Good day, and welcome to the Evercore Third Quarter 2022 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Evercore management and a question and answer session. In order to ask a question, please press the star key followed by the one key on your touch-tone phone at any time. I will now turn the call over to Katy Haber, Managing Director of Investor Relations and ESG at Evercore. Please go ahead.
Great. Thank you, operator. Good morning, and thank you for joining us today for Evercore's Third 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 will open up the call for questions. Earlier today, we issued a press release announcing Evercore's Third 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 statement. 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 of 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, everybody. Before I review our results, I'd like to share the news that Celeste will be leaving Evercore in February to pursue an entirely different area of finance. She's been approached by a large private international alternative asset manager, and she's decided to accept the position with her. We've all been fortunate to have worked closely with Celeste, and we wish her well on this next step in her career. We will commence a formal search process to identify her replacement, and Celeste will stay on with us into February to help us and support us with this transition. Now let me talk about our quarter. Evercore performed well in an increasingly challenging environment. As we actively monitor the current macroeconomic backdrop, we see continued uncertainty looking forward. However, we also see tremendous opportunities for our business stemming from these inherent cycles.
We've been through these types of cycles before, and we've successfully navigated through them. During the last significant downturn driven by the global financial crisis, Evercore emerged stronger. Our competitive positioning and strategic focus allowed us to hire exceptional talent and strengthen our business, which was evident in the growth of our market share and marked a significant step in building our firm to where we are today. A decade ago, we were much more reliant on traditional M&A. Our M&A and Strategic Advisory businesses remain strong and very much at the core of what we do. We have also invested heavily in building capabilities and products beyond mergers. We've built scale and restructuring, debt advisory, private capital advisory, fundraising, shareholder advice, capital markets advice, and execution for both equity and debt, equity sales and trading, and wealth management.
In fact, in each of the last three years, our M&A businesses accounted for at least two-thirds of our businesses and our non-M&A businesses accounted for at least one-third of our revenue. We've also fortified our balance sheet and have a strong cash position. This provides us the financial wherewithal to invest in our business and to take advantage of the current hiring environment. As we look forward through the cycle, we are optimistic about the opportunities at hand and remain focused on executing our long-term strategy and investing in our future growth. Before I review our businesses, I want to speak more about the current environment. While markets briefly stabilized in the late summer, volatility returned in September as the overall economic outlook became more negative as global economies continue to be faced with high inflation, rising interest rates, and energy challenges.
These conditions led U.S. equity markets to experience their third consecutive quarter of negative returns. Debt markets have also been challenged, and bank lending has become even more selective as credit and private credit have turned more cautious. All of these factors have led to a sustained slowdown in our merger markets. Turning to backlog. Based on where it stands today, our backlog remains strong, but there is greater risk to execution. Transaction announcements continue to be slow relative to last year, and the timing of transaction closings remains elongated. Economic stability and market conditions will continue to influence deal activity. As I mentioned earlier, we are committed to our strategy despite the near-term challenges facing the global economy. We continue to invest in industry sector and geographic and white space, with a focus on our growth internationally as well as in the United States.
We also remain focused on expanding our product capabilities, including equity capital markets, debt advisory, and private capital advisory, an area in which we continue to see opportunities evolving through the cycles. Moreover, we continue to believe there is significant upside for us as we expand our client coverage model. We continue to focus on enhancing our sponsor coverage efforts. We most recently added several senior bankers to our U.S. financial sponsors group, which will strengthen and catalyze our efforts. I will now review our results in more detail, which underscore the strength and diversity of our model. Evercore generated $583 million in adjusted net revenues, $489 million in adjusted advisory revenues, and $2.20 in adjusted earnings per share. On a year-to-date basis, total net revenues were $1.9 billion.
These results represent the second-best third quarter and nine months year-to-date on record for our firm. In advisory, M&A activity levels were lower in the third quarter. That said, year-to-date, the number of announced global transactions for Evercore is down only 8% versus the prior year. That compares favorably to the overall market, which is down more than double that. M&A activity in our U.S. business was down, though that was partially offset by our team in Europe having a very strong quarter, led by the financials, utilities, and industrial sectors. Our activist Defense business is seeing significant activity as the number of activism campaigns in the U.S. is tracking last year's record levels, and European activity remains high. Restructuring activity continues to accelerate as uncertain markets, spiking interest rates, and limited access to new capital for highly levered companies increases the need for restructuring advice.
