Evercore Inc. (EVR) Q4 2020 Earnings Call Transcript

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Evercore Inc. (EVR 0.45%)
Q4 2020 Earnings Call
Feb 3, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore Fourth Quarter and Full-Year 2020 Financial Results Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference call will be opened for questions.

[Operator Instructions]

This conference call is being recorded today, Wednesday, February 3, 2021.

I would now like to turn the conference call over to your host, Evercore's Head of Investor Relations, Hallie Miller. Please go ahead, ma'am.

Hallie Miller -- Head of Investor Relations

Thank you, Joanne. Good morning, everyone, and thank you for joining us today for Evercore's fourth quarter and full-year 2020 financial results conference call. I'm Hallie Miller, Evercore's Head of Investor Relations. And joining me today on the call are Ralph Schlosstein and John Weinberg, our Co-Chairmen and Co-CEOs; and Bob Walsh, our CFO. After our prepared remarks, we will open up the call for questions.

Earlier today, we issued a press release announcing Evercore's fourth quarter 2020 financial results. The company's 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.

I want to point out that, during the course of this conference call, we may make a number of forward-looking statements. Any forward-looking statements that we make, including those about COVID-19 and its effect on our business, are subject to various risks and uncertainties and are important factors that could cause actual outcomes to differ materially than those indicated in these statements.

These factors include, but are not limited to, those discussed in Evercore's filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. I want to remind you that the company assumes no duty to update any forward-looking statements.

In our presentation today, unless otherwise indicated, we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP reconciliations, you should refer to the financial data contained within our press release, which is posted on our website.

We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closings.

I'll now turn the call over to Ralph.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Thank you very much, Hallie. And good morning to everyone. It's hard to believe that when we reported our 2019 earnings at this time last year, everything was "normal." Our team was energized and ready for the [Technical Issues], our expectations were for another strong year, and many of the analysts and investors on this call were probably looking forward to wrap up earnings season and attending investor conferences in Miami.

The past 12 months, however, have been anything but normal. So, please indulge me a brief review of the year. When faced in mid-March with two simultaneous crises, a global pandemic and the sharpest economic downturn in decades, our entire business and way of life was disrupted. Our clients' needs changed rapidly and many of their strategic initiatives, particularly their M&A plans, were placed on hold. Corporate leaders and financial sponsors became focused almost exclusively on cost control, reducing capital spending, increasing liquidity, amending debt covenants and strengthening their balance sheets. And while most previously committed M&A transactions were complete, this strategic M&A activity essentially stopped.

Later in the second quarter, as fiscal and monetary stimulus stabilized the debt and equity markets, we helped client capitalize on the opportunity to build liquidity and in certain cases to initiate large restructuring and recapitalization transactions.

These balance sheet and liquidity focused assignments, which drove demand for capital raising advice and execution in both the equity and debt markets, dominated our advisory services in the second quarter and into the beginning of the third quarter. As the third quarter evolved, strategic and M&A discussions began to resume.

Despite the sharp decline in M&A activity, which lasted several months starting the beginning of March, our revenues were essentially flat year-over-year through the first nine months.

So, how did this happen? First, over the last few years, we have made significant investments that have materially broadened the services that we can provide to our clients. We acquired ISI, which materially enhanced our research, underwriting and distribution capabilities. We greatly strengthened our restructuring team by adding five new SMDs globally, dramatically enhanced our equity underwriting team, we enhanced our private capital raising capabilities for both sponsors and public and private companies, we strengthened our debt advisory capabilities, we added the best activist defense and shareholder engagement team in our entire industry and we added best-in-class capabilities in corporate restructuring, split offs, spins, Morris Trust, reverse Morris Trust, etc., and best-in-class capabilities in SPAC capital raising and SPAC merger advice.

So, first, first nine months of 2020, we demonstrated that we have in place best-in-class capabilities to advise our clients in widely varied environments. And second, we demonstrated that our team has the talent and the entrepreneurial spirit to deploy these capabilities rapidly in support of our clients.

In the latter half of 2020, the M&A market began to recover meaningfully. Local and US M&A volume increased 92% and 163% respectively compared to the first half and the number of global and US deals increased 18% and 16% respectively.

Still, for the year, M&A volume was down [Technical Issues]. And in the US, the largest M&A market for all firms, and for Evercore particularly, M&A volume was down 21%. The recovery in M&A, coupled with continued momentum in the broader advisory capabilities that I just described, led to a spectacular fourth quarter by any measure and fueled the many records that we achieved as a firm in 2020.

The point of this review is simple. In 2020, we proved that while M&A is still our largest source of revenue, our capabilities to advise our clients and to be paid for that advice is much broader than many of our shareholders and many of our analysts -- and perhaps even we -- would have anticipated.

So, while there clearly is some cyclicality in various parts of our business, we truly are very much an all-weather firm that can advise clients on their most important strategic, financial and capital needs in widely varied environments and a firm that can generate significant revenues by providing that advice to our clients in widely varied environments, all the while sticking religiously to our fee-only, no capital risk business model.

As we begin 2021, M&A dialogs and strategic activity discussions are strong. Growth companies continued to access the public markets for capital. Financial sponsors and other private businesses are seeking capital and acquisitions in the private and public markets and institutional investors continue to value high quality research, investment analysis and advice. So, as we enter 2021, our momentum continues to be significant in all of our businesses. The level of activity of our teams is high and our backlogs remains very strong.

While there certainly still are challenges related to the pandemic and the economy and all of us at Evercore most certainly have enormous empathy for those in our society who have not been as fortunate as we have been, we begin 2021 in a very strong position.

As we look forward, we continue to focus on long-term and trusted relationships with both current and prospective clients determined to advise them on their most important strategic, financial and capital decisions.

