EVERCORE INC. NEW YORK, Oct. 26, 2017 /PRNewswire/ --
Third Quarter 2017 Results 2017 Year to Date Results
U.S. GAAP Adjusted U.S. GAAP Adjusted
vs. vs. vs. vs.
Q3 2016 Q3 2016 YTD 2016 YTD 2016
Net Revenues ($ millions) $406.6 5% $402.9 5% $1,164.3 17% $1,160.3 17%
------------------------ ------ --- ------ --- -------- --- -------- ---
Operating Income ($ millions) $87.1 2% $103.6 (2%) $244.7 49% $292.3 16%
---------------------------- ----- --- ------ --- ------ --- ------ ---
Net Income Attributable to $45.9 32% $61.0 (2%) $144.9 126% $198.4 33%
Evercore Inc. ($ millions)
-------------------------
Diluted Earnings Per Share $1.04 32% $1.22 -% $3.23 123% $3.90 35%
-------------------------- ----- --- ----- --- ----- --- ----- ---
Operating Margin 21.4% (61) bps 25.7% (196) bps 21.0% 454 bps 25.2% (27) bps
---------------- ---- -------- ---- --------- ---- ------- ---- --------
Business and -Record Net Revenues, Net Income Attributable to
Financial Evercore Inc. and Earnings Per Share for the first nine
months of 2017, on both a U.S. GAAP and an Adjusted
basis
Highlights
-Record third quarter Net Revenues on
both a U.S. GAAP and an Adjusted basis.
Third quarter decline in Net Income
Attributable to Evercore Inc. driven by
higher compensation costs associated with
talent additions. Adjusted Q3 2017
Earnings Per Share equal to record result
reported in Q3 2016
-U.S. GAAP and Adjusted Operating Margins
sustained above 20% and 25%,
respectively, for the quarter and year to
date results
-Advisory Revenues for the first nine
months increased 26% versus the prior
year, on a U.S. GAAP basis and 27% versus
the prior year, on an Adjusted basis (for
the third quarter Advisory Revenues
increased 8% on a U.S. GAAP and Adjusted
basis)
-181 advisory fees in excess of $1
million for the first nine months (vs.
164 last year) and 67 advisory fees in
excess of $1 million for the third
quarter (vs. 65 last year)
-Advised the Scripps Family in connection
with the ~$15 billion sale of Scripps
Networks Interactive to Discovery
Communications
- Evercore ISI again ranked #3 in the
Institutional Investor All-America
Equity Research team rankings
-Global Investment Banking team profiled
in Euromoney for "making it into the
major leagues", following on Euromoney's
recognition of Evercore as the "world's
best independent investment bank" earlier
this year
Strategic -Closed the sale of the Institutional Trust and
Independent Fiduciary business of Evercore Trust Company
in mid October
Transaction
Talent -Michael J. Paliotta to join Evercore ISI as Chief
Executive Officer of Evercore's Equities Business
-Anthony DiClemente to join Evercore ISI
covering Internet stocks
-Evercore ranked #2 in Vault.com's 2018
Vault Banking 50, their annual rankings
of the best investment banking firms for
which to work
Capital Return -Board approved share repurchase authorization of $750
million and increased the quarterly dividend by 18% to
$0.40 per share, the tenth sequential year of growth
-$340.6 million returned to shareholders
for the first nine months through
dividends and repurchases, including
repurchases of 3.9 million shares/units
at an average price of $74.99
Evercore Inc., formerly known as Evercore Partners Inc., (NYSE: EVR) today announced its results for the third quarter ended September 30, 2017.
LEADERSHIP COMMENTARY
Ralph Schlosstein, President and Chief Executive Officer
"We are pleased with our third quarter and year to date results which reflect record revenues for a third quarter and record revenues, earnings and earnings per share for the year to date period. This is our fifth consecutive period of year-over-year growth in Adjusted earnings per share for a nine month period. These results are driven by the steady execution of our strategy of continually investing in and developing world class talent and focusing on businesses and services in which we have a competitive advantage."
"Our operating metrics remain strong. In Advisory, we continue to be the #1 ranked independent M&A advisor in the U.S. league tables for announced transactions, both on a year to date and a trailing twelve months basis, and the #2 advisor among independent firms in the Global league tables on a trailing twelve months basis. Our market share has grown strongly again this year. Our clients in the equities market recognized our strong research capabilities as we again ranked #3 in the Institutional Investor All-America Equity Research team rankings and #2 on a weighted basis. Importantly, we remain the highest ranked independent research firm in the U.S. In Investment Management, we continued to focus on building our wealth management business, and completed the previously announced sale of our fiduciary services business in mid October," said Ralph Schlosstein, President and Chief Executive Officer.
"We continued to deliver strong returns to our shareholders as Adjusted Operating Margins for the quarter and the first nine months of the year exceeded 25%. Our Board of Directors increased our quarterly dividend to $0.40 per share, the tenth successive year of growth in our annual dividend, and approved an increase in the share repurchase authorization to $750 million."
John S. Weinberg, Executive Chairman
"Our Advisory businesses continued to drive our results in the third quarter with all of our teams contributing. Our M&A pipeline remains strong and our broader advisory capabilities continue to reach more clients," said John S. Weinberg, Executive Chairman. "We anticipate 2017 will be another strong recruiting year adding at least nine new Senior Managing Directors - six in Advisory and three in Equities. These additions complement the four promotions to Senior Managing Director in our Advisory business at the beginning of the year."
Roger C. Altman, Founder and Senior Chairman
"Market conditions continue to be favorable for M&A broadly, supporting healthy deal activity both in the U.S. and throughout the world," said Roger C. Altman, Founder and Senior Chairman. "In fact, looking at global trends, volumes are now up year to date, with each of the major regions, U.S., Europe and Asia, contributing."
Selected Financial Data - U.S. GAAP Results:
The following is a discussion of Evercore's results on a U.S. GAAP basis.
U.S. GAAP
Three Months Ended Nine Months Ended
September 30, September 30, % September 30, 2017 September 30,
2017 2016 2016 %
Change Change
------
(dollars in thousands, except per share data)
Net Revenues $406,601 $386,314 5% $1,164,318 $994,683 17%
Operating Income (1) $87,070 $85,085 2% $244,665 $163,815 49%
Net Income
Attributable to
Evercore Inc. $45,911 $34,695 32% $144,866 $64,100 126%
Diluted Earnings Per
Share $1.04 $0.79 32% $3.23 $1.45 123%
Compensation Ratio 60.7% 60.0% 59.2% 63.6%
Operating Margin 21.4% 22.0% 21.0% 16.5%
Effective Tax Rate 32.4% 45.2% 27.8% 47.3%
Trailing Twelve Month
Compensation Ratio 59.4% 63.3%
(1) Operating Income for the nine months ended September 30, 2017 includes Special Charges of $21.5 million recognized in the Investment Banking and Investment Management segments in Q2 2017.
Net Revenues
For the three months ended September 30, 2017, Net Revenues of $406.6 million increased 5% versus the three months ended September 30, 2016, driven by an increase in Investment Banking revenues, primarily due to an increase in Advisory fees. For the nine months ended September 30, 2017, Net Revenues of $1.2 billion increased 17% versus the nine months ended September 30, 2016, driven by an increase in Investment Banking revenues, primarily due to an increase in Advisory fees. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.
Compensation Ratio
For the three months ended September 30, 2017, the compensation ratio was 60.7% versus 60.0% for the three months ended September 30, 2016, driven by increased compensation costs in the Investment Banking business, principally due to costs associated with new senior hires, as well as the increase in compensation costs in Evercore ISI following our review of the outlook for the business during the first quarter of 2017. For the nine months ended September 30, 2017, the compensation ratio was 59.2% versus 63.6% for the nine months ended September 30, 2016, driven by higher revenues in our Investment Banking business as well as the decrease in costs associated with transaction consideration during the first quarter of 2017. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.
Operating Income
For the three months ended September 30, 2017, Operating Income of $87.1 million increased 2% versus the three months ended September 30, 2016, driven by an increase in Net Revenues, partially offset by increased compensation and non-compensation costs in the Investment Banking business. For the nine months ended September 30, 2017, Operating Income of $244.7 million increased 49% versus the nine months ended September 30, 2016, driven by an increase in Net Revenues, partially offset by increased compensation and non-compensation costs in the Investment Banking business. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.
Effective Tax Rate
For the three months ended September 30, 2017, the effective tax rate was 32.4% versus 45.2% for the three months ended September 30, 2016. For the nine months ended September 30, 2017, the effective tax rate was 27.8% versus 47.3% for the nine months ended September 30, 2016; the decrease was primarily driven by the application of a new accounting standard, effective January 1, 2017, related to share-based compensation, which requires that the tax deduction associated with the appreciation in the Firm's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. The effective tax rate is also impacted by the non-deductible treatment of compensation associated with Evercore LP Units/Interests.
Net Income and Earnings Per Share
For the three months ended September 30, 2017, Net Income Attributable to Evercore Inc. and Earnings Per Share of $45.9 million and $1.04, respectively, each increased 32% versus the three months ended September 30, 2016, principally driven by an increase in Net Revenues in the Investment Banking business and a decrease in the effective tax rate.
