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Evercore Reports Third Quarter 2016 Results; Quarterly Dividend Raised To $0.34 Per Share

NEW YORK, Oct. 26, 2016 /PRNewswire/ --

Evercore

Highlights

  • Third Quarter Financial Summary
    • U.S. GAAP Net Revenues of $386.3 million, up 25% compared to Q3 2015
    • U.S. GAAP Net Income Attributable to Evercore Partners Inc. of $34.7 million, up 382% compared to Q3 2015, or $0.79 per share, up 394% compared to Q3 2015
    • Adjusted Net Revenues of $383.5 million, up 25% compared to Q3 2015; 28% after adjusting for the deconsolidation of an Investment Management affiliate
    • Adjusted Net Income Attributable to Evercore Partners Inc. of $62.4 million, up 45% compared to Q3 2015, or $1.22 per share, up 51% compared to Q3 2015
  • Year-to-Date Financial Summary
    • U.S. GAAP Net Revenues of $994.7 million, up 22% compared to the same period in 2015
    • U.S. GAAP Net Income Attributable to Evercore Partners Inc. of $64.1 million, up 188% compared to the same period in 2015, or $1.45 per share, up 179% compared to the same period in 2015
    • Adjusted Net Revenues of $988.9 million, up 22% compared to the same period in 2015; 24% after adjusting for the deconsolidation of an Investment Management affiliate
    • Adjusted Net Income Attributable to Evercore Partners Inc. of $148.6 million, up 39% compared to the same period in 2015, or $2.88 per share, up 43% compared to the same period in 2015
  • Investment Banking
    • Advising clients on significant transactions globally, including:
      • Advisor on the two largest healthcare deals announced in 2016: Abbott Laboratories on its $31 billion acquisition of St. Jude Medical, Inc. and Medivation on its $14 billion sale to Pfizer Inc.
      • Advising Energy Future Holdings on the pending sale of its 80% indirect interest in Oncor Electric Delivery Co. to NextEra Energy for $9.8 billion
      • Bookrunner on Patheon N.V.'s$719 million IPO, the largest Healthcare Services IPO since 2014
      • Advising Tesla Motors, Inc. on its proposed acquisition of SolarCity Corporation for $2.6 billion
      • Advising American International Group, Inc. on the $1.1 billion sale of its interests in Ascot Underwriting to the Canada Pension Plan Investment Board
      • Advised OfficeFirst Immobilien AG on its refinancing
    • Announced the addition of Dimitrios Georgiou as an Advisory Senior Managing Director, strengthening our capabilities in the Industrials sector in Europe
    • Evercore ISI again ranked #3 in the Institutional Investor All-America Equity Research team rankings
  • Investment Management
    • Completed the transfer of 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 $8.4 billion
  • Increased the quarterly dividend to $0.34 per share, the ninth sequential year of growth. Returned $203.9 million of capital to shareholders for the first nine months through dividends and repurchases, including repurchases of 3.4 million shares at an average price of $47.58

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

U.S. GAAP Results:

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
 2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues

$         386,314

 

$         350,656

 

$         308,951

 

10%

 

25%

 

$         994,683

 

$         815,030

 

22%

Operating Income

$           85,085

 

$           62,605

 

$           11,898

 

36%

 

615%

 

$         163,815

 

$           54,007

 

203%

Net Income Attributable to Evercore Partners Inc.

$           34,695

 

$           24,087

 

$             7,197

 

44%

 

382%

 

$           64,100

 

$           22,261

 

188%

Diluted Earnings Per Share

$               0.79

 

$               0.55

 

$               0.16

 

44%

 

394%

 

$               1.45

 

$               0.52

 

179%

Compensation Ratio

60.0%

 

63.1%

 

63.9%

         

63.6%

 

65.5%

   

Operating Margin

22.0%

 

17.9%

 

3.9%

         

16.5%

 

6.6%

   

 

Net Revenues were $386.3 million for the quarter ended September 30, 2016, an increase of 25% compared to $309.0 million for the quarter ended September 30, 2015. Net Revenues were $994.7 million for the nine months ended September 30, 2016, an increase of 22% compared to $815.0 million for the nine months ended September 30, 2015. Net Income Attributable to Evercore Partners Inc. for the quarter ended September 30, 2016 was $34.7 million, up 382% compared to $7.2 million a year ago. Earnings Per Share was $0.79 for the quarter ended September 30, 2016, up 394% in comparison to the prior year period. Net Income Attributable to Evercore Partners Inc. for the nine months ended September 30, 2016 was $64.1 million, up 188% compared to $22.3 million for the same period last year. Earnings Per Share was $1.45 for the nine months ended September 30, 2016, up 179% in comparison to the prior year period.

The trailing twelve-month compensation ratio of 63.3% compares to 63.8% for the same period in 2015. The compensation ratio for the nine months ended September 30, 2016 was 63.6%, compared to 65.5% for the nine months ended September 30, 2015. The compensation ratio for the quarter ended September 30, 2016 was 60.0%, compared to 63.9% for the quarter ended September 30, 2015.

For the three and nine months ended September 30, 2016, Evercore's effective tax rate was 45.2% and 47.3%, respectively, compared to 57.6% and 52.3%, respectively, for the three and nine months ended September 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.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues

$         383,473

 

$         348,272

 

$         305,633

 

10%

 

25%

 

$         988,948

 

$         812,292

 

22%

Operating Income

$         106,169

 

$           90,980

 

$           73,454

 

17%

 

45%

 

$         251,819

 

$         182,683

 

38%

Net Income Attributable to Evercore Partners Inc.