We are planning for our eventual return to our offices globally, with the health and safety of our team paramount as we develop these plans. We are focused on maintaining our strong culture that is grounded in our core values and in collaboration, both of which are hugely important contributors to our many accomplishments in 2020.

We, of course, are actively pursuing opportunities to add talent strategically throughout the firm and we are optimistic about our ability to recruit this talent. We see significant opportunities to continue to grow our business, both by expanding our coverage of key sectors and geographies and by deepening our product capabilities.

And we are committed to continuing to operate with financial discipline, delivering strong returns to our shareholders, while maintaining a strong and liquid balance sheet and resuming our historical approach of returning any excess capital to our shareholders through dividends and share repurchases.

Let me now turn to our financial results. We achieved record fourth quarter and full-year adjusted revenues, adjusted operating income, adjusted net income and adjusted EPS, driven by extremely strong revenue growth and good operating leverage.

Fourth quarter adjusted net revenues of $969.9 million grew 45% year-over-year and full-year adjusted net revenues of $2.33 billion grew 14% compared to 2019, the highest annual revenues in our history.

Fourth quarter advisory fees of $790 million grew 40% year-over-year and full year advisory fees of $1.76 billion grew 6% compared to 2019 and also were the highest in our history.

Based on current consensus estimates and actual results, we expect to maintain our number 4 ranking on advisory fees among all publicly traded investment banking firms and we also expect to grow our market share among these firms.

Importantly, our growth in 2020, combined with declining advisory revenues at the three top bulge bracket firms, resulted in a nearly 50% reduction in the gap between us and the number 3 ranked firm and we narrowed the gap between Evercore and the number 1 and number 2 firms as well.

Fourth quarter underwriting fees of $95 million and full-year underwriting fees of $276.2 million each more than tripled year-over-year. This business experienced the true step up in 2020, in large part due to the expansion of our capabilities that allowed us to work on a variety of assignments for our clients, including IPOs, follow-ons, convertibles, SPACs and caps, as well as the more prominent role we play in virtually all transactions with which we were involved.

Fourth quarter commissions and related fees of $52.4 million increased 1% year-over-year and full year commissions and related fees of $205.8 million increased 9% compared to 2019.

Fourth quarter asset administration fees of $20.1 million increased 20% year-over-year and full-year asset management and administration fees of $67.2 million increased 11% compared to 2019.

Turning to expenses, our adjusted compensation rate for the fourth quarter is 52.3% and for the full year is 58.9%.

Fourth quarter non-compensation costs of $85.8 million declined 12% year-over-year. And full-year non-compensation costs of $316.7 million declined 10% versus [Technical Issues].

Fourth quarter adjusted operating income and adjusted net income of $376.4 million and $277.4 million increased 110% and 113% respectively and adjusted earnings per share of $5.67 increased 108% versus the fourth quarter of 2019.

Full-year operating income and adjusted net income of $639.3 million and $459.6 million increased 28% and 23% respectively and adjusted earnings per share of $9.62 increased 25% versus 2019.

We produced a full-year adjusted operating margin of 27.5%, roughly 300 basis points of margin expansion compared to 2019.

Finally, we remain committed to returning excess capital to our shareholders. Our Board declared a dividend of $0.61 and we will resume our normal annual reassessment of that dividend in April. We remain committed to offsetting the dilution of our upcoming bonus RSU grants and RSU grants to new hires through share buybacks. And we will resume our historical policy of returning excess earnings not reinvested in the business to our shareholders through dividends and share repurchases.

Bob will comment later on our GAAP results and provide additional detail on our balance sheet.

Let me now turn the call over to John to discuss some of our achievements in 2020 and our opportunities for growth in 2021 and beyond. Thank you. John?

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

Thank you, Ralph. Our results demonstrate clearly that we are a leader in virtually every business in which we participate and our strength in the fourth quarter in particular contributed significantly to the many records we set for the full year as a firm.

We sustained our number one League Table ranking for volume of announced M&A transactions both globally and in the US among independent firms in 2020 and are advising on 4 of the 10 largest US M&A transactions in 2020.

In the fourth quarter, we realized revenues from many assignments that we started earlier in the year. And we participated in a number of announced transactions that will close in the future. This includes advising AstraZeneca on its acquisition of Alexion which was announced in the fourth quarter and is the largest healthcare deal and the largest cross-border deal since the onset of the pandemic.

Our restructuring team ranked number 2 in the League Tables for number of announced US transactions in 2020. We believe that our restructuring franchise is even stronger than the League Table indicates due to our diversified business base of working with both debtor and creditor clients, as well as working on both in-court and out-of-court restructurings.

Our restructuring business can deliver service and advice far beyond the traditional Chapter 11 bankruptcy advice and many companies called on us in 2020 for our liability management and financing capabilities. We believe activity levels will remain elevated as certain sectors and companies continue the slow and taxing recovery from the pandemic induced downturn.

Our equity capital markets business performed exceptionally well in 2020 and we expect to continue to benefit from the sustained strong market for equity issuance. We continue to see strong results from our ongoing investment in this business, which has diversified our capabilities and has led to both fee-paying events and larger transactions.

In 2020, we participated in more than 100 equity and equity-linked transactions that raised nearly $70 billion in total proceeds. Additionally, both sponsor and corporate clients increasingly have looked at Evercore to play a significant role in their capital raising.

We increased both the number of active book run and book run assignments in 2020 with our growth in active book run assignments outpacing our growth in book run assignments. Our investments in SPAC capabilities have positioned us well to serve many new clients as they navigate this active market.

We are also encouraged by early results from our investment in convertible debt underwriting and sales and trading, including our first ever sole book run convertible transaction that took place just last week.

Our capital advisory group had a phenomenal year. Our team advised on more than $30 billion of deals in GP and LP-led transactions, increased significantly in the second half of the year, and we continue to raise primary capital successfully for these clients.

