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Evercore Reports Third Quarter 2015 Results; Quarterly Dividend Raised to $0.31 Per Share

NEW YORK, Nov. 2, 2015 /PRNewswire/ --

Evercore

Highlights

  • Third Quarter Financial Summary
    • Record third quarter U.S. GAAP Net Revenues of $309 million, up 36% compared to Q3 2014
    • U.S. GAAP Net Income Attributable to Evercore Partners Inc. of $7 million, down 70% compared to Q3 2014, or $0.16 per share, down 72% compared to Q3 2014
    • Record third quarter Adjusted Pro Forma Net Revenues of $306 million, up 36% compared to Q3 2014
    • Record third quarter Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. of $43 million, up 30% compared to Q3 2014, or $0.81 per share, up 14% compared to Q3 2014
  • Year-to-Date Financial Summary
    • Record U.S. GAAP Net Revenues of $815 million, up 37% compared to the same period in 2014
    • U.S. GAAP Net Income Attributable to Evercore Partners Inc. of $22 million, down 62% compared to the same period in 2014, or $0.52 per share, down 63% compared to the same period in 2014
    • Record Adjusted Pro Forma Net Revenues of $812 million, up 37% compared to the same period in 2014
    • Record Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. of $107 million, up 36% compared to the same period in 2014, or $2.01 per share, up 20% compared to the same period in 2014
  • Investment Banking
    • Advising clients on significant transactions globally:
      • The largest technology transaction of all time: EMC on its $67 billion sale to Dell and its owners, Michael S. Dell, MSD Capital and Silver Lake Partners, announced in October 2015
      • Shire, on a potential combination with Baxalta, in a transaction worth in excess of $30 billion
      • One of the largest and most high-profile infrastructure projects planned in the UK: The Bazalgette Consortium of infrastructure investors on its successful bid to finance, deliver, and own the £4.2 billion Thames Tideway Tunnel
      • Centene Corporation on its $6.8 billion acquisition of Health Net, Inc
      • E. I. du Pont de Nemours and Company on the $6.7 billion spin-off of Chemours
      • Amlin plc on its £3.5 billion sale to Mitsui Sumitomo Insurance Company
    • Evercore ISI, ranked #3 in the Institutional Investor All-America Equity Research team rankings, the first time an independent firm has ranked in the top three since DLJ was ranked #2 in 1995
  • Investment Management
    • Assets Under Management in consolidated businesses were $13.3 billion
  • Returned $188.5 million of capital to shareholders for the first nine months through dividends and repurchases, including repurchases of 3.0 million shares/units. Increased the quarterly dividend to $0.31 per share, the eighth sequential year of growth

Evercore Partners Inc. (NYSE: EVR) today announced that its U.S. GAAP Net Revenues were $309.0 million for the quarter ended September 30, 2015, compared to $227.2 million for the quarter ended September 30, 2014. U.S. GAAP Net Revenues were $815.0 million for the nine months ended September 30, 2015, compared to $594.0 million for the nine months ended September 30, 2014. U.S. GAAP Net Income Attributable to Evercore Partners Inc. for the third quarter was $7.2 million, or $0.16 per share, compared to $24.3 million, or $0.58 per share, a year ago. U.S. GAAP Net Income Attributable to Evercore Partners Inc. for the nine months ended September 30, 2015 was $22.3 million, or $0.52 per share, compared to $59.1 million, or $1.41 per share, for the same period last year.

Adjusted Pro Forma Net Revenues were $305.6 million for the quarter ended September 30, 2015, an increase of 36% compared to $224.8 million for the quarter ended September 30, 2014. Adjusted Pro Forma Net Revenues were $812.3 million for the nine months ended September 30, 2015, an increase of 37% compared to $591.0 million for the nine months ended September 30, 2014. Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. was $42.9 million for the third quarter, up 30% compared to $32.9 million a year ago. Adjusted Pro Forma earnings per share was $0.81 for the quarter, up 14% in comparison to the prior year period. Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. was $106.6 million for the nine months ended September 30, 2015, up 36% compared to $78.4 million for the same period last year. Adjusted Pro Forma earnings per share was $2.01 for the nine months ended September 30, 2015, up 20% in comparison to the prior year period.

The U.S. GAAP trailing twelve-month compensation ratio of 63.8% compares to 60.5% for the same period in 2014. The U.S. GAAP compensation ratio for the three months ended September 30, 2015 was 63.9%, compared to 60.1% for the quarter ended September 30, 2014. The Adjusted Pro Forma compensation ratio for the trailing twelve months was 57.6%, compared to 59.3% for the same period in 2014. The Adjusted Pro Forma compensation ratio for the current quarter was 57.4%, compared to 60.5% for the quarter ended September 30, 2014.

Results for the three and nine months ended September 30, 2015 and the three months ended June 30, 2015 include the combined operations of Evercore ISI.

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.

"Our third quarter results demonstrate our ability to sustain the growth of our business in volatile markets, as revenues, net income and earnings per share each represent record performance. Our advisory business performed strongly in both the U.S. and Europe, and our equities business did extremely well, reporting $60.0 million of net revenues and an operating margin of 20.0%, despite a soft quarter for ECM activity. Importantly, Evercore ISI was ranked #3 in the Institutional Investor All-America Equity Research team rankings, validating our success integrating ISI to better serve our investor and advisory clients," said Ralph Schlosstein, President and Chief Executive Officer. "As always, we remain focused on balancing growth with return for our shareholders, delivering operating margins of 24.0% for the quarter. Our quarterly dividend was increased to $0.31 per share in the quarter, our eighth consecutive year of growth. Despite a record year of new hires, we have fully offset the dilution of bonus and new hire equity grants for 2015 and begun to offset the dilution resulting from the acquisition of ISI, as we have repurchased three million shares and units year to date. We remain optimistic about the market environment and our teams are working hard to finish the year strongly and to lay the foundation for a strong 2016."

"Our Advisory business delivered the best third quarter and nine month results in our history. The tone and breadth of our business remains good, as we are advising on several of the most significant recently announced transactions in the U.S. and Europe and are beginning to see restructuring opportunities in select sectors, notably energy and other commodities sensitive industries," said Roger Altman, Executive Chairman.

