FORM 8-K |
EVERCORE INC. |
(Exact name of registrant as specified in its charter) |
Delaware | 001-32975 | 20-4748747 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
55 East 52 nd Street | ||
New York, New York | 10055 | |
(Address of principal executive offices) | (Zip Code) |
(212) 857-3100 |
(Registrant's telephone number, including area code) |
NOT APPLICABLE |
(Former name or former address, if changed since last report) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
EVERCORE INC. | ||||||
Date: January 30, 2019 | /s/ Robert B. Walsh | |||||
By: | Robert B. Walsh | |||||
Title: | Chief Financial Officer |
Fourth Quarter 2018 Results | 2018 Full Year Results | ||||||||||||||||||
U.S. GAAP | Adjusted(1)(2) | U.S. GAAP | Adjusted(1)(2) | ||||||||||||||||
vs. Q4 2017 | vs. Q4 2017 | vs. 2017 | vs. 2017 | ||||||||||||||||
Net Revenues ($ millions) | $ | 771.4 | 43% | $ | 776.2 | 63% | $ | 2,064.7 | 21% | $ | 2,083.2 | 26% | |||||||
Operating Income ($ millions) | $ | 250.2 | 36% | $ | 263.6 | 96% | $ | 542.1 | 26% | $ | 591.0 | 39% | |||||||
Net Income Attributable to Evercore Inc. ($ millions) | $ | 163.3 | NM | $ | 194.2 | 149% | $ | 377.2 | 201% | $ | 454.0 | 64% | |||||||
Diluted Earnings Per Share | $ | 3.67 | NM | $ | 3.93 | 154% | $ | 8.33 | 198% | $ | 9.01 | 65% | |||||||
Operating Margin | 32.4 | % | (166) bps | 34.0 | % | 581 bps | 26.3 | % | 109 bps | 28.4 | % | 258 bps | |||||||
(1) The Adjusted presentation for current and prior periods was revised to eliminate the netting of client related expenses with their related revenue. The revised presentation reflects the expense and related revenue gross. See pages 9 and 19 for further discussion. | |||||||||||||||||||
(2) Excluded from the Company’s Adjusted results for the three and twelve months ended December 31, 2017 is the impact of the enactment of the Tax Cuts and Jobs Act, that was signed into law on December 22, 2017, on deferred tax assets and our tax receivable agreement. See pages 3, 4, 7 and A-3 for further discussion. |
Business and Financial Highlights | g | Record fourth quarter and full year 2018 Net Revenues, Net Income Attributable to Evercore Inc. and Earnings Per Share, on both a U.S. GAAP and an Adjusted basis |
g | Advisory Revenues for 2018 exceeded $1.7 billion, increasing 32% versus the prior year, on both a U.S. GAAP and an Adjusted basis. Advisory Revenues of $696 million for the fourth quarter increased 81% versus the prior year, on both a U.S. GAAP and an Adjusted basis | |
g | U.S. GAAP Operating Margin was 26.3% for the twelve months ended December 31, 2018, compared to 25.2% for the twelve months ended December 31, 2017. Adjusted Operating Margin was 28.4% for the twelve months ended December 31, 2018, compared to 25.8% for the twelve months ended December 31, 2017 | |
g | Effective tax rate reduced by 12 and 13 percentage points for 2018 on a U.S. GAAP and an Adjusted basis, respectively, and 12 and 13 percentage points in the fourth quarter on a U.S. GAAP and an Adjusted basis, respectively, due to the Tax Cuts and Jobs Act | |
Talent | g | Anthony Laubi joined the Advisory team in the fourth quarter as part of the Industrials Group in London, ending 2018 with the addition of eight Advisory Senior Managing Director external hires |
g | Promoted seven Advisory Managing Directors to Senior Managing Director in 2019, strengthening our position in the Insurance, Technology and Energy sectors, and growing our Equities, Activist Defense and Private Capital Advisory capabilities | |
g | Zaheed Kajani joined the Advisory team in January as part of the Technology Advisory Practice in our Menlo Park office | |
g | John Startin joining the Advisory team in April to lead the Metals, Materials & Mining Group | |
g | In January, we enhanced our Evercore ISI leadership team with the addition of Marc Harris as Director of Research, and our research team with the addition of Ravi Mehrotra in Healthcare | |
Capital Return | g | Quarterly dividend of $0.50 per share |
g | $376.4 million returned to shareholders during the year through dividends and share repurchases of 3.1 million shares/units at an average price of $93.24 | |
U.S. GAAP | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands, except per share data) | |||||||||||||||||||||
