UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_____________________________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to .
Commission File Number 001-32975
____________________________________________________
(Exact name of registrant as specified in its charter)
____________________________________________________
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices)
Registrant’s telephone number, including area code: (212 ) 857-3100
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s Class A common stock, par value $0.01 per share, outstanding as of April 21, 2023 was 38,347,196 . The number of shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding as of April 21, 2023 was 51 (excluding 49 shares of Class B common stock held by a subsidiary of the registrant).
Table of Contents
In this report, references to "Evercore", the "Company", "we", "us", "our" refer to Evercore Inc., a Delaware corporation, and its consolidated subsidiaries. Unless the context otherwise requires, references to (1) "Evercore Inc." refer solely to Evercore Inc., and not to any of its consolidated subsidiaries and (2) "Evercore LP" refer solely to Evercore LP, a Delaware limited partnership, and not to any of its consolidated subsidiaries.
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2
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements | ||||
| Condensed Consolidated Financial Statements (Unaudited) | Page | ||||
3
EVERCORE INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(dollars in thousands, except share data)
| March 31, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and Cash Equivalents | $ | $ | |||||||||
Investment Securities and Certificates of Deposit (includes available-for-sale debt securities with an amortized cost of $ | |||||||||||
Accounts Receivable (net of allowances of $ | |||||||||||
| Receivable from Employees and Related Parties | |||||||||||
| Other Current Assets | |||||||||||
| Total Current Assets | |||||||||||
| Investments | |||||||||||
| Deferred Tax Assets | |||||||||||
| Operating Lease Right-of-Use Assets | |||||||||||
Furniture, Equipment and Leasehold Improvements (net of accumulated depreciation and amortization of $ | |||||||||||
| Goodwill | |||||||||||
| Other Assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Accrued Compensation and Benefits | $ | $ | |||||||||
| Accounts Payable and Accrued Expenses | |||||||||||
| Payable to Employees and Related Parties | |||||||||||
| Operating Lease Liabilities | |||||||||||
| Taxes Payable | |||||||||||
| Other Current Liabilities | |||||||||||
| Total Current Liabilities | |||||||||||
| Operating Lease Liabilities | |||||||||||
| Notes Payable | |||||||||||
| Amounts Due Pursuant to Tax Receivable Agreements | |||||||||||
| Other Long-term Liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Commitments and Contingencies (Note 15) | |||||||||||
| Equity | |||||||||||
| Evercore Inc. Stockholders' Equity | |||||||||||
| Common Stock | |||||||||||
Class A, par value $ | |||||||||||
Class B, par value $ | |||||||||||
| Additional Paid-In-Capital | |||||||||||
| Accumulated Other Comprehensive Income (Loss) | ( | ( | |||||||||
| Retained Earnings | |||||||||||
Treasury Stock at Cost ( | ( | ( | |||||||||
| Total Evercore Inc. Stockholders' Equity | |||||||||||
| Noncontrolling Interest | |||||||||||
| Total Equity | |||||||||||
| Total Liabilities and Equity | $ | $ | |||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
EVERCORE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars and share amounts in thousands, except per share data)
| For the Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenues | |||||||||||
| Investment Banking & Equities: | |||||||||||
| Advisory Fees | $ | $ | |||||||||
| Underwriting Fees | |||||||||||
| Commissions and Related Revenue | |||||||||||
| Asset Management and Administration Fees | |||||||||||
| Other Revenue, Including Interest and Investments | ( | ||||||||||
| Total Revenues | |||||||||||
| Interest Expense | |||||||||||
| Net Revenues | |||||||||||
| Expenses | |||||||||||
| Employee Compensation and Benefits | |||||||||||
| Occupancy and Equipment Rental | |||||||||||
| Professional Fees | |||||||||||
| Travel and Related Expenses | |||||||||||
| Communications and Information Services | |||||||||||
| Depreciation and Amortization | |||||||||||
| Execution, Clearing and Custody Fees | |||||||||||
| Special Charges, Including Business Realignment Costs | |||||||||||
| Other Operating Expenses | |||||||||||
| Total Expenses | |||||||||||
| Income Before Income from Equity Method Investments and Income Taxes | |||||||||||
| Income from Equity Method Investments | |||||||||||
| Income Before Income Taxes | |||||||||||
| Provision for Income Taxes | |||||||||||
| Net Income | |||||||||||
| Net Income Attributable to Noncontrolling Interest | |||||||||||
| Net Income Attributable to Evercore Inc. | $ | $ | |||||||||
| Net Income Attributable to Evercore Inc. Common Shareholders | $ | $ | |||||||||
| Weighted Average Shares of Class A Common Stock Outstanding | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
| Net Income Per Share Attributable to Evercore Inc. Common Shareholders: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements.
