<< Back
Evercore Reports Second Quarter 2016 Results; Quarterly Dividend Of $0.31 Per Share

NEW YORK, July 27, 2016 /PRNewswire/ --

Evercore

Highlights

  • Second Quarter Financial Summary
    • U.S. GAAP Net Revenues of $350.7 million, up 31% compared to Q2 2015
    • U.S. GAAP Net Income Attributable to Evercore Partners Inc. of $24.1 million, up 124% compared to Q2 2015, or $0.55 per share, up 112% compared to Q2 2015
    • Adjusted Net Revenues of $348.3 million, up 30% compared to Q2 2015; 32% after adjusting for the deconsolidation of an Investment Management affiliate
    • Adjusted Net Income Attributable to Evercore Partners Inc. of $53.4 million, up 57% compared to Q2 2015, or $1.04 per share, up 60% compared to Q2 2015
  • Year-to-Date Financial Summary
    • U.S. GAAP Net Revenues of $608.4 million, up 20% compared to the same period in 2015
    • U.S. GAAP Net Income Attributable to Evercore Partners Inc. of $29.4 million, up 95% compared to the same period in 2015, or $0.66 per share, up 89% compared to the same period in 2015
    • Adjusted Net Revenues of $605.5 million, up 20% compared to the same period in 2015; 22% after adjusting for the deconsolidation of an Investment Management affiliate
    • Adjusted Net Income Attributable to Evercore Partners Inc. of $86.2 million, up 35% compared to the same period in 2015, or $1.67 per share, up 39% compared to the same period in 2015
  • Investment Banking
    • Announced the addition of Mike Palm as an Advisory SMD, strengthening our capabilities in the Industrials sector
    • Advising clients on significant transactions globally, including:
      • Abbott Laboratories' announced agreement to acquire St. Jude Medical in cash and stock for ~$31 billion total enterprise value
      • The Special Committee of the Board of Facebook, Inc. on its proposed multi-class recapitalization
      • Active bookrunner on MGM Growth Properties'$1.2 billion IPO
      • Medivation on the unsolicited approach from Sanofi
      • The Special Committee of the Board of Directors of NorthStar Asset Management Group on its $18.7 billion three-way merger with NorthStar Realty Finance Corp. and Colony Capital, Inc.
      • Envision Healthcare Holdings, Inc. on its $15 billion all-stock transaction with AmSurg Corp.
  • Investment Management
    • Announced the plan to transfer ownership and control of the Mexican Private Equity Business to a newly formed entity controlled by the principals of the business
    • Assets Under Management in consolidated businesses were $8.5 billion
  • Returned $188.0 million of capital to shareholders for the first six months through dividends and repurchases, including repurchases of 3.4 million shares at an average price of $47.56. Declared quarterly dividend of $0.31 per share

Note: The Company has renamed its unaudited non-generally accepted accounting principle ("non-GAAP") measure presented in its quarterly earnings release and other supplementary information from "Adjusted Pro Forma" to "Adjusted."  See Page 4 for further information.

Evercore Partners Inc. (NYSE: EVR) today announced its results for the second quarter ended June 30, 2016.

U.S. GAAP Results:

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues

$         350,656

 

$         257,713

 

$         268,096

 

36%

 

31%

 

$         608,369

 

$         506,079

 

20%

Operating Income

$           62,605

 

$           16,125

 

$           31,111

 

288%

 

101%

 

$           78,730

 

$           42,109

 

87%

Net Income Attributable to Evercore Partners Inc.

$           24,087

 

$             5,318

 

$           10,764

 

353%

 

124%

 

$           29,405

 

$           15,064

 

95%

Diluted Earnings Per Share

$               0.55

 

$               0.12

 

$               0.26

 

358%

 

112%

 

$               0.66

 

$               0.35

 

89%

Compensation Ratio

63.1%

 

69.8%

 

64.6%

         

66.0%

 

66.4%

   

Operating Margin

17.9%

 

6.3%

 

11.6%

         

12.9%

 

8.3%

   

 

Net Revenues were $350.7 million for the quarter ended June 30, 2016, an increase of 31% compared to $268.1 million for the quarter ended June 30, 2015. Net Revenues were $608.4 million for the six months ended June 30, 2016, an increase of 20% compared to $506.1 million for the six months ended June 30, 2015. Net Income Attributable to Evercore Partners Inc. for the quarter ended June 30, 2016 was $24.1 million, up 124% compared to $10.8 million a year ago. Earnings Per Share was $0.55 for the quarter ended June 30, 2016, up 112% in comparison to the prior year period. Net Income Attributable to Evercore Partners Inc. for the six months ended June 30, 2016 was $29.4 million, up 95% compared to $15.1 million for the same period last year. Earnings Per Share was $0.66 for the six months ended June 30, 2016, up 89% in comparison to the prior year period.

The trailing twelve-month compensation ratio of 64.4% compares to 63.0% for the same period in 2015. The compensation ratio for the quarter ended June 30, 2016 was 63.1%, compared to 64.6% for the quarter ended June 30, 2015.

For the three and six months ended June 30, 2016, Evercore's effective tax rate was approximately 47.7% and 49.5%, respectively, compared to 50.5% and 50.7%, respectively, for the three and six months ended June 30, 2015. The effective tax rate is impacted by the non-deductible treatment of compensation associated with Evercore LP Units/Interests.

Adjusted Results:

 

Adjusted 

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues

$         348,272

 

$         257,203

 

$         268,500

 

35%

 

30%

 

$         605,475

 

$         506,659

 

20%

Operating Income

$           90,980

 

$           54,670

 

$           58,756

 

66%

 

55%

 

$         145,650

 

$         109,229

 

33%

Net Income Attributable to Evercore Partners Inc.

$           53,363

 

$           32,815

 

$           33,931

 

63%

 

57%

 

$           86,178

 

$           63,656

 

35%

Diluted Earnings Per Share

$               1.04

 

$               0.63

 

$               0.65

 

65%

 

60%

 

$               1.67

 

$               1.20

 

39%

Compensation Ratio

57.6%

 

57.6%

 

57.4%

         

57.6%

 

57.4%

   

Operating Margin

26.1%

 

21.3%

 

21.9%

         

24.1%

 

21.6%

   

 

Net Revenues were $348.3 million for the quarter ended June 30, 2016, an increase of 30% compared to $268.5 million for the quarter ended June 30, 2015. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Net Revenues would have increased 32% compared to the second quarter of 2015. Net Revenues were $605.5 million for the six months ended June 30, 2016, an increase of 20% compared to $506.7 million for the six months ended June 30, 2015. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Net Revenues would have increased 22% compared to the six months ended June 30, 2015. Net Income Attributable to Evercore Partners Inc. was $53.4 million for the quarter ended June 30, 2016, up 57% compared to $33.9 million a year ago. Earnings Per Share was $1.04 for the quarter ended June 30, 2016, up 60% in comparison to the prior year period. Net Income Attributable to Evercore Partners Inc. was $86.2 million for the six months ended June 30, 2016, up 35% compared to $63.7 million for the same period last year. Earnings Per Share was $1.67 for the six months ended June 30, 2016, up 39% in comparison to the prior year period.