Net Revenues | $ | 771,406 | $ | 540,031 | 43 | % | $ | 2,064,705 | $ | 1,704,349 | 21 | % | |||||||||
Operating Income(1) | $ | 250,206 | $ | 184,146 | 36 | % | $ | 542,077 | $ | 428,811 | 26 | % | |||||||||
Net Income (Loss) Attributable to Evercore Inc. | $ | 163,305 | $ | (19,412 | ) | NM | $ | 377,240 | $ | 125,454 | 201 | % | |||||||||
Diluted Earnings (Loss) Per Share | $ | 3.67 | $ | (0.50 | ) | NM | $ | 8.33 | $ | 2.80 | 198 | % | |||||||||
Compensation Ratio | 55.8 | % | 50.6 | % | 58.0 | % | 56.5 | % | |||||||||||||
Operating Margin | 32.4 | % | 34.1 | % | 26.3 | % | 25.2 | % | |||||||||||||
Effective Tax Rate | 23.9 | % | 100.7 | % | 19.7 | % | 59.1 | % | |||||||||||||
(1) Operating Income for the three and twelve months ended December 31, 2018 includes Special Charges of $1.1 million and $5.0 million, respectively, recognized in the Investment Banking segment. Operating Income for the three months ended December 31, 2017 includes Special Charges of $3.9 million recognized in the Investment Management segment, and Operating Income for the twelve months ended December 31, 2017 includes Special Charges of $25.4 million recognized in the Investment Banking and Investment Management segments. |
Adjusted(1)(2) | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands, except per share data) | |||||||||||||||||||||
Net Revenues | $ | 776,198 | $ | 476,751 | 63 | % | $ | 2,083,200 | $ | 1,654,070 | 26 | % | |||||||||
Operating Income | $ | 263,559 | $ | 134,192 | 96 | % | $ | 590,959 | $ | 426,497 | 39 | % | |||||||||
Net Income Attributable to Evercore Inc. | $ | 194,208 | $ | 77,998 | 149 | % | $ | 453,957 | $ | 276,371 | 64 | % | |||||||||
Diluted Earnings Per Share | $ | 3.93 | $ | 1.55 | 154 | % | $ | 9.01 | $ | 5.45 | 65 | % | |||||||||
Compensation Ratio | 55.0 | % | 56.0 | % | 56.7 | % | 57.5 | % | |||||||||||||
Operating Margin | 34.0 | % | 28.1 | % | 28.4 | % | 25.8 | % | |||||||||||||
Effective Tax Rate | 24.7 | % | 37.0 | % | 20.8 | % | 31.3 | % | |||||||||||||
(1) The Adjusted presentation for current and prior periods was revised to eliminate the netting of client related expenses with their related revenue. The revised presentation reflects the expense and related revenue gross. See pages 9 and 19 for further discussion. | |||||||||||||||||||||
(2) Excluded from the Company’s Adjusted results for the three and twelve months ended December 31, 2017 is the impact of the enactment of the Tax Cuts and Jobs Act, that was signed into law on December 22, 2017, on deferred tax assets and our tax receivable agreement. See pages 3, 4, 7 and A-3 for further discussion. |
U.S. GAAP | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Net Revenues: | |||||||||||||||||||||
Investment Banking: | |||||||||||||||||||||
Advisory Fees(1) | $ | 696,214 | $ | 384,571 | 81 | % | $ | 1,743,473 | $ | 1,324,412 | 32 | % | |||||||||
Underwriting Fees(2) | 8,907 | 15,657 | (43 | %) | 71,691 | 45,827 | 56 | % | |||||||||||||
Commissions and Related Fees | 60,568 | 56,732 | 7 | % | 200,015 | 205,630 | (3 | %) | |||||||||||||
Other Revenue, net(3) | (6,375 | ) | 61,830 | NM | (3,156 | ) | 58,399 | NM | |||||||||||||
Net Revenues | 759,314 | 518,790 | 46 | % | 2,012,023 | 1,634,268 | 23 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Employee Compensation and Benefits | 423,017 | 266,261 | 59 | % | 1,166,169 | 926,494 | 26 | % | |||||||||||||
Non-compensation Costs | 86,068 | 74,240 | 16 | % | 307,486 | 270,843 | 14 | % | |||||||||||||
Special Charges | 1,148 | — | NM | 5,012 | 14,400 | (65 | %) | ||||||||||||||
Total Expenses | 510,233 | 340,501 | 50 | % | 1,478,667 | 1,211,737 | 22 | % | |||||||||||||
Operating Income | $ | 249,081 | $ | 178,289 | 40 | % | $ | 533,356 | $ | 422,531 | 26 | % | |||||||||
Compensation Ratio | 55.7 | % | 51.3 | % | 58.0 | % | 56.7 | % | |||||||||||||
Non-compensation Ratio | 11.3 | % | 14.3 | % | 15.3 | % | 16.6 | % | |||||||||||||
Operating Margin | 32.8 | % | 34.4 | % | 26.5 | % | 25.9 | % | |||||||||||||
Advisory Client Transactions(4) | 309 | 246 | 26 | % | 663 | 574 | 16 | % | |||||||||||||
Advisory Fees in Excess of $1 million(4) | 135 | 74 | 82 | % | 345 | 255 | 35 | % | |||||||||||||