5
EVERCORE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands)
| For the Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net Income | $ | $ | |||||||||
| Other Comprehensive Income (Loss), net of tax: | |||||||||||
| Unrealized Gain (Loss) on Securities and Investments, net | ( | ||||||||||
| Foreign Currency Translation Adjustment Gain (Loss), net | ( | ||||||||||
| Other Comprehensive Income (Loss) | ( | ||||||||||
| Comprehensive Income | |||||||||||
| Comprehensive Income Attributable to Noncontrolling Interest | |||||||||||
| Comprehensive Income Attributable to Evercore Inc. | $ | $ | |||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements.
6
EVERCORE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(dollars in thousands, except share data)
| For the Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Paid-In | Comprehensive | Retained | Treasury Stock | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Dollars | Capital | Income (Loss) | Earnings | Shares | Dollars | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Treasury Stock Purchases | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Evercore LP Units Exchanged for Class A Common Stock | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based Compensation Awards | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling Interest (Note 12) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Paid-In | Comprehensive | Retained | Treasury Stock | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Dollars | Capital | Income (Loss) | Earnings | Shares | Dollars | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss) | — | — | — | ( | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Treasury Stock Purchases | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Evercore LP Units Exchanged for Class A Common Stock | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based Compensation Awards | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling Interest (Note 12) | — | — | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements.
7
EVERCORE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
| For the Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash Flows From Operating Activities | |||||||||||
| Net Income | $ | $ | |||||||||
| Adjustments to Reconcile Net Income to Net Cash Provided by (Used In) Operating Activities: | |||||||||||
| Net (Gains) Losses on Investments, Investment Securities and Contingent Consideration | ( | ||||||||||
| Equity Method Investments, Including Gain on Sale | ( | ( | |||||||||
| Equity-Based and Other Deferred Compensation | |||||||||||
| Noncash Lease Expense | |||||||||||
| Depreciation, Amortization and Accretion, net | |||||||||||
| Bad Debt Expense | ( | ||||||||||
| Deferred Taxes | ( | ( | |||||||||
| Decrease (Increase) in Operating Assets: | |||||||||||
| Investment Securities | ( | ||||||||||
| Accounts Receivable | |||||||||||
| Receivable from Employees and Related Parties | |||||||||||
| Other Assets | ( | ||||||||||
| (Decrease) Increase in Operating Liabilities: | |||||||||||
| Accrued Compensation and Benefits | ( | ( | |||||||||
| Accounts Payable and Accrued Expenses | ( | ||||||||||
| Payables to Employees and Related Parties | |||||||||||
| Taxes Payable | ( | ( | |||||||||
| Other Liabilities | ( | ( | |||||||||
| Net Cash Provided by (Used in) Operating Activities | ( | ( | |||||||||
| Cash Flows From Investing Activities | |||||||||||
| Investments Purchased | ( | ||||||||||
| Proceeds from Sale of Investments | |||||||||||
| Distributions of Private Equity Investments | |||||||||||
| Investment Securities: | |||||||||||
| Proceeds from Sales and Maturities of Investment Securities | |||||||||||
| Purchases of Investment Securities | ( | ( | |||||||||
| Maturity of Certificates of Deposit | |||||||||||
| Purchase of Certificates of Deposit | ( | ( | |||||||||
| Purchase of Furniture, Equipment and Leasehold Improvements | ( | ( | |||||||||
| Net Cash Provided by Investing Activities | |||||||||||
| Cash Flows From Financing Activities | |||||||||||
| Issuance of Noncontrolling Interests | |||||||||||
| Distributions to Noncontrolling Interests | ( | ( | |||||||||
| Purchase of Treasury Stock and Noncontrolling Interests | ( | ( | |||||||||
| Dividends | ( | ( | |||||||||
| Net Cash Provided by (Used in) Financing Activities | ( | ( | |||||||||
| Effect of Exchange Rate Changes on Cash | ( | ||||||||||
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | ( | ( | |||||||||
| Cash, Cash Equivalents and Restricted Cash – Beginning of Period | |||||||||||
| Cash, Cash Equivalents and Restricted Cash – End of Period | $ | $ | |||||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURE | |||||||||||
| Payments for Interest | $ | $ | |||||||||
| Payments for Income Taxes | $ | $ | |||||||||
| Accrued Dividends | $ | $ | |||||||||
| Amounts Due for Purchase of Noncontrolling Interest | $ | $ | |||||||||
| Settlement of Sale of Trilantic VI | $ | $ | |||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements.