The compensation ratio for the trailing twelve months was 57.9%, compared to 58.3% for the same period in 2015. The compensation ratio for the quarter ended June 30, 2016 was 57.6%, compared to 57.4% for the quarter ended June 30, 2015. 

For the three and six months ended June 30, 2016, Evercore's effective tax rate was 37.5%, compared to 37.3% for the three and six months ended June 30, 2015. Changes in the effective tax rate are principally driven by the level of earnings in businesses with minority owners and earnings generated outside of the U.S. 

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.

"Evercore maintained very strong momentum in the second quarter, increasing our Advisory market share, growing the Equities business, maintaining cost discipline and returning significant capital to our shareholders. And despite the episodic volatility in the marketplace, activity levels remained quite high, adding to our backlogs. We reported strong results in both the second quarter and the first half, with significant growth in both revenue and earnings from the prior year, and we believe that we are well positioned as we begin the second half of the year," said Ralph Schlosstein, President and Chief Executive Officer. "We continue to advance our strategic objectives, adding seasoned bankers and research analysts to our Investment Banking business in the United States and Europe. We continue to streamline our Investment Management business, announcing the plan to transfer ownership and control of our private equity business in Mexico to the management team, and we continue to return significant capital to our shareholders through meaningful share repurchases and competitive dividend distributions."

"The financial market environment continues to favor our business and our model. And, all of our Investment Banking activities contributed to these record results," said Roger C. Altman, Executive Chairman. "While there has been considerable public debate as to whether Brexit would slow U.K. and European M&A volume, we have yet to see evidence of that."

Non-GAAP Measures:

Throughout this release certain information is presented on an Adjusted basis, which is a non-GAAP measure. Adjusted 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 and Interests into Class A shares. Evercore believes that the disclosed Adjusted 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. 

Evercore's Adjusted Net Income Attributable to Evercore Partners Inc. for the three and six months ended June 30, 2016 was higher than U.S. GAAP as a result of the exclusion of expenses associated with awards granted in conjunction with certain of the Company's acquisitions, and certain other business acquisition-related charges and professional fees.

Acquisition-related compensation charges for 2016 include expenses associated with performance-based awards granted in conjunction with the Company's acquisition of ISI. The amount of expense is based on the determination that it is probable that Evercore ISI will achieve certain earnings and margin targets in future periods. Acquisition and Transition charges for 2016 include professional fees incurred, as well as the reversal of a provision for certain settlements. Acquisition-related charges for 2016 also include adjustments for contingent consideration related to certain acquisitions.

In addition, for Adjusted purposes, client related expenses have been presented as a reduction from Revenues and Non-compensation costs.

Evercore's Adjusted Diluted Shares Outstanding for the three and six months ended June 30, 2016 were higher than U.S. GAAP as a result of the inclusion of Evercore LP partnership units, as well as the assumed vesting of LP Units/Interests and unvested restricted stock units granted to ISI employees.

Further details of these adjustments, as well as an explanation of similar amounts for the three and six months ended June 30, 2015 and the three months ended March 31, 2016, are included in Annex I, pages A-2 to A-13. 

Business Line Reporting – Discussion of U.S. GAAP Results

The following is a discussion of Evercore's segment results on a U.S. GAAP basis.

Investment Banking

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues:

                             

Investment Banking Revenues

$         327,174

 

$         240,626

 

$         246,550

 

36%

 

33%

 

$         567,800

 

$         464,188

 

22%

Other Revenue, net

983

 

(913)

 

(2,173)

 

NM

 

NM

 

70

 

(3,231)

 

NM

Net Revenues

328,157

 

239,713

 

244,377

 

37%

 

34%

 

567,870

 

460,957

 

23%

                               

Expenses:

                             

Employee Compensation and Benefits

208,916

 

169,718

 

159,677

 

23%

 

31%

 

378,634

 

308,317

 

23%

Non-compensation Costs

61,404

 

57,574

 

57,535

 

7%

 

7%

 

118,978

 

110,204

 

8%

Special Charges

-

 

-

 

(139)

 

NM

 

NM

 

-

 

2,151

 

NM

Total Expenses

270,320

 

227,292

 

217,073

 

19%

 

25%

 

497,612

 

420,672

 

18%

                               

Operating Income

$           57,837

 

$           12,421

 

$           27,304

 

366%

 

112%

 

$           70,258

 

$           40,285

 

74%

                               

Compensation Ratio

63.7%

 

70.8%

 

65.3%

         

66.7%

 

66.9%

   

Operating Margin

17.6%

 

5.2%

 

11.2%

         

12.4%

 

8.7%

   

 

For the second quarter, Evercore's Investment Banking segment reported Net Revenues of $328.2 million, which represents an increase of 34% year-over-year. Operating Income of $57.8 million increased 112% from the second quarter of last year. The Operating Margin was 17.6%, in comparison to 11.2% for the second quarter of last year. For the six months ended June 30, 2016, Investment Banking reported Net Revenues of $567.9 million, an increase of 23% from last year. Year-to-date Operating Income of $70.3 million increased 74% compared to $40.3 million last year. The year-to-date Operating Margin was 12.4% compared to 8.7% last year.

Revenues

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

 

(dollars in thousands)

Advisory Fees

$         256,758

 

$         180,102

 

$         172,288

 

43%

 

49%

 

$         436,860

 

$         331,090

 

32%

Commissions and Related Fees

57,178

 

57,218

 

53,031

 

— %

 

8%

 

114,396

 

106,099

 

8%

Underwriting Fees

13,238

 

3,306

 

21,231

 

300%

 

(38%)

 

16,544

 

26,999

 

(39%)

Total Investment Banking Revenue

$         327,174

 

$         240,626

 

$         246,550

 

36%

 

33%

 

$         567,800

 

$         464,188

 

22%

 

During the quarter, Investment Banking earned advisory fees from 201 client transactions (vs. 179 in Q2 2015) and fees in excess of $1 million from 58 client transactions (vs. 42 in Q2 2015).  For the first six months of the year, Investment Banking earned advisory fees from 296 clients (vs. 261 last year) and fees in excess of $1 million from 99 transactions (vs. 77 last year).

During the second quarter of 2016, Commissions and Related Fees of $57.2 million increased 8% from last year on higher trading volume. Underwriting Fees of $13.2 million for the three months ended June 30, 2016 decreased 38% versus the prior year. During the six months ended June 30, 2016, Commissions and Related Fees of $114.4 million increased 8% from last year on higher trading volume. Underwriting Fees of $16.5 million for the six months ended June 30, 2016 decreased 39% versus the prior year.

