Release Details

NEW YORK, Oct. 24, 2018 /PRNewswire/ -- 

Evercore Inc. (NYSE: EVR) today announced its results for the third quarter ended September 30, 2018.

 

 

 

LEADERSHIP COMMENTARY

Ralph Schlosstein, President and Chief Executive Officer
"Despite a reduced number of closings in our Advisory business this quarter, the momentum in our business remains very strong, as we work closely with clients to complete Advisory assignments in 2018 and to announce transactions that will complete next year. Growth in Equity Capital Markets activity is high and our capabilities here are becoming more widely recognized. Our Equities team continues to deliver high quality research while working with clients to receive appropriate compensation for our services, earning revenues that were equal to those in the third quarter of 2017. And our Wealth Management team continues to deliver steady growth," said Ralph Schlosstein, President and Chief Executive Officer. "We are pleased with our results year to date and are working hard to finish the year strongly. These strong results year to date have enabled us to return more than $251 million to our shareholders."

John S. Weinberg, Executive Chairman
"We are pleased to once again be recognized by our clients through the recent Institutional Investor All-America Research survey as a top-tier quality research provider," said John S. Weinberg, Executive Chairman. "We remain in active dialogues with additional talent for all of our businesses as we look ahead to the 2019 recruiting class."

Mr. Weinberg also noted, "We are pleased to welcome Ken Wilson to our Board. He is an established leader in finance, government and philanthropy, and his expertise will further enhance our Board's capabilities."

Roger C. Altman, Founder and Senior Chairman
"The tone and breadth of client dialogue and activity remains healthy. The M&A and capital markets environment continues to be favorable and our backlog is strong," said Roger C. Altman, Founder and Senior Chairman.

Selected Financial Data - U.S. GAAP Results:

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

 

 

Net Revenues
For the three months ended September 30, 2018, Net Revenues of $381.3 million decreased 6% versus the three months ended September 30, 2017, primarily driven by a decrease in Advisory Fees. For the nine months ended September 30, 2018, Net Revenues of $1.3 billion increased 11% versus the nine months ended September 30, 2017, primarily driven by increases in Advisory Fees and Underwriting Fees. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.

The Company adopted the new accounting standard, ASC 606, "Revenue from Contracts with Customers," on January 1, 2018. Under ASC 606, revenue is recognized when all material conditions for completion have been met and it is probable that a significant revenue reversal will not occur in a future period. The application of this standard resulted in advisory revenue of $50.8 million being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard. In addition, beginning in 2018, client related expenses for underwriting transactions are presented gross (previously presented net) in related U.S. GAAP reported revenues and expenses.

Compensation Ratio
For the three months ended September 30, 2018, the compensation ratio was 59.1% versus 60.7% for the three months ended September 30, 2017. The compensation ratio was higher for the three months ended September 30, 2017 due to the expense associated with acquisition-related LP Units/Interests. For the nine months ended September 30, 2018, the compensation ratio was 59.3% versus 59.2% for the nine months ended September 30, 2017. The compensation ratio was lower for the nine months ended September 30, 2017 due to the expense reversal associated with acquisition-related LP Interests during the first quarter of 2017. The compensation ratio for the three and nine months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.

Operating Income
For the three months ended September 30, 2018, Operating Income of $74.5 million decreased 14% versus the three months ended September 30, 2017, driven by a decrease in Net Revenues, partially offset by a decrease in compensation costs in the Investment Banking business. For the nine months ended September 30, 2018, Operating Income of $291.9 million increased 19% versus the nine months ended September 30, 2017, driven by an increase in Net Revenues and a reduction in special charges, partially offset by increased compensation and non-compensation costs in the Investment Banking business. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.

Effective Tax Rate
For the three months ended September 30, 2018, the effective tax rate was 22.8% versus 32.4% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, the effective tax rate was 16.1% versus 27.8% for the nine months ended September 30, 2017.

