Earnings Call Transcript - EVR Q1 2026

Operator, Operator

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

Katy Haber, Head of Investor Relations

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 closings. I will now turn the call over to John.

John Weinberg, Chairman and CEO

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 uncertainty could extend transaction timelines 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 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 markets and debt advisory team remained active, particularly with structured minority deals despite some lengthening in transaction timelines. 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 were very healthy. In the quarter, 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.

Timothy LaLonde, CFO

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 non-comp 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 non-comps 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 of 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 approximately 1 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 grants. 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 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, Operator

And our first question comes from Alex Bond with KBW. 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.

Alexander Bond, Analyst (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 persists 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.

John Weinberg, Chairman and CEO

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 situations 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. Not everyone is going to respond the same way to what looks like a hesitation in the software markets. On the M&A side, 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. 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, and software is a component, but it is not dictating the business.

Operator, Operator

Our next question comes from Ryan Kenny with Morgan Stanley.

Ryan Kenny, Analyst (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 as disproportionately impacting Europe versus U.S. So what are your thoughts on Europe right now?

John Weinberg, Chairman and CEO

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. Because we have such high-quality people, we're in a lot of the boardrooms and having consequential conversations. So from our perspective, 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 decide they don't think they're going to be able to get things done. From our experience, that is not the case at this time.

Operator, Operator

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

James Mitchell, Analyst (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?

John Weinberg, Chairman and CEO

Well, I think you nailed it, which is that the larger large-cap market in financial sponsors, where they have big high-quality assets, is 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 interest. Middle market has slowed. There's no question. It's a slowdown. It's not a standstill. Transactions are 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. One of our objectives was to take several powerful sponsor-related franchises and bring them together to have a coherent offering to financial sponsors generally. We are seeing the fruits of that: our pitch rate is up and our win rate is up. 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 and middle market transactions are really slowed. It's not to say they won't happen, but it's not nearly as buoyant as we hoped it would be at the beginning of the year.

Operator, Operator

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

Daniel Cocchiara, Analyst (Bank of America)

In your prepared remarks, you mentioned that some deals were accelerated from 2Q into the end of 1Q given added uncertainties within the market. I would think that would be more likely to see those conversations extended rather than shortened. So I would love to hear maybe 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?

Timothy LaLonde, CFO

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

Daniel Cocchiara, Analyst (Bank of America)

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

John Weinberg, Chairman and CEO

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 is a firm with extraordinarily capable and competent people who really know the business and their sectors, who serve the clients in every respect and who have engendered confidence in both management teams and boards. We've hired some really high-quality people. The people of Evercore in today's world are top-notch, and we've worked hard to create a culture where people work together and pull in the same direction. Our competitive edge is delivering better results for our clients in an ethical and client-oriented fashion. That's what we hope our clients see and why they choose us.

Operator, Operator

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

Brendan O'Brien, Analyst (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?

John Weinberg, Chairman and CEO

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-led and GP-led; we're quite balanced. The dynamics of the business are that it continues to present clients with real alternatives in terms of how they want to get liquidity, move assets to an ownership position they're comfortable with, and allow flexibility beyond pure merger or IPO paths to monetize and assign ownership. We're seeing continued interest in the flexibility PCA offers. In addition, there are many new products that our PCA group is undertaking; they're very creative in how they think about the market. As secondaries grow and become more powerful, they are performing better and better. They have a very high market position and present high-quality advice. This is a very powerful growth engine for our firm, and we feel comfortable with how they're defining and addressing their market.

Operator, Operator

Our next question comes from Nathan Stein with Deutsche Bank.

Nathan Stein, Analyst (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?

Timothy LaLonde, CFO

Yes, sure. Historically, advisory has been around 45% M&A, and I would say it's still over 40% today. By the way, the non-M&A businesses are doing great. We're really pleased with the strength of their performance, backlog and outlook. 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. 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.

John Weinberg, Chairman and CEO

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 provide clients and what we deliver for shareholders. We are not a balance sheet bank, so there are certain things we are not going to be in. Everything that is not balance sheet driven, we're thinking aggressively about how we participate and create competitive positions. We feel good about the people who come to Evercore and the people we hire, and we believe we have real opportunity across the board.

