Evercore (EVR) FY 2025 Annual General Meeting June 11, 2025 09:00 AM ET Speaker0 Good morning and welcome to the twenty twenty five Annual Meeting of Stockholders of Evercore. Please note that this meeting will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without Evercore's consent. I will now turn the call over to John Weinberg, Chairman of the Board and Chief Executive Officer of Evercore. Speaker1 Thank you. We sincerely thank you for taking the ...

Evercore (EVR) 2025 Conference June 10, 2025 11:25 AM ET Speaker0 All right, I'll start with our disclosure. So for important disclosures, please see Morgan Stanley Research disclosure website, ww.morganstanley.com/researchdisclosures. If you have any questions, please feel free to reach out to your Morgan Stanley sales representative. All right. So we are pleased to have with us John Weinberg, Chairman and CEO of Evercore. John, thanks so much for joining us. Speaker1 Thank you for having me. Speaker0 So j ...

Group 1 - The company has a strong focus on mergers and acquisitions (M&A) as its core business [1] - In addition to M&A, the company has developed non-M&A revenue streams such as Liability Management & Restructuring [1]

Core Viewpoint - The investment banking landscape is evolving, with Evercore Inc. and The Goldman Sachs Group Inc. gaining investor attention due to their distinct service offerings in mergers and acquisitions, capital markets, and wealth management [1]. Investment Banking Sector Overview - The long-term outlook for the investment banking sector remains favorable, but near-term momentum has moderated due to market volatility and concerns over economic slowdown and inflation [2]. - The anticipated recovery in M&A activity is expected to occur in the latter half of 2025 [2]. Goldman Sachs Analysis - Goldman Sachs maintains a leadership position in global banking and markets, with a 24% year-over-year increase in IB revenues in 2024, driven by corporate debt and equity issuances [3]. - However, IB revenues declined by 8% year-over-year in Q1 2025 due to market uncertainty and a slowdown in M&A activities [3][4]. - Goldman is strategically exiting its non-core consumer banking business to focus on higher-margin areas like investment banking and trading, including ending its partnership with Apple [5][6]. - The company has divested several consumer finance businesses to enhance its focus on scalable core businesses [6]. Evercore Analysis - Evercore, while smaller, generates 95.9% of its revenues from Investment Banking and Equities, with a CAGR of 8.6% from 2017 to 2024 [7]. - The company is actively increasing its staff in the IB sector, employing 197 senior managing directors as of March 31, 2025, to support revenue growth [8]. Price Performance and Valuation - Over the past six months, Goldman shares fell by 0.1%, while Evercore shares dropped by 28.7%, against an industry growth of 0.8% [9]. - Goldman is trading at a 12-month forward P/E of 12.72X, higher than its five-year median of 10.17X, while Evercore trades at 18.06X, above its five-year median of 12.40X [11]. - Evercore's valuation is at a premium compared to the industry average of 13.73X, while Goldman is trading at a discount, making it a better choice for value investors [14]. Dividend Yield - Evercore has a dividend yield of 1.43%, while Goldman has a higher yield of 2.02%, both exceeding the industry average of 1.12% [14]. Earnings Estimates - The Zacks Consensus Estimate for Goldman suggests year-over-year revenue increases of 7.7% and 6% for Q2 and Q3 2025, respectively, with earnings growth of 13.9% and 20.9% [18]. - Conversely, Evercore's estimates indicate a revenue decline of 7.1% and 1.2% for the same quarters, with earnings declines of 22.7% and 3.4% [20]. Strategic Positioning - Despite near-term challenges, Goldman is well-positioned with an increased backlog and diversified revenue base, providing resilience that Evercore lacks during volatility [21]. - Goldman’s focus on high-return segments and divestitures is improving operational focus and profitability [22].