In conjunction with the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which reduced income tax rates in the U.S. in 2018 and future years, our effective tax rate for the three and nine months ended September 30, 2018 was reduced by 12 percentage points before the impact of the application of the share-based compensation accounting standard, described below.

The provision for income taxes for the three and nine months ended September 30, 2018 includes a benefit of $0.6 million and $22.8 million, respectively, and $0.5 million and $23.7 million for the three and nine months ended September 30, 2017, respectively, following the application of a new accounting standard, effective January 1, 2017, related to share-based compensation, which requires that the tax deduction associated with the appreciation in the Firm's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. This benefit resulted in a decrease in the effective tax rate of 0.8 and 7.6 percentage points for the three and nine months ended September 30, 2018, respectively, and 0.6 and 9.5 percentage points for the three and nine months ended September 30, 2017, respectively.

The effective tax rate is also impacted by the non-deductible treatment of compensation associated with Evercore LP Units/Interests.

Net Income and Earnings Per Share
For the three months ended September 30, 2018, Net Income Attributable to Evercore Inc. and Earnings Per Share of $49.5 million and $1.08, respectively, increased 8% and 4%, respectively, versus the three months ended September 30, 2017, principally driven by a decrease in compensation costs in the Investment Banking business and a decrease in the effective tax rate.

For the nine months ended September 30, 2018, Net Income Attributable to Evercore Inc. and Earnings Per Share of $213.9 million and $4.70, respectively, increased 48% and 46%, respectively, versus the nine months ended September 30, 2017, principally driven by an increase in Net Revenues in the Investment Banking business and a decrease in the effective tax rate.

Selected Financial Data - Adjusted Results:

The following is a discussion of Evercore's results on an Adjusted basis. See pages 7 and A-2 to A-12 for further information and reconciliations of these non-GAAP metrics to our U.S. GAAP results.

 

 

Adjusted Net Revenues
For the three months ended September 30, 2018, Adjusted Net Revenues of $376.0 million decreased 7% versus the three months ended September 30, 2017, primarily driven by a decrease in Advisory Fees. For the nine months ended September 30, 2018, Adjusted Net Revenues of $1.3 billion increased 10% versus the nine months ended September 30, 2017, primarily driven by increases in Advisory Fees and Underwriting Fees. See the Business Line Reporting - Discussion of Adjusted Results below for further information.

The Company adopted the new accounting standard, ASC 606, "Revenue from Contracts with Customers," on January 1, 2018. Under ASC 606, revenue is recognized when all material conditions for completion have been met and it is probable that a significant revenue reversal will not occur in a future period. The application of this standard resulted in advisory revenue of $50.8 million being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard.

Adjusted Compensation Ratio
For the three and nine months ended September 30, 2018, the Adjusted compensation ratio was 59.0%, flat compared to the three and nine months ended September 30, 2017. The Adjusted compensation ratio for the three and nine months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation  associated with recruiting senior talent in 2016 and 2017. See the Business Line Reporting - Discussion of Adjusted Results below for further information.

Adjusted Operating Income
For the three months ended September 30, 2018, Adjusted Operating Income of $87.0 million decreased 16% versus the three months ended September 30, 2017, driven by a decrease in Net Revenues, partially offset by a decrease in compensation costs in the Investment Banking business. For the nine months ended September 30, 2018, Adjusted Operating Income of $327.4 million increased 12% versus the nine months ended September 30, 2017, driven by an increase in Net Revenues, partially offset by increased compensation and non-compensation costs in the Investment Banking business. See the Business Line Reporting - Discussion of Adjusted Results below for further information.

Adjusted Effective Tax Rate
For the three months ended September 30, 2018, the Adjusted effective tax rate was 24.2% versus 37.0% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, the Adjusted effective tax rate was 17.6% versus 28.7% for the nine months ended September 30, 2017.

In conjunction with the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which reduced income tax rates in the U.S. in 2018 and future years, our Adjusted effective tax rate for the three and nine months ended September 30, 2018 was reduced by 14 and 13 percentage points, respectively, before the impact of the application of the share-based compensation accounting standard, described below.