For the nine months ended September 30, 2017, Net Income Attributable to Evercore Inc. and Earnings Per Share of $144.9 million and $3.23, respectively, increased 126% and 123%, respectively, versus the nine months ended September 30, 2016, principally driven by an increase in Net Revenues in the Investment Banking business and a decrease in the effective tax rate.
Selected Financial Data - Adjusted Results:
The following is a discussion of Evercore's results on an Adjusted basis. See pages 7 and A-2 to A-13 for further information and reconciliations of these non-GAAP metrics to our U.S. GAAP results.
Adjusted
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------ ------
(dollars in thousands, except per share data)
Net Revenues $402,857 $383,473 5% $1,160,300 $988,948 17%
Operating Income $103,625 $106,169 (2%) $292,305 $251,819 16%
Net Income
Attributable to
Evercore Inc. $60,972 $62,423 (2%) $198,373 $148,601 33%
Diluted Earnings Per
Share $1.22 $1.22 - % $3.90 $2.88 35%
Compensation Ratio 59.0% 56.8% 59.0% 57.3%
Operating Margin 25.7% 27.7% 25.2% 25.5%
Effective Tax Rate 37.0% 38.8% 28.7% 38.1%
Trailing Twelve Month
Compensation Ratio 58.5% 57.7%
Adjusted Net Revenues
For the three months ended September 30, 2017, Adjusted Net Revenues of $402.9 million increased 5% versus the three months ended September 30, 2016, driven by an increase in Investment Banking revenues, primarily due to an increase in Advisory fees. For the nine months ended September 30, 2017, Adjusted Net Revenues of $1.2 billion increased 17% versus the nine months ended September 30, 2016, driven by an increase in Investment Banking Revenues, primarily due to an increase in Advisory fees. See the Business Line Reporting - Discussion of Adjusted Results below for further information.
Adjusted Compensation Ratio
For the three months ended September 30, 2017, the Adjusted compensation ratio was 59.0%, versus 56.8% for the three months ended September 30, 2016, driven by increased compensation costs in the Investment Banking business, principally due to costs associated with new senior hires, as well as the increase in compensation costs in Evercore ISI following our review of the outlook for the business during the first quarter of 2017. For the nine months ended September 30, 2017, the Adjusted compensation ratio was 59.0% versus 57.3% for the nine months ended September 30, 2016, driven by increased compensation costs in the Investment Banking business, principally due to costs associated with new senior hires, as well as the increase in compensation costs in Evercore ISI following our review of the outlook for the business during the first quarter of 2017. The Adjusted compensation ratio reflects the cost associated with compensation awarded to employees based on their performance consistent with market rates, and the cost associated with the addition of senior professionals. These new hire costs reflect both the number and seniority of the personnel we recruit and have the potential to change the compensation ratio in any period. See the Business Line Reporting - Discussion of Adjusted Results below for further information.
Adjusted Operating Income
For the three months ended September 30, 2017, Adjusted Operating Income of $103.6 million decreased 2% versus the three months ended September 30, 2016, driven by an increase in compensation and non-compensation costs in the Investment Banking business. For the nine months ended September 30, 2017, Adjusted Operating Income of $292.3 million increased 16% versus the nine months ended September 30, 2016, driven by an increase in Net Revenues, partially offset by increased compensation and non-compensation costs in the Investment Banking business. See the Business Line Reporting - Discussion of Adjusted Results below for further information.
Adjusted Effective Tax Rate
For the three months ended September 30, 2017, the effective tax rate was 37.0% versus 38.8% for the three months ended September 30, 2016. For the nine months ended September 30, 2017, the effective tax rate was 28.7% versus 38.1% for the nine months ended September 30, 2016; the decrease was primarily driven by the application of a new accounting standard, effective January 1, 2017, related to share-based compensation, which requires that the tax deduction associated with the appreciation in the Firm's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. Changes in the Adjusted effective tax rate are also driven by the level of earnings in businesses with minority owners.
Adjusted Net Income and Earnings Per Share
For the three months ended September 30, 2017, Adjusted Net Income Attributable to Evercore Inc. and Adjusted Earnings Per Share of $61.0 million and $1.22, respectively, decreased 2% and was flat, respectively, versus the three months ended September 30, 2016, driven by an increase in Net Revenues in the Investment Banking business, offset by increased compensation and non-compensation costs.
For the nine months ended September 30, 2017, Adjusted Net Income Attributable to Evercore Inc. and Adjusted Earnings Per Share of $198.4 million and $3.90, respectively, increased 33% and 35%, respectively, versus the nine months ended September 30, 2016, principally driven by an increase in Net Revenues in the Investment Banking business and a decrease in the effective tax rate.
Adjusted Net Income Attributable to Evercore Inc. and Adjusted Earnings Per Share for the nine months ended September 30, 2017 was $172.3 million and $3.40, respectively, excluding the effects of the change in accounting for income taxes, up 16% and 18%, respectively, versus the nine months ended September 30, 2016.
Evercore's quarterly results may fluctuate significantly due to the timing and amount of transaction fees earned, as well as other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.
Non-GAAP Measures:
Throughout this release certain information is presented on an Adjusted basis, which is a non-GAAP measure. Adjusted results begin with information prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and then those results are adjusted to exclude certain items and reflect the conversion of vested and certain unvested Evercore LP Units and Interests into Class A shares. Evercore believes that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore's results across several periods and facilitate an understanding of Evercore's operating results. Evercore uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.
Evercore's Adjusted Net Income Attributable to Evercore Inc. for the three and nine months ended September 30, 2017 was higher than U.S. GAAP as a result of the exclusion of expenses associated with awards granted in conjunction with certain of the Company's acquisitions, and certain other business acquisition-related charges and Special Charges.
Acquisition-related compensation charges for 2017 include expenses and the reversal of expenses associated with performance-based awards granted in conjunction with the Company's acquisition of ISI. The amount of expense or the reversal of expense for the Class G and H LP Interests is based on the determination if it is probable that Evercore ISI will achieve certain earnings and margin targets in future periods. Acquisition-related charges for 2017 also include professional fees incurred and amortization of intangible assets. Special Charges for 2017 relate to a charge for the impairment of goodwill in the Institutional Asset Management reporting unit and a charge for the impairment of our investment in G5 | Evercore during the second quarter.
In addition, for Adjusted purposes, client related expenses have been presented as a reduction from Revenues and Non-compensation costs.
Evercore's Adjusted Diluted Shares Outstanding for the three and nine months ended September 30, 2017 were higher than U.S. GAAP as a result of the inclusion of Evercore LP Units, as well as the assumed vesting of certain Evercore LP Units/Interests and unvested restricted stock units granted to ISI employees.
This release also presents changes in Adjusted Net Revenues, Adjusted Investment Management Revenues and Adjusted Investment Management Expenses from the prior-year periods assuming that the restructuring of certain Investment Management affiliates occurred on December 31, 2015. This includes the transfer of ownership of the Mexican Private Equity Business that occurred on September 30, 2016. Evercore believes this is useful additional information for investors because it improves the comparability of period-over-period results and aligns with management's view of business performance.
Further details of these adjustments, as well as an explanation of similar amounts for the three and nine months ended September 30, 2016 are included in Annex I, pages A-2 to A-13.
Business Line Reporting - Discussion of U.S. GAAP Results
The following is a discussion of Evercore's segment results on a U.S. GAAP basis.
Investment Banking
U.S. GAAP
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------ ------
(dollars in thousands)
Net Revenues:
Investment Banking
Revenue $388,834 $368,434 6% $1,118,303 $936,234 19%
Other Revenue, net (535) 200 NM (2,825) 270 NM
----
Net Revenues 388,299 368,634 5% 1,115,478 936,504 19%
------- ------- --------- -------
Expenses:
Employee Compensation
and Benefits 236,564 221,380 7% 660,233 600,014 10%
Non-compensation
Costs 68,448 64,708 6% 196,603 183,686 7%
Special Charges - - NM 14,400 - NM
Total Expenses 305,012 286,088 7% 871,236 783,700 11%
------- ------- ------- -------
Operating Income $83,287 $82,546 1% $244,242 $152,804 60%
======= ======= ======== ========
Compensation Ratio 60.9% 60.1% 59.2% 64.1%
Non-compensation
Ratio 17.6% 17.6% 17.6% 19.6%
Operating Margin 21.4% 22.4% 21.9% 16.3%
Revenues
U.S. GAAP
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------ ------
(dollars in thousands)
Advisory Fees $332,753 $306,993 8% $939,841 $743,853 26%
Commissions and
Related Fees 45,047 53,512 (16%) 148,292 167,908 (12%)
Underwriting Fees 11,034 7,929 39% 30,170 24,473 23%
Investment Banking
Revenue $388,834 $368,434 6% $1,118,303 $936,234 19%
======== ======== ========== ========
Advisory Client
Transactions 210 211 - % 429 418 3%
Advisory Fees in
Excess of $1
million 67 65 3% 181 164 10%
During the three months ended September 30, 2017, Advisory Fees increased 8% versus the three months ended September 30, 2016, driven primarily by the number and composition of fees in excess of $1 million, taking into account the size and type of transaction and the nature of services provided. Commissions and Related Fees for the three months ended September 30, 2017 decreased 16% from the third quarter of last year as institutional clients are adjusting the level and composition of trading volumes in light of the broad movement to passive investing strategies and lower levels of volatility, impacting both payments for research and execution services. Underwriting Fees of $11.0 million for the three months ended September 30, 2017 increased 39% versus the third quarter of last year, as we participated in 13 underwriting transactions (vs. 12 in Q3 2016); 8 as a bookrunner (vs. 4 in Q3 2016).