Revenue and Income - Total revenues for the Investment Banking & Equities and Investment Management segments include fees for services, transaction-related client reimbursements, and other revenue, with net revenues reflecting total revenues less interest expense[182]. - Revenue trends in the advisory business are correlated to M&A activity, restructuring activity, and capital advisory activity, with fluctuations based on market conditions and client transaction completions[184]. - The Investment Management segment generates revenue primarily from management fees, fiduciary fees, and gains or losses on investments, with management fees typically representing a percentage of assets under management (AUM)[185][186]. - Net Income Attributable to Evercore Inc. was $146.2 million for the three months ended March 31, 2025, an increase of $60.5 million, or 71%, compared to $85.7 million for the same period in 2024[209]. - Net Revenues were $694.8 million for the three months ended March 31, 2025, an increase of $114.0 million, or 20%, versus $580.8 million for the same period in 2024[210]. - Advisory Fees increased by $127.5 million, or 30%, to $557.3 million, while Underwriting Fees decreased by $1.3 million, or 2%, to $54.3 million[210]. - Operating Income for the Investment Banking & Equities segment was $106.7 million for the three months ended March 31, 2025, an increase of $27.8 million, or 35%, compared to $78.9 million for the same period in 2024[219]. - Net Revenues for the three months ended March 31, 2025, were $20.3 million, an increase of $1.2 million, or 6%, compared to $19.1 million for the same period in 2024[235]. Expenses - Employee Compensation and Benefits Expense was $459.8 million for the three months ended March 31, 2025, an increase of $72.1 million, or 19%, compared to $387.7 million for the same period in 2024[212]. - Non-compensation expenses were $123.8 million for the three months ended March 31, 2025, an increase of $14.8 million, or 14%, versus $109.0 million for the same period in 2024[213]. - Total Expenses increased by $86.9 million, or 18%, to $583.6 million for the three months ended March 31, 2025, compared to $496.7 million for the same period in 2024[212]. - Employee Compensation and Benefits Expense was $11.8 million for the three months ended March 31, 2025, an increase of $1.4 million, or 13%, compared to $10.5 million for the same period in 2024[236]. - Non-Compensation expenses rose to $4.0 million for the three months ended March 31, 2025, an increase of $0.6 million, or 18%, compared to $3.4 million for the same period in 2024[237]. Investments and Assets - Income from equity method investments includes the company's share of income or loss from equity interests in various partnerships, contributing to income before income taxes[201]. - Assets Under Management (AUM) in Wealth Management decreased by $0.2 billion, or 1%, to $13.7 billion as of March 31, 2025, compared to $13.9 billion at December 31, 2024[230]. - The composition of AUM for Wealth Management as of March 31, 2025, was 65% Equities, 20% Fixed Income, 10% Liquidity, and 5% Alternatives[232]. - Investment Securities as of March 31, 2025, totaled $794.6 million, with 82% being U.S. Treasury securities[281]. - Total receivables in Accounts Receivable as of March 31, 2025, amounted to $469.1 million, an increase from $421.5 million as of December 31, 2024[279]. Cash and Liquidity - Cash, Cash Equivalents, and Restricted Cash were $562.7 million at March 31, 2025, a decrease of $319.4 million from $882.1 million at December 31, 2024[241]. - The company’s liquidity is highly dependent on revenue from its Investment Banking & Equities segment, which is irregular and influenced by external factors[245]. - The company’s Management Committee regularly reviews liquidity and cash positions to inform recommendations for quarterly dividend payments[245]. - Operating activities resulted in a net outflow of $549.7 million, primarily related to the payment of 2024 bonus awards and deferred cash compensation[241]. Taxation - The provision for income taxes for the three months ended March 31, 2025 was ($41.7) million, reflecting an effective tax rate of (37.2%) compared to ($6.7) million and (7.7%) for the same period in 2024[215]. Foreign Currency and Hedging - The net impact of foreign currency fluctuations for the three months ended March 31, 2025, was a gain of $8.7 million, net of tax[275]. - The company has not entered into transactions to hedge foreign exchange fluctuations, which may impact financial results[275]. - A foreign currency exchange forward contract was entered into during Q3 2023 to buy 30.0 million British Pounds for $36.7 million, resulting in a loss of $0.3 million for the three months ended March 31, 2024[276]. Share Repurchase and Capital