Release Details

Highlights

• Full Year Financial Summary
  • Record U.S. GAAP Net Revenues of $765.4 million, up 19% compared to 2012
  • Record U.S. GAAP Net Income from Continuing Operations of $74.8 million, up 89% compared to 2012, or $1.42 per share, up 60% compared to 2012
  • Record Adjusted Pro Forma Net Revenues of $760.1 million, up 19% compared to 2012
  • Record Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. of $103.7 million, up 33% compared to 2012, or $2.25 per share, up 26% compared to 2012

• Fourth Quarter Financial Summary
  • Record U.S. GAAP Net Revenues of $218.7 million, up 2% and 17% compared to Q4 2012 and Q3 2013, respectively
  • U.S. GAAP Net Income from Continuing Operations of $23.4 million, down 6% and up 17% compared to Q4 2012 and Q3 2013, respectively, or $0.42 per share, down 25% and up 8% compared to Q4 2012 and Q3 2013, respectively
  • Record Adjusted Pro Forma Net Revenues of $214.6 million, up 1% and 15% compared to Q4 2012 and Q3 2013, respectively
  • Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. of $33.0 million, down 6% and up 36% compared to Q4 2012 and Q3 2013, respectively, or $0.71 per share, down 12% and up 34% compared to Q4 2012 and Q3 2013, respectively
• Investment Banking
  • Record full year Net Revenues and Operating Income on an adjusted basis
  • Continue to advise on many of the leading transactions in the marketplace, including:
    • Advising E. I. du Pont de Nemours and Company on the spin-off of its Performance Chemicals business
    • Advising Forstmann Little & Co. on the sale of its ownership stake in IMG Worldwide Holdings, Inc.
    • Advising PVR Partners, L.P. on its sale to Regency Energy Partners LP
• Investment Management
  • Record full year and fourth quarter Net Revenues and Operating Income on an adjusted basis
  • Assets Under Management in consolidated businesses were $13.6 billion
• Promoted three Managing Directors, including two new Advisory Senior Managing Directors and one new Senior Managing Director leading our Mexico Private Equity team
• Repurchased 2.5 million shares/units during the year, returning $128.2 million of capital to shareholders, including dividends. Quarterly dividend of $0.25 per share

NEW YORK--(BUSINESS WIRE)--Jan. 29, 2014-- Evercore Partners Inc. (NYSE:EVR) today announced that its U.S. GAAP Net Revenues were $765.4 million for the twelve months ended December 31, 2013, compared to $642.4 million for the twelve months ended December 31, 2012. U.S. GAAP Net Revenues were $218.7 million for the quarter ended December 31, 2013, compared to $214.0 million and $187.3 million for the quarters ended December 31, 2012 and September 30, 2013, respectively. U.S. GAAP Net Income from Continuing Operations was $74.8 million, or $1.42 per share, for the twelve months ended December 31, 2013, compared to $39.5 million, or $0.89 per share, for the same period last year. U.S. GAAP Net Income from Continuing Operations for the fourth quarter was $23.4 million, or $0.42 per share, compared to $25.0 million, or $0.56 per share, a year ago and $20.1 million, or $0.39 per share, last quarter.

Adjusted Pro Forma Net Revenues were $760.1 million for the twelve months ended December 31, 2013, compared with $638.8 million for the twelve months ended December 31, 2012. Adjusted Pro Forma Net Revenues were $214.6 million for the quarter ended December 31, 2013, compared with $212.1 million and $186.5 million for the quarters ended December 31, 2012 and September 30, 2013, respectively. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $103.7 million, or $2.25 per share, for the twelve months ended December 31, 2013, compared to $78.0 million, or $1.78 per share, for the same period last year. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $33.0 million, or $0.71 per share, for the fourth quarter, compared to $35.3 million, or $0.81 per share, a year ago and $24.3 million, or $0.53 per share, last quarter.

The U.S. GAAP trailing twelve-month compensation ratio of 63.5% compares to 67.0% for the same period in 2012 and 63.8% for the twelve months ended September 30, 2013. The U.S. GAAP compensation ratio for the three months ended December 31, 2013, December 31, 2012 and September 30, 2013 was 61.3%, 62.6% and 63.2%, respectively. The Adjusted Pro Forma compensation ratio for the trailing twelve months was 59.2%, compared to 59.7% for the same period in 2012 and 58.9% for the twelve months ended September 30, 2013. The Adjusted Pro Forma compensation ratio for the current quarter was 59.0%, compared to 58.0% and 59.2% for the quarters ended December 31, 2012 and September 30, 2013, respectively.

