Evercore Q1 2023 Earnings Call Transcript

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Provided by Quartr
April 26, 2023

Key Takeaways

  • In Q1 2023 Evercore reported adjusted net revenues of $578 million, down 21% year-over-year, and adjusted EPS of $2.16, down 43% from the record prior-year quarter.
  • Global M&A announcements for deals over $100 million fell 43% in Q1 amid market volatility and banking-sector disruption in March, extending transaction timelines and pressuring revenue.
  • The firm saw restructuring and liability-management activity accelerate on tightening credit markets and looming debt maturities, while Private Capital Advisory dialogues remain robust despite softer capital-raising.
  • Management is maintaining expense discipline while opportunistically recruiting senior talent to expand product capabilities, viewing the current market as a hiring opportunity.
  • Evercore returned $327.8 million to shareholders in Q1 through dividends and buybacks, including a 6% dividend increase to $0.76 per share, underscoring its commitment to capital return.
AI Generated. May Contain Errors.
Earnings Conference Call
Evercore Q1 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good morning, and welcome to the Evercore First Quarter 2023 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore Management and the question and answer session. Item number 1 on your touch tone phone at any time. I will now turn the call over to Katie Haber, Managing Director of Investor Relations and ESG at Evercore. Call.

Operator

Please go ahead.

Speaker 1

Thank you, Chelsea. Good morning, and thank you for joining us today for Evercore's Q1 2023 Financial Results Call. I'm Katie Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO and Tim Mulan, our CFO. Quarter Results.

Speaker 1

Earlier today, we issued a press release announcing Evercore's Q1 2023 financial results. Question. 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 conference call. Question.

Speaker 1

During the course of this 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 question. This could cause actual outcomes to differ materially from those indicated in these statements. These factors include, but are not limited to, those discuss and Evercore's filings with the SEC, including our annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 Call. I want to remind you that the company assumes no duty to update any forward looking statements.

Speaker 1

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 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.

Speaker 2

Thank you, Katie, and good morning, everyone. Before I review the quarter, I want to start off by addressing the environment. I've I've been in this business for many years and it is clear it will always be cyclical. Historically, Evercore has embraced all cycles and use each part of the cycle to build and strengthen our firm by expanding our client connectivity and product and sector capabilities and we will aspire to do so again in this environment. In this current cycle, we also see great opportunity to add extraordinary talent to our firm, which will further enhance our franchise.

Speaker 2

We believe we are well positioned regardless of the macroeconomic landscape and have maintained an all weather balance sheet. We believe we will emerge from downturn in a stronger position as we have done in every other cycle. Continued volatility and uncertainty in the market quarter. Have resulted in a challenging Q1 for both the market and for Evercore. That said, our bankers and teams are increasingly active as promising client dialogue continue to build momentum and CEO confidence level has begun to rise off of recent lows.

Speaker 2

Call. In the quarter, Evercore achieved $578,000,000 in adjusted net revenues, dollars 93,000,000 in adjusted net income and $2.16 in adjusted earnings per share. Our adjusted net revenues and EPS were down 21% 43%, quarter, respectively compared to last year's record Q1. In the 1st part of the quarter, green shoots had begun to emerge. However, quarter.

Speaker 2

In early March, with the banking system disruption, volatility returned and confidence levels shifted lower. As challenging macro and geopolitical risks remain in force, coupled with diminished access to the M and A market, quarter. Global announced M and A transactions greater than 100 in the first quarter were down 43% 44% on a dollar and number of transaction basis reflected respectively versus a year ago. Our backlogs remain strong. We continue to note that execution risk remains quarter as transaction processes and closing timelines continue to be elongated.

Speaker 2

And while the outlook for global economies and market conditions will continue to influence the timing of deal activity. Our teams continue to be fully engaged financial discussions with management teams and Boards as companies continue to prepare for a turn in the market. Quarter. The recovery in the market will be led by macroeconomic clarity, increasing confidence levels and an improvement in the financing market. As I mentioned, we are seeing significant opportunities to recruit high quality talent in many areas of our strategic focus.