In fact, the team has an impressive virtual fundraising track record, closing more funds virtually than anyone else in the industry. We continue to see broad growth opportunities in these areas.

In defense and shareholder advisory where campaigns were down in 2020, we continued to experience very strong demand for our market-leading activism advisory practice. We advised on the defense of the largest US hostile takeover attempt and successfully advised on the defense of two of the largest proxy fights. Activist activity continues to build as activists increase their positions in companies.

In equities, our team of top institutional investor ranked macroeconomic and fundamental analysts provided valuable insights to our clients throughout this volatile year.

We also continue to make investments in our platform to support our ECM franchise, which enables us to execute at a very high level on a significant number of transactions, with increasingly important roles.

Finally, our wealth management business grew AUM past the $10 billion mark for the first time in 2020 and provided important investment advice to clients in a challenging environment.

We are pleased with these many accomplishments. Yet, we remain focused on continuing this momentum in 2021 and beyond.

Let me now turn to discuss our opportunities for future growth. Our expanded advisory and underwriting capabilities provide the foundation for our growth in the future and plenty of opportunity to grow remains.

We believe that there are two main elements to our future growth. First, further expanding our coverage model, and second, deepening and broadening our capabilities. Our continued efforts with the Evercore 100, our program to expand service to targeted large cap nationals and multinationals, our dedicated coverage of financial sponsors and investing in talent to grow in areas of whitespace with the addition of A plus talent will all facilitate our expanded coverage model.

There are many areas of untapped geographic and sector potential and we are actively seeking to add talent in those areas where we believe we can deepen our coverage, including TMT, FinTech, pharma, consumer, financial sponsors, large cap multinationals and Europe. We continue to have many conversations with talented professionals to strengthen these important areas of coverage.

While we were below our historical average of 4 to 8 recruits annually in 2020 as we pulled back from our usual recruiting process due to the pandemic, we welcome two advisory SMDs to the Evercore during the year. These additions enhance our advisory capabilities on complex, large cap corporate realignments and our capital markets [Indecipherable] business. We look forward to additional talent announcements in 2021 as we resume a more normalized recruiting process.

Equally important to recruiting externally is our focus on long-term commitment to attracting recruiting and mentoring talented junior individuals and promoting from within. These individuals contribute to our ability to be a self-sustaining from. We are pleased to announce that we promoted three managing directors to senior managing director in January, strengthening our advisory coverage of healthcare and restructuring and our equities coverage of healthcare services and technology.

Deepening and broadening our capabilities, the second element of our growth plan further enables our bankers to collaborate with others across the firm to meet the strategic, financial and capital needs of our clients.

An excellent example of this was a merger deal announced this morning where Jazz Pharma bought GW Pharma in a $7.2 billion deal. Evercore acted as a lead financial advisor and the sole debt advisor to this transaction. In addition, people from M&A and advisory as well as equity capital markets and hedging all contributed to the advice.

We continue to focus on broadening and diversifying our capabilities, so that we can deepen client relationships, participate in a broader range of activities and earn a greater share of fees that clients pay to their advisor on any given transaction.

We are pleased to welcome our first advisory SMD hire of 2021, our new Head of Equity Capital Markets, Kristie Grippi. We've built a truly world-class ECM, underwriting and advisory business and we are excited to have Kristie join us to lead this business through its next stage of growth.

Our 2020 results demonstrate that the breadth and diversity of our capabilities drives deeper relationships with clients and helps with building new client relationships. Our investments in both the SPAC and convertible markets are just two recent examples of investments that have enabled new opportunities to advise clients.

We believe that the significant opportunities remain to provide additional services to our current client base and to attract new clients. Our broader capabilities have supported our industry-leading advisory SMD productivity. We anticipate that, as these capabilities become more broadly utilized by our clients and our fee share increases, our market-leading productivity will be sustained or even enhanced.

Before I turn the call over to Bob to go over our GAAP financials and discuss our balance sheet, I want to acknowledge our exceptional team across the board -- advisory, equities, wealth management and the corporate group.

The results and achievements that Ralph and I have summarized could not have happened without the dedication, teamwork, collaboration and commitment that our people demonstrated throughout one of the most uniquely challenging years many of us have ever experienced. We are deeply grateful for their extraordinary effort.

Now, let me pass the call over to Bob.

Robert B. Walsh -- Senior Managing Director and Chief Financial Officer

Thank you, John. And good morning to all. Let's kick off with our GAAP results. For the fourth quarter of 2020, net revenues, net income and earnings per share on a GAAP basis were $927 million, $220 million and $5.02 respectively. For the full year, net revenues, net income and earnings per share on a GAAP basis were $2.3 billion, $351 million and $8.22 respectively.

As has been the case historically, our adjusted results exclude certain items related to the realignment strategy that began in the fourth quarter of 2019 and which was completed in the fourth quarter of 2020. In total, we incurred separation and transition benefits and related costs of approximately $45 million, which reflect a modest increase in the costs from our prior estimate of $43 million. During the fourth quarter of 2020, we recorded approximately $4 million of special charges, which are excluded from our adjusted results.

In the fourth quarter, we completed the sale of our broker-dealer business in Mexico to its management team and we completed the transition of our advisory business in Mexico to a strategic alliance with TACTIV, a newly performed strategic advisory firm founded by the former leaders of our advisory business. There, there is a loss of approximately $31 million for the year included in other revenue that is related to our transition in Mexico.

Our adjusted results for the fourth quarter and full-year 2020 also exclude special charges of $1.3 million and $3.3 million respectively related to accelerated depreciation expense and $1.7 million related to the impairment of assets resulting from the wind down of our Mexico business.

Turning to taxes, our GAAP tax rate for the fourth quarter was 23.2% compared to 21.7% in the prior-year period. Our GAAP tax rate for the full year was 23.7% compared to 21.2% in the prior period.