(1) The application of the new revenue accounting standard, ASC 606, resulted in advisory revenue of $3,374 being recognized in the fourth quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the first quarter of 2019 under the legacy accounting standard, and advisory revenue of $50,829 being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard. | |||||||||||||||||||||
(2) The application of the new revenue accounting standard, ASC 606, resulted in client related expenses for underwriting transactions being presented gross (previously presented net) in related revenues and expenses on a U.S. GAAP basis for the three and twelve months ended December 31, 2018. Underwriting Fees are gross of related non-compensation expenses of $767 and $4,680 for the three and twelve months ended December 31, 2018, respectively. | |||||||||||||||||||||
(3) Includes ($95) and ($701) of principal trading losses that were previously included in Investment Banking Revenue for the three and twelve months ended December 31, 2017, respectively, to conform to the current presentation. | |||||||||||||||||||||
(4) Includes Advisory and Underwriting Transactions. | |||||||||||||||||||||
U.S. GAAP | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Net Revenues: | |||||||||||||||||||||
Asset Management and Administration Fees(1) | $ | 11,643 | $ | 12,611 | (8 | %) | $ | 48,246 | $ | 59,648 | (19 | %) | |||||||||
Other Revenue, net(1) | 449 | 8,630 | (95 | %) | 4,436 | 10,433 | (57 | %) | |||||||||||||
Net Revenues | 12,092 | 21,241 | (43 | %) | 52,682 | 70,081 | (25 | %) | |||||||||||||
Expenses: | |||||||||||||||||||||
Employee Compensation and Benefits | 7,619 | 7,065 | 8 | % | 31,004 | 36,018 | (14 | %) | |||||||||||||
Non-compensation costs | 3,348 | 4,389 | (24 | %) | 12,957 | 16,746 | (23 | %) | |||||||||||||
Special Charges | — | 3,930 | NM | — | 11,037 | NM | |||||||||||||||
Total Expenses | 10,967 | 15,384 | (29 | %) | 43,961 | 63,801 | (31 | %) | |||||||||||||
Operating Income | $ | 1,125 | $ | 5,857 | (81 | %) | $ | 8,721 | $ | 6,280 | 39 | % | |||||||||
Compensation Ratio | 63.0 | % | 33.3 | % | 58.9 | % | 51.4 | % | |||||||||||||
Non-compensation Ratio | 27.7 | % | 20.7 | % | 24.6 | % | 23.9 | % | |||||||||||||
Operating Margin | 9.3 | % | 27.6 | % | 16.6 | % | 9.0 | % | |||||||||||||
Assets Under Management (in millions)(2) | $ | 9,135 | $ | 8,963 | 2 | % | $ | 9,135 | $ | 8,963 | 2 | % | |||||||||
(1) $610 and $2,037 of net realized and unrealized gains on private equity investments have been classified in Other Revenue, net, for the three and twelve months ended December 31, 2017, respectively, to conform to the current presentation. | |||||||||||||||||||||
(2) Assets Under Management reflect end of period amounts from our consolidated subsidiaries. |
U.S. GAAP | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Asset Management and Administration Fees: | |||||||||||||||||||||
Wealth Management | $ | 11,049 | $ | 10,552 | 5 | % | $ | 44,875 | $ | 40,288 | 11 | % | |||||||||
Institutional Asset Management | 594 | 990 | (40 | %) | 3,371 | 3,628 | (7 | %) | |||||||||||||
Disposed and Restructured Businesses(1) | — | 1,069 | NM | — | 15,732 | NM | |||||||||||||||
Total Asset Management and Administration Fees | $ | 11,643 | $ | 12,611 | (8 | %) | $ | 48,246 | $ | 59,648 | (19 | %) | |||||||||
(1) Reflects the Institutional Trust and Independent Fiduciary business of ETC, which was previously a consolidated business. |
Adjusted(1) | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Net Revenues: | |||||||||||||||||||||
Investment Banking: | |||||||||||||||||||||
Advisory Fees(2)(3) | $ | 696,435 | $ | 384,959 | 81 | % | $ | 1,743,991 | $ | 1,324,689 | 32 | % | |||||||||
Underwriting Fees(4) | 8,907 | 15,657 | (43 | %) | 71,691 | 45,827 | 56 | % | |||||||||||||
Commissions and Related Fees | 60,568 | 56,732 | 7 | % | 200,015 | 205,630 | (3 | %) | |||||||||||||
Other Revenue, net(5) | (4,035 | ) | 3,027 | NM | 6,045 | 7,090 | (15 | %) | |||||||||||||
Net Revenues | 761,875 | 460,375 | 65 | % | 2,021,742 | 1,583,236 | 28 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Employee Compensation and Benefits | 419,246 | 259,797 | 61 | % | 1,150,928 | 915,050 | 26 | % | |||||||||||||
