Evercore(US:EVR)2023-10-25 15:30Financial Data and Key Metrics Changes - The third quarter adjusted net revenues were $576 million, a decline of 1% year-over-year but an increase of 14% sequentially [15] - Adjusted operating income and adjusted net income for the third quarter were $83 million and $55 million, representing decreases of 39% and 42% respectively compared to the same quarter in 2022 [15] - Adjusted earnings per share for the third quarter were $1.30, down 41% from the prior year period [15] - The adjusted operating margin for the third quarter was 14% [15] Business Line Data and Key Metrics Changes - In investment banking, third quarter adjusted advisory fees were $468 million, down 4% year-over-year but up 25% sequentially [16] - Adjusted asset management and administration fees for the third quarter were $19 million, an increase of 9% year-over-year, driven by an AUM of $11.3 billion, which is up 13% year-over-year [17] - Underwriting fees for the third quarter were $31 million, up 7% compared to the same quarter in 2022 [31] Market Data and Key Metrics Changes - The European advisory group experienced strong activity levels, particularly in debt advisory [12] - The IPO market opened in the third quarter, with the company serving as an active book runner on significant biotech IPOs [27] Company Strategy and Development Direction - The company is focused on executing strategic plans, investing in talent, and expanding coverage and geographic reach [28] - The hiring of senior managing directors (SMDs) is seen as a significant investment for future growth, with nine of eleven new SMD hires already working at the company [11] - The private capital advisory and fundraising businesses showed resilience, with elevated continuation fund activity and strong new business activity [26] Management's Comments on Operating Environment and Future Outlook - Management noted that market uncertainty is driven by geopolitical tensions and higher rates, with expectations for improved activity levels in 2024 [10] - There is optimism about the early signs of an improved market backdrop, with internal indicators showing elevated client activity levels [24] - The company does not expect a significant improvement in results in the near term but anticipates building activity levels in 2024 [10] Other Important Information - The adjusted compensation ratio for the third quarter was 68%, influenced by the revenue environment and onboarding of new senior hires [18] - Non-compensation expenses were $102 million, up 12% from a year ago, reflecting increased rent and information services fees [20] - The company returned $490 million to shareholders year-to-date through dividends and share repurchases [34] Q&A Session Summary Question: Advisory SMD count decline and expense inflation impact on normalized margins - Management explained that while the advisory SMD count declined, they are focused on hiring high-quality talent while managing headcount effectively [40] - Regarding expense inflation, management noted a modest impact and expressed optimism about returning to normal margins as revenues improve [42] Question: Elevated comp ratio expectations for 2024 - Management acknowledged the uncertainty in predicting comp ratios but indicated that elevated ratios may persist until revenues improve significantly [56] Question: M&A recovery timeline - Management stated that while the pace of recovery is hard to predict, internal indicators show strengthening backlogs and robust client dialogues [61] Question: Restructuring activity outlook - Management confirmed that restructuring activity is robust and expected to continue, even if the merger market picks up [87] Question: Non-M&A revenue and private capital advisory performance - Management indicated that non-M&A revenue has historically represented over a third of total advisory revenue and is expected to remain strong in the current environment [71]