? Just any help on how you're thinking about the evolution of the comp ratio from here?

Yes. Jim, sure, happy to share some thoughts. And yes, as you mentioned, we have made some progress these last couple of years, 340 basis points over the last 2 years as we came down from 67.6% to 65.7% and now 64.2% this year. And look, and I don't want to make this answer sound too much like a disclaimer, but there are really a lot of things that go into determining the comp ratio, and it has to do with absolute revenues, revenue growth, market comp and competitive environment, number of SMBs and non-SMBs hiring. So there's an awful lot of things that go into that. And what I'd say is we're striving to make continued progress. Now whether we can continue to decrease it every year at the same kind of pace and magnitude that you've seen over the last couple of years might be a bit challenging, but we're striving to make continued improvement as we head into '26.

Our next question comes from Brendan O'Brien with Wolfe Research.

I guess I just wanted to ask on the sponsor backdrop and specifically just how you'd characterize the conversations that you're having with your sponsor clients at the moment and whether there's been any notable shift in the tenor of those discussions and how we should be thinking about the trajectory of sponsor activity throughout the remainder of this year?

Thanks for the question. As you have seen, we've had a very interesting set of circumstances with sponsors. We have a lot of dry powder. We have LPs that really want liquidity. and we have markets that seem to be recovering. And in many respects, the sponsor business has really started to gain momentum in terms of that activity level on the M&A side with size being a dictator, the bigger, the more active you're seeing in the market. I think what we're seeing on the M&A side that the market is starting to really start to diversify some and that some of the middle market assets or even the B assets are becoming more liquid.

And we're seeing, in some respects, a capitulation where sponsors are trying to really look carefully at their portfolios and start to move things out because they really want to create more movement. And so I think there will be a growing momentum in the sponsor business. Obviously, the big highest quality assets will continue. And then I think you're going to see assets throughout really the spectrum. Now one of the very important things in terms of sponsor activity for us is, as we've said, we have a very strong set of businesses which service sponsors, whether it's PCA or PFG or LP stake sales. And those businesses are very healthy. The dialogues are very strong.

We're seeing that activity level continue. And so from that perspective, the sponsor business for us continues to build. As we've articulated in many calls before this, one of the things that we're spending a lot of time focusing on is how do we bring together all of the strengths of our businesses, the M&A side and the coverage side of the sponsors themselves, the PCA business and how we really interact with GPs on that business. the fundraising business with PFG and really how we think about advising the senior people in these businesses about liquidity. And I think we're making a lot of progress on that, and we're feeling momentum there. So I'm hoping that, that will lead to even more dialogue activity and opportunities for us to serve this very important client base.

Next, we have a question from Nathan Stein with Deutsche Bank.

So large mega deals really fueled the deal-making recovery in 2025, and we're all monitoring the industry data to see when this could really start to widen out down market. Could you talk about the -- are you seeing an uptick in the core upper middle market transactions within your business lines?

We are definitely seeing more activity. We are definitely seeing more in our backlog. We do have diversification in our backlog. So we are seeing -- we have a significant number of what you classify as middle market. And frankly, if you think about our investment as a firm, we are investing in coverage of the middle market. And so we're seeing more of those types of assignments coming into our backlog as the people who we've hired over the last 2 or 3 years begin to mature and to hit their stride.

So we're seeing it building out. In terms of the market itself, which I think is what your question is, is there really continued or increasing activity in the middle market? We think there is. We think that there is a very healthy build in that side. And we're seeing a lot of that. Our pitch -- our numbers of pitches, both sponsors in the middle market companies as well as nonsponsor is up significantly. And so we're seeing a very strong level of pitch activity and dialogue activity in that middle market sector.

Our next question will come from Ryan Kenny with Morgan Stanley.

So on the private capital advisory side, you are a market leader in secondaries, and we've seen some peers lean in recently. We've seen some of the money center banks doing more. So what's your sense of competition ramping up? Are you feeling that? And how do you protect your share?

There is definitely a lot of activity in people trying to build these businesses. And I'm certain that there's going to be very worthy competition and it's going to grow. We have a very good business, and we have a really well-established base. We have a group of clients who are very happy with the service that we've been providing them. And I think there's a level of advantage for having been in this business for a long time and done it well, whether it's data that we've been able to capture and it's very strong data, an experience level that people recognize and I think in many respects, clients appreciate, a track record of success and the relationships themselves.

And so I think that we're going to be able to compete very adequately as new people -- new entrants come into the market. But as you know, on Wall Street, competition can be intense. The competitors are always very worthy and good. So we're going to have our hands full, but I think we're ready for it. And I think we're actually competing extremely well right now.

And we do have a follow-up question from Daniel Cocchiara with Bank of America.

Just when thinking about private, we've seen alt struggle in terms of price action. Do you think LPs are recalibrating how they allocate to private markets? And on the non-M&A revenues, is there a high correlation between M&A activity? Or should we think of these 2 as entirely uncorrelated?

Well, I don't think you can ever have something be entirely uncorrelated with the flow of funds going back and forth through asset classes. I don't think that we're going to see what I would call as kind of a rethinking or maybe somewhat of a discussion on alt to be changing what's happening on the M&A side. So I think that what you'll see is you'll see flows of funds going back and forth. There always is. We don't see any major impact right now in our business. But obviously, we're watching it just like you are. And -- but we don't anticipate it's going to have a big impact.

We do have another follow-up question from Nathan Stein with Deutsche Bank.

I was hoping you'd provide some additional color on the capital allocation strategy in 2026. You called out doing buybacks again this year, net of the employee comp program. Is the 4Q repurchase level a good run rate for buybacks for the rest of the year? And just how are you thinking about capital allocation this year?

Yes, sure, Nate, and thanks for the question. We -- I would not take any particular quarter of buybacks that you see from us and apply an annualization to it. I think just to give you some color on it. First, what I would note is that the $812 million that we returned last year was our second highest return of capital ever trailing only 2021 and trailing that number by not much. And so that would be the first point.

Second is -- each year, we've indicated to the market that we strive to acquire at least a number of shares equivalent to the number of RSUs we grant as part of our bonus cycle. So that's probably the second point I would make. And then thirdly, we're sitting right now on -- as of year-end, about $3 billion of cash. And some of that, of course, is required for regulatory purposes and for underwriting capital and for operating capital. But there's still some excess there. And we intend to be repurchasing shares, not only for the last 5 years, not only have we repurchased a number equivalent to the RSUs issued as part of our comp cycle, but we've acquired a number in excess of that. And I think we certainly strive to do that this year as well.

We do have one more question in the queue. This one from Jim Mitchell with Seaport Global Securities.