The Adjusted effective tax rate includes a benefit of $0.7 million and $23.9 million for the three and nine months ended September 30, 2018, respectively, and $0.5 million and $26.1 million for the three and nine months ended September 30, 2017, respectively, following the application of a new accounting standard, effective January 1, 2017, related to share-based compensation, which requires that the tax deduction associated with the appreciation in the Firm's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. This benefit resulted in a decrease in the Adjusted effective tax rate of 0.8 and 7.4 percentage points for the three and nine months ended September 30, 2018, respectively, and 0.5 and 9.2 percentage points for the three and nine months ended September 30, 2017, respectively.

Adjusted Net Income and Earnings Per Share
For the three months ended September 30, 2018, Adjusted Net Income Attributable to Evercore Inc. and Adjusted Earnings Per Share of $62.8 million and $1.23, respectively, increased 3% and 1%, respectively, versus the three months ended September 30, 2017, driven by a decrease in compensation costs in the Investment Banking business and a decrease in the effective tax rate.

For the nine months ended September 30, 2018, Adjusted Net Income Attributable to Evercore Inc. and Adjusted Earnings Per Share of $259.7 million and $5.13, respectively, increased 31% and 32%, respectively, versus the nine months ended September 30, 2017, driven by an increase in Net Revenues in the Investment Banking business and a decrease in the effective tax rate.

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.

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 certain 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 Inc. for the three and nine months ended September 30, 2018 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 Special Charges.

Acquisition-related compensation charges for 2018 include expenses associated with awards granted in conjunction with the Company's acquisition of ISI. Acquisition-related charges for 2018 also include professional fees incurred and amortization of intangible assets.

Special Charges for 2018 relate to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York.

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

Evercore's Adjusted Diluted Shares Outstanding for the three and nine months ended September 30, 2018 were higher than U.S. GAAP as a result of the inclusion of certain Evercore LP Units.

This release also presents changes in Adjusted Investment Management Operating Income and Adjusted Investment Management Operating Margin from the prior-year periods assuming that the restructuring of certain Investment Management affiliates occurred on December 31, 2016. This includes the sale of the Institutional Trust and Independent Fiduciary business of ETC that occurred on October 18, 2017. 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, 2017 are included in Annex I, pages A-2 to A-12.

Certain balances in the prior period were reclassified to conform to their current presentation in this release.  "Investment Banking Revenue" has been disaggregated into "Advisory Fees," "Underwriting Fees" and "Commissions and Related Fees" and "Investment Management Revenue" has been renamed to "Asset Management and Administration Fees." "Other Revenue, Including Interest" has been renamed to "Other Revenue, Including Interest and Investments" and principal trading gains and losses and realized and unrealized gains and losses on private equity investments have been reclassified from Investment Banking Revenue and Investment Management Revenue to "Other Revenue, Including Interest and Investments."

 

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.

 

Revenues

During the three months ended September 30, 2018, fees for Advisory services decreased 8% versus the three months ended September 30, 2017, reflecting a decline in the number of Advisory fees in excess of $1 million. Underwriting Fees of $11.4 million for the three months ended September 30, 2018 increased 4% versus the third quarter of last year. We participated in 12 underwriting transactions (vs. 13 in Q3 2017); 6 as a bookrunner (vs. 8 in Q3 2017). Commissions and Related Fees for the three months ended September 30, 2018 were flat from the third quarter of last year.

During the nine months ended September 30, 2018, fees for Advisory services increased 11% versus the nine months ended September 30, 2017, as we continued to advise clients on a wide variety of matters including strategic M&A, activism, restructuring and capital raising. Underwriting Fees of $62.8 million for the nine months ended September 30, 2018 increased 108% versus the nine months ended September 30, 2017, as we participated in 43 underwriting transactions (vs. 39 in 2017); 31 as a bookrunner (vs. 19 in 2017). Commissions and Related Fees for the nine months ended September 30, 2018 decreased 6% from the nine months ended September 30, 2017 principally driven by the trend of institutional clients adjusting the level of payments for research services.

