NEW YORK–(BUSINESS WIRE)–Evercore Inc. (NYSE: EVR):
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Second Quarter Results |
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Year to Date Results |
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U.S. GAAP |
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Adjusted |
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U.S. GAAP |
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Adjusted |
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Q2 2022 |
Q2 2021 |
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Q2 2022 |
Q2 2021 |
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YTD 2022 |
YTD 2021 |
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YTD 2022 |
YTD 2021 |
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Net Revenues ($ mm) |
$ |
630.9 |
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$ |
687.9 |
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$ |
637.4 |
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$ |
691.2 |
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$ |
1,353.8 |
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$ |
1,350.2 |
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$ |
1,365.8 |
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$ |
1,361.1 |
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Operating Income ($ mm) |
$ |
146.2 |
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$ |
207.0 |
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$ |
153.2 |
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$ |
210.3 |
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$ |
355.5 |
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$ |
401.2 |
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$ |
368.1 |
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$ |
412.1 |
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Net Income Attributable to Evercore Inc. ($ mm) |
$ |
95.6 |
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$ |
140.4 |
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$ |
107.8 |
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$ |
154.0 |
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$ |
253.6 |
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$ |
284.7 |
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$ |
281.1 |
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$ |
316.5 |
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Diluted Earnings Per Share |
$ |
2.33 |
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$ |
3.21 |
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$ |
2.46 |
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$ |
3.17 |
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$ |
6.13 |
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$ |
6.46 |
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$ |
6.29 |
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$ |
6.47 |
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Compensation Ratio |
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61.7 |
% |
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59.3 |
% |
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61.0 |
% |
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59.0 |
% |
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60.5 |
% |
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59.5 |
% |
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59.9 |
% |
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59.0 |
% |
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Operating Margin |
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23.2 |
% |
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30.1 |
% |
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24.0 |
% |
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30.4 |
% |
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26.3 |
% |
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29.7 |
% |
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27.0 |
% |
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30.3 |
% |
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Effective Tax Rate |
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26.0 |
% |
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22.1 |
% |
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27.0 |
% |
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24.7 |
% |
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|
20.4 |
% |
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19.2 |
% |
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21.2 |
% |
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21.0 |
% |
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Business and Financial Highlights |
■ |
Second Quarter and First Half Net Revenues were $630.9 million and $1.4 billion, respectively, on a U.S. GAAP basis and $637.4 million and $1.4 billion, respectively, on an Adjusted basis. First Half 2022 Net Revenues were flat on both a U.S. GAAP and an Adjusted basis versus 2021 |
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■ |
Advisory Revenues of $1.2 billion on both a U.S. GAAP basis and an Adjusted basis for the first half of 2022 were records, increasing 12% on both a U.S. GAAP and an Adjusted basis versus the same period in 2021 |
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■ |
European fees were a strong contributor to second quarter Advisory Fees as we continue to build our brand and presence globally |
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■ |
Evercore hosted its inaugural Global Clean Energy Summit which was a cornerstone event for Evercore ISI and Advisory energy transition efforts |
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■ |
Evercore was awarded M&A Deal of the Year by The Banker |
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Talent |
■ |
Five Advisory Senior Managing Directors have already joined Evercore in 2022, three of whom joined in the second quarter and July, all in areas of strategic significance; Herb Yeh and Chris Buddin have built on the momentum in our Technology coverage team, and Jason Fournier has strengthened our coverage in Consumer/Retail ECM |
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■ |
Two additional Advisory Senior Managing Directors have committed to join in 2022, contributing to our Debt Advisory & Placement and European businesses, respectively |
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Financial Transactions |
■ |
Refinanced $67 million of Senior Unsecured Notes through the issuance of an equivalent amount of 4.61% Senior Unsecured Notes due November 15, 2028 |
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Capital Return |
■ |
Quarterly dividend of $0.72 per share |
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■ |
Returned $502.0 million to shareholders during the first six months of 2022 through dividends and repurchases of 3.6 million shares at an average price of $120.13 |
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Evercore Inc. (NYSE: EVR) today announced its results for the second quarter ended June 30, 2022.