Contributions - During the three months ended March 31, 2025, the company repurchased a total of 1,554,522 Class A Shares for an aggregate purchase consideration of $406.0 million, at an average cost per share of $261.15[252]. - The company has total commitments of $2.6 million relating to future capital contributions to private equity funds as of March 31, 2025[266]. - The company established a revolving credit facility with PNC for up to $85.0 million, which is unsecured and has a maturity date of October 27, 2026[260]. - The company issued $67.0 million of 4.61% Series J Notes on June 28, 2022, as part of a private placement[256]. Market Performance - The Wealth Management business lagged the S&P 500 by approximately 8% and 3% on a 1 and 3-year basis, respectively[240]. - A hypothetical 10%, 20%, and 30% adverse change in the market value of investments would have resulted in a decrease in pre-tax income of approximately $14.3 million, $28.7 million, and $43.0 million, respectively[272]. - A hypothetical 10% adverse change in the value of private equity funds would decrease pre-tax income by approximately $0.3 million for the three months ended March 31, 2025[274]. Credit Losses - The company maintains an allowance for credit losses based on historical credit loss experience and current market conditions[278]. - Bad debt expense recorded for the three months ended March 31, 2025, was $2.6 million, while a reversal of bad debt expense of $0.6 million was noted for the same period in 2024[278]. - The collection period for receivables generally is within 90 days, with some fees related to private funds capital raising potentially exceeding one year[278].

Core Viewpoint - Evercore Inc. reported better-than-expected first-quarter 2025 results, with adjusted earnings per share of $3.49, significantly surpassing the Zacks Consensus Estimate of $1.60 and the prior year's $2.13 [1][2] Financial Performance - Adjusted net revenues for the first quarter of 2025 were $699.9 million, exceeding the Zacks Consensus Estimate by 19.3% and increasing 19.2% year over year [3] - Net income attributable to common shareholders (GAAP basis) was $146.2 million, a 70.6% increase from the year-ago quarter [2] - Total expenses rose 17.5% year over year to $583.6 million, primarily due to increases in all components except depreciation and amortization [3] - Adjusted operating margin improved to 16.6%, up from 15.4% in the prior-year quarter [4] Segment Performance - Investment Banking & Equities segment net revenues increased 20.1% year over year to $674.5 million, driven by higher advisory fees and commissions, with operating income surging 35.3% to $106.7 million [5] - Investment Management segment net revenues were $20.3 million, up 6.3% from the prior-year quarter, while operating income decreased 14.8% to $4.5 million; assets under management (AUM) reached $13.7 million, a 5.4% year-over-year increase [6] Balance Sheet Strength - As of March 31, 2025, cash and cash equivalents stood at $553 million, with investment securities and certificates of deposit totaling $811.5 million; current assets exceeded current liabilities by $1.4 billion [7] Capital Distribution Activities - The company declared a quarterly dividend of 84 cents per share, a 5% increase from the previous payout, to be paid on June 13 to shareholders of record as of May 30 [8] - In the reported quarter, Evercore repurchased 0.7 million shares at an average price of $227.45 [8] Industry Context - Evercore's revenue growth reflects strong momentum in advisory solutions, supported by a solid liquidity position and sustainable capital distribution activities [9] - However, rising expenses may hinder bottom-line growth in the near term [9]

Group 1 - Evercore reported revenue of $699.9 million for the quarter ended March 2025, representing a 19.2% increase year-over-year and a surprise of +19.27% over the Zacks Consensus Estimate of $586.82 million [1] - The earnings per share (EPS) for the quarter was $3.49, significantly higher than the $2.13 reported in the same quarter last year, with an EPS surprise of +118.13% compared to the consensus estimate of $1.60 [1] - Adjusted Net Revenues from Investment Banking & Equities totaled $678.69 million, exceeding the average estimate of $542.94 million by two analysts, marking a year-over-year increase of +19.8% [4] Group 2 - Net Revenues from Other Revenue were reported at $11.33 million, which is a decline of -60.3% year-over-year and below the average estimate of $21.67 million by two analysts [4] - Adjusted Net Revenues from Investment Management, specifically Asset Management and Administration Fees, were $21.90 million, slightly above the estimated $21.72 million, reflecting a +7.7% change compared to the previous year [4] - Over the past month, Evercore's shares have returned -0.7%, underperforming the Zacks S&P 500 composite's -0.2% change, and the stock currently holds a Zacks Rank 5 (Strong Sell) [3]