Consolidated U.S. GAAP and Adjusted Pro Forma Selected Financial Data (Unaudited)

 
 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

 

(dollars in thousands)

Net Revenues

$ 308,951

 

$ 268,096

 

$ 227,161

 

15%

 

36%

 

$ 815,030

 

$ 593,970

 

37%

Operating Income

$ 11,898

 

$ 31,111

 

$ 39,346

 

(62%)

 

(70%)

 

$ 54,007

 

$ 103,095

 

(48%)

Net Income Attributable to Evercore
Partners Inc.

$ 7,197

 

$ 10,764

 

$ 24,309

 

(33%)

 

(70%)

 

$ 22,261

 

$ 59,142

 

(62%)

Diluted Earnings Per Share

$ 0.16

 

$ 0.26

 

$ 0.58

 

(38%)

 

(72%)

 

$ 0.52

 

$ 1.41

 

(63%)

Compensation Ratio

63.9%

 

64.6%

 

60.1%

         

65.5%

 

60.2%

   

Operating Margin

3.9%

 

11.6%

 

17.3%

         

6.6%

 

17.4%

   
 

Adjusted Pro Forma

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

 

(dollars in thousands)

Net Revenues

$ 305,633

 

$ 268,500

 

$ 224,757

 

14%

 

36%

 

$ 812,292

 

$ 590,997

 

37%

Operating Income

$ 73,454

 

$ 58,756

 

$ 51,448

 

25%

 

43%

 

$ 182,683

 

$ 129,265

 

41%

Net Income Attributable to Evercore
Partners Inc.

$ 42,934

 

$ 33,931

 

$ 32,930

 

27%

 

30%

 

$ 106,590

 

$ 78,379

 

36%

Diluted Earnings Per Share

$ 0.81

 

$ 0.65

 

$ 0.71

 

25%

 

14%

 

$ 2.01

 

$ 1.67

 

20%

Compensation Ratio

57.4%

 

57.4%

 

60.5%

         

57.4%

 

59.4%

   

Operating Margin

24.0%

 

21.9%

 

22.9%

         

22.5%

 

21.9%

   

 

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 and Interests 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

Investment Banking

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

 

(dollars in thousands)

Net Revenues:

                             

Investment Banking Revenues

$ 285,561

 

$ 246,550

 

$ 202,178

 

16%

 

41%

 

$ 749,749

 

$ 522,933

 

43%

Other Revenue, net

357

 

(2,173)

 

850

 

NM

 

(58%)

 

(2,874)

 

(731)

 

(293%)

Net Revenues

285,918

 

244,377

 

203,028

 

17%

 

41%

 

746,875

 

522,202

 

43%

                               

Expenses:

                             

Employee Compensation and
Benefits

184,372

 

159,677

 

122,064

 

15%

 

51%

 

492,689

 

315,443

 

56%

Non-compensation Costs

66,324

 

57,535

 

39,581

 

15%

 

68%

 

176,528

 

107,936

 

64%

Special Charges

-

 

(139)

 

3,732

 

NM

 

NM

 

2,151

 

3,732

 

(42%)

Total Expenses

250,696

 

217,073

 

165,377

 

15%

 

52%

 

671,368

 

427,111

 

57%

                               

Operating Income

$ 35,222

 

$ 27,304

 

$ 37,651

 

29%

 

(6%)

 

$ 75,507

 

$ 95,091

 

(21%)

                               
                               

Compensation Ratio

64.5%

 

65.3%

 

60.1%

         

66.0%

 

60.4%

   

Operating Margin

12.3%

 

11.2%

 

18.5%

         

10.1%

 

18.2%

   
                               
                               
                               
 

Adjusted Pro Forma

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

 

(dollars in thousands)

Net Revenues:

                             

Investment Banking Revenues

$ 278,436

 

$ 243,007

 

$ 196,535

 

15%

 

42%

 

$ 735,415

 

$ 510,789

 

44%

Other Revenue, net

1,809

 

(380)

 

1,984

 

NM

 

(9%)

 

2,121

 

2,693

 

(21%)

Net Revenues

280,245

 

242,627

 

198,519

 

16%

 

41%

 

737,536

 

513,482

 

44%

                               

Expenses:

                             

Employee Compensation and
Benefits

162,392

 

140,532

 

121,472

 

16%

 

34%

 

425,029

 

309,072

 

38%

Non-compensation Costs

51,576

 

49,393

 

29,482

 

4%

 

75%

 

146,599

 

89,161

 

64%

Total Expenses

213,968

 

189,925

 

150,954

 

13%

 

42%

 

571,628

 

398,233

 

44%

                               

Operating Income

$ 66,277

 

$ 52,702

 

$ 47,565

 

26%

 

39%

 

$ 165,908

 

$ 115,249

 

44%

                               

Compensation Ratio

57.9%

 

57.9%

 

61.2%

         

57.6%

 

60.2%

   

Operating Margin

23.6%

 

21.7%

 

24.0%

         

22.5%

 

22.4%

   

 

For the third quarter, Evercore's Investment Banking segment reported Net Revenues of $280.2 million, which represents an increase of 41% year-over-year. Operating Income of $66.3 million increased 39% from the third quarter of last year. Operating Margins were 23.6% in comparison to 24.0% for the third quarter of last year. For the nine months ended September 30, 2015, Investment Banking reported Net Revenues of $737.5 million, an increase of 44% from last year. Year-to-date Operating Income of $165.9 million compared to $115.2 million last year, an increase of 44%. Year-to-date Operating Margins were 22.5% compared to 22.4% last year.

Revenues

 

Adjusted Pro Forma

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

 

(dollars in thousands)

Advisory Fees

$ 215,657

 

$ 168,745

 

$ 185,220

 

28%

 

16%

 

$ 539,538

 

$ 470,409

 

15%

Commissions and Related Fees

58,264

 

53,031

 

5,874

 

10%

 

892%

 

164,363

 

21,643

 

659%

Underwriting Fees

4,515

 

21,231

 

5,441

 

(79%)

 

(17%)

 

31,514

 

18,737

 

68%

Total Investment Banking Revenue

$ 278,436

 

$ 243,007

 

$ 196,535

 

15%

 

42%

 

$ 735,415

 

$ 510,789

 

44%

                               

 

During the quarter, Investment Banking earned advisory fees from 168 clients (vs. 162 in Q3 2014) and fees in excess of $1 million from 35 transactions (vs. 50 in Q3 2014). For the first nine months of the year, Investment Banking earned advisory fees from 354 clients (vs. 310 last year) and fees in excess of $1 million from 112 transactions (vs. 117 last year).

