Evercore(US:EVR)2023-07-26 16:20Financial Data and Key Metrics Changes - For Q2 2023, adjusted net revenues were $505 million, adjusted net income was $40 million, and adjusted earnings per share (EPS) was $0.96, reflecting a 21% decline in adjusted net revenues, a 63% decrease in adjusted net income, and a 61% drop in adjusted EPS compared to the same quarter last year [25][6][11] - The adjusted operating margin for Q2 was 13%, down from previous periods [25] - The adjusted compensation ratio for Q2 was 67%, influenced by revenue environment and senior hiring [28][21] Business Line Data and Key Metrics Changes - Adjusted advisory fees for Q2 were $375 million, down 35% year-over-year from a record $576 million in Q2 2022 [43] - Underwriting revenues for Q2 were $38 million, showing a significant increase compared to Q2 2022 and Q1 2023 due to improved equity capital markets activity [26] - Commissions and related revenue were $50 million, down 5% year-over-year due to weaker trading volumes [44] Market Data and Key Metrics Changes - Global announced M&A transactions greater than $100 million in the first half of 2023 were down almost 40% on a dollar basis compared to the previous year [6] - The equity capital markets showed signs of strengthening in May and June, with the dollar value of issuance being the highest since November 2021 [20] Company Strategy and Development Direction - The company is focused on strategic partner hiring, with 11 new senior advisory managing directors added in 2023, enhancing capabilities in key sectors [114] - The company aims to maintain a durable balance sheet while returning excess cash to shareholders through dividends and share repurchases [119] - The company is preparing for a market recovery and is cautiously optimistic about recent shifts in sentiment [10][17] Management's Comments on Operating Environment and Future Outlook - Management noted significant economic uncertainty and a challenging M&A environment impacting revenues, but expressed optimism about increasing client dialogue and market stabilization [11][17] - The restructuring business remains busy, with expectations of continued activity due to rising interest rates and a maturity wall approaching in 2024-2025 [109][111] Other Important Information - The company reported a cash and investment securities total of approximately $1.5 billion as of June 30, ensuring significant liquidity for strategic initiatives [14] - Non-compensation expenses increased to $103 million, primarily due to higher travel-related expenses and inflationary impacts [122] Q&A Session Summary Question: What breaks the M&A logjam and brings companies back to transaction? - Management indicated that clarity in the macro outlook, stability of interest rates, and improved financial markets are essential for resuming M&A activity [47][48] Question: How durable are the current green shoots in activity? - Management expressed confidence that current activity levels are more foundational compared to earlier in the year, indicating a stronger basis for future transactions [66] Question: What is the outlook for the compensation ratio? - The compensation ratio is expected to remain elevated due to new hires starting later in the year, which will not be reflected in the first half's ratio [121][85] Question: How is the backlog in restructuring business evolving? - The backlog in the restructuring business continues to build, with expectations of both strong restructuring and improving M&A markets [98][109]