Within the above results, Evercore ISI, our U.S. equities business, reported Net Revenues of $122.0 million, including allocated U.S. underwriting revenues of $7.8 million for the six months ended June 30, 2016 and Operating Margins of 20.7%, compared to 16.6% for the first six months of 2015. Operating margins as contemplated for the performance targets of the Class G and H LP Interests, giving effect to just Commissions and Related Fees, for the six months ended June 30, 2016 were consistent with those assumed at the time of the closing of the transactions.

Expenses

Compensation costs were $208.9 million for the second quarter, an increase of 31% year-over-year. The trailing twelve-month compensation ratio was 65.0%, up from 63.2% a year ago. Evercore's Investment Banking compensation ratio was 63.7% for the second quarter, down versus the compensation ratio reported for the three months ended June 30, 2015 of 65.3%. Year-to-date compensation costs were $378.6 million, an increase of 23% from the prior year.

Compensation costs include $20.6 million and $52.3 million of expense for the three and six months ended June 30, 2016, respectively, and $18.1 million and $43.3 million of expense for the three and six months ended June 30, 2015, respectively, related to the Class E, G and H LP Units/Interests issued in conjunction with the acquisition of ISI. The amount of expense related to the Class G and H LP Interests is based on the determination that it is probable that Evercore ISI will achieve certain earnings and margin targets in future periods. 

Assuming the maximum thresholds for the Class G and H LP Interests were considered probable of achievement at June 30, 2016, an additional $21.6 million of expense would have been incurred in the second quarter ended June 30, 2016 and the remaining expense to be accrued over the future vesting period extending from July 1, 2016 to February 15, 2020 would be $141.9 million. In that circumstance, the total number of Class G and H LP Interests that would vest and become exchangeable to Class E LP Units would be 5.0 million.

Non-compensation costs for the current quarter were $61.4 million, up 7% from the same period last year. The increase in non-compensation costs versus the same period in the prior year reflects the addition of personnel within most parts of the business and increased new business costs associated with higher levels of global transaction activity. The ratio of non-compensation costs to net revenue for the current quarter was 18.7%, compared to 23.5% in the same quarter last year. Year-to-date non-compensation costs were $119.0 million, up 8% from the prior year. The ratio of non-compensation costs to net revenue for the six months ended June 30, 2016 was 21.0%, compared to 23.9% last year.

Investment Management

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

Net Revenues:

(dollars in thousands)

Investment Management Revenues

$           22,255

 

$           18,429

 

$           24,505

 

21%

 

(9%)

 

$           40,684

 

$           46,586

 

(13%)

Other Revenue, net

244

 

(429)

 

(786)

 

NM

 

NM

 

(185)

 

(1,464)

 

87%

Net Revenues

22,499

 

18,000

 

23,719

 

25%

 

(5%)

 

40,499

 

45,122

 

(10%)

                               

Expenses:

                             

Employee Compensation and Benefits

12,418

 

10,197

 

13,467

 

22%

 

(8%)

 

22,615

 

27,953

 

(19%)

Non-compensation Costs

5,313

 

4,099

 

6,445

 

30%

 

(18%)

 

9,412

 

11,997

 

(22%)

Special Charges

-

 

-

 

-

 

NM

 

NM

 

-

 

3,348

 

NM

Total Expenses

17,731

 

14,296

 

19,912

 

24%

 

(11%)

 

32,027

 

43,298

 

(26%)

                               

Operating Income

$             4,768

 

$             3,704

 

$             3,807

 

29%

 

25%

 

$             8,472

 

$             1,824

 

364%

                               

Compensation Ratio

55.2%

 

56.7%

 

56.8%

         

55.8%

 

61.9%

   

Operating Margin

21.2%

 

20.6%

 

16.1%

         

20.9%

 

4.0%

   
                               

Assets Under Management (in millions) (1)

$             8,545

 

$             8,455

 

$           14,077

 

1%

 

(39%)

 

$             8,545

 

$           14,077

 

(39%)

                               

(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries and therefore exclude AUM of $4,921 million and $5,090 million from Atalanta Sosnoff at June 30, 2016 and March 31, 2016, respectively, following the restructuring of our investment on December 31, 2015.

 

For the second quarter, Evercore's Investment Management segment reported Net Revenues of $22.5 million and Operating Income of $4.8 million. The Operating Margin was 21.2%. For the six months ended June 30, 2016, Investment Management reported Net Revenues of $40.5 million and Operating Income of $8.5 million. The year-to-date Operating Margin was 20.9%, compared to 4.0% last year.

As of June 30, 2016, Investment Management reported $8.5 billion of AUM, an increase of 1% from March 31, 2016.

Revenues

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

Investment Advisory and Management Fees

(dollars in thousands)

Wealth Management

$             9,090

 

$             8,779

 

$             8,733

 

4%

 

4%

 

$           17,869

 

$           17,178

 

4%

Institutional Asset Management

5,906

 

5,679

 

11,721

 

4%

 

(50%)

 

11,585

 

22,814

 

(49%)

Private Equity

1,348

 

1,349

 

1,414

 

— %

 

(5%)

 

2,697

 

2,822

 

(4%)

Total Investment Advisory and Management Fees

16,344

 

15,807

 

21,868

 

3%

 

(25%)

 

32,151

 

42,814

 

(25%)

                               

Realized and Unrealized Gains

                             

Institutional Asset Management

1,147

 

1,255

 

822

 

(9%)

 

40%

 

2,402

 

2,446

 

(2%)

Private Equity

4,764

 

1,367

 

1,815

 

249%

 

162%

 

6,131

 

1,326

 

362%

Total Realized and Unrealized Gains 

5,911

 

2,622

 

2,637

 

125%

 

124%

 

8,533

 

3,772

 

126%

                               

Investment Management Revenues

$           22,255

 

$           18,429

 

$           24,505

 

21%

 

(9%)

 

$           40,684

 

$           46,586

 

(13%)

                               

 

On December 31, 2015, the Company restructured its investment in Atalanta Sosnoff such that, following the restructuring, its results are reflected on the equity method of accounting.

On July 20, 2016, the Company announced its plan to transfer ownership and control of the Mexican Private Equity Business to a newly formed entity, Glisco Partners Inc., which is controlled by the principals of the business. As of June 30, 2016, the Company's consolidated AUM included $267 million related to the businesses being transferred.

Investment Advisory and Management Fees of $16.3 million for the quarter ended June 30, 2016 decreased 25% compared to the same period a year ago, driven primarily by lower fees in Institutional Asset Management related to our deconsolidation of Atalanta Sosnoff, partially offset by higher fees in Wealth Management.

