Evercore(EVR) - 2024 Q3 - Quarterly Report

Part I. Financial Information Financial Statements This section presents Evercore's unaudited condensed consolidated financial statements for the period ended September 30, 2024, including statements of financial condition, operations, comprehensive income, changes in equity, and cash flows, with detailed notes explaining accounting policies and financial details Condensed Consolidated Statements of Financial Condition The company's total assets decreased to $3.57 billion as of September 30, 2024, from $3.70 billion at year-end 2023, primarily due to a reduction in Cash and Cash Equivalents and Investment Securities, while total liabilities also decreased to $1.79 billion from $1.92 billion, mainly from a reduction in Accrued Compensation and Benefits, with total equity remaining relatively stable at $1.78 billion Condensed Consolidated Statements of Financial Condition (Unaudited) | (in thousands) | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | $533,109 | $596,878 | | Investment Securities and Certificates of Deposit | $1,287,118 | $1,436,883 | | Accounts Receivable | $415,494 | $371,606 | | Total Current Assets | $2,479,865 | $2,605,217 | | Total Assets | $3,567,547 | $3,703,298 | | Liabilities and Equity | | | | Accrued Compensation and Benefits | $629,289 | $763,160 | | Total Current Liabilities | $831,750 | $910,059 | | Notes Payable | $337,971 | $373,885 | | Total Liabilities | $1,787,593 | $1,920,808 | | Total Equity | $1,779,954 | $1,782,490 | | Total Liabilities and Equity | $3,567,547 | $3,703,298 | Condensed Consolidated Statements of Operations For the third quarter of 2024, Evercore reported a 29% increase in Net Revenues to $734.2 million and a 50% increase in Net Income Attributable to Evercore Inc. to $78.4 million, compared to the same period in 2023, with diluted EPS for the quarter rising to $1.86 from $1.30, and for the nine-month period, Net Revenues grew 22% to $2.00 billion, and Net Income Attributable to Evercore Inc. increased 38% to $237.8 million, with diluted EPS at $5.76 versus $4.33 in the prior year Key Operating Results (Unaudited, in thousands, except per share data) | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | YTD 2024 (in thousands) | YTD 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $734,222 | $570,220 | $2,004,261 | $1,641,782 | | Advisory Fees | $592,980 | $467,401 | $1,591,049 | $1,304,519 | | Total Expenses | $612,229 | $493,394 | $1,689,905 | $1,400,336 | | Employee Compensation and Benefits | $488,010 | $391,730 | $1,334,650 | $1,096,976 | | Net Income Attributable to Evercore Inc. | $78,393 | $52,148 | $237,844 | $172,731 | | Diluted EPS | $1.86 | $1.30 | $5.76 | $4.33 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash provided by operating activities was $301.8 million, a significant increase from $42.3 million in the prior year, driven by higher net income, while investing activities provided $179.1 million, primarily from net proceeds of investment securities, and financing activities used $550.7 million, mainly for treasury stock purchases and dividends, resulting in a net decrease in cash of $63.5 million for the period Cash Flow Summary (Unaudited, in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $301,767 | $42,324 | | Net Cash Provided by Investing Activities | $179,131 | $290,465 | | Net Cash Used in Financing Activities | ($550,651) | ($510,604) | | Net Decrease in Cash | ($63,455) | ($170,671) | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies and financial data, covering business organization, revenue recognition, investments, leases, debt, equity, share-based compensation, income taxes, and segment results, with notable events including the sale of the remaining interest in ABS and the redemption of the interest in Luminis - The company operates through two main segments: Investment Banking & Equities and Investment Management[22][23] Revenue by Segment (Unaudited, in thousands) | Segment | Q3 2024 (in thousands) | Q3 2023 (in thousands) | YTD 2024 (in thousands) | YTD 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Investment Banking & Equities | $691,671 | $546,912 | $1,877,711 | $1,543,226 | | Investment Management | $20,555 | $17,304 | $58,454 | $49,837 | - In July 2024, the company sold its remaining 26% ownership interest in ABS for $18.1 million, resulting in a gain of $615 thousand[57] - In September 2024, the company redeemed its interest in Luminis for no consideration, resulting in a write-off and a loss of $7.3 million, which was recorded under Special Charges[60] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the third quarter and first nine months of 2024, highlighting a 27% increase in Q3 Advisory Fees and a 43% rise in Underwriting Fees year-over-year, reflecting improved M&A and capital markets activity, covering segment performance, liquidity, capital resources, and market risks, and emphasizing its share repurchase program and strong liquidity position despite market uncertainties Results of Operations For Q3 2024, Net Revenues increased 29% YoY to $734.2 million, driven by a 27% rise in Advisory Fees and a 43% increase in Underwriting Fees, with Net Income Attributable to Evercore Inc. growing 50% to $78.4 million, and for the nine-month period, Net Revenues were up 22% to $2.0 billion, and Net Income Attributable to Evercore Inc. rose 38% to $237.8 million, reflecting higher business activity and increased headcount, leading to higher compensation and non-compensation expenses Financial Performance Summary (Unaudited, in thousands) | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change | YTD 2024 (in thousands) | YTD 2023 (in thousands) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $734,222 | $570,220 | 29% | $2,004,261 | $1,641,782 | 22% | | Total Expenses | $612,229 | $493,394 | 24% | $1,689,905 | $1,400,336 | 21% | | Net Income Attributable to Evercore Inc. | $78,393 | $52,148 | 50% | $237,844 | $172,731 | 38% | - The increase in Q3 2024 operating expenses was primarily due to a $96.3 million (25%) rise in Employee Compensation and Benefits, reflecting a higher accrual for incentive compensation and increased amortization of deferred awards[213] - A special charge of $7.3 million was recorded in Q3 2024 related to the write-off of the company's investment in Luminis[214] Business Segments The Investment Banking & Equities segment saw a 29% YoY increase in Q3 Net Revenues to $712.8 million, driven by higher advisory and underwriting fees, while the Investment Management segment's Q3 Net Revenues grew 22% to $21.4 million, supported by a 13% increase in Assets Under Management (AUM) to $13.9 billion since year-end 2023, primarily due to market appreciation Investment Banking & Equities Segment Performance (Unaudited, in thousands) | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change | YTD 2024 (in thousands) | YTD 2023 (in thousands) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $712,775 | $552,641 | 29% | $1,944,513 | $1,589,698 | 22% | | Pre-Tax Income | $116,594 | $73,392 | 59% | $299,961 | $230,318 | 30% | Investment Management Segment Performance (Unaudited, in thousands) | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change | YTD 2024 (in thousands) | YTD 2023 (in thousands) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $21,447 | $17,579 | 22% | $59,748 | $52,084 | 15% | | Pre-Tax Income | $6,471 | $5,098 | 27% | $19,649 | $15,802 | 24% | Wealth Management AUM Activity (in millions) | AUM Activity | Nine Months Ended Sep 30, 2024 (in millions) | | :--- | :--- | | Balance at December 31, 2023 | $12,272 | | Inflows | $965 | | Outflows | ($794) | | Market Appreciation | $1,444 | | Balance at September 30, 2024 | $13,887 | Liquidity and Capital Resources As of September 30, 2024, Evercore maintained a strong liquidity position with $533.1 million in Cash and Cash Equivalents and $1.29 billion in Investment Securities and Certificates of Deposit, with liquidity primarily funded by operating cash flows, and during the first nine months of 2024, the company repurchased 2.2 million Class A shares for $417.9 million, also renewing its revolving credit facilities in October 2024, establishing a new unsecured facility of $85 million - The company's liquidity is highly dependent on revenue from its Investment Banking & Equities segment, which is tied to the successful closing of client transactions[263] - During the nine months ended September 30, 2024, the company repurchased an aggregate of 2,203,024 Class A shares for $417.9 million, including 1,218,540 shares under the repurchase program and 984,484 shares for employee tax withholding[267][268][269] - In October 2024, upon maturity of its existing credit facilities, the company established a new unsecured revolving credit facility with PNC for up to $85.0 million, maturing in October 2025[278] Quantitative and Qualitative Disclosures About Market Risk The company states that it does not face material interest rate risk, foreign currency exchange risk, equity price risk, or other market risks beyond what is disclosed in the MD&A section, with primary risks identified related to market and investment risk from its deferred compensation hedge portfolio, private equity investments, foreign exchange rate fluctuations, and credit risk from accounts receivable - The company's primary market risks stem from its investment portfolio used to hedge deferred compensation, private equity fund investments, foreign currency exposure from international operations, and credit risk associated with client receivables[288][302] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of September 30, 2024, with no material changes made to the internal control over financial reporting during the third quarter of 2024 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[304] - There were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[305] Part II. Other Information Legal Proceedings The company is involved in various judicial or regulatory proceedings in the normal course of business, however, management believes that there are no material pending proceedings that would have a material effect on the company's financial condition - The company states that it is not currently party to any material pending legal proceedings that would have a material effect on its financial results[307] Issuer Purchases of Equity Securities This section details the company's repurchases of its equity securities, with a total of 425,492 shares repurchased at an average price of $235.96 per share during the third quarter of 2024 (July to September), and for the nine months ended September 30, 2024, a total of 2,203,024 shares were repurchased at an average price of $189.69 per share Issuer Purchases of Equity Securities (Q3 2024) | Period | Total Shares Purchased | Average Price Paid Per Share (in dollars) | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | July 2024 | 159,671 | $244.89 | 144,562 | | August 2024 | 261,705 | $230.39 | 252,190 | | September 2024 | 4,116 | $244.15 | — | | Total Q3 2024 | 425,492 | $235.96 | 396,752 | - The company has a share repurchase program authorized on February 22, 2022, for the lesser of $1.4 billion or 10.0 million shares/units, with 4,356,629 shares/units remaining available for repurchase under this program as of September 30, 2024[308] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - Exhibits filed include CEO and CFO certifications (Rule 13a-14(a) and Section 1350) and financial statements formatted in Inline XBRL[311]