We are seeing an uptick in traditional restructuring assignments and continued opportunities in special situation financing, liability management, and out-of-court restructuring. Our Private Capital businesses, which include fundraising, buying and selling LP and GP stakes, and continuation funds, have been impacted by the broader environment. That said, our market-leading positions in fundraising and continuation funds continue to build momentum and drive new business opportunities. Recently, our private funds group was ranked number one in multiple categories in Preqin's 2022 Service Provider report for its fundraising efforts in private equity, private debt, and infrastructure space. Underwriting experienced a slight pickup compared to the prior quarter, as seen in both our business and in the overall market. Despite unfavorable market conditions, some issuers in need of capital took advantage of select windows of opportunity. Activity in the third quarter for Evercore was primarily driven by follow-ons and at-the-market offerings.
IPO activity remained quite limited as it was the slowest third quarter for IPOs in over a decade. However, some first-time issuers came to the market, and Evercore served as a joint book runner on Corebridge Financial's $1.7 billion IPO, which is the largest IPO to date. Healthcare, which is our strongest ECM sector, has been quite active. Year-to-date, we participated in 25% of all marketed healthcare deals. Our ECM pipeline remains diversified across products and sectors, and we would expect activity to pick up as the market stabilizes. In our Equity business, market volatility continues to impact client portfolios and positioning. Our client interactions are on pace to hit record levels, and our research organization continues to perform at the highest levels.
The team was once again recognized by Institutional Investor as the top independent research firm for the ninth straight year and ranks number one among all firms for analysts on a weighted basis for the very first time. In our Wealth Management business, AUM declined in September with broader markets. Long-term performance and client retention rates remain strong. With respect to recruiting talent, we will continue to take advantage of today's recruiting environment. We've hired seven advisory SMDs year-to-date, all in areas of strategic significance to us, such as TMT Tech, debt advisory, ECM, and Europe. In addition, we have a senior advisor who is committed to join us in 2022 who will bring new expertise and capabilities to our technology franchise. We continue to have dialogues with potential candidates and have a strong pipeline of talent heading into next year.
Lastly, as it relates to our capital return strategy, we remain committed to our goal of returning excess cash not invested in the business to our shareholders through dividends and share repurchases. While we returned less capital this quarter, we've bought back a significant amount of stock this year and increased our dividends in the first quarter. We will continue to opportunistically buy back shares while maintaining a durable balance sheet. Despite the uncertainty facing the market today, we continue to see strong dialogue with our clients and believe that we are well-positioned for the pickup in activity when markets stabilize and recover. We remain committed to executing our long-term strategy, and when the market returns, we believe we will emerge even better positioned than where we are today.
Now let me turn the call over to Celeste.
Thank you, John. Before I get into the numbers, I want to express that it has been a privilege to have been at Evercore and to have worked with all of you. I have great esteem for this incredible firm, and it is with mixed feelings that I am moving on. While I will be here for the next few months to help with the transition, Evercore is in a very strong position financially, and its finance leadership bench is both seasoned and extensive, positioning the firm for continued success. For the third quarter of 2022, net revenues, net income and EPS on a GAAP basis were $577 million, $82 million, and $2.03 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 the reconciliation of GAAP to adjusted results can be found in our press release, which is on our website. Third quarter adjusted net revenues was $583 million, down 30% year-over-year. Third quarter adjusted advisory fees of $489 million were 31% lower year-over-year, reflecting a decrease in the number of fees and the size of fees earned as market volumes remained low. Our Underwriting business generated revenue of $29 million, down 47% from the year ago period, reflecting the decline in overall market activity. Our Equities business continued to perform well, with commissions and related revenue of $49 million, up 5% year-over-year, driven primarily by higher trading volumes and increased revenues from research subscriptions.
In wealth management, adjusted asset management and administration fees were $17 million, down 14% versus a year ago, primarily driven by market depreciation on AUM. Third quarter adjusted other revenue net was a loss of approximately $1 million, reflecting lower performance of our investment fund portfolio, which is used as a hedge for our DCCP commitments due to overall market decline. In accordance with relevant accounting principles, our revenue includes approximately $32 million of advisory fees, driven primarily from transactions that closed in early October. To compare, we recognized $67 million in the second quarter of 2022 and $93 million in the third quarter of 2021 in accordance with the same accounting principles. Adjusted net income was $95 million for the quarter, down 49% versus the year ago period. Adjusted EPS of $2.20 decreased 44% from the prior year.