During the nine months ended September 30, 2017, Advisory Fees grew 26% versus the nine months ended September 30, 2016, driven primarily by the number and composition of fees in excess of $1 million, taking into account the size and type of transaction and the nature of services provided. Commissions and Related Fees for the nine months ended September 30, 2017 decreased 12% from last year as institutional clients are adjusting the level and composition of trading volumes in light of the broad movement to passive investing strategies and lower levels of volatility, impacting both payments for research and execution services. Underwriting Fees of $30.2 million for the nine months ended September 30, 2017 increased 23% from last year, as we participated in 39 underwriting transactions (vs. 30 in 2016); 19 as a bookrunner (vs. 12 in 2016).
Expenses
Compensation costs of $236.6 million for the three months ended September 30, 2017 were up 7% compared to the third quarter of last year, driven by higher compensation costs as a result of increased headcount in the business, including new senior hires, as well as higher levels of revenue earned and the increase in compensation costs in Evercore ISI following our review of the outlook for the business during the first quarter of 2017. Compensation costs of $660.2 million for the nine months ended September 30, 2017 were up 10% compared to last year, driven by higher compensation costs as a result of increased headcount in the business, including new senior hires, as well as higher levels of revenue earned and the increase in compensation costs in Evercore ISI following our review of the outlook for the business during the first quarter of 2017. This resulted in a compensation ratio of 60.9% and 59.2% for the three and nine months ended September 30, 2017, respectively, compared to 60.1% and 64.1% for the three and nine months ended September 30, 2016, respectively. Compensation costs include $4.8 million and $15.3 million of expense for the three and nine months ended September 30, 2017, respectively, related to the Class E LP Units and $2.0 million and ($12.9) million of expense for the three and nine months ended September 30, 2017, respectively, related to the Class G and H LP Interests issued in conjunction with the acquisition of ISI. The Company incurred an expense reversal in the first quarter of 2017 following a review of the outlook for the Evercore ISI business where the Company concluded that it would be appropriate to lower the level of earnings and margins that it considers probable of achievement for future periods. Compensation costs included $13.8 million and $66.1 million of expense for the three and nine months ended September 30, 2016, respectively, related to the Class E, G and H LP Units/Interests issued in conjunction with the acquisition of ISI based on the probability assumptions in place at that time.
As discussed in "Capital Transactions" below, in July 2017, the Board of Directors approved the exchange of all of the outstanding Class H LP Interests into 1.9 million Class J LP Units, which will continue to vest based on the completion of service through February 15, 2020. This modification did not result in any further expense and the remaining expense as of the modification date will be recorded ratably from the date of modification to the final vesting date. Compensation costs include $2.3 million of expense for the three and nine months ended September 30, 2017 related to the Class J LP Units.
Assuming the maximum thresholds for the Class G LP Interests were considered probable of achievement at September 30, 2017, an additional $16.3 million of expense would have been incurred in the third quarter of 2017 and the remaining expense to be accrued over the future vesting period extending from October 1, 2017 to February 15, 2018 would be $2.5 million. In that circumstance, the total number of Class G LP Interests that would vest and become exchangeable to Class E LP Units would be 366,000.
Non-compensation costs for the three months ended September 30, 2017 were $68.4 million, up 6% compared to the third quarter of last year. The increase in non-compensation costs versus last year reflects the addition of personnel within most parts of the business. The ratio of non-compensation costs to net revenue for the three months ended September 30, 2017 was 17.6%, flat compared to the third quarter of last year. Non-compensation costs for the nine months ended September 30, 2017 were $196.6 million, up 7% from last year. The increase in non-compensation costs versus last year reflects the addition of personnel within most parts of the business. The ratio of non-compensation costs to net revenue for the nine months ended September 30, 2017 was 17.6%, compared to 19.6% last year, driven by increased net revenues.
Special Charges for the nine months ended September 30, 2017 reflect an impairment charge of $14.4 million incurred in the second quarter of 2017 related to the Company's equity method investment in G5 | Evercore, resulting from the sustained negative economic and political climate in Brazil.
Investment Management
U.S. GAAP
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------
(dollars in thousands)
Net Revenues:
Investment Management
Revenue $18,236 $17,158 6% $48,464 $57,842 (16%)
Other Revenue, net 66 522 (87%) 376 337 12%
Net Revenues 18,302 17,680 4% 48,840 58,179 (16%)
------ ------ ------ ------
Expenses:
Employee Compensation
and Benefits 10,208 10,330 (1%) 28,953 32,945 (12%)
Non-compensation
costs 4,311 4,811 (10%) 12,357 14,223 (13%)
Special Charges - - NM 7,107 - NM
Total Expenses 14,519 15,141 (4%) 48,417 47,168 3%
------ ------ ------ ------
Operating Income $3,783 $2,539 49% $423 $11,011 (96%)
====== ====== ==== =======
Compensation Ratio 55.8% 58.4% 59.3% 56.6%
Non-compensation
Ratio 23.6% 27.2% 25.3% 24.4%
Operating Margin 20.7% 14.4% 0.9% 18.9%
Assets Under
Management (in
millions) (1) $8,961 $8,355 7% $8,961 $8,355 7%
(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries.
Revenues
U.S. GAAP
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------ ------
(dollars in thousands)
Investment
Advisory and
Management Fees:
Wealth Management $10,232 $9,311 10% $29,736 $27,180 9%
Institutional
Asset Management 6,052 6,105 (1%) 17,301 17,690 (2%)
Private Equity - 760 NM - 3,457 NM
Total Investment
Advisory and
Management Fees 16,284 16,176 1% 47,037 48,327 (3%)
------ ------ ------ ------
Realized and
Unrealized Gains
(Losses):
Institutional
Asset Management 744 811 (8%) 2,412 3,213 (25%)
Private Equity 1,208 171 606% (985) 6,302 NM
Total Realized and
Unrealized Gains 1,952 982 99% 1,427 9,515 (85%)
----- --- ----- -----
Investment
Management
Revenue $18,236 $17,158 6% $48,464 $57,842 (16%)
======= ======= ======= =======
Investment Advisory and Management Fees of $16.3 million for the three months ended September 30, 2017 increased 1% compared to the third quarter of last year, driven primarily by higher fees in Wealth Management in the third quarter of 2017.
Realized and Unrealized Gains of $2.0 million for the three months ended September 30, 2017 increased relative to the third quarter of last year, driven principally by higher gains in Private Equity.
Investment Advisory and Management Fees of $47.0 million for the nine months ended September 30, 2017 decreased 3% compared to the first nine months of last year, driven primarily by a lack of fees in Private Equity for the first nine months of 2017, partially offset by higher fees in Wealth Management in the first nine months of 2017.
Realized and Unrealized Gains of $1.4 million for the nine months ended September 30, 2017 decreased relative to the first nine months of last year, driven by losses related to the wind-down of a Private Equity fund in Mexico in 2017.
On September 30, 2016, the Company completed the transfer of ownership and control of the Mexican Private Equity Business to a newly formed entity, Glisco Partners Inc., which is controlled by the principals of the business.
Expenses
Investment Management's expenses for the three months ended September 30, 2017 were $14.5 million, a decrease of 4% compared to the third quarter of last year principally as a result of a reduction in non-compensation costs. Investment Management expenses for the nine months ended September 30, 2017 were $48.4 million, up 3% from last year due to special charges recorded during the second quarter of 2017.
Special Charges for the nine months ended September 30, 2017 reflect an impairment charge of $7.1 million incurred in the second quarter of 2017 related to goodwill in the Company's Institutional Asset Management reporting unit where the fair value has been reduced relative to the remaining goodwill as a result of the pending sale of the Institutional Trust and Independent Fiduciary business of Evercore Trust Company.
Business Line Reporting - Discussion of Adjusted Results
The following is a discussion of Evercore's segment results on an Adjusted basis. See pages 7 and A-2 to A-13 for further information and reconciliations of these metrics to our U.S. GAAP results.
