Release Details

Highlights

• Third Quarter Financial Summary
  • Adjusted Pro Forma Net Revenues of $149.2 million, down 8% and 13%, respectively, compared to Q3 2011 and Q2 2012, which were the two best quarters in the Firm’s history
  • Adjusted Pro Forma Net Income from Continuing Operations of $17.3 million, or $0.40 per share, down 13% and 18% compared to Q3 2011 and Q2 2012, respectively
  • U.S. GAAP Net Revenues of $153.0 million, down 6% and 11% compared to Q3 2011 and Q2 2012, respectively
  • U.S. GAAP Net Income from Continuing Operations of $5.3 million, or $0.17 per share, up from $2.0 million, or $0.06 per share, for the same period last year
• Year-to-Date Financial Summary
  • Adjusted Pro Forma Net Revenues of $426.9 million, up 4% from last year
  • Adjusted Pro Forma Net Income from Continuing Operations of $42.8 million, or $0.98 per share, down 13% compared to the same period in 2011
  • U.S. GAAP Net Revenues of $428.3 million, up 4% compared to last year
  • U.S. GAAP Net Income from Continuing Operations of $9.9 million, or $0.31 per share, up from $7.9 million, or $0.27 per share, for the same period last year
• Investment Banking
  • Investment Banking year-to-date net revenue up 10% from last year
  • Continue to advise on prominent transactions, including:
    • Kraft Foods Inc. on its spin-off of Kraft Foods Group
    • MetroPCS on its pending merger with T-Mobile USA
    • Ally Financial on the pending sale of its Canada operations to Royal Bank of Canada
    • AIA Group Limited on its pending acquisition of ING Malaysia
  • Rank eighth in year-to-date U.S. announced transactions (Thomson Reuters)
  • Hired four new Senior Managing Directors
    • George Estey joined as Head of Canada
    • Brett Pickett and Lowell Strug joined as Co-Heads of the Consumer and Retail Group
    • Stephen Goldstein joined the Restructuring and Debt Advisory Group
• Investment Management
  • Assets Under Management in consolidated businesses were down 2% from Q2 2012 to $11.6 billion
• Repurchased more than 1 million shares during the quarter. The Board authorized repurchase of an additional 5 million shares
• Increased quarterly dividend to $0.22 per share

NEW YORK--(BUSINESS WIRE)--Oct. 25, 2012-- Evercore Partners Inc. (NYSE: EVR) today announced that its Adjusted Pro Forma Net Revenues were $149.2 million for the quarter ended September 30, 2012, compared with $163.1 million and $172.1 million for the quarters ended September 30, 2011 and June 30, 2012, respectively. Adjusted Pro Forma Net Revenues were $426.9 million for the first nine months of the year compared to $408.7 million for the nine months ended September 30, 2011. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $17.3 million, or $0.40 per share, for the third quarter, compared to $19.8 million, or $0.46 per share, a year ago and $21.2 million, or $0.49 per share, last quarter. Year-to-date Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $42.8 million, or $0.98 per share, compared to $49.1 million, or $1.17 per share, for the same period last year.

U.S. GAAP Net Revenues were $153.0 million for the quarter ended September 30, 2012, compared to $163.2 million and $172.5 million for the quarters ended September 30, 2011 and June 30, 2012, respectively. U.S. GAAP Net Revenues were $428.3 million for the first nine months of the year, compared to $411.5 million for the first nine months of 2011. U.S. GAAP Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $5.3 million, or $0.17 per share, for the third quarter, compared to $2.0 million, or $0.06 per share, a year ago and $7.9 million, or $0.25 per share, last quarter. U.S. GAAP Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $9.9 million, or $0.31 per share, for the first nine months of the year, compared to $7.9 million, or $0.27 per share, for the same period last year.