Our third quarter adjusted operating margin was 23.4% versus 31.5% in the third quarter of last year. Turning to expenses, our adjusted compensation ratio for the third quarter was 61%, unchanged from the second quarter. The compensation ratio is our estimate for the full year as of today, but is subject to change depending on how the year ends. As John mentioned, there's greater risk to execution in today's environment and visibility is limited. Third quarter adjusted non-compensation costs of $91 million were up 9% versus a year ago, primarily driven by an increase in travel and related expenses, as well as higher professional fees. First, travel and related expenses were higher as travel has picked up materially from this time last year, contributing to the trend we have seen all year.
Inflationary pressures have driven our travel expenses higher. Second, professional fees were driven higher by consulting and search and placement fees. Third, communication and information services were higher than the year ago period, relating to increased information service fees from higher license fee renewals. We are very focused on our expense management practices, both comp and non-comp. We are limiting incremental and replacement hires and driving efficiencies across our non-comp base. We are rigorously reviewing how and where we spend with a focus on balancing between the near term and the long term. Our adjusted tax rate for the quarter was 27.4%, up versus last year, largely reflecting nondeductible expenses, including meals and entertainment and stock compensation expenses. Turning to our balance sheet, as of September thirtieth, our cash and investment securities totaled about $1.8 billion.
Our excess cash as a percentage of our total cash and investment securities was in the mid-teens%. We are constantly reviewing our excess cash position with respect to the current business environment, and we are currently holding more cash than the prior quarter as market and economic uncertainty persists. Our third quarter adjusted diluted share count declined to 43.2 million from 43.8 million in the second quarter of 2022, primarily reflecting the reduction due to the lower share price employed in the treasury stock method and our continued buyback, partially offset by vesting. In total, we have repurchased 3.9 million shares year-to-date at an average price of $118.28. Including dividends and share repurchases, we have returned $565 million to shareholders this year-to-date.
We remain committed to returning all excess capital not invested in the business to our shareholders over time. We will remain prudent and nimble, and we will opportunistically buy back shares while maintaining a durable balance sheet. Similar to what we have done this year, we will continue to offset the dilution from the RSUs that are granted as part of our annual bonus compensation process in future periods. With today's macro challenges, it is critical we protect and grow our franchise while also executing on our long-term capital return strategy. Before we turn to your questions, as John said, we have been through cycles like this before and have emerged stronger. Our diverse business model and financial position ensure we are well-positioned to capitalize on the current environment, and we are excited for the opportunity ahead. With that, we will now open the line for questions.
Thank you. We will now conduct the question and answer portion of the conference. Please limit to one question only. You're welcome to rejoin the queue for additional questions, time permitting. Again, in order to ask a question, please press the star key followed by the one on your touch-tone phone. We'll take our first question from Steven Chubak with Wolfe Research.
Good morning. This is Brendan O'Brien filling in for Steven. I guess to start, was nice to see you able to hold the line on the comp ratio this quarter. I understand that it's your best estimate at this point in time and could change, but want to get a sense as for around what your assumptions are on deal timelines and, like, deal elongation relative to what you would expect to see in a more normal environment and last quarter. Would you say that deal elongation has gotten worse or stayed the same over the past three months?
I'll just start with really how we're seeing the environment, and then I'll let Celeste answer the question more specifically about the comp ratio. I think that the environment has slowed somewhat, but really, when we were looking at things the last quarter, we saw a lot of this and actually articulated it. From our perspective, we are seeing deals that are being discussed widely in boardrooms. We think that there's activity, but we don't think it's speeding up, and we see that it slowed slightly. Really what we articulated last time and what we believed last time was our reflection for the year, and it remains so. We really believe that this is where we will end up for the year. You know, things are changing.
As you know, day by day, there are different views on recession and what that will mean, and we're actually following it. We don't really have a crystal ball at this point. There's a lot more uncertainty than I've seen in a long time, but we feel pretty comfortable with where we are. Celeste.
Yeah. Thanks for the question. You know, to give you a little insight into how we forecast. On a short-term basis, we look at the quarter in particular on a deal-by-deal basis. We have, you know, standards in terms of where, you know, the likelihood of deals closing and when they close. On the margin, you know, where we were unsure as to whether or not a deal would close in, you know, the current period, we're generally assuming it will not. It's not that we're saying we're adding a certain period of time because it is very specific on a deal-by-deal basis.