$           62,423

 

$           53,363

 

$           42,934

 

17%

 

45%

 

$         148,601

 

$         106,590

 

39%

Diluted Earnings Per Share

$               1.22

 

$               1.04

 

$               0.81

 

17%

 

51%

 

$               2.88

 

$               2.01

 

43%

Compensation Ratio

56.8%

 

57.6%

 

57.4%

         

57.3%

 

57.4%

   

Operating Margin

27.7%

 

26.1%

 

24.0%

         

25.5%

 

22.5%

   

 

 

Net Revenues were $383.5 million for the quarter ended September 30, 2016, an increase of 25% compared to $305.6 million for the quarter ended September 30, 2015. Assuming the restructuring of Atalanta Sosnoff, an Investment Management affiliate, had occurred on December 31, 2014, Net Revenues would have increased 28% compared to the third quarter of 2015. Net Revenues were $988.9 million for the nine months ended September 30, 2016, an increase of 22% compared to $812.3 million for the nine months ended September 30, 2015. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Net Revenues would have increased 24% compared to the nine months ended September 30, 2015. Net Income Attributable to Evercore Partners Inc. was $62.4 million for the quarter ended September 30, 2016, up 45% compared to $42.9 million a year ago. Earnings Per Share was $1.22 for the quarter ended September 30, 2016, up 51% in comparison to the prior year period. Net Income Attributable to Evercore Partners Inc. was $148.6 million for the nine months ended September 30, 2016, up 39% compared to $106.6 million for the same period last year. Earnings Per Share was $2.88 for the nine months ended September 30, 2016, up 43% in comparison to the prior year period.

The compensation ratio for the trailing twelve months was 57.7%, compared to 57.6% for the same period in 2015. The compensation ratio for the nine months ended September 30, 2016 was 57.3%, compared to 57.4% for the nine months ended September 30, 2015. The compensation ratio for the quarter ended September 30, 2016 was 56.8%, compared to 57.4% for the quarter ended September 30, 2015. 

For the three and nine months ended September 30, 2016, Evercore's effective tax rate was 38.8% and 38.1%. respectively, compared to 37.3% for the three and nine months ended September 30, 2015. The increase in the effective tax rate was primarily driven by a higher percentage of earnings in the U.S. Changes in the effective tax rate are also driven by the level of earnings in businesses with minority owners. 

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 and year to date results demonstrate that clients globally are embracing our unconflicted, independent advisory business model. Our investments in our Investment Banking business continued to yield strong returns in the third quarter and year to date. We earned record Advisory revenues in the first nine months, which were up 35% on an Adjusted basis, as we served a record number of clients in strategic industry sectors globally. We were recognized as the leading independent equity research firm in the U.S., as Evercore ISI was again ranked #3 in the Institutional Investor All-America Equity Research team rankings and #2 on a weighted basis. And we continued to execute our strategy, adding senior talent in our Advisory and Equities businesses and completing the separation of our Mexico Private Equity business," said Ralph Schlosstein, President and Chief Executive Officer. "We continued to deliver strong returns to our shareholders as Adjusted Operating Margins for the quarter and the first nine months of the year exceeded 25%. And our Board of Directors increased our quarterly dividend to $0.34 per share; the ninth successive year of growth in our annual dividend."

"Our Advisory business continues to perform strongly compared to both the overall market and our universal banking and independent advisory firm competitors. Consequently, we expect our market share of Advisory fees among all public firms on a trailing twelve months basis to increase again this quarter, up from 5.7% at the end of the second quarter this year and 5.1% at year end 2015. Moreover, market conditions continue to remain favorable for each of our three main capabilities – M&A, restructuring and capital raising," said Roger C. Altman, Executive Chairman.

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 nine months ended September 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. The gain resulting from the transfer of ownership of the Mexican Private Equity business in the third quarter of 2016 has also been presented as a reduction from Revenues.

Evercore's Adjusted Diluted Shares Outstanding for the three and nine months ended September 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.

This release also presents changes in Adjusted Net Revenues, Adjusted Investment Management Net Revenues and Adjusted Investment Management Expenses from the prior-year periods assuming that the deconsolidation of Atalanta Sosnoff occurred on December 31, 2014 rather than December 31, 2015. Evercore believes this is useful additional information for investors because it improves the comparability of period-over-period results and aligns with management's view of business performance.

Further details of these adjustments, as well as an explanation of similar amounts for the three and nine months ended September 30, 2015 and the three months ended June 30, 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.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues:

                             

Investment Banking Revenues

$         368,434

 

$         327,174

 

$         285,561

 

13%

 

29%

 

$         936,234

 

$         749,749

 

25%

Other Revenue, net

200

 

983

 

357

 

(80%)

 

(44%)

 

270

 

(2,874)

 

NM

Net Revenues

368,634

 

328,157

 

285,918

 

12%

 

29%

 

936,504

 

746,875

 

25%

                               

Expenses:

                             

Employee Compensation and Benefits

221,380

 

208,916

 

184,372

 

6%

 

20%

 

600,014

 

492,689

 

22%

Non-compensation Costs

64,708

 

61,404

 

66,324

 

5%

 

(2%)

 

183,686

 

176,528

 

4%

Special Charges

-

 

-

 

-

 

NM

 

NM

 

-

 

2,151

 

NM

Total Expenses

286,088

 

270,320

 

250,696

 

6%

 

14%

 

783,700

 

671,368

 

17%

                               

Operating Income

$           82,546

 

$           57,837

 

$           35,222

 

43%

 

134%

 

$         152,804

 

$           75,507

 

102%

                               

Compensation Ratio

60.1%

 

63.7%

 

64.5%

         

64.1%

 

66.0%

   

Operating Margin

22.4%

 

17.6%

 

12.3%

         

16.3%

 

10.1%

   

 

 

 

For the third quarter, Evercore's Investment Banking segment reported Net Revenues of $368.6 million, which represents an increase of 29% year-over-year. Operating Income of $82.5 million increased 134% from the third quarter of last year. The Operating Margin was 22.4%, in comparison to 12.3% for the third quarter of last year. For the nine months ended September 30, 2016, Investment Banking reported Net Revenues of $936.5 million, an increase of 25% from last year. Year-to-date Operating Income of $152.8 million increased 102% compared to $75.5 million last year. The year-to-date Operating Margin was 16.3% compared to 10.1% last year.

