Welcome to the Evercore first quarter 2015 financial results conference call. During today's presentation, all parties will be in listen-only mode. Following the presentation, the conference call will be opened for questions. If you have a question, please press the star followed by the one on your touch-tone phone. Please press star zero for operator assistance at any time. For participants using speaker equipment, it may be necessary to pick up your handset before making your selection. This conference call is being recorded today, Wednesday, April 22nd, 2015. I would now like to turn the conference call over to your host, Evercore's Chief Financial Officer, Robert Walsh. Please go ahead, sir.
Thank you. Good morning. I'm Robert Walsh, Evercore's Chief Financial Officer, and joining me on the call today are Ralph Schlosstein, our President and Chief Executive Officer, and Roger Altman, our Chairman. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore's first quarter 2015 financial results. The company's presentation today is complementary to that press release, which is available on our website at evercore.com. This conference call is being webcast live on the investor relations section of the website, and an archive of it will be available beginning approximately one hour after the conclusion of this call for 30 days. I want to point out that during the course of this conference call, we may make a number of forward-looking statements.
These forward-looking statements are subject to various risks and uncertainties. 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 Securities and Exchange Commission, 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 pro forma or non-GAAP financial measures, which we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and their GAAP reconciliations, you should refer to the financial data contained within our press release, which, as previously mentioned, is posted on our website.
We will refrain from repeating the information included in the press release. We focus instead on the key opportunities, challenges, and changes in our business. 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'll now turn the call over to Ralph.
Thank you, Bob, and good morning, everyone. Before I start, let me make everyone aware that Roger and I and Bob are in different cities, so that if we are not perfectly orchestrated today, particularly during the question and answer period, it is simply that fact, not rudeness or disrespect toward each other. Now to the review of the quarter. Our first quarter results, while always seasonally lower than other quarters, reflect our strongest start to the year since we went public. We continue to be very pleased by the positive momentum in our business. Our risked and unrisked pipeline of advisory opportunities continues to be strong, and our pipeline of underwriting assignments is building quite strongly as well. Assets under management in our wealth management and trust business grew by 4% as the business continues to attract new clients and add assets from existing clients.
Overall, assets under management were essentially flat as the weak peso and the strong dollar reduced the reported value of assets under management in Mexico. The integration of our equities business is on track, producing operating margins from secondary activities of 14.2%, up from 6.2% in the first two months of the combined operation at the end of 2014. Very importantly, we are having an unusually high level of success in recruiting this year, having already attracted eight senior managing directors and two senior advisors, with several additional discussions still very active. We have succeeded in getting early commitments this year, so much of this new talent will be on board by the end of the second quarter. Let me now briefly review our financial results.
First quarter 2015 net revenues were $238.2 million, up 60% versus the same period last year, although down 26% from the record fourth quarter of 2014. The increase versus the first quarter last year, of course, reflects our much larger equities business. Even without the equities business, firm-wide revenues would have been up 32%, and our advisory revenues were up even more. Net income for the quarter was $29.7 million, with earnings per share of $0.56. These results are up 102% and 81% respectively from the prior year, but down from last year's record fourth quarter. Operating margins were 21.2% for the quarter. Our compensation ratio was 57.4% for the quarter, lower than the same period last year, and our trailing 12 months compensation ratio was 58.6%, compared to roughly 59% for both the prior period, and for the period ending this time last year.
Non-compensation costs were $51.1 million, up from the first quarter of last year, once again, due to the larger equity business and to the expansion of our business generally, but down in comparison with the fourth quarter of 2014. Our cost per employee, the key metric to which we manage, declined 12% in comparison with the fourth quarter of last year. We again returned significant capital to our shareholders, more than $100 million in this quarter, including repurchasing 1.7 million shares, offsetting a substantial portion of the 2.2 million shares granted in conjunction with 2014 bonus awards. Let me now turn the call over to Roger, who will comment on our investment banking performance and the M&A environment more broadly.
Good morning, everyone. The firm had its best first quarter ever in investment banking. You all know about the seasonality of this business for us and everybody else in it who's a major factor. For example, fourth quarters are always stronger than first quarters. That's been the case with us for many, many years. I don't see any reason why it won't continue to be. By first quarter standards, this was very good. Investment banking revenue was up 70% to $214 million on a year-over-year basis, up from $125 million a year ago. Operating income, $47 million, more than double last year's first quarter. Of the $214 million in total first quarter revenue, advisory fees were $155 million of that. We earned 35 fees in excess of $1 million, which is about 10% above the year-earlier level.