Investment Banking
Adjusted
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------ ------
(dollars in thousands)
Net Revenues:
Investment Banking
Revenue $380,867 $362,374 5% $1,101,393 $919,730 20%
Other Revenue, net 1,953 2,792 (30%) 4,669 7,216 (35%)
Net Revenues 382,820 365,166 5% 1,106,062 926,946 19%
------- ------- --------- -------
Expenses:
Employee Compensation
and Benefits 227,315 207,521 10% 655,253 533,658 23%
Non-compensation
Costs 58,057 55,197 5% 172,521 157,778 9%
Total Expenses 285,372 262,718 9% 827,774 691,436 20%
------- ------- ------- -------
Operating Income $97,448 $102,448 (5%) $278,288 $235,510 18%
======= ======== ======== ========
Compensation Ratio 59.4% 56.8% 59.2% 57.6%
Non-compensation
Ratio 15.2% 15.1% 15.6% 17.0%
Operating Margin 25.5% 28.1% 25.2% 25.4%
Adjusted Revenues
Adjusted
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------
(dollars in thousands)
Advisory Fees (1) $324,786 $300,933 8% $922,931 $727,349 27%
Commissions and
Related Fees 45,047 53,512 (16%) 148,292 167,908 (12%)
Underwriting Fees 11,034 7,929 39% 30,170 24,473 23%
Investment Banking
Revenue $380,867 $362,374 5% $1,101,393 $919,730 20%
======== ======== ========== ========
Advisory Client
Transactions 210 211 - % 429 418 3%
Advisory Fees in
Excess of $1
million 67 65 3% 181 164 10%
(1) Advisory Fees on an Adjusted basis reflect the reduction of revenues for client-related expenses and provisions for uncollected receivables of $7,892 and $5,948 for the three months ended September 30, 2017 and 2016, respectively, and $16,799 and $16,410 for the nine months ended September 30, 2017 and 2016, respectively, as well
as the reclassification of earnings (losses) related to our equity investment in G5 | Evercore - Advisory of ($129) and ($112) for the three months ended September 30, 2017 and 2016, respectively, and ($222) and ($94) for the nine months ended September 30, 2017 and 2016, respectively, and the reclassification of earnings related to
our equity investment in Luminis of $54 and $111 for the three and nine months ended September 30, 2017, respectively.
During the three months ended September 30, 2017, Advisory Fees increased 8% versus the three months ended September 30, 2016, driven primarily by the number and composition of fees in excess of $1 million, taking into account the size and type of transaction and the nature of services provided. Commissions and Related Fees for the three months ended September 30, 2017 decreased 16% from the third quarter of last year as institutional clients are adjusting the level and composition of trading volumes in light of the broad movement to passive investing strategies and lower levels of volatility, impacting both payments for research and execution services. Underwriting Fees of $11.0 million for the three months ended September 30, 2017 increased 39% versus the third quarter of last year, as we participated in 13 underwriting transactions (vs. 12 in Q3 2016); 8 as a bookrunner (vs. 4 in Q3 2016).
During the nine months ended September 30, 2017, Advisory fees grew 27% year over year, driven primarily by the number and composition of fees in excess of $1 million, taking into account the size and type of transaction and the nature of services provided. Commissions and Related Fees for the nine months ended September 30, 2017 decreased 12% from last year as institutional clients are adjusting the level and composition of trading volumes in light of the broad movement to passive investing strategies and lower levels of volatility, impacting both payments for research and execution services. Underwriting Fees of $30.2 million for the nine months ended September 30, 2017 increased 23% from last year, as we participated in 39 underwriting transactions (vs. 30 in 2016); 19 as a bookrunner (vs. 12 in 2016).
Adjusted Expenses
Adjusted compensation costs were $227.3 million for the three months ended September 30, 2017, an increase of 10% from the third quarter of last year. Evercore's Investment Banking Adjusted compensation ratio was 59.4% for the three months ended September 30, 2017, up versus the Adjusted compensation ratio reported for the third quarter of last year of 56.8%, driven by higher compensation costs as a result of increased headcount in the business, including new senior hires, as well as higher levels of revenue earned and the increase in compensation costs in Evercore ISI following our review of the outlook for the business during the first quarter of 2017. Adjusted compensation costs for the nine months ended September 30, 2017 were $655.3 million, an increase of 23% from last year, and the Adjusted compensation ratio was 59.2% for the nine months ended September 30, 2017 compared to an Adjusted compensation ratio of 57.6% for the first nine months of 2016, driven by higher compensation costs as a result of increased headcount in the business, including new senior hires, as well as higher levels of revenue earned and the increase in compensation costs in Evercore ISI following our review of the outlook for the business during the first quarter of 2017.
Adjusted non-compensation costs for the three months ended September 30, 2017 were $58.1 million, up 5% from the third quarter of last year. The increase in Adjusted non-compensation costs versus last year reflects the addition of personnel within most parts of the business. The ratio of Adjusted non-compensation costs to Adjusted net revenue for the three months ended September 30, 2017 was 15.2%, compared to 15.1% for the third quarter of last year. Adjusted non-compensation costs for the nine months ended September 30, 2017 were $172.5 million, up 9% from last year due to the addition of personnel within most parts of the business. The ratio of Adjusted non-compensation costs to net revenue for the nine months ended September 30, 2017 was 15.6%, compared to 17.0% last year, driven by increased net revenues.
Investment Management
Adjusted
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------
(dollars in thousands)
Net Revenues:
Investment Management
Revenue $19,971 $18,191 10% $53,862 $61,401 (12%)
Other Revenue, net 66 116 (43%) 376 601 (37%)
Net Revenues 20,037 18,307 9% 54,238 62,002 (13%)
------ ------ ------ ------
Expenses:
Employee Compensation
and Benefits 10,208 10,330 (1%) 28,953 32,945 (12%)
Non-compensation
Costs 3,652 4,256 (14%) 11,268 12,748 (12%)
Total Expenses 13,860 14,586 (5%) 40,221 45,693 (12%)
------ ------ ------ ------
Operating Income $6,177 $3,721 66% $14,017 $16,309 (14%)
====== ====== ======= =======
Compensation Ratio 50.9% 56.4% 53.4% 53.1%
Non-compensation
Ratio 18.2% 23.2% 20.8% 20.6%
Operating Margin 30.8% 20.3% 25.8% 26.3%
Assets Under
Management (in
millions) (1) $8,961 $8,355 7% $8,961 $8,355 7%
(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries.
Adjusted Revenues
Adjusted
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change Change
------
(dollars in thousands)
Investment Advisory and Management
Fees:
Wealth Management $10,232 $9,311 10% $29,736 $27,180 9%
Institutional
Asset Management
(1) 5,885 5,848 1% 17,081 17,026 - %
Private Equity - 760 NM - 3,457 NM
Total Investment
Advisory and
Management Fees 16,117 15,919 1% 46,817 47,663 (2%)
------ ------ ------ ------
Realized and Unrealized Gains
(Losses):
Institutional
Asset Management 744 811 (8%) 2,412 3,213 (25%)
Private Equity 1,208 171 606% (985) 6,302 NM
Total Realized and
Unrealized Gains 1,952 982 99% 1,427 9,515 (85%)
----- --- ----- -----
Equity in Earnings
of Affiliates (2) 1,902 1,290 47% 5,618 4,223 33%
Investment
Management
Revenue $19,971 $18,191 10% $53,862 $61,401 (12%)
======= ======= ======= =======
(1) Management fees from Institutional Asset Management on an Adjusted basis reflect the reduction of revenues for client-related expenses of $167 and $257 for the three months ended September 30, 2017 and 2016, respectively, and $220 and $664 for the nine months ended September 30, 2017 and 2016, respectively.
(2) Equity in G5 ? Evercore - Wealth Management, ABS and Atalanta Sosnoff on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income from Equity Method Investments.
Adjusted Investment Advisory and Management Fees of $16.1 million for the three months ended September 30, 2017 increased 1% compared to the third quarter of last year, driven primarily by higher fees in Wealth Management.
Realized and Unrealized Gains of $2.0 million for the three months ended September 30, 2017 increased relative to the third quarter of last year, driven principally by higher gains in Private Equity.
Equity in Earnings of Affiliates of $1.9 million for the three months ended September 30, 2017 increased relative to the third quarter of last year principally as a result of higher income earned in the third quarter of 2017 by ABS.
Adjusted Investment Advisory and Management Fees of $46.8 million for the nine months ended September 30, 2017 decreased 2% compared to the first nine months of last year, driven primarily by a lack of fees in Private Equity during the first nine months of 2017, partially offset by higher fees in Wealth Management in the first nine months of 2017.
Realized and Unrealized Gains of $1.4 million for the nine months ended September 30, 2017 decreased relative to the first nine months of last year, driven principally by losses related to the wind-down of a Private Equity fund in Mexico in 2017.
Equity in Earnings of Affiliates of $5.6 million for the nine months ended September 30, 2017 increased relative to the first nine months of last year principally as a result of higher income earned in the first nine months of 2017 by ABS.
On September 30, 2016, the Company completed the transfer of ownership and control of the Mexican Private Equity Business to a newly formed entity, Glisco Partners Inc., which is controlled by the principals of the business.
Adjusted Expenses
Investment Management's Adjusted expenses for the three months ended September 30, 2017 were $13.9 million, down 5% compared to the third quarter of last year principally due to a reduction in non-compensation costs. Assuming the restructuring of certain Investment Management affiliates had occurred on December 31, 2015, Adjusted Investment Management expenses would have increased 1% when compared to the third quarter of last year. Adjusted Investment Management expenses for the nine months ended September 30, 2017 were $40.2 million, down 12% from last year due to a decrease in compensation and non-compensation costs. Assuming the restructuring of certain Investment Management affiliates had occurred on December 31, 2015, Adjusted Investment Management expenses would have decreased 7% when compared to the nine months ended September 30, 2016.
Balance Sheet
The Company continues to maintain a strong balance sheet, holding cash, cash equivalents, marketable securities and certificates of deposit of $555.6 million at September 30, 2017. Current assets exceed current liabilities by $440.7 million at September 30, 2017. Amounts due related to the Long-Term Notes Payable and Subordinated Borrowings were $175.1 million at September 30, 2017.