Group 1: Earnings Performance - Evercore reported quarterly earnings of $3.49 per share, significantly exceeding the Zacks Consensus Estimate of $1.60 per share, and up from $2.13 per share a year ago, representing an earnings surprise of 118.13% [1] - The company posted revenues of $699.9 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 19.27%, compared to year-ago revenues of $587.33 million [2] Group 2: Stock Performance and Outlook - Evercore shares have declined approximately 28.2% since the beginning of the year, contrasting with the S&P 500's decline of 5.5% [3] - The current consensus EPS estimate for the upcoming quarter is $1.67 on revenues of $684.56 million, and for the current fiscal year, it is $9.67 on revenues of $3.14 billion [7] Group 3: Industry Context - The Financial - Investment Bank industry, to which Evercore belongs, is currently ranked in the bottom 23% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Financial Data and Key Metrics Changes - For Q1 2025, adjusted net revenues were $700 million, a 19% increase year-over-year [18] - Adjusted operating income for Q1 2025 was $116 million, up 28% from the previous year [18] - Adjusted earnings per share (EPS) increased 64% year-over-year to $3.49 [19] - Adjusted operating margin improved to 16.6%, compared to 15.4% in the prior year [19] Business Line Data and Key Metrics Changes - Adjusted advisory fees reached $557 million, a 29% increase year-over-year, reflecting strong performance in both M&A and non-M&A advisory [19] - Underwriting revenues were $54 million, down 2% from the previous year, influenced by lower follow-on activity [20] - Commissions and related revenue increased 14% year-over-year to $55 million, driven by higher trading volumes [20] - Adjusted asset management and administration fees rose 8% year-over-year to $22 million [21] Market Data and Key Metrics Changes - Global transaction volumes increased in Q1 compared to the prior year, although the number of transactions declined due to macroeconomic headwinds [12] - The private capital advisory group had a record first quarter, particularly in GP-led continuation vehicles [13] - The equity capital markets business showed strong momentum, with the best first quarter since 2020, driven by market volatility [14] Company Strategy and Development Direction - The company remains focused on long-term value creation for clients and shareholders, with a commitment to invest in talent through the cycle [9][15] - The firm is strategically positioned to navigate increased market volatility and uncertainty, emphasizing a diversified platform across various sectors and geographies [6][7] - The company plans to continue hiring in key areas such as technology, healthcare, and Europe, despite a potentially slower M&A backdrop [66] Management's Comments on Operating Environment and Future Outlook - Management noted that heightened geopolitical and trade tensions are causing increased volatility in financial markets, impacting CEO and Board confidence levels [6][8] - There is a robust backlog and active client dialogues, indicating pent-up demand for transactions once market conditions stabilize [8][29] - The company expects Q2 and Q3 results to be impacted by market volatility, but remains optimistic about medium to long-term prospects [17][28] Other Important Information - The company returned a record $454 million of capital to shareholders through share repurchases and dividends [25] - The adjusted tax rate for the quarter was negative 39.7%, influenced by a significant net tax benefit [24] - The firm maintains a strong cash position of nearly $1.4 billion, consistent with the previous year [25][28] Q&A Session Summary Question: Insights on Backlogs and Client Types - Management expressed satisfaction with the robust and growing backlog, indicating that while there are pauses, cancellations are minimal [34][38] Question: Outlook for Private Capital Advisory - The private capital advisory business is performing strongly, particularly in continuity funds, which are seen as effective for monetizing assets [40][41] Question: Comparison of M&A Activity in Europe vs. the U.S. - Management noted that while there is healthy activity in Europe, it is not necessarily driven by stronger forces than in the U.S., and recovery timelines remain uncertain [46][49] Question: Compensation Ratio and Revenue Growth - Management indicated that revenue growth is crucial for improving the compensation ratio, with a strong backlog supporting future performance [52][56] Question: Restructuring Environment and Liability Management - The restructuring business is healthy, with no limitations on serving clients in liability management, despite concerns about high rates and potential bankruptcies [58][60] Question: Hiring Plans in a Slower M&A Environment - The company plans to continue hiring strong talent in key areas, maintaining a consistent approach regardless of market conditions [62][66] Question: Equity Capital Markets Outlook - Management is optimistic about the equity capital markets, with a good backlog of transactions ready to go once market conditions stabilize [68][70]