And on a GAAP basis, the share count was 43.9 million for the fourth quarter and 42.6 million for the full year. Our share count for adjusted earnings per share was 48.9 million for the fourth quarter and 47.8 million for the full year.

Firmwide non-compensation costs per employee were approximately $47,000 for the fourth quarter and $172,000 for the full year, each down 9% and 11% on a year-over-year basis respectively. The decrease in non-compensation costs per employee versus last year primarily reflects lower travel and related expenses. As we continue to evolve toward more normal operations, costs associated with travel, recruiting and other expenses will begin to increase.

Finally, focusing on our balance sheet. Our strong year-end balance sheet reflects the strength and momentum of the recovery in the latter part of the year. As of December 31, we held approximately $830 million in cash and cash equivalents and $1.1 billion in investment in securities.

As is always the case at this time of year, a meaningful portion of our liquidity will be used to fund upcoming cash bonus payments, payments related to prior-year deferred compensation awards that are vesting currently, tax obligations related to compensation awards including relating to the net settlement of restricted stock units that vest in the first quarter.

Longer term, we are holding investment securities to fund payment obligations relating to deferred compensation awards that will vest in the future and to meet liquidity and regulatory capital requirements.

As of December 31, we have made commitments to pay more than $450 million related to future cash payment obligations under our long-term deferred compensation programs and these payment obligations exist at various dates through 2024. These payments are, of course, subject to satisfaction of established investing requirements.

This number will change in the first quarter as prior awards will vest and be paid out and new awards relating to 2020 compensation will be granted. The actions taken in 2020 strengthen our balance sheet significantly. And as Ralph and John have noted, put us in a position to return free cash earnings generated from operations to investors, consistent with past practice.

I would now like to open the line for questions, operator.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions]. Our first question comes from the line of Manan Gosalia with Morgan Stanley. Your line is now open.

Manan Gosalia -- Morgan Stanley -- Analyst

Hi, good morning. Clearly, a very strong quarter here. If I can dig into the M&A environment a little bit, I appreciate all the color on the near-term strength, but could you give us what percentage of deals completed this quarter, were those that were put on hold pre-COVID, and what percentage of the deals went through in an accelerated fashion this quarter that maybe would have taken two to three quarters to complete?

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Sure. Let me start. We think that a significant portion -- and we haven't really studied exactly how many, but a significant portion began. But what I would say, and I think this is important is that we felt the activity level continued to warm up. And as you saw, things started to percolate in the third quarter and things continued with a very positive environment in the fourth quarter.

We have found that our activity level is quite strong now, reflecting on the continuing improvement from the fourth quarter. And so, what I would say is there is a significant percentage that started earlier in the year. But to give you a sense, we feel that the activity level right now is quite strong, and we feel very good about the types of dialogs we're having and really the interest of our clients about thinking strategically.

Manan Gosalia -- Morgan Stanley -- Analyst

Got it. Maybe on the pre-tax margin front. This quarter and this year show that you can go well above the 25% pre-tax margin in a strong revenue environment. I was wondering if the environment holds here and we are at the start of an M&A cycle, is there any reason why you might not necessarily get back up to the 28% plus pre-tax margins that you saw back in 2018? Are there any investments that you're looking to make that are higher than the current run rate, or any headwinds that we should be considering?

Robert B. Walsh -- Senior Managing Director and Chief Financial Officer

Well, I think we've always said that we expect to be able to run our business at 25% plus margins in normal environments. This year was a little abnormal. We obviously benefited somewhat from lower travel and entertainment activity. But, look, we genuinely feel that we can run our business with high 50s comp ratios, 58%, 59%, and non-comp ratios in the 15% to 17% range. And as I said, it's a little lower this year because of the lack of travel and entertainment -- lower travel and entertainment expense. I don't think we will ever set a specific target, like the one in your question, because there are so many variables in any given year. And, of course, we always reserve the right because it's good for our long-term value creation to make significant investments in people if we get the opportunity to do that. And that, of course, could cause a temporary bump or a blip in the compensation ratio above the target that I articulated earlier in my comments.

Manan Gosalia -- Morgan Stanley -- Analyst

All right, thank you.

Operator

Thank you. And next question comes from Devin Ryan with JMP Securities. Your line is now open.

Devin Ryan -- JMP Securities -- Analyst

Okay, great. Good morning, everyone.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Good morning, Devin.

Robert B. Walsh -- Senior Managing Director and Chief Financial Officer

Maybe just to follow-up a bit on the first question there and talk a little bit more about the outlook. So, heard the word very in front of strong in the backlog comment, which I know you guys are very thoughtful about how you frame things. And so, I want to talk a little bit more about the hand off between M&A and some of the other advisory businesses and really just as M&A is accelerating after what just seems like a fantastic year for restructuring and then just some of the other ancillary advisory businesses kind of reaccelerating, just trying to think about putting that altogether and also what that implies for productivity because the M&A piece is kind of historically the biggest individual piece and seems like that's improving the most, but do you still feel like you have momentum in some of these other areas? Just kind of think about some of the puts and takes there.

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

Sure. Let me just start by saying that what we've seen in the latter half of 2020 is that there has been a pickup and a constant pickup in the merger business. And so, as we have articulated, we feel good about the fact that that activity level is actually in a good place and we're seeing a lot of clients really reaching out and wanting to talk about strategic situations.

You also saw -- and we've articulated that many of our businesses, whether that's equity capital markets or whether it's debt advisory or whether it's been private capital advisory, have all actually seen strong activity levels into the fourth quarter. And so, as a result, we really believe that we've got some momentum to our business and that I think is what you're trying to get your hands around, which is how does that play.