Our approach is more conservative, and just given what we've seen, we think that is the right approach to thinking about, you know, how the year will end up for us, particularly as we're doing our planning for 2022 and 2023. As it relates to our comp ratio, you know, for the past 10 years, the fourth quarter has been the largest quarter for us, and hopefully will continue to be the same. You know, while we are comfortable with our estimates for the year as of today, it really will depend on what closes in December versus what closes in January, where, you know, most of the fluidity in the environment is really about when deals are closing more than anything. You know, the December will be a really important month for us. The whole quarter will be important for us as it relates to the comp ratio.
That's great color. Thank you both. Turning to Advisory business. Results this quarter were once again surprisingly strong relative to what we've seen in the public data, which your commentary suggests is driven by your non-M&A Advisory businesses. Could you speak to what your go-forward outlook is for these businesses in light of all the choppiness in the market and potential further slowing in global economies? Additionally, specific to the Private Capital Advisory business, I know you noted that the fundraising environment has slowed and is expected to continue to slow over the next 6-12 months. At the same time, you know, demand for liquidity from LPs and GPs is expected to head the other direction. Just hoping you could speak to your outlook for that business in particular as well.
Well, our view of those businesses is that they are continuing to move along and that we are seeing activity. There is no question, though, that the current environment does impact those. We do have significant non-merger revenue, and the reason for giving that was that we wanted to make sure that we articulated the fact that the strength of our financial performance is really the M&A market plus all of our other markets. Prospectively, we believe that those markets will continue to be active. Really trying to take out and really give a specific view as to how they're going to perform is very difficult, and we can't do that. I would just say that you know, clients are still very busy. We're still seeing a lot of dialogue.
Really in those businesses as well as the merger business, there is a lot of activity and dialogue. I think that there's a significant amount of business that's being discussed. Now, whether those actually transition quickly into revenues is another thing. I think that a lot of that is gonna be the economies and also the financial market stability. Celeste, do you wanna say anything more on that?
Yeah, I think just to add to your question on fundraising, you know, the team has really focused on raising capital for the very best. You know, the ability for the very best to raise is greater than for others in this environment, though, you know, everyone's facing the same challenges with LPs in terms of liquidity and things like that. You know, there have still very strong demand and very good receptivity for the deals that they're bringing to market.
Thank you. As a reminder, please limit to one question only. We'll take our next question from Richard Ramsden with Goldman Sachs.
Hey, good morning everyone. Celeste, congratulations on the new role. John, can you just expand a little bit on what you're seeing on the restructuring side? I know you said last quarter that the dialogue was very active, but it hadn't translated into assignments at that point. You know, has that started to change as we head into the year-end, given that equity and debt capital is not widely available, and there's obviously a very significant refinancing requirement for a lot of companies that went public over the last few years? Thanks.
Thank you, Richard, for the question. Yes, we did see real activity beginning in restructuring, and I would say that has continued unabated. There is just a significant amount of dialogue, and our restructuring group is very busy right now with really giving advice on liability management as well as out-of-court bankruptcy discussions. The dialogues are very strong, and we are seeing increasingly activity coming in both on that and, you know, very traditional restructurings. We think that default rates are gonna begin to climb. We think that there have been significantly a pickup in downgrades, which is also contributing to this. What we're seeing is that the activity levels are really climbing. I don't know exactly when that is gonna translate into actual revenue, but our activity level continues to increase, and there's a very healthy buzz to the restructuring group's floor because they're actually very active right now.
Okay, thanks a lot.
We'll take our next question from Brennan Hawken with UBS.
Good morning. Thank you for taking my questions. also would echo Richard, congrats, Celeste. Sorry to see you go so quickly, but I'm sure it's to a great opportunity. Celeste, you touched upon slowing hiring. We saw the SMD headcount drop here versus 630. yet you talked about an opportunity to add talent. could you help us consider how you're managing the headcount, the expense base in this uncertain environment? how should we think about the comp ratio? You had said 61% for the year, but year-to-date you're at like 60.2, something like that. should we expect a higher comp ratio in the fourth quarter to bring the full year to 61? Was the 61% indication more a suggestion of a go forward from there, where it would be 61% for the remainder of the year? Thanks.
That's a lot of questions, Brennan, in one question.
You're limiting me to one, so I have to do a multi-parter. Come on now.