Non-compensation Costs | 82,426 | 71,557 | 15 | % | 297,373 | 260,877 | 14 | % | |||||||||||||
Total Expenses | 501,672 | 331,354 | 51 | % | 1,448,301 | 1,175,927 | 23 | % | |||||||||||||
Operating Income | $ | 260,203 | $ | 129,021 | 102 | % | $ | 573,441 | $ | 407,309 | 41 | % | |||||||||
Compensation Ratio | 55.0 | % | 56.4 | % | 56.9 | % | 57.8 | % | |||||||||||||
Non-compensation Ratio | 10.8 | % | 15.5 | % | 14.7 | % | 16.5 | % | |||||||||||||
Operating Margin | 34.2 | % | 28.0 | % | 28.4 | % | 25.7 | % | |||||||||||||
Advisory Client Transactions(6) | 309 | 246 | 26 | % | 663 | 574 | 16 | % | |||||||||||||
Advisory Fees in Excess of $1 million(6) | 135 | 74 | 82 | % | 345 | 255 | 35 | % | |||||||||||||
(1) The Adjusted presentation for current and prior periods was revised to eliminate the netting of client related expenses with their related revenue. The revised presentation reflects the expense and related revenue gross. See pages 9 and 19 for further discussion. | |||||||||||||||||||||
(2) Advisory Fees on an Adjusted basis reflect the reclassification of earnings related to our equity investment in Luminis of $221 and $388 for the three months ended December 31, 2018 and 2017, respectively, and $518 and $499 for the twelve months ended December 31, 2018 and 2017, respectively, and the reclassification of losses related to our former equity method investment in G5 - Advisory of ($222) for the twelve months ended December 31, 2017. | |||||||||||||||||||||
(3) The application of the new revenue accounting standard, ASC 606, resulted in advisory revenue of $3,374 being recognized in the fourth quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the first quarter of 2019 under the legacy accounting standard, and advisory revenue of $50,829 being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard. | |||||||||||||||||||||
(4) The application of the new revenue accounting standard, ASC 606, resulted in client related expenses for underwriting transactions being presented gross (previously presented net) in related revenues and expenses for the three and twelve months ended December 31, 2018. Underwriting Fees are gross of related non-compensation expenses of $767 and $4,680 for the three and twelve months ended December 31, 2018, respectively. | |||||||||||||||||||||
(5) Includes ($95) and ($701) of principal trading losses that were previously included in Investment Banking Revenue for the three and twelve months ended December 31, 2017, respectively, to conform to the current presentation. | |||||||||||||||||||||
(6) Includes Advisory and Underwriting Transactions. |
Adjusted(1) | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Net Revenues: | |||||||||||||||||||||
Asset Management and Administration Fees(2) | $ | 13,874 | $ | 15,554 | (11 | %) | $ | 57,022 | $ | 68,209 | (16 | %) | |||||||||
Other Revenue, net(2) | 449 | 822 | (45 | %) | 4,436 | 2,625 | 69 | % | |||||||||||||
Net Revenues | 14,323 | 16,376 | (13 | %) | 61,458 | 70,834 | (13 | %) | |||||||||||||
Expenses: | |||||||||||||||||||||
Employee Compensation and Benefits | 7,619 | 7,065 | 8 | % | 31,004 | 36,018 | (14 | %) | |||||||||||||
Non-compensation Costs | 3,348 | 4,140 | (19 | %) | 12,936 | 15,628 | (17 | %) | |||||||||||||
Total Expenses | 10,967 | 11,205 | (2 | %) | 43,940 | 51,646 | (15 | %) | |||||||||||||
Operating Income | $ | 3,356 | $ | 5,171 | (35 | %) | $ | 17,518 | $ | 19,188 | (9 | %) | |||||||||
Compensation Ratio | 53.2 | % | 43.1 | % | 50.4 | % | 50.8 | % | |||||||||||||
Non-compensation Ratio | 23.4 | % | 25.3 | % | 21.0 | % | 22.1 | % | |||||||||||||
Operating Margin | 23.4 | % | 31.6 | % | 28.5 | % | 27.1 | % | |||||||||||||
Assets Under Management (in millions)(3) | $ | 9,135 | $ | 8,963 | 2 | % | $ | 9,135 | $ | 8,963 | 2 | % | |||||||||
(1) The Adjusted presentation for current and prior periods was revised to eliminate the netting of client related expenses with their related revenue. The revised presentation reflects the expense and related revenue gross. See pages 9 and 19 for further discussion. | |||||||||||||||||||||
(2) $610 and $2,037 of net realized and unrealized gains on private equity investments have been classified in Other Revenue, net, for the three and twelve months ended December 31, 2017, respectively, to conform to the current presentation. | |||||||||||||||||||||