During the third quarter of 2015, Commissions and Related Fees of $58.3 million increased 892% from last year, reflecting the acquisition of ISI. Underwriting Fees of $4.5 million for the three months ended September 30, 2015 decreased 17% versus the prior year. During the nine months ended September 30, 2015 Commissions and Related Fees of $164.4 million increased 659% from last year, reflecting the acquisition of ISI. Underwriting Fees of $31.5 million for the nine months ended September 30, 2015 increased 68% versus the prior year.

Evercore ISI, our U.S. equities business, reported Net Revenues of $177.5 million, including allocated underwriting revenues of $14.6 million for the nine months ended September 30, 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 nine months ended September 30, 2015 were consistent with those assumed at the time of the closing of the transactions.

Expenses

Compensation costs were $162.4 million for the third quarter, an increase of 34% year-over-year. The trailing twelve-month compensation ratio was 57.9%, down from 60.5% a year ago, despite hiring a record number of Senior Managing Directors. Evercore's Investment Banking compensation ratio was 57.9% for the third quarter, down versus the compensation ratio reported for the three months ended September 30, 2014 of 61.2%. Year to-date compensation costs were $425.0 million, an increase of 38% from the prior year.

Non-compensation costs for the current quarter were $51.6 million, up 75% from the same period last year. The increase in costs versus the same period in the prior year reflects the addition of personnel within most parts of the business, including the acquisition of ISI, increased new business costs associated with higher levels of global transaction activity and higher professional fees. The ratio of non-compensation costs to net revenue for the current quarter was 18.4%, compared to 14.9% in the same quarter last year. Year-to-date non-compensation costs were $146.6 million, up 64% from the prior year. The ratio of non-compensation costs to revenue for the nine months ended September 30, 2015 was 19.9%, compared to 17.4% last year, driven primarily by the higher non-compensation costs in the Evercore ISI equities business.

Investment Management

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

Net Revenues:

(dollars in thousands)

Investment Management Revenues

$ 23,812

 

$ 24,505

 

$ 24,777

 

(3%)

 

(4%)

 

$ 70,398

 

$ 73,493

 

(4%)

Other Revenue, net

(779)

 

(786)

 

(644)

 

1%

 

(21%)

 

(2,243)

 

(1,725)

 

(30%)

Net Revenues

23,033

 

23,719

 

24,133

 

(3%)

 

(5%)

 

68,155

 

71,768

 

(5%)

                               

Expenses:

                             

Employee Compensation and
Benefits

13,003

 

13,467

 

14,497

 

(3%)

 

(10%)

 

40,956

 

41,856

 

(2%)

Non-compensation Costs

5,354

 

6,445

 

7,941

 

(17%)

 

(33%)

 

17,351

 

21,908

 

(21%)

Special Charges

28,000

 

-

 

-

 

NM

 

NM

 

31,348

 

-

 

NM

Total Expenses

46,357

 

19,912

 

22,438

 

133%

 

107%

 

89,655

 

63,764

 

41%

                               

Operating Income (Loss)

$ (23,324)

 

$ 3,807

 

$ 1,695

 

NM

 

NM

 

$ (21,500)

 

$ 8,004

 

NM

                               

Compensation Ratio

56.5%

 

56.8%

 

60.1%

         

60.1%

 

58.3%

   

Operating Margin

(101.3%)

 

16.1%

 

7.0%

         

(31.5%)

 

11.2%

   
                               
                               
                               
 

Adjusted Pro Forma

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

Net Revenues:

(dollars in thousands)

Investment Management Revenues

$ 25,205

 

$ 25,700

 

$ 25,926

 

(2%)

 

(3%)

 

$ 74,125

 

$ 76,400

 

(3%)

Other Revenue, net

183

 

173

 

312

 

6%

 

(41%)

 

631

 

1,115

 

(43%)

Net Revenues

25,388

 

25,873

 

26,238

 

(2%)

 

(3%)

 

74,756

 

77,515

 

(4%)

                               

Expenses:

                             

Employee Compensation and Benefits

13,003

 

13,467

 

14,497

 

(3%)

 

(10%)

 

40,956

 

41,856

 

(2%)

Non-compensation Costs

5,208

 

6,352

 

7,858

 

(18%)

 

(34%)

 

17,025

 

21,643

 

(21%)

Total Expenses

18,211

 

19,819

 

22,355

 

(8%)

 

(19%)

 

57,981

 

63,499

 

(9%)

                               

Operating Income

$ 7,177

 

$ 6,054

 

$ 3,883

 

19%

 

85%

 

$ 16,775

 

$ 14,016

 

20%

                               

Compensation Ratio

51.2%

 

52.1%

 

55.3%

         

54.8%

 

54.0%

   

Operating Margin

28.3%

 

23.4%

 

14.8%

         

22.4%

 

18.1%

   
                               

Assets Under Management (in millions) (1)

$ 13,329

 

$ 14,077

 

$ 14,482

 

(5%)

 

(8%)

 

$ 13,329

 

$ 14,482

 

(8%)

                               

(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries.

           

 

For the third quarter, Investment Management reported Net Revenues and Operating Income of $25.4 million and $7.2 million, respectively. Investment Management reported a third quarter Operating Margin of 28.3%. For the nine months ended September 30, 2015, Investment Management reported Net Revenues and Operating Income of $74.8 million and $16.8 million, respectively. The year-to-date Operating Margin was 22.4%, compared to 18.1% last year.

As of September 30, 2015, Investment Management reported $13.3 billion of AUM, a decrease of 5% from June 30, 2015.