On October 18, 2017, the Company completed the sale of the Institutional Trust and Independent Fiduciary business of Evercore Trust Company for a purchase price of $34.4 million. This transaction resulted in a decrease of $28.4 million to Goodwill.
Capital Transactions
On October 23, 2017, the Board of Directors of Evercore declared a quarterly dividend of $0.40 per share to be paid on December 8, 2017 to common stockholders of record on November 24, 2017.
During the three months ended September 30, 2017 the Company repurchased approximately 800,000 shares/units at an average price per share/unit of $75.87. During the nine months ended September 30, 2017, the Company repurchased a total of 3.9 million shares/units at an average price per share/unit of $74.99.
During the first quarter, after consideration of the market environment in which our equities business operates and the intermediate term cost structure of that business, we reduced the shares we expect to deliver, included in our Adjusted share base, for the 2014 acquisition of ISI from approximately 7.0 million shares to 5.4 million shares. Further, in July 2017, the Board of Directors approved the exchange of all of the outstanding Class H LP Interests into 1.9 million Class J LP Units, reducing the aggregate number of units to 5.3 million. The new units contain the same service vesting terms as the Class H LP Interests and are not entitled to distributions. The Class J LP Units do not have performance thresholds and the holders will be issued one share each of Class B common stock of Evercore Inc., which will entitle them to one vote on all matters submitted generally to holders of Class A and Class B common stock for each Class E LP Unit and Class J LP Unit held.
The total shares available to be granted in the future under the Amended and Restated 2016 Evercore Inc. Stock Incentive Plan was approximately 7.4 million as of September 30, 2017.
Conference Call
Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Thursday, October 26, 2017, accessible via telephone and the internet. Investors and analysts may participate in the live conference call by dialing (877) 359-9508 (toll-free domestic) or (224) 357-2393 (international); passcode: 96579176. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for one week via telephone starting approximately one hour after the call ends. The replay can be accessed at (855) 859-2056 (toll-free domestic) or (404) 537-3406 (international); passcode: 96579176. A live audio webcast of the conference call will be available on the Investor Relations section of Evercore's website at www.evercore.com. The webcast will be archived on Evercore's website for 30 days after the call.
About Evercore
Evercore (NYSE: EVR) is a premier global independent investment banking advisory firm. We are dedicated to helping our clients achieve superior results through trusted independent and innovative advice on matters of strategic significance to boards of directors, management teams and shareholders, including mergers and acquisitions, strategic shareholder advisory, restructurings, and capital structure. Evercore also assists clients in raising public and private capital and delivers equity research and equity sales and agency trading execution, in addition to providing wealth and investment management services to high net worth and institutional investors. Founded in 1995, the Firm is headquartered in New York and maintains offices and affiliate offices in major financial centers in North America, Europe, South America and Asia. For more information, please visit www.evercore.com.
Investor Contact: Robert B. Walsh
Chief Financial Officer,
Evercore
212-857-3100
Media Contact: Dana Gorman
The Abernathy MacGregor
Group, for Evercore
212-371-5999
Basis of Alternative Financial Statement Presentation
Our Adjusted results are a non-GAAP measure. As discussed further under "Non-GAAP Measures", Evercore believes that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore's results across several periods and better reflect management's view of operating results. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of our U.S. GAAP results to Adjusted results is presented in the tables included in Annex I.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect our current views with respect to, among other things, Evercore's operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "probable," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. All statements other than statements of historical fact included in this presentation are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore's business. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Evercore believes these factors include, but are not limited to, those described under "Risk Factors" discussed in Evercore's Annual Report on Form 10-K for the year ended December 31, 2016, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and Registration Statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Evercore to predict all risks and uncertainties, nor can Evercore assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and Evercore does not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Evercore undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
With respect to any securities offered by any private equity fund referenced herein, such securities have not been and will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
ANNEX I
Schedule Page Number
Unaudited Condensed Consolidated Statements of
Operations for the Three and Nine Months Ended
September 30, 2017 and 2016 A-1
Adjusted:
Adjusted Results (Unaudited) A-2
U.S. GAAP Reconciliation to Adjusted Results
(Unaudited) A-4
U.S. GAAP Segment Reconciliation to Adjusted Results
for the Three and Nine Months ended September 30, 2017
(Unaudited) A-8
U.S. GAAP Segment Reconciliation to Adjusted Results
for the Three and Nine Months ended September 30, 2016
(Unaudited) A-9
U.S. GAAP Segment Reconciliation to Consolidated
Results (Unaudited) A-10
------------------------------------------------ ----
Notes to Unaudited Condensed Consolidated Adjusted
Financial Data A-11
-------------------------------------------------- ----
EVERCORE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(dollars in thousands, except per share data)
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenues
Investment Banking
Revenue $388,834 $368,434 $1,118,303 $936,234
Investment Management
Revenue 18,236 17,158 48,464 57,842
Other Revenue 4,944 5,509 12,542 12,650
----- ----- ------ ------
Total Revenues 412,014 391,101 1,179,309 1,006,726
Interest Expense (1) 5,413 4,787 14,991 12,043
Net Revenues 406,601 386,314 1,164,318 994,683
------- ------- --------- -------
Expenses
Employee Compensation and
Benefits 246,772 231,710 689,186 632,959
Occupancy and Equipment
Rental 13,531 12,627 40,191 33,983
Professional Fees 16,151 15,419 43,432 39,872
Travel and Related
Expenses 15,113 12,440 46,976 42,258
Communications and
Information Services 10,613 10,155 30,865 29,944
Depreciation and
Amortization 6,421 5,907 18,267 18,915
Special Charges - - 21,507 -
Acquisition and
Transition Costs 599 339 976 10
Other Operating Expenses 10,331 12,632 28,253 32,927
Total Expenses 319,531 301,229 919,653 830,868
------- ------- ------- -------
Income Before Income from
Equity Method
Investments and Income
Taxes 87,070 85,085 244,665 163,815
Income from Equity Method
Investments 1,827 1,178 5,507 4,129
----- ----- ----- -----
Income Before Income
Taxes 88,897 86,263 250,172 167,944
Provision for Income
Taxes 28,815 38,980 69,566 79,390
------ ------ ------ ------
Net Income 60,082 47,283 180,606 88,554
Net Income Attributable
to Noncontrolling
Interest 14,171 12,588 35,740 24,454
Net Income Attributable
to Evercore Inc. $45,911 $34,695 $144,866 $64,100
======= ======= ======== =======
Net Income Attributable
to Evercore Inc. Common
Shareholders $45,911 $34,695 $144,866 $64,100
======= ======= ======== =======
Weighted Average Shares of Class A Common
Stock Outstanding:
Basic 39,045 38,912 39,873 39,259
Diluted 44,036 43,734 44,887 44,085
Net Income Per Share Attributable to
Evercore Inc. Common Shareholders:
Basic $1.18 $0.89 $3.63 $1.63
Diluted $1.04 $0.79 $3.23 $1.45
(1) Includes interest expense on long-term debt and interest expense on short-term repurchase agreements.
Adjusted Results
Throughout the discussion of Evercore's business segments, information is presented on an Adjusted basis (formerly called "Adjusted Pro Forma"), which is a non-generally accepted accounting principles ("non-GAAP") measure. Adjusted results begin with information prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), adjusted to exclude certain items and reflect the conversion of vested and certain unvested Evercore LP Units and Interests, as well as Acquisition Related Share Issuances and Unvested Restricted Stock Units granted to ISI employees, into Class A shares. Evercore believes that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore's results across several periods and facilitate an understanding of Evercore's operating results. The Company uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. These Adjusted amounts are allocated to the Company's two business segments: Investment Banking and Investment Management. The differences between the Adjusted and U.S. GAAP results are as follows:
1. Assumed Vesting of Evercore LP Units and Exchange into Class A Shares.
The Company incurred expenses, in Employee Compensation and Benefits,
resulting from the vesting of Class E LP Units issued in conjunction with
the acquisition of ISI, as well as Class G and H LP Interests and Class J
LP Units. The amount of expense or the reversal of expense for the Class
G and H LP Interests is based on the determination if it is probable that
Evercore ISI will achieve certain earnings and margin targets in 2017 and
in future periods. The Adjusted results assume these LP Units and certain
Class G and H LP Interests have vested and have been exchanged for Class
A shares. Accordingly, any expense or reversal of expense associated with
these units and interests, and related awards, is excluded from the
Adjusted results, and the noncontrolling interest related to these units
is converted to a controlling interest. The Company's Management believes
that it is useful to provide the per-share effect associated with the
assumed conversion of these previously granted equity interests, and thus
the Adjusted results reflect the exchange of certain vested and unvested
Evercore LP partnership units and interests and IPO related restricted
stock unit awards into Class A shares.