(3) Assets Under Management reflect end of period amounts from our consolidated subsidiaries. |
Adjusted(1) | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Asset Management and Administration Fees: | |||||||||||||||||||||
Wealth Management | $ | 11,049 | $ | 10,552 | 5 | % | $ | 44,875 | $ | 40,288 | 11 | % | |||||||||
Institutional Asset Management | 594 | 990 | (40 | %) | 3,371 | 3,628 | (7 | %) | |||||||||||||
Disposed and Restructured Businesses(2) | — | 1,069 | NM | — | 15,732 | NM | |||||||||||||||
Equity in Earnings of Affiliates(3) | 2,231 | 2,943 | (24 | %) | 8,776 | 8,561 | 3 | % | |||||||||||||
Total Asset Management and Administration Fees | $ | 13,874 | $ | 15,554 | (11 | %) | $ | 57,022 | $ | 68,209 | (16 | %) | |||||||||
(1) The Adjusted presentation for current and prior periods was revised to eliminate the netting of client related expenses with their related revenue. The revised presentation reflects the expense and related revenue gross. See pages 9 and 19 for further discussion. | |||||||||||||||||||||
(2) Reflects the Institutional Trust and Independent Fiduciary business of ETC. | |||||||||||||||||||||
(3) Equity in ABS, Atalanta Sosnoff and G5 - Wealth Management (through December 31, 2017, the date the Company exchanged all of its outstanding equity interests for debentures of G5) on a U.S. GAAP basis are reclassified from Asset Management and Administration Fees to Income from Equity Method Investments. |
Schedule | Page Number |
Unaudited Condensed Consolidated Statements of Operations for the Three and Twelve Months Ended December 31, 2018 and 2017 | 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 Twelve Months ended December 31, 2018 (Unaudited) | A-7 |
U.S. GAAP Segment Reconciliation to Adjusted Results for the Three and Twelve Months ended December 31, 2017 (Unaudited) | A-8 |
U.S. GAAP Segment Reconciliation to Consolidated Results (Unaudited) | A-9 |
Notes to Unaudited Condensed Consolidated Adjusted Financial Data | A-10 |
EVERCORE INC. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2018 AND 2017 | |||||||||||||||
(dollars in thousands, except per share data) | |||||||||||||||
(UNAUDITED) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Investment Banking:(1) | |||||||||||||||
Advisory Fees(2) | $ | 696,214 | $ | 384,571 | $ | 1,743,473 | $ | 1,324,412 | |||||||
Underwriting Fees(3) | 8,907 | 15,657 | 71,691 | 45,827 | |||||||||||
Commissions and Related Fees | 60,568 | 56,732 | 200,015 | 205,630 | |||||||||||
Asset Management and Administration Fees(1) | 11,643 | 12,611 | 48,246 | 59,648 | |||||||||||
Other Revenue, Including Interest and Investments(4) | (1,775 | ) | 75,465 | 19,051 | 88,828 | ||||||||||
Total Revenues | 775,557 | 545,036 | 2,082,476 | 1,724,345 | |||||||||||
Interest Expense(5) | 4,151 | 5,005 | 17,771 | 19,996 | |||||||||||
Net Revenues | 771,406 | 540,031 | 2,064,705 | 1,704,349 | |||||||||||
Expenses | |||||||||||||||
Employee Compensation and Benefits | 430,636 | 273,326 | 1,197,173 | 962,512 | |||||||||||
Occupancy and Equipment Rental | 15,722 | 13,257 | 58,971 | 53,448 | |||||||||||
Professional Fees(6) | 25,812 | 21,368 | 82,393 | 63,857 | |||||||||||
Travel and Related Expenses | 17,896 | 17,203 | 68,754 | 64,179 | |||||||||||
Communications and Information Services | 9,685 | 10,528 | 41,319 | 41,393 | |||||||||||
Depreciation and Amortization | 6,845 | 6,552 | 27,054 | 24,819 | |||||||||||
Execution, Clearing and Custody Fees(6) | 3,652 | 3,806 | 11,470 | 14,778 | |||||||||||
Special Charges | 1,148 | 3,930 | 5,012 | 25,437 | |||||||||||
Acquisition and Transition Costs | — | 697 | 21 | 1,673 | |||||||||||
Other Operating Expenses(6) | 9,804 | 5,218 | 30,461 | 23,442 | |||||||||||
Total Expenses | 521,200 | 355,885 | 1,522,628 | 1,275,538 | |||||||||||
Income Before Income from Equity Method Investments and Income Taxes | 250,206 | 184,146 | 542,077 | 428,811 | |||||||||||
Income from Equity Method Investments | 2,452 | 3,331 | 9,294 | 8,838 | |||||||||||
Income Before Income Taxes | 252,658 | 187,477 | 551,371 | 437,649 | |||||||||||
Provision for Income Taxes | 60,502 | 188,876 | 108,520 | 258,442 | |||||||||||
