Evercore (EVR) 25 Oct 232023 Q3 Earnings call transcript

Good morning, and welcome to the Evercore's Third Quarter 2023 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Evercore management and the question-and-answer session. [Operator Instructions] I will now turn the call over to Katy Haber, Managing Director of Investor Relations and ESG at Evercore. Please go ahead.

Thank you, operator. you Financial us Results thank Third for and XXXX Quarter Conference morning, for today joining Evercore's Good Call. I'm Investor Katy Relations of and ESG. Haber, Evercore's Head

Joining questions. Earlier our third results. prepared Weinberg, we will announcing is and call Evercore's the quarter LaLonde, issued remarks, me call a up and release for Tim After financial Chairman we CEO; John CFO. our open on the today, XXXX our today press

is available discussion webcast the days which it conclusion Our XX Investors" beginning for our this press This website, evercore.com. of is results live our be an and the "For being of call. our to complementary on approximately conference of today the section is X at of available after will archive website release, call in hour

to, Form discussed to you include, on not to duty limited statements. that XX-Q company this number forward-looking reports XX-K, and report to reports the on our During that statements in These want risks could indicated actual those but important make may factors call, conference these Form statements. statements. quarterly with cause in forward-looking Evercore's current Form assumes the Any no and and X-K. SEC, are I including we on course are filings various of annual those to forward-looking the materially make from remind of that uncertainties, are subject we factors update there differ a outcomes any

company's performance. are In when the are measures believe will discussing that meaningful, our be adjusted financial presentation today, non-GAAP measures, which otherwise unless we indicated, evaluating we

the on within press GAAP For our and release, reconciliations, which detailed financial disclosures refer the measures posted to our these website. is you contained data on should

believe evaluate that is We annual an performance Evercore's basis. continue to on important to it

any will John. are for call quarter As by turn of timing closings. now results to particular influenced I transaction the previously, the our we've noted over

the addressing morning to for innocent by Middle terrorism and want and the that everyone. sadness must of crisis to to victims. condemned. East, start hate profound we Thank want be acknowledge feeling by and I Evercore, morning, good all Katy, I the emphasize live in and At you, this the are acts values, our we

quarter, over past conditions at increasing management confidence summer. see the client Internally, seen of are capital The moderately levels these across improved higher boardrooms, markets. an and of accessibility, the market a albeit costs, believe and equity and should a step many that to Over but elevated continuation towards teams greater financing the provide we've activity in an backdrop, tracking market at began pace improving levels we to positive return a indicators normalization markets our activity. broad-based takes of first time, slow activity benefit a which we

to higher positive in increased continue levels uncertainty the quarter do the expect an rates. expect in as to environment, as remains, market term. not to market activity driven meaningfully in well activity unexpected shift the into tensions XXXX. Clearly, said, barring near results seen That in levels over past build improved macro the translate and significant geopolitical shift we by We sentiment

seeing early While are quarter. last days, still it this our stronger is to in similar we backlog reflected

medium growth term. years, from stronger XX year, foundation ever. SMDs, investments significant firm's hiring believe and SMD more X as us backdrop, will last drive and hires the our When on quarter, an history, strongest presented long opportunities year ramping than last a and with discussed X has in in in seen ramping we paired investments the of over all talent made help We've the environment significant improving it. productive SMD market hiring the As current largest we capitalized our our have and as for these well capacity this promotes build

and started including have U.S. year-to-date SMD hires SMD both identified Europe, TMT, new strategically have at and have areas, in are XX Evercore. advisory. capital estate coverage, we as These hires sponsored significant, which new working services, real our industrials, and the joined of X business

continue candidates, been We but other to with our XXXX have plans new in hire believe strong completed. engage we discussions largely will

As XXXX, remain of initiatives, our build execution past I've our in steadfast we the recruiting strategic for pipeline which on outlined we calls.