LEADERSHIP COMMENTARY
John S. Weinberg, Chairman and Chief Executive Officer, «Despite today’s uncertain environment, we accomplished a solid second quarter and first half of 2022. While our backlogs remain strong, we recognize the increased risk associated with the current geopolitical, economic, and market headwinds. We remain confident in our growth strategy and believe that the investments in our business will allow us to continue to achieve success for our clients, firm, and shareholders. As it relates to talent, we are pleased to have seven Advisory Senior Managing Directors join this year. Further, we remain committed to our capital return strategy and will continue to return capital to shareholders while maintaining a durable balance sheet.»
Roger C. Altman, Founder and Senior Chairman, «Evercore has continued to execute very well. And, historically, during complex environments like this, we improve our market share. That is our goal again here.»
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.
Business Segments:
Evercore’s business results are categorized into two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Investment Management includes Wealth Management and interests in private equity funds which are not managed by the Company, as well as advising third-party investors through affiliates. See pages A-2 to A-9 for further information and reconciliations of these segment results to our U.S. GAAP consolidated results.
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 certain Evercore LP Units 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 six months ended June 30, 2022 was higher than U.S. GAAP as a result of Special Charges, Including Business Realignment Costs. Special Charges, Including Business Realignment Costs, in 2022 relate to charges associated with the prepayment of the Company’s $67 million aggregate principal amount of its 5.23% Series B senior notes, originally due March 30, 2023 (the «Series B Notes»), during the second quarter, as well as certain professional fees related to the ongoing liquidation of the Company’s operations in Mexico.
The gain on the sale of a portion of the Company’s interests in ABS in the first quarter of 2022 has been excluded from Adjusted Net Revenues.
Evercore’s Adjusted Diluted Shares Outstanding for the three and six months ended June 30, 2022 were higher than U.S. GAAP, as a result of the inclusion of certain Evercore LP Units and Unvested Restricted Stock Units.
Further details of these adjustments, as well as an explanation of similar amounts for the three and six months ended June 30, 2021 are included in pages A-2 to A-9.
Selected Financial Data – U.S. GAAP Results
The following is a discussion of Evercore’s consolidated results on a U.S. GAAP basis. See pages A-5 to A-7 for our business segment results.
Net Revenues
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U.S. GAAP |
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Three Months Ended |
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Six Months Ended |
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June 30, 2022 |
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June 30, 2021 |
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% |
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June 30, 2022 |
|
June 30, 2021 |
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% |
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(dollars in thousands) |
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Investment Banking: |
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Advisory Fees |
$ |
576,245 |
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$ |
560,814 |
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3% |
|
$ |
1,200,809 |
|
|
$ |
1,072,732 |
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12% |
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Underwriting Fees |
|
13,516 |
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|
48,048 |
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(72%) |
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|
49,822 |
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|
127,305 |
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(61%) |
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Commissions and Related Revenue |
|
52,485 |
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|
50,725 |
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3% |
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|
103,383 |
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|
104,251 |
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(1%) |
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Investment Management: |
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Asset Management and Administration Fees |
|
15,968 |
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|
16,183 |
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(1%) |
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|
33,083 |
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|
31,132 |
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6% |
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Other Revenue, net |
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(27,297 |
) |
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|
12,095 |
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NM |
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(33,326 |
) |
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|
14,755 |
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NM |
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Net Revenues |
$ |
630,917 |
|
|
$ |
687,865 |
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(8%) |
|
$ |
1,353,771 |
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|
$ |
1,350,175 |
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—% |