Revenues

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

 

(dollars in thousands)

Advisory Fees

$         306,993

 

$         256,758

 

$         222,782

 

20%

 

38%

 

$         743,853

 

$         553,872

 

34%

Commissions and Related Fees

53,512

 

57,178

 

58,264

 

(6%)

 

(8%)

 

167,908

 

164,363

 

2%

Underwriting Fees

7,929

 

13,238

 

4,515

 

(40%)

 

76%

 

24,473

 

31,514

 

(22%)

Total Investment Banking Revenue

$         368,434

 

$         327,174

 

$         285,561

 

13%

 

29%

 

$         936,234

 

$         749,749

 

25%

 

During the quarter, Investment Banking earned advisory fees from 211 client transactions (vs. 168 in Q3 2015) and fees in excess of $1 million from 65 client transactions (vs. 35 in Q3 2015).  For the first nine months of the year, Investment Banking earned advisory fees from 418 clients (vs. 354 last year) and fees in excess of $1 million from 164 transactions (vs. 112 last year).

During the third quarter of 2016, Commissions and Related Fees of $53.5 million decreased 8% from last year on lower trading volume. Underwriting Fees of $7.9 million for the three months ended September 30, 2016 increased 76% versus the prior year. During the nine months ended September 30, 2016, Commissions and Related Fees of $167.9 million increased 2% from last year on higher trading volume. Underwriting Fees of $24.5 million for the nine months ended September 30, 2016 decreased 22% versus the prior year.

Expenses

Compensation costs were $221.4 million for the third quarter, an increase of 20% year-over-year. The trailing twelve-month compensation ratio was 63.7%, down from 64.1% a year ago. Evercore's Investment Banking compensation ratio was 60.1% for the third quarter, down versus the compensation ratio reported for the three months ended September 30, 2015 of 64.5%. Year-to-date compensation costs were $600.0 million, an increase of 22% from the prior year.

Compensation costs include $13.8 million and $66.1 million of expense for the three and nine months ended September 30, 2016, respectively, and $21.9 million and $65.1 million of expense for the three and nine months ended September 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 September 30, 2016, an additional $28.3 million of expense would have been incurred in the third quarter ended September 30, 2016 and the remaining expense to be accrued over the future vesting period extending from October 1, 2016 to February 15, 2020 would be $126.3 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 $64.7 million, down 2% from the same period last year. The ratio of non-compensation costs to net revenue for the current quarter was 17.6%, compared to 23.2% in the same quarter last year. Year-to-date non-compensation costs were $183.7 million, up 4% from the prior year. The ratio of non-compensation costs to net revenue for the nine months ended September 30, 2016 was 19.6%, compared to 23.6% last year.

Investment Management

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

Net Revenues:

(dollars in thousands)

Investment Management Revenues

$           17,158

 

$           22,255

 

$           23,812

 

(23%)

 

(28%)

 

$           57,842

 

$           70,398

 

(18%)

Other Revenue, net

522

 

244

 

(779)

 

114%

 

NM

 

337

 

(2,243)

 

NM

Net Revenues

17,680

 

22,499

 

23,033

 

(21%)

 

(23%)

 

58,179

 

68,155

 

(15%)

                               

Expenses:

                             

Employee Compensation and Benefits

10,330

 

12,418

 

13,003

 

(17%)

 

(21%)

 

32,945

 

40,956

 

(20%)

Non-compensation Costs

4,811

 

5,313

 

5,354

 

(9%)

 

(10%)

 

14,223

 

17,351

 

(18%)

Special Charges

-

 

-

 

28,000

 

NM

 

NM

 

-

 

31,348

 

NM

Total Expenses

15,141

 

17,731

 

46,357

 

(15%)

 

(67%)

 

47,168

 

89,655

 

(47%)

                               

Operating Income (Loss)

$             2,539

 

$             4,768

 

$          (23,324)

 

(47%)

 

NM

 

$           11,011

 

$          (21,500)

 

NM

                               

Compensation Ratio

58.4%

 

55.2%

 

56.5%

         

56.6%

 

60.1%

   

Operating Margin

14.4%

 

21.2%

 

(101.3%)

         

18.9%

 

(31.5%)

   
                               

Assets Under Management (in millions) (1)

$             8,355

 

$             8,545

 

$           13,329

 

(2%)

 

(37%)

 

$             8,355

 

$           13,329

 

(37%)

                               

(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries and therefore exclude AUM of $5,197 million and $4,921 million from Atalanta Sosnoff at September 30, 2016 and June 30, 2016, respectively, following the restructuring of our investment on December 31, 2015, and AUM of $304 million from the Mexican Private Equity Business at September 30, 2016, following the transfer of ownership on September 30, 2016.

 

For the third quarter, Evercore's Investment Management segment reported Net Revenues of $17.7 million and Operating Income of $2.5 million. The Operating Margin was 14.4%. For the nine months ended September 30, 2016, Investment Management reported Net Revenues of $58.2 million and Operating Income of $11.0 million. The year-to-date Operating Margin was 18.9%, compared to (31.5%) last year.

As of September 30, 2016, Investment Management reported $8.4 billion of AUM, a decrease of 2% from June 30, 2016 driven primarily by the transfer of ownership of the Mexican Private Equity Business.