Sorry, apologies for keeping you. But maybe just, John, can you speak about the recruiting environment, whether or not it's getting tougher to get people to leave their seats in this environment? And is it getting more expensive? And just overall, what's your take on your recruiting pipeline?

Thanks, Jim. The recruiting environment is heated up a lot, and it's very intense and it's very competitive. We feel good about the pipeline of people that we're talking to. There is no question that getting people to move is harder than it was 2 or 3 years ago. But I think what's happening is there's a lot of momentum at Evercore, and we have a pretty compelling story for people. But I do think your -- the premise of your question, which is it's harder and it's going to take more work and it may even be more expensive. Those -- that premise is correct.

There is definitely going to be more competition. It's probably going to be more expensive. We're going to be having to work harder to get people to make the move, especially if they're very busy in a recovering environment. So I do think it's going to be hard. We spent a lot of effort and time finding the right people and going after A+ candidates. I think one of the things that we're really happy about is that a lot of the people that we really have worked hard to get over the last 3 or 4 years, many of them have ramped hit their stride and they're starting to really kick in. And some of the results that we're showing now is that group. So our incentive to continue to go even if the environment is harder, maybe more expensive, will still be there. We're going to continue our aggressive recruiting efforts throughout the cycle here.

Right. One thing I might add to that, Jim, is the good news is that we've made a lot of progress in these past 3 years. We've added 41 through external means and promoted 25 internally. We've got 40 that are in ramp mode. And so while, as John said, we're always out there working hard, trying to implement our strategic plan and talking to a lot of people, though we never know in any given year exactly how many will cross the finish line. The good news is I think we're really well positioned based on the success we have had over the past 3 years.

And there are no further questions in the queue at this time. With that said, this does conclude Evercore's Fourth Quarter 2025 and Full Year Earnings Conference Call. You may now disconnect.

All right. Let's get started here. Up next, we have John Weinberg, Chairman and CEO of Evercore. Positions he held for nearly 4 years. Previously, he was Co-Chairman of the Board and co-CEO positions he held since July of 2020, and he has overseen the best-in-class growth at Evercore in his tenure. This is John's fourth time at the conference. Prior to joining the firm in November of 2016. John served as Vice Chairman of Goldman Sachs and Head of Investment Banking.

Thank you so much for joining us, John.

Thank you very much for having me.

Okay. John, you're substantially passed the 5-year mark at the helm of Evercore. Could you walk us through your biggest successes, the biggest lessons and, I guess, the biggest opportunity and strategic priorities for Evercore going forward over the next, let's say, 3 to 5 years?

Well, thank you, James. I'd say that the thing that I'm proudest of is that we have really grown the firm with real quality, and we have expanded our footprint for covering clients extensively. And so whereas 5, 6 years ago, we were much smaller. Now we've really extended our reach in terms of industries we cover, in terms of sectors that we're involved in. In terms of businesses. For example, we've built out our Europe business tremendously. We've really built our sponsor business. And really, across the board, we have a much expanded client footprint, which allows us to do more with more clients.

Second thing I think I'm really proud of is the really strong group of exceptional people that we've brought in. I think our talent level has gone up dramatically. And whereas we have -- we've brought really good people in. We've promoted really good people. And I think person for person at Evercore, we really have an incredibly strong group of people who are covering our clients and executing our deals. And so I feel really good about the talent level at the firm.

I think the third thing I'm really proud of with respect to Evercore is that we've really built out our market position. So our market shares have gone up year-over-year each year. We've really become a much larger organization in terms of participating in big deals. One measure that we look at quite extensively is total revenue -- total global revenues of advisory revenues. And for total advisory revenues globally we're now #3, and we're really proud of the fact that we've really moved up there. And I think our market shares have been quite strong in terms of their improvement level.

And then I think finally, the thing that I'm really happy about is our brand. Our brand has real momentum. We've really built out the brand. We have really a very different feel and look around the world. I think more and more people know who we are, more and more people are thinking about us in a very positive light. And when I first started 9 years ago, people didn't know what Evercore was, at least most of the meetings I started, I had to really explain to the firm. And now business is coming in without us even asking in many cases and people know who we are and boards know who we are, and we have a real track record. So I think those are the things.

In terms of lessons learned, I'd say there are 2 things that I think a lot about. One is that a relentless focus on clients is really the most important thing that we could be doing as a firm, and we make that very, very clear to our people that we are in business for clients and we are absolutely waking up every day thinking about how can we serve them.

And then I think the second thing is culture, having a collaborative culture, where we are working together and a real team really gives us, I think, an edge. We do it well, we understand that the way that we're going to win business is by putting all of our talent together and really competing really as one big team. So I think that's -- those are the big things.

In terms of the forward, we can talk more about that. But we have a strategy. And the strategy has to do with expanding our client footprint, broadening and deepening our products and really being able to serve our clients with more and then really investing in places where we think that there is real growth in the economies where it's so for example, in software and AI and fintech and biotech. The areas that we see real growth, we're making sure that we're allocating capital appropriately.

Your hiring has been very strong this year. Maybe how are you thinking about the organic expansion of the talent base next year? And then maybe also if you could comment on deals, obviously, you did a deal for the first time in a very long time this past year?

Sure. So maybe I'll start with the deal. So we -- many of you know, we have brought Robey Warshaw into Evercore. It was a very strategic acquisition in that they have an extraordinary client base and a really strong footprint in the U.K., especially but through Europe, very strong firm. And they have really outstanding relationships with big cap. And we have really bring to the table, we have relationships, but we also have extensive product reach and also we have geographic reach.

And so taking their expertise and their large-cap relationship and marrying that with what we bring to the table was really a very strategic thing. And it's been a big part of what we've done in terms of building out Europe. In terms of the recruiting year, it's been a very good year for us. We've really made sure that what we really do is we're looking for just A+ talent.

And this year, we were able to find some really extensive, really strong people. And so we have 18 people currently in SMDs that we've recruited. We promoted another strong group of people, and we have a very good pipeline going forward. In terms of how we're thinking about it, we're going to continue to be in a build mode. Organically, we're going to be continuing to promote and develop talent, but we're also going to be out in the market. We have a very good pipeline right now, and I can easily see us doing something similar to what we did this year. But it's really going to be more driven by the opportunities in front of us rather than a goal that we have to bring in a certain number of people because really, we're just recruiting for quality.

And in terms of deals, a big deal, I don't see one in the horizon for us, but you never say never. If something comes up, that really makes sense and really helps us with a strategic imperative that we see in terms of building out the business, we'll certainly look at it carefully.