Speaker 2

Furthermore, another advisory SMD is joining the firm later this week and in our European Equity Capital Markets business and one other is committed to join our technology group later this year. Additionally, our newly promoted SMDs are off to a strong start. Quarter. Importantly, as we move forward, we will continue to focus on actively managing our expense base, while executing on our future growth plan. Quarter.

Speaker 2

Slower than a year ago and represents the weakest Q1 for industry wide M and A volumes since 2014. That said, quarter. We continue to be involved in take private activity, particularly with the tech sector as sponsors are slowly starting to become more quarter. We are making real progress with this client base as we have significantly increased our efforts in traditional sponsor coverage over the last year as well as continuing to invest in our private capital businesses. Our advisory team in Europe quarter.

Speaker 2

We had another strong quarter and we continue to build our pipeline in the region. Our leading strategic defense and shareholder advisory business continues to be strong as activist campaigns remain at an elevated pace. Quarter. In restructuring, where we have one of the most active groups in the industry, our activity levels are high and gaining momentum. We are starting to see the implications quarter.

Speaker 2

In addition, the tightening of credit markets quarter. Has led to an uptick in traditional restructuring and liability management activity. Significant near term Security Walls in 2024 and 2026 may serve as catalysts for continued activity in the coming months. Quarter. Our Private Capital Advisory and Fundraising businesses saw strong client dialogues and activity in the quarter, albeit at lower levels from peaks in 2021.

Speaker 2

The fundraising environment across all fund sizes has started to see marginal improvements relative to 2022. Quarter. The underwriting business continues to be impacted by broad market and macroeconomic uncertainty. However, we acted as a book runner in 11 of our 12 equity and equity related offerings in the quarter highlighting our progress in Equity Capital Markets. In fact, we were involved as a book runner in the 2 largest follow ons of the quarter.

Speaker 2

In our equities business, we continue to be a thought leader across macro and fundamental research, helping our clients navigate recent market uncertainty. Quarter. Lastly, in Wealth Management, our long term performance and client retention have remained strong. Before I turn the call over to Tim quarter. To review our financial results and other financial matters, I want to briefly discuss our capital return strategy.

Speaker 2

We remain committed question. Our goal of returning excess cash not invested in the business to shareholders in the form of dividends and share repurchases over time. Quarter. Our Board declared a dividend of $0.76 a share, an increase of 6% from the prior dividend declared. Looking ahead, our while uncertainty continues to be a constant and to have an impact on the business environment, quarter.

Speaker 2

We remain excited for the opportunities that lie ahead. We have a clear path for the firm going forward. As I detailed in our 4th quarter earnings, quarter consistent roadmap for growth, including investing in talent and broadening and deepening our products and capabilities will allow us to continuously serve our clients and address their needs. With that, let me turn it over to Tim.

Speaker 3

Thank you, John. I'm now about 7 weeks into the new role and I'm please to be doing my first earnings call as CFO of Evercore. I've been in the industry since 1986 and though for the past year we've been in a challenging environment. I know that eventually the cycle will turn, it always does. And I am encouraged about our medium and longer term outlook and the way Evercore continues to implement its plan through the cycle.

Speaker 3

And lastly, I look forward to meeting all of you, of our investors and sell side research analysts over the coming months. For the Q1 of 20 question. Net revenues, net income and EPS on a GAAP basis were $655,000,000 $2.06 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.

Speaker 3

Our first quarter adjusted net revenues of $578,000,000 declined 21 Sense versus the Q1 of 2022, which was a record Q1 for our firm. 1st quarter adjusted operating income and adjusted net income of $115,000,000 $93,000,000 decreased in each case 46% versus Q1 of 2022. Adjusted earnings per share of $2.16 decreased 40 3% versus the Q1 of last year. Our adjusted operating margin was 20% for the quarter. Lower than the Q1 2022 adjusted operating margin of nearly 30%, but roughly in line with the Q1 adjusted operating margins in 2020 2019 of 19% 23%, respectively.