Just let me take the SMD question first, then John, 'cause John may want to add on this because he is really driving a lot of the work on the recruiting side. What you see in our reported SMD numbers, there is a decline sequentially, that is not indicative of, I think, anything. There are a number of SMDs that are not included in that number. I believe we only include the ramped number. There are a very high number of un-ramped SMDs, I think over 30 plus. That is, you know, that would include the people we've hired much more recently.
As it relates to headcount overall, we have been working very carefully outside of the strategic hires to limit, you know, replacement hires, incremental hires, very, very focused on sort of the you know, value versus the cost of each incremental hire. Excuse me. On non-comps, well, you know, comp is our biggest expense. We've been reviewing our non-comps line by line. Looking at how and where we spend, we have found some good cost savings, but, you know, travel continues to ramp. This year-to-date, we've only been running around 50% of trips versus 2019 levels. So there continues to be, you know, more and more trips which will cost more money. As you know, the inflation on travel is higher as well.
We've delayed certain projects that, you know, long term we think will be very beneficial, but short term will cost money. You know, we're managing the costs as tightly as we can. As it relates to the comp ratio, again, the fourth quarter is gonna really drive the outcome for the quarter and for the year. Obviously, we're very comfortable with our forecast, but it could easily go either way. We've looked at a lot of sensitivity. I think the comp ratio will be dependent on what the fourth quarter revenue looks like. You guys have your forecast, we have ours, and you know, hopefully you know, for the fourth, we'll see things close quite well in the fourth, you know, as we go into the end of December.
Brennan, in the spirit of the multi-question question, I'll just spend a minute on recruiting. As Celeste said, we are very much still in the market for high-grade, extraordinary talent. This year, as I said, we've hired seven SMDs with one senior advisor coming on. We also have a really good pipeline for next year, and we intend to continue to build. We think that the opportunity in this market is quite extensive. In the areas that we're thinking about and trying to build, there are some very talented people who are very much in the mindset of thinking about coming over. We're very much investing in that. Having said that, we are really trying to be responsible about headcount.
You know, we're trying to be slow on replacements. We're trying to make sure that we're managing our costs as tightly as we can. We're trying to really be sensitive to the fact that this is a difficult environment, and we don't know how much it'll slow. We're trying to be, you know, on the one hand, very careful with our costs, very careful and thoughtful about our headcount. At the same time, we are very much thinking that this is a good time to be investing.
Okay. Thanks for the color and the patience with the multi-parter. I think, Celeste, you made reference to the fact that not all the SMDs are in the SMD headcount. I can re-queue if you would rather, but that's, I think that's the first we've heard of that. Could you, if you don't mind expanding on that policy, that might be helpful to understand.
You can follow up with IR for all of the technical-
Okay. Will do.
Yeah.
We'll take our next question from Michael Brown with KBW.
Hi, good morning, John and Celeste. Celeste, congrats and best of luck to you.
Thank you.
You called out the strength in Europe in terms of the advisory results this quarter. Could you expand on that a bit? What's your expectations for the regions in terms of the outlook there for M&A, but also for restructuring? If you could add any comment specifically about the U.K. and the continent, that would be helpful. Thanks.
Okay, sure. The European business has actually had a very good first nine months, and there have been some very significant deals that have come through with some very good fees. The areas that have been very busy over there for us have been the financial institutions, utilities, and the industrial side. We think that those areas will continue with some activity. I think that really the prospects of that market are gonna actually impact how robust that business continues. If there's a significant recession over there, things will slow. The one thing I would say is that the narrative, the activity levels and the discussions have been quite full.
I think we have a very good team over there, both in the U.K., and we have several really strong relationships and very good players over on the continent. I'd say that from our perspective, we're watching carefully. I wouldn't say that you should expect that there is going to be robust growth over there. I think what you should expect, though, is that we're gonna continue to consistently cover those clients. I think that if there are transactions to be done, we're gonna hopefully get our fair share, and we feel very comfortable. We are building and investing in that sector of the world. We plan to continue to do that. It's a strategic priority for us.
We think that there is real opportunity for us and our brand if we do invest over there. We're really looking at those opportunities. I would expect that we will grow our business there over the cycle. Can't say exactly that it will grow from a revenue standpoint, just because so much right now is determined by the market and the market uncertainties, and I think that we're all watching that carefully.
Thanks, John. I'd also just ask about the restructuring activity in Europe as well. Have you seen any trends playing out there?
Well, it's very much the same as what we have in the U.S., and I'm sorry, I missed that. We are seeing the activity level build there. Now, our European restructuring business is not as big as our U.S. restructuring business, but we have some very, very high quality people over there, and we are actually seeing some quite promising activity levels there and some interesting assignments. We are definitely seeing that area develop. But right now we don't know exactly when that's gonna translate into revenues for the firm.