I know you're still heavily focused with clients. And I get the sense that that's your favorite part of this job still. What's top of mind in the boardroom? And maybe within that answer, you could talk about the art of the possible regulation has improved, it seems like. So maybe the art of the possible has evolved as well over the past year?

Well, I think that there is a feeling in boardrooms with management teams, but also with the Board members themselves that there is -- that really, there isn't anything that people aren't looking at right now.

Not that everybody -- each company thinks they can do exactly what they want. But you're seeing a real attitude of can do and there's really nothing off the table. So I've been in several Board meetings in the last 3 weeks where we've looked at things that we would never have looked at this time last year for any number of reasons, financing is plentiful and people really believe they can get things done. The regulatory environment seems to be more accepting, we'll see. But clearly, that looks to the case.

I think people are more comfortable with the geopolitical stability and whereas we still have things going on geopolitically. But I think people are more comfortable that there won't be dramatic interruption. So I think the Boards are quite open. There is real discussion.

In terms of our backlogs, we're seeing really consequential really interesting things going on. And there's -- it comes in many different ways. It's strategic just in terms of growth. It's something to do with kind of building technology or capability. And it's also looking at really trying to make more -- give more breadth to businesses.

So you're seeing it across the board. So I guess your -- the premise of your question was is, are things much more open? And the answer is yes.

Excellent. Maybe digging one level deeper, maybe you could differentiate a little bit between what's top of mind in the corporate boardroom versus what you're hearing with the key sponsor private equity decision makers.

Well, there's no question that sponsors is beginning to open up. There is real pressure on sponsors to really start to do some deals. They have a tremendous number of companies in their portfolios, and there hasn't been quite as much movement.

And we've all heard about the fact that limited partners are getting anxious to get money returned. And so there's real pressure. Also, the sponsors have a huge amount of dry powder. And they've got to put some of that to work because some of it's going to start drying up over time now. And so there's real impetus for sponsors to be moving. Couple that with the fact that the markets are open and people are actually looking at things carefully.

And you're seeing the sponsors business really start to pick up. And you're seeing it really up and down the size line, which is that the larger deals we're getting done early on, and they still are being out there to get done. I think we're seeing many more of the more middle portfolio companies start to come to market. We're at record bake-off activity in our firm right now.

We are in the middle of so many different solicitations and bake-off. And I think a lot of that is that the sponsors want really to get going. And so whereas not every one of the things that we're baking off right now will come to market in the next 3, 4 months but we are seeing a real activity, and I anticipate there'll be a substantial buildup in sponsor activity in terms of deals being done.

Okay. So maybe on Europe, you actually delivered a record quarter that even before Robey Warshaw, and you've added in addition to our inorganic a lot of organic talent or getting hiring there over the past few years and especially this year. So maybe you could just talk a little bit about the opportunity or your outlook for Europe into next year?

Sure. So over the last couple of years, we've really focused on how we're going to move strategically in Europe. And we've really tried to lay down the building book to really establish a very strong market-leading business.

And so we've gone out, we added Spain originally. And then we've added in France. We've built a business in France. We have -- we've added building blocks in Italy with a very senior banker. We've just recently brought in someone in the Nordics and then up Robey Warshaw. And really, what we've tried to do is lay the building blocks for a really sound extraordinary business.

We're working really hard on building these long-term relationships, which we are seeing some real activity pick up there. We -- you may have seen that we just in France 3 weeks ago, did a deal for hearing where we sold beauty business to L'Oréal. And that's just the beginning of a lot of the bigger cap business that we're starting to see, and a lot of that's coming in. We had a record -- we were on a record before Robey Warshaw in terms of record quarter in the third quarter. We continue to see high activity level in our European business.

And I think what we're really looking for is to really build that business and really invest long term in Europe and build it into a really enduring sustainable top quality business.

There's a lot of positive sentiment here across much of advisory. One thing I just want to touch on quickly. You noted in the last earnings call that 4Q seasonality might be a little bit less pronounced than is typical given the record results in the third quarter. As well as the impact of the market volatility and then maybe the government shutdown as well. So given that, maybe you could just an update on the near term on the business?

Well, fourth quarter is tracking well. And we feel good about kind of the way this is going to all play out for the year and really going forward. I'd say that the seasonality for the fourth quarter, which we've seen over the last couple of years may not be as pronounced as it has been.

Part of that is that we have had a record second quarter and a record third quarter. Our business is very much influenced in some respect by the timing of the closings of the big things we do. And we have -- we're running at very high backlogs right now -- record backlogs. In fact, we -- I think we said in our third quarter earnings that we were at a record -- we were at record backlog levels significant. And we continue to add to that backlog. So our backlog continue to build in a very healthy way.

And so we feel like things are going along well, but we think that there -- from a timing standpoint, as I said, I think that the seasonality uplift may not be quite as extensive as it was in other fourth quarters, but we feel like we have a very, very strong -- we have a very strong business in terms of the fourth quarter and really going into the first quarter of next year.

Maybe just one more on the advisory side. So you've been in this business for more than 40 years, by my count. So in your view, what inning of the M&A? And maybe throw in ECM cycles do you think we're in right now?

I think we're relatively early on the merger cycles, which I think all of you may know, is the merger cycles have historically been 2 bad years to 4 to 5 really significant uplift years. And we had a couple of years that were not as good. The last year and the year before that, we were starting to see lift and think '23 -- '24 was better than '23 and '25 is better than '24. And so we're seeing the lift. But everything that we see right now, and I mean really -- you only can really plan ahead or think about 6 months ahead in this business, things change so dramatically. But what we're seeing right now, there's a real strength in the market.

The activity level is across the board very strong. We talked about sponsors. We've talked about strategics. We've talked about the fact that boards are feeling quite empowered to look at lots of different things. And so we think that there will be a continued strength in the market. And so I think that we're in the early stages, and I think it's going to continue to build.

Great. Okay. So let's turn to equity capital markets. We saw a strong IPO momentum in the third quarter, and you had strong activity in convertibles. Active tech and industrials and solid follow-on activity.

But then we saw the government shut down, and there was a bit of a blip there. Maybe you could just help us think through the near-term ECM picture and then maybe longer term as well?

Well, what we're seeing is that ECM is building, and you're seeing it in really across the board, different sectors, and we're -- we've been investing in diversifying our Equity Capital Markets business, and we're seeing some fruit for that labor. But what we're seeing is that the market is strengthening. And I think that the IPO market is actually quite strong right now, and there's a lot of possibility there.