2. Adjustments Associated with Business Combinations. The following charges
resulting from business combinations have been excluded from the Adjusted
results because the Company's Management believes that operating
performance is more comparable across periods excluding the effects of
these acquisition-related charges:
a. Amortization of Intangible Assets and Other Purchase Accounting-related Amortization. Amortization of intangible assets and other purchase accounting-related amortization from the acquisitions of ISI, SFS and certain other acquisitions.
b. Acquisition and Transition Costs. Primarily professional fees incurred, as well as the reversal of a provision for certain settlements in 2016 and costs related to transitioning acquisitions or divestitures.
c. Fair Value of Contingent Consideration. The expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company's acquisitions is excluded from the Adjusted results.
d. Gain on Transfer of Ownership of Mexican Private Equity Business. The gain resulting from the transfer of ownership of the Mexican Private Equity business in the third quarter of 2016 is excluded from the Adjusted Results.
3. Client Related Expenses. Client related expenses and provisions for
uncollected receivables have been classified as a reduction of revenue in
the Adjusted presentation. The Company's Management believes that this
adjustment results in more meaningful key operating ratios, such as
compensation to net revenues and operating margin.
4. Special Charges. Expenses during 2017 relate to a charge for the
impairment of goodwill in the Institutional Asset Management reporting
unit and a charge for the impairment of our investment in G5 | Evercore
in the second quarter.
5. Income Taxes. Evercore is organized as a series of Limited Liability
Companies, Partnerships, C-Corporations and a Public Corporation and
therefore, not all of the Company's income is subject to corporate-level
taxes. As a result, adjustments have been made to the Adjusted earnings
to assume that the Company has adopted a conventional corporate tax
structure and is taxed as a C-Corporation in the U.S. at the prevailing
corporate rates and that all deferred tax assets relating to foreign
operations are fully realizable within the structure on a consolidated
basis. This assumption is consistent with the assumption that certain
Evercore LP Units and interests are vested and exchanged into Class A
shares, as discussed in Item 1 above, as the assumed exchange would
change the tax structure of the Company. In addition, the Adjusted
presentation can reflect the netting of changes in the Company's Tax
Receivable Agreement against Income Tax Expense.
6. Presentation of Interest Expense. The Adjusted results present interest
expense on short-term repurchase agreements, within the Investment
Management segment, in Other Revenues, net, as the Company's Management
believes it is more meaningful to present the spread on net interest
resulting from the matched financial assets and liabilities. In addition,
Adjusted Investment Banking and Investment Management Operating Income
are presented before interest expense on debt, which is included in
interest expense on a U.S. GAAP basis.
7. Presentation of Income from Equity Method Investments. The Adjusted
results present Income from Equity Method Investments within Revenue as
the Company's Management believes it is a more meaningful presentation.
This release also presents changes in Adjusted Net Revenues, Adjusted Investment Management Revenues and Adjusted Investment Management Expenses from the prior-year periods assuming that the restructuring of certain Investment Management affiliates occurred on December 31, 2015. This includes the transfer of ownership of the Mexican Private Equity Business that occurred on September 30, 2016. Evercore believes this is useful additional information for investors because it improves the comparability of period-over-period results and aligns with management's view of business performance.
EVERCORE INC.
U.S. GAAP RECONCILIATION TO ADJUSTED RESULTS
(dollars in thousands, except per share data)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September 30, September 30, 2016
2017
---
Net Revenues -U.S.
GAAP $406,601 $386,314 $1,164,318 $994,683
Client Related Expenses
(1) (8,059) (6,205) (17,019) (17,074)
Income from Equity
Method Investments (2) 1,827 1,178 5,507 4,129
Interest Expense on
Debt (3) 2,488 2,592 7,494 7,616
Gain on Transfer of
Ownership of Mexican
Private Equity
Business (4) - (406) - (406)
Net Revenues - Adjusted $402,857 $383,473 $1,160,300 $988,948
======== ======== ========== ========
Compensation Expense -
U.S. GAAP $246,772 $231,710 $689,186 $632,959
Amortization of LP
Units /Interests and
Certain Other Awards
(5) (9,249) (13,859) (4,980) (66,356)
Compensation Expense -
Adjusted $237,523 $217,851 $684,206 $566,603
======== ======== ======== ========
Operating Income -U.S.
GAAP $87,070 $85,085 $244,665 $163,815
Income from Equity
Method Investments (2) 1,827 1,178 5,507 4,129
----- ----- ----- -----
Pre-Tax Income - U.S.
GAAP 88,897 86,263 250,172 167,944
Gain on Transfer of
Ownership of Mexican
Private Equity
Business (4) - (406) - (406)
Amortization of LP
Units /Interests and
Certain Other Awards
(5) 9,249 13,859 4,980 66,356
Special Charges (6) - - 21,507 -
Intangible Asset
Amortization /Other
Purchase Accounting-
related Amortization
(7a) 2,392 2,538 7,176 8,628
Acquisition and
Transition Costs (7b) 599 339 976 10
Fair Value of
Contingent
Consideration (7c) - 984 - 1,671
--- --- --- -----
Pre-Tax Income -
Adjusted 101,137 103,577 284,811 244,203
Interest Expense on
Debt (3) 2,488 2,592 7,494 7,616
Operating Income -
Adjusted $103,625 $106,169 $292,305 $251,819
======== ======== ======== ========
Provision for Income
Taxes -U.S. GAAP $28,815 $38,980 $69,566 $79,390
Income Taxes (8) 8,627 1,211 12,139 13,536
Provision for Income
Taxes -Adjusted $37,442 $40,191 $81,705 $92,926
======= ======= ======= =======
Net Income Attributable
to Evercore Inc. -
U.S. GAAP $45,911 $34,695 $144,866 $64,100
Gain on Transfer of
Ownership of Mexican
Private Equity
Business (4) - (406) - (406)
Amortization of LP
Units /Interests and
Certain Other Awards
(5) 9,249 13,859 4,980 66,356
Special Charges (6) - - 21,507 -
Intangible Asset
Amortization /Other
Purchase Accounting-
related Amortization
(7a) 2,392 2,538 7,176 8,628
Acquisition and
Transition Costs (7b) 599 339 976 10
Fair Value of
Contingent
Consideration (7c) - 984 - 1,671
Income Taxes (8) (8,627) (1,211) (12,139) (13,536)
Noncontrolling Interest
(9) 11,448 11,625 31,007 21,778
Net Income Attributable
to Evercore Inc. -
Adjusted $60,972 $62,423 $198,373 $148,601
======= ======= ======== ========
Diluted Shares
Outstanding -U.S.
GAAP 44,036 43,734 44,887 44,085
LP Units (10) 5,898 7,604 5,975 7,443
Unvested Restricted
Stock Units -Event
Based (10) 12 12 12 12
Diluted Shares
Outstanding -Adjusted 49,946 51,350 50,874 51,540
====== ====== ====== ======
Key Metrics: (a)
---------------
Diluted Earnings Per
Share -U.S. GAAP $1.04 $0.79 $3.23 $1.45
Diluted Earnings Per
Share -Adjusted $1.22 $1.22 $3.90 $2.88
Compensation Ratio -
U.S. GAAP 60.7% 60.0% 59.2% 63.6%
Compensation Ratio -
Adjusted 59.0% 56.8% 59.0% 57.3%
Operating Margin -U.S.
GAAP 21.4% 22.0% 21.0% 16.5%
Operating Margin -
Adjusted 25.7% 27.7% 25.2% 25.5%
Effective Tax Rate -
U.S. GAAP 32.4% 45.2% 27.8% 47.3%
Effective Tax Rate -
Adjusted 37.0% 38.8% 28.7% 38.1%
(a) Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components above.
EVERCORE INC.
RECONCILIATION TO RESTRUCTURING OF INVESTMENT MANAGEMENT ADJUSTED RESULTS
(dollars in thousands)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 % September 30, 2017 September 30, 2016 %
Change
Change
------
Net Revenues -U.S.
GAAP $406,601 $386,314 5% $1,164,318 $994,683 17%
Adjustments -U.S.
GAAP to Adjusted (a) (3,744) (2,841) (32%) (4,018) (5,735) 30%
------ ------ ------ ------
Net Revenues -
Adjusted 402,857 383,473 5% 1,160,300 988,948 17%
Transfer of Ownership
of Mexican Private
Equity Business (11) - (608) NM - (2,708) NM
--- ---- --- ------
Adjusted Net Revenues
-Including
Restructuring of
Investment
Management
Adjustments $402,857 $382,865 5% $1,160,300 $986,240 18%
======== ======== ========== ========
Investment Management
Revenues -U.S. GAAP $18,236 $17,158 6% $48,464 $57,842 (16%)
Adjustments -U.S.
GAAP to Adjusted (b) 1,735 1,033 68% 5,398 3,559 52%
----- ----- ----- -----
Investment Management
Revenues -Adjusted 19,971 18,191 10% 53,862 61,401 (12%)
Transfer of Ownership
of Mexican Private
Equity Business (11) - (608) NM - (2,708) NM
--- ---- --- ------
Adjusted Investment
Management Revenues
-Including
Restructuring of
Investment
Management
Adjustments $19,971 $17,583 14% $53,862 $58,693 (8%)
======= ======= ======= =======
Investment Management
Expenses -U.S. GAAP $14,519 $15,141 (4%) $48,417 $47,168 3%
Adjustments -U.S.