Financial Data and Key Metrics Changes - For Q1 2025, adjusted net revenues were $700 million, a 19% increase year-over-year [18] - Adjusted operating income for Q1 2025 was $116 million, up 28% compared to the same period last year [18] - Adjusted earnings per share (EPS) rose to $3.49, reflecting a 64% increase year-over-year [19] - Adjusted operating margin improved to 16.6%, up from 15.4% in the prior year [19] Business Line Data and Key Metrics Changes - Adjusted advisory fees reached $557 million, a 29% increase year-over-year, indicating strong performance in both M&A and non-M&A advisory [19] - Underwriting revenues were $54 million, down 2% from the previous year, with lower follow-on activity but improvements in the IPO market [20] - Commissions and related revenue increased by 14% year-over-year to $55 million, driven by higher trading volumes [20] - Adjusted asset management and administration fees rose 8% year-over-year to $22 million, supported by an increase in assets under management (AUM) [21] Market Data and Key Metrics Changes - Global transaction volumes increased in Q1 2025 compared to the prior year, although the number of transactions declined due to macroeconomic headwinds [12] - The private capital advisory group achieved record performance in Q1, particularly in GP-led continuation vehicles [13] - The equity capital markets business showed strong momentum, with expectations for a recovery as market volatility stabilizes [14] Company Strategy and Development Direction - The company is focused on long-term value creation for clients and shareholders, maintaining a capital return philosophy [15] - Evercore aims to invest in talent and expand its capabilities across various sectors, including technology, healthcare, and private capital advisory [10][67] - The firm is positioned to navigate through challenging market conditions, emphasizing a diversified platform across geographies and sectors [8] Management's Comments on Operating Environment and Future Outlook - Management noted increased volatility in global financial markets due to geopolitical tensions and inflation concerns, impacting CEO and Board confidence levels [7][9] - There is a robust backlog of transactions, with active client dialogues indicating pent-up demand for M&A activity [9][36] - The company expects transaction levels to increase once there is greater clarity in the macroeconomic environment [9] Other Important Information - The adjusted compensation ratio for Q1 was 65.7%, slightly down from the previous year, with non-compensation expenses rising 14% year-over-year [22][23] - The company returned a record $454 million to shareholders through share repurchases and dividends [26] - The effective tax rate for the quarter was negative 39.7%, influenced by stock price appreciation at the time of vesting [25] Q&A Session Summary Question: Insights on Backlogs and Client Types - Management expressed satisfaction with the robust and growing backlog, indicating strong engagement across various sectors, particularly in software and restructuring [36][37] Question: Outlook for Private Capital Advisory - The private capital advisory business remains strong, with continuity funds gaining traction as a method for sponsors to return capital to LPs [41][42] Question: Comparison of M&A Activity in Europe vs. the U.S. - Management noted that while there is healthy activity in Europe, it is not necessarily stronger than in the U.S., with ongoing uncertainty affecting both regions [49][50] Question: Compensation Ratio and Revenue Growth - Management indicated that revenue growth is crucial for improving the compensation ratio, with a strong backlog supporting future performance [56][57] Question: Restructuring Environment and Liability Management - The restructuring business is performing well, with no limitations on serving clients in liability management, despite concerns about high interest rates [60][61] Question: Hiring Plans in a Slower M&A Environment - The company plans to continue hiring top talent across various sectors, maintaining a consistent approach regardless of market conditions [66][67] Question: Equity Capital Markets Outlook - Management is optimistic about the equity capital markets, with a good backlog of transactions ready to proceed once market volatility decreases [70][71]