Revenues

Investment Management Revenue

                             
 

Adjusted Pro Forma

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

 

% Change

Investment Advisory and Management Fees

(dollars in thousands)

Wealth Management

$ 8,650

 

$ 8,733

 

$ 7,906

 

(1%)

 

9%

 

$ 25,828

 

$ 22,592

 

14%

Institutional Asset Management (1)

11,088

 

11,721

 

11,777

 

(5%)

 

(6%)

 

33,897

 

34,403

 

(1%)

Private Equity

1,391

 

1,414

 

2,055

 

(2%)

 

(32%)

 

4,213

 

6,104

 

(31%)

Total Investment Advisory and Management Fees

21,129

 

21,868

 

21,738

 

(3%)

 

(3%)

 

63,938

 

63,099

 

1%

                               

Realized and Unrealized Gains

                             

Institutional Asset Management

686

 

822

 

1,367

 

(17%)

 

(50%)

 

3,132

 

4,742

 

(34%)

Private Equity

1,933

 

1,815

 

1,671

 

7%

 

16%

 

3,259

 

5,633

 

(42%)

Total Realized and Unrealized Gains

2,619

 

2,637

 

3,038

 

(1%)

 

(14%)

 

6,391

 

10,375

 

(38%)

                               

Equity in Earnings of Affiliates (2)

1,457

 

1,195

 

1,150

 

22%

 

27%

 

3,796

 

2,926

 

30%

Investment Management Revenues

$ 25,205

 

$ 25,700

 

$ 25,926

 

(2%)

 

(3%)

 

$ 74,125

 

$ 76,400

 

(3%)

                               

(1) Management fees from Institutional Asset Management were $11.2 million, $11.7 million and $11.8 million for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively, and $34.0 million and $34.4 million for the nine months ended September 30, 2015 and 2014, respectively, on a U.S. GAAP basis, excluding the reduction of revenues for client-related expenses.

 

(2) Equity in G5 | Evercore - Wealth Management and ABS on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income from Equity Method Investments.

 

Investment Advisory and Management Fees of $21.1 million for the quarter ended September 30, 2015 decreased 3% compared to the same period a year ago, driven primarily by lower fees in Private Equity and Institutional Asset Management, partially offset by higher fees in Wealth Management.

Realized and Unrealized Gains of $2.6 million in the quarter decreased relative to the prior year, with the change relative to the prior period driven principally by lower Institutional Asset Management gains.

Equity in Earnings of Affiliates of $1.5 million in the quarter increased relative to the prior year principally as a result of higher income earned in the third quarter of 2015 by ABS and G5 ǀ Evercore.

Expenses

Investment Management's third quarter expenses were $18.2 million, down 19% compared to the third quarter of 2014. Year-to-date Investment Management expenses were $58.0 million, down 9% from a year ago.

Other U.S. GAAP Adjustments

Evercore's Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three and nine months ended September 30, 2015 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, Special Charges, certain other business acquisition-related charges and professional fees.

Acquisition-related compensation charges for 2015 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 2015 and in future periods. Special Charges for 2015 include a pre-tax charge for the impairment of goodwill in the Institutional Asset Management reporting unit in the third quarter of $28 million ($9.6 million after adjusting for taxes and non-controlling interests), separation benefits and costs associated with the termination of certain contracts within Evercore ISI, and the finalization of a matter associated with the wind-down of the Company's U.S. Private Equity business. Acquisition-related charges for 2015 include professional fees incurred related to the acquisition of all of the outstanding equity interests of the operating businesses of ISI, as well as costs related to transitioning ISI's infrastructure and adjustments to liabilities for contingent consideration issued to the sellers of certain of the Company's acquisitions.

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

Evercore's Adjusted Pro Forma Diluted Shares Outstanding for the three and nine months ended September 30, 2015 were higher than U.S. GAAP as a result of the inclusion of Evercore LP partnership units, as well as the assumed vesting of certain acquisition-related shares, LP Units/Interests and unvested restricted stock units granted to Lexicon and ISI employees.

Further details of these adjustments, as well as an explanation of similar amounts for the three and nine months ended September 30, 2014 and the three months ended June 30, 2015, are included in Annex I, pages A-2 to A-11.

Non-controlling Interests

Non-controlling Interests in certain operating subsidiaries are owned by the principals and strategic investors in these businesses. Evercore's equity ownership percentages in these operating businesses range from 62% to 72%. For the periods ended September 30, 2015, June 30, 2015 and September 30, 2014 the gain (loss) allocated to non-controlling interests was as follows:

 

Net Gain (Loss) Allocated to Noncontrolling Interests

 

Three Months Ended

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

Segment

(dollars in thousands)

Investment Banking (1)

$ 248

 

$ 388

 

$ (2,669)

 

$ 335

 

$ (4,200)

Investment Management (1)

1,360

 

823

 

342

 

2,799

 

3,067

Total

$ 1,608

 

$ 1,211

 

$ (2,327)

 

$ 3,134

 

$ (1,133)

                   

(1) The difference between Adjusted Pro Forma and U.S. GAAP Noncontrolling Interests relates primarily to the allocation of income to noncontrolling interests held at Evercore LP and intangible amortization expense for certain acquisitions, which we exclude from the Adjusted Pro Forma results. See pages A-2 through A-3 for further information.

 

Income Taxes

For the three and nine months ended September 30, 2015, Evercore's Adjusted Pro Forma effective tax rate was 37.3%, compared to 38.0% and 37.2%, respectively, for the three and nine months ended September 30, 2014. 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.

For the three and nine months ended September 30, 2015, Evercore's U.S. GAAP effective tax rate was approximately 57.6% and 52.3%, respectively, compared to 37.7% and 35.9%, respectively, for the three and nine months ended September 30, 2014. The effective tax rate for U.S. GAAP purposes for 2015 reflects significant adjustments relating to the tax treatment of compensation associated with Evercore LP Units/Interests, 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 $320.5 million at September 30, 2015. Current assets exceed current liabilities by $318.0 million at September 30, 2015. Amounts due related to the Long-Term Notes Payable and Subordinated Borrowings were $129.4 million at September 30, 2015.

Capital Transactions

On October 26, 2015, the Board of Directors of Evercore declared a quarterly dividend of $0.31 per share to be paid on December 11, 2015 to common stockholders of record on November 27, 2015.

During the three months ended September 30, 2015 the Company repurchased approximately 527,000 shares at an average cost per share of $53.21, and a total of 3,002,000 shares/units in the nine months ended September 30, 2015 at an average price of $50.87.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Monday, November 2, 2015, 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: 58286821. 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: 58286821. 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 28 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.

