Evercore Inc. Q2 FY2022 Earnings Call

Good morning, and thank you for standing by. Welcome to Evercore's Second Quarter 2022 Financial Results Conference Call. During today's call, all parties will be in a listen-only mode. Following the presentation, the conference call will be opened for questions. As a reminder, this conference call is being recorded today, Wednesday, July 27, 2022. I would now like to turn the conference call over to your host, Evercore's Head of Investor Relations and ESG, Katy Haber. Please go ahead.

Thank you, operator. Good morning and thank you for joining us today for Evercore's second quarter 2022 financial results conference call. I'm Katy Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO; and Celeste Mellet, our CFO. After our prepared remarks, we'll open up the call for questions. Earlier today we issued a press release announcing Evercore's second quarter 2022 financial results. Our discussion of our results today is complementary to the press release which is available on our website at evercore.com. This conference call is being webcast live in the For Investors section of our website and an archive of it will be available for 30 days, beginning approximately one hour after the conclusion of this call. During the course of this conference call, we may make a number of forward-looking statements. Any forward-looking statements that we make are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. These factors include, but are not limited to, those discussed in 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. Since we last spoke a quarter ago on our earnings call, macroeconomic uncertainty and market volatility have intensified. The outlook from here remains clouded given numerous macro challenges including historically high inflation, supply chain constraints, rising interest rates, geopolitical tensions, and the current regulatory environment. With this backdrop, the equity markets too continue to experience instability. The S&P 500 suffered its worst first half decline in over 50 years. In addition, financing markets have also continued to tighten, making it harder to access capital and are now at higher rates and wider credit spreads. This is a notable change from where we were just a few months ago; all of these macro-economic and market factors have impacted our businesses as uncertainty is never good for M&A or capital raising; however, with all that said Evercore generated a solid second quarter. For the second quarter, we generated $637 million in adjusted net revenues, $576 million in adjusted advisory revenues, and $2.46 in adjusted earnings per share. These results underscore the breadth and depth of our franchise, coupled with our focus on managing the firm for the long term. Consistent with last quarter, our backlogs remain strong but are at more risk as we continue to face headwinds that I just noted. These headwinds have led to a continuation of the slowing of the pace of announcements and an elongation of the timing of transaction closings. Looking at the overall M&A market year-to-date global and U.S. M&A announced dollar volume decreased 20% and 28%, respectively, compared to the first half of 2021. Also, the number of announced deals decreased 17% globally and 21% in the U.S. versus the first half of 2021. For the largest deals, those above $5 billion global activity remains below the record levels in 2021 with dollar volume down 8% and the number of announced deals down 24% as compared to the first half of last year. That said, when comparing volumes to a more normalized year and not last year's record M&A activity is still quite solid. We continue to have high levels of dialogue and activity with clients. This is seen across a broad spectrum of sectors and capabilities. It is in an environment such as this one when interaction, connectivity, and thoughtful advice are most valued. It is critical that we remain deeply engaged with our clients. This is when they need our advice and support the most. We believe we are well-positioned to address our clients' needs and to help them plan for the dynamics of this environment, highlighting the significant investments that we've made over time. And although some of the conditions needed for a strong M&A environment in the short term are not in place, the fundamental themes that drive M&A activity in the intermediate to long-term remain intact. Turning to the quarter, the previously mentioned macroeconomic and industry forces impacted investment banking revenues. However, our business diversity enabled us to achieve solid results for the firm indicative of the revenue-generating power of this franchise. In advisory, we saw continued strength in some of the largest sectors including Technology, Media and Telecom, Healthcare, industrials, and the beginnings of an improved environment for energy driven both by our corporate and sponsor clients. In addition, our European advisory team had a very strong quarter as a result of investments that we've made over time and we continued to fill white spaces, both geographically and from a sector perspective in the region. In Capital Advisory, we saw continued activity in our GP-led transactions, fundraising, secondary investments, continuation fund opportunities, and Real Estate Capital Advisory. In terms of restructuring, we are starting to see an increase in dialogues as it is becoming harder for companies to access the public debt markets. In addition to the cost of debt rising materially. That said, corporate balance sheets generally remain healthy, default rates are still low historically versus averages, and the environment is setting up differently than the restructuring cycle seen in 2020. We believe we are well-positioned to advise our clients as activity picks up. Underwriting experienced a difficult quarter. Activity continued to be impacted by the significant spikes in volatility and macro headwinds that weighed on issuers and kept them on the sidelines. Away from traditional IPO and follow-on activity, which has been extremely quiet, we've seen a strong uptick across our platform in aftermarket offerings, also known as ATMs as well as private placements. Overall, our ECM business is becoming more diverse from a sector and product perspective. We continue to build our pipeline and would expect to see the conversion of the pipeline when markets stabilize and as financing needs in some sectors become more acute into the year-end. In our equities franchise while the market volatility has had varied impacts on our business and our clients, our team is deeply engaged with clients guiding them through the volatility. The business continues to consistently deliver market-leading research and differentiated client service. The firm also successfully hosted 10 conferences and symposiums in the second quarter, including our inaugural Global Clean Energy Summit that was a cornerstone event for Evercore's ISI and Advisory energy transition efforts and was well received by our clients. And lastly, in Wealth Management, long-term performance remains strong and we continue to generate new business in the quarter, despite some shrinkage in AUM linked to market performance. We remain optimistic about our future and continue to invest in our businesses by opportunistically adding A+ talent in areas of targeted growth. Across our advisory teams, we are pleased to have added seven Senior Managing Directors so far this year, all in key strategic areas that we have previously identified including TMT, debt advisory in placement, ECM in Europe. As it relates to compensation, we are mindful of the environment and are focused on building our franchise prudently as we continue to invest in the key areas of growth that support our medium to long-term strategy. Celeste will discuss the compensation financial metrics in more detail shortly. Lastly, our capital return strategy. We remain committed to our goal of returning excess cash not invested in the business in the form of dividends and share repurchases to our shareholders. Even in this less certain environment, we've bought back a significant amount of stock and we'll opportunistically buy back shares as well while maintaining a durable balance sheet. As we look ahead, we remain optimistic about our future and we have a clear strategy for the firm. Despite today's uncertain environment, we are confident that we have the team and capabilities to serve our clients throughout all environments and we will continue to drive towards achieving our long-term goals. Now let me turn the call over to Celeste.