Operator, Operator

We'll go next to Brennan Hawken with BMO Capital Markets. We've also been allocating capital and investing in non-M&A businesses to diversify what we provide clients and what we deliver for shareholders. We are not a balance sheet bank, so there are certain things we are not going to be in. Everything that is not balance sheet driven, we're thinking aggressively about how we participate and create competitive positions. We feel good about the people who come to Evercore and the people we hire, and we believe we have real opportunity across the board.

Brennan Hawken, Analyst (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?

Timothy LaLonde, CFO

Yes. Sure, Brennan, I'm happy to answer that. First, I would point out that in the last couple of years we've achieved pretty strong improvement in our compensation ratio. For example, we went from 67.6% down to 65.7%, and then from 65.7% to 64.2%, which is meaningful improvement. This quarter we reduced another 20 basis points, so it's been strong improvement over a little more than two years. We're striving to continue to make improvement, though it likely won't be at the same magnitude as the last couple of years because it's hard to keep going at that rate. Regarding whether that's driven by revenue outlook or the competitiveness for talent, I think it's both. We remain optimistic about our revenue outlook: backlogs and pipelines continue to look good and activity levels remain high. The market for talent remains competitive, and we're committed to obtaining the best talent. As you've seen, we've continued to be proactive in augmenting our partner ranks and strengthening those areas where we believe it's earning positive returns. The key takeaways are that we are striving to make continued progress, although it might not be at the same magnitude as prior years, and the market for talent remains competitive.

Brendan O'Brien, Analyst (Wolfe Research)

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.

Timothy LaLonde, CFO

Sure. Please.

Brennan Hawken, Analyst (BMO Capital Markets)

Right. So it's sort of a related and actually a real follow-up, Tim, on that point. Your revenue productivity numbers have been great, and the hiring is very effective, not a criticism. My question is: has competition for talent scaled to a level where a return to the sub-60% comp ratio is going to be more challenging? Has the quality and scale of hires also scaled to a level where sub-60 will be tougher? You're driving the business, and you want to make sure you're not compromising on standards. Is that the right frame to think about it?

Timothy LaLonde, CFO

Thanks again for the follow-up. We continually analyze returns on partner hiring and other metrics. The NPVs and IRRs on our partner hiring have been pretty good. We're focused first on serving clients with excellence and second on building value for the firm. We don't want to suboptimize by focusing solely on the comp ratio and thereby foregoing hires that are clearly adding value. On the sub-60% target, we've been working to improve quarter over quarter and remain a ways from sub-60. For now, we're focused on improving from where we are, and we'll evaluate progress over time.

John Weinberg, Chairman and CEO

Let me make one comment about the marketplace for talent. It's more competitive and it's hard to get people; the ante has been raised. A big piece of our strategy is bringing in A+ players, and an A+ player will create value for the firm. We're spending a lot of time bringing high-quality people. Because we've been able to create momentum for our franchise, we're seeing highly talented people interested in coming to us: people who want the opportunity to work with other talented colleagues and provide better service to clients. While it's more competitive and it's not easier for us, we're finding real success with high-quality hires even as the market gets more competitive.

Brennan Hawken, Analyst (BMO Capital Markets)

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

Operator, Operator

Our next question comes from James Yaro with Goldman Sachs.

James Yaro, Analyst (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 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?

John Weinberg, Chairman and CEO

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 for the last 18 months or so. Part of that is that companies and managements see that it is increasingly acceptable and welcomed by shareholders. Throughout my time in the industry, there are times when the market is excited about big strategic deals and other times when it looks elsewhere. Right now, amidst uncertainty, big deals are welcomed and there is an opportunity in the current regulatory environment to get deals done. Not every deal will be waved in, but there is a willingness to consider larger deals that is promising. Some key factors driving activity are: CEO confidence is sound and quite high; the economy, despite some dislocations and geopolitical uncertainty, is resilient; financing markets are open and abundant; and Boards are comfortable that scale is beneficial for many reasons, including addressing AI, supply chains and competitive positioning. These factors point to continued strength in large-cap activity, though not every company will pursue a large deal.