will the I quarter. discuss Now briefly

billion have market sequentially, reflect impact global announcement in our and on in results, sentiment quarter recent third yet improvement a the has Our merger with as while of Smurfit including this activity. remained and quarter, $XX of has Chevron's as completion acquisition on Bristol-Myers Veralto, $X.X backdrop advised billion Kappa, up well as the In Advisory the in WestRock notably challenged and we've muted week, on Mirati. to of acquisition market its activity substantial business, Squibb its Danaher on transactions, Hess, several merger it's $XX transformative billion spin-off

levels, Our advisory. in activity European Advisory including debt strong Group experienced

group collaboration building Additionally, the as advisory we We over sponsor what private continue will sponsor-related our continue synergies. expanded to efforts. especially across make with strong with businesses for time, We're this progress coverage momentum and see capital fundraising businesses. accomplish excited drive will our to our

were activity The the at capital market-leading elevated new and has strength resilient strong. our activity private pace Continuation franchises. advisory highlighting is an the of persisted business and in quarter, fund fundraising businesses

to had our year better business While a the muted, a broader fundraising private relative quarter environment funds remained ago.

continued biotech business similar particularly quarter, by second Advisory driven busy as In corporates way with and had activity energy. with elevated our clean at we traditional in assignments. Defense Underwriting distressed tech regular in remains what quarter Shareholder to follow-ons, campaigns the liability management and activist and levels Restructuring advisory Strategic practice, levels. financing saw Our strong, continued another

market. quarter The IPO book active biotech's as opening on second the the IPO largest saw quarter, an runner In for of the we year-to-date RayzeBio. an third served

year active also overnight Madrigal largest book an Pharmaceuticals'. this We the for were runner biotech follow-on offering on

continued overall share of a to the Our and to growth our testament rise, strength ECM market business.

America a Research row, second Survey. #X a on Institutional basis in equities are the awarded year Investors In franchise, for we our to weighted been have pleased ranking Equity all the in

the Street had ever. analysts on Wall first time #X most also the ranked for We

strong. client Lastly, rates continues our retention assets modestly to Management, in performance Wealth both the management be and in declined under quarter,

I Before I our out plans enhance and by challenging few operating capital. focused in a to on execution to it pushing thoughts. remained for coverage to capabilities purposely with strengthen been strategic want Despite turn continuing product to backdrop, XXXX geographic to our invest a we've executing our building broaden wrap and intellectual continuing the our our on and over has year industry. up reach, undoubtedly franchise, and our Tim,

a turn, in market We the better for are Evercore. XXXX hopeful will and, year be that

for environment will present an businesses. Our improving client for the opportunities contact remains us. active our excited and robust across We're

With that, it Tim. let over me turn to

you, John. Thank

Our in do third to the quarter environment. reflect second meaningfully early-stage results improvements quarter, show and yet the the sequential improvement compared not

We levels picking from are discernibly year. activity client seeing this up earlier internal

is financial However, significantly and gradual between there as on quarterly I that dialogues one is time mentioned exists our improved as results the client then completions. between road and a lag announcements last announcements to a call, and

advantage third of productivity. strive Additionally, attractive yet I coupled record an with will discuss we areas taken our count quarter as partner to disciplined across firm a market recruiting that all increase we SMD management head the our of results. have with now financial hiring year,

share, and we on focus $X.XX revenues, on results. on net For respectively. GAAP when comments net metrics, $XXX income which $XX useful, believe million will were here evaluating basis of a My million, non-GAAP XXXX, the EPS per are third from quarter our and

found Our reconciliation website. results to GAAP be press is and adjusted reporting standard which GAAP a release, of our can in our on

third versus of net third million quarter adjusted XX% the up were but X% $XXX revenues quarter declined year ago, Our a sequentially.

income $X.XX net the XX%, $XX income Third year million respectively, the prior XX% adjusted versus of XX% quarter Adjusted adjusted of share period. million XXXX. operating per decreased and earnings decreased third $XX of and quarter versus and

for Our quarter. XX% adjusted the operating margin was third

to million our to to quarter Turning Sequentially, year-over-year Investment across up levels last businesses. advisory market $XXX various were XX% fees revenues X% in compared quarter. $XXX fees advisory of In businesses year's modestly quarter. Banking, million as third advisory of last stronger the advisory were activity declined adjusted compared third

of to were the underwriting third X% quarter fees Third million of quarter $XX compared XXXX. up