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

Hello? Can you hear me?

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

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

Okay. I'll go ahead and give the Q&A instructions. Thank you. We will now begin the Q&A session. Our first question comes from Richard Ramsden with Goldman Sachs. You may proceed.

Okay. Good morning. Can you hear me?

Yes, I can.

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

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

Okay. That's very helpful. Thank you very much.

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

Good morning, everyone. It's historically unusual to see strong strategic discussions occurring amid declining confidence, increasing financing costs, and expectations of a recession. While I'm pleased to see this, I still have a sense of impending challenges. John, having experienced various cycles, how do you perceive the current situation compared to past recessions?

I believe your question is quite relevant, and it's something we have been contemplating as we consider the future. There are still several key factors in play, which is why robust discussions continue among corporate boards and management teams. Companies maintain healthy leverage levels and ample cash reserves. While this situation may evolve, a significant number of companies remain well-capitalized. There is a prevailing belief in long-term market growth, fueled by factors like technological disruption and clean energy, along with the general confidence that businesses will expand over time. Consequently, when boards convene, they focus on the future prospects. Additionally, there appears to be a widespread acceptance of M&A discussions among companies. While we've noted a slowdown in merger activity, this does not reflect a decrease in conversations; rather, it's a reduction in actual transactions. Based on my recent experiences in corporate board meetings, there's a consensus that companies may be hesitant to pursue significant transactions amidst a volatile market. However, there is a recognition that being prepared for a market shift is prudent. Thus, meaningful discussions are taking place, although there's a sense of uncertainty about the timing of future developments. We all recognize the existing volatility and uncertainty. Corporate leaders, boards, and CEOs are assessing the situation, just as we are, and we're all closely monitoring the landscape. It's challenging to predict these events, given that some factors remain beyond our control, such as geopolitical risks. Additionally, we understand that entering a substantial recession would likely affect M&A and advisory activities as well.