The number of fee-paying clients increased to 151, which is a 30% increase from the 116 level of a year ago. We participated in 10 underwriting transactions during the quarter and 12 other capital-raising transactions. The latter primarily represent fundraising for sponsors and secondary transactions for owners of LP interests. 35% of our total banking revenue was generated by clients outside the U.S., with Europe being particularly healthy. Productivity of our partners, as you know, we watch this very closely. We consider it one of the most important measures, rose 20% year-over-year to $12 million. Quite a good figure. We finished the quarter with 73 Senior Managing Directors. Recall that we promoted six internally at the end of last year. As Ralph said, 2015 is shaping up as a particularly strong recruiting year.
Nine senior bankers have committed to join the firm in 2015. To give you a flavor of this. Yes, on the one hand, Evercore is 20 years old as of last month, but we still have a lot of building out to do. We recruited a head of a new oil field services group, a new chemicals group, a new power and utilities group. We added to our technology team in London. We added to our equity capital markets team, both in New York and in Silicon Valley, added to our insurance team, added to our restructuring team, all so far in 2015. As in the past, if we have an outsized recruiting year, there will be two P&L effects, generically speaking. There'll be a short-term bump in our comp ratio, and there'll be faster medium-term growth. We feel good about 2015 as a whole.
In other words, the outlook for the whole year in terms of investment banking. It's possible it'll be a little more seasonal than usual, meaning back-end loaded, but we'll see on that. In terms of the environment, M&A volume levels are healthy. This is a good moment in the cycle. Both global announced volume, and I'm referring to dollar volume, and U.S.-announced volume are up about 30% year-over-year. That's the right way to look at it. They may be down a bit from the fourth quarter, but just like our own results are seasonal, M&A volume as a whole is seasonal. Completed transactions volume was up 13% globally year-over-year. Down, interestingly, about 5% in the U.S. year-over-year. The number of announced deals, not the volume of them in dollars, but the number, was down about 3% year-over-year.
When you put all that together, you say to yourself the same thing which we said on the last earnings call, which is what's really going on in the M&A market is that the average deal size is increasing. When you see dollar volumes go up and the number of deals down or flat, then by definition, the average deal size is going up. It's an interesting dynamic because in a super strong market, you'd see both go up. Three final comments. Our energy business remains very strong. There's a shift in composition of it from what we call the A&D sector, which essentially means selling assets, for example, like acreage, shifting over to corporate transactions, for example, stock-for-stock mergers. The energy side of the equation is really quite good. As I said a moment ago, Europe is strengthening.
Both generally and for us, our backlog remains quite healthy. Back to Ralph. Let me just talk briefly about the equities business, which contributed revenues of $55.2 million in the quarter, including $2.7 million attributable to underwriting, earning operating margins of 15.8%. The operating margins, excluding the effect of underwriting, were in excess of 14%. Secondary revenues are down quite modestly in comparison with the combined revenues for the predecessor businesses for the same period last year. Progress has been made in reducing non-compensation costs. Other cost savings initiatives will be implemented in the second and third quarters and it will start to take effect in the second half of the year. We continue to steadily improve in the votes of key institutional clients and are seeing continued positive momentum throughout the first voting cycle as a combined company.
We hope and expect that that is a precursor for secondary trading activity as well. Headcount reductions were made a few weeks ago to better align the size of the team on the combined platform with our current revenue opportunities. This was done in the ordinary course of our planned integration. We continue to invest in and grow the business to best serve the needs of our clients, adding a senior analyst in the energy space who will join in the second quarter. Our investment management business continues to contribute. On an overall basis, net revenues were $23.5 million for the quarter, a 3% increase from the same period last year. 13% below the fourth quarter, which were aided by both year-end performance fees and marks in our PE business. Operating income was $3.5 million for the quarter, delivering a margin of 15.1%.
Assets under management were essentially flat for the quarter. Probably the highlight here is our wealth management business, which is performing particularly well, adding talent, clients, and assets under management. Our performance in wealth management in all of our products is ahead of their benchmarks, and that's over any period of time, one, three, and five years. Now that we have a five-year track record, which we recently passed from a chronological point of view, we are beginning to see early signs of a pickup in organic growth. As you can see, our wealth management business finished the quarter with $5.9 billion of assets, an increase of 4% from the prior quarter. Bob will now provide some further comments on our non-comp costs and on several financial matters.