Speaker 3

Quarter. Turning to the businesses. 1st quarter adjusted advisory fees of $463,000,000 declined 26 cent year over year compared to a record Q1 for advisory fees last year. As we all know, we team to operate in a challenging environment that has affected the capital raising and M and A markets. By comparison, quarter.

Speaker 3

The dollar value and number of M and A announcements globally for transactions greater than $100,000,000 which as John cited earlier, were down 43% and 44%, respectively. In accordance with the relevant accounting principles, our revenue for the Q1 of 2023 quarter. $18,000,000 from transactions which closed subsequent to March 31 or otherwise had contingent elements at March 31. Quarter. To compare, we recognized $45,000,000 in the Q1 of 2022 quarter and $116,000,000 in the Q4 of 2022 in accordance with the same accounting principles.

Speaker 3

Quarter underwriting revenues of $23,000,000 were down 37% compared to the Q1 of 2022 quarter. As our underwriting business continues to be impacted by the broader market conditions, which reflect substantially lower than normal issuance levels. Commissions and related revenue of $48,000,000 in the first quarter was down 6% year over year reflecting weaker trading volumes quarter adjusted asset management and administration fees of $17,000,000 quarter decrease 10% year over year, primarily reflecting a decline in AUM driven by market depreciation. 1st quarter adjusted other revenue net was a gain of approximately $27,000,000 in part reflecting the increase in value of our Investment Funds portfolio, which is used as a hedge for our DCCP commitments. In addition, we generated interest income on our cash balance, which benefited from short term rates that have been higher this year than last.

Speaker 3

Also note that our cash quarter. Balance was higher in January February prior to bonus payments that occurred in March. Turning to expenses, quarter. The adjusted compensation ratio for the Q1 is 63.5%. It is still early in the year and our Q1 compensation ratio quarter reflects the best estimate for the full year based on our visibility at this point in time, which is limited.

Speaker 3

Quarter. With that in mind, it is important to note that we remain disciplined about continuing to implement our strategic plan throughout cycle and to build on the strength of our franchise. As John mentioned, we believe the current recruiting environment presents an attractive opportunity for us. That said, we are judiciously managing our headcount and using a disciplined approach to hire additional senior bankers where we see hiring opportunities which we believe can be especially impactful to our business. As the year progresses, question.

Speaker 3

If we have greater than anticipated success in our hiring goals and or a market recovery takes longer, we will adjust accordingly. Quarter. Primarily driven by an increase in travel and related expenses, including both a higher number of trips and travel cost per trip, quarter as well as other operating expenses driven by an increase in bad debt expenses, which are episodic in nature. Quarter. As we mentioned last quarter, we continue to expect non comps to increase in 2023, but at a lower rate than what we saw in 20 22.

Speaker 3

This quarter. This will be driven by continued normalization of travel practices, some inflationary pressures across both travel and tech, as quarter. Continued occupancy related increases driven by the annualization of new space and contractual rent increases. Quarter. The tax rate for the quarter was 15.2% compared to 17.1% in the Q1 of last year.

Speaker 3

Quarter. The tax rate for this quarter reflects a tax benefit associated with the vesting of stock compensation awards similar to a year ago, but had larger impact this quarter as the net income was lower. Turning to our balance sheet. Quarter. As of March 31, our cash and investment securities totaled nearly $1,400,000,000 Our excess cash as a percentage of our total cash and investment Securities was in the mid-20s percent range.

Speaker 3

We have a durable and liquid balance sheet and a strong cash position, which provides us with the ability to invest in our business throughout market cycles. We regularly review our cash position with respect to the current business environment and we prudently manage our cash position to ensure we have significant liquidity to enable us to implement our strategy, including hiring plans, ability to capitalize on opportunities and ensuring all our stakeholders that we have financial stability. In the Q1, we returned a total call of 327,800,000

Speaker 1

quarter and we expect to be approximately

Speaker 3

$100,000,000 to shareholders through an average price of $132.20 We and we plan to continue this strategy going forward. Our first quarter adjusted diluted share count decreased by 2,500,000 shares to $43,200,000 from $45,700,000 a year ago, driven by the impact of share repurchases, quarter, partially offset by the vesting of awards. While we are currently in a challenging environment, quarter. We remain optimistic and energized about the prospects of the firm. And I am excited in my new role as CFO to help along with John, Our management team and our Board of Directors chart the course of this company as we continue to implement our medium and long term plan and create value for our shareholders.