Okay. Thank you.

Thank you. One moment for questions. Our next question comes from Steven Chubak with Wolfe Research. You may proceed.

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

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

Great. Thank you for taking my question.

Thank you. One moment for questions. Our next question comes from Brennan Hawken with UBS. You may proceed.

Good morning. Thank you for taking my question. I want to focus on the comp ratio. Last time, I believe you mentioned expecting a 61% comp ratio for the remainder of the year. Typically, you have good visibility about six months out regarding revenue, and the comp ratios are informed by both the numerator and the denominator. I would like to confirm that this is still the case. What factors are influencing your assumption about the comp ratio? Regarding recruiting, do you anticipate staying active in the second half of the year? Considering the ongoing upward pressure from recruiting, how are you currently viewing the market? Evercore has become active in previous downturns, which has benefited them in the long run, even if it sometimes creates near-term pressure. Any insights would be appreciated. Thank you.

Sure. Let me start with the recruiting question and then I'll turn it over to Celeste to address how we determine the compensation ratio. Regarding recruiting, we plan to remain active. As you heard, we've already made seven senior-level hires this year. We are actively engaging with top-tier talent, and if the chance arises to bring in exceptional candidates, we will pursue that opportunity. We believe that a market lull can provide a valuable chance to evaluate talent that aligns with our needs. Therefore, we will always be seeking top-tier talent. Our level of activity may fluctuate based on available opportunities, but we will continue to participate in the market. We are monitoring activity levels closely. I want to add one more point before passing it to Celeste: there is currently more uncertainty and volatility regarding earnings outcomes than we have experienced in the past. When we discuss our outlook six months ahead, we are facing more uncertainty now than during previous earnings calls.

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

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

That's really fair. Thanks a lot for the color.

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

Hi. Good morning.

Good morning.

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

Sure. I'm going to provide more detail on our expenses to ensure everyone is aligned with what we've communicated. Throughout the year, we've indicated that non-comps will continue to reflect levels similar to 2021, which were significantly impacted by reduced activities as people stayed home. Several factors have influenced this quarter, including the increase in travel as business resumes post-COVID; our bankers are actively meeting clients, which is essential. We will continue to promote this face-to-face engagement. Additionally, there has been a noticeable rise in in-person events like the Clean Energy Summit, which was a successful occasion for us, among others. Over time, we expect our trip levels to reach 70% to 80% of pre-COVID figures and currently, domestically, we're at approximately 69% of trips from the same quarter in 2019, while global travel stands at about 64%. This indicates an uptick in domestic travel, though international trips are still lagging behind. We've observed a surge in travel costs due to inflation. There's also been an increase in professional fees, primarily due to normal fluctuations associated with legal and similar expenses, along with variations tied to our search and placement activities. It's worth noting there was one notable episodic item during the quarter. Additionally, costs associated with our growth have increased as we've expanded our operations, requiring more space. As employees return to the office, operating expenses have also risen. We've acquired additional space in New York and London recently, which will contribute to our expenses in this quarter and the next. In terms of specific episodic items, we had a significant increase in sub-advisory fees this quarter, which is typically minimal. Our bad debt also saw significant fluctuation due to a specific deal in the quarter, contrasting with last year's reversal. If we exclude these atypical items, our non-comps would align more closely with market expectations. To address your question, we are consistently reviewing all our expenses. Bob manages this very efficiently, and we regularly assess our policies, data spending, and other areas not critical to business investments. Notably, a large portion of our expenses is in compensation, which will vary with revenue. Our non-comps mainly consist of fixed expenses, and we're focused on identifying areas where we can minimize, defer, or alter our spending, especially as we scale. Continuous improvement is our objective, even during stronger performance periods.

Thank you, Celeste. Very full some answer. Appreciate all the context.

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

Good morning. Regarding buybacks, you have a significant buyback program. While your stock is currently down and more affordable, the environment remains uncertain. How should we consider your capacity, particularly your excess cash position, and your approach to balancing the risks and rewards of buybacks in the second half of the year?

Hi, James. Thanks for the question.

Sure.