Thank you, Ralph. Just a few quick points. Our adjusted results for the first quarter exclude certain costs that are directly related to our equities business, and also the finalization of matters associated with the closing of the U.S. private equity business. Specifically, our U.S. GAAP results include $6.1 million of special charges relating to a variety of matters, including the employee separations that Ralph mentioned, termination of contracts, and certain acquisition and transaction costs. In addition, our adjusted results exclude the costs associated with expensing the equity consideration granted in conjunction with the ISI acquisition. The charge is larger this quarter as we have begun to amortize the costs associated with the Class G and H LP Interests in the first quarter, in addition to the costs of the Class E units.
Non-compensation costs were lower in the first quarter, even though the results of the combined equities business were included for a full quarter versus two months in the prior period. As Ralph mentioned, firm-wide non-comp costs per employee were $37,000 for the quarter, which is 12% lower than Q4. As he mentioned, we continue to focus on cost reduction opportunities, not only in our equities business, but across the entire firm. The adjusted pro forma tax rate for the quarter is 37.25%, up slightly in comparison with the first quarter of last year. That's principally due to the elimination of the minority interests in our equities business. The share count for adjusted pro forma earnings per share was 53.4 million shares, an increase of approximately 2.1 million shares from the fourth quarter of last year.
This increase reflects the inclusion of the LP units associated with ISI for a full period, an additional 2.2 million share equivalents. The offsetting decrease is due to the net effect of share repurchases offset by normal growth from RSUs. Our average share price for the quarter was $50.82, which is up slightly from the fourth quarter. As Ralph noted, we repurchased 1.7 million shares in the quarter. At March 31st, we had remaining authority to purchase 6.1 million shares, or approximately $303 million in value. Finally, our cash position remains strong as we hold approximately $258 million in cash and marketable securities, with current assets exceeding current liabilities by approximately $271 million. Let me turn it over to Ralph for closing comments.
Okay, let me conclude by saying that we are very encouraged by the momentum in our business. Our first quarter, as measured by any metric, was materially stronger than any first quarter in our history. As Roger indicated, our backlogs in both the advisory business and in equity underwriting are strong. We already have had our strongest recruiting year ever, and we have additional important discussions still underway. We are finding that we increasingly are the destination of choice for the high-performance advisory bankers who we work so hard to recruit. As Roger indicated, our recruiting success to date, depending on our revenues, may have a slightly greater effect on our comp ratio and our operating margins than in prior years. We still need, of course, to successfully execute both the growth in our advisory business and the integration of our equity business.
Assuming we make progress on those, we believe that this recruiting success does bode well for the future value of the company. Thanks very much, and we'll now take any questions.
Thank you, sir. We will now begin the question and answer session. As a reminder, if you have a question, please press the star followed by the 1 key on your touch-tone phone. If you would like to withdraw your question, please press the pound key. If you're using speaker equipment, you may need to lift the handset before making your selection. Our first question is from the line of Douglas Sipkin of Susquehanna. You may begin.
Thank you, and good morning, guys. How are you?
Good morning.
Just wanted to drill down on a couple of things. Obviously, it looks like a tremendous start to recruiting. It seems like the pace is a good amount above your average, so to speak. I just wanted to drill down. Anything that you guys can sort of tie it to? Is it the ISI and the potential for underwriting, or is it just the great 2014 for advisory growth? I'm just curious. Obviously, the business has gotten better, and guys, the bigger firms are still looking to get bigger in the business again. Yet you guys have still managed to recruit incredibly well. I'm just curious, what are you guys linking it to?
I would say it's probably a number of factors. Number one, I think we do stand out a little bit in terms of the momentum that we have and the breadth of things that bankers can do with their clients from a strategic point of view. That's one factor. I think second, having the equity underwriting capability has been important to maybe one or two of these recruits. On the margin, it's helped us as well. Finally, I think from the point of view of the people involved, there just seems to be a little bit more willingness to consider alternative ways of doing business, the advisory model versus the full-service model, than existed in the past. I'm not quite sure how to explain that.
A hypothesis might be people have had a few more years of earnings under their belt from the financial crisis and maybe feel a little more financially secure. It's hard to say exactly what's happening on that side.