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.

“2013 was another record year, our fifth consecutive year of significant growth in net revenues and earnings. These results reflect the attractiveness of our independent advisory model to clients globally, and the success of our disciplined approach to investment in our business; adding clients, growing market share and expanding the range of advisory capabilities that we provide to our clients,” said Ralph Schlosstein, President and Chief Executive Officer. “We had a record year in our advisory business and our early stage businesses were profitable for the quarter and the full year, as the Institutional Equities business continued to grow market share and the Wealth Management business increased assets under management to $4.9 billion. Our operating margins improved to 23.2%; we increased our dividend for the sixth consecutive year and we repurchased sufficient shares to offset the dilutive effect of bonus awards for the fourth consecutive year. Looking ahead, we hope to build on this strong momentum and continue to gain market share in our key businesses and geographies.”

“2013 was a strong year for Evercore as Investment Banking Net Revenues and Operating Income grew by 18% and 22%, respectively, our third consecutive year of growing Investment Banking Operating Income by more than 20% in what has been a generally flat advisory market overall. Our growth reflects the increasing diversity of Evercore’s advisory business, as fee paying clients increased 10%, to 358, and our capabilities in M&A, Restructuring, Equity and Debt Capital Markets and Private Funds Advisory continued to expand. These results reflect the strength of our core advisory business, which gained share in the M&A market for the third consecutive year. We also continued to grow globally, earning 32% of our Investment Banking revenues from clients located outside of the United States,” said Roger Altman, Executive Chairman. “We are well positioned to sustain our positive momentum as we recruited five Advisory Senior Managing Directors in 2013, expanding our capabilities in Latin America and Singapore, and increasing our presence on the West Coast with a new office in Silicon Valley. We began 2014 with 66 Advisory Senior Managing Directors and have since promoted two of our talented Managing Directors, strengthening our position in the energy and utilities industries.”

The U.S. GAAP and Adjusted Pro Forma results present the continuing operations of the Company, which exclude amounts related to Evercore Pan-Asset Capital Management (“Pan”), whose operations were discontinued during the fourth quarter of 2013. 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 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.

For the fourth quarter, Evercore’s Investment Banking segment reported Net Revenues of $185.4 million, which represents a decrease of 3% year-over-year and an increase of 15% sequentially. Operating Income of $44.0 million decreased 23% from the fourth quarter of last year and increased 15% sequentially. Operating Margins were 23.7% in comparison to 29.7% for the fourth quarter of last year and 23.7% for the third quarter of this year. For the twelve months ended December 31, 2013, Investment Banking reported Net Revenues of $657.3 million, an increase of 18% from last year. Year-to-date Operating Income was $155.6 million compared to $127.3 million last year, an increase of 22%. Year-to-date Operating Margins were 23.7%, compared to 22.9% last year.

Revenues

During the quarter, Investment Banking earned advisory fees from 182 clients (vs. 169 in Q4 2012 and 136 in Q3 2013) and fees in excess of $1 million from 51 transactions (vs. 48 in Q4 2012 and 31 in Q3 2013). For the twelve months ended December 31, 2013, Investment Banking earned advisory fees from 358 clients (vs. 324 last year) and fees in excess of $1 million from 132 transactions (vs. 125 last year).

The Institutional Equities business contributed revenues of $12.5 million in the quarter, up 46% in comparison to the third quarter, reflecting higher levels of activity in both the primary and secondary markets during the quarter, and up 76% from the fourth quarter of 2012. On a full year basis, the Institutional Equities business reported revenues of $42.2 million.

Expenses

Compensation costs were $114.1 million for the fourth quarter, an increase of 3% year-over-year and 18% sequentially. The trailing twelve-month compensation ratio was 60.4%, up from 59.7% a year ago and 59.2% in the previous quarter. Evercore’s Investment Banking compensation ratio was 61.5% for the fourth quarter, versus the compensation ratio reported for the three months ended December 31, 2012 and September 30, 2013 of 57.5% and 60.0%, respectively. Full year compensation costs were $396.8 million, an increase of 20% from the prior year.