We are dedicated to returning all excess capital that is not necessary for running our business to our shareholders. This year, we have distributed over $500 million through dividends and share repurchases. As you know, we increased the dividend in the first quarter. We have offset all the Restricted Stock Units issued as part of bonuses and repurchased approximately another 1.1 million shares, totaling 3.6 million shares. As we consider the latter half of the year, we will be cautious yet opportunistic with stock buybacks, while also prioritizing the maintenance of a strong balance sheet due to the current uncertainties. Our goal is to ensure that we can continue to invest in our business and make prudent decisions for its long-term benefit. We will strive to find the right balance between these priorities while ensuring we have the necessary resources to navigate this uncertain period. Going forward, we will continue to return all excess capital to shareholders opportunistically through buybacks.

Okay. Thanks.

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

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

Thank you, Devin. Regarding the flow of deals in our backlog, your observation about the delays in deals is accurate. This elongation suggests that while deals are coming in, the period before they close is significantly longer. We haven't observed complete terminations; instead, we see deals being delayed. Honestly, I'm not sure if these delays indicate that some deals may eventually disappear. However, we manage our backlog carefully and only keep items that we believe are still actively progressing. We have confidence in the soundness of our backlog, though we acknowledge that things are moving out further than expected. It would be unrealistic to assume that none of these extended timelines could result in some deals not materializing. As we analyze our situation closely, we currently do not identify any immediate risks of that kind. Regarding your query on whether we are still experiencing slowdowns or maintaining a steady pace, I personally believe we are at a steady state now. I don't anticipate declines unless we face a significant recession, which would necessitate a reassessment of the situation, as larger companies, sponsors, and the markets would be negatively affected. Right now, I see us at a stable point, without signs of deterioration unless another shock occurs. That shock could stem from a recession, geopolitical issues, or other unforeseen events. Throughout this discussion, we have emphasized that the level of uncertainty and risk is significantly heightened at present. Interest rates are likely to rise, inflation may shape business sentiments, market volatility will reflect these conditions, and there are always geopolitical risks to consider. Given these factors, we must account for increased risk, making predictions more challenging.

Yes. Appreciate it's fluid, but thanks for all the context. Thank you.

Thank you. One moment for questions. Our next question comes from Manan Gosalia with Morgan Stanley. You may proceed.

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

I apologize, but we can't provide a detailed breakdown on that. However, we highlighted the productivity in Europe because it has been significant. The current activity levels in the market, although lower, combined with the fact that some of our talented professionals have taken on interesting opportunities, have allowed the business to demonstrate positive results. It's premature to claim a definitive market share gain at this point. However, it's clear that when skilled individuals tackle engaging challenges, they generate real value for us by effectively meeting client needs. That's what we're seeing here; our talented team is addressing client issues, and that is reflected in our results.

Appreciate that. That's helpful. Thank you.

Thank you. One moment for questions. Our next question comes from Brennan Hawken with UBS. You may proceed.

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

Sure, Brennan. Let me start with restructuring since it's a significant aspect of our business and has consistently performed well for us over time. Our restructuring operations are currently very active. However, I don't anticipate a surge of major restructuring assignments in the immediate future, though I do believe it will happen eventually. At this moment, we are fully engaged in liability management, out-of-court bankruptcy discussions, and restructurings, providing advice to both debtor and creditor groups. There is considerable activity in this area, and we feel well positioned despite the relatively low bankruptcy rates currently. We are waiting for a shift, and I believe we'll see developments over time, especially with the prevailing market uncertainty. Additionally, our private capital advisory businesses continue to thrive and are crucial to us. Our activism sector is also performing well, even if it doesn't always align with market cycles, and we are seeing substantial engagement there. In equity capital markets, we have a strong pipeline of assignments, and if that market picks up, we expect significant activity. We're also expanding our sponsors business, which is increasingly important to our strategy; sponsors may begin activity ahead of larger corporations based on past trends. While we are focusing on various non-traditional, M&A oriented businesses, I want to emphasize that the merger business remains a critical and impactful part of our operations. I hope this provides clarity, Brennan.

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

No, unfortunately it wasn't missed. And I'm sorry that I'm not responsive on that. I'd like to try and view it myself. But at this point, we can't do that.

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

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

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

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