Operator, Operator

Our next question comes from Mike Brown with UBS.

Michael Brown, Analyst (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 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?

Timothy LaLonde, CFO

Yes, sure. We've always been committed to returning capital to our shareholders. If you look back, we're proud of our track record, which includes consecutive years of dividend increases, six consecutive years of repurchasing shares at least equivalent to our RSU issuance as part of the bonus process and, in many years, significantly more. We're cognizant of returning capital to shareholders and committed to it. With respect to acquisitions, we're always seeking to create value, whether through developing our people internally or hiring externally. We evaluate situations from time to time, but we have not been a serial acquirer and are highly selective.

John Weinberg, Chairman and CEO

Robey Warshaw was a unique opportunity for us and we were excited to do that. We're not looking to use our capital for acquisitions broadly; to do an acquisition is a high bar for us. We'll use capital to return to shareholders, invest in high-quality talent to drive our businesses, and look at new businesses and talent to build out capabilities. If something strategically exciting came along that was really compelling for our franchise, we would consider it, but it's not a priority and the bar is very high.

Operator, Operator

Our next question comes from Devin Ryan with Citizens Bank.

Neil Eloff, Analyst (on behalf of Devin Ryan, Citizens Bank)

Neil Eloff on here for Devin. Our question is on AI and the impact on 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 whether that protects the sector? And then also if you guys could quickly touch on AI implementation at the firm and what productivity gains you're already seeing?

John Weinberg, Chairman and CEO

Why don't I start and let Tim carry it through in terms of implementation. 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 AI is an investment theme: certain businesses that adopt AI will do much better, while others may be impaired by AI's impact on what they bring to the market. Both possibilities create strategic opportunities on the M&A side. We have to be cognizant of how AI changes competitive landscapes sector by sector. For us internally, I'll let Tim answer, but we are spending a lot of time on it.

Timothy LaLonde, CFO

Echoing John's comments, we're excited about AI in two ways. One is structural: AI may change certain industries or business types, and that structural change creates opportunities for an advisory firm like ours. We're in the middle of that and assisting clients in their evaluations. Internally, we welcomed a new Chief Information Officer in the past year and have continued to augment that team. We're investing in this area and expect productivity enhancements in the shorter run, both for banking teams and in how we run our business. In the longer term, you could see continued deal efficiencies, in processing and potentially idea generation. We're working hard at this alongside many firms and see real opportunity.

Operator, Operator

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

Alexander Bond, Analyst (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 relative to last year's full year results?

John Weinberg, Chairman and CEO

We see the ECM business as quite healthy. There are high-quality large companies that would like to get to market, and we don't see any reason why that won't happen. If geopolitical conditions become difficult, that could interrupt equity market opportunities, but we don't see that right now. We think it's possible this sustains: there are opportunities in biotech and other sectors throughout the year. For the most part, unless there's a real interruption, we could see a healthy ECM market that compares quite well to last year.

Operator, Operator

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

James Yaro, Analyst (Goldman Sachs)

I just want to clarify one of your comments and then think about the run rate further afield. I 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 if I run that out further, would that mean 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?

Timothy LaLonde, CFO

Yes. I think you characterized things appropriately. We talked about some deals that looked like they would close in Q4 being prolonged into Q1 and other significant deals that looked like they would close in Q2 accelerating into Q1, resulting in a quite large Q1. We encourage evaluating our business across a multi-quarter timeframe given the lumpiness of our business. You heard from John and me that we think business is good: we're coming off a record year and a record quarter, activity levels remain strong across essentially all of our businesses, and we're enthusiastic about the outlook. Taking those comments together, that's a fair representation of our view.

John Weinberg, Chairman and CEO

Yes, I agree with that. One additional point is that the fee environment has many large fees and big deals in the market, which creates lumpiness. I don't think that's going away in the near term and maybe it's not something we'd want to get rid of, because those are high-quality, big opportunities. We anticipate some will not happen, but we believe others will. It's a very healthy market and we feel good about participating. How it translates quarter to quarter will include lumpiness, and that's consistent with our long-standing view.

Operator, Operator

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.