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Three Months Ended |
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Six Months Ended |
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June 30, 2022 |
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June 30, 2021 |
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% |
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June 30, 2022 |
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June 30, 2021 |
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% |
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Total Number of Fees from Advisory Client Transactions(1) |
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217 |
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|
255 |
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(15%) |
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|
354 |
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|
418 |
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(15%) |
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Total Number of Fees of at Least $1 million from Advisory Client Transactions(1) |
|
100 |
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|
115 |
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(13%) |
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|
186 |
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218 |
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(15%) |
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Total Number of Underwriting Transactions |
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7 |
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31 |
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(77%) |
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21 |
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|
70 |
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(70%) |
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Total Number of Underwriting Transactions as a Bookrunner |
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5 |
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|
25 |
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(80%) |
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18 |
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56 |
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(68%) |
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1. Includes Advisory and Underwriting Transactions. |
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As of June 30, |
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2022 |
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2021 |
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% |
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Assets Under Management ($ mm)(1) |
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Wealth Management(2) |
$ |
10,462 |
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$ |
11,134 |
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(6%) |
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Total Assets Under Management |
$ |
10,462 |
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$ |
11,134 |
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(6%) |
| 1. |
Assets Under Management reflect end of period amounts from our consolidated Wealth Management business. |
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| 2. |
Assets Under Management includes Evercore assets which are managed by Evercore Wealth Management of $0.3 million and $76.3 million as of June 30, 2022 and 2021, respectively. |
Advisory Fees – Second quarter Advisory Fees increased $15.4 million, or 3%, year-over-year, reflecting growth in average fee size during the second quarter of 2022. Year-to-date Advisory Fees increased $128.1 million, or 12%, year-over-year, reflecting growth in average fee size during 2022.
Underwriting Fees – Second quarter Underwriting Fees decreased $34.5 million, or 72%, year-over-year, and year-to-date Underwriting Fees decreased $77.5 million, or 61%, year-over-year. The decrease principally reflects a decrease in the number of transactions we participated in due to the decline in overall market issuances.
Commissions and Related Revenue – Second quarter Commissions and Related Revenue increased $1.8 million, or 3%, year-over-year, primarily reflecting higher trading volumes. Year-to-date Commissions and Related Revenue decreased $0.9 million, or 1%, year-over-year, primarily reflecting lower trading volumes, partially offset by increased revenues from research subscriptions.
Asset Management and Administration Fees – Second quarter Asset Management and Administration Fees decreased $0.2 million, or 1%, year-over-year, driven by a decrease in fees from Wealth Management clients as associated AUM decreased 6%, primarily from market depreciation. Year-to-date Asset Management and Administration Fees increased $2.0 million, or 6%, year-over-year, driven by an increase in fees from Wealth Management clients.
Other Revenue – Second quarter Other Revenue, net, decreased $39.4 million year-over-year, primarily reflecting a shift from gains of $9.8 million to losses of $26.4 million on our investment funds portfolio due to the overall market decline. The portfolio is used as an economic hedge against our deferred cash compensation program. The decrease was also driven by a $4.4 million gain on the redemption of the G5 debt security in the second quarter of 2021. Year-to-date Other Revenue, net, decreased $48.1 million year-over-year, primarily reflecting a shift from gains of $16.0 million to losses of $31.5 million on our investment funds portfolio due to the overall market decline. The decrease was also driven by a $4.4 million gain on the redemption of the G5 debt security in the second quarter of 2021. This was partially offset by a $1.3 million gain on the sale of a portion of our interests in ABS during the first quarter of 2022.