8
EVERCORE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts, unless otherwise noted)
Note 1 – Organization
Evercore Inc., together with its subsidiaries (the "Company"), is an investment banking and investment management firm, incorporated in Delaware and headquartered in New York, New York. The Company is a holding company which owns a controlling interest in, and is the sole general partner of, Evercore LP, a Delaware limited partnership ("Evercore LP"). The Company operates from its offices and through its affiliates in the Americas, Europe, the Middle East and Asia.
The Investment Banking & Equities segment includes the investment banking business through which the Company provides advice to clients on significant mergers, acquisitions, divestitures, shareholder activism and other strategic corporate transactions, with a particular focus on advising prominent multinational corporations and substantial private equity firms on large, complex transactions. The Company also provides restructuring advice to companies in financial transition, as well as to creditors, shareholders and potential acquirers. In addition, the Company provides its clients with capital markets advice, underwrites securities offerings, raises funds for financial sponsors and provides advisory services focused on secondary transactions for private funds interests, as well as on primary and secondary transactions for real estate oriented financial sponsors and private equity interests. The Investment Banking & Equities segment also includes the equities business through which the Company offers macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors.
The Investment Management segment includes the wealth management business through which the Company provides investment advisory, wealth management and fiduciary services for high-net-worth individuals and associated entities, and the private equity business, which holds interests in private equity funds which are not managed by the Company.
Note 2 – Significant Accounting Policies
For a further discussion of the Company's accounting policies, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Basis of Presentation – The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. As permitted by the rules and regulations of the United States Securities and Exchange Commission, the unaudited condensed consolidated financial statements contain certain condensed financial information and exclude certain footnote disclosures normally included in audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The accompanying condensed consolidated financial statements are unaudited and are prepared in accordance with U.S. GAAP. In the opinion of the Company's management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring accruals, necessary to fairly present the accompanying unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2022. The December 31, 2022 Unaudited Condensed Consolidated Statement of Financial Condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023.
The accompanying unaudited condensed consolidated financial statements of the Company are comprised of the consolidation of Evercore LP and Evercore LP's wholly-owned and majority-owned direct and indirect subsidiaries, including Evercore Group L.L.C. ("EGL"), a registered broker-dealer in the U.S. The Company's policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any variable interest entities ("VIEs") where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company reviews factors, including the rights of the equity holders and obligations of equity holders to absorb losses or receive expected residual returns, to determine if the investment is a VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis is generally performed qualitatively. This analysis, which requires judgment, is performed at each reporting date.