And we think that there's no reason to believe that it's not going to continue to build through. And so I think that really across sectors, and we've seen a lot of activity in the health care side, which is -- and biotech, which is really a place that we do spend a lot of time we're seeing those things build. And so I think that the equity market is going to continue to build.

I think it's not quite at the level that the merger market has been but it's actually building quite well, and I think there's no reason to believe that it's not going to continue to strengthen.

So we touched on this, I think, on the advisory side, but -- maybe we can talk about in the couple of ECM as well, which is how do you differentiate your ease? You just touched on biotech. Is it that product? Is it sector? Is it geography? Or is it something else?

Well, the way we think about our business is we really look at it by sector. And so we've invested in industrial. We have consumer business. We have a strong health care business. And I think that we have done a lot in the technology side.

And so we're investing in each one of those. And as you know, the way firms like ours get Equity Capital Markets businesses, we have to have relationships with companies. We have to have strong research coverage. And then we bring all that together in terms of trying to be able to add value when they try to raise -- when they're thinking about raising equity.

And in many respects, we're not the biggest in the business. But we like to think that we have a tremendous amount of value-added and expertise that we can bring to the party. And I think that, that seems to be working quite well now. I think we have some momentum. And we're really going to be continuing to invest in that business.

So the other side of equities is on the secondary side of the equities trading side where you've had really strong results over the past few quarters. How much of that is environmentally driven versus investments that you've made? And how should we think about the growth algorithm on that side of the business?

Well, we have very strong research. And it's -- I think it's the fourth year in a row, we've had the #1 rated research group. And that certainly is an important part. We've done a lot of work in terms of investing in the relationships with the buy side. And a lot of that work is really actually starting to see real returns.

And I think that what we're doing is we are continuing to build those relationships. We're continuing to build the service that we're providing those clients. And I think those are actually really yielding a continuing market share pickup for us over time. I think we're going to continue that. I think it's been a very solid business. They've had a very good year this year so far. And I think we're feeling good about where they stand. And really we're just going to continue to invest.

I asked you about this last year, but the secondary has continued for another year to grow at a really strong pace, and you have the leading secondaries franchise out there. By my math, I guess, has anything changed over the past year for the better or for worse? And I guess, when or if does this powerful growth drivers start to subside?

Well, we don't see any ebbing of that business. It just continues to be strong. The first 3 quarters of this year exceeded all of last year. And so they're on, obviously, a record pace. There's real acceptance of the products. And I think that those products really provide real value to the clients, especially on the sponsor side. So that continues to be powerful. .

We don't see that there's a flagging of that business. We actually see that there's continuing to strengthen. And we add new -- we're adding new products. So we collateralized fund obligation transactions we build. We're really looking at all kinds of different other LP type transactions. There's just so much really in that sector that we are able to build on.

So I think that we're seeing it. We have a really strong business. 10 years ago, we had 10 people in that business. We now have over 150 people in that business. And we have really collected data over that 10 years, and so we've got really strong data that we can use to help build transactions. We have a very strong group of people. We've been really developing and recruiting people into that area for 10 years. And so we have a really good established strong group.

And we have a great client base where we've been able to provide real value to those clients, and they come back because really, those relationships have been really sound and the transactions have gone well.

So a regular way sponsor ECM and M&A does pick up, how much of an impact do you expect that to have on the secondaries business? And I guess if you're -- if you'd like to maybe just comment on the difference on the GP side versus the LP secondary side, whether there could be divergent trends going forward in that -- in those 2?

We haven't seen any cannibalization between GP LP. They're both very different. I think what -- the way I would classify it is that each one of those provide a service to sponsors that is actually very well received. And I don't see any weakening of the need for those businesses to really provide the opportunity for sponsors to manage their portfolios.

The GP side of the business, which has a lot of continuation vehicle type business, has been very helpful to managing the portfolios, managing the return to shareholders and really providing liquidity for its sponsors. The LP side, of the business really is that there's LPs that want to really have a marketplace where they can come in and out of their positions. And each of those is a very different service. Each of those and they don't really contrast or conflict that we can see. So I can see each of those business independently growing and actually leading quite really a healthy set of market and results.

Maybe just one more on sponsor, which is -- we've talked about the sponsor recovery picking up for a number of years now. What gives you the confidence that 2026 might be the year where we actually see that big acceleration or not?

Well, my confidence is ceded by the fact that we're seeing such extraordinarily busy and robust levels inside our firm in terms of the conversations and the activities that we're being asked by sponsors to undertake, whether that's bake-offs or whether it's that we're being asked literally without a bake-off to really get involved in thinking about things. And in some respects, it's just help us think about what to do next with this set of portfolio companies. In other cases, it could be things like there may be some portfolio of companies in distress and they're coming to us for the restructuring/liability management work.

Those things just continue to build. And the better we do at developing those relationships, the more business we're going to see. And one of the most important things, I think, what I said earlier, which is we've built our client footprint, we've invested really high-quality people to really address client needs.

And I think we're able to serve them better. We're able to give them even better advice. We're able to really come up with very creative solutions for them. And in terms of things where there are places where they really need help, I think there's a view that our people, our bankers are strong and can really help with those difficult situations.

One last business question. So restructuring activity remains robust with an increase in larger traditional segments and a strong backlog that you've highlighted. Maybe you can just talk about the 2026 key catalysts, I don't know, maturity walls, maybe the rate path, maybe private credit? And do you think this strong pace that we've seen in recent years can continue?

I definitely think -- well, our restructuring business is running at a very healthy level, and it will -- and it was last year and it will continue this year. And we don't see anything insight that would prevent it from continuing. I think a lot of it is that there is a different interpretation of what the restructuring business can be in that it is looked upon as much as a liability management tool as it is a restructuring or bankruptcy business.

We're seeing many more big restructuring come in. And those are big and they are also high fees. But we're also seeing a lot of sponsor portfolio companies coming in. And so there's a there's a real healthy influx of activity from those. And some of that is that there's -- there are companies that have been put together with -- in a period where they paid a lot of money to bring those companies in, and there's a little bit of a mismatch with the capital structure.

One of the things that happens with sponsors is you do a really good job with sponsors, you end up getting a lot of their business because they don't really want to go out to everybody with the weakened portfolio companies they have. They really want to stick with one. And so we've block by block we've built very strong relationships with some very strong, very good sponsors where they're trusted go to. And obviously, that's a very good place to be because then you're going to be able to be a trusted adviser and you're going to be able to help them with those things.

I think that the restructuring business right now is very healthy. And I don't -- we always used to say 5 years ago or 4 years ago, restructuring business was a counter to the merger business. They kind of they acted in opposite ways. We don't see that right now. The merger business is strengthening and the restructuring business is going quite well. And I think part of that is that the restructuring business is fulfilling needs of helping people manage their liabilities in a different way than people had thought about them before. And it's not just sort of as a bankruptcy business.