Okay, great. No, that's helpful. Maybe a follow-up for Bob. See, obviously, the improvement in the margin at ISI on the expenses, you guys sort of indicated there's a little bit more to do. Can you sort of maybe frame up where we are in that process in terms of taking out, how much have you taken out so far and how much is maybe left and when we'd expect? I know you guys indicated the second half, so I'm assuming third or fourth quarter. Where are we in that in terms of taking out cost process?
We've said, I think reasonably consistently, we attacked the easier costs initially. We had in our sights some information services contracts. A good chunk of that is done. Some of that we completed at the end of the first quarter, but we won't see any benefit from it until the second and third quarter because literally the conversions were completed right at the end of the first quarter. We're engaged in the long-tailed projects, looking at our clearing brokers, looking at our core systems, and dealing with some of the more intransient travel and entertainment challenges. I would say we're probably sort of two-thirds of the way into the actions we have to take and seeing a little bit closer to half of the reduction in the numbers.
Great. Just finally, on the capital management, obviously a nice return this quarter. Anything sort of different in your thought process as we look out through the year or even in this first quarter? It does look like first quarter is the quarter where you often tend to do a lot. I'm just wondering if there's any sort of moderation, excuse me, not moderation, any modification, I should say, to your capital management policy.
Let me take that first. Ralph may want to amplify it. As you've noted, we're always strong in the first quarter. Part of that is the natural benefit of net settlement of bonus awards. We saw some opportunities this quarter where we thought we could accomplish a good part of our basic goal, which is to offset the 2.2 million shares from bonus equity. We're going to remain committed to absolutely offsetting the dilutive effect of the bonus equity awards, opportunistically offsetting the shares we use for new hires. As we've indicated over the five-year period, we're going to look to offset
Target half of the dilution from the ISI equity award. I would say no change in strategic plan and the timing from here, we'll have the opportunity to be a little bit opportunistic having made a good start in the first quarter.
I think that sums it up.
Our next question is from the line of Joel Jeffrey with KBW.
Hey, good morning, guys.
Hey, good morning.
Hi.
In terms of just thinking about the comp ratio, it certainly came in a bit lower than what we were looking for. Just wondering how much of that was an impact of managing the ISI business to a 55% comp ratio.
That's certainly an important contributor to it. We didn't really experience much of a change, if any, in the comp ratio of our advisory business. Given the commitments that are made in the agreement, in the equities business, it actually has a very modest downward effect on our comp ratio for the firm as a whole.
Okay, great. Sort of just thinking about the advisory business during the quarter, were there any verticals or geographies where you guys saw sort of an unexpected weakness or just a business that dropped off a little bit more than you had anticipated?
No.
Okay. Just lastly, maybe a bit of a housekeeping issue here. Just when you think about the terms surrounding the G and the H units, tied to the ISI deal, when we think about the margin requirements to achieve those, is that with or without underwriting?
Without.
Okay. It would be the 14% margin we should be looking at?
That's correct.
Great. Thanks for taking my questions.
Our next question is from the line of Hugh Miller with Macquarie. Dave again.
Hi, good morning.
Hey, good morning.
Morning.
A question on the ISI franchise and kind of looking at that. As you have the business now for a few months, and you look at kind of where you'd like it to be, and you mentioned seeing some progress on the underwriting side of the business, what other investments, as you look out over the next year or so, do you guys feel you have to make within that franchise in order to continue to gain traction and grow it further?
In terms of investments, really nothing. We did have a hole in the E&P part of our energy coverage, and we filled that with a very strong analyst. In terms of headcount or hiring, which is obviously the principal driver, we feel we have the right team on the field right now. In terms of the underwriting activity, we shouldn't forget that we literally closed this transaction at the end of October. Sort of the life cycle of when managers or book runners and senior managers are picked for offerings is very often six to 12 months, before they actually become visible to all of us.
It wasn't surprising to us that the level of underwriting activity in the first quarter, which is the first full quarter that we've had since closing, would be dramatically less than what we would expect for an average quarter of this year. Based on the backlog that we're looking at now, we would expect that the impact of the franchise on our underwriting activity would begin to show up in a way that I think most of you would consider somewhat meaningful, even this quarter.