Net Income (Loss) | 192,156 | (1,399 | ) | 442,851 | 179,207 | ||||||||||
Net Income Attributable to Noncontrolling Interest | 28,851 | 18,013 | 65,611 | 53,753 | |||||||||||
Net Income (Loss) Attributable to Evercore Inc. | $ | 163,305 | $ | (19,412 | ) | $ | 377,240 | $ | 125,454 | ||||||
Net Income (Loss) Attributable to Evercore Inc. Common Shareholders | $ | 163,305 | $ | (19,412 | ) | $ | 377,240 | $ | 125,454 | ||||||
Weighted Average Shares of Class A Common Stock Outstanding: | |||||||||||||||
Basic | 40,111 | 38,985 | 40,595 | 39,641 | |||||||||||
Diluted | 44,505 | 38,985 | 45,279 | 44,826 | |||||||||||
Net Income (Loss) Per Share Attributable to Evercore Inc. Common Shareholders: | |||||||||||||||
Basic | $ | 4.07 | $ | (0.50 | ) | $ | 9.29 | $ | 3.16 | ||||||
Diluted | $ | 3.67 | $ | (0.50 | ) | $ | 8.33 | $ | 2.80 | ||||||
(1) Certain balances in the prior period were reclassified to conform to their current presentation. "Investment Banking Revenue" has been disaggregated into "Advisory Fees," "Underwriting Fees" and "Commissions and Related Fees" and "Investment Management Revenue" has been renamed to "Asset Management and Administration Fees." | |||||||||||||||
(2) The application of the new revenue accounting standard, ASC 606, resulted in advisory revenue of $3,374 being recognized in the fourth quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the first quarter of 2019 under the legacy accounting standard, and advisory revenue of $50,829 being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard. | |||||||||||||||
(3) The application of the new revenue accounting standard, ASC 606, resulted in client related expenses for underwriting transactions being presented gross (previously presented net) in related revenues and expenses on a U.S. GAAP basis for the three and twelve months ended December 31, 2018. Underwriting Fees are gross of related non-compensation expenses of $767 and $4,680 for the three and twelve months ended December 31, 2018, respectively. | |||||||||||||||
(4) "Other Revenue, Including Interest" has been renamed to "Other Revenue, Including Interest and Investments" and principal trading losses of ($95) and ($701) for the three and twelve months ended December 31, 2017, respectively, and net realized and unrealized gains on private equity investments of $610 and $2,037 for the three and twelve months ended December 31, 2017, respectively, have been classified in Other Revenue, Including Interest and Investments, to conform to the current presentation. | |||||||||||||||
(5) Includes interest expense on long-term debt and interest expense on short-term repurchase agreements. | |||||||||||||||
(6) Other Operating Expenses of $3,543 and $13,572 for the three and twelve months ended December 31, 2017, respectively, and Professional Fees of $263 and $1,206 for the three and twelve months ended December 31, 2017, respectively, were reclassified to a new expense line item "Execution, Clearing and Custody Fees" to conform to the current presentation. | |||||||||||||||
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 was based on the determination if it was probable that Evercore ISI would 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 and Divestitures. The following charges resulting from business combinations and divestitures 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 acquisition of ISI and certain other acquisitions. |
b. | Acquisition and Transition Costs. Primarily professional fees incurred and costs related to transitioning acquisitions or divestitures. |
3. | Special Charges. Expenses during 2018 that are excluded from the Adjusted presentation relate to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Expenses during 2017 that are excluded from the Adjusted presentation relate to a charge for the impairment of goodwill in the |
4. | 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 is subject to the statutory tax rates of a C-Corporation under a conventional corporate tax structure 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. |
5. | 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. |
6. | 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. |
EVERCORE INC. | |||||||||||||||
U.S. GAAP RECONCILIATION TO ADJUSTED RESULTS | |||||||||||||||