Speaker 3

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

Operator

Thank you. To rejoin the queue for additional questions, time permitting. Question. Our first question will come from Devin Ryan with JMP Securities. Your line is open.

Speaker 4

Terrific. Good morning, John and Tim. Welcome to the call. First question, I guess my only question. I want to start on just restructuring.

Speaker 4

And John, you noted the restructuring team has been increasingly active and quarter. We're tracking a pretty healthy acceleration in mandates at Evercore over the past 9 months. So just maybe love to just parse through a little bit more of the commentary and how you would frame quarter. The current environment relative to maybe some other periods of stress and then looking ahead with this maturity wall coming, question. Do you think the baseline of activity is going to be higher for the next few years irrespective of what happens in the credit backdrop?

Speaker 4

Just want to get some more flavor for kind of what you're seeing there and how impactful this acceleration is.

Speaker 2

Sure. Thanks, Devin. We definitely see increasing activity in the restructuring area. And as we've noted, we've invested more there and our team continues to see momentum in their business and it continues to build. As you mentioned, rising rates, difficult refinancing markets really and also default rates which are beginning to come up and predicted to be even higher.

Speaker 2

We are seeing restructurings, more liability management assignments. We are seeing people begin really significant default preparation and we are actually finding opportunities really across the board with companies both at larger corporate situations where we really have to help them with their liability management as well as portfolio companies. The wall that's coming of refinancing is going to actually really produce real activity levels. We think that your prediction or question which is will there be continuing momentum in this business. We think there will be.

Speaker 2

We're planning for that. We think it's We think that the restructuring business has real legs to it. Comparing it to 'eight in particular, I don't think it will be at the same level as 'eight because I just believe it's going to be more consistent, but I also think that it's going sustained longer. I think it's going to be a sustained activity level going forward.

Speaker 5

Okay. Thank you.

Operator

Question. Thank you. Our next question will come from Brennan Hawken with UBS. Your line is open.

Speaker 6

Good morning. Thanks for taking my questions. And Tim, welcome to our quarterly dance. Good to have you. So curious About the comp ratio.

Speaker 6

So, Tim, very clear, current this quarter's level is what you expect. But Could you maybe help us frame a little bit some of the commentary around both recruiting, but also revenue expectation and environment. Last year, we learned that when many firms were sort of anticipating a recovery in the back quarter. And that resulted in some movement in the expectations of comp ratio. What kind of does that 63.5%, assume that the environment remains the same.

Speaker 6

And then when you think about the recruiting pipeline, does it assume that you're able to continue to recruit in line with your expectations or if you does it not assume any recruiting? How can you help us calibrate that recruiting comment, please.

Speaker 3

Yes, sure. And thank you, Brennan. Look, as you correctly hit us In your question, the context of it, the key drivers, which is it does reflect our best outlook for this year. This is probably single greatest factor that will determine where it actually ends up will be what happens to the revenue. And so in response to the first aspect of your question.

Speaker 3

It assumes an environment that's similar to what we're in today. Now there's seasonality in the sense that as we all know 4th quarter tends to be the biggest quarter of the year for people in our business. But it assumes a consistent environment. With respect to the new partner hire, quarter. It reflects what we know today.

Speaker 3

And so what we're we don't do from an accounting standpoint is guess about how many might join us in the Q4 or something like that, but it reflects what we know today. Quarter. And then the last key variable is really where the market is for investment banking compensation. And that remains to be seen. It's a long way away.

Speaker 6

Great. Thanks for that color.

Operator

Question. Thank you. Our next question will come from Ryan Kenny with Morgan Stanley. Your line is open.