Expenses

Compensation costs were $217.5 million for the three months ended September 30, 2018, a decrease of 8% from the third quarter of last year. The compensation ratio was 59.3% for the three months ended September 30, 2018, compared to 60.9% for the three months ended September 30, 2017. The compensation ratio was higher for the three months ended September 30, 2017 due to the expense associated with acquisition-related LP Units/Interests. Compensation costs were $743.2 million for the nine months ended September 30, 2018, an increase of 13% from the nine months ended September 30, 2017. The compensation ratio was 59.3% for the nine months ended September 30, 2018, compared to 59.2% for the nine months ended September 30, 2017, reflecting the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017. The compensation ratio was also lower for the nine months ended September 30, 2017 due to the expense reversal associated with acquisition-related LP Interests during the first quarter of 2017.

Non-compensation Costs for the three months ended September 30, 2018 were $76.3 million, up 11% compared to the third quarter of last year. The increase in Non-compensation Costs versus last year reflects the addition of personnel, increased occupancy costs and the inclusion of underwriting expenses in 2018 pursuant to the new accounting requirements. The ratio of Non-compensation Costs to Net Revenues for the three months ended September 30, 2018 was 20.8%, compared to 17.6% for the third quarter of last year, driven by lower revenues in 2018. Non-compensation Costs for the nine months ended September 30, 2018 were $221.4 million, up 13% from the nine months ended September 30, 2017. The increase in Non-compensation Costs versus last year reflects the addition of personnel, increased occupancy costs and the inclusion of underwriting expenses in 2018 pursuant to the new accounting requirements. The ratio of Non-compensation Costs to Net Revenues for the nine months ended September 30, 2018 was 17.7%, compared to 17.6% for the nine months ended September 30, 2017.

Special Charges for the three months ended September 30, 2018 reflect separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Special Charges for the nine months ended September 30, 2018 reflect separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Special Charges for the nine months ended September 30, 2017 reflect an impairment charge related to our former equity method investment in G5, resulting from the sustained negative economic and political climate in Brazil.

 

 

 

On October 18, 2017, the Company completed the sale of the Institutional Trust and Independent Fiduciary business of ETC.

Asset Management and Administration Fees of $12.7 million for the three months ended September 30, 2018 decreased 22% compared to the third quarter of last year, following the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 13% as associated AUM increased 16%.

Asset Management and Administration Fees of $36.6 million for the nine months ended September 30, 2018 decreased 22% compared to the nine months ended September 30, 2017, following the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 14% as associated AUM increased 16%.

Expenses

Investment Management's expenses for the three months ended September 30, 2018 were $11.0 million, a decrease of 24% compared to the third quarter of last year principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Investment Management expenses for the nine months ended September 30, 2018 were $33.0 million, down 32% from the nine months ended September 30, 2017 principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017 and a reduction in Special Charges.

Business Line Reporting - Discussion of Adjusted Results

The following is a discussion of Evercore's segment results on an Adjusted basis. See pages 7 and A-2 to A-12 for further information and reconciliations of these metrics to our U.S. GAAP results.

 

 

Adjusted Revenues

During the three months ended September 30, 2018, fees for Advisory services decreased 9% versus the three months ended September 30, 2017, reflecting a decline in the number of Advisory fees in excess of $1 million. Underwriting Fees of $11.3 million for the three months ended September 30, 2018 increased 3% versus the third quarter of last year. We participated in 12 underwriting transactions (vs. 13 in Q3 2017); 6 as a bookrunner (vs. 8 in Q3 2017). Commissions and Related Fees for the three months ended September 30, 2018 were flat compared to the third quarter of last year.

During the nine months ended September 30, 2018, fees for Advisory services increased 11% versus the nine months ended September 30, 2017, as we continued to advise clients on a wide variety of matters including strategic M&A, activism, restructuring and capital raising. Underwriting Fees of $58.9 million for the nine months ended September 30, 2018 increased 95% versus the nine months ended September 30, 2017, as we participated in 43 underwriting transactions (vs. 39 in 2017); 31 as a bookrunner (vs. 19 in 2017). Commissions and Related Fees for the nine months ended September 30, 2018 decreased 6% from the nine months ended September 30, 2017 principally driven by the trend of institutional clients adjusting the level of payments for research services.