Evercore LP is a VIE and the Company is the primary beneficiary. Specifically, the Company has the majority economic interest in Evercore LP and has decision making authority that significantly affects the economic performance of the entity while the limited partners have no kick-out or substantive participating rights. The assets and liabilities of Evercore LP represent substantially all of the consolidated assets and liabilities of the Company with the exception of U.S. corporate taxes
9
EVERCORE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts, unless otherwise noted)
and related items, which are presented on the Company's (Parent Company Only) Condensed Statements of Financial Condition in Note 24 to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Evercore ISI International Limited ("Evercore ISI U.K."), Evercore Partners International LLP ("Evercore U.K."), Evercore (Japan) Ltd. ("Evercore Japan"), Evercore Consulting (Beijing) Co. Ltd. ("Evercore Beijing") and Evercore Partners Canada Ltd. ("Evercore Canada") are also VIEs, and the Company is the primary beneficiary of these VIEs. Specifically for Evercore ISI U.K., Evercore Japan, Evercore Beijing and Evercore Canada, the Company provides financial support through transfer pricing agreements with these entities, which exposes the Company to losses that are potentially significant to these entities, and has decision making authority that significantly affects the economic performance of these entities. The Company has the majority economic interest in Evercore U.K. and has decision making authority that significantly affects the economic performance of this entity. The Company included in its Unaudited Condensed Consolidated Statements of Financial Condition Evercore ISI U.K., Evercore U.K., Evercore Japan, Evercore Beijing and Evercore Canada assets of $291,905 and liabilities of $144,272 at March 31, 2023 and assets of $584,192 and liabilities of $247,884 at December 31, 2022.
All intercompany balances and transactions with the Company's subsidiaries have been eliminated upon consolidation.
Note 3 – Recent Accounting Pronouncements
Note 4 – Revenue and Accounts Receivable
The following table presents revenue recognized by the Company for the three months ended March 31, 2023 and 2022:
| For the Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Investment Banking & Equities: | |||||||||||
| Advisory Fees | $ | $ | |||||||||
| Underwriting Fees | |||||||||||
| Commissions and Related Revenue | |||||||||||
| Total Investment Banking & Equities | $ | $ | |||||||||
| Investment Management: | |||||||||||
| Asset Management and Administration Fees: | |||||||||||
Wealth Management | $ | $ | |||||||||
| Total Investment Management | $ | $ | |||||||||
Contract Balances
10
EVERCORE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts, unless otherwise noted)
| For the Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
Receivables (Current)(1) | Receivables (Long-term)(2) | Contract Assets (Current)(3) | Contract Assets (Long-term)(2) | Deferred Revenue (Current Contract Liabilities)(4) | Deferred Revenue (Long-term Contract Liabilities)(5) | ||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Increase (Decrease) | ( | ( | |||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||
Receivables (Current)(1) | Receivables (Long-term)(2) | Contract Assets (Current)(3) | Contract Assets (Long-term)(2) | Deferred Revenue (Current Contract Liabilities)(4) | Deferred Revenue (Long-term Contract Liabilities)(5) | ||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Increase (Decrease) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1)Included in Accounts Receivable on the Unaudited Condensed Consolidated Statements of Financial Condition.
(2)Included in Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition.
(3)Included in Other Current Assets on the Unaudited Condensed Consolidated Statements of Financial Condition.
(4)Included in Other Current Liabilities on the Unaudited Condensed Consolidated Statements of Financial Condition.
(5)Included in Other Long-term Liabilities on the Unaudited Condensed Consolidated Statements of Financial Condition.
The Company's contract assets represent arrangements in which an estimate of variable consideration has been included in the transaction price and thereby recognized as revenue that precedes the contractual due date. Under Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers" ("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 Company recognized revenue of $3,547 and $4,208 on the Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022, respectively, that was initially included in deferred revenue within Other Current Liabilities on the Company’s Unaudited Condensed Consolidated Statements of Financial Condition.
Generally, performance obligations under client arrangements will be settled within one year ; therefore, the Company has elected to apply the practical expedient in ASC 606-10-50-14.
The allowance for credit losses for the three months ended March 31, 2023 and 2022 is as follows:
| For the Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Beginning Balance | $ | $ | |||||||||
| Bad debt expense, net of reversals | ( | ||||||||||
| Write-offs, foreign currency translation and other adjustments | ( | ( | |||||||||
| Ending Balance | $ | $ | |||||||||
The change in the balance during the three months ended March 31, 2023 is primarily related an increase in the Company's reserve for credit losses and the write-off of aged receivables.