The only thing I would add to that is that this is a long-term build. It's really going to take years to ultimately build this all the way out. One example that is very prominent in this regard is technology. We have now put an equity capital markets capability in Silicon Valley, as I might have mentioned. If you know the technology community, you know that it's a quote, unquote, "show me" community. Our view on the tech ECM business, for example, was it's going to take four, five, six, seven, eight years to get to where we need it to. Hopefully, that'll be a steady, consistent build-out, but this is a really long-term effort. That's the point.
Very helpful color there. Just a quick follow-up on that. As you mentioned the buildup of the backlog in ECM, and you gave some color on the technology side, are there other sectors where you're kind of seeing a more immediate benefit, based on the ISI franchise and you're gaining kind of traction earlier in other sectors?
Well.
I personally think it's kind of a steady build-out across the board. If we do things right, we should be doing each year more business than we did the year before for the next many years. Maybe Ralph has a view on that. I think the answer to that is not really.
I agree with that.
Okay. Just transitioning a little towards the advisory business, as you look at the energy segment, obviously a meaningful portion of your business, what's the tone with the conversation you're having with clients? Are people getting kind of concerned looking out with where oil prices have remained, concerned about covenant issues on the horizon? Are there people that are getting excited about the potential for consolidation in the space, or what are you hearing from clients?
Well, I mentioned in my own comments that there's, in effect, a shift in mix from what we call A&D, where, in substance at least, you're selling acreage or producing properties or "assets" towards corporate transactions like stock-for-stock mergers. There's also some build-up in restructuring backlog, as you allude. In my own experience, and I'm fairly active with our team there, every party in the energy sector has a different point of view about oil prices. Some people think we're going to see a relatively short period of lower oil prices, and other people, if you saw, for example, the public comments of ExxonMobil, think it's going to be a rather long period. There's no uniform view on that at all. That's really all I could intelligently say about it.
It's helpful colo r. Thank you. Then you guys.
The only thing I would add is that we are seeing a little bit of pickup in the restructuring area in energy as well, which is not surprising.
Sure. Then you guys had alluded to kind of the dynamics of the average deal size, that it's been increasing, and somewhat, I guess, surprisingly, where we are right now in the cycle. What do you think needs to happen in order to kind of see a pickup more in the middle market space?
Well, the increase in average deal size, I would say, is subtle. It's not that the middle market space is weak. It's nothing more than saying, if you look at two facts, A, that dollar volume is up, and B, that the number of transactions isn't, then you come to only one conclusion. Average deal size has risen. It's not a comment about the weakness of the middle market. Keep in mind that in any given year, there are relatively few, in fact, very few mega deals. The vast proportion of the activity for any firm in the business, not just Evercore, is in what you might call the middle market or upper middle market. That's just where the transactions are. Mega deals get all the attention, and they're important, don't get me wrong. There's nothing weak about the middle market or the upper middle market.
That's helpful. The last question I had was just with regard to the asset management segment. I think you guys had mentioned that you've seen kind of a positive relative performance, and that you're starting to see some traction with the ability to see some positive flows there. I was wondering if you could maybe provide us a little bit more insight there.
Sure. The remarks there were really directly apropos our wealth management business, which closed the quarter with $5.9 billion of assets, up about 4% from the prior quarter. We basically are a comprehensive wealth manager, but we provide internal management of equities and of municipal and taxable fixed income. If you look at our equity performance over a one, three-year, and five-year period of time, if you look at our fixed income performance over a one-year, three-year, and five-year period of time, or our balanced or mixed accounts, all of them are ahead of benchmark. The company is just a little over five years old. As I often have said before about the asset management business, it's very hard to have a five-year track record if you haven't been in business for five years.
Well, now we have, and now we have that track record, and it's a good one. That normally is a bit of a precursor for more organic or positive flows, and we started to see the beginnings of that in the first quarter, and hopefully it continues.
All right. Thank you for answering my questions.
Okay.
Our next question is from the line of Devin Ryan with JMP Securities.
Hey, thanks. Good morning, everyone.
Morning.
Hi, Devin.
Hi. Maybe just bigger picture here. Clearly, I think a debate going on right now around where we are in the current M&A cycle, and as we're talking about dollar volumes are looking pretty good relative to history, particularly in the U.S., but then there hasn't been much of an uplift in the number of deals. When you look at your business sector by sector or region by region, does it feel like there's still a lot of room to improve within those, and areas that really aren't turned on yet? I'm just trying to get some additional perspective around maybe where you guys think we are in the cycle.