 

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

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, 2014, 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 Nine Months Ended September 30, 2015 and 2014

A-1

Adjusted Pro Forma:

 

Adjusted Pro Forma Results (Unaudited)

A-2

U.S. GAAP Reconciliation to Adjusted Pro Forma (Unaudited)

A-4

U.S. GAAP Segment Reconciliation to Adjusted Pro Forma for the
Three and Nine Months ended September 30, 2015 (Unaudited)

A-6

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

A-7

U.S. GAAP Segment Reconciliation to Adjusted Pro Forma for the
Three and Nine Months ended September 30, 2014 (Unaudited)

A-8

Notes to Unaudited Condensed Consolidated Adjusted Pro Forma
Financial Data

A-9

 

EVERCORE PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

(dollars in thousands, except per share data)

(UNAUDITED)

               
 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2015

 

2014

 

2015

 

2014

               

Revenues

             

Investment Banking Revenue

$ 285,561

 

$ 202,178

 

$ 749,749

 

$ 522,933

Investment Management Revenue

23,812

 

24,777

 

70,398

 

73,493

Other Revenue

4,097

 

4,170

 

8,656

 

8,861

Total Revenues

313,470

 

231,125

 

828,803

 

605,287

Interest Expense (1)

4,519

 

3,964

 

13,773

 

11,317

Net Revenues

308,951

 

227,161

 

815,030

 

593,970

               

Expenses

             

Employee Compensation and Benefits

197,375

 

136,561

 

533,645

 

357,299

Occupancy and Equipment Rental

11,717

 

9,999

 

35,631

 

29,621

Professional Fees

13,410

 

10,862

 

36,007

 

31,361

Travel and Related Expenses

12,567

 

9,576

 

39,137

 

27,058

Communications and Information Services

9,295

 

3,974

 

27,595

 

11,269

Depreciation and Amortization

8,398

 

3,508

 

21,112

 

10,866

Special Charges

28,000

 

3,732

 

33,499

 

3,732

Acquisition and Transition Costs

538

 

4,122

 

1,939

 

5,238

Other Operating Expenses

15,753

 

5,481

 

32,458

 

14,431

Total Expenses

297,053

 

187,815

 

761,023

 

490,875

               

Income Before Income from Equity Method Investments and
Income Taxes

11,898

 

39,346

 

54,007

 

103,095

Income from Equity Method Investments

929

 

1,102

 

4,034

 

3,381

Income Before Income Taxes

12,827

 

40,448

 

58,041

 

106,476

Provision for Income Taxes

7,392

 

15,264

 

30,327

 

38,214

Net Income

5,435

 

25,184

 

27,714

 

68,262

Net Income (Loss) Attributable to Noncontrolling Interest

(1,762)

 

875

 

5,453

 

9,120

Net Income Attributable to Evercore Partners Inc.

$ 7,197

 

$ 24,309

 

$ 22,261

 

$ 59,142

               

Net Income Attributable to Evercore Partners Inc. Common
Shareholders

$ 7,197

 

$ 24,309

 

$ 22,261

 

$ 59,142

               

Weighted Average Shares of Class A Common Stock
Outstanding:

             

Basic

36,773

 

36,527

 

36,649

 

35,655

Diluted

44,334

 

41,873

 

43,100

 

41,819

               

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

             

Basic

$ 0.20

 

$ 0.67

 

$ 0.61

 

$ 1.66

Diluted

$ 0.16

 

$ 0.58

 

$ 0.52

 

$ 1.41

               
               

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

 

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 and ISI 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, 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 2015 and in future periods. The Adjusted Pro Forma 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 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 these previously granted equity interests, and thus the Adjusted Pro Forma 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 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:
    1. 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.
    2. Compensation Charges. Expenses for deferred consideration issued to the sellers of certain of the Company's acquisitions.
    3. GP Investments. Write-off of General Partnership investment balances during the fourth quarter of 2013 associated with the acquisition of Protego.
    4. Acquisition and Transition Costs. Primarily professional fees for legal and other services incurred related to the acquisition of all of the outstanding equity interests of the operating businesses of ISI, as well as costs related to transitioning ISI's infrastructure.
    5. 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 Adjusted Pro Forma results.
  3. Client Related Expenses. Client related expenses 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. Professional Fees. The expense associated with share-based awards resulting from increases in the share price, which is required upon change in employment status, is excluded from Adjusted Pro Forma results.
  5. Special Charges. Expenses during 2015 primarily related to a charge for the impairment of goodwill in the Institutional Asset Management reporting unit, separation benefits and costs associated with the termination of certain contracts within the Company's Evercore ISI business, and the finalization of a matter associated with the wind-down of the Company's U.S. Private Equity business. Expenses during 2014 primarily related to employee severance arrangements and facilities-related write-offs in the Institutional Equities business.
  6. 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 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 Pro Forma presentation reflects the netting of changes in the Company's Tax Receivable Agreement against Income Tax Expense.
  7. 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 debt, which is included in interest expense on a U.S. GAAP basis.
  8. 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.

 

EVERCORE PARTNERS INC.

U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA

(dollars in thousands)

(UNAUDITED)

           
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

September 30,
2015

 

September 30,
2014

Net Revenues - U.S. GAAP

$ 308,951

 

$ 268,096

 

$ 227,161

 

$ 815,030

 

$ 593,970

Client Related Expenses (1)

(6,661)

 

(4,346)

 

(5,596)

 

(14,641)

 

(12,618)

Income from Equity Method Investments (2)

929

 

1,998

 

1,102

 

4,034

 

3,381

Interest Expense on Debt (3)

2,414

 

2,752

 

2,090

 

7,763

 

6,264

Other Purchase Accounting-related Amortization (8a)

-

 

-

 

-

 

106

 

-

Net Revenues - Adjusted Pro Forma

$ 305,633

 

$ 268,500

 

$ 224,757

 

$ 812,292

 

$ 590,997

                   

Compensation Expense - U.S. GAAP

$ 197,375

 

$ 173,144

 

$ 136,561

 

$ 533,645

 

$ 357,299

Amortization of LP Units / Interests and Certain Other Awards (5)

(21,980)

 

(18,193)

 

-

 

(66,123)

 

-

Other Acquisition Related Compensation Charges (6)

-

 

(952)

 

(592)

 

(1,537)

 

(6,371)

Compensation Expense - Adjusted Pro Forma

$ 175,395

 

$ 153,999

 

$ 135,969

 

$ 465,985

 

$ 350,928

                   