Non-compensation costs for the current quarter were $27.3 million, up 11% from the same period last year and 4% sequentially. The increase in costs versus the prior year reflects the addition of personnel within the business as well as higher recruiting costs. The ratio of non-compensation costs to net revenue for the current quarter was 14.7%, compared to 12.8% in the same quarter last year and 16.3% in the previous quarter. Year-to-date non-compensation costs were $104.9 million, up 8% from the prior year. The ratio of non-compensation costs to revenue for the twelve months ended December 31, 2013 was 16.0%, compared to 17.4% last year.

Expenses in the Institutional Equities business were $12.2 million for the fourth quarter, an increase of 48% from the previous quarter. Expenses on a full year basis were $40.9 million, reflecting the growth of the business.

For the fourth quarter, Investment Management reported Net Revenues and Operating Income of $29.2 million and $9.2 million, respectively. Investment Management reported a fourth quarter Operating Margin of 31.4%. The high growth in Revenues and Operating Income was supported by an increase in performance fees and valuation increases for private equity investments. For the twelve months ended December 31, 2013, Investment Management reported Net Revenues and Operating Income of $102.8 million and $20.9 million, respectively. The year-to-date Operating Margin was 20.4%, compared to 5.3% last year. As of December 31, 2013, Investment Management reported $13.6 billion of AUM, an increase of 3% from September 30, 2013.

On December 3, 2013, the Company sold all of its interest in Pan. Accordingly, the historical results of Pan have been included within Discontinued Operations.

Revenues

Investment Advisory and Management Fees of $21.1 million for the quarter ended December 31, 2013 increased compared to the same period a year ago, driven primarily by higher fees in Wealth Management and Institutional Asset Management.

Realized and Unrealized Gains of $4.3 million in the quarter increased relative to the prior year; the change relative to the prior period was driven principally by Private Equity gains, including carry.

Equity in Earnings of Affiliates of $3.5 million in the quarter increased relative to the prior year and the prior quarter principally as a result of performance fees earned in the fourth quarter of 2013 by an affiliated investment manager.

Expenses

Investment Management’s fourth quarter expenses were $20.0 million, down 1% compared to the fourth quarter of 2012 and 4% compared to the previous quarter, driven principally by lower levels of compensation. Year-to-date Investment Management expenses were $81.8 million, up 4% from a year ago.

Other U.S. GAAP Expenses

Evercore’s Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three and twelve months ended December 31, 2013 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, Special Charges, certain business acquisition-related charges and the netting of changes in the Company’s Tax Receivable Agreement with Income Tax Expense. 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 twelve months ended December 31, 2012 and the three months ended September 30, 2013, 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 72%. For the periods ended December 31, 2013, September 30, 2013, and December 31, 2012 the gain (loss) allocated to non-controlling interests was as follows:

Income Taxes

For the three and twelve months ended December 31, 2013, Evercore’s Adjusted Pro Forma effective tax rate was 37.2% and 37.8%, respectively, compared to 37.9% and 38.0% for the three and twelve months ended December 31, 2012, respectively.

For the three and twelve months ended December 31, 2013, Evercore’s U.S. GAAP effective tax rate was approximately 53.1% and 46.0%, respectively, compared to 42.7% and 43.9% for the three and twelve months ended December 31, 2012, respectively. The effective tax rate for U.S. GAAP purposes reflects significant adjustments relating to the tax treatment of certain compensation transactions, non-controlling interest associated with Evercore LP Units, state, local and foreign taxes, and other adjustments.

Balance Sheet

The Company continues to maintain a strong balance sheet, holding cash, cash equivalents and marketable securities of $341.9 million at December 31, 2013. Current assets exceed current liabilities (which include $157.7 million of accrued compensation and benefits, which will be paid to employees in early 2014) by $254.9 million at December 31, 2013. Amounts due related to the Long-Term Notes Payable were $103.2 million at December 31, 2013.

Capital Transactions

On January 27, 2014, the Board of Directors of Evercore declared a quarterly dividend of $0.25 per share to be paid on March 14, 2014 to common stockholders of record on February 28, 2014.

During the three months ended December 31, 2013 the Company repurchased approximately 51,000 shares at an average cost per share of $50.14.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Wednesday, January 29, 2014, accessible via telephone and the internet. Investors and analysts may participate in the live conference call by dialing (866) 825-3209 (toll-free domestic) or (617) 213-8061 (international); passcode: 50133489. 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: 32932388. 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

Evercore 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 equity 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 20 offices in North America, Europe, South America and Asia. 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, 2012, 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.