Revenues

 

U.S. GAAP

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

Investment Advisory and Management Fees

(dollars in thousands)

Wealth Management

$             9,311

 

$             9,090

 

$             8,650

 

2%

 

8%

 

$           27,180

 

$           25,828

 

5%

Institutional Asset Management

6,105

 

5,906

 

11,152

 

3%

 

(45%)

 

17,690

 

33,966

 

(48%)

Private Equity

760

 

1,348

 

1,391

 

(44%)

 

(45%)

 

3,457

 

4,213

 

(18%)

Total Investment Advisory and Management Fees

16,176

 

16,344

 

21,193

 

(1%)

 

(24%)

 

48,327

 

64,007

 

(24%)

                               

Realized and Unrealized Gains

                             

Institutional Asset Management

811

 

1,147

 

686

 

(29%)

 

18%

 

3,213

 

3,132

 

3%

Private Equity

171

 

4,764

 

1,933

 

(96%)

 

(91%)

 

6,302

 

3,259

 

93%

Total Realized and Unrealized Gains 

982

 

5,911

 

2,619

 

(83%)

 

(63%)

 

9,515

 

6,391

 

49%

                               

Investment Management Revenues

$           17,158

 

$           22,255

 

$           23,812

 

(23%)

 

(28%)

 

$           57,842

 

$           70,398

 

(18%)

                               

 

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 September 30, 2016, the Company completed the transfer of 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.

Investment Advisory and Management Fees of $16.2 million for the quarter ended September 30, 2016 decreased 24% compared to the same period a year ago, driven primarily by lower fees in Private Equity and Institutional Asset Management related to our deconsolidation of Atalanta Sosnoff, partially offset by higher fees in Wealth Management.

Realized and Unrealized Gains of $1.0 million in the quarter decreased relative to the prior year, with the change relative to the prior period driven principally by lower gains in Private Equity.

Expenses

Investment Management's third quarter expenses were $15.1 million, down 67% compared to the third quarter of 2015, primarily driven by a charge for the impairment of goodwill in the Institutional Asset Management reporting unit in the third quarter of 2015. Year-to-date Investment Management expenses were $47.2 million, down 47% 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.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

 

(dollars in thousands)

Net Revenues:

                             

Investment Banking Revenues

$         362,374

 

$         320,924

 

$         278,436

 

13%

 

30%

 

$         919,730

 

$         735,415

 

25%

Other Revenue, net

2,792

 

3,859

 

1,809

 

(28%)

 

54%

 

7,216

 

2,121

 

240%

Net Revenues

365,166

 

324,783

 

280,245

 

12%

 

30%

 

926,946

 

737,536

 

26%

                               

Expenses:

                             

Employee Compensation and Benefits

207,521

 

188,178

 

162,392

 

10%

 

28%

 

533,658

 

425,029

 

26%

Non-compensation Costs

55,197

 

52,198

 

51,576

 

6%

 

7%

 

157,778

 

146,599

 

8%

Total Expenses

262,718

 

240,376

 

213,968

 

9%

 

23%

 

691,436

 

571,628

 

21%

                               

Operating Income

$         102,448

 

$           84,407

 

$           66,277

 

21%

 

55%

 

$         235,510

 

$         165,908

 

42%

                               

Compensation Ratio

56.8%

 

57.9%

 

57.9%

         

57.6%

 

57.6%

   

Operating Margin

28.1%

 

26.0%

 

23.6%

         

25.4%

 

22.5%

   

 

 

For the third quarter, Evercore's Investment Banking segment reported Net Revenues of $365.2 million, which represents an increase of 30% year-over-year. Operating Income of $102.4 million increased 55% from the third quarter of last year. The Operating Margin was 28.1%, in comparison to 23.6% for the third quarter of last year. For the nine months ended September 30, 2016, Investment Banking reported Net Revenues of $926.9 million, an increase of 26% from last year. Year-to-date Operating Income of $235.5 million increased 42% compared to $165.9 million last year. The year-to-date Operating Margin was 25.4% compared to 22.5% last year.

Revenues

 

Adjusted 

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

 

(dollars in thousands)

Advisory Fees (1)

$         300,933

 

$         250,508

 

$         215,657

 

20%

 

40%

 

$         727,349

 

$         539,538

 

35%

Commissions and Related Fees

53,512

 

57,178

 

58,264

 

(6%)

 

(8%)

 

167,908

 

164,363

 

2%

Underwriting Fees

7,929

 

13,238

 

4,515

 

(40%)

 

76%

 

24,473

 

31,514

 

(22%)

Total Investment Banking Revenue

$         362,374

 

$         320,924

 

$         278,436

 

13%

 

30%

 

$         919,730

 

$         735,415

 

25%

 

(1) Advisory Fees on an Adjusted basis reflect the reduction of revenues for client-related expenses and provisions for uncollected receivables of $5,948, $6,540 and $6,597 for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively, and $16,410 and $14,572 for the nine months ended September 30, 2016 and 2015, respectively, as well as the reclassification of earnings (losses) related to our equity investment in G5 | Evercore - Advisory of ($112), $290 and ($528) for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively, and ($94) and $238 for the nine months ended September 30, 2016 and 2015, respectively.

 

During the quarter, Investment Banking earned advisory fees from 211 client transactions (vs. 168 in Q3 2015) and fees in excess of $1 million from 65 client transactions (vs. 35 in Q3 2015).  For the first nine months of the year, Investment Banking earned advisory fees from 418 clients (vs. 354 last year) and fees in excess of $1 million from 164 transactions (vs. 112 last year).

During the third quarter of 2016, Commissions and Related Fees of $53.5 million decreased 8% from last year on lower trading volume. Underwriting Fees of $7.9 million for the three months ended September 30, 2016 increased 76% versus the prior year. During the nine months ended September 30, 2016, Commissions and Related Fees of $167.9 million increased 2% from last year on higher trading volume. Underwriting Fees of $24.5 million for the nine months ended September 30, 2016 decreased 22% versus the prior year.

Within the above results, Evercore ISI, our U.S. equities business, reported Net Revenues of $177.5 million, including allocated U.S. underwriting revenues of $10.0 million for the nine months ended September 30, 2016 and Operating Margins of 21.1%, compared to 17.7% for the first nine 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 nine months ended September 30, 2016 were consistent with those assumed at the time of the closing of the transactions.

Expenses

Compensation costs were $207.5 million for the third quarter, an increase of 28% year-over-year. The trailing twelve-month compensation ratio was 58.1%, up from 57.9% a year ago primarily related to the accrual of higher discretionary bonus for the current twelve month period. Evercore's Investment Banking compensation ratio was 56.8% for the third quarter, down versus the compensation ratio reported for the three months ended September 30, 2015 of 57.9%. Year-to-date compensation costs were $533.7 million, an increase of 26% from the prior year.