Operating Income - U.S. GAAP

$ 11,898

 

$ 31,111

 

$ 39,346

 

$ 54,007

 

$ 103,095

Income from Equity Method Investments (2)

929

 

1,998

 

1,102

 

4,034

 

3,381

Pre-Tax Income - U.S. GAAP

12,827

 

33,109

 

40,448

 

58,041

 

106,476

Amortization of LP Units / Interests and Certain Other Awards (5)

21,980

 

18,193

 

-

 

66,123

 

-

Other Acquisition Related Compensation Charges (6)

-

 

952

 

592

 

1,537

 

6,371

Special Charges (7)

28,000

 

(139)

 

3,732

 

33,499

 

3,732

Intangible Asset Amortization / Other Purchase Accounting-related
Amortization (8a)

4,898

 

2,972

 

464

 

10,984

 

628

Acquisition and Transition Costs (8b)

538

 

917

 

4,122

 

1,939

 

4,122

Professional Fees (8c)

-

 

-

 

-

 

-

 

1,672

Fair Value of Contingent Consideration (8d)

2,797

 

-

 

-

 

2,797

 

-

Pre-Tax Income - Adjusted Pro Forma

71,040

 

56,004

 

49,358

 

174,920

 

123,001

Interest Expense on Debt (3)

2,414

 

2,752

 

2,090

 

7,763

 

6,264

Operating Income - Adjusted Pro Forma

$ 73,454

 

$ 58,756

 

$ 51,448

 

$ 182,683

 

$ 129,265

                   

Provision for Income Taxes - U.S. GAAP

$ 7,392

 

$ 16,723

 

$ 15,264

 

$ 30,327

 

$ 38,214

Income Taxes (9)

19,106

 

4,139

 

3,491

 

34,869

 

7,541

Provision for Income Taxes - Adjusted Pro Forma

$ 26,498

 

$ 20,862

 

$ 18,755

 

$ 65,196

 

$ 45,755

                   

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

$ 7,197

 

$ 10,764

 

$ 24,309

 

22,261

 

59,142

Amortization of LP Units / Interests and Certain Other Awards (5)

21,980

 

18,193

 

-

 

66,123

 

-

Other Acquisition Related Compensation Charges (6)

-

 

952

 

592

 

1,537

 

6,371

Special Charges (7)

28,000

 

(139)

 

3,732

 

33,499

 

3,732

Intangible Asset Amortization / Other Purchase Accounting-related
Amortization (8a)

4,898

 

2,972

 

464

 

10,984

 

628

Acquisition and Transition Costs (8b)

538

 

917

 

4,122

 

1,939

 

4,122

Professional Fees (8c)

-

 

-

 

-

 

-

 

1,672

Fair Value of Contingent Consideration (8d)

2,797

 

-

 

-

 

2,797

 

-

Income Taxes (9)

(19,106)

 

(4,139)

 

(3,491)

 

(34,869)

 

(7,541)

Noncontrolling Interest (10)

(3,370)

 

4,411

 

3,202

 

2,319

 

10,253

Net Income Attributable to Evercore Partners Inc. - Adjusted
Pro Forma

$ 42,934

 

$ 33,931

 

$ 32,930

 

$ 106,590

 

$ 78,379

                   

Diluted Shares Outstanding - U.S. GAAP

44,334

 

42,165

 

41,873

 

43,100

 

41,819

Vested Partnership Units (11a)

4,260

 

4,413

 

4,670

 

4,383

 

4,823

Unvested Partnership Units / Interests (11a)

4,489

 

5,786

 

-

 

5,466

 

-

Unvested Restricted Stock Units - Event Based (11a)

12

 

12

 

12

 

12

 

12

Acquisition Related Share Issuance (11b)

-

 

96

 

148

 

69

 

266

Diluted Shares Outstanding - Adjusted Pro Forma

53,095

 

52,472

 

46,703

 

53,030

 

46,920

                   

Key Metrics: (a)

                 

Diluted Earnings Per Share - U.S. GAAP

$ 0.16

 

$ 0.26

 

$ 0.58

 

$ 0.52

 

$ 1.41

Diluted Earnings Per Share - Adjusted Pro Forma

$ 0.81

 

$ 0.65

 

$ 0.71

 

$ 2.01

 

$ 1.67

                   

Compensation Ratio - U.S. GAAP

63.9%

 

64.6%

 

60.1%

 

65.5%

 

60.2%

Compensation Ratio - Adjusted Pro Forma

57.4%

 

57.4%

 

60.5%

 

57.4%

 

59.4%

                   

Operating Margin - U.S. GAAP

3.9%

 

11.6%

 

17.3%

 

6.6%

 

17.4%

Operating Margin - Adjusted Pro Forma

24.0%

 

21.9%

 

22.9%

 

22.5%

 

21.9%

                   

Effective Tax Rate - U.S. GAAP

57.6%

 

50.5%

 

37.7%

 

52.3%

 

35.9%

Effective Tax Rate - Adjusted Pro Forma

37.3%

 

37.3%

 

38.0%

 

37.3%

 

37.2%

                   

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

                   

 

EVERCORE PARTNERS INC.

U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA

TRAILING TWELVE MONTHS

(dollars in thousands)

(UNAUDITED)

 

Consolidated

 

Twelve Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

Net Revenues - U.S. GAAP

$ 1,136,918

 

$ 1,055,128

 

$ 812,642

Client Related Expenses (1)

(19,776)

 

(18,711)

 

(18,241)

Income from Equity Method Investments (2)

5,833

 

6,006

 

9,374

Interest Expense on Debt (3)

9,929

 

9,605

 

8,301

General Partnership Investments (4)

-

 

-

 

385

Other Purchase Accounting-related Amortization (8a)

317

 

317

 

-

Adjustment to Tax Receivable Agreement Liability (9)

-

 

-

 

(6,905)

Net Revenues - Adjusted Pro Forma

$ 1,133,221

 

$ 1,052,345

 

$ 805,556

           

Compensation Expense - U.S. GAAP

$ 725,862

 

$ 665,048

 

$ 491,379

Amortization of LP Units / Interests and Certain Other

Awards (5)

(69,522)

 

(47,542)

 

(4,820)

Other Acquisition Related Compensation Charges (6)

(3,105)

 

(3,697)

 

(9,069)