(dollars in thousands, except per share data) | |||||||||||||||
(UNAUDITED) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||
Net Revenues - U.S. GAAP | $ | 771,406 | $ | 540,031 | $ | 2,064,705 | $ | 1,704,349 | |||||||
Income from Equity Method Investments (1) | 2,452 | 3,331 | 9,294 | 8,838 | |||||||||||
Interest Expense on Debt (2) | 2,340 | 2,466 | 9,201 | 9,960 | |||||||||||
Gain on Sale of Institutional Trust and Independent Fiduciary business of ETC (3) | — | (7,808 | ) | — | (7,808 | ) | |||||||||
Foreign Exchange Losses from G5 Transaction (4) | — | 16,266 | — | 16,266 | |||||||||||
Adjustment to Tax Receivable Agreement Liability (8) | — | (77,535 | ) | — | (77,535 | ) | |||||||||
Net Revenues - Adjusted | $ | 776,198 | $ | 476,751 | $ | 2,083,200 | $ | 1,654,070 | |||||||
Compensation Expense - U.S. GAAP | $ | 430,636 | $ | 273,326 | $ | 1,197,173 | $ | 962,512 | |||||||
Amortization of LP Units / Interests and Certain Other Awards (5) | (3,771 | ) | (6,464 | ) | (15,241 | ) | (11,444 | ) | |||||||
Compensation Expense - Adjusted | $ | 426,865 | $ | 266,862 | $ | 1,181,932 | $ | 951,068 | |||||||
Operating Income - U.S. GAAP | $ | 250,206 | $ | 184,146 | $ | 542,077 | $ | 428,811 | |||||||
Income from Equity Method Investments (1) | 2,452 | 3,331 | 9,294 | 8,838 | |||||||||||
Pre-Tax Income - U.S. GAAP | 252,658 | 187,477 | 551,371 | 437,649 | |||||||||||
Gain on Sale of Institutional Trust and Independent Fiduciary business of ETC (3) | — | (7,808 | ) | — | (7,808 | ) | |||||||||
Foreign Exchange Losses from G5 Transaction (4) | — | 16,266 | — | 16,266 | |||||||||||
Amortization of LP Units / Interests and Certain Other Awards (5) | 3,771 | 6,464 | 15,241 | 11,444 | |||||||||||
Special Charges (6) | 1,148 | 3,930 | 5,012 | 25,437 | |||||||||||
Intangible Asset Amortization / Other Purchase Accounting-related Amortization (7a) | 2,157 | 2,235 | 8,628 | 9,411 | |||||||||||
Acquisition and Transition Costs (7b) | — | 697 | 21 | 1,673 | |||||||||||
Fair Value of Contingent Consideration (7c) | 1,485 | — | 1,485 | — | |||||||||||
Adjustment to Tax Receivable Agreement Liability (8) | — | (77,535 | ) | — | (77,535 | ) | |||||||||
Pre-Tax Income - Adjusted | 261,219 | 131,726 | 581,758 | 416,537 | |||||||||||
Interest Expense on Debt (2) | 2,340 | 2,466 | 9,201 | 9,960 | |||||||||||
Operating Income - Adjusted | $ | 263,559 | $ | 134,192 | $ | 590,959 | $ | 426,497 | |||||||
Provision for Income Taxes - U.S. GAAP | $ | 60,502 | $ | 188,876 | $ | 108,520 | $ | 258,442 | |||||||
Income Taxes (8) | 3,918 | (140,203 | ) | 12,368 | (128,064 | ) | |||||||||
Provision for Income Taxes - Adjusted | $ | 64,420 | $ | 48,673 | $ | 120,888 | $ | 130,378 | |||||||
Net Income (Loss) Attributable to Evercore Inc. - U.S. GAAP | $ | 163,305 | $ | (19,412 | ) | $ | 377,240 | $ | 125,454 | ||||||
Gain on Sale of Institutional Trust and Independent Fiduciary business of ETC (3) | — | (7,808 | ) | — | (7,808 | ) | |||||||||
Foreign Exchange Losses from G5 Transaction (4) | — | 16,266 | — | 16,266 | |||||||||||
Amortization of LP Units / Interests and Certain Other Awards (5) | 3,771 | 6,464 | 15,241 | 11,444 | |||||||||||
Special Charges (6) | 1,148 | 3,930 | 5,012 | 25,437 | |||||||||||
Intangible Asset Amortization / Other Purchase Accounting-related Amortization (7a) | 2,157 | 2,235 | 8,628 | 9,411 | |||||||||||
Acquisition and Transition Costs (7b) | — | 697 | 21 | 1,673 | |||||||||||
Fair Value of Contingent Consideration (7c) | 1,485 | — | 1,485 | — | |||||||||||
Adjustment to Tax Receivable Agreement Liability and Income Taxes, Net (8) | (3,918 | ) | 62,668 | (12,368 | ) | 50,529 | |||||||||
Noncontrolling Interest (9) | 26,260 | 12,958 | 58,698 | 43,965 | |||||||||||
Net Income Attributable to Evercore Inc. - Adjusted | $ | 194,208 | $ | 77,998 | $ | 453,957 | $ | 276,371 | |||||||
Diluted Shares Outstanding - U.S. GAAP | 44,505 | 38,985 | 45,279 | 44,826 | |||||||||||
LP Units (10) | 4,928 | 8,006 | 5,075 | 5,885 | |||||||||||
Unvested Restricted Stock Units - Event Based (10) | 12 | 12 | 12 | 12 | |||||||||||
Unvested Restricted Stock Units - Service Based (10) | — | 3,347 | — | — | |||||||||||
Diluted Shares Outstanding - Adjusted | 49,445 | 50,350 | 50,366 | 50,723 | |||||||||||