The Adjusted Pro Forma compensation ratio for the current quarter was 60%, compared to 62% and 60% for the quarters ended September 30, 2011 and June 30, 2012, respectively. The Adjusted Pro Forma compensation ratio for the trailing twelve months was 60%, compared to 60% for the twelve months ended September 30, 2011 and June 30, 2012. The U.S. GAAP compensation ratio for the three months ended September 30, 2012, September 30, 2011 and June 30, 2012 was 66%, 70% and 66%, respectively. The U.S. GAAP trailing twelve-month compensation ratio of 69% compares to 68% for the twelve months ended September 30, 2011 and 70% for the twelve months ended June 30, 2012.

Evercore’s quarterly results may fluctuate significantly due to the timing and amount of transaction fees earned, as well as other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.

“We are pleased with our third quarter results, reporting our third best quarter for revenue on sustained strong performance in our Advisory business. Our Wealth Management and Institutional Equities businesses continue to take market share and investment performance is improving in the Institutional Asset Management business. While market conditions remain challenging, we are working hard to sustain this momentum through the end of the year and into 2013, continuing to build market share in each of our core businesses,” said Ralph Schlosstein, President and Chief Executive Officer. “Our results further demonstrate our commitment to delivering strong returns to our shareholders. During the quarter we repurchased more than 1 million shares of stock (2.6 million shares year to date) and increased our dividend by 10% to $0.22 per share. The increased dividend and our Board’s authorization of a new stock repurchase program for 5 million shares, more than double the size of the prior program, demonstrate our ongoing commitment to delivering returns to our shareholders as we continue to grow.”

“Evercore continues to grow and gain market share. Compared to this time last year, our year-to-date Investment Banking revenues have grown by 10%, despite a 15% decrease in global announced M&A volume and a 27% decrease in global completed M&A volume. We were again strong competitively, ranking eighth among all firms in year-to-date U.S. announced deals. We continued our long standing practice of adding talented Senior Managing Directors, hiring four new SMDs who will strengthen our Consumer, Restructuring and Canada businesses,” said Roger Altman, Executive Chairman.

The U.S. GAAP and Adjusted Pro Forma results for September 30, 2011 present the continuing operations of the Company, which exclude amounts related to Evercore Asset Management (“EAM”), whose operations were discontinued during the fourth quarter of 2011. See page A-1 for the full financial results of the Company including its discontinued operations.

Throughout the discussion of Evercore’s business segments, information is presented on an Adjusted Pro Forma basis, which is an unaudited non-generally accepted accounting principles (“non-GAAP”) measure. Adjusted Pro Forma results begin with information prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and then those results are adjusted to exclude certain items and reflect the conversion of vested and unvested Evercore LP Units into Class A shares. Evercore believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore’s results across several periods and facilitate an understanding of Evercore’s operating results. Evercore uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. For more information about the Adjusted Pro Forma basis of reporting used by management to evaluate the performance of Evercore and each line of business, including reconciliations of U.S. GAAP results to an Adjusted Pro Forma basis, see pages A-2 through A-11 included in Annex I. These Adjusted Pro Forma amounts are allocated to the Company’s two business segments: Investment Banking and Investment Management.

Business Line Reporting

A discussion of Adjusted Pro Forma revenues and expenses from continuing operations is presented below for the Investment Banking and Investment Management segments. Unless otherwise stated, all of the financial measures presented in this discussion are Adjusted Pro Forma measures. For a reconciliation of the Adjusted Pro Forma segment data to U.S. GAAP results, see pages A-2 to A-11 in Annex I.

Investment Banking

For the third quarter, Evercore’s Investment Banking segment reported net revenues of $128.2 million, which represents a decrease of 7% year-over-year and 15% sequentially. Operating income of $27.4 million decreased by 12% from the third quarter of last year and 23% sequentially. Operating margins were 21% in comparison to 22% this time last year. For the nine months ended September 30, 2012, Investment Banking reported net revenues of $364.4 million, an increase of 10% from last year. Year-to-date operating income was $70.4 million compared to $76.8 million last year. Year-to-date operating margins were 19%, compared to 23% last year. The Company had 61 Investment Banking Senior Managing Directors as of September 30, 2012.