Compensation Expense - Adjusted Pro Forma

$ 653,235

 

$ 613,809

 

$ 477,490

           

Compensation Ratio - U.S. GAAP (a)

63.8%

 

63.0%

 

60.5%

Compensation Ratio - Adjusted Pro Forma (a)

57.6%

 

58.3%

 

59.3%

           
 

Investment Banking

 

Twelve Months Ended

 

September 30,
2015

 

June 30,
2015

 

September 30,
2014

Net Revenues - U.S. GAAP

$ 1,044,310

 

$ 961,420

 

$ 715,141

Client Related Expenses (1)

(19,675)

 

(18,673)

 

(18,211)

Income from Equity Method Investments (2)

278

 

758

 

2,901

Interest Expense on Debt (3)

6,105

 

5,787

 

4,529

Other Purchase Accounting-related Amortization (8a)

317

 

317

 

-

Adjustment to Tax Receivable Agreement Liability (9)

-

 

-

 

(5,524)

Net Revenues - Adjusted Pro Forma

$ 1,031,335

 

$ 949,609

 

$ 698,836

           

Compensation Expense - U.S. GAAP

$ 669,895

 

$ 607,587

 

$ 436,498

Amortization of LP Units / Interests and Certain Other Awards (5)

(69,522)

 

(47,542)

 

(4,304)

Other Acquisition Related Compensation Charges (6)

(3,105)

 

(3,697)

 

(9,069)

Compensation Expense - Adjusted Pro Forma

$ 597,268

 

$ 556,348

 

$ 423,125

           

Compensation Ratio - U.S. GAAP (a)

64.1%

 

63.2%

 

61.0%

Compensation Ratio - Adjusted Pro Forma (a)

57.9%

 

58.6%

 

60.5%

           

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

 

EVERCORE PARTNERS INC.

U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED PRO FORMA

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015

(dollars in thousands)

(UNAUDITED)

                         
 

Investment Banking Segment

 

Three Months Ended September 30, 2015

 

Nine Months Ended September 30, 2015

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

 

U.S. GAAP Basis

   

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

Net Revenues:

                       

Investment Banking Revenue

$ 285,561

 

$ (7,125)

(1)(2)

$ 278,436

 

$ 749,749

   

$ (14,334)

(1)(2)

$ 735,415

Other Revenue, net

357

 

1,452

(3)

1,809

 

(2,874)

   

4,995

(3)(8a)

2,121

Net Revenues

285,918

 

(5,673)

 

280,245

 

746,875

   

(9,339)

 

737,536

                         

Expenses:

                       

Employee Compensation and
Benefits

184,372

 

(21,980)

(5)

162,392

 

492,689

   

(67,660)

(5)(6)

425,029

Non-compensation Costs

66,324

 

(14,748)

(8)

51,576

 

176,528

   

(29,929)

(8)

146,599

Special Charges

-

 

-

 

-

 

2,151

   

(2,151)

(7)

-

Total Expenses

250,696

 

(36,728)

 

213,968

 

671,368

   

(99,740)

 

571,628

                         

Operating Income (a)

$ 35,222

 

$ 31,055

 

$ 66,277

 

$ 75,507

   

$ 90,401

 

$ 165,908

                         

Compensation Ratio (b)

64.5%

     

57.9%

 

66.0%

       

57.6%

Operating Margin (b)

12.3%

     

23.6%

 

10.1%

       

22.5%

                         
 

Investment Management Segment

 

Three Months Ended September 30, 2015

 

Nine Months Ended September 30, 2015

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

 

U.S. GAAP Basis

   

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

Net Revenues:

                       

Investment Management Revenue

$ 23,812

 

$ 1,393

(1)(2)

$ 25,205

 

$ 70,398

   

$ 3,727

(1)(2)

$ 74,125

Other Revenue, net

(779)

 

962

(3)

183

 

(2,243)

   

2,874

(3)

631

Net Revenues

23,033

 

2,355

 

25,388

 

68,155

   

6,601

 

74,756

                         

Expenses:

                       

Employee Compensation and
Benefits

13,003

 

-

 

13,003

 

40,956

   

-

 

40,956

Non-compensation Costs

5,354

 

(146)

(8)

5,208

 

17,351

   

(326)

(8)

17,025

Special Charges

28,000

 

(28,000)

(7)

-

 

31,348

   

(31,348)

(7)

-

Total Expenses

46,357

 

(28,146)

 

18,211

 

89,655

   

(31,674)

 

57,981

                         

Operating Income (Loss) (a)

$ (23,324)

 

$ 30,501

 

$ 7,177

 

$ (21,500)

   

$ 38,275

 

$ 16,775

                         

Compensation Ratio (b)

56.5%

     

51.2%

 

60.1%

       

54.8%

Operating Margin (b)

(101.3%)

     

28.3%

 

(31.5%)

       

22.4%

                         

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

 

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

 

EVERCORE PARTNERS INC.

U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED PRO FORMA

FOR THE THREE MONTHS ENDED JUNE 30, 2015

(dollars in thousands)

(UNAUDITED)

           
 

Investment Banking Segment

 

Three Months Ended June 30, 2015

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

Net Revenues:

         

Investment Banking
Revenue

$ 246,550

 

$ (3,543)

(1)(2)

$ 243,007

Other Revenue, net

(2,173)

 

1,793

(3)

(380)

Net Revenues

244,377

 

(1,750)

 

242,627

           

Expenses:

         

Employee Compensation and
Benefits

159,677

 

(19,145)

(5)(6)

140,532

Non-compensation Costs

57,535

 

(8,142)

(8)

49,393

Special Charges

(139)

 

139

(7)

-

Total Expenses

217,073

 

(27,148)

 

189,925

           

Operating Income (a)

$ 27,304

 

$ 25,398

 

$ 52,702

           

Compensation Ratio (b)

65.3%

     

57.9%

Operating Margin (b)

11.2%

     

21.7%

           
 

Investment Management Segment

 

Three Months Ended June 30, 2015

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

Net Revenues:

         

Investment Management
Revenue

$ 24,505

 

$ 1,195

(1)(2)

$ 25,700

Other Revenue, net

(786)

 

959

(3)

173

Net Revenues

23,719

 

2,154

 

25,873

           

Expenses:

         

Employee Compensation and

Benefits

13,467

 

-

 

13,467

Non-compensation Costs

6,445

 

(93)

(8)

6,352

Total Expenses

19,912

 

(93)

 

19,819

           

Operating Income (a)

$ 3,807

 

$ 2,247

 

$ 6,054

           

Compensation Ratio (b)

56.8%

     

52.1%

Operating Margin (b)

16.1%

     

23.4%

           

(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 Pro Forma are a derivative of the reconciliations of their components above.