Speaker 2

Quarter. Hey, good morning.

Speaker 3

Good morning. Good morning, Ryan.

Speaker 2

So heard the comment around the March banking industry events pushing out the pipeline. How should we think about the size and timing of that impact? Did it push out deal completions by a few weeks from March to April or do you think it's a longer push out from March to maybe year end or sometime further? Takes longer to do transactions. The answer is most likely yes, because it's just taking longer to get the transactions through the pipeline.

Speaker 2

And once we do get those, it's taking longer to get them finished and closed. So question. If you're asking the question, will deals that are in the backlog take longer to get Out of backlog and into the market, I think the answer is also yes. I think it will take somewhat longer, because I think what's happening now is there's a real thought process going on, which is when will the recovery happen and when will markets become more active and buoyant. And I think that management teams as well as financial sponsors are really looking at that.

Speaker 2

And as we said, what people are really looking for question. With respect to deals is clarity, the confidence levels and really the financing markets being open. And so that will actually impact how deals come out and what they do. So I would say that really it's really across the board, but I think that what you should think about that once deals get They'll take somewhat longer, but I don't think it's going to be material. But there are many deals in backlog right now, call, which are very strong, very good deals and there's a lot of activity in it really in the backlog that we have.

Speaker 2

And I think what What we're saying is that those may take a little longer to come out because some of the decision makers are really waiting for there to be a turn in the market.

Speaker 3

Right. And one thing I would add to that is that with respect to financing transactions. What you could see because there's some pent up demand that we're seeing, companies that would like to raise financing, but are sitting on the sidelines because of the challenging markets that when those financing windows open, it's possible you could see attempt to rush through those windows and you could see a flurry, but we don't know exactly when that will be.

Operator

Our next question will come from Steven Chubak with Wolfe Research. Your line is open.

Speaker 7

Hi, good morning, John, and welcome, Tim.

Speaker 3

Good morning. Good morning.

Speaker 6

So, I wanted to ask

Speaker 7

a question on traditional M and A. I'm actually going to pivot and quarter. I was hoping you can just offer some additional specificity on the planned expense actions you're taking question. And are those what's driving the slower pace of non comp growth? Are there incremental opportunities on the comp side that you're seeing as well?

Speaker 3

Yes, sure. I'll take that. Let me just make a couple of observations. And so one is, we are up year over year from $85,000,000 to about $95,000,000 Although the $95,000,000 that we booked this quarter is consistent with the prior 3 quarters. And bear in mind that's in an environment which is significantly inflationary.

Speaker 3

Quarter. And so we think we have demonstrated some cost containment there. The reason we're at 90 five as opposed to the lower number like what you saw 4 quarters ago is travel. And to me that's a good thing. If we're going to spend money somewhere, I'd like to spend it on travel because that means our bankers are out there seeing clients.

Speaker 3

And so We've seen that ramp up literally the number of trips is virtually double what it was a year ago. And so I think what you've seen is really an increase in travel and then what I would call pretty good cost containment

Speaker 2

with respect to the other expense lines.

Speaker 3

Now, payment with respect to the other expense lines. Now we're doing a little bit of an office move, which is just required due to some building complications where some of our employees currently are. So that'll be there and there's little we can do about that. And then with respect to other types of contracts, whether it's information services or trying to reduce the cost per trip of our travel You can rest assured we're working hard on that.

Speaker 7

Great. Thanks for taking my question.

Operator

Question. Thank you. Our next question will come from James Yaro with Goldman Sachs. Line is open.

Speaker 6

Good morning and thanks for taking my questions. So you've talked

Speaker 2

a little bit about the

Speaker 6

impact so far, but What do you see as the longer term ramifications of the stress on the banking industry in terms of how it affects the broader M and A business? And then how would you contrast the dialogues that you're having with large versus mid cap clients in between strategic and sponsor clients at this point?

Speaker 2

The long term impact of the bank disruption is really hard really to predict. I think we're all hoping update that we think that the markets will return. Right now, what we're looking at in the medium term is we feel like that quarter. Things will begin to recover. We don't exactly know when.