Revenues

During the quarter, Investment Banking earned advisory fees from 147 clients (vs. 112 in Q3 2011 and 137 in Q2 2012) and fees in excess of $1 million from 30 transactions (vs. 26 in Q3 2011 and 30 in Q2 2012). For the first nine months of the year, Investment Banking earned advisory fees from 247 clients (vs. 188 last year) and fees in excess of $1 million from 77 transactions (vs. 65 last year).

The Institutional Equities business contributed revenues of $5.2 million and the Private Funds Group closed one capital raise during the quarter.

Expenses

Compensation costs were $77.3 million for the third quarter, a decrease of 10% year-over-year and 14% sequentially. The trailing twelve-month compensation ratio was 60%, down from 61% a year ago and flat when compared to the previous quarter. Evercore’s Investment Banking compensation ratio was 60% for the third quarter, versus the compensation ratio reported for the three months ended September 30, 2011 and June 30, 2012 of 62% and 59%, respectively. Year-to-date compensation costs were $221.6 million, an increase of 10% from the prior year.

Non-compensation costs for the current quarter were $23.5 million, up 10% from the same period last year but down 9% sequentially. The year-over-year increase in costs reflects the Lexicon acquisition and continued growth of the Investment Banking business. The sequential quarter-over-quarter decrease was driven by completion of real estate consolidation and cost control initiatives implemented in the quarter. The ratio of non-compensation costs to revenue for the current quarter was 18%, compared to 15% in the same quarter last year and 17% in the previous quarter. Year-to-date non-compensation costs were $72.4 million, up 35% from the prior year. The ratio of non-compensation costs to revenue for the first nine months was 20%, compared to 16% last year.

Expenses in the Institutional Equities business were $6.9 million for the third quarter, an increase of 5% from the previous quarter, reflecting the addition of a team to cover the REIT sector.

Investment Management

For the third quarter, Investment Management reported net revenues and operating income of $21.0 million and $2.0 million, respectively. Investment Management reported third quarter operating margin of 9%. For the nine months ended September 30, 2012, Investment Management reported net revenue and operating income of $62.5 million and $4.3 million, respectively. The year-to-date operating margin was 7%, compared to 12% last year. As of September 30, 2012, Investment Management reported $11.6 billion of AUM, down 2% from the second quarter as net outflows of $0.7 billion offset market appreciation of $0.5 billion.

Investment Advisory and Management Fees of $18.6 million for the quarter ended September 30, 2012 declined compared to the same period a year ago, as higher fees in Wealth Management and Private Equity were offset by declines in Institutional Asset Management. Fees earned in the current quarter decreased in comparison to the previous quarter due to a lower contribution from Institutional Asset Management.

Realized and Unrealized Gains of $1.7 million in the quarter declined by $1.3 million relative to the prior year but increased by $0.9 million relative to the previous quarter; the change relative to the prior periods was primarily driven by valuation adjustments in Private Equity.

Equity in Earnings of Affiliates of $0.6 million in the quarter increased relative to the prior year, reflecting an increased contribution from ABS Investment Management, and was in line with the prior quarter.

Expenses

Investment Management’s third quarter expenses were $19.0 million, a decrease of 15% compared to the third quarter of 2011 and 5% compared to previous quarter. Year-to-date Investment Management expenses were $58.1 million, down 15% from a year ago. The decreases from the prior periods primarily reflect lower performance-based compensation costs.

Other U.S. GAAP Expenses

Evercore’s Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three and nine months ended September 30, 2012 was higher than U.S. GAAP as a result of the exclusion of expenses associated with the vesting of IPO equity awards and awards granted in conjunction with the Lexicon acquisition and certain business acquisition-related costs, including Special Charges. In addition, for Adjusted Pro Forma purposes, client related expenses and expenses associated with revenue-sharing engagements with third parties have been presented as a reduction from Revenues and Non-compensation costs. Further details of these expenses, as well as an explanation of similar expenses for the three and nine months ended September 30, 2011 and the three months ended June 30, 2012, are included in Annex I, pages A-2 to A-11.