Realized and Unrealized Gains of $5.9 million in the quarter increased relative to the prior year, with the change relative to the prior period driven principally by higher gains and performance fees in Private Equity.

Expenses

Investment Management's second quarter expenses were $17.7 million, down 11% compared to the second quarter of 2015. Year-to-date Investment Management expenses were $32.0 million, down 26% from a year ago.

Business Line Reporting – Discussion of Adjusted Results

The following is a discussion of Evercore's segment results on an Adjusted basis. See Annex I, pages A-2 to A-13 for further information and reconciliations of these metrics to our U.S. GAAP results.

Investment Banking

 

Adjusted 

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues:

                             

Investment Banking Revenues

$         320,924

 

$         236,432

 

$         243,007

 

36%

 

32%

 

$         557,356

 

$         456,979

 

22%

Other Revenue, net

3,859

 

565

 

(380)

 

583%

 

NM

 

4,424

 

312

 

NM

Net Revenues

324,783

 

236,997

 

242,627

 

37%

 

34%

 

561,780

 

457,291

 

23%

                               

Expenses:

                             

Employee Compensation and Benefits

188,178

 

137,959

 

140,532

 

36%

 

34%

 

326,137

 

262,637

 

24%

Non-compensation Costs

52,198

 

50,383

 

49,393

 

4%

 

6%

 

102,581

 

95,023

 

8%

Total Expenses

240,376

 

188,342

 

189,925

 

28%

 

27%

 

428,718

 

357,660

 

20%

                               

Operating Income

$           84,407

 

$           48,655

 

$           52,702

 

73%

 

60%

 

$         133,062

 

$           99,631

 

34%

                               

Compensation Ratio

57.9%

 

58.2%

 

57.9%

         

58.1%

 

57.4%

   

Operating Margin

26.0%

 

20.5%

 

21.7%

         

23.7%

 

21.8%

   
                               

 

For the second quarter, Evercore's Investment Banking segment reported Net Revenues of $324.8 million, which represents an increase of 34% year-over-year. Operating Income of $84.4 million increased 60% from the second quarter of last year. The Operating Margin was 26.0%, in comparison to 21.7% for the second quarter of last year. For the six months ended June 30, 2016, Investment Banking reported Net Revenues of $561.8 million, an increase of 23% from last year. Year-to-date Operating Income of $133.1 million increased 34% compared to $99.6 million last year. The year-to-date Operating Margin was 23.7% compared to 21.8% last year.

Revenues

 

Adjusted 

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

 

(dollars in thousands)

Advisory Fees (1)

$         250,508

 

$         175,908

 

$         168,745

 

42%

 

48%

 

$         426,416

 

$         323,881

 

32%

Commissions and Related Fees

57,178

 

57,218

 

53,031

 

— %

 

8%

 

114,396

 

106,099

 

8%

Underwriting Fees

13,238

 

3,306

 

21,231

 

300%

 

(38%)

 

16,544

 

26,999

 

(39%)

Total Investment Banking Revenue

$         320,924

 

$         236,432

 

$         243,007

 

36%

 

32%

 

$         557,356

 

$         456,979

 

22%

 

(1) Advisory Fees on an Adjusted basis reflect the reduction of revenues for client-related expenses and provisions for uncollected receivables of $6,540, $3,922 and $4,346 for the three months ended June 30, 2016, March 31, 2016 and June 30, 2015, respectively, and $10,462 and $7,975 for the six months ended June 30, 2016 and 2015, respectively, as well as the reclassification of earnings (losses) related to our equity investment in G5 | Evercore - Advisory of $290, ($272) and $803 for the three months ended June 30, 2016, March 31, 2016 and June 30, 2015, respectively, and $18 and $766 for the six months ended June 30, 2016 and 2015, respectively.

 

During the quarter, Investment Banking earned advisory fees from 201 client transactions (vs. 179 in Q2 2015) and fees in excess of $1 million from 58 client transactions (vs. 42 in Q2 2015).  For the first six months of the year, Investment Banking earned advisory fees from 296 clients (vs. 261 last year) and fees in excess of $1 million from 99 transactions (vs. 77 last year).

During the second quarter of 2016, Commissions and Related Fees of $57.2 million increased 8% from last year on higher trading volume. Underwriting Fees of $13.2 million for the three months ended June 30, 2016 decreased 38% versus the prior year. During the six months ended June 30, 2016, Commissions and Related Fees of $114.4 million increased 8% from last year on higher trading volume. Underwriting Fees of $16.5 million for the six months ended June 30, 2016 decreased 39% versus the prior year.

Within the above results, Evercore ISI, our U.S. equities business, reported Net Revenues of $122.0 million, including allocated U.S. underwriting revenues of $7.8 million for the six months ended June 30, 2016 and Operating Margins of 20.7%, compared to 16.6% for the first six months of 2015. Operating margins as contemplated for the performance targets of the Class G and H LP Interests, giving effect to just Commissions and Related Fees, for the six months ended June 30, 2016 were consistent with those assumed at the time of the closing of the transactions.

Expenses

Compensation costs were $188.2 million for the second quarter, an increase of 34% year-over-year. The trailing twelve-month compensation ratio was 58.4%, down from 58.6% a year ago. Evercore's Investment Banking compensation ratio was 57.9% for the second quarter, flat versus the compensation ratio reported for the three months ended June 30, 2015. Year-to-date compensation costs were $326.1 million, an increase of 24% from the prior year.

Non-compensation costs for the current quarter were $52.2 million, up 6% from the same period last year. The increase in non-compensation costs versus the same period in the prior year reflects the addition of personnel within most parts of the business and increased new business costs associated with higher levels of global transaction activity. The ratio of non-compensation costs to net revenue for the current quarter was 16.1%, compared to 20.4% in the same quarter last year. Year-to-date non-compensation costs were $102.6 million, up 8% from the prior year. The ratio of non-compensation costs to net revenue for the six months ended June 30, 2016 was 18.3%, compared to 20.8% last year.

Investment Management

 

Adjusted 

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

Net Revenues:

(dollars in thousands)

Investment Management Revenues

$           23,245

 

$           19,965

 

$           25,700

 

16%

 

(10%)

 

$           43,210

 

$           48,920

 

(12%)

Other Revenue, net

244

 

241

 

173

 

1%

 

41%

 

485

 

448

 

8%

Net Revenues

23,489

 

20,206

 

25,873

 

16%

 

(9%)

 

43,695

 

49,368

 

(11%)

                               

Expenses:

                             

Employee Compensation and Benefits

12,418

 

10,197

 

13,467

 

22%

 

(8%)

 

22,615

 

27,953

 

(19%)

Non-compensation Costs

4,498

 

3,994

 

6,352

 

13%

 

(29%)

 

8,492

 

11,817

 

(28%)

Total Expenses

16,916

 

14,191

 

19,819

 

19%

 

(15%)

 

31,107

 

39,770

 

(22%)

                               

Operating Income

$             6,573

 

$             6,015

 

$             6,054

 

9%

 

9%

 

$           12,588

 

$             9,598

 

31%

                               

Compensation Ratio

52.9%

 

50.5%

 

52.1%

         

51.8%

 

56.6%

   

Operating Margin

28.0%

 

29.8%

 

23.4%

         

28.8%

 

19.4%

   
                               

Assets Under Management (in millions) (1)

$             8,545

 

$             8,455

 

$           14,077

 

1%

 

(39%)

 

$             8,545

 

$           14,077

 

(39%)

                               

(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries and therefore exclude AUM of $4,921 million and $5,090 million from Atalanta Sosnoff at June 30, 2016 and March 31, 2016, respectively, following the restructuring of our investment on December 31, 2015.