Non-compensation costs for the current quarter were $55.2 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. The ratio of non-compensation costs to net revenue for the current quarter was 15.1%, compared to 18.4% in the same quarter last year. Year-to-date non-compensation costs were $157.8 million, up 8% from the prior year. The ratio of non-compensation costs to net revenue for the nine months ended September 30, 2016 was 17.0%, compared to 19.9% last year.

Investment Management

 

Adjusted 

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

Net Revenues:

(dollars in thousands)

Investment Management Revenues

$           18,191

 

$           23,245

 

$           25,205

 

(22%)

 

(28%)

 

$           61,401

 

$           74,125

 

(17%)

Other Revenue, net

116

 

244

 

183

 

(52%)

 

(37%)

 

601

 

631

 

(5%)

Net Revenues

18,307

 

23,489

 

25,388

 

(22%)

 

(28%)

 

62,002

 

74,756

 

(17%)

                               

Expenses:

                             

Employee Compensation and Benefits

10,330

 

12,418

 

13,003

 

(17%)

 

(21%)

 

32,945

 

40,956

 

(20%)

Non-compensation Costs

4,256

 

4,498

 

5,208

 

(5%)

 

(18%)

 

12,748

 

17,025

 

(25%)

Total Expenses

14,586

 

16,916

 

18,211

 

(14%)

 

(20%)

 

45,693

 

57,981

 

(21%)

                               

Operating Income

$             3,721

 

$             6,573

 

$             7,177

 

(43%)

 

(48%)

 

$           16,309

 

$           16,775

 

(3%)

                               

Compensation Ratio

56.4%

 

52.9%

 

51.2%

         

53.1%

 

54.8%

   

Operating Margin

20.3%

 

28.0%

 

28.3%

         

26.3%

 

22.4%

   
                               

Assets Under Management (in millions) (1)

$             8,355

 

$             8,545

 

$           13,329

 

(2%)

 

(37%)

 

$             8,355

 

$           13,329

 

(37%)

                               

(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries and therefore exclude AUM of $5,197 million and $4,921 million from Atalanta Sosnoff at September 30, 2016 and June 30, 2016, respectively, following the restructuring of our investment on December 31, 2015, and AUM of $304 million from the Mexican Private Equity Business at September 30, 2016, following the transfer of ownership on September 30, 2016.

 

 

For the third quarter, Evercore's Investment Management segment reported Net Revenues of $18.3 million and Operating Income of $3.7 million. The Operating Margin was 20.3%. For the nine months ended September 30, 2016, Investment Management reported Net Revenues of $62.0 million and Operating Income $16.3 million. The year-to-date Operating Margin was 26.3%, compared to 22.4% last year.

As of September 30, 2016, Investment Management reported $8.4 billion of AUM, a decrease of 2% from June 30, 2016 driven primarily by the transfer of ownership of the Mexican Private Equity Business. Excluding the Mexican Private Equity Business from the prior period, AUM increased 1% from June 30, 2016.  

Revenues

 

Adjusted

 

Three Months Ended

 

% Change vs.

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

% Change

Investment Advisory and Management Fees

(dollars in thousands)

Wealth Management

$             9,311

 

$             9,090

 

$             8,650

 

2%

 

8%

 

$           27,180

 

$           25,828

 

5%

Institutional Asset Management (1)

5,848

 

5,522

 

11,088

 

6%

 

(47%)

 

17,026

 

33,897

 

(50%)

Private Equity

760

 

1,348

 

1,391

 

(44%)

 

(45%)

 

3,457

 

4,213

 

(18%)

Total Investment Advisory and Management Fees

15,919

 

15,960

 

21,129

 

— %

 

(25%)

 

47,663

 

63,938

 

(25%)

                               

Realized and Unrealized Gains

                             

Institutional Asset Management

811

 

1,147

 

686

 

(29%)

 

18%

 

3,213

 

3,132

 

3%

Private Equity

171

 

4,764

 

1,933

 

(96%)

 

(91%)

 

6,302

 

3,259

 

93%

Total Realized and Unrealized Gains 

982

 

5,911

 

2,619

 

(83%)

 

(63%)

 

9,515

 

6,391

 

49%

                               

Equity in Earnings of Affiliates (2)

1,290

 

1,374

 

1,457

 

(6%)

 

(11%)

 

4,223

 

3,796

 

11%

Investment Management Revenues

$           18,191

 

$           23,245

 

$           25,205

 

(22%)

 

(28%)

 

$           61,401

 

$           74,125

 

(17%)

                               

(1) Management fees from Institutional Asset Management on an Adjusted basis reflect the reduction of revenues for client-related expenses of $257, $384 and $64 for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively, and $664 and $69 for the nine months ended September 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 $15.9 million for the quarter ended September 30, 2016 decreased 25% compared to the same period a year ago, driven primarily by lower fees in Private Equity and 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 decreased 9% when compared to the third quarter of 2015.

On September 30, 2016, the Company completed the transfer of 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.

Realized and Unrealized Gains of $1.0 million in the quarter decreased relative to the prior year, with the change relative to the prior period driven principally by lower gains in Private Equity.

Equity in Earnings of Affiliates of $1.3 million in the quarter decreased relative to the prior year principally as a result of lower income earned in the third quarter of 2016 by ABS and G5 | Evercore, partially offset by the inclusion of Atalanta Sosnoff's income in the third quarter of 2016.

Expenses

Investment Management's third quarter expenses were $14.6 million, down 20% compared to the third quarter of 2015. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Investment Management expenses would have increased 11% when compared to the third quarter of 2015. Year-to-date Investment Management expenses were $45.7 million, down 21% from a year ago. Assuming the restructuring of Atalanta Sosnoff had occurred on December 31, 2014, Investment Management expenses would have increased 8% when compared to the nine months ended September 30, 2015.