Speaker 2

In the near term, we think that there will continue to be less clarity and therefore we think it will take some time, but obviously things like interest rates inflation and really what is happening in the banking system will impact the timing of when things turn.

Speaker 1

The

Speaker 2

Some of the banks will actually become a little bit more conservative about lending. And so that will impact. If that does have an impact, it will impact exactly how aggressive there is in terms of the bank market generally. But we really anticipate and see that banks are really returning to their normal levels of first thinking about risk and taking risk and putting money out and doing leveraged loans. And we do see a beginning of a recovery in leverage loans and also in the general lending market.

Speaker 2

So I think what we're looking at is that it's In terms of corporate versus sponsors, we think that sponsors are really looking really carefully at when they can go. Question. I think that sponsors have a lot of capital built up. I think there's over $3,000,000,000,000 of dry powder on the equity side. And I think that sponsors really want to get to work.

Speaker 2

Question because obviously that does impact their economics. On the corporate side, we see question. The companies really have been doing their homework. And I can just tell you firsthand that there are number of companies that I deal with where they really have done a tremendous amount of work getting ready for what they will perceive at the turn when they see that there is some confidence and that markets will be receptive and the bid asks are in a decent place. I think you'll see The big corporate start to come out because pretty rapidly because they've done a lot of homework and they've had lots of discussions and Board level discussions have taken place.

Speaker 2

And so many companies know exactly what they want to do when they perceive a turn in the market and when they see receptivity.

Speaker 6

That's very helpful. Thanks so much.

Operator

Thank you. Our next question will come from Matt Moon with KBW. Your line is open.

Speaker 5

Hi, good morning guys. I just had one for Tim. Quarter. Given that this is your first full quarter as CFO, just wondering if you could provide some insights into how you're thinking about the business now that you've had full quarter under your belt. It sounded like in your prepared remarks that your thoughts on excess cash levels were pretty consistent with prior disclosures.

Speaker 5

But Curious on your thoughts on capital preferences as it relates to buybacks and dividends, as well as your general thoughts on comp and your recruiting philosophy. It It would be great to hear your thoughts on these items, particularly if there's any kind of differences in views versus your predecessor.

Speaker 3

Yes, great. And Happy to touch on that. It's a bit of a wide ranging question. And I have limited time, but I'll hit on the highlights. And so With respect to capital return, I think that's an area where the firm's done pretty well over the last 2 years.

Speaker 3

We return $1,500,000,000 of capital this year, dollars 328,000,000 already in the Q1. And we've nearly repurchased shares equivalent to all of the RSUs we issued as part of our compensation process. So I'm pretty pleased with that and I think My own personal philosophy is very consistent with what you've seen from the firm over the last several years. I think with respect to the compensation ratio. We care a lot about that.

Speaker 3

We're managing headcount as I said in my remarks judiciously. I think if you look at Where the headcount stands today in terms of total employees relative to about 3 quarters ago or last summer, you would see it's been About perfectly flat over that period of time. And but what I don't want to do is be shortsighted and because we also care about implementing our medium and long term strategic plan and about the growth for the firm. And therefore, we're out there working hard to continue to build and upgrade the team we have in place. And so I don't like to focus on optimizing margins for any single quarter, but instead, try to build the firm over the medium and long term to create value for the shareholders.

Operator

Question will come from Jim Mitchell with Seaport Global. Your line is open.

Speaker 2

Hey, good morning. Another hire in Europe time on the ECM side. So can you kind of update us where you are in the build out process in Europe? How you view the current environment and the opportunity set long term? Sure, Tim.

Speaker 2

We continue to look at really strong growth opportunities in Europe. And as we've always said, we are taking opportunities to fill the white spaces and to fill out our product set as we see opportunities. And really the mitigating factor or the limiting factor is this the top talent. And right now we're seeing some very good talent. So I could see us doing more hiring in Europe, because I believe that what really is has happened is that there's some very high level A plus talent available.