 

For the second quarter, Evercore's Investment Management segment reported Net Revenues of $23.5 million and Operating Income of $6.6 million. The Operating Margin was 28.0%. For the six months ended June 30, 2016, Investment Management reported Net Revenues of $43.7 million and Operating Income $12.6 million. The year-to-date Operating Margin was 28.8%, compared to 19.4% last year.

As of June 30, 2016, Investment Management reported $8.5 billion of AUM, an increase of 1% from March 31, 2016.

Revenues

 

Adjusted 

 

Three Months Ended

 

% Change vs.

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

% Change

Investment Advisory and Management Fees

(dollars in thousands)

Wealth Management

$             9,090

 

$             8,779

 

$             8,733

 

4%

 

4%

 

$           17,869

 

$           17,178

 

4%

Institutional Asset Management (1)

5,522

 

5,656

 

11,721

 

(2%)

 

(53%)

 

11,178

 

22,809

 

(51%)

Private Equity

1,348

 

1,349

 

1,414

 

— %

 

(5%)

 

2,697

 

2,822

 

(4%)

Total Investment Advisory and Management Fees

15,960

 

15,784

 

21,868

 

1%

 

(27%)

 

31,744

 

42,809

 

(26%)

                               

Realized and Unrealized Gains

                             

Institutional Asset Management

1,147

 

1,255

 

822

 

(9%)

 

40%

 

2,402

 

2,446

 

(2%)

Private Equity

4,764

 

1,367

 

1,815

 

249%

 

162%

 

6,131

 

1,326

 

362%

Total Realized and Unrealized Gains 

5,911

 

2,622

 

2,637

 

125%

 

124%

 

8,533

 

3,772

 

126%

                               

Equity in Earnings of Affiliates (2)

1,374

 

1,559

 

1,195

 

(12%)

 

15%

 

2,933

 

2,339

 

25%

Investment Management Revenues

$           23,245

 

$           19,965

 

$           25,700

 

16%

 

(10%)

 

$           43,210

 

$           48,920

 

(12%)

                               

(1) Management fees from Institutional Asset Management on an Adjusted basis reflect the reduction of revenues for client-related expenses of $384 and $23 for the three months ended June 30, 2016 and March 31, 2016, respectively, and $407 and $5 for the six months ended June 30, 2016 and 2015, respectively. 

 

(2) Equity in G5 ǀ Evercore - Wealth Management, ABS and Atalanta Sosnoff (after its deconsolidation on December 31, 2015) on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income from Equity Method Investments. 

 

Investment Advisory and Management Fees of $16.0 million for the quarter ended June 30, 2016 decreased 27% compared to the same period a year ago, driven primarily by lower fees in Institutional Asset Management related to our deconsolidation of Atalanta Sosnoff, partially offset by higher fees in Wealth Management.

On December 31, 2015, the Company restructured its investment in Atalanta Sosnoff such that, following the restructuring, its results are reflected on the equity method of accounting. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Investment Management Revenues would have increased 14% when compared to the second quarter of 2015.

On July 20, 2016, the Company announced its plan to transfer ownership and control of the Mexican Private Equity Business to a newly formed entity, Glisco Partners Inc., which is controlled by the principals of the business. As of June 30, 2016, the Company's consolidated AUM included $267 million related to the businesses being transferred.

Realized and Unrealized Gains of $5.9 million in the quarter increased relative to the prior year, with the change relative to the prior period driven principally by higher gains and performance fees in Private Equity.

Equity in Earnings of Affiliates of $1.4 million in the quarter increased relative to the prior year principally as a result of the inclusion of Atalanta Sosnoff's income in the second quarter of 2016.

Expenses

Investment Management's second quarter expenses were $16.9 million, down 15% compared to the second quarter of 2015. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Investment Management expenses would have increased 16% when compared to the second quarter of 2015. Year-to-date Investment Management expenses were $31.1 million, down 22% from a year ago. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Investment Management expenses would have increased 6% when compared to the six months ended June 30, 2015.

Balance Sheet

The Company continues to maintain a strong balance sheet, holding cash, cash equivalents and marketable securities of $316.0 million at June 30, 2016. Current assets exceed current liabilities by $334.8 million at June 30, 2016. Amounts due related to the Long-Term Notes Payable and Subordinated Borrowings were $184.5 million at June 30, 2016.

Capital Transactions

On July 26, 2016, the Board of Directors of Evercore declared a quarterly dividend of $0.31 per share to be paid on September 9, 2016 to common stockholders of record on August 26, 2016.

During the three months ended June 30, 2016 the Company repurchased approximately 1.0 million shares at an average cost per share of $49.74. During the six months ended June 30, 2016, the Company repurchased a total of 3.4 million shares at an average price of $47.56.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Wednesday, July 27, 2016, accessible via telephone and the internet. Investors and analysts may participate in the live conference call by dialing (877) 359-9508 (toll-free domestic) or (224) 357-2393 (international); passcode: 50327013.  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 (855) 859-2056   (toll-free domestic) or (404) 537-3406 (international); passcode: 50327013. 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

Established in 1995, Evercore is a leading global independent investment banking advisory firm. Evercore advises a diverse set of investment banking clients on a wide range of transactions and issues and provides institutional investors with high quality equity research, sales and trading execution that is free of the conflicts created by proprietary activities. The firm also offers investment management services to high net worth and institutional investors. With 28 offices in North America, Europe, South America and Asia, Evercore has the scale and strength to serve clients globally through a focused and tailored approach designed to meet their unique needs.  More information about Evercore can be found on the Company's website at www.evercore.com.

 

Investor Contact:

Robert B. Walsh

 

Chief Financial Officer, Evercore

 

+1.212.857.3100

   

Media Contact:

Dana Gorman 

 

The Abernathy MacGregor Group, for Evercore

 

+1.212.371.5999

 

Basis of Alternative Financial Statement Presentation

Our Adjusted results are a non-GAAP measure. Evercore believes that the disclosed Adjusted 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 our U.S. GAAP results to Adjusted 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," "probable," "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, 2015, 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.