GAAP to Adjusted (b) (659) (555) (19%) (8,196) (1,475) (456%)
---- ---- ------ ------
Investment Management
Expenses -Adjusted 13,860 14,586 (5%) 40,221 45,693 (12%)
Transfer of Ownership
of Mexican Private
Equity Business (11) - (859) NM - (2,516) NM
--- ---- --- ------
Adjusted Investment
Management Expenses
-Including
Restructuring of
Investment
Management
Adjustments $13,860 $13,727 1% $40,221 $43,177 (7%)
======= ======= ======= =======
(a) See page A-4 for details of U.S. GAAP to Adjusted adjustments.
(b) See pages A-8 and A-9 for details of U.S. GAAP to Adjusted adjustments.
EVERCORE INC.
RECONCILIATION TO ADJUSTED RESULTS EXCLUDING CHANGE IN ACCOUNTING FOR
INCOME TAXES RELATED TO SHARE-BASED PAYMENTS
(dollars in thousands)
(UNAUDITED)
Nine Months Ended
September 30, 2017 September 30, 2016 %
Change
------
Net Income
Attributable to
Evercore Inc. -
U.S. GAAP $144,866 $64,100 126%
Adjustments -U.S.
GAAP to Adjusted
(a) 53,507 84,501 (37%)
------ ------
Net Income
Attributable to
Evercore Inc. -
Adjusted 198,373 148,601 33%
Change in
Accounting for
Income Taxes
Related to Share-
Based Payments
(12) (26,068) - NM
------- ---
Adjusted Net
Income
Attributable to
Evercore Inc. -
Excluding Change
in Accounting for
Income Taxes
Related to Share-
Based Payments $172,305 $148,601 16%
======== ========
Diluted Shares
Outstanding -
U.S. GAAP 44,887 44,085 2%
Adjustments -U.S.
GAAP to Adjusted
(a) 5,987 7,455 (20%)
----- -----
Diluted Shares
Outstanding -
Adjusted 50,874 51,540 (1%)
Change in
Accounting for
Income Taxes
Related to Share-
Based Payments
(12) (261) - NM
---- ---
Adjusted Diluted
Shares
Outstanding -
Excluding Change
in Accounting for
Income Taxes
Related to Share-
Based Payments 50,613 51,540 (2%)
====== ======
Key Metrics: (b)
---------------
U.S. GAAP Diluted
Earnings Per
Share $3.23 $1.45 123%
Adjusted Diluted
Earnings Per
Share $3.90 $2.88 35%
Adjusted Diluted
Earnings Per
Share -
Excluding Change
in Accounting for
Income Taxes
Related to Share-
Based Payments $3.40 $2.88 18%
(a) See page A-4 for details of U.S. GAAP to Adjusted adjustments.
(b) Reconciliations of the key metrics are a derivative of the reconciliations of their components above.
EVERCORE INC.
U.S. GAAP RECONCILIATION TO ADJUSTED RESULTS
TRAILING TWELVE MONTHS
(dollars in thousands)
(UNAUDITED)
Consolidated
------------
Twelve Months Ended
September 30, 2017 September 30, 2016
------------------ ------------------
Net Revenues -U.S.
GAAP $1,609,687 $1,402,926
Client Related Expenses
(1) (25,343) (25,058)
Income from Equity
Method Investments (2) 8,019 6,145
Interest Expense on
Debt (3) 10,126 9,470
Gain on Transfer of
Ownership of Mexican
Private Equity
Business (4) - (406)
Net Revenues - Adjusted $1,602,489 $1,393,077
========== ==========
Compensation Expense -
U.S. GAAP $956,817 $887,489
Amortization of LP
Units /Interests and
Certain Other Awards
(5) (19,470) (83,906)
------- -------
Compensation Expense -
Adjusted $937,347 $803,583
======== ========
Compensation Ratio -
U.S. GAAP (a) 59.4% 63.3%
Compensation Ratio -
Adjusted (a) 58.5% 57.7%
Investment Banking
------------------
Twelve Months Ended
September 30, 2017 September 30, 2016
------------------ ------------------
Net Revenues -U.S.
GAAP $1,542,833 $1,320,544
Client Related Expenses
(1) (24,881) (24,389)
Income from Equity
Method Investments (2) 1,353 646
Interest Expense on
Debt (3) 10,126 8,098
Net Revenues - Adjusted $1,529,431 $1,304,899
========== ==========
Compensation Expense -
U.S. GAAP $921,358 $841,403
Amortization of LP
Units /Interests and
Certain Other Awards
(5) (19,470) (83,906)
------- -------
Compensation Expense -
Adjusted $901,888 $757,497
======== ========
Compensation Ratio -
U.S. GAAP (a) 59.7% 63.7%
Compensation Ratio -
Adjusted (a) 59.0% 58.1%
(a) Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their
components above.
EVERCORE INC.
U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED RESULTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(dollars in thousands)
(UNAUDITED)
Investment Banking Segment
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
U.S. GAAP Basis Adjustments Non-GAAP Adjusted U.S. GAAP Basis Adjustments Non-GAAP Adjusted
Basis Basis
--------------- ----------- ------------------ --------------- ----------- ------------------
Net Revenues:
Investment Banking
Revenue $388,834 $(7,967) (1)(2) $380,867 $1,118,303 $(16,910) (1)(2) $1,101,393
Other Revenue, net (535) 2,488 (3) 1,953 (2,825) 7,494 (3) 4,669
Net Revenues 388,299 (5,479) 382,820 1,115,478 (9,416) 1,106,062
------- ------ ------- --------- ------ ---------
Expenses:
Employee Compensation
and Benefits 236,564 (9,249) (5) 227,315 660,233 (4,980) (5) 655,253
Non-compensation
Costs 68,448 (10,391) (7) 58,057 196,603 (24,082) (7) 172,521
Special Charges - - (6) - 14,400 (14,400) (6) -
Total Expenses 305,012 (19,640) 285,372 871,236 (43,462) 827,774
------- ------- ------- ------- ------- -------
Operating Income (a) $83,287 $14,161 $97,448 $244,242 $34,046 $278,288
======= ======= ======= ======== ======= ========
Compensation Ratio
(b) 60.9% 59.4% 59.2% 59.2%
Operating Margin (b) 21.4% 25.5% 21.9% 25.2%
Investment Management Segment
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
U.S. GAAP Basis Adjustments Non-GAAP Adjusted U.S. GAAP Basis Adjustments Non-GAAP Adjusted
Basis Basis
--------------- ----------- ------------------ --------------- ----------- ------------------
Net Revenues:
Investment Management
Revenue $18,236 $1,735 (1)(2) $19,971 $48,464 $5,398 (1)(2) $53,862
Other Revenue, net 66 - 66 376 - 376
Net Revenues 18,302 1,735 20,037 48,840 5,398 54,238
------ ----- ------ ------ ----- ------
Expenses:
Employee Compensation
and Benefits 10,208 - 10,208 28,953 - 28,953
Non-compensation
Costs 4,311 (659) (7) 3,652 12,357 (1,089) (7) 11,268
Special Charges - - (6) - 7,107 (7,107) (6) -
Total Expenses 14,519 (659) 13,860 48,417 (8,196) 40,221
------ ---- ------ ------ ------ ------
Operating Income (a) $3,783 $2,394 $6,177 $423 $13,594 $14,017
====== ====== ====== ==== ======= =======
Compensation Ratio
(b) 55.8% 50.9% 59.3% 53.4%
Operating Margin (b) 20.7% 30.8% 0.9% 25.8%
(a) Operating Income for U.S. GAAP excludes Income (Loss) from Equity Method Investments.
(b) Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components above.
EVERCORE INC.
U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED RESULTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016
(dollars in thousands)
(UNAUDITED)
Investment Banking Segment
Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
U.S. GAAP Basis Adjustments Non-GAAP Adjusted U.S. GAAP Basis Adjustments Non-GAAP Adjusted
Basis Basis
--------------- ----------- ------------------ --------------- ----------- ------------------
Net Revenues:
Investment Banking
Revenue $368,434 $(6,060) (1)(2) $362,374 $936,234 $(16,504) (1)(2) $919,730
Other Revenue, net 200 2,592 (3) 2,792 270 6,946 (3) 7,216
--- ----- ----- --- ----- -----
Net Revenues 368,634 (3,468) 365,166 936,504 (9,558) 926,946
------- ------ ------- ------- ------ -------
Expenses:
Employee Compensation
and Benefits 221,380 (13,859) (5) 207,521 600,014 (66,356) (5) 533,658
Non-compensation
Costs 64,708 (9,511) (7) 55,197 183,686 (25,908) (7) 157,778
Total Expenses 286,088 (23,370) 262,718 783,700 (92,264) 691,436
------- ------- ------- ------- ------- -------
Operating Income (a) $82,546 $19,902 $102,448 $152,804 $82,706 $235,510
======= ======= ======== ======== ======= ========
Compensation Ratio
(b) 60.1% 56.8% 64.1% 57.6%
Operating Margin (b) 22.4% 28.1% 16.3% 25.4%
Investment Management Segment
Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
U.S. GAAP Basis Adjustments Non-GAAP Adjusted U.S. GAAP Basis Adjustments Non-GAAP Adjusted
Basis Basis
--------------- ----------- ------------------ --------------- ----------- ------------------
Net Revenues:
Investment Management
Revenue $17,158 $1,033 (1)(2) $18,191 $57,842 $3,559 (1)(2) $61,401
Other Revenue, net 522 (406) (4) 116 337 264 (3)(4) 601
--- ---
Net Revenues 17,680 627 18,307 58,179 3,823 62,002
------ --- ------ ------ ----- ------
Expenses:
Employee Compensation
and Benefits 10,330 - 10,330 32,945 - 32,945
Non-compensation
Costs 4,811 (555) (7) 4,256 14,223 (1,475) (7) 12,748
Total Expenses 15,141 (555) 14,586 47,168 (1,475) 45,693
------ ---- ------ ------ ------ ------
Operating Income (a) $2,539 $1,182 $3,721 $11,011 $5,298 $16,309
====== ====== ====== ======= ====== =======
Compensation Ratio
(b) 58.4% 56.4% 56.6% 53.1%
Operating Margin (b) 14.4% 20.3% 18.9% 26.3%
(a) Operating Income for U.S. GAAP excludes Income (Loss) from Equity Method Investments.
