Evercore(EVR) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record second quarter adjusted net revenues of $695 million, a 38% increase year-over-year [68] - Adjusted advisory fees reached$ 568 million, up 52% year-over-year, reflecting a strengthening market environment [36][44] - Adjusted operating income increased by 80% to $114 million, with adjusted earnings per share rising 89% to$ 1.81 [68] Business Line Data and Key Metrics Changes - The Private Capital Advisory business experienced strong performance, driven by robust activity in the GP segment, with expectations for continued growth [39][55] - Underwriting fees were $31 million, down 19% year-over-year, but up nearly 42% for the first half of 2024 [44] - The Equities business had a solid quarter despite low volatility, providing clients with exceptional execution and differentiated corporate access [40] Market Data and Key Metrics Changes - The global M&A announced dollar volume increased by 24% year-over-year, indicating a gradual recovery in the M&A markets [36] - European advisory saw improvement compared to the first quarter, with expectations for a stronger second half of the year [27] - The company noted a 17% to 20% increase in sponsor activity year-to-date, reflecting a positive market tone [50] Company Strategy and Development Direction - The company is focused on expanding its industry coverage groups and geographic presence, particularly in Europe [65] - Investments in the Evercore ISI business include recruiting top-tier research analysts to enhance capabilities [26] - The strategy involves balancing strategic investments with improving expense margins over time [42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market outlook, anticipating a busy second half of the year supported by robust backlogs [25] - The company is monitoring economic and geopolitical risks that could impact recovery timing and trajectory [25] - There is a belief that the broader market recovery will progress throughout 2024 and into 2025 [72] Other Important Information - The adjusted compensation ratio for the second quarter was 66%, showing a slight improvement from 67% a year ago [45] - Non-compensation expenses increased by 18% year-over-year, reflecting higher client-related expenses and normalization of travel costs [46][70] - Cash and investment securities totaled nearly$ 1.7 billion, with $396 million returned to shareholders through dividends and share repurchases [47] Q&A Session Summary Question: What is the outlook for sponsor engagement around IPOs? - Management noted that sponsor activity is picking up, with significant bake-offs and a positive tone in the market, indicating a ramp-up in activity [50][51] Question: How does the European M&A pipeline compare to the US? - The US market is currently ahead of Europe in terms of activity, but both markets are showing positive trends [79] Question: What are the expectations for the compensation ratio moving forward? - The company aims to make meaningful improvements in the compensation ratio over the next few years, but it is premature to speculate on a return to sub-60% levels [94] Question: How are non-comp expenses expected to trend? - Non-comp expenses are expected to grow, influenced by travel normalization and inflationary pressures, but the company is exercising discipline in managing these costs [96][117]