Adjusted Expenses

Adjusted compensation costs were $213.7 million for the three months ended September 30, 2018, a decrease of 6% from the third quarter of last year. Evercore's Investment Banking Adjusted compensation ratio was 59.5% for the three months ended September 30, 2018, up versus the Adjusted compensation ratio reported for the third quarter of last year of 59.4%. The Adjusted compensation ratio for the three months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017. Adjusted compensation costs for the nine months ended September 30, 2018 were $731.7 million, an increase of 12% from the nine months ended September 30, 2017. The Adjusted compensation ratio was 59.3% for the nine months ended September 30, 2018, up versus the Adjusted compensation ratio reported for the nine months ended September 30, 2017 of 59.2%. The Adjusted compensation ratio for the nine months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017.

Adjusted Non-compensation Costs for the three months ended September 30, 2018 were $64.3 million, up 11% from the third quarter of last year. The increase in Adjusted Non-compensation Costs versus last year reflects the addition of personnel and increased occupancy costs. The ratio of Adjusted Non-compensation Costs to Adjusted Net Revenues for the three months ended September 30, 2018 was 17.9%, compared to 15.2% for the third quarter of last year, driven by lower revenues in 2018. Adjusted Non-compensation Costs for the nine months ended September 30, 2018 were $188.0 million, up 9% from the nine months ended September 30, 2017 due to the addition of personnel and increased occupancy costs. The ratio of Adjusted Non-compensation Costs to Adjusted Net Revenues for the nine months ended September 30, 2018 was 15.3%, compared to 15.6% for the nine months ended September 30, 2017, driven by higher revenues in 2018.

 

 

 

 

On October 18, 2017, the Company completed the sale of the Institutional Trust and Independent Fiduciary business of ETC.

Adjusted Asset Management and Administration Fees of $15.0 million for the three months ended September 30, 2018 decreased 17% compared to the third quarter of last year, following the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 13% as associated AUM increased 16%.

Equity in Earnings of Affiliates of $2.3 million for the three months ended September 30, 2018 increased relative to the third quarter of last year, driven principally by higher income earned in the third quarter of 2018 by ABS.

Adjusted Asset Management and Administration Fees of $43.1 million for the nine months ended September 30, 2018 decreased 18% compared to the nine months ended September 30, 2017, following the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 14% as associated AUM increased 16%.

Equity in Earnings of Affiliates of $6.5 million for the nine months ended September 30, 2018 increased relative to the nine months ended September 30, 2017, driven principally by higher income earned by ABS in 2018.

Adjusted Expenses

Investment Management's Adjusted expenses for the three months ended September 30, 2018 were $11.0 million, down 21% compared to the third quarter of last year principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Adjusted Investment Management expenses for the nine months ended September 30, 2018 were $33.0 million, down 18% from the nine months ended September 30, 2017 principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017.

Assuming the restructuring of our Investment Management affiliate noted above had occurred on December 31, 2016, Investment Management's Adjusted Operating Income would have increased 19% and 46%, respectively, when compared to the three and nine months ended September 30, 2017, respectively, and Investment Management's Adjusted Operating Margin would have been 31.5% for the third quarter of last year and 24.5% for the nine months ended September 30, 2017.

Balance Sheet

The Company continues to maintain a strong balance sheet, holding cash, cash equivalents, marketable securities and certificates of deposit of $736.3 million at September 30, 2018. Current assets exceed current liabilities by $624.1 million at September 30, 2018. Amounts due related to the Long-Term Notes Payable were $168.5 million at September 30, 2018.

Capital Transactions

On October 22, 2018, the Board of Directors of Evercore declared a quarterly dividend of $0.50 per share to be paid on December 14, 2018 to common stockholders of record on November 30, 2018.