And clearly, we're not going to project or give you any forward comments about really where we're going to end up. But I would just say that we feel good about that activity level. One of our very, very strong engines, and we talked about this in our comments, is our restructuring business and we were very, very proud of their performance this year. Having said that, given the environment that we're looking at right now where credit is available, there's lots of cash in the market, we would say that it would be very difficult for that business to equal its activity level this year versus last year. So, there will be trade-offs in our business, but what we have articulated, and I think Ralph said it well in our comments is, we have really been able to diversify our capabilities and really the services that we provide clients and we hope that that breadth of offerings for our clients will allow us to continue to grow into the future. And that's really the concept that we're pursuing right now, which is more capabilities, more applicability to clients' issues and objectives, and then also continuing to add people. And hopefully, those together will keep us moving forward.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Yeah, I would just add on to John's comments. Devin, I would just add that, in the first three calls of 2020, first three earnings calls, we said with the pause in M&A, which is our largest business, we expected strength in underwriting and commissions and checks and restructuring, but we weren't sure that they were sufficient to offset the pause in M&A. And it turned out, as I said in my opening remarks, for the first nine months of the year, we were exactly flat in revenues versus 2019. So, those other activities, plus the completion of some transactions that had been announced before the pandemic, allowed us to remain flat in the fourth quarter.

M&A had started to pick up. And the others -- the other businesses were still strong. So, we have the perfect positive storm in the fourth quarter where all of our businesses performed extremely well. I would urge you not to annualize our fourth quarter revenues and putting together your models or 2021. But I would say, as John indicated, that having quite positive momentum in our largest revenue advisory business is certainly helpful to continuing the momentum of our business.

Devin Ryan -- JMP Securities -- Analyst

Okay, terrific. Thank you. And then maybe just a follow-up here on just trying for the model to think about the trajectory of non-compensation costs and kind of return to work. And travel, obviously, benefits over the course of 2020. Do you guys have a good sense around kind of the acceleration? It seems like maybe the first quarter will remain light, but as we get further into maybe the middle of this year, that could step up materially? I'm just trying to think about some of the puts and takes. You had some tailwinds to expenses that were unusual this year that may reverse, but then obviously continuing to invest in the platform as well. So, just any help there would be appreciated.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Why don't we let Bob start with that and then John or I will add something?

Robert B. Walsh -- Senior Managing Director and Chief Financial Officer

As I, and I think all of us, said in our remarks, we're anxious to get back to the office. And sort of concurrent with that, we do anticipate a pickup in travel. It will be measured during the course of the year, in our view. It won't be bit of a lights-on, everybody back to 2019 levels. So, we'll see.

Getting back to the important -- getting back to the office, Devin, is important for us in terms of our culture and bringing people together. So, the cost per head, which is the key statistic for us, we anticipate it will go up perhaps in a more measured way.

And you did pick on one cost driver, which net-net is a positive, which is we anticipate sort of back to normal recruiting, which will have some upward pressure to professional fees.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

I would just add to that. None of us know with any certainty what normalized travel will be post pandemic when we have everybody vaccinated and people feel safe again. My own view is, it's not going to go back to what it was because I think we've all learned that certain things that were done face to face including negotiation of transactions, etc., etc., can be done quite effectively over video call.

On the other hand, making a new business call and developing a relationship with a client is definitely more challenging to do electronically than it is in person. And I suspect once it is safe to travel again, our bankers and banks and every other firm on Wall Street will resume those types of activities in fairly short order. Whether that turns out to be 75% of our pre-COVID numbers or 80% or 70% or 85%, I don't think anybody really knows. But it will be less.

Devin Ryan -- JMP Securities -- Analyst

All right. Okay, terrific. I will leave it there. But appreciate the time, guys, and congrats on the great year.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Thank you.

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Michael Brown with KBW. Your line is now open.

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

Great. Hi, good morning.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Good morning.

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

So, I just wanted to start maybe with restructuring. Would it be possible for you to kind of provide the contribution from restructuring-related activities in the fourth quarter and as we think about kind of full-year 2020, just an approximate estimate, so we can think about that. A piece of the revenue pie and how that -- and then any thoughts on how that could trend out into 2021? Is there really a lot left in the COVID related pipeline or is that mostly kind of complete at this point?

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

As you know, we never break out the individual label of our advisory activities. By the way, it's not because we don't want to be transparent. It's really because it's not easy to categorize restructuring versus the debt advisory versus balance sheet repair. And so, we won't answer that question not because we're truculent or difficult just because we really don't know how to break this down in a way that would be accurate for public reporting.

What we will say is that the amount of revenue that our restructuring partners touch this year was higher than historical levels. And we would expect that, in 2021, it will still be very good, but as long as the markets are as strong as they are right now, we would expect that it would not be as high as it was in 2020.

Having said that, as John said earlier, our large business by far, it comes from strategic and M&A advice, and that has very strong momentum right now. And I think we'd all be surprised if our revenues from that area of our advisory business, which is the largest, would be stronger in 2021 than it was in 2020.

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

I'd just like to add one thing, which is, and this will not directly answer your question, but maybe it will give you a little bit of a sense for how we think about our businesses culturally, and that is that our restructuring business has some truly outstanding financiers in it. And what we always do when we're serving clients and acting to give advice on their objectives is we bring parts of the firm that can add value in. And so, our activity level, with respect to our restructuring business, is not just dependent on bankruptcies per se, but there is a tremendous amount of advice and value-add that they bring to really some of the general business that we do giving clients advice, whether it's in terms of thinking about their balance sheets or whether it's thinking about how to finance mergers. They get very involved with us.

And so, one of the things that we have is real flex because our professionals really work hard to partner together and to really gang-tackle the problems of our clients. And so, hopefully, what you will see at the firm over time is this partnership allowing us to get real leverage in our system.