Non-controlling Interests

Non-controlling Interests in certain subsidiaries are owned by the principals and strategic investors in these businesses. Evercore’s equity ownership percentages in these businesses range from 51% to 86%. For the periods ended September 30, 2012, June 30, 2012, and September 30, 2011 the gain (loss) allocated to non-controlling interests was as follows:

Income Taxes

For the three and nine months ended September 30, 2012, Evercore’s Adjusted Pro Forma effective tax rate was 38%, compared to 40% for the three and nine months ended September 30, 2011.

For the three and nine months ended September 30, 2012, Evercore’s U.S. GAAP effective tax rate was approximately 49% and 46%, respectively, compared to 82% and 58%, respectively, for the three and nine months ended September 30, 2011. The effective tax rate for U.S. GAAP purposes reflects significant adjustments relating to the tax treatment of certain compensation transactions, valuation allowances on deferred tax assets of non-U.S. subsidiaries as well as the non-controlling interest associated with Evercore LP Units. The effective tax rate for the three and nine month periods ended September 30, 2012, was lower than the three and nine month periods ended September 30, 2011 primarily due to a higher level of expected foreign sourced income in 2012.

Balance Sheet

The Company continues to maintain a strong balance sheet, holding cash, cash equivalents and marketable securities of $205.2 million at September 30, 2012. Current assets exceed current liabilities by $184.3 million at September 30, 2012. Amounts due related to the Long-Term Notes Payable were $100.9 million at September 30, 2012.

During the quarter the Company repurchased approximately 1,015,000 shares at an average cost of $24.23 per share.

Evercore also announced that its Board of Directors has authorized the repurchase of up to 5 million shares of Evercore Class A Common Stock and/or Evercore LP partnership units. Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of shares repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. This program may be suspended or discontinued at any time and does not have a specified expiration date.

Dividend

On October 22, 2012, the Board of Directors of Evercore declared a quarterly dividend of $0.22 per share to be paid on December 14, 2012 to common stockholders of record on November 30, 2012.

Conference Call

Investors and analysts may participate in the live conference call by dialing (800) 706-7745 (toll-free domestic) or (617) 614-3472 (international); passcode: 93290025. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for one week via telephone starting approximately one hour after the call ends. The replay can be accessed at (888) 286-8010 (toll-free domestic) or (617) 801-6888 (international); passcode: 49057013. A live webcast of the conference call will be available on the Investor Relations section of Evercore’s website at www.evercore.com. The webcast will be archived on Evercore’s website for 30 days after the call.

About Evercore Partners

Evercore Partners is a leading independent investment banking advisory firm. Evercore’s Investment Banking business advises its clients on mergers, acquisitions, divestitures, restructurings, financings, public offerings, private placements and other strategic transactions and also provides institutional investors with high quality research, sales and trading execution that is free of the conflicts created by proprietary activities; Evercore’s Investment Management business comprises wealth management, institutional asset management and private equity investing. Evercore serves a diverse set of clients around the world from its offices in New York, Boston, Chicago, Minneapolis, Houston, Los Angeles, San Francisco, Washington D.C., Toronto, London, Aberdeen, Scotland, Mexico City and Monterrey, Mexico, Hong Kong and Rio de Janeiro and São Paulo, Brazil. More information about Evercore can be found on the Company’s website at www.evercore.com.

Basis of Alternative Financial Statement Presentation

Adjusted Pro Forma results are a non-GAAP measure. Evercore believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore’s results across several periods and better reflect management’s view of operating results. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of U.S. GAAP results to Adjusted Pro Forma results is presented in the tables included in Annex I.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect our current views with respect to, among other things, Evercore’s operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. All statements other than statements of historical fact included in this presentation are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore’s business. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Evercore believes these factors include, but are not limited to, those described under “Risk Factors” discussed in Evercore’s Annual Report on Form 10-K for the year ended December 31, 2011, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and Registration Statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Evercore to predict all risks and uncertainties, nor can Evercore assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and Evercore does not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Evercore undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

With respect to any securities offered by any private equity fund referenced herein, such securities have not been and will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.