Okay, great. Thank you for taking my questions.
We'll take our next question from Manan Gosalia.
Hi. Good morning, John and Celeste. Celeste, all the very best in your new role. My question was on, you know, what are you hearing from clients on the impact of the rate outlook on their ability to do deals? You know, the expectations for the terminal Fed funds rate moving to 4.5% plus, leveraged lending markets are seeing a lot of pressure. I guess, in this environment, do we just need to see certainty on where rates are going, whether it's 4.5% or 5% or whatever the number is, and then, you know, we know what the rate is so we can underwrite and get a valuation and do the deal?
Are clients saying that they need to see lower rates before they do some of the large deals and those large deals come back in a big way?
Manan, it's an interesting question, and I've actually been in several boardrooms over the last 10 days or so, discussing the actionability of deals. What I would say, my observation would be that for deals that really make sense strategically, companies are not really as sensitive to rates as they are about access to the markets. As you know, right now, some of the markets, leveraged loans and high yield and others, are backed up some. There is some real congestion. I think that is, in my mind, the biggest issue. Rates are much higher than they've been, but they're not, you know, higher than they've ever been.
I think that the companies that have really good prospects will be watching carefully to see when the markets will give them access, and then they'll run the numbers to make sure that the strategic deals that they're looking at still make sense. My own point of view is it's gonna be more driven by the markets opening up and there being access. I think it does, as you said, and I agree with it, is that it's a lot about certainty and about some stability. Once that does begin to play, you'll see companies beginning to be more aggressive. Clearly, it's more opportune to do a deal in an upmarket than a downmarket because then by definition, things are gonna look better. I think companies that really have, you know, important strategic needs are gonna look at those as soon as they think that there's actionability in the market.
Great. Thank you so much.
We'll take our next question from Devin Ryan with JMP Securities.
Thanks. Good morning, John and Celeste. Celeste, congratulations. Most questions have been asked here, so just one question, one-p arter. Just love to dig a little bit more into sponsor engagement and outlook. I know there's been a lot of talk around, you know, sponsors having had a record dry powder. On the flip side, sponsors are kinda licking wounds on recent investments that have been made over the last year or so, with kind of record deployment activity. Love to just dig a little bit more into kind of what breaks that dam with sponsors. Is it just, you know, bid-ask spreads coming closer together or, you know, more maybe confidence in the economic outlook, but just, you know, when they can kind of more aggressively reengage with the record dry powder?
Devin, you know, I actually think it's as much as anything stability in the market. I think right now a lot of the sponsor discussions which continue are really about what is the art of the possible to actually do deals. Now, clearly, sponsors are often more sensitive to actual rate levels than big strategics might be, who have a lot of cash on hand and real strong debt capacity. The leveraged loan market, the high-yield market does impact what sponsors are willing to do, and they're looking at it carefully. In a situation like now when the markets are much more backed up, that is really gonna back off with respect to sponsors doing the traditional deals.
Now, as you know, there's been a lot of private debt complexes that are willing to put money to work. I think those to a degree have slowed down some because there's been a lot of private debt that has been put to work already. In terms of your question, which is what breaks the logjam? I actually think stability of the market and really the market having the capacity to actually put more, you know, more money back in. There's been several of the big banks and others who have some things that they need to absorb. Once that starts to have finished absorbing, people are gonna be starting to, in earnest, run these numbers and see what makes sense and works.
I think the first step is working through some of the issues that are in the market right now. The second step is gonna be, you know, whether buyers and sellers have expectations that are closer. I actually think that the expectations between buyers and sellers are actually coming much closer together for the simple reason that people are starting to really absorb really what this market actually is. I think there is a view that this may not overnight turn. As a result, I think that's what's made people's conscious mentality be that, you know, this may be what we're dealing with for the next year. Anybody who really wants to look at a deal or put their money to work is gonna have to accept where the market is.
Okay, great. Thank you.
Thanks, Devin.
We are approaching the end of the allotted time. I would now like to turn the floor to John Weinberg for any closing comments.
Thank you all for joining. We very much look forward to seeing you next quarter. Obviously, we're open to any interactions you might wanna have with us, going forward. Thank you so much.
This concludes today's Evercore's Third Quarter 2022 Financial Results Conference Call. You may now disconnect.