Expenses
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U.S. GAAP |
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Three Months Ended |
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Six Months Ended |
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June 30, 2022 |
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June 30, 2021 |
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% |
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June 30, 2022 |
|
June 30, 2021 |
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% |
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(dollars in thousands) |
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Employee Compensation and Benefits |
$ |
388,971 |
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$ |
407,798 |
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(5%) |
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$ |
818,706 |
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$ |
803,188 |
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2% |
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Compensation Ratio |
|
61.7 |
% |
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|
59.3 |
% |
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|
60.5 |
% |
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|
59.5 |
% |
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Non-Compensation Costs |
$ |
95,232 |
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|
$ |
73,054 |
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30% |
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$ |
178,987 |
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|
$ |
145,766 |
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|
23% |
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Non-Compensation Ratio |
|
15.1 |
% |
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|
10.6 |
% |
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|
13.2 |
% |
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|
10.8 |
% |
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Special Charges, Including Business Realignment Costs |
$ |
532 |
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|
$ |
— |
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|
NM |
|
$ |
532 |
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|
$ |
— |
|
|
NM |
Employee Compensation and Benefits – Second quarter Employee Compensation and Benefits decreased $18.8 million, or 5%, year-over-year, reflecting a compensation ratio of 61.7% for the quarter versus 59.3% for the prior year period. The decrease in Employee Compensation and Benefits compared to the prior year period principally reflects a lower accrual for incentive compensation, partially offset by higher base salaries, costs associated with investments in new hires and an increase in the amortization of prior period deferred compensation awards. Year-to-date Employee Compensation and Benefits increased $15.5 million, or 2%, year-over-year, reflecting a year-to-date compensation ratio of 60.5% versus 59.5% for the prior year period. The increase in Employee Compensation and Benefits compared to the prior year period principally reflects higher base salaries and costs associated with investments in new hires, as well as an increase in the amortization of prior period deferred compensation awards, partially offset by a lower accrual for incentive compensation. The Compensation Ratio was also impacted by the lower performance of our investment funds portfolio during the current year period. See «Deferred Compensation» for more information.
Non-Compensation Costs – Second quarter Non-Compensation Costs increased $22.2 million, or 30%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, higher professional fees, including fee sharing agreements with sub advisors, as well as an increase in bad debt expense compared to a reversal of bad debt expense in the prior year period. The second quarter Non-Compensation ratio of 15.1% increased from 10.6% for the prior year period. Year-to-date Non-Compensation Costs increased $33.2 million, or 23%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, higher professional fees, including fee sharing agreements with sub advisors, as well as an increase in bad debt expense compared to a reversal of bad debt expense in the prior year period. The year-to-date Non-Compensation ratio of 13.2% increased from 10.8% for the prior year period.
Special Charges, Including Business Realignment Costs – Second quarter and year-to-date 2022 Special Charges, Including Business Realignment Costs, relate to charges associated with the prepayment of the Company’s Series B Notes during the second quarter, as well as certain professional fees related to the ongoing liquidation of the Company’s operations in Mexico.
Effective Tax Rate
The second quarter effective tax rate was 26.0% versus 22.1% for the prior year period. The year-to-date effective tax rate was 20.4% versus 19.2% for the prior year period. The effective tax rate is principally impacted by the deduction associated with the appreciation in the Firm’s share price upon vesting of employee share-based awards above the original grant price. The year-to-date provision for income taxes reflects an additional tax benefit of $19.8 million versus $17.0 million for the prior year period, due to the net impact associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price.
Selected Financial Data – Adjusted Results
The following is a discussion of Evercore’s consolidated results on an Adjusted basis. See pages 3 and A-2 to A-9 for further information and reconciliations of these metrics to our U.S. GAAP results. See pages A-5 to A-7 for our business segment results.