Maybe just shifting to expenses broadly. How do you think about balancing investing for growth with margin improvement over time?

Well, our job is to create value. And clearly, what we want to do is make sure that we are balancing all the different interests of shareholders and stakeholders. One of the things that, obviously, we think a lot about is our comp ratio. We have, over the last couple of years, continued to improve our comp ratio, and it continues to be a focus for us.

And so we're going to be working to bring that comp ratio down over time. I think that. We also spend a lot of time making sure that we are trying to manage our noncomp expenses. And so I think that right now, we're really looking at the different opportunities, which is making sure that we're growing appropriately into growing market, making sure that we continue to build this firm and leverage a brand that seems to have real momentum and really create value by actually taking market share and becoming a company that has real growth in our sector.

On the other hand, we are not at all turning a blind eye to the fact that I think people want us to make sure that we're very focused on the different expenses that we're incurring and making sure that we're responsible with shareholder wealth.

You stepped up your capital return on a gross basis in recent years, but also issued some shares and may issue future shares through the Robey Warshaw acquisition. Could you just update us on your capital return priorities?

Sure. We continue to repurchase shares. We've done significant repurchase even in this quarter. We have pretty much already repurchased all of the stock that we've done for Robey Warshaw. And we continue to have the same philosophy that we've always had, which is that capital that we don't need to run our business, we're going to make sure that we're focusing on returning it. And I think that we're going to continue to do that. So we've pretty consistently repurchased shares all through the year, this year, and we continue to have the same philosophy going forward, which is we're going to continue to repurchase shares. And we're going to continue to make sure that we are returning capital back to shareholders.

Okay. John, last one. Any final thoughts that you want to leave us with as we approach the end of 2025?

Yes. I'd say that we feel really good about 2025, and we feel good about 2026. And we are in a build mode. I think we've been be able to bring in really strong talent. I think that we are able -- we're building a business that I think is enduring has real growth opportunities, and we have the people that are going to continue to passionately pursue it. We feel really good about the culture we have so that we're all working hard together. And I really think that this firm is really in a very good place right now.

Excellent. With that. We're out of time. Thank you so much. Hope we can do it again next year, John.

Thank you very much.

Good morning, and welcome to the Evercore Third Quarter 2025 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore management and the question-and-answer session. [Operator Instructions] I will now turn the call over to Katy Haber, Head of Investor Relations at Evercore. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today for Evercore's Third Quarter 2025 Financial Results Conference Call. I'm Katy Haber, Evercore's Head of Investor Relations. Joining me on the call today is John Weinberg, our Chairman and CEO; and Tim LaLonde, our CFO. After our prepared remarks, we'll open up the call for questions. Earlier today, we issued a press release announcing Evercore's third quarter 2025 financial results. Our discussion of our results today is complementary to the press release, which is available at 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 1 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 Evercore's 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 Evercore's performance on an annual basis. As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closing. I will now turn the call over to John.

Thank you, Katy. Evercore delivered record third quarter results following a record first half with momentum across all business areas. We generated over $1 billion in adjusted net revenues, up 42% year-over-year, marking our best third quarter ever and the second best quarter in our history, behind the fourth quarter of 2021. Our quarterly and year-to-date results reflect the strength of our diversified revenue streams, the impact of our Senior Managing Director hiring and promotions over the past several years and the benefit of a steadily improving market environment.

We remain committed to delivering for our clients and shareholders by executing our long-term strategy, which includes focusing on areas of sector and geographic white space broadening our client coverage and expanding and deepening our product capabilities. We are working at closing out 2025 on a strong note and positioning ourselves for a successful 2026. Throughout the third quarter and in October, market conditions and investment banking activity have continued to strengthen, supporting a more conducive environment to deal making. Announced M&A activity has advanced at a healthy pace, led by larger strategic transactions, while capital markets activity has accelerated.

Transactions that were impacted by market volatility earlier this year are now returning to the market. In line with the momentum that we've experienced over the last several months, our backlog continued to increase in the quarter and client activity across the firm remains robust. We expect these trends to carry through year-end and into 2026. It's worth noting that in many years, we've experienced significant positive seasonality in our business in the fourth quarter. This seasonality is likely to be less pronounced this year versus prior years given the strength of our year-to-date results, the timing of some transactions closings that may have been impacted by the market volatility earlier in the year and a possible timing impact from the government shutdown, which we are continuing to monitor closely.

That said, we expect continued strengthening in the market and our business. Overall, we continue to believe we are in the early stages of an investment banking recovery driven by a combination of cyclical and structural factors. Global announced M&A as a percentage of global market cap remains well below historical averages and pent-up demand from both corporates and sponsors, together with broader secular shifts such as accelerating impact of AI and other long-term trends is driving new opportunities across sectors. Turning to talent. We continue to make strong progress on our recruiting efforts. We successfully closed the Robey Warshaw transaction on October 1, which has been an important addition to our build-out in Europe and significantly enhances our ability to serve clients across the regions and around the world.

Along with the 5 new investment banking SMDs from Robey Warshaw, 4 additional SMDs have committed to join our global investment banking practice. 2 in the U.S. with 1 focused on financial sponsors and the other on health care and 2 in Europe with 1 covering financial sponsors and another advising Nordic clients. So far, 2025 has been our strongest recruiting year-to-date. With our most recent joiners and commits, we now have 168 investment banking SMDs, up nearly 50% from the year-end 2021, positioning us well as the market strengthens. We continue to see a healthy pipeline of external candidates and attracting and developing exceptional talent remains core to our strategy and future success.

Now let me turn to the businesses. We experienced broad-based strength across our diversified platform, both sequentially and year-over-year. In the third quarter and over the last 12 months, approximately 45% and 50% of total revenues, respectively, were from non-M&A sources. Our U.S. M&A advisory practice continued to gain momentum across sectors, including tech, infrastructure and health care. Financial sponsor activity is steadily picking up, and we expect this positive trend to continue into next year. Evercore is well positioned to benefit as we have meaningfully built out our sponsor coverage effort in recent years. Our European Advisory business delivered its best quarter on record with strong performance across sectors, products and geographies. We are very pleased with our progress across the region and are seeing high-quality engagements with both corporates and sponsors. We expect this to continue as we welcome the Robey Warshaw team and expand our presence in Europe.