That's a very difficult question to answer because there are so many sectors. I don't think we can say anything particularly helpful on that. I would really say that, and I was asked this earlier on this call. There are no sectors that are usually important, which are now extremely weak.
So forth, general industrial, of course. They're all operating at around the same level of activity. It's not a case where if you had 15 lights on your screen, 10 of them are bright green and five of them are bright red. It's not that kind of environment. I would say you don't have huge weaknesses and an outsized strength, no.
Okay. That's great. Thanks. Maybe just drilling back down into energy a bit more. I just want to frame out that sector and as you guys mentioned, diverging views on energy prices from different areas within the sector. The comments about it feeling good right now, should we take that as a reference to the tone of activity and there's a lot of conversations, or is that a remark around the revenue outlook? Just I know the last couple of years have been very strong in that sector, I'm trying to get some more perspective there. To the extent energy starts to stabilize or energy prices start to stabilize, is that what is going to be necessary to actually bring this activity together to actually get deals to announcement? Just trying to get some more perspective around those comments.
Well, I would give you a very simple answer. As I just mentioned in the context of your other question, we don't see in our own business, a meaningful fall off in energy-related revenue. The mix is changing, but the totals are not particularly changing. I can't speak for what it'll be nine months from now, but I'm just giving you the sense of the tone right now.
Okay. Helpful. Just lastly, with respect to ISI, looking at the revenues from this quarter, is that a pretty good run rate to think about just as we model out over the next year, or should we think about some seasonality there? Just looking for some color there as well.
There's a little bit of seasonality. The first quarter generally is a little bit below the average for the year. To be honest, I don't think we have enough experience with a large business and a combined business to reach a conclusion about that yet. In a couple of years, I think we'll be able to give a better answer to that.
Okay, great. Thanks very much.
Our next question is from the line of Brennan Hawken with UBS.
Good morning. Thanks for taking the question.
Morning, Brennan.
Quick question on the hiring. Given how robust the hiring has been for you guys and with a few more likely to be put on the board here soon, I kind of get maybe the potential for a share creep too beyond the ISI related share noise?
No, I don't think so. First of all, we have actually been trying to minimize the amount of shares that we put out to new hires. Generally, we wind up replacing their leave-behinds probably on average with half cash, half stock. As you've seen, I think that we've made the commitment in our proxy that we will buy back always enough shares to offset the amount of shares issued for bonuses each year. Over the last five years, we have bought back enough shares to also exceed the amount that we issued for new hires. We certainly hope to continue to be able to do that. Then on top of that, we said when we announced the ISI transaction, that it's roughly half of the shares that will be issued in that transaction over the five-year period that it pays out.
I think that's probably the best summary of our intention. It's our expectation that the business will continue to form, that we can fulfill that.
Okay. All right, great. Thank you. Then when grading earnings from GAAP, it looked like the adjustments were impacted this quarter by ISI deal-related performance shares. Should we just expect those deltas to be larger as you work through those performance periods? Or were some of these adjustments more one time in nature?
You should expect those to be larger for the next several years, Brennan, so long as the business is performing.
Excellent. Okay, thanks. That's clear. Then last one, the rounds of layoffs that you guys had in the ISI business, can you help us understand what drove having a second round of layoffs six months after an acquisition and whether or not that had to do with the fact that I think you had indicated that the revenues were tracking a bit lower versus the combined legacy business and whether or not that had to do with the cuts? What was the takeaway?
It's important that we correct this. If we caused that misimpression, then it's our fault, but I don't think we did. This is part of the original integration plan. This is not a decision made since we decided to acquire ISI. This is part of the original plan at the time the deal was signed up, let alone closed.
Yeah.
Part of the original integration plan.
Yeah. If you go back to the presentation that we made the day that we announced the transaction
You'll see an expected reduction of headcount. With the latest adjustments that we made, we're not exactly where we said we would be, but we're closer to where we said we would be. We made a decision, which I think we discussed on the last call, that we wanted a little bit of time to live with the people that we had. We knew we had a few too many, but we wanted to live with them for a while to see what was muscle so that we didn't cut any. After the first four months together, we felt we had enough information to make the very surgical adjustments that we had always planned to make.
Okay. That helps. Thanks very much.
Our next question is from the line of Ashley Serrao with Credit Suisse.