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

Okay, great. That's helpful color. I wanted to change gears given your equities franchise and ask about a topic that's kind of been all over the news in the past week-and-a-half or so at least, the impact of some of these Reddit or meme stocks, if you will. Can you speak to the puts and takes of that volatility across your equities franchise? And at this point, it seems like the worst of the volatility and the de-levering appears to be behind us, but do you -- I guess one thing that would be interesting to hear about is, do you think some of that market-related volatility could impact some of the ECM issuance volumes or do you think it will just continue as kind of business as usual? Thanks.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Well, first of all, I think we're really not touched in any meaningful way by this volatility because it's driven almost exclusively, if not exclusively, by individual investors. And our equity business is connectivity, is all with institutional clients. So, in terms of its effect on our revenues, really inconsequential.

I do think that, as a general matter, the kinds of individual stock moves that we've had in recent days are -- they're not the best thing for markets in general because they are indicative of the supply and demand in certain stocks, allowing the trading value of a stock to depart fairly consequentially from the fundamental earnings power and prospects of a stock. And I think we've seen some of that in the last handful of weeks.

I think those sorts of things are, I think, never really good to see in a stock market because they generally end badly, and very often badly for individual investors, not the large institutions who have the wherewithal to withstand that kind of volatility. So, I'm not happy to see it, but I don't have an easy prescription for addressing it.

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

Okay, great. Thanks. I appreciate the commentary on the topic. Thanks.

Operator

Thank you. Our next question comes from Richard Ramsden with Goldman Sachs. Your line is now open.

Richard Ramsden -- Goldman Sachs -- Analyst

Hey, good morning, guys. So, a couple of questions from me. Could we talk a little bit about the underwriting business. That's obviously become a significant business for you. When you think longer term, what do you think is a realistic market share within ECM? And maybe you could also talk about the debt advisory businesses as well and talk a little bit again about what you think is a realistic market share that you could get maybe over a three to five-year period of the global revenue pool in those businesses.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Okay. Let me talk about the underwriting business first. And I look at our underwriting business at the beginning of 2021 in sort of the same way that I would have looked at our advisory business in 2015 or 2016. And what I mean by that is I think we have pretty consequential market share gains ahead of us. I think last year was clearly a breakout year where we both expanded the number of -- the types of things that we do with clients and adding convertible capability and SPAC capability and cap capability in addition to IPOs and follow-ons. We benefited from that. We benefited from the fact that a much broader group of our highly entrepreneurial bankers participated, much broader industries were involved. And thirdly, we've benefited from the fact that our average share of fee in the transactions collectively with which we were involved went up. And I think as a general matter, we will continue to benefit from those three things, and they will cause us to continue to gain market share.

Now the revenues in any business, whether it was advisory in '15, '16, '17, '18 or equities -- or equity underwriting going forward are a function of two things. The aggregate level of activity and our market share. I think John and I feel very confident that our market share will continue to grow and that we're not in the 7th, 8th or 9th inning of our success in that business. What we don't know is what will be the aggregate level of activity, although we certainly know that the beginning of the year started out very strongly.

With respect to debt advisory, I wouldn't even know how to answer that question because there is no publicly available data on that. I will say it's a business that only the independent firms can be in because we're basically helping clients interface with capital providers, many of whom are the larger firms. And it's a business that I think all of the independent firms would say that they're in, but there is no data at all on market share. So, I really couldn't even begin to answer that question.

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

I was just going to add something, Richard, and that is that, as we have continued to add A-plus type talent, what we are finding is that clients increasingly want the services with respect to our financing judgments and how can help them think through things. On the equity side, obviously, it ends up that we take larger and larger roles, as Ralph said, in financings, but also in terms of helping them think strategically about how to think about those strategic financings. And on the debt side, it's the same thing, which is that, because we have a very respected group of people doing this and are able to give really high quality advice, increasingly, we're able to get into positions where we are adding real value-added advice and that ends up translating into higher fees. And so, we think there's a lot of whitespace in front of us because we don't see an end to the opportunities in terms of giving really high quality advice in a lot of the transactions and to a lot of the companies that we've been associated with.

Richard Ramsden -- Goldman Sachs -- Analyst

Okay, that's helpful. So, the second thing I wanted to ask about is post the election corporate tax reform looks like it could be a possibility again. If we do get some sort of corporate tax reform, either later on this year or maybe in 2022, do you think that would have a material impact for the business, either positively or negatively? I guess, obviously, the advisory business in particular.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Not really. In his campaign, President Biden -- then candidate Biden -- had as part of his plan an increase in the corporate tax rate from 21% to 28%. It's not clear, by the way, with a split Congress as we have that any of his tax plans will make it through. But even if he did achieve all of that, which I'm quite skeptical about, the way I think about that is that, at a 21% tax rate, 79% of every dollar of earnings goes to shareholders. At a 28% tax rate, it's 72%. So, that's a decline in earnings of less than 10%. If it goes to 25%, which I personally think would be more likely, if we get any increase at all, it's a decline in earnings of 5 percentage points. So, that's nothing -- it's not that big a deal either in my view.

Richard Ramsden -- Goldman Sachs -- Analyst

Okay, that's great. And then, my last question is, you talked about a strong pipeline for recruiting advisors. How would you characterize the recruiting environment today? And obviously, this is a great environment for you. It's obviously a great environment for your peers as well. Would you say that the recruiting environment is rational today in terms of what people are willing to pay for talent?

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

I can't really make a judgment on what people are willing to pay for talent. But what I can give a judgment on is how our discussions and negotiations are going. And in general, I think that we've found success in finding people who really like our model and like -- and are drawn to our firm and our culture. And we think that that has really afforded us the opportunity to talk to some real A plus talent. And as we've said to you, we continue to feel like there is real opportunity to pick up more talent who want to join.