During the three months ended September 30, 2018, the Company repurchased approximately 24 thousand shares from employees for the net settlement of stock-based compensation awards at an average price per share of $110.87 and approximately 0.2 million shares at an average price per share of $108.51 in open market transactions pursuant to the Company's share repurchase program. The aggregate approximately 0.2 million shares were acquired at an average price per share of $108.74. During the nine months ended September 30, 2018, the Company repurchased approximately 1.1 million shares primarily from employees for the net settlement of stock-based compensation awards at an average price per share of $99.92 and approximately 0.8 million shares/units at an average price per share/unit of $96.05 in open market transactions pursuant to the Company's share repurchase program. The aggregate approximately 1.9 million shares/units were acquired at an average price per share/unit of $98.20.

During the nine months ended September 30, 2018, the Company granted to certain existing and new employees approximately 1.9 million unvested RSUs. The total shares available to be granted in the future under the Amended and Restated 2016 Evercore Inc. Stock Incentive Plan was approximately 5.4 million as of September 30, 2018.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Wednesday, October 24, 2018, 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: 2128949. 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: 2128949. A live audio webcast of the conference call will be available on the For Investors 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 (NYSE: EVR) is a premier global independent investment banking advisory firm. We are dedicated to helping our clients achieve superior results through trusted independent and innovative advice on matters of strategic significance to boards of directors, management teams and shareholders, including mergers and acquisitions, strategic shareholder advisory, restructurings, and capital structure. Evercore also assists clients in raising public and private capital and delivers equity research and equity sales and agency trading execution, in addition to providing wealth and investment management services to high net worth and institutional investors. Founded in 1995, the Firm is headquartered in New York and maintains offices and affiliate offices in major financial centers in North America, Europe, South America, the Middle East and Asia. For more information, please visit www.evercore.com.

Investor Contact:     
Jamie Easton
Head of Investor Relations, Evercore
212-857-3100

Media Contact:         
Dana Gorman
The Abernathy MacGregor Group, for Evercore
212-371-5999

Basis of Alternative Financial Statement Presentation

Our Adjusted results are a non-GAAP measure. As discussed further under "Non-GAAP Measures", 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," "backlog," "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, 2017, 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.

 

 

 

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 certain unvested Evercore LP Units and Interests, as well as Acquisition Related Share Issuances and Unvested Restricted Stock Units granted to 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 and Class J LP Units. The amount of expense or the reversal of expense for the Class G and H LP Interests was based on the determination if it was probable that Evercore ISI would achieve certain earnings and margin targets in 2017 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 or reversal of expense associated with these units and interests, 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 and Divestitures.  The following charges resulting from business combinations and divestitures have been excluded from the Adjusted results because the Company's Management believes that operating performance is more comparable across periods excluding the effects of these acquisition-related charges:

a.  Amortization of Intangible Assets and Other Purchase Accounting-related Amortization.  Amortization of intangible assets and other purchase accounting-related amortization from the acquisition of ISI and certain other acquisitions.

b.  Acquisition and Transition Costs.  Primarily professional fees incurred and costs related to transitioning acquisitions or divestitures.

c.  Gain on Sale of Institutional Trust and Independent Fiduciary business of ETC.  The gain resulting from the sale of the Institutional Trust and Independent Fiduciary business of ETC in the fourth quarter of 2017 is excluded from the Adjusted Results.

d.  Foreign Exchange Gains / (Losses).  Release of cumulative foreign exchange losses resulting from the restructuring of our equity method investment in G5 in the fourth quarter of 2017 are excluded from the Adjusted presentation.

3.   Client Related Expenses.  Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables have been classified as a reduction of revenue in the Adjusted 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 2018 relate to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Expenses during 2017 relate to a charge for the impairment of goodwill in the Institutional Asset Management reporting unit and a charge for the impairment of our investment in G5 in the second quarter.