ANNEX I

 

Schedule

Page Number

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015

A-1

Adjusted:

 

Adjusted Results (Unaudited)

A-2

U.S. GAAP Reconciliation to Adjusted Results (Unaudited)

A-4

U.S. GAAP Segment Reconciliation to Adjusted Results for the Three and Six Months ended June 30, 2016 (Unaudited)

A-7

U.S. GAAP Segment Reconciliation to Adjusted Results for the Three Months ended March 31, 2016 (Unaudited)

A-8

U.S. GAAP Segment Reconciliation to Adjusted Results for the Three and Six Months ended June 30, 2015 (Unaudited)

A-9

U.S. GAAP Segment Reconciliation to Consolidated Results (Unaudited)

A-10

Notes to Unaudited Condensed Consolidated Adjusted Financial Data

A-11

 

EVERCORE PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

(dollars in thousands, except per share data) 

(UNAUDITED)

               
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2016

 

2015

 

2016

 

2015

               

Revenues

             

Investment Banking Revenue

$                327,174

 

$                246,550

 

$                567,800

 

$                464,188

Investment Management Revenue

22,255

 

24,505

 

40,684

 

46,586

Other Revenue

5,764

 

1,852

 

7,141

 

4,559

Total Revenues

355,193

 

272,907

 

615,625

 

515,333

Interest Expense (1)

4,537

 

4,811

 

7,256

 

9,254

Net Revenues

350,656

 

268,096

 

608,369

 

506,079

               

Expenses

             

Employee Compensation and Benefits

221,334

 

173,144

 

401,249

 

336,270

Occupancy and Equipment Rental

10,582

 

11,684

 

21,356

 

23,914

Professional Fees

13,751

 

13,164

 

24,453

 

22,597

Travel and Related Expenses

15,989

 

13,400

 

29,818

 

26,570

Communications and Information Services

9,786

 

9,738

 

19,789

 

18,300

Depreciation and Amortization

6,626

 

6,313

 

13,008

 

12,714

Special Charges

-

 

(139)

 

-

 

5,499

Acquisition and Transition Costs

(329)

 

917

 

(329)

 

1,401

Other Operating Expenses

10,312

 

8,764

 

20,295

 

16,705

Total Expenses

288,051

 

236,985

 

529,639

 

463,970

               

Income Before Income from Equity Method Investments and Income Taxes

62,605

 

31,111

 

78,730

 

42,109

Income from Equity Method Investments

1,664

 

1,998

 

2,951

 

3,105

Income Before Income Taxes

64,269

 

33,109

 

81,681

 

45,214

Provision for Income Taxes

30,676

 

16,723

 

40,410

 

22,935

Net Income 

33,593

 

16,386

 

41,271

 

22,279

Net Income Attributable to Noncontrolling Interest

9,506

 

5,622

 

11,866

 

7,215

Net Income Attributable to Evercore Partners Inc.

$                  24,087

 

$                  10,764

 

$                  29,405

 

$                  15,064

               

Net Income Attributable to Evercore Partners Inc. Common Shareholders

$                  24,087

 

$                  10,764

 

$                  29,405

 

$                  15,064

               

Weighted Average Shares of Class A Common Stock Outstanding:

             

Basic

39,249

 

36,445

 

39,435

 

36,584

Diluted

43,603

 

42,165

 

44,261

 

42,479

               

Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders:

             

Basic

$                      0.61

 

$                      0.30

 

$                      0.75

 

$                      0.41

Diluted

$                      0.55

 

$                      0.26

 

$                      0.66

 

$                      0.35

               

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

 

A-1

Adjusted Results

Throughout the discussion of Evercore's business segments, information is presented on an Adjusted basis (formerly called "Adjusted Pro Forma"), which is a non-generally accepted accounting principles ("non-GAAP") measure. Adjusted 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, as well as Acquisition Related Share Issuances and Unvested Restricted Stock Units granted to Lexicon and ISI employees, into Class A shares. Evercore believes that the disclosed Adjusted 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 amounts are allocated to the Company's two business segments: Investment Banking and Investment Management. The differences between the Adjusted 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, in Employee Compensation and Benefits, resulting from the vesting of Class E LP Units issued in conjunction with the acquisition of ISI, as well as Class G and H LP Interests. The amount of expense for the Class G and H LP Interests is based on the determination that it is probable that Evercore ISI will achieve certain earnings and margin targets in 2016 and in future periods. The Adjusted results assume these LP Units and certain Class G and H LP Interests have vested and have been exchanged for Class A shares. Accordingly, any expense associated with these units, and related awards, is excluded from the Adjusted results, and the noncontrolling interest related to these units is converted to a controlling interest. The Company's Management believes that it is useful to provide the per-share effect associated with the assumed conversion of these previously granted equity interests, and thus the Adjusted results reflect the exchange of certain vested and unvested Evercore LP partnership units and interests and IPO related restricted stock unit awards into Class A shares.

2.  Adjustments Associated with Business Combinations.  The following charges resulting from    business combinations have been excluded from the Adjusted 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 and Other Purchase Accounting-related Amortization.  Amortization of intangible assets and other purchase accounting-related amortization from the acquisitions of ISI, SFS and certain other acquisitions.

b. Compensation Charges.  Expenses for deferred consideration issued to the sellers of certain of the Company's acquisitions.

c.  Acquisition and Transition Costs.  Primarily professional fees incurred, as well as the reversal of a provision for certain settlements in 2016 and costs related to transitioning acquisitions or divestitures.

d.  Fair Value of Contingent Consideration.  The expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company's acquisitions is excluded from the Adjusted results.

3.  Client Related Expenses.  Client related expenses and provisions for uncollected receivables have been classified as a reduction of revenue in the Adjusted 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.

A-2

4.  Special Charges.  Expenses during 2015 include separation benefits and costs associated with the termination of certain contracts within the Company's Evercore ISI business, as well as the finalization of a matter associated with the wind-down of the Company's U.S. Private Equity business.

5.  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 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 certain Evercore LP Units and interests 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 presentation can reflect the netting of changes in the Company's Tax Receivable Agreement against Income Tax Expense.

6.  Presentation of Interest Expense.  The Adjusted 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 Investment Banking and Investment Management Operating Income are presented before interest expense on debt, which is included in interest expense on a U.S. GAAP basis. 

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

A-3

EVERCORE PARTNERS INC.