Speaker 2

And so we are focusing on that. Question. Will we hire more in Europe than we do other places? No. But what we're doing is we're looking very carefully at The opportunities that we've identified not only in terms of white space, but also product needs and we are actually hiring.

Speaker 2

And so we're going to continue to invest in Europe and we are of what we see available in the market. So the bottom line is, we will continue to drive that. You can anticipate that we will do that consistently. The markets that we see and the opportunities in Europe are extensive and I think for us that build out is important.

Speaker 6

Okay,

Operator

thanks. Thank you. Our last question will come from Steven Chubak with Wolfe Research. Your line is open.

Speaker 7

Thanks for accommodating the follow-up. The other topic I quarter. I wanted to just drill down on is the non M and A businesses. You've highlighted in the past that's composed at least a third of revenues over the past 3 years. Quarter.

Speaker 7

Just given less activity today, I was hoping you can provide some perspective on how the mix compares to that 1 third baseline, especially in light of some of the positive commentary that you offered, both on the restructuring side as well as the question. I think the commentary that you offered both on the restructuring side as well as in the private capital advisory business, given you're more on the secondary side, which appears to be more robust at the moment.

Speaker 3

Yes. Thanks and good question. Look, I think quarter. We've talked, as you mentioned in the past about our non M and A businesses comprising at least a third of revenue. And so What you would expect to see in a quarter like this is of course with M and A a little bit softer and restructuring gathering steam, You would expect to see that principal hold even more so than normal and that's the case.

Speaker 3

Quarter. And so restructuring is ramping up. We've got a fantastic PCA business and that's one by the way that we've continued to invest in along with the other businesses you've scene. In fact, one of our partner hires who's already joined us, joined Sevgenko, is in that business and we're pleased to have her here. Quarter.

Speaker 3

And so what you would see is in an environment where M and A sell size for private equity sponsors. It's more challenging that some of those sponsors might be looking at, for example, continuation funds as an alternative. Alternative. And we are continuing to see activity in that area. And We're pleased that what we think we've built, which is what I would call an all weather firm, is continuing prove out in a market like this.

Speaker 2

Yes, I would just add that on the private capital advisory businesses, they're seeing activity levels. And I think that they continue to see real prospects as the year goes on. They're less limited by the overall public markets and really influenced by availability of capital and also the appetite sponsors to do different things like raise money or to basically think about bringing some of question. Their companies into a continuation process. So I'd just say that quarter.

Speaker 2

We are seeing really strong activity levels in those areas, and I think that there is a strong possibility that they will continue to build momentum through the year.

Speaker 7

No, that's great color. If I could squeeze in one more just on NII. Quarter. The commentary in the release suggests that $17,000,000 was driven by interest income. Question.

Speaker 7

I know you're never perceived to be a very rate sensitive firm, but it appears that that's probably at least on that side of the ledger rates are providing a nice windfall. Question. Given 1Q tends to be the low point for cash on the balance sheet,

Speaker 3

I

Speaker 7

was hoping you can provide some context as to how you see that contribution evolving quarter. As the year progresses, especially if we're in a higher for longer interest rate environment.

Speaker 3

Right. I think with respect to the other revenue, and just For the sake of everyone on the phone, about let's assume about a third of that was due to the DCCP hedge and then roughly 2 thirds interest income. And of course the S and P was up about 7% in the Q1. So that's what would account for that DCCP gain. And then with respect to the cash, there were really 2 components that resulted in a higher than normal number this quarter.

Speaker 3

And one of those was of course short term interest rates which are higher than they were a year ago and up in the let's call it the 4% area. And then but we also during the 1st 2 months of the quarter had higher cash balances Because that of course was prior to paying the bonuses, year end bonuses. And so I'd Be a little careful about annualizing, for example, that number, but I think I've given you enough guidance where you can You build your own framework.

Speaker 7

Helpful color, Tim. Thanks for taking my additional follow ups.

Speaker 3

Sure.

Operator

Thank you. And ladies and gentlemen, this does conclude today's Evercore's Q1 2023 Financial Results Conference Call. You may now disconnect.

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