As of the end of the quarter, we advised on 4 of the 11 largest global M&A transactions. We've continued to experience strong activity in October, including advising Carlyle on a EUR 7.7 billion acquisition of BASF coatings and Huntington Bancshares on its acquisition of Cadence Bank for $7.4 billion, representing our second transaction advising Huntington this year. Next, our strategic defense and Shareholder Advisory group remains busy as the number of activist campaigns in the U.S. is at record levels. The Liability Management and Restructuring business continued to see robust activity in the quarter, generally tracking in line with trends experienced earlier this year. We are seeing an increase in larger traditional restructuring assignments and our backlog in this area remains strong as highly levered companies face ongoing challenges.

Our private capital markets and debt advisory team continues to be active as the credit markets remain open and transaction activity picks up. Consistent with the strength we saw in the first 2 quarters of the year, our Private Capital Advisory business delivered a record third quarter, driven in large part by GP-led continuation fund transactions. In fact, through the first 9 months of 2025, PCA revenues have already exceeded full year 2024, which was our best year on record. We continue to see strong momentum in all areas of the business, including GP-led continuation funds, LP secondaries and securitization.

Similarly, our Private Funds Group generated a record third quarter, while the overall fundraising market remains challenging, our team continues to be active, operating at a very high level. Equity Capital Markets saw a resurgence in activity in the third quarter, particularly with IPOs supported by lower levels of market volatility. Our underwriting business remained active throughout the quarter as we continue to focus on our sector and product diversification efforts. We saw particular strength in tech and industrials with Evercore serving as an active book runner on Karman's $1 billion follow-on offering.

We also experienced a significant increase in convertible issuance, an area where we have been investing and expanding our capabilities. Our equities business, Evercore ISI has achieved the #1 ranking in Extel's All-American Research survey for the fourth straight year. Additionally, the business had its best quarter since the fourth quarter of 2016 reflecting healthy levels of volatility and broad-based activity across products and services. Strong client engagement, combined with a constructive market backdrop and healthy client performance all contributed to the quarter's results.

Lastly, Wealth Management achieved record quarter-end AUM of approximately $15.4 billion driven by both market appreciation and strong new net client inflows. Before I turn it over to Tim, I'd like to make a final comment. The strength of our third quarter and year-to-date results reflects the power of our diversified platform, the continued execution of our strategy and our commitment to our clients. As we look ahead, we are confident in our ability to continue delivering value for our clients, shareholders and people. With that, let me turn it over to Tim.

Thank you, John. Evercore's third quarter results reflect an environment which has continued to strengthen across all our businesses. For the third quarter of 2025, net revenues, operating income and EPS on a GAAP basis were $1 billion, $216 million and $3.41 per share, 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 reconciliation of GAAP to adjusted results can be found in our press release, which is on our website.

Our third quarter adjusted net revenues of $1 billion increased 42% versus the third quarter of 2024. Third quarter adjusted operating income of $228 million increased 69% versus the third quarter of 2024. Adjusted earnings per share of $3.48 increased 71% versus the third quarter of last year. Our adjusted operating margin was 21.8%, up from 18.2% in the prior year period, an improvement of nearly 360 basis points. Turning to the businesses. Third quarter adjusted advisory fees of $884 million increased 49% year-over-year, which is a record for the third quarter and reflects continued market share gains. While we recently have experienced a strong uptick in activity and expect that momentum to continue in the fourth quarter, the seasonality we typically see in our fourth quarter advisory revenues is likely to be less pronounced this year versus prior years.

This reflects the record results we've achieved year-to-date as well as the impact of the market volatility in March and April, which may have influenced the timing of certain transactions and related revenues and possible timing impacts from the government shutdown. Our third quarter underwriting revenues were $44 million, down 1% from a year ago, but up 36% sequentially. Commissions and related revenue of $63 million in the quarter increased 15% year-over-year and was a record third quarter and the highest quarter in nearly a decade. The strength in the quarter was primarily related to higher revenues from trading commissions on stronger trading volumes as well as higher subscription fees and good activity in convertibles and derivative products.

Third quarter adjusted asset management and administration fees of $24 million rose 10% year-over-year, driven by market appreciation and net inflows. Third quarter adjusted other revenue net was approximately $33 million, which compares to $26 million a year ago. Nearly 2/3 of the gain is related to interest income in the quarter with most of the balance of other revenue related to gains in our DCCP hedge portfolio, which is correlated to the performance of the broader equity market. Turning to expenses. The adjusted compensation ratio for the third quarter is 65%, down nearly 100 basis points from the prior year period and down 40 basis points from last quarter.

Our compensation ratio for the quarter reflects the continued steady improvement we have seen in the investment banking environment and in our revenues. We remain committed to investing in our business and executing on our strategic growth plan as reflected in the record SMD recruiting we've achieved so far this year. As we have mentioned on past calls, we are balancing our investments in growth. We're striving to make further improvement in our compensation ratio over time. And based on our current visibility, we expect our full year ratio to be generally in line with current levels.

Adjusted noncompensation expenses in the quarter were $139 million, which is 13.2% of net revenue. This is an improvement of 260 basis points from a year ago and nearly 270 basis points compared to last quarter. The adjusted noncomp expenses of $139 million is up 18% from the third quarter a year ago. As a reminder, the noncomp expense line consists of a mix of fixed and variable expenses. So some of the related line items are going to increase as client activity increases and some of those are client billable expenses and are recouped over time. An example of this would be travel and related expenses, which increased due to higher levels of client travel as well as spend for conferences and client events.

Other noncomp expenses increased as we build our business and execution capacity like occupancy and equipment expenses which reflected the acquisition of additional floors in our New York locations and new leases in Dubai, Paris and London. Some of our noncomp expenses occur as we are investing in what we hope will provide improved efficiencies or competitive advantage in the near to medium term, such as increased technology spend which includes investment in the development and implementation of newer technologies as well as spend on licensing and consulting fees. Accordingly, we would expect our non-comp expenses for the full year to be up year-over-year on a percentage basis, generally consistent with what you have seen for the first 9 months. As I've mentioned in the past, we continue to maintain a disciplined focus on our noncomp expenses while investing in areas that are necessary to support our growth.

Our adjusted tax rate for the quarter was 28.7% down modestly from the third quarter of last year. Turning to our balance sheet. As of September 30, our cash and investment securities totaled over $2.4 billion. In the third quarter, we repurchased approximately 170,000 shares at an average price of $326.62 and our share repurchase activity continued into the early part of the fourth quarter. Through the end of the third quarter, we have returned approximately $624 million of capital to shareholders through the repurchase of shares at an average purchase price of $264.72 and the payment of dividends. We have more than fully offset the dilution associated with RSU grants from our 2024 bonus cycle.