(b) Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components above.
EVERCORE INC.
U.S. GAAP SEGMENT RECONCILIATION TO CONSOLIDATED RESULTS
(dollars in thousands)
(UNAUDITED)
U.S. GAAP
Three Months Ended Nine Months Ended
September 30, September 30, September 30, 2017 September 30,
2017 2016 2016
-------------- -------------- ------------------ --------------
Investment Banking
Net Revenues:
Investment Banking
Revenue $388,834 $368,434 $1,118,303 $936,234
Other Revenue, net (535) 200 (2,825) 270
Net Revenues 388,299 368,634 1,115,478 936,504
------- ------- --------- -------
Expenses:
Employee Compensation
and Benefits 236,564 221,380 660,233 600,014
Non-compensation
Costs 68,448 64,708 196,603 183,686
Special Charges - - 14,400 -
Total Expenses 305,012 286,088 871,236 783,700
------- ------- ------- -------
Operating Income (a) $83,287 $82,546 $244,242 $152,804
======= ======= ======== ========
Investment Management
Net Revenues:
Investment Management
Revenue $18,236 $17,158 $48,464 $57,842
Other Revenue, net 66 522 376 337
Net Revenues 18,302 17,680 48,840 58,179
------ ------ ------ ------
Expenses:
Employee Compensation
and Benefits 10,208 10,330 28,953 32,945
Non-compensation
Costs 4,311 4,811 12,357 14,223
Special Charges - - 7,107 -
Total Expenses 14,519 15,141 48,417 47,168
------ ------ ------ ------
Operating Income (a) $3,783 $2,539 $423 $11,011
====== ====== ==== =======
Total
Net Revenues:
Investment Banking
Revenue $388,834 $368,434 $1,118,303 $936,234
Investment Management
Revenue 18,236 17,158 48,464 57,842
Other Revenue, net (469) 722 (2,449) 607
Net Revenues 406,601 386,314 1,164,318 994,683
------- ------- --------- -------
Expenses:
Employee Compensation
and Benefits 246,772 231,710 689,186 632,959
Non-compensation
Costs 72,759 69,519 208,960 197,909
Special Charges - - 21,507 -
Total Expenses 319,531 301,229 919,653 830,868
------- ------- ------- -------
Operating Income (a) $87,070 $85,085 $244,665 $163,815
======= ======= ======== ========
(a) Operating Income excludes Income (Loss) from Equity Method Investments.
Notes to Unaudited Condensed Consolidated Adjusted Financial Data
For further information on these adjustments, see page A-2.
(1) Client related expenses and provisions for uncollected receivables have been reclassified as a reduction of Revenue in the Adjusted presentation.
(2) Income (Loss) from Equity Method Investments has been reclassified to Revenue in the Adjusted presentation.
(3) Interest Expense on Debt is excluded from the Adjusted Investment Banking and Investment Management segment results and is included in Interest Expense in the segment results on a U.S. GAAP basis.
(4) The gain resulting from the transfer of ownership of the Mexican Private Equity business in the third quarter of 2016 is excluded from the Adjusted presentation.
(5) Expenses or reversal of expenses incurred from the assumed vesting of Class E LP Units, Class G and H LP Interests and Class J LP Units issued in conjunction with the acquisition of ISI are excluded from the Adjusted presentation.
(6) Special Charges for 2017 relate to a charge for the impairment of goodwill in the Institutional Asset Management reporting unit and a charge for the impairment of our investment in G5 | Evercore in the second quarter.
(7) Non-compensation Costs on an Adjusted basis reflect the following adjustments:
Three Months Ended September 30, 2017
U.S. GAAP Adjustments Adjusted
--------- ----------- --------
(dollars in thousands)
Occupancy and Equipment
Rental $13,531 $ - $13,531
Professional Fees 16,151 (3,207) (1) 12,944
Travel and Related
Expenses 15,113 (3,659) (1) 11,454
Communications and
Information Services 10,613 (31) (1) 10,582
Depreciation and
Amortization 6,421 (2,392) (7a) 4,029
Acquisition and
Transition Costs 599 (599) (7b) -
Other Operating Expenses 10,331 (1,162) (1) 9,169
Total Non-compensation
Costs $72,759 $(11,050) $61,709
======= ======== =======
Three Months Ended September 30, 2016
U.S. GAAP Adjustments Adjusted
--------- ----------- --------
(dollars in thousands)
Occupancy and Equipment
Rental $12,627 $ - $12,627
Professional Fees 15,419 (2,922) (1) 12,497
Travel and Related
Expenses 12,440 (1,989) (1) 10,451
Communications and
Information Services 10,155 (20) (1) 10,135
Depreciation and
Amortization 5,907 (2,538) (7a) 3,369
Acquisition and
Transition Costs 339 (339) (7b) -
Other Operating Expenses 12,632 (2,258) (1)(7c) 10,374
Total Non-compensation
Costs $69,519 $(10,066) $59,453
======= ======== =======
Nine Months Ended September 30, 2017
U.S. GAAP Adjustments Adjusted
--------- ----------- --------
(dollars in thousands)
Occupancy and Equipment
Rental $40,191 $ - $40,191
Professional Fees 43,432 (4,462) (1) 38,970
Travel and Related
Expenses 46,976 (9,947) (1) 37,029
Communications and
Information Services 30,865 (85) (1) 30,780
Depreciation and
Amortization 18,267 (7,176) (7a) 11,091
Acquisition and
Transition Costs 976 (976) (7b) -
Other Operating Expenses 28,253 (2,525) (1) 25,728
Total Non-compensation
Costs $208,960 $(25,171) $183,789
======== ======== ========
Nine Months Ended September 30, 2016
U.S. GAAP Adjustments Adjusted
--------- ----------- --------
(dollars in thousands)
Occupancy and Equipment
Rental $33,983 $ - $33,983
Professional Fees 39,872 (7,292) (1) 32,580
Travel and Related
Expenses 42,258 (7,607) (1) 34,651
Communications and
Information Services 29,944 (59) (1) 29,885
Depreciation and
Amortization 18,915 (8,628) (7a) 10,287
Acquisition and
Transition Costs 10 (10) (7b) -
Other Operating Expenses 32,927 (3,787) (1)(7c) 29,140
Total Non-compensation
Costs $197,909 $(27,383) $170,526
======== ======== ========
(7a) The exclusion from the Adjusted presentation of expenses associated with amortization of intangible assets and other purchase accounting-related amortization from the acquisitions of ISI, SFS and certain other acquisitions.
(7b) Primarily professional fees incurred, as well as the reversal of a provision for certain settlements in 2016 and costs related to transitioning acquisitions or divestitures.
(7c) The expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company's acquisitions is excluded from the Adjusted results.
(8) Evercore is organized as a series of Limited Liability Companies, Partnerships, C-Corporations and a Public Corporation and therefore, not all of the Company's income is subject to corporate level taxes. As a result, adjustments have been made to Evercore's effective tax rate assuming that the Company has adopted a conventional corporate tax structure and is taxed as a C-Corporation in the U.S. at the prevailing corporate rates and that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis. In addition, the Adjusted presentation can reflect the netting of changes in the Company's Tax Receivable Agreement against Income Tax Expense.
(9) Reflects an adjustment to eliminate noncontrolling interest related to all Evercore LP partnership units which are assumed to be converted to Class A common stock in the Adjusted presentation.
(10) Assumes the vesting, and exchange into Class A shares, of certain Evercore LP partnership units and interests and IPO related restricted stock unit awards in the Adjusted presentation. In the computation of outstanding common stock equivalents for U.S. GAAP net income per share, the Evercore LP partnership units are anti-dilutive.
(11) Assumes the transfer of ownership of the Mexican Private Equity business had occurred as of the beginning of the prior period presented and reflects adjustments to eliminate the management fees and expenses that were previously recorded from the Mexican Private Equity business and the addition of income from the Mexican Private Equity business if its results were based on the percentage of the management fees that the Company is currently entitled to. Management believes this adjustment is useful to investors to compare Evercore's results across periods.
(12) Reflects the impact of the application of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which requires that excess tax benefits and deficiencies from the delivery of Class A common stock under share-based payment arrangements be recognized in the Company's Provision for Income Taxes rather than in Additional Paid-In-Capital under prior U.S. GAAP.
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SOURCE Evercore
