And therefore, we have more firepower now than we’ve ever had. So, you should expect our open market purchases to be as robust, if not more robust than they’ve ever been. The other thing that we’re also mindful of is, if we’re going to repurchase, we’ve typically tried to do it in the front half of the year, more so just, because we can match repurchases better with awards that get issued. But there’s no there’s no black box algorithm. It’s just a basic philosophy, which is always be prudent with the balance sheet. Always put shareholders first and all else equal, probably bigger buyers in the first half of the year than in the second half of the year just, because it’s easier for us to do matching.
Helen Meates: I would just add, if you look over the last two years, our repurchases have pretty closely matched, what we issued as part of year-end comp. And as you mentioned, there’s additional shares that are coming into the share count, it will be about 1.3 million shares. And it will be our intention, to go get those back, but we may not perfectly match when they come into the account.
Steven Chubak: Great, color. Thanks so much for taking my questions.
Paul Taubman: Thanks, Steven.
Operator: Our next question will come from Brennan Hawken with UBS. Please go ahead.
Brennan Hawken: Good morning. Thanks for taking my questions.
Paul Taubman: Absolutely. Good morning.
Brennan Hawken: Good morning, Paul. So Helen, you touched on this in your prepared remarks, but hoping to drill down a little bit. You touched on hitting the performance metrics. I believe it was a VWAP target. I think you guys hit that in December. So, if you could confirm that. And then, I think what you said was that, impacted the fully diluted average shares, but there’s more to come. Could you give us a sense of how much more we should expect, in the first quarter from that averaging in? And did it also impact the compensation expense in 2023 as well?
Helen Meates: It did not – I’ll answer that question first, it did not impact the compensation expense in 2023, the crystallization of those units. And in terms of sizing of the 1.3 million, 600,000 came in in Q4. And so another 700,000 will come in Q1.
Brennan Hawken: Excellent. Thank you for that.
Paul Taubman: I’m sorry. And just to clarify, the triggering of the award in no way affected the comp ratio. But clearly, the granting of the award back in ’22, was expensed beginning in ’22 and it continues for a number of years. But it’s not the triggering of the vesting event.
Brennan Hawken: Understood. Thank you for clarifying that. Staying on expenses. So under totally appreciate that trying to predict the comp ratio, is really challenging, right, because you’ve got revenue and you’ve got expenses, and it’s very hard to predict revenue in February, or beginning of February. So, if we were to just maybe lay out a scenario, right? If you were to see total revenue in 2024 grow by 10%, and you were to hire no more bankers, right? So all you had was, the existing base of employees. What sort of magnitude could we expect comp expense, to grow in a scenario like that for 2024?
Helen Meates: So look, we’re just trying to clarify your assumptions. Revenues are up 10%. Is that what you said and no hiring?
Brennan Hawken: Revenue is up 10%, headcount bunch. What kind of operating leverage? I’m just trying to get a sense of the operating leverage that is embedded, given how much recruiting you guys have done and how much the comp ratio was impacted?
Paul Taubman: Yes. I mean I guess my first reaction to that is, it’s really hard to answer hypotheticals because you’ve got to start to then say, okay, if revenues were up 10%, how is that distributed amongst our three businesses? Are they all up 10% – you start to get there. Then you get into what’s the broader macro environment for talent and compensation? What are the fixed costs at the more junior levels? Or what’s the associate and VP and on? What’s the pyramid cost going to be? If we have a inflation or deflation, then you’ve got the next issue, which is, it up 10%, because the next year looks like it’s going to be where the business takes off, or is it up 10%, but then you think you have a lot could come right back down there.
You start to get into so many hypotheticals. If you want to talk about the comp leverage, the way I think about it is, over the last three years, we have added 35% headcount, and we’ve not grown our revenues near 35%. And that’s what the drag is. And we’re making an investment where we’re confident that over time, that headcount is going to be reflected in the bottom line, and it’s less about at 10% in one year, it’s really sort of trying to get step function change in our revenue. As those individuals who we know are going to be quite productive on the platform, or not only productive on the platform in a relative sense, but they actually have a constructive M&A backdrop in, which to translate client progress into revenues. And then this all kind of gets back to normal.
But exactly kind of how it sort of drifts back in to reduce the ratio. It’s very hard to answer a hypothetical like that. You got to really sit down with all the facts at the end of year, which is why I’m confident that where we are is certainly elevated relative to trend. And I’m confident that it will return to a more normal level. But fundamentally, that’s just getting the investment, to begin to show a financial return. We see a return by what these individuals are doing and how they’re expanding our practice, well before you all see it in the P&L, and that’s the lag effect.
Brennan Hawken: Yes. No, I totally appreciate all that, Paul. I just – it’d be great maybe – I know it’s sort of challenging to come up with on the slide. But it’d be great if you could try and help – because this is a one question that investors struggle with is, how do you think about the leverage that’s embedded into the platform and how much is from this expansion? And so maybe you guys could consider adding some, more granular color around compensation leverage in the future? I would really appreciate that? Thanks.
Paul Taubman: More than happy to revisit it. But as I’ve said, that here’s the paradox of the business. When M&A is going gangbusters and it’s easiest financially to absorb new investment, it’s hardest to attract the new investment. When M&A markets are dislocated and it’s the worst possible time to absorb that investment into your P&L, is when you get the best opportunities to build the franchise. And we’re just simply trying to – make the most out of it. If I learned in drivers and many decades ago was aim high in the steering wheel, look far down the road. That’s what we’re doing. And we’re constantly measuring it to make sure we’re doing the right things. But that’s really where we’re at. And that’s the paradox, which is we invested at the depth of the market, because that’s when you could get the best talent.
That’s when people were most willing to move. I think that continues into ’24, but consistent with my commentary, as the M&A market is slowly heal. I expect that, that environment will still be quite attractive by historic levels. But not as attractive as ’23 was, and then as this market begins to rebound as we know it will, for deal making, so then these ratios start to quickly return to more normal levels.