In terms of the rational cost of it, I don't think we have found that it is out of bounds of what we've seen in the past. I think what really happens is people look at the opportunity they have at a firm, and they make a judgment as to whether this is a firm they want to be with, whether they want to join the team and then whether they can realize their financial goals by being there. And our experience is that, in fact, we've had no problem in getting people to come over with reasonable terms. And in fact, I think a lot of people are looking at our platform and believe the momentum of the platform and are making the judgment that they love being a part of an organization that has momentum, but also they realize that they can do quite well because the firm continues to have the momentum and has access to client and transaction situations that are quite attractive.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Yeah. Richard, I would just add one thing, and that is, and this is reinforced by our performance this year. John and I can consistently sit in front of anyone with whom we're having discussions, whether they are coming from a large firm, full service firm or from another independent firm, and without any pushback from the people we're recruiting, we can inarguably say to them that if they come to an independent firm that they can do more business with their clients at Evercore than they can at any other firm in the industry. We're the only independent firm that has equity underwriting capability. We're the only independent firm that has a world-class activist defense and shareholder engagement practice. We're the only independent firm who has the leading expert in corporate structure, split, spins, Morris Trust, reverse Morris Trust, etc. And we are strong in everything else that you would find in an independent firm.

So, the reality is, and one of the big draws of our firm is that bankers can do -- be involved in anything that they would have been involved in at their old firm, sometimes as an advisor like debt advisories who are an extender of debt, but in many cases, exactly as they would have done at a large firm and that's certainly true, for example, of the equity underwriting business.

Richard Ramsden -- Goldman Sachs -- Analyst

Okay, thank you very much. That's very helpful.

Operator

Thank you. Our next question comes from Brennan Hawken with UBS. Your line is now open.

Brennan Hawken -- UBS Securities LLC -- Analyst

Good morning. Thanks for taking my questions. Actually, first question is going to be a follow-up on that last line of questioning on recruiting. We saw this year -- or in '20 -- sorry, I should say in 2020, the decision by a lot of the bulge bracket competitors to show some comp leverage for the benefit of shareholders, not maintain the traditional relationship in between revenues and comp. Have you seen or do you expect that to have any kind of impact on the opportunity set for you on the recruiting front this year? Has that made you a little bit more bullish? And has it actually translated into any discussions yet? Or would that just be expectation?

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Yeah. Brennan, I think what's happened in the large firms is not exactly what you've just outlined. I think what happened in the large firms is the return that they've gotten on their capital has been extraordinary last year. And that allows them to pay their people well and to pay their shareholders well and have compensation ratios that have the appearance of being more disciplined. Those results are, in my view, almost 100% or 100% a result of the extraordinary revenue and return from the capital that they deployed. And therefore, we really have not seen any effect on the compensation of individual bankers with maybe the exception of one or two firms.

For the most part, the bankers that we pursue, who I often characterize as the high ROE bankers, those who can generate revenue without necessarily being dependent on the balance sheet, those people were compensated well last year as they have been historically.

Brennan Hawken -- UBS Securities LLC -- Analyst

Okay. Thanks for that, Ralph. And then, the momentum in ISI is really impressive. So, I'm in search of a new pet project here with you guys at Evercore. So, have you guys thought about strategic alternatives for the wealth and asset management business? It seems as though that's just sort of small. And at this point, it's like low single-digit type percentage of operating income for you all. Why not consider strategic alternatives, given the popularity of M&A in that space and use the capital to either return to shareholders via buybacks or fund more hiring?

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Well, first of all, Brennan, I really appreciate you taking on a new pet project. Yeah, look, I think of the businesses that we own in wealth management -- or in asset management, at this point, one of them is consolidated. That's our wealth management business. I think we do see some -- and I hate this word -- synergy between people. When we sell a business, wealth comes in. And sometimes, we're able to turn those people into wealth management clients and sometimes wealth management clients have advisory opportunities as well.

The deconsolidated businesses that are accounted for in the equity method are essentially investments at this point and we always look at those from the point of view of, are they more valuable to someone else than they are to us. What I'd like to add is that the Evercore wealth management group is performing extremely well and we're really pleased with how they're executing their business and serving their clients and feel very, very good about their performance there, their opportunities ahead and remain very committed to them.

Brennan Hawken -- UBS Securities LLC -- Analyst

Okay, thanks for the color.

Operator

Thank you. Our next question comes from Jeff Harte with Piper Sandler. Your line is now open.

Jeffery Harte -- Piper Sandler -- Analyst

Hi. Good morning, guys.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Good morning.

Jeffery Harte -- Piper Sandler -- Analyst

A couple of, I guess, kind of clean-up questions. Can you give us the SMD and employee counts at year-end?

Robert B. Walsh -- Senior Managing Director and Chief Financial Officer

Jeff, the senior managing directors reflecting a bunch of changes that we've disclosed. So, really as of today as opposed to as of year-end is 107. And the total headcount for the firm is about 1,800.

Jeffery Harte -- Piper Sandler -- Analyst

Okay. And were there any pull forward of revenues -- any meaningful pull forward of revenues from deals that closed in 1Q back into 4Q?

Robert B. Walsh -- Senior Managing Director and Chief Financial Officer

I'll let you decide on meaningful. 4Q of this year was a bit more than $32 million. That compares with 4Q last year of a bit more than $33 million.

Jeffery Harte -- Piper Sandler -- Analyst

Okay, thanks. And thinking about productivity, I'm getting like upper revenue per SMD of something close to $16 million in what was admittedly an unusual 2020. Is that a reasonable base case going forward? And can you parse out at all the productivity levels kind of across some of the different assignment types? I'm thinking M&A versus some of the areas that we're stronger in 2021, like restructuring or private placement.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

The productivity is -- we have a slightly different way of measuring it, in the sense that we count only SMDs that are in their first full year. So, our measure would be a little bit higher than yours. And I think we have already industry-leading productivity. Compared to the other independent firms, we're probably close to twice theirs. And in some cases, closer to three times theirs. So, our productivity is already quite good. It's aided I think by the fact that we do have a broader array of capabilities for our senior managing directors to deploy.