And additionally, we have repurchased a number of shares that exceeds those issued for the initial payment related to the Robey Warshaw transaction. Our second quarter adjusted diluted share count was 44.6 billion shares. As we have mentioned previously, our shares outstanding are impacted by the changes in our share price due to the accounting for unvested RSUs as our average share price increased 42% in the third quarter. We continue to maintain a strong cash position and take into consideration our regulatory requirements, the current economic and business environment, cash needs for the implementation of our strategic initiatives, including hiring plans and preserving a solid financial footing.

While various geopolitical and macroeconomic uncertainties remain present, we enter the fourth quarter, optimistic about the environment and are encouraged by the momentum we are experiencing across the firm. We believe we are well positioned and are confident in our ability to deliver strong results. With that, we will now open the line for questions.

[Operator Instructions] Our first question will come from Devin Ryan with Citizens Bank.

Congrats on the strong quarter. I wanted to just ask a question about the current environment and kind of the trajectory, obviously, really good trends in the quarter and you talked about kind of some larger strategic transactions leading the recovery, but now sponsors are steadily picking up. So can you maybe just explain kind of what you're seeing in terms of the breadth of activity, how that's evolved over the last few months and just expectations here as we exit the year relative to maybe where we were in the earlier where it seems like you guys maybe disproportionately benefited but now things are broadening out and that's helping you as well. So love to get some color there.

Sure. Thanks, Devin. We are seeing a continued strengthening in the market generally. And we're seeing it really across the board, really almost every sector that we cover seems to have real activity. The larger deals started earlier, we're seeing midsized deals really build. And frankly, across the board in terms of the industry sectors, large and small deals are being considered. The engagement level with Boards and management teams is very high. Our backlogs right now are as high as they've ever been. And clearly, as you look at the measurements, the CEO confidence index is building and quite high.

And on sponsors, we're in many conversations more than we've been in a long time. And we are actually in many bake-offs also. The bake-off levels has really picked up. So generally, it's quite complete and quite thorough in terms of the activity level. And we see this continuing to build through the end of the year, and we also have -- we anticipate that this will continue to build into 2026.

Our next question will come from Brendan O'Brien with Wolfe Research.

So I just want to ask on comp leverage and the top line results have been very impressive year-to-date. However, despite the strong revenue growth, you've only been able to lower the comp ratio by about 70 bps, implying an incremental comp margin of about 63% versus historically in the low 50s. I understand that you've been leaning into recruiting quite a lot this year and have had a lot of success adding talent to the platform. But I just want to get a sense as to how you're thinking about the incremental comp margins in the coming years and whether you expect to see any improvements from the current levels if the pace of hiring slows relative to this year's record level?

Yes. Brendan, thanks for the question. As you pointed out, we have made comp leverage. I was just trying to make that clear first point. 2 years ago, our comp ratio was 67.6% so we're down 260 basis points from 2 years ago. Last year, our comp ratio was 66% in the relevant quarter. And so we're down 100 basis points from that. That's in the context of having added 18 partners and 1 senior adviser, which is our biggest partner hiring year ever. And so what we're trying to focus on here is not micromanaging or suboptimizing the comp ratio, but optimizing the overall value creation and strength of our platform and our ability to serve our clients and create value for the shareholders in the medium and long term.

And so honestly, I actually feel pretty good about where we landed relative to adding 18 partners and 1 senior adviser this year. Now having said that, that doesn't mean that we're not still striving to make improvement. And as I mentioned, we've made 260 basis points in the last 2 years, 100 so far quarter versus quarter last year. And I think I mentioned in our comments, we would expect to end this year somewhat similar to where we were this quarter. Now in order to accomplish that because we're down 40 basis points from last quarter and down 70 basis points from the first quarter mathematically that would require us to be a little bit lower in the fourth quarter than we are this quarter in order to accomplish that.

And then as we look at long term, we're striving to make additional progress, although we don't want to do it at the expense of building long-term profitability and value.

Our next question will come from Brennan Hawken with BMO Capital Markets.

I'd love to drill into those comments, Tim, because I hear you that you're adding -- I hear you that the level of competition for talent is intense. And you've made reference to the fact that it falls about recruiting and retention given the caliber of bankers that you have. So it's clearly the environment is challenging. I doubt that's going to change. I mean, you guys have spoken regardless of 4Q and timing and all that other ones. The environment is getting better, and it seems like the bulge brackets are punching back in a really sort of strong way. So that doesn't seem like it's going to fade. But do we need to give up the ghost on the low 60s right? Because you did 40% revenue year-over-year comp leverage 100 bps. Yes, it's improved from the really bad levels of 2023. But like in order for us to be thinking about -- the really investments you're talking about it is like where are we going to get to in 2027. And most of that underwrites low 60s comp ratios. Given what you noted, is that realistic? Or do we need to re-underwrite things in a more meaningful way?

Thanks, Brennan, for your question. Look, it's -- the way to think about this is there will not be a quick return to those kinds of levels, okay? Not a quick return. What we've talked about is making gradual progress over time. And I'd reiterate that the comp ratio you saw it's down 260 basis points. We've talked about in my last response that we think the fourth quarter will be better on a comp ratio perspective than the third quarter because mathematically, that's what's required to get us to this type of level for the full year. And so that's the first point. Second point would be we're focused on max, first and foremost, serving our clients and providing excellent services to them. But with respect to the shareholders, we're focused on creating value.

In the medium and longer term one of the ways we do that is increasing our earnings per share and our cash flow per share over time. And if 1 models it out, what you'd see is that there's this trade-off between investment and growth. And that the way to create the most value is to grow and then to improve or provide some improved margins as we progress. That's what we're focused on. And so the short answer to your question is there's certainly is not a quick return. What I talked about in the past is each year trying to make progress. And when we can make additional progress then I would invite you to raise that question again, and we'll see what the art of the possible is at that point. But not -- it's not a quick return to those levels.

Our next question will come from James Yaro with Goldman Sachs.

John, you touched on this a bit, but perhaps could you expand a little bit on the impact of the government shutdown on your business in terms of time line and whether any of the effects will be permanent? And then could you differentiate between the impacts on the equity capital markets and M&A.

Sure. Thanks, James. We think that we don't really know exactly what the impact of the government shutdown is going to be clearly. If it gets settled in the near term, we think it will be just a temporary blip, and we will move forward with dispatch on all the things that are coming in and being looked at. If it goes a lot longer, you could see it having some impact. Although I think our view is with the things that we're working on that may be slowed down, we don't think any of them right now are going to be sidelined. We just think that they're kind of moving slowly and that none of them are being pulled apart.