U.S. GAAP RECONCILIATION TO ADJUSTED  RESULTS

(dollars in thousands)

(UNAUDITED)

           
 

Three Months Ended

 

Six Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

Net Revenues - U.S. GAAP

$          350,656

 

$          257,713

 

$          268,096

 

$          608,369

 

$          506,079

Client Related Expenses (1)

(6,924)

 

(3,945)

 

(4,346)

 

(10,869)

 

(7,980)

Income from Equity Method Investments (2)

1,664

 

1,287

 

1,998

 

2,951

 

3,105

Interest Expense on Debt (3)

2,876

 

2,148

 

2,752

 

5,024

 

5,349

Other Purchase Accounting-related Amortization (7a)

-

 

-

 

-

 

-

 

106

Net Revenues - Adjusted 

$          348,272

 

$          257,203

 

$          268,500

 

$          605,475

 

$          506,659

                   

Compensation Expense - U.S. GAAP

$          221,334

 

$          179,915

 

$          173,144

 

$          401,249

 

$          336,270

Amortization of LP Units / Interests and Certain Other Awards (4)

(20,738)

 

(31,759)

 

(18,193)

 

(52,497)

 

(44,143)

Other Acquisition Related Compensation Charges (5)

-

 

-

 

(952)

 

-

 

(1,537)

Compensation Expense - Adjusted 

$          200,596

 

$          148,156

 

$          153,999

 

$          348,752

 

$          290,590

                   

Operating Income - U.S. GAAP

$            62,605

 

$            16,125

 

$            31,111

 

$            78,730

 

$            42,109

Income from Equity Method Investments (2)

1,664

 

1,287

 

1,998

 

2,951

 

3,105

Pre-Tax Income - U.S. GAAP

64,269

 

17,412

 

33,109

 

81,681

 

45,214

Amortization of LP Units / Interests and Certain Other Awards (4)

20,738

 

31,759

 

18,193

 

52,497

 

44,143

Other Acquisition Related Compensation Charges (5)

-

 

-

 

952

 

-

 

1,537

Special Charges (6)

-

 

-

 

(139)

 

-

 

5,499

Intangible Asset Amortization / Other Purchase Accounting-related Amortization (7a)

2,845

 

3,245

 

2,972

 

6,090

 

6,086

Acquisition and Transition Costs (7b)

(329)

 

-

 

917

 

(329)

 

1,401

Fair Value of Contingent Consideration (7c)

581

 

106

 

-

 

687

 

-

Pre-Tax Income - Adjusted 

88,104

 

52,522

 

56,004

 

140,626

 

103,880

Interest Expense on Debt (3)

2,876

 

2,148

 

2,752

 

5,024

 

5,349

Operating Income - Adjusted

$            90,980

 

$            54,670

 

$            58,756

 

$          145,650

 

$          109,229

                   

Provision for Income Taxes - U.S. GAAP

$            30,676

 

$              9,734

 

$            16,723

 

$            40,410

 

$            22,935

Income Taxes (8)

2,364

 

9,961

 

4,139

 

12,325

 

15,763

Provision for Income Taxes - Adjusted 

$            33,040

 

$            19,695

 

$            20,862

 

$            52,735

 

$            38,698

                   

Net Income Attributable to Evercore Partners Inc. - U.S. GAAP

$            24,087

 

$              5,318

 

$            10,764

 

$            29,405

 

$            15,064

Amortization of LP Units / Interests and Certain Other Awards (4)

20,738

 

31,759

 

18,193

 

52,497

 

44,143

Other Acquisition Related Compensation Charges (5)

-

 

-

 

952

 

-

 

1,537

Special Charges (6)

-

 

-

 

(139)

 

-

 

5,499

Intangible Asset Amortization / Other Purchase Accounting-related Amortization (7a)

2,845

 

3,245

 

2,972

 

6,090

 

6,086

Acquisition and Transition Costs (7b)

(329)

 

-

 

917

 

(329)

 

1,401

Fair Value of Contingent Consideration (7c)

581

 

106

 

-

 

687

 

-

Income Taxes (8)

(2,364)

 

(9,961)

 

(4,139)

 

(12,325)

 

(15,763)

Noncontrolling Interest (9)

7,805

 

2,348

 

4,411

 

10,153

 

5,689

Net Income Attributable to Evercore Partners Inc. - Adjusted

$            53,363

 

$            32,815

 

$            33,931

 

$            86,178

 

$            63,656

                   

Diluted Shares Outstanding - U.S. GAAP 

43,603

 

44,920

 

42,165

 

44,261

 

42,479

LP Units (10a)

7,617

 

7,106

 

10,199

 

7,363

 

10,282

Unvested Restricted Stock Units - Event Based (10a)

12

 

12

 

12

 

12

 

12

Acquisition Related Share Issuance (10b)

-

 

-

 

96

 

-

 

106

Diluted Shares Outstanding - Adjusted

51,232

 

52,038

 

52,472

 

51,636

 

52,879

                   

Key Metrics: (a)

                 

Diluted Earnings Per Share - U.S. GAAP

$                0.55

 

$                0.12

 

$                0.26

 

$                0.66

 

$                0.35

Diluted Earnings Per Share - Adjusted

$                1.04

 

$                0.63

 

$                0.65

 

$                1.67

 

$                1.20

                   

Compensation Ratio - U.S. GAAP

63.1%

 

69.8%

 

64.6%

 

66.0%

 

66.4%

Compensation Ratio - Adjusted 

57.6%

 

57.6%

 

57.4%

 

57.6%

 

57.4%

                   

Operating Margin - U.S. GAAP

17.9%

 

6.3%

 

11.6%

 

12.9%

 

8.3%

Operating Margin - Adjusted 

26.1%

 

21.3%

 

21.9%

 

24.1%

 

21.6%

                   

Effective Tax Rate - U.S. GAAP

47.7%

 

55.9%

 

50.5%

 

49.5%

 

50.7%

Effective Tax Rate - Adjusted 

37.5%

 

37.5%

 

37.3%

 

37.5%

 

37.3%

                   

(a)  Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components above.

                   

 

A-4

EVERCORE PARTNERS INC.

RECONCILIATION TO ATALANTA SOSNOFF ADJUSTED RESULTS

(dollars in thousands)

(UNAUDITED)

   
 

Three Months Ended

 

Six Months Ended

 

June 30,
2016

 

June 30,
2015

 

% Change

 

June 30,
2016

 

June 30,
2015

 

% Change

                       

Adjusted Net Revenues (a)

$         348,272

 

$         268,500

 

30%

 

$         605,475

 

$         506,659

 

20%

Atalanta Sosnoff Deconsolidation (11)

-

 

(5,309)

 

NM

 

-

 

(10,714)

 

NM

Adjusted Net Revenues - Including Atalanta Sosnoff Adjustment

$         348,272

 

$         263,191

 

32%

 

$         605,475

 

$         495,945

 

22%

                       

Adjusted Investment Management Revenues (a)

$           23,245

 

$           25,700

 

(10%)

 

$           43,210

 

$           48,920

 

(12%)

Atalanta Sosnoff Deconsolidation (11)

-

 

(5,309)

 

NM

 

-

 

(10,713)

 

NM

Adjusted Investment Management Revenues - Including Atalanta Sosnoff Adjustment

$           23,245

 

$           20,391

 

14%

 

$           43,210

 

$           38,207

 

13%

                       

Adjusted Investment Management Expenses (a)

$           16,916

 

$           19,819

 

(15%)

 

$           31,107

 

$           39,770

 

(22%)

Atalanta Sosnoff Deconsolidation (11)

-

 

(5,200)

 

NM

 

-

 

(10,482)

 

NM

Adjusted Investment Management Expenses - Including Atalanta Sosnoff Adjustment

$           16,916

 

$           14,619

 

16%

 

$           31,107

 

$           29,288

 

6%

                       

(a)  See page A-4 for reconciliations of U.S. GAAP to Adjusted results.