And I wouldn't really want to predict where it can go. In good markets, I think it can be higher than what it is right now. I think [Technical Issues] we would have predicted, it might have wound up lower than it turned out to be. And so, I think we have terrific people and we have the broadest array of capabilities of any independent firm. So, our productivity -- the gap between us and our competitors should be maintained and perhaps even widened.

Jeffery Harte -- Piper Sandler -- Analyst

And across kind of different businesses, should we think of the different businesses being more productive than others because it all kind of would net out in the end?

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

I think that's -- it's awful hard to do because included in that 107 that Bob just gave you are people who are capabilities or product people who aren't necessarily responsible for covering clients. So, the mix that we have doesn't -- really isn't amenable to the kind of categorization that you're asking about.

Jeffery Harte -- Piper Sandler -- Analyst

Okay. And finally, you mentioned the strong pipeline of senior talent additions as we enter 2021. How should we think about operating leverage and kind of margins as recruitment ramps back up? And I'm kind of thinking that specifically relative to the last couple of years when the comp ratio kind of stepped up and you guys had referenced kind of senior hires as being a driver of that stepped up rate.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

I think that, at this point, it's not clear. We have a lot of dialogs under way right now. If all of those turned into new hires, it's possible there would be a little bit of pressure on the comp ratio. I think what we've always said is, if we get that opportunity, we'll take advantage of it and we'll surely share with you -- that in a very transparent way. I think we're a ways away from having that kind of a discussion at this point.

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

And just to state the obvious, we get leverage as our revenues grow. That is clearly a really important part of how the comp ratio plays out. And so, a lot of it depends on what the market gives us and what we're able to apply. We've told you that we really believe that by expanding our -- both our people who can address themselves to clients as well as our capabilities, we think we're going to share in more of an uplift in the market. But clearly, that is a very important part of how the comp ratio plays.

Jeffery Harte -- Piper Sandler -- Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from Jim Mitchell with Seaport Global Securities. Your line is now open.

Jim Mitchell -- Seaport Global Securities -- Analyst

Okay, great. Good morning. Maybe just a question on Europe. It's been an underperformer for 10 years. We might finally have a little clarity on Brexit. You highlighted it as an area of geographic expansion. So, how are you feeling about Europe at this point? Do you see the potential for a sustained improvement over there? It seems like we've seen some green shoots. Just want to hear your thoughts going forward.

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

Okay. I think we do think that there is some pickup in activity in Europe. Europe is still, as you indicated in your question, well below its pre-financial crisis role in aggregate M&A activity. I don't think we anticipate getting back to that quite honestly. But there should be some pickup. We have, among the independent firms, the largest franchise there by far of those firms that were born in Europe -- born in the United States. Sorry. So, we're not as big as Lazard and Rothschild in Europe. And if Europe does pick up disproportionately, I think we would expect them to benefit more from that than we would, but we would benefit from that more than any of the other independent firms.

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

Yeah. And what I would offer is that we clearly do look at Europe as an opportunity for us. We have found that our bankers and our brand are playing well there. And so, we are looking quite intensively for talent who want to join our team and we really believe that there is real opportunity for us. So, you can expect that we will be looking and mining for real talent and we will be focusing on finding some growth in Europe, especially as the market improves.

Jim Mitchell -- Seaport Global Securities -- Analyst

Okay, that's helpful. And maybe just to follow up on the ECM conversation. I know this is really long term, but how do you think about your long-term target? Is it getting to bulge bracket levels or is there something about being an independent boutique that doesn't have a balance sheet that would sort of keep you from getting to that kind of market share long-term?

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

First of all, there is something that the bulge bracket firms do and it's not a small part of overall equity underwriting activity, which are block trades. [Technical Issues]. So, I think just as we're never going to get the League Table credit that the large firms get, which they uniformly get when they extend credit, we only get League Table credit when we actually are an advisor, there is a certain part of the market that our market share is going to be zero. So, by definition, we'll never get to the bulge brackets.

On the other hand, I think -- and I know John agrees with this -- we can be very competitive in the parts of the underwriting business that don't involve massive [Technical Issues].

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

Without making a prediction, the one thing I would say is that we are increasingly seeing that we're getting opportunities to move to lead, active lead, lead left. We've continued to get those opportunities, and they build. And so, we think there is real space in front of us to assume that we're going to get to their market share or their profitability level. I think that may be a leap certainly for now. All we're really doing right now is looking at what we think is really significant growth in front of us and we think that it's there for us to take and keep moving. So, we feel good about the prospects, but I think getting to the level that you're suggesting, I think that remains to be seen, and we'll see.

Jim Mitchell -- Seaport Global Securities -- Analyst

Okay. Appreciate the thoughts.

Operator

Thank you. There appear to be no questions at this time. I would now like to turn the floor to Ralph Schlosstein and John Weinberg for any closing comments.

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

Thank you all for your time today. We really appreciate it.

Operator

[Operator Closing Remarks].

Duration: 79 minutes

Call participants:

Hallie Miller -- Head of Investor Relations

Ralph Schlosstein -- Co-Chairman of the Board and Co-Chief Executive Officer

John S. Weinberg -- Co-Chairman of the Board and Co-Chief Executive Officer

Robert B. Walsh -- Senior Managing Director and Chief Financial Officer

Manan Gosalia -- Morgan Stanley -- Analyst

Devin Ryan -- JMP Securities -- Analyst

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

Richard Ramsden -- Goldman Sachs -- Analyst

Brennan Hawken -- UBS Securities LLC -- Analyst

Jeffery Harte -- Piper Sandler -- Analyst

Jim Mitchell -- Seaport Global Securities -- Analyst

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