Balance Sheet

The Company continues to maintain a strong balance sheet, holding cash, cash equivalents and marketable securities of $512.5 million at September 30, 2016. Current assets exceed current liabilities by $380.4 million at September 30, 2016. Amounts due related to the Long-Term Notes Payable and Subordinated Borrowings were $184.6 million at September 30, 2016.

Capital Transactions

On October 24, 2016, the Board of Directors of Evercore declared a quarterly dividend of $0.34 per share to be paid on December 9, 2016 to common stockholders of record on November 25, 2016.

During the three months ended September 30, 2016 the Company repurchased approximately 41,000 shares at an average cost per share of $48.63. During the nine months ended September 30, 2016, the Company repurchased a total of approximately 3,402,000 shares at an average price of $47.58.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Wednesday, October 26, 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: 99170796.  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: 99170796. 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. As discussed further under "Non-GAAP Measures" above, 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 Nine Months Ended September 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 Nine Months ended September 30, 2016 (Unaudited)

A-7

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

A-8

U.S. GAAP Segment Reconciliation to Adjusted Results for the Three and Nine Months ended September 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 NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(dollars in thousands, except per share data) 

(UNAUDITED)

               
 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2016

 

2015

 

2016

 

2015

               

Revenues

             

Investment Banking Revenue

$                368,434

 

$                285,561

 

$                936,234

 

$                749,749

Investment Management Revenue

17,158

 

23,812

 

57,842

 

70,398

Other Revenue

5,509

 

4,097

 

12,650

 

8,656

Total Revenues

391,101

 

313,470

 

1,006,726

 

828,803

Interest Expense (1)

4,787

 

4,519

 

12,043

 

13,773

Net Revenues

386,314

 

308,951

 

994,683

 

815,030

               

Expenses

             

Employee Compensation and Benefits

231,710

 

197,375

 

632,959

 

533,645

Occupancy and Equipment Rental

12,627

 

11,717

 

33,983

 

35,631

Professional Fees

15,419

 

13,410

 

39,872

 

36,007

Travel and Related Expenses

12,440

 

12,567

 

42,258

 

39,137

Communications and Information Services

10,155

 

9,295

 

29,944

 

27,595

Depreciation and Amortization

5,907

 

8,398

 

18,915

 

21,112

Special Charges

-

 

28,000

 

-

 

33,499

Acquisition and Transition Costs

339

 

538

 

10

 

1,939

Other Operating Expenses

12,632

 

15,753

 

32,927

 

32,458

Total Expenses

301,229

 

297,053

 

830,868

 

761,023

               

Income Before Income from Equity Method Investments and Income Taxes

85,085

 

11,898

 

163,815

 

54,007

Income from Equity Method Investments

1,178

 

929

 

4,129

 

4,034

Income Before Income Taxes

86,263

 

12,827

 

167,944

 

58,041

Provision for Income Taxes

38,980

 

7,392

 

79,390

 

30,327

Net Income 

47,283

 

5,435

 

88,554

 

27,714

Net Income (Loss) Attributable to Noncontrolling Interest

12,588

 

(1,762)

 

24,454

 

5,453

Net Income Attributable to Evercore Partners Inc.

$                  34,695

 

$                    7,197

 

$                  64,100

 

$                  22,261

               

Net Income Attributable to Evercore Partners Inc. Common Shareholders

$                  34,695

 

$                    7,197

 

$                  64,100

 

$                  22,261

               

Weighted Average Shares of Class A Common Stock Outstanding:

             

Basic

38,912

 

36,773

 

39,259

 

36,649

Diluted

43,734

 

44,334

 

44,085

 

43,100

               

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

             

Basic

$                      0.89

 

$                      0.20

 

$                      1.63

 

$                      0.61

Diluted

$                      0.79

 

$                      0.16

 

$                      1.45

 

$                      0.52

               

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

 

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:
    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. 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.
    4. 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.
    5. Gain on Transfer of Ownership of Mexican Private Equity Business.  The gain resulting from the transfer of ownership of the Mexican Private Equity business in the third quarter of 2016 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.
  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, the finalization of a matter associated with the wind-down of the Company's U.S. Private Equity business, and a charge for the impairment of goodwill in the Institutional Asset Management reporting unit.
  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.

This release also presents changes in Adjusted Net Revenues, Adjusted Investment Management Net Revenues and Adjusted Investment Management Expenses from the prior-year periods assuming that the deconsolidation of Atalanta Sosnoff occurred on December 31, 2014 rather than December 31, 2015. Evercore believes this is useful additional information for investors because it improves the comparability of period-over-period results and aligns with management's view of business performance.

 

EVERCORE PARTNERS INC.

U.S. GAAP RECONCILIATION TO ADJUSTED  RESULTS

(dollars in thousands)

(UNAUDITED)

           
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

Net Revenues - U.S. GAAP

$          386,314

 

$          350,656

 

$          308,951

 

$          994,683

 

$          815,030

Client Related Expenses (1)

(6,205)

 

(6,924)

 

(6,661)

 

(17,074)

 

(14,641)

Income from Equity Method Investments (2)

1,178

 

1,664

 

929

 

4,129

 

4,034

Interest Expense on Debt (3)

2,592

 

2,876

 

2,414

 

7,616

 

7,763

Gain on Transfer of Ownership of Mexican Private Equity Business (4)

(406)

 

-

 

-

 

(406)

 

-

Other Purchase Accounting-related Amortization (8a)

-

 

-

 

-

 

-

 

106

Net Revenues - Adjusted 

$          383,473

 

$          348,272

 

$          305,633

 

$          988,948

 

$          812,292

                   

Compensation Expense - U.S. GAAP

$          231,710

 

$          221,334

 

$          197,375

 

$          632,959

 

$          533,645

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

(13,859)

 

(20,738)

 

(21,980)

 

(66,356)

 

(66,123)

Other Acquisition Related Compensation Charges (6)

