Evercore(US:EVR)2020-04-22 19:01Financial Data and Key Metrics Changes - Adjusted net revenues for Q1 2020 were $435 million, a 4% increase compared to Q1 2019, while total revenues from Investment Banking businesses increased by 10% to $436 million [24][25] - Adjusted operating income and adjusted net income were $82.5 million and $57.8 million, reflecting declines of 14% and 29% respectively, with adjusted earnings per share at $1.21, down 27% from Q1 2019 [33][34] - The compensation ratio for Q1 2020 was 62%, impacted by revenue declines and changes in the value of hedges for deferred compensation plans [29][34] Business Line Data and Key Metrics Changes - Advisory fees, the largest revenue source, were $359 million, up 10% compared to Q1 2019, despite a 24% decline in the dollar value of announced M&A transactions globally [25][26] - Underwriting fees fell to $21.1 million, a 22% decline from Q1 2019, as activity halted due to COVID-19 [27] - Commissions and related fees increased by 32% to $55.4 million, marking the best first quarter since 2016, driven by high volatility in equity trading [27][28] Market Data and Key Metrics Changes - The dollar value of closed M&A transactions fell by 37% compared to the same quarter last year, indicating a significant slowdown in M&A activity [26] - The firm maintained its number one ranking for volume of announced transactions over the past 12 months among independent firms, and ranked sixth globally and fourth in the U.S. [46][47] Company Strategy and Development Direction - The company is focusing on four priorities: ensuring team health and safety, pivoting services to meet evolving client needs, leveraging technology for effective operations, and maintaining a strong balance sheet [12][15] - The firm is adapting its advisory efforts to address the current environment, particularly in restructuring and debt advisory, while maintaining a strong liquidity position [18][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a gradual recovery, supported by unprecedented fiscal and monetary stimulus, but noted that the recovery will not be as sharp as the decline [15][76] - The firm anticipates that M&A activity will be negatively affected for some time, but sees potential for recovery as strong companies begin to explore opportunities [16][78] Other Important Information - The company returned $178.1 million to shareholders through dividends and share repurchases during the quarter, maintaining a dividend of $0.58 [35][36] - The firm holds approximately $588 million in cash and $264 million in investment securities, with current assets exceeding current liabilities by about $880 million [68] Q&A Session Summary Question: How does this downturn compare to prior ones, particularly the financial crisis? - Management noted that recoveries from financially induced recessions tend to be longer and shallower, but expects a quicker recovery this time due to significant fiscal and monetary stimulus [73][75] Question: What are the early indicators on restructuring opportunities? - Management indicated that while restructuring revenues are increasing, they are not expected to offset the decline in M&A activity due to the timing of success fees [90][91] Question: What are the conditions for maintaining the current dividend? - The firm expects to maintain the dividend as long as cash positions remain strong, without needing to stay at current levels [92] Question: How is the company managing cash and liquidity? - The company is closely monitoring its $880 million working capital and has a strong liquidity position, with careful consideration of compensation and expenses [96][97] Question: What factors will influence the timing of M&A activity recovery? - The recovery will depend on market stability, access to financing, and overall economic conditions, with a focus on health and science developments [100][104]