Adjusted Net Revenues
|
|
Adjusted |
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Three Months Ended |
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Six Months Ended |
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|
|
June 30, 2022 |
|
June 30, 2021 |
|
% |
|
June 30, 2022 |
|
June 30, 2021 |
|
% |
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|
(dollars in thousands) |
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Investment Banking: |
|
|
|
|
|
|
|
|
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|
Advisory Fees(1) |
$ |
576,409 |
|
|
$ |
561,363 |
|
3% |
|
$ |
1,201,347 |
|
|
$ |
1,073,450 |
|
12% |
|
Underwriting Fees |
|
13,516 |
|
|
|
48,048 |
|
(72%) |
|
|
49,822 |
|
|
|
127,305 |
|
(61%) |
|
Commissions and Related Revenue |
|
52,485 |
|
|
|
50,725 |
|
3% |
|
|
103,383 |
|
|
|
104,251 |
|
(1%) |
|
Investment Management: |
|
|
|
|
|
|
|
|
|
|
|
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|
Asset Management and Administration Fees(2) |
|
18,078 |
|
|
|
19,028 |
|
(5%) |
|
|
37,331 |
|
|
|
36,832 |
|
1% |
|
Other Revenue, net |
|
(23,039 |
) |
|
|
12,027 |
|
NM |
|
|
(26,112 |
) |
|
|
19,257 |
|
NM |
|
Net Revenues |
$ |
637,449 |
|
|
$ |
691,191 |
|
(8%) |
|
$ |
1,365,771 |
|
|
$ |
1,361,095 |
|
—% |
| 1. |
Advisory Fees on an Adjusted basis reflect the reclassification of earnings related to our equity method investments in Luminis and Seneca Evercore of $0.2 million and $0.5 million for the three and six months ended June 30, 2022, respectively, and $0.5 million and $0.7 million for the three and six months ended June 30, 2021, respectively. |
|
| 2. |
Asset Management and Administration Fees on an Adjusted basis reflect the reclassification of earnings related to our equity method investments in Atalanta Sosnoff and ABS of $2.1 million and $4.2 million for the three and six months ended June 30, 2022, respectively, and $2.8 million and $5.7 million for the three and six months ended June 30, 2021, respectively. |
See page 4 for additional business metrics.
Advisory Fees – Second quarter adjusted Advisory Fees increased $15.0 million, or 3%, year-over-year, reflecting growth in average fee size during the second quarter of 2022. Year-to-date adjusted Advisory Fees increased $127.9 million, or 12%, year-over-year, reflecting growth in average fee size during 2022.
Underwriting Fees – Second quarter Underwriting Fees decreased $34.5 million, or 72%, year-over-year, and year-to-date Underwriting Fees decreased $77.5 million, or 61%, year-over-year. The decrease principally reflects a decrease in the number of transactions we participated in due to the decline in overall market issuances.
Commissions and Related Revenue – Second quarter Commissions and Related Revenue increased $1.8 million, or 3%, year-over-year, primarily reflecting higher trading volumes. Year-to-date Commissions and Related Revenue decreased $0.9 million, or 1%, year-over-year, primarily reflecting lower trading volumes, partially offset by increased revenues from research subscriptions.
Asset Management and Administration Fees – Second quarter adjusted Asset Management and Administration Fees decreased $1.0 million, or 5%, year-over-year, primarily attributed to a 26% decrease in equity in earnings of affiliates, driven by lower income earned by ABS, principally reflecting a decrease in our ownership following the sale of a portion of our interests during the first quarter. The decrease was also driven by a decrease in fees from Wealth Management clients, as associated AUM decreased 6%, primarily from market depreciation. Year-to-date adjusted Asset Management and Administration Fees increased $0.5 million, or 1%, year-over-year, primarily driven by an increase in fees from Wealth Management clients. This was partially offset by a 25% decrease in equity in earnings of affiliates, driven by lower income earned by ABS, principally reflecting a decrease in our ownership following the sale of a portion of our interests during the first quarter.
Other Revenue – Second quarter adjusted Other Revenue, net, decreased $35.1 million year-over-year, primarily reflecting a shift from gains of $9.8 million to losses of $26.4 million on our investment funds portfolio due to the overall market decline. The portfolio is used as an economic hedge against our deferred cash compensation program. Year-to-date adjusted Other Revenue, net, decreased $45.4 million year-over-year, primarily reflecting a shift from gains of $16.0 million to losses of $31.5 million on our investment funds portfolio due to the overall market decline.