 

EVERCORE PARTNERS INC.

U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED PRO FORMA

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014

(dollars in thousands)

(UNAUDITED)

                       
 

Investment Banking Segment

 

Three Months Ended September 30, 2014

 

Nine Months Ended September 30, 2014

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

Net Revenues:

                     

Investment Banking Revenue

$ 202,178

 

$ (5,643)

(1)(2)

$ 196,535

 

$ 522,933

 

$ (12,144)

(1)(2)

$ 510,789

Other Revenue, net

850

 

1,134

(3)

1,984

 

(731)

 

3,424

(3)

2,693

Net Revenues

203,028

 

(4,509)

 

198,519

 

522,202

 

(8,720)

 

513,482

                       

Expenses:

                     

Employee Compensation
and Benefits

122,064

 

(592)

(6)

121,472

 

315,443

 

(6,371)

(6)

309,072

Non-compensation Costs

39,581

 

(10,099)

(8)

29,482

 

107,936

 

(18,775)

(8)

89,161

Special Charges

3,732

 

(3,732)

(7)

-

 

3,732

 

(3,732)

(7)

-

Total Expenses

165,377

 

(14,423)

 

150,954

 

427,111

 

(28,878)

 

398,233

                       

Operating Income (a)

$ 37,651

 

$ 9,914

 

$ 47,565

 

$ 95,091

 

$ 20,158

 

$ 115,249

                       

Compensation Ratio (b)

60.1%

     

61.2%

 

60.4%

     

60.2%

Operating Margin (b)

18.5%

     

24.0%

 

18.2%

     

22.4%

                       
 

Investment Management Segment

 

Three Months Ended September 30, 2014

 

Nine Months Ended September 30, 2014

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

 

U.S. GAAP Basis

 

Adjustments

 

Non-GAAP
Adjusted Pro
Forma Basis

Net Revenues:

                     

Investment Management
Revenue

$ 24,777

 

$ 1,149

(1)(2)

$ 25,926

 

$ 73,493

 

$ 2,907

(1)(2)

$ 76,400

Other Revenue, net

(644)

 

956

(3)

312

 

(1,725)

 

2,840

(3)

1,115

Net Revenues

24,133

 

2,105

 

26,238

 

71,768

 

5,747

 

77,515

                       

Expenses:

                     

Employee Compensation and Benefits

14,497

 

-

 

14,497

 

41,856

 

-

 

41,856

Non-compensation Costs

7,941

 

(83)

(8)

7,858

 

21,908

 

(265)

(8)

21,643

Total Expenses

22,438

 

(83)

 

22,355

 

63,764

 

(265)

 

63,499

                       

Operating Income (a)

$ 1,695

 

$ 2,188

 

$ 3,883

 

$ 8,004

 

$ 6,012

 

$ 14,016

                       

Compensation Ratio (b)

60.1%

     

55.3%

 

58.3%

     

54.0%

Operating Margin (b)

7.0%

     

14.8%

 

11.2%

     

18.1%

                       

(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 Pro Forma are a derivative of the reconciliations of their components above.

 

Notes to Unaudited Condensed Consolidated Adjusted Pro Forma Financial Data

For further information on these Adjusted Pro Forma adjustments, see page A-2.

(1)

Client related expenses and provisions for uncollected receivables have been reclassified as a reduction of revenue in the Adjusted Pro Forma presentation.

   

(2)

Income (Loss) from Equity Method Investments has been reclassified to Revenue in the Adjusted Pro Forma presentation.

   

(3)

Interest Expense on Debt is excluded from the Adjusted Pro Forma Investment Banking and Investment Management segment results and is included in Interest Expense in the segment results on a U.S. GAAP Basis.

   

(4)

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

   

(5)

Expenses incurred from the assumed vesting of Class E LP Units and Class G and H LP Interests issued in conjunction with the acquisition of ISI are excluded from the Adjusted Pro Forma presentation.

   

(6)

Expenses for deferred consideration issued to the sellers of certain of the Company's acquisitions are excluded from the Adjusted Pro Forma presentation.

   

(7)

Expenses during 2015 primarily related to a charge for the impairment of goodwill in the Institutional Asset Management reporting unit, separation benefits and costs associated with the termination of certain contracts within the Company's Evercore ISI business, and the finalization of a matter associated with the wind-down of the Company's U.S. Private Equity business. Expenses during 2014 primarily related to employee severance arrangements and facilities-related write-offs in the Institutional Equities business.

   

(8)

Non-compensation Costs on an Adjusted Pro Forma basis reflect the following adjustments:

 

 

Three Months Ended September 30, 2015

 

U.S. GAAP

 

Adjustments

 

Total Segments

 

Investment
Banking

 

Investment
Management

Occupancy and Equipment Rental

$ 11,717

 

$ -

 

$ 11,717

 

$ 10,675

 

$ 1,042

Professional Fees

13,410

 

(1,823)

(1)

11,587

 

9,939

 

1,648

Travel and Related Expenses

12,567

 

(3,631)

(1)

8,936

 

8,454

 

482

Communications and Information Services

9,295

 

(11)

(1)

9,284

 

8,825

 

459

Depreciation and Amortization

8,398

 

(4,898)

(8a)

3,500

 

2,463

 

1,037

Acquisition and Transition Costs

538

 

(538)

(8b)

-

 

-

 

-

Other Operating Expenses

15,753

 

(3,993)

(1)(8d)

11,760

 

11,220

 

540

Total Non-compensation Costs

$ 71,678

 

$ (14,894)

 

$ 56,784

 

$ 51,576

 

$ 5,208

                   
                   
 

Three Months Ended June 30, 2015

 

U.S. GAAP

 

Adjustments

 

Total Segments

 

Investment
Banking

 

Investment
Management

Occupancy and Equipment Rental

$ 11,684

 

$ -

 

$ 11,684

 

$ 9,881