-

 

-

 

-

 

-

 

(1,537)

Compensation Expense - Adjusted 

$          217,851

 

$          200,596

 

$          175,395

 

$          566,603

 

$          465,985

                   

Operating Income - U.S. GAAP

$            85,085

 

$            62,605

 

$            11,898

 

$          163,815

 

$            54,007

Income from Equity Method Investments (2)

1,178

 

1,664

 

929

 

4,129

 

4,034

Pre-Tax Income - U.S. GAAP

86,263

 

64,269

 

12,827

 

167,944

 

58,041

Gain on Transfer of Ownership of Mexican Private Equity Business (4)

(406)

 

-

 

-

 

(406)

 

-

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

13,859

 

20,738

 

21,980

 

66,356

 

66,123

Other Acquisition Related Compensation Charges (6)

-

 

-

 

-

 

-

 

1,537

Special Charges (7)

-

 

-

 

28,000

 

-

 

33,499

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

2,538

 

2,845

 

4,898

 

8,628

 

10,984

Acquisition and Transition Costs (8b)

339

 

(329)

 

538

 

10

 

1,939

Fair Value of Contingent Consideration (8c)

984

 

581

 

2,797

 

1,671

 

2,797

Pre-Tax Income - Adjusted 

103,577

 

88,104

 

71,040

 

244,203

 

174,920

Interest Expense on Debt (3)

2,592

 

2,876

 

2,414

 

7,616

 

7,763

Operating Income - Adjusted

$          106,169

 

$            90,980

 

$            73,454

 

$          251,819

 

$          182,683

                   

Provision for Income Taxes - U.S. GAAP

$            38,980

 

$            30,676

 

$              7,392

 

$            79,390

 

$            30,327

Income Taxes (9)

1,211

 

2,364

 

19,106

 

13,536

 

34,869

Provision for Income Taxes - Adjusted 

$            40,191

 

$            33,040

 

$            26,498

 

$            92,926

 

$            65,196

                   

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

$            34,695

 

$            24,087

 

$              7,197

 

$            64,100

 

$            22,261

Gain on Transfer of Ownership of Mexican Private Equity Business (4)

(406)

 

-

 

-

 

(406)

 

-

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

13,859

 

20,738

 

21,980

 

66,356

 

66,123

Other Acquisition Related Compensation Charges (6)

-

 

-

 

-

 

-

 

1,537

Special Charges (7)

-

 

-

 

28,000

 

-

 

33,499

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

2,538

 

2,845

 

4,898

 

8,628

 

10,984

Acquisition and Transition Costs (8b)

339

 

(329)

 

538

 

10

 

1,939

Fair Value of Contingent Consideration (8c)

984

 

581

 

2,797

 

1,671

 

2,797

Income Taxes (9)

(1,211)

 

(2,364)

 

(19,106)

 

(13,536)

 

(34,869)

Noncontrolling Interest (10)

11,625

 

7,805

 

(3,370)

 

21,778

 

2,319

Net Income Attributable to Evercore Partners Inc. - Adjusted

$            62,423

 

$            53,363

 

$            42,934

 

$          148,601

 

$          106,590

                   

Diluted Shares Outstanding - U.S. GAAP 

43,734

 

43,603

 

44,334

 

44,085

 

43,100

LP Units (11a)

7,604

 

7,617

 

8,749

 

7,443

 

9,849

Unvested Restricted Stock Units - Event Based (11a)

12

 

12

 

12

 

12

 

12

Acquisition Related Share Issuance (11b)

-

 

-

 

-

 

-

 

69

Diluted Shares Outstanding - Adjusted

51,350

 

51,232

 

53,095

 

51,540

 

53,030

                   

Key Metrics: (a)

                 

Diluted Earnings Per Share - U.S. GAAP

$                0.79

 

$                0.55

 

$                0.16

 

$                1.45

 

$                0.52

Diluted Earnings Per Share - Adjusted

$                1.22

 

$                1.04

 

$                0.81

 

$                2.88

 

$                2.01

                   

Compensation Ratio - U.S. GAAP

60.0%

 

63.1%

 

63.9%

 

63.6%

 

65.5%

Compensation Ratio - Adjusted 

56.8%

 

57.6%

 

57.4%

 

57.3%

 

57.4%

                   

Operating Margin - U.S. GAAP

22.0%

 

17.9%

 

3.9%

 

16.5%

 

6.6%

Operating Margin - Adjusted 

27.7%

 

26.1%

 

24.0%

 

25.5%

 

22.5%

                   

Effective Tax Rate - U.S. GAAP

45.2%

 

47.7%

 

57.6%

 

47.3%

 

52.3%

Effective Tax Rate - Adjusted 

38.8%

 

37.5%

 

37.3%

 

38.1%

 

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.

 

 

 

EVERCORE PARTNERS INC.

RECONCILIATION TO ATALANTA SOSNOFF ADJUSTED RESULTS

(dollars in thousands)

(UNAUDITED)

   
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2016

 

September 30,
2015

 

% Change

 

September 30,
2016

 

September 30,
2015

 

% Change

                       

Adjusted Net Revenues (a)

$         383,473

 

$         305,633

 

25%

 

$         988,948

 

$         812,292

 

22%

Atalanta Sosnoff Deconsolidation (12)

-

 

(5,135)

 

NM

 

-

 

(15,849)

 

NM

Adjusted Net Revenues - Including Atalanta Sosnoff Adjustment

$         383,473

 

$         300,498

 

28%

 

$         988,948

 

$         796,443

 

24%

                       

Adjusted Investment Management Revenues (a)

$           18,191

 

$           25,205

 

(28%)

 

$           61,401

 

$           74,125

 

(17%)

Atalanta Sosnoff Deconsolidation (12)

-

 

(5,132)

 

NM

 

-

 

(15,845)

 

NM

Adjusted Investment Management Revenues - Including Atalanta Sosnoff Adjustment

$           18,191

 

$           20,073

 

(9%)

 

$           61,401

 

$           58,280

 

5%

                       

Adjusted Investment Management Expenses (a)

$           14,586

 

$           18,211

 

(20%)

 

$           45,693

 

$           57,981

 

(21%)

Atalanta Sosnoff Deconsolidation (12)

-

 

(5,076)

 

NM

 

-

 

(15,558)

 

NM

Adjusted Investment Management Expenses - Including Atalanta Sosnoff Adjustment

$           14,586

 

$           13,135

 

11%

 

$           45,693

 

$           42,423

 

8%

                       

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

           

 

 

 

EVERCORE PARTNERS INC.