Good morning.
Good morning.
Historically, you've asked us to look at a ratio for non-comp, but just given that you're in the midst of integration, should we expect the absolute dollar amount of non-comp to trend down, putting travel aside? Said another way, do you have a target for the year, putting travel aside?
Yeah, Ashley, the main metric that we look to is cost per head. As we continue to invest in the growth in the business, and you can see this over the last five years, the absolute amount of costs have gone up, but the cost per head has gone down or remained flat. The ISI acquisition has taken that statistic up, and we're working hard now to bring it back down to a level more consistent with history.
Okay, that makes sense. Just another question on hiring. It looks like these private boutiques are ramping up hiring efforts. You've been very active. I was just hoping you could talk about your hiring ambitions and whether the cost of talent is beginning to become a limiting factor at all.
The answer to that is no. There's nothing whatsoever different about Evercore's hiring approach today than there was five years ago. We have a strong hand on recruiting. As Ralph said, people like Evercore as a place to work. We've worked very hard on our culture over 20 years, there's nothing new going on. Costs are not rising, and the ease or difficulty of recruiting is not changing.
Okay, thanks for taking my questions.
Our next question is from the line of Vincent Hung with Autonomous Research.
Hi. Just a quick question. What is the total headcount and SMD count this quarter?
The total headcount for the firm at the end of the quarter is 1,275, and the advisory SMDs was 73.
Okay. Thank you.
Our next question is from the line of Steven Chubak with Nomura.
Hi, good morning.
Hey, good morning.
Roger, you spoke earlier of the seasonality in the advisory business, I just wanted to maybe clarify some of your comments. I suppose I can't help but have this strong sense that we've seen this movie before, where 1Q fees are generally lower, the public backlogs in Dealogic look a bit light, we hear constructive commentary on both risked and unrisked backlogs, then in 2Q, we see that ramp in announcements as well as fees. Just given the constructive outlook that you've delivered on the call, is there any reason why we shouldn't expect that same seasonal pattern to hold? Maybe just as a quick follow-up, whether I should read into the fact that in the year-ago quarter, you did talk about record backlogs, and this time, while it's strong, it's still not operating at a record.
Well, I-
You shouldn't read anything from that comment. That was a misspeaking by the CEO a year ago. Making plans to punish him for that.
Yes.
If you saw the quality of his lunches in the interim since he's made that observation, you'd notice the change.
Yeah. Somehow I seem to have fattened up on bread and water nonetheless.
Right. All I said in my comments was essentially the following. In preparing for today, I went back and looked at the last 5 years, and in each of the last 5 years, our first quarter was smaller in terms of revenue than our fourth quarter, which is just the seasonality of the business. I've been in the business I started 46 years ago, and it's been seasonal ever since. That's all I was referring to in terms of that factor. I mean, we had a very good first quarter by standards of first quarters. In fact, as we said, the best ever. This is inherently a back-end loaded business. People try very hard to get transactions and projects closed by year-end for tax reasons, accounting reasons, legal reasons, and so forth. Always have, probably always will.
It's a back-end loaded business, and maybe this year will be, as I said, a little bit more than usual. Hard to tell, but it might. That's the long and the short of it.
Okay. Roger, having the pleasure of covering some of your larger competitors, I would say that the seasonality in your numbers is certainly more pronounced than others. It certainly exists in terms of the broader industry trend, but I just didn't know if there was anything that you could speak to, maybe in terms of transaction mix, what have you, that drives that more pronounced seasonal uptick in the back half of the year.
I'm not aware of any. I don't know whether our business is a touch more seasonal than anybody else's, but it's a seasonal industry. I mean, you take a more precise view, I'm sure, to evaluating other firms than I would. It's not exactly revelatory to say investment banking is seasonal. I mean, it's always been. I mean, I'm getting up there in terms of experience, and it's been seasonal ever since I started. Maybe I'm missing something, but to me, it's a little bit analogous to which direction the sun comes up in. Seems to come up in the east, and this seems to be a seasonal business.
Okay, fair enough. Thank you for taking my questions.
Sure.
There appear to be no questions at this time. I would now like to turn the floor to Ralph Schlosstein for any closing comments.
Thank you very much for your time and attention. We'll see you next quarter.
Take care.
This concludes today's Evercore first quarter 2015 financial results conference call. You may now disconnect.