So our view is that the government slowdown is going to become more of an impact if it goes longer, but we don't think it's a permanent impact. And we think that there would be a rapid recovery as soon as things start to open up again. In terms of ECM and M&A, both of those are moving forward slowly. I think that the staffing levels, the SEC, the FCC at the Justice Department clearly are going to slow things down on some of these deals. ECM has a workaround that can be done but we do think it will be slowed. And on the M&A side, with respect to Justice, it's going to go slower there, too. So I think, generally, I think my comments are consistent that it just depends, and it depends how long this goes. We don't anticipate that this is going to have a meaningful impact as we finish out this year. So we think it's going to -- it will resolve itself. And we think that when it does resolve itself, we think that the deals that are being contemplated will be rapidly brought to the market.

Our next question comes from Ryan Kenny with Morgan Stanley.

I have another government-related question, which is on regulatory environment. Can you update us on what you're seeing there, especially on time to close deals? And are you seeing an improved environment across the board? Or are there some industries where scrutiny is higher.

What we're seeing is that the way the government is looking at this is consistent. And obviously, people have said that Big Tech has been focused on by government, we're seeing that the deals that we're working on seem to be moving through the system quite well. We think that the regulatory environment, many people expect, and I think we would expect that there continues to be a loosening of the regulatory overlay. But that's going to be somewhat specific in terms of how that's addressed. In general, we think that it's a more benign environment, and we think that the art of the possible is quite broad right now. And so we'll -- I think we will see as things go. And as these different deals that are being contemplated are brought but we feel quite optimistic.

Our next question will come from Nathan Stein with Deutsche Bank.

I wanted to ask about potential impacts related to some unexpected losses at, let's say, traditional banks and private funds in recent weeks, call it, tricolor first brands, et cetera. I guess just combined with the government shutdown, you started -- you sounded like that was more transitional, but are these headlines making clients in general, more hesitant to transact?

I think that people are looking at these losses right now, and I think there's a broad narrative that these losses are fairly isolated. In our experience, and we've really -- we've talked to a lot of our bankers, and I certainly have been in some boardrooms since these situations. I think people are looking at this as being something that is a possibility but it's not broadly impacting the market. And people aren't thinking that this is going to shut down the credit markets or it's going to limit the credit markets. I think people think that this is just something that happens in all markets, there are always going to be some trips, but this is not a system-wide issue. And for the most part, I think people are forging ahead.

[Operator Instructions] And our next question will come from Alex Bond with KBW.

Wondering if you could just share your outlook for DCM business more broadly here for the fourth quarter. The IPO market is obviously still heating up, but you mentioned some of the impact or I guess, the still unknown impact of the government shutdown here. So yes, maybe if you could just share how you're thinking about how your pipeline is shaping up for the back end of the year here.

We are seeing a strengthening pipeline. We are seeing that there are significant deals kind of lining up in the market. And we are quite optimistic that these deals will see their way through. As we've said, there will -- if the government stays shut, there will be some slowdown there. In many cases, there is a workaround that can be done but this will slow down. Having said that, the backlog is building, and there is quite a broad optimism that these will get done. In addition, I think there's a growing appetite of investors that they really like the IPO market right now with respect to what it offers in terms of investment opportunities.

And so I think we think that it's -- we have this cloud of the slowdown of the government shutdown, but we think that this will lift and that the market will go well. And in fact -- and we do have really quite a strong backlog that it has built.

Our next question will come from Jim Mitchell with Seaport Global Securities.

Maybe you could talk a little bit about Europe. You had a record year and a record quarter in the third quarter. Obviously, that doesn't include Robey Warshaw yet. So can you, I guess, number one, give us a lay of the land of Europe and the environment? And secondly, even after Robey Warshaw, how much white space in terms of investment do you see?

Thanks, Jim. We've been really focused on Europe. And we have built out Europe significantly. As you know, a couple of years ago, we brought in a Spanish team, and we built that. We have really built out our France team. More recently, we've brought in Scandinavia, and we also have an Italy team. And so we've really, really tried to address the market. And then, obviously, there's Robey Warshaw, who have not -- we closed that deal the beginning of October. And it's just now kind of getting really geared in. We're feeling very optimistic about Europe.

In terms of the activity level, they did have a record quarter. It was broadly across sectors. We're seeing a growing strength. I think in some ways, adding the throw weight of all of these different professionals who we think are really outstanding is really helping our momentum generally around Europe and not just in the U.K. but through the continent, and we see this continuing. In terms of white space, there's a tremendous amount of white space. As we fill out countries, there's just many, many companies, which we've never covered before that we're now able to cover and cover quite well. We obviously aren't going to be the biggest but we think that the quality of the people that we've hired, we're going to be able to really serve some very, very strong companies that we've really never had relationships before with and that will really continue to build the momentum.

So I think that in terms of -- as we think of our growth worldwide, we really do anticipate that Europe is going to be quite a constructive part of really what we're able to offer in terms of growth for shareholders.

Our next question will come from Brennan Hawken with BMO Capital Markets.

You guys have spoken to the non-M&A piece reaching half on a TTM basis, which is great and very encouraging to see. As M&A turns back on, where would you expect that share of non-M&A revenue to drift to? Is it reasonable to think it will go from like half to about 40%? Or are you more thinking maybe it's more like 1/3. What's the right way to think about that?

Well, it's really hard to say. I mean, as you know, that if you look at our full year year-to-date, non-M&A was 50% as we've gotten into the third quarter and M&As continued to pick up, it's now -- it was at 45% for the quarter. As M&A continues to strengthen that, will go down some, although I would say that our non-M&A businesses are firing on all cylinders. If you look at our PCA business, which is the secondaries business and continuation vehicles or you look at the PFG business, which is our fundraising business or you look at the restructuring business, all of those businesses are running full out. And each of them is looking at record quarters and doing very well.

And so I think that the M&A business is a powerful part of our overall offering to clients, and it probably will overpower some of the other places as it gets stronger and stronger. But having said that, I think we've got a formidable diverse set of businesses that are going to continue to be quite influential in terms of the percentage of our M&A and non-M&A offerings. And so I think that you will see M&A start as it really picks up. And if it gets really, really strong, it will continue. You've asked is it going to be 40% or 30%, Hard to know but I don't see it getting a lot below 40%. But no, we'll just have to see. And a lot of it has to do with does M&A really pick up. We are so well conditioned and ready for the continuing growth and strength of M&A, we may have seen a lot of activity coming through there.

There are no further questions in the queue at this time. So I would like to conclude today's Evercore Third Quarter 2025 Earnings Conference Call. You may now disconnect.