Adjusted Expenses
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|
Adjusted |
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|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
June 30, 2022 |
|
June 30, 2021 |
|
% |
|
June 30, 2022 |
|
June 30, 2021 |
|
% |
||||
|
|
(dollars in thousands) |
||||||||||||||
|
Employee Compensation and Benefits |
$ |
388,971 |
|
$ |
407,798 |
|
(5%) |
|
$ |
818,706 |
|
$ |
803,188 |
|
2% |
|
Compensation Ratio |
|
61.0 % |
|
|
59.0 % |
|
|
|
|
59.9 % |
|
|
59.0 % |
|
|
|
Non-Compensation Costs |
$ |
95,232 |
|
$ |
73,054 |
|
30% |
|
$ |
178,987 |
|
$ |
145,759 |
|
23% |
|
Non-Compensation Ratio |
|
14.9 % |
|
|
10.6 % |
|
|
|
|
13.1 % |
|
|
10.7 % |
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Employee Compensation and Benefits – Second quarter adjusted Employee Compensation and Benefits decreased $18.8 million, or 5%, year-over-year, reflecting a compensation ratio of 61.0% for the quarter versus 59.0% for the prior year period. The decrease in Employee Compensation and Benefits compared to the prior year period principally reflects a lower accrual for incentive compensation, partially offset by higher base salaries, costs associated with investments in new hires and an increase in the amortization of prior period deferred compensation awards. Year-to-date adjusted Employee Compensation and Benefits increased $15.5 million, or 2%, year-over-year, reflecting a year-to-date adjusted compensation ratio of 59.9% versus 59.0% for the prior year period. The increase in Employee Compensation and Benefits compared to the prior year period principally reflects higher base salaries and costs associated with investments in new hires, as well as an increase in the amortization of prior period deferred compensation awards, partially offset by a lower accrual for incentive compensation. The adjusted Compensation Ratio was also impacted by the lower performance of our investment funds portfolio during the current year period. See «Deferred Compensation» for more information.
Non-Compensation Costs – Second quarter adjusted Non-Compensation Costs increased $22.2 million, or 30%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, higher professional fees, including fee sharing agreements with sub advisors, as well as an increase in bad debt expense compared to a reversal of bad debt expense in the prior year period. The second quarter adjusted Non-Compensation ratio of 14.9% increased from 10.6% for the prior year period. Year-to-date adjusted Non-Compensation Costs increased $33.2 million, or 23%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, higher professional fees, including fee sharing agreements with sub advisors, as well as an increase in bad debt expense compared to a reversal of bad debt expense in the prior year period. The year-to-date adjusted Non-Compensation ratio of 13.1% increased from 10.7% for the prior year period.
Adjusted Effective Tax Rate
The second quarter adjusted effective tax rate was 27.0% versus 24.7% for the prior year period. The year-to-date adjusted effective tax rate was 21.2% versus 21.0% for the prior year period. The adjusted effective tax rate is principally impacted by the deduction associated with the appreciation in the Firm’s share price upon vesting of employee share-based awards above the original grant price. The year-to-date adjusted provision for income taxes for 2022 reflects an additional tax benefit of $20.3 million versus $18.1 million for the prior year period, due to the net impact associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price.
Liquidity
The Company continues to maintain a strong balance sheet. As of June 30, 2022, cash and cash equivalents were $444.3 million, investment securities and certificates of deposit were $1.1 billion and current assets exceeded current liabilities by $1.4 billion. Amounts due related to the Notes Payable were $371.7 million at June 30, 2022.
On June 28, 2022, the Company refinanced its Series B Notes through the issuance of $67 million aggregate principal amount of 4.61% Series J senior notes due November 15, 2028 through private placement. The Company incurred charges during the quarter related to the prepayment and acceleration of the remaining debt issuance costs related to the Series B Notes, which has been recorded as Special Charges, Including Business Realignment Costs, and are excluded from our Adjusted results.
Contacts
Investors:
Katy Haber
Head of Investor Relations and ESG
212-822-7554
Media:
Dana Gorman
Abernathy MacGregor, for Evercore
212-371-5999