Revenue seeing been respectable slightly year-over-year, some trading volumes given and outcome, market of than a quarter improvement was transactions third in are last year's Commissions recently. the with the lower $XX in a and have volatility which is that number down of We significant Related market more million levels.

million billion, quarter $XX Asset and of to increased This Third year-over-year. year-over-year. is is which a Administration $XX.X primarily due X% XX% of Fees adjusted Management quarter AUM up third

a is by reflecting higher short-term quarter of the million DCCP $XX approximately rates, investment $XX used due balance, equity was our market a Third approximately our loss to quarter. in portfolio, partially hedge earned for interest our commitments, million, cash offset funds as a which values million of on income revenue by in other decline in $X driven a adjusted net gain

to quarter The for this is compensation adjusted expenses. Turning ratio third XX%.

level on compensation firm, prior of deferred well earnings whom the hires, to be environment, market amortization compensation. quarter's I joined X for the meaningfully compensation the of As as revenue by call, since the new some length of senior discussed as awards, last of the year the our ratio at our onboarding have impacted the continues third middle quarter,

new expect fourth these ratio. upward recognize their on their start the many to year, we year-end, have additional we that compensation and see in compensation Given XXXX would SMDs late joined through from of pressure the quarter

Note revenue quarter and actual market quarter either revenues incorporating full quarters future best current compensation rates, compensation year be of representative and our ratio market expect today comp generally year-end we the know comp or in fourth we impact what to variations the ratios compensation these quarter levels in on ratios our about could fourth our direction. and would estimates that estimates. past X of Based

expenses some to up new relocation the corporate our higher non-compensation increase of lease fees. million, space group rent and The services a third required year-over-year to information increased our non-comp related Shifting ago. In $XXX reflects of year part quarter, expenses. XX% expense from were for

time, reflected increase non-comp non-comp a our that year Additionally, expense expense ago our from reversal, which materially at larger expenses in an a year-over-year. resulting decreased

expense a it was modestly is year, in below, that pre-COVID and I XXXX, non-comp would note modestly our a head basis on year above per where the ago. still

We non-comp second similar remainder our the and year. to the levels be to quarter our of expect third for

manage to expenses. non-comp continuing We diligently monitor and our are

for rate from identical was ago. tax to the year XX.X%, adjusted Our tax XX.X% rate quarter a virtually the

sheet. the Turning balance to

investment which the cash billion, at approximately last our quarter. up XX, $X.X and September end of is billion of securities from As $X.X totaled

for a continue business the consideration preserving taking needs a into financial hiring our environment, cash and and solid current strategic footing. strong We economic position, to plans, maintain the including implementation of cash initiatives,

at we returned have repurchases million through million to and shares shareholders an $XXX.XX. average X of Year-to-date, of $XXX total dividends a of price

is diluted million. count XX.X Our adjusted share third quarter

past X that we about we to were As market a X than from more of ago. have down the returned reminder, years, to where equating is X/X million shares In cash at years shareholders our cap. X

to to We a stability shareholders position, to returning of continue not for strong strategic provide our maintain to implement plan remain capital and our financial stakeholders. we committed to our cash philosophy needed and

backdrop. the the last market mentioned, who the we greater quarter, early John for of the That, are earnings are still As us or medium revenue position improved and coupled the years, an in who longer third with leverage signs SMDs, those in to couple term. encouraged of to by over Evercore joined promoted and join, hired SMDs,

now open will for the we that, questions. line With

from Devin first JMP Our Securities. with is question Instructions] [Operator Ryan

guess have X it I since I make two-question, X maybe here. parts, First,

X% [ guess, by I off, advisory SMD first So ]. declined the count

color dynamic? recently, any And that from I understand what a other for the are and since clients get So more broadly? just question, of wanted and inflation part expense just means just hiring the Evercore the lot your sure you getting to normalized then that I for about make margins industry there, to we're guys

But obviously, have you been of of -- today. biggest back going revenue time? kind expense higher we in of that can thinking normalized excuse shifted I think are levels are me, get is Or we're inflation? some of And at because do about historically? you structurally be normal you that revenues, the shifted how to we Have over guys lower a not or the margins appreciate guys driver to you structurally environment

Yes. And thanks, Devin.

the first take you take question. me Let the Then can second.