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5.   Income Taxes.  Evercore is organized as a series of Limited Liability Companies, Partnerships, C-Corporations 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 is subject to the statutory tax rates of a C-Corporation under a conventional corporate tax structure in the U.S. at the prevailing corporate rates and that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis. 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.

Excluded from the Company's Adjusted results are adjustments related to the impact of the enactment of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017, which resulted in a reduction in income tax rates in the U.S. in 2018 and future years. The tax reform resulted in an estimated adjustment to Other Revenue for the fourth quarter of 2017 of $77.5 million related to the re-measurement of amounts due pursuant to our tax receivable agreement, which was reduced due to the lower enacted income tax rates in the U.S. in 2018 and future years.

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 Investment Management Operating Income and Adjusted Investment Management Operating Margin from the prior-year periods assuming that the restructuring of certain Investment Management affiliates occurred on December 31, 2016. This includes the sale of the Institutional Trust and Independent Fiduciary business of ETC that occurred on October 18, 2017. 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.

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Notes to Unaudited Condensed Consolidated Adjusted Financial Data

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

(1)     Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables have been reclassified as a reduction of Revenue in the Adjusted presentation.

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

(3)     Interest Expense on Debt is excluded from the Adjusted Investment Banking and Investment Management segment results and is included in Interest Expense in the segment results on a U.S. GAAP basis.

(4)     Expenses or reversal of expenses incurred from the assumed vesting of Class E LP Units, Class G and H LP Interests and Class J LP Units issued in conjunction with the acquisition of ISI are excluded from the Adjusted presentation.

(5)     Expenses during 2018 relate to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Expenses during 2017 relate to a charge for the impairment of goodwill in the Institutional Asset Management reporting unit and a charge for the impairment of our investment in G5 in the second quarter.

(6)     Non-compensation Costs on an Adjusted basis reflect the following adjustments:

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(6a)   The exclusion from the Adjusted presentation of expenses associated with amortization of intangible assets and other purchase accounting-related amortization from the acquisition of ISI and certain other acquisitions.

(6b)   Primarily professional fees incurred and costs related to transitioning acquisitions or divestitures.

(7)     Evercore is organized as a series of Limited Liability Companies, Partnerships, C-Corporations 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 is subject to the statutory tax rates of a C-Corporation under a conventional corporate tax structure in the U.S. at the prevailing corporate rates and that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis. This assumption is consistent with the assumption that certain Evercore LP Units and Interests are vested and exchanged into Class A shares, as the assumed exchange would change the tax structure of the Company.

Excluded from the Company's Adjusted results are adjustments, described below, related to the impact of the enactment of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017, which resulted in a reduction in income tax rates in the U.S. in 2018 and future years. The tax reform also resulted in an estimated adjustment to Other Revenue of $77.5 million in the fourth quarter of 2017 related to the re-measurement of amounts due pursuant to our tax receivable agreement, which was reduced due to the lower enacted income tax rates in the U.S. in 2018 and future years.

(8)     Reflects an adjustment to eliminate noncontrolling interest related to all Evercore LP partnership units which are assumed to be converted to Class A common stock in the Adjusted presentation.

(9)     Assumes the vesting, and exchange into Class A shares, of certain Evercore LP partnership units and interests and IPO related restricted stock unit awards in the Adjusted presentation. In the computation of outstanding common stock equivalents for U.S. GAAP net income per share, the Evercore LP partnership units are anti-dilutive.

(10)   Assumes the sale of the Institutional Trust and Independent Fiduciary business of ETC had occurred as of the beginning of the prior period presented and reflects adjustments to eliminate revenue and expenses that were previously consolidated from the Institutional Trust and Independent Fiduciary business of ETC. Management believes this adjustment is useful to investors to compare Evercore's results across periods.

(11)   The gain resulting from the sale of the Institutional Trust and Independent Fiduciary business of ETC in the fourth quarter of 2017 is excluded from the Adjusted presentation.

(12)   Release of cumulative foreign exchange losses resulting from the restructuring of our equity method investment in G5 in the fourth quarter of 2017 are excluded from the Adjusted presentation.

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SOURCE Evercore