11
EVERCORE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts, unless otherwise noted)
| Amortized Carrying Value by Origination Year | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Total | ||||||||||||||||||||||||||||||
| Long-term Accounts Receivable and Long-Term Contract Assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Note 5 – Related Parties
Advisory Fees includes fees earned from clients that have the Company's Senior Managing Directors, certain Senior Advisors and executives as a member of their Board of Directors of $1,668 and $2,860 for the three months ended March 31, 2023 and 2022, respectively.
Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition includes the long-term portion of loans receivable from certain employees of $14,354 and $16,928 as of March 31, 2023 and December 31, 2022, respectively. See Note 14 for further information.
Note 6 – Investment Securities and Certificates of Deposit
The Company's Investment Securities and Certificates of Deposit as of March 31, 2023 and December 31, 2022 were as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||||||||||||||||||||
| Debt Securities | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Equity Securities | |||||||||||||||||||||||||||||||||||||||||||||||
| Debt Securities Carried by EGL | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment Funds | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Investment Securities (carried at fair value) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Certificates of Deposit (carried at contract value) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Investment Securities and Certificates of Deposit | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Scheduled maturities of the Company's available-for-sale debt securities as of March 31, 2023 and December 31, 2022 were as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
| Due within one year | $ | $ | $ | $ | |||||||||||||||||||
| Due after one year through five years | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The Company has the ability and intent to hold available-for-sale securities until a recovery of fair value is equal to an amount approximating its amortized cost, which may be at maturity. Further, the securities are all U.S. Treasuries, and the Company has not incurred credit losses on its securities. As such, the Company does not consider these securities to be impaired at March 31, 2023 and has not recorded a credit allowance on these securities.
Debt Securities
Debt Securities are classified as available-for-sale securities within Investment Securities and Certificates of Deposit on the Unaudited Condensed Consolidated Statements of Financial Condition. These securities are stated at fair value with unrealized gains and losses included in Accumulated Other Comprehensive Income (Loss) on the Unaudited Condensed
12
EVERCORE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share amounts, unless otherwise noted)
Consolidated Statements of Financial Condition and realized gains and losses included in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations. The Company had net realized losses of ($151 ) and ($34 ) for the three months ended March 31, 2023 and 2022, respectively.
Equity Securities
Equity Securities are carried at fair value with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations. The Company had net realized and unrealized gains of $163 and $11 for the three months ended March 31, 2023 and 2022, respectively.
Debt Securities Carried by EGL
EGL invests in a fixed income portfolio consisting primarily of U.S. Treasury bills. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations, as required for broker-dealers in securities. The Company had net realized and unrealized gains of $6 and $21 for the three months ended March 31, 2023 and 2022, respectively.
Investment Funds
The Company invests in a portfolio of exchange-traded funds as an economic hedge against its deferred cash compensation program. See Note 14 for further information. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations. The Company had net realized and unrealized gains (losses) of $9,441 and ($5,163 ) for the three months ended March 31, 2023 and 2022, respectively.
Certificates of Deposit
At March 31, 2023 and December 31, 2022, the Company held certificates of deposit of $46,948 and $122,890 , respectively, with certain banks with original maturities of four months or less when purchased.
Note 7 – Investments
The Company's investments reported on the Unaudited Condensed Consolidated Statements of Financial Condition consist of investments in unconsolidated affiliated companies, other investments in private equity partnerships and equity securities in private companies. The Company's investments are relatively high-risk and illiquid assets.
The Company's investments in ABS Investment Management Holdings, LP and ABS Investment Management GP LLC (collectively, "ABS"), Atalanta Sosnoff Capital, LLC ("Atalanta Sosnoff"), Luminis Partners ("Luminis") and Seneca Advisors LTDA ("Seneca Evercore") are in voting interest entities. The Company's share of earnings (losses) from these investments is included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.
The Company also has investments in private equity partnerships which consist of investment interests in private equity funds which are voting interest entities. Realized and unrealized gains and losses on private equity investments are included within Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations.
Equity Method Investments
A summary of the Company's investments accounted for under the equity method of accounting as of March 31, 2023 and December 31, 2022 was as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||
| ABS | $ | $ | |||||||||
| Atalanta Sosnoff | |||||||||||
| Luminis | |||||||||||
| Seneca Evercore | |||||||||||
| Total | $ | ||||||||||