Go Okay. ahead, John.

we who have to In market, we're we time, And terms hiring are are the at we've mode and in. high-quality people. what we all in there the of that is said We've about same very talented advisory promoting SMDs, what the people. people, there out people, But of to who said you high-quality shifting are bringing talented our aggressive been are managing headcount. are obviously the

disciplined. know, internally this we've be tried we've And basically in as X SMD outside XX hiring we're to you done What the year, to the XX. people years. We've promoted last really is from

And execution are what out. different to were are high-quality for who we right bringing we -- are so reasons, do, is so may of sure and a fit, we in the just this said people, really be those that who, an we going making is which people shifting all they're not

And let to time research expenses. just a we're And Sure. always assess then and our to community X doing. to and what at look on thing comment our we've little the multiple on multiple a bit guided me add and order that, investors that's that firm year quarter span in I'll

plus course, number recent and And at the X so and look Advisory ago been so about you have it's numbers, up in most of years our XX%. would if headcount that business, partner XX XXX the XXX,

number peak that we year, XX%. up earnings compared where we're and at looked XXXX, you revenue to were our in about If

being John's pardon commentary increased management, count overall our head that period also headcount disciplined on XX.X%. headcount time, over of partner about while me, headcount increased about Now XX%, increased our same -- our

see productivity person per And and evidence so per of you there what some our increase is to striving our banker. can

But a higher expenses. per a basis, our lower XXXX, numbers our would actually head impact. for Now were per in What see head ago. interestingly, to they're in on marginally is basis a instance, of still only amount at turning moment a they a for look modest on non-comps, if than the slightly year than and you you inflation

our and generated to, able by continue be to and optimistic normal we're to -- terms inflation. respect with margins, our what impact may able the business, revenues. about to to on with do we've of margins been in in so certainly returning And is And largest

to the magnitude And will returning margin subsequently market significant more transaction and increasing to exactly, expect so to a occur when revenues, and think see will I you soon be for normalized when turning but it's you and the the that predict can announcements structure. with improvement, respect margin too what timeframe

come Our UBS. will question next from with Hawken Brennan

your the on Tim, start, comp to comment love I'd on ratio.

I a chat, I little based people, on a who think too. I few want think there's but clarify other it, to Bloomberg I a got are and just confused

going that the So I comp XQ Did is believe to the quarters, looking low-XXs, that the excess like what was I correctly? to hear the full fourth be in couple year last that you XX%. would suggested probably of in going given ratio which look the mean, we're of at quarter,

I -- to Well you in hi, didn't mathematics understand certainly lead Brennan. say the I might conclusion. excess of XX%, that but that

sometimes sometimes And the there make And quarter. point year or will the so fees because dependent impossible significant inside all it's ratio in what the be so as as the revenues. predict fourth approach for know, first certain on that comp are quarter one full precisely is year-end, for and fall the fall quarter the we outside they I'd is, us the to it's

to pressure be is It the about that and this the due quarter, case on year, of too there's that, the upward the is fact part some want I which, precise. careful of that's natural fourth so to the accruing as know, to course, And latter partner you of don't for providing guidance start arriving this which those mid-August arrive need before until we've -- are XX at as hires people, And XX announced firm. year-end. year-end. XX, arrive will we through X we And they anytime year, from of those that's

remarks, estimates second like What quarter. and do I for saw third that said would our pressure in look I the -- what in or my But the would what put quarter we full say, generally is does something additional year. the is that on prepared which still some I best fourth

my And but All and challenging, Yes. it's to fair. I'm going even to try going make totally that's completely answering question next more anyway.