(1) Includes interest expense on long-term debt and interest expense on short-term repurchase agreements.

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Adjusted Pro Forma Results

Throughout the discussion of Evercore’s business segments, information is presented on an Adjusted Pro Forma basis, which is a 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”), adjusted to exclude certain items and reflect the conversion of vested and unvested Evercore LP Units, other IPO related restricted stock unit awards, as well as Acquisition Related Share Issuances and Unvested Restricted Stock Units granted to Lexicon employees, 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. The Company 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. These Adjusted Pro Forma amounts are allocated to the Company’s two business segments: Investment Banking and Investment Management. The differences between Adjusted Pro Forma and U.S. GAAP results are as follows:

1. Assumed Vesting of Evercore LP Units and Exchange into Class A Shares. The Company incurred expenses, primarily, in Employee Compensation and Benefits, resulting from the modification of Evercore LP Units, which will vest generally over a five-year period. The Adjusted Pro Forma results assume these LP Units have vested and have been exchanged for Class A shares. Accordingly, any expense associated with these units and related awards is excluded from Adjusted Pro Forma results and the noncontrolling interest related to these units is converted to controlling interest. The Company’s Management believes that it is useful to provide the per-share effect associated with the assumed conversion of this previously granted but unvested equity, and thus the Adjusted Pro Forma results reflect the vesting of all unvested Evercore LP partnership units and IPO related restricted stock unit awards.

2. Adjustments Associated with Business Combinations. The following charges resulting from business combinations have been excluded from Adjusted Pro Forma results because the Company’s Management believes that operating performance is more comparable across periods excluding the effects of these acquisition-related charges;

a. Amortization of Intangible Assets. Amortization of intangible assets related to the Protego acquisition, the Braveheart acquisition and the acquisitions of SFS and Lexicon.

b. Compensation Charges. Expenses for deferred share-based and cash consideration and retention awards associated with the acquisition of Lexicon, as well as base salary adjustments for Lexicon employees for the period preceding the acquisition.

c. Special Charges. Expenses primarily related to the write-off of intangible assets during the fourth quarter of 2013 associated with the acquisition of Morse Williams and the exiting the legacy office space in the UK in 2012.

d. GP Investments. Write-off of General Partnership investment balances during the fourth quarter of 2013 associated with the acquisition of Protego.

3. Client Related Expenses. Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables, have been classified as a reduction of revenue in the Adjusted Pro Forma presentation. The Company’s Management believes that this adjustment results in more meaningful key operating ratios, such as compensation to net revenues and operating margin.

4. Income Taxes. Evercore is organized as a series of Limited Liability Companies, Partnerships, a C-Corporation and a Public Corporation and therefore, not all of the Company’s income is subject to corporate-level taxes. As a result, adjustments have been made to the Adjusted Pro Forma earnings to assume that the Company has adopted a conventional corporate tax structure and is taxed as a C-Corporation in the U.S. at the prevailing corporate rates, that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis and that adjustments for deferred tax assets related to the ultimate tax deductions for equity-based compensation awards are made directly to stockholders’ equity. This assumption is consistent with the assumption that all Evercore LP Units are vested and exchanged into Class A shares, as discussed in Item 1 above, as the assumed exchange would change the tax structure of the Company. In addition, the Adjusted Pro Forma presentation reflects the netting of changes in the Company’s Tax Receivable Agreement against Income Tax Expense.

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5. Presentation of Interest Expense. The Adjusted Pro Forma results present interest expense on short-term repurchase agreements, within the Investment Management segment, in Other Revenues, net, as the Company’s Management believes it is more meaningful to present the spread on net interest resulting from the matched financial assets and liabilities. In addition, Adjusted Pro Forma Investment Banking and Investment Management Operating Income is presented before interest expense on long-term debt, which is included in interest expense on a U.S. GAAP basis.

6. Presentation of Income from Equity Method Investments. The Adjusted Pro Forma results present Income from Equity Method Investments within Revenue as the Company’s Management believes it is a more meaningful presentation.

7. Presentation of Income (Loss) from Equity Method Investment in Pan. The Adjusted Pro Forma results from continuing operations exclude the income (loss) from our equity method investment in Pan. The Company’s Management believes this to be a more meaningful presentation.

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