U.S. GAAP RECONCILIATION TO ADJUSTED RESULTS

TRAILING TWELVE MONTHS

(dollars in thousands)

(UNAUDITED)

 

Consolidated

 

Twelve Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

Net Revenues - U.S. GAAP

$      1,402,926

 

$      1,325,563

 

$      1,136,918

Client Related Expenses (1)

(25,058)

 

(25,514)

 

(19,776)

Income from Equity Method Investments (2)

6,145

 

5,896

 

5,833

Interest Expense on Debt (3)

9,470

 

9,292

 

9,929

Gain on Transfer of Ownership of Mexican Private Equity Business (4)

(406)

 

-

 

-

Other Purchase Accounting-related Amortization (8a)

-

 

-

 

317

Net Revenues - Adjusted 

$      1,393,077

 

$      1,315,237

 

$      1,133,221

           

Compensation Expense - U.S. GAAP

$         887,489

 

$         853,154

 

$         725,862

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

(83,906)

 

(92,027)

 

(69,522)

Other Acquisition Related Compensation Charges (6)

-

 

-

 

(3,105)

Compensation Expense - Adjusted 

$         803,583

 

$         761,127

 

$         653,235

           

Compensation Ratio - U.S. GAAP (a)

63.3%

 

64.4%

 

63.8%

Compensation Ratio - Adjusted (a)

57.7%

 

57.9%

 

57.6%

           
 

Investment Banking

 

Twelve Months Ended

 

September 30,
2016

 

June 30,
2016

 

September 30,
2015

Net Revenues - U.S. GAAP

$      1,320,544

 

$      1,237,828

 

$      1,044,310

Client Related Expenses (1)

(24,389)

 

(25,038)

 

(19,675)

Income from Equity Method Investments (2)

646

 

230

 

278

Interest Expense on Debt (3)

8,098

 

6,958

 

6,105

Other Purchase Accounting-related Amortization (8a)

-

 

-

 

317

Net Revenues - Adjusted 

$      1,304,899

 

$      1,219,978

 

$      1,031,335

           

Compensation Expense - U.S. GAAP

$         841,403

 

$         804,395

 

$         669,895

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

(83,906)

 

(92,027)

 

(69,522)

Other Acquisition Related Compensation Charges (6)

-

 

-

 

(3,105)

Compensation Expense - Adjusted 

$         757,497

 

$         712,368

 

$         597,268

           

Compensation Ratio - U.S. GAAP (a)

63.7%

 

65.0%

 

64.1%

Compensation Ratio - Adjusted (a)

58.1%

 

58.4%

 

57.9%

           

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

 

 

 

EVERCORE PARTNERS INC.

U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED RESULTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016

(dollars in thousands)

(UNAUDITED)

                         
 

Investment Banking Segment

 

Three Months Ended September 30, 2016

 

Nine Months Ended September 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

$               368,434

 

$             (6,060)

(1)(2)

$               362,374

 

$               936,234

   

$               (16,504)

(1)(2)

$               919,730

Other Revenue, net

200

 

2,592

(3)

2,792

 

270

   

6,946

(3)

7,216

Net Revenues

368,634

 

(3,468)

 

365,166

 

936,504

   

(9,558)

 

926,946

                         

Expenses:

                       

Employee Compensation and Benefits

221,380

 

(13,859)

(5)

207,521

 

600,014

   

(66,356)

(5)

533,658

Non-compensation Costs

64,708

 

(9,511)

(8)

55,197

 

183,686

   

(25,908)

(8)

157,778

Total Expenses

286,088

 

(23,370)

 

262,718

 

783,700

   

(92,264)

 

691,436

                         

Operating Income (a)

$                 82,546

 

$            19,902

 

$               102,448

 

$               152,804

   

$                 82,706

 

$               235,510

                         

Compensation Ratio (b)

60.1%

     

56.8%

 

64.1%

       

57.6%

Operating Margin (b)

22.4%

     

28.1%

 

16.3%

       

25.4%

                         
 

Investment Management Segment

 

Three Months Ended September 30, 2016

 

Nine Months Ended September 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

$                 17,158

 

$              1,033

(1)(2)

$                 18,191

 

$                 57,842

   

$                   3,559

(1)(2)

$                 61,401

Other Revenue, net

522

 

(406)

(4)

116

 

337

   

264

(3)(4)

601

Net Revenues

17,680

 

627

 

18,307

 

58,179

   

3,823

 

62,002

                         

Expenses:

                       

Employee Compensation and Benefits

10,330

 

-

 

10,330

 

32,945

   

-

 

32,945

Non-compensation Costs

4,811

 

(555)

(8)

4,256

 

14,223

   

(1,475)

(8)

12,748

Total Expenses

15,141

 

(555)

 

14,586

 

47,168

   

(1,475)

 

45,693

                         

Operating Income (a)

$                   2,539

 

$              1,182

 

$                   3,721

 

$                 11,011

   

$                   5,298

 

$                 16,309

                         

Compensation Ratio (b)

58.4%

     

56.4%

 

56.6%

       

53.1%

Operating Margin (b)

14.4%

     

20.3%

 

18.9%

       

26.3%

                         

(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.

 

 

 

EVERCORE PARTNERS INC.

U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED RESULTS

FOR THE THREE MONTHS ENDED JUNE 30, 2016

(dollars in thousands)

(UNAUDITED)