           

 

A-5

EVERCORE PARTNERS INC.

U.S. GAAP RECONCILIATION TO ADJUSTED RESULTS

TRAILING TWELVE MONTHS

(dollars in thousands)

(UNAUDITED)

 

Consolidated

 

Twelve Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

Net Revenues - U.S. GAAP

$      1,325,563

 

$      1,243,003

 

$      1,055,128

Client Related Expenses (1)

(25,514)

 

(22,936)

 

(18,711)

Income from Equity Method Investments (2)

5,896

 

6,230

 

6,006

Interest Expense on Debt (3)

9,292

 

9,168

 

9,605

Other Purchase Accounting-related Amortization (7a)

-

 

-

 

317

Net Revenues - Adjusted 

$      1,315,237

 

$      1,235,465

 

$      1,052,345

           

Compensation Expense - U.S. GAAP

$         853,154

 

$         804,964

 

$         665,048

Amortization of LP Units / Interests and Certain Other Awards (4)

(92,027)

 

(89,482)

 

(47,542)

Other Acquisition Related Compensation Charges (5)

-

 

(952)

 

(3,697)

Compensation Expense - Adjusted 

$         761,127

 

$         714,530

 

$         613,809

           

Compensation Ratio - U.S. GAAP (a)

64.4%

 

64.8%

 

63.0%

Compensation Ratio - Adjusted (a)

57.9%

 

57.8%

 

58.3%

           
 

Investment Banking

 

Twelve Months Ended

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

Net Revenues - U.S. GAAP

$      1,237,828

 

$      1,154,048

 

$         961,420

Client Related Expenses (1)

(25,038)

 

(22,844)

 

(18,673)

Income from Equity Method Investments (2)

230

 

743

 

758

Interest Expense on Debt (3)

6,958

 

5,875

 

5,787

Other Purchase Accounting-related Amortization (7a)

-

 

-

 

317

Net Revenues - Adjusted 

$      1,219,978

 

$      1,137,822

 

$         949,609

           

Compensation Expense - U.S. GAAP

$         804,395

 

$         755,156

 

$         607,587

Amortization of LP Units / Interests and Certain Other Awards (4)

(92,027)

 

(89,482)

 

(47,542)

Other Acquisition Related Compensation Charges (5)

-

 

(952)

 

(3,697)

Compensation Expense - Adjusted 

$         712,368

 

$         664,722

 

$         556,348

           

Compensation Ratio - U.S. GAAP (a)

65.0%

 

65.4%

 

63.2%

Compensation Ratio - Adjusted (a)

58.4%

 

58.4%

 

58.6%

           

(a)  Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components above.

           

 

A-6

EVERCORE PARTNERS INC.

U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED RESULTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016

(dollars in thousands)

(UNAUDITED)

                         
 

Investment Banking Segment

 

Three Months Ended June 30, 2016

 

Six Months Ended June 30, 2016

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP Adjusted Basis

 

U.S. GAAP Basis

   

Adjustments

 

Non-GAAP Adjusted Basis

Net Revenues:

                       

Investment Banking Revenue

$               327,174

 

$             (6,250)

(1)(2)

$               320,924

 

$               567,800

   

$               (10,444)

(1)(2)

$               557,356

Other Revenue, net

983

 

2,876

(3)

3,859

 

70

   

4,354

(3)

4,424

Net Revenues

328,157

 

(3,374)

 

324,783

 

567,870

   

(6,090)

 

561,780

                         

Expenses:

                       

Employee Compensation and Benefits

208,916

 

(20,738)

(4)

188,178

 

378,634

   

(52,497)

(4)

326,137

Non-compensation Costs

61,404

 

(9,206)

(7)

52,198

 

118,978

   

(16,397)

(7)

102,581

Total Expenses

270,320

 

(29,944)

 

240,376

 

497,612

   

(68,894)

 

428,718

                         

Operating Income (a)

$                 57,837

 

$            26,570

 

$                 84,407

 

$                 70,258

   

$                 62,804

 

$               133,062

                         

Compensation Ratio (b)

63.7%

     

57.9%

 

66.7%

       

58.1%

Operating Margin (b)

17.6%

     

26.0%

 

12.4%

       

23.7%

                         
 

Investment Management Segment

 

Three Months Ended June 30, 2016

 

Six Months Ended June 30, 2016

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP Adjusted Basis

 

U.S. GAAP Basis

   

Adjustments

 

Non-GAAP Adjusted Basis

Net Revenues:

                       

Investment Management Revenue

$                 22,255

 

$                 990

(1)(2)

$                 23,245

 

$                 40,684

   

$                   2,526

(1)(2)

$                 43,210

Other Revenue, net

244

 

-

(3)

244

 

(185)

   

670

(3)

485

Net Revenues

22,499

 

990

 

23,489

 

40,499

   

3,196

 

43,695

                         

Expenses:

                       

Employee Compensation and Benefits

12,418

 

-

 

12,418

 

22,615

   

-

 

22,615

Non-compensation Costs

5,313

 

(815)

(7)

4,498

 

9,412

   

(920)

(7)

8,492

Total Expenses

17,731

 

(815)

 

16,916

 

32,027

   

(920)

 

31,107

                         

Operating Income (a)

$                   4,768

 

$              1,805

 

$                   6,573

 

$                   8,472

   

$                   4,116

 

$                 12,588

                         

Compensation Ratio (b)

55.2%

     

52.9%

 

55.8%

       

51.8%

Operating Margin (b)

21.2%

     

28.0%

 

20.9%

       

28.8%

                         

(a)  Operating Income for U.S. GAAP excludes Income (Loss) from Equity Method Investments.

(b)  Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components above.

 

A-7

EVERCORE PARTNERS INC.

U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED RESULTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(dollars in thousands)

(UNAUDITED)

           
 

Investment Banking Segment

 

Three Months Ended March 31, 2016

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP Adjusted Basis

Net Revenues:

         

Investment Banking Revenue

$               240,626

 

$                 (4,194)

(1)(2)

$               236,432

Other Revenue, net

(913)

 

1,478

(3)

565

Net Revenues

239,713

 

(2,716)

 

236,997