in franchise the benefit So decent takes close having a and given you particular. long what how do you forward have how great it look -- have guys in of to a M&A deals large-cap just

you're comp all decent XXXX, even ramp continued fixed beginning and pretty your at for not when go given based a in to least best and upon So revenues see and at works hard here in recovery my through where substantial this, base expectations take given what for out pressure of XXXX. the and a the upward of it's guess, advisory seeing model, I me

to of continue I -- range at like kind And shake an out upward comp 'XX. above historical ratio at for an

Of course, there's a embedded still ton of in 'XX. uncertainty

I'm comp for ratio given the reasonable even to not maybe enough we'd achieve? We revenues continuing with to idea the the have ramp that an is least of drive a really year, can until can the be the what that giving of -- it get think half deal we at potential back elevated up down. could you magnitude first no that moving and ramp, strongly maybe to end But which helping comp to of and ratio probably these

Right.

And a don't so, of we, matter as provide look, guidance. of course, practice,

a so very a revenues percentage you're in I declining. that -- when awards this. a larger-than-normal on prior improving, tailwind. basis, about can the provide revenues amortization a there's the are all sometimes mathematics way some market, when the what And in that say. And right you you're where But where want behind are careful hit are to And market I be of year in a mathematics

joined hires. really will about you pointed out, too it's they've really know too as is know but we prospects, In be what us, to their than for that. the really we're to addition, we're say more and positive soon the new ramp All rate glad soon

from Yaro come Goldman will Sachs. question next with Our James

to the recovery. in overall, and been seem slowly. XXXX does appear But few recover past pushed positive. you've M&A this that's the the to XXXX to the And be success quite industry recovery some continues had continues like Obviously, be to it doesn't So out. months

is likelihood view what saw a XXXX? guess this I back of post recovery a build robust ends like more level M&A up years of taking your to we So that number the to

really backlogs to I James. are anecdotally, inside just activity level building, Thanks, look if It's the would at our you would be our hard the take internally, firm, no firm some the which said, deals And of elongation very that indicators robust. fact you an say respect now. to And time is and question I client of to really take the that time But lead to there's recovery. the pace other time. absolutely to strengthening. as And lead true. just then there's are that it say activity with takes dialogues to does call that internal right seem indicators the announcements, closings, to

now. feel optimistic right about have we the We activity level

I a know that of hard see just going the to It's exactly that say we call. don't will indicators probably think have there pace ramp it's be We very that, very we'll to that 'XX. a healthy and how I is be. our But just safe say in to what activity inside if translates. think amount

question next will come Steven Research. Our Chubak Wolfe from with

to unpack and most sponsors the all strategic intermediate was speak to of to announced and the really and the made I helpful? trying term. was and distinguish near a to remain muted, energy you having sponsor number would it's strategics from be strategic hoping transactions the the At recently that of fairly subdued hoping at space. activity. remained between was differentiation And least I any in it, commentary in dialogue with to -- suggests some sponsor hoping the to time, you're the yes, could call really same the, you commentary has likely 'XX, on activity large we've I And seen public

are way, The it's to want does by you, going rates call but happen sponsors. which And to I frustrate very higher, hard Steve. really interest with don't Sure, the to what's capital. sponsors economics kind impact sponsor really get of want need actually but got the and They've They've to going. return of got a to powder. real lot deals, of dry monetize

back prices think pressures do want can they don't hand, are there's in on so to sponsor monetize lower But they I to get then bring assets. on that going. really that, sponsors the their and level investors. transactions and the other business to to at And take capitulate their And

a really a what don't but going see I pressure And there. we think on so that immediately there you'll that deals think real will start deals there's massive to be sponsors. And see happen, coming rash is see -- of from you'll you'll

activities fund fundraising continuation building. that that and if and at say that, we of the little which you building, environments better. side to continuation sponsors on that sponsors we're be way see activity said is engage seems and of Having look the fundraising, that some the business see with, We we the bit funds feeling other seeing a I'd the

so -- general, one the And respect we gone faster. that in concern with have, think going hasn't to some sponsors on it hand,

think there what strengthening, hand, other the that On we builds. activity be do a we think we see that will is and do

the publicly. seen, On more side, a quite been you've as bit has there activity strategic

dialogue are But relatively You've pace. It's recently. that safe at seen point. build high whether to levels, have quite that larger deals, and some that which activity at come this somewhat a out are to continue I will think say, hard levels say it's

As if quality. we you but that's not that in the a earlier anecdotally, that in I us call, of dialogue there's think number, just -- terms at also is of lot look inside said

to some take time. build the strategic is It to begin So starting will say momentum. side I'd that

it's said, it forward, I take may to so will do a bit I hard think. what to think timing. As longer, sponsors start move call little is this the I but And

with And Stanley. Morgan our comes Kenny question [Operator next from Ryan Instructions]

that about talked the things impact we've the seen deals is Or we above push to more specifically, impact encouragement Is a recent indicators. XX-year you think any leading that few on And quarter? limited? yields volatility just weeks forward? And last when significant have out enough So X%. moving briefly does spike from about where

move think there a for stabilizing financings the in people existing deal are example, conditions tends for push to I I rates think sponsors. be think, it market. of that Will what way interest think deals. a think if, risk I I that has bigger the do It though could. will out? certainly the on activity it forward impact, impact the about It

that some think have geopolitically I environment people holding of are that X the is economically. think deal the And and things carefully. watching uncertainties, back of both real are really we I that

But watching the I will what's how to in So -- and I market at a rates it's impact to I think the impact deals environment happening think think not bigger the really people necessarily is is going look generally. degree. equity

that's think case. I So the

I mean, that our to are the been move high think from we standpoint, dialogues that have continuing forward. quality

necessarily don't rates think are I it will get I think going that are the fact to interest degree, So I to things people the think do it moderate materially But a impact the that exactly carefully. and watching done.

Our Mitchell next Global. with question comes from Seaport Jim

talk bit It been we about restructuring. increasingly active, can it's little so. Maybe like pretty seems a

I impact quarter? you're and the going lot restructurings. And discuss would the think of thoughts in you at activity forward? Can a sort just great. how That your out-of-court of looking be

on -- as advisory well. Sure. the very creditor is there's of there lot and busy, now, out-of-court and our is as side debtor as, you our management Restructuring quite well going some is from standpoint, quite the both said, business doing and robust work. We're and a liability right restructurings

actually some. restructure -- rates, that we'll there that basically that there I impact and and going restructuring. also And you as that a with Interest -- to if velocity actually maturity we is is are structures think have does there get rates XXXX. companies capital And higher in will coming and there's wall need know, think advice more that, continues up XXXX continue. to

will quite picks business think robust, merger our think and So is the of market we even if the continue restructuring up. I that prospects

Hawken Our with next UBS. come question from will Brennan

it about am revenue. least I total curious at of the Advisory. X/X Previously non-M&A believe around, was running I

maybe there advisory update an funds this? the in give then doing could you if environment that's and and private speak capital business how So to and private an also like

Yes, sure.

I overall the at of to so our it's I if assume said think M&A, currently. And represented reasonable than we've that's even And years, revenue, for it's the non-M&A revenue. And that more to challenging past periods X/X tends higher. X you it during be the think look case of

to And -- and where the reflect it we so levels, And PCA, PCA results a market respect that. a the PFG, fundraising feel will those increased is the certainly with for a we're seeing earlier, increased would as activity PFG a John continue environment environment, we're on and as PCA, that mentioned for normalized while. to and hopeful returning that we that strengthening characterize think fundraising more little we

And just everybody PFG PCA business, our and secondaries more knows, is sure make business. is our fundraising to

Thank you. Ladies and Evercore Results Financial concludes gentlemen, Quarter Call. XXXX today's Conference Third this

may You now disconnect.