EVERCORE INC. | |||||||||||||||
U.S. GAAP RECONCILIATION TO ADJUSTED RESULTS (cont'd) | |||||||||||||||
(UNAUDITED) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||
Key Metrics: (a) | |||||||||||||||
Diluted Earnings (Loss) Per Share - U.S. GAAP | $ | 3.67 | $ | (0.50 | ) | $ | 8.33 | $ | 2.80 | ||||||
Diluted Earnings Per Share - Adjusted | $ | 3.93 | $ | 1.55 | $ | 9.01 | $ | 5.45 | |||||||
Compensation Ratio - U.S. GAAP | 55.8 | % | 50.6 | % | 58.0 | % | 56.5 | % | |||||||
Compensation Ratio - Adjusted | 55.0 | % | 56.0 | % | 56.7 | % | 57.5 | % | |||||||
Operating Margin - U.S. GAAP | 32.4 | % | 34.1 | % | 26.3 | % | 25.2 | % | |||||||
Operating Margin - Adjusted | 34.0 | % | 28.1 | % | 28.4 | % | 25.8 | % | |||||||
Effective Tax Rate - U.S. GAAP | 23.9 | % | 100.7 | % | 19.7 | % | 59.1 | % | |||||||
Effective Tax Rate - Adjusted | 24.7 | % | 37.0 | % | 20.8 | % | 31.3 | % | |||||||
(a) Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components on page A-4. |
EVERCORE INC. | |||||||||||||||||||||
RECONCILIATION TO RESTRUCTURING OF INVESTMENT MANAGEMENT ADJUSTED RESULTS | |||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
December 31, 2018 | December 31, 2017 | % Change | December 31, 2018 | December 31, 2017 | % Change | ||||||||||||||||
Investment Management Net Revenues - U.S. GAAP | $ | 12,092 | $ | 21,241 | (43 | %) | $ | 52,682 | $ | 70,081 | (25 | %) | |||||||||
Adjustments - U.S. GAAP to Adjusted (a) | 2,231 | (4,865 | ) | NM | 8,776 | 753 | NM | ||||||||||||||
Investment Management Net Revenues - Adjusted | 14,323 | 16,376 | (13 | %) | 61,458 | 70,834 | (13 | %) | |||||||||||||
Sale of Institutional Trust and Independent Fiduciary Business of Evercore Trust Company (11) | — | (1,088 | ) | NM | — | (15,639 | ) | NM | |||||||||||||
Adjusted Investment Management Net Revenues - Including Restructuring of Investment Management Adjustments | $ | 14,323 | $ | 15,288 | (6 | %) | $ | 61,458 | $ | 55,195 | 11 | % | |||||||||
Investment Management Expenses - U.S. GAAP | $ | 10,967 | $ | 15,384 | (29 | %) | $ | 43,961 | $ | 63,801 | (31 | %) | |||||||||
Adjustments - U.S. GAAP to Adjusted (a) | — | (4,179 | ) | NM | (21 | ) | (12,155 | ) | 100 | % | |||||||||||
Investment Management Expenses - Adjusted | 10,967 | 11,205 | (2 | %) | 43,940 | 51,646 | (15 | %) | |||||||||||||
Sale of Institutional Trust and Independent Fiduciary Business of Evercore Trust Company (11) | — | (1,342 | ) | NM | — | (11,605 | ) | NM | |||||||||||||
Adjusted Investment Management Expenses - Including Restructuring of Investment Management Adjustments | $ | 10,967 | $ | 9,863 | 11 | % | $ | 43,940 | $ | 40,041 | 10 | % | |||||||||
Investment Management Operating Income - U.S. GAAP | $ | 1,125 | $ | 5,857 | (81 | %) | $ | 8,721 | $ | 6,280 | 39 | % | |||||||||
Adjustments - U.S. GAAP to Adjusted (a) | 2,231 | (686 | ) | NM | 8,797 | 12,908 | (32 | %) | |||||||||||||
Investment Management Operating Income - Adjusted | 3,356 | 5,171 | (35 | %) | 17,518 | 19,188 | (9 | %) | |||||||||||||
Sale of Institutional Trust and Independent Fiduciary Business of Evercore Trust Company (11) | — | 254 | NM | — | (4,034 | ) | NM | ||||||||||||||
Adjusted Investment Management Operating Income - Including Restructuring of Investment Management Adjustments | $ | 3,356 | $ | 5,425 | (38 | %) | $ | 17,518 | $ | 15,154 | 16 | % | |||||||||
Key Metrics: (b) | |||||||||||||||||||||
Operating Margin - U.S. GAAP | 9.3 | % | 27.6 | % | 16.6 | % | 9.0 | % | |||||||||||||
Operating Margin - Adjusted | 23.4 | % | 31.6 | % | 28.5 | % | 27.1 | % | |||||||||||||
Adjusted Operating Margin - Including Restructuring of Investment Management Adjustments | 23.4 | % | 35.5 | % | 28.5 | % | 27.5 | % | |||||||||||||
(a) See pages A-7 and A-8 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 SEGMENT RECONCILIATION TO ADJUSTED RESULTS | |||||||||||||||||||||||
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2018 | |||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||
Investment Banking Segment | |||||||||||||||||||||||
Three Months Ended December 31, 2018 | Twelve Months Ended December 31, 2018 | ||||||||||||||||||||||
U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | ||||||||||||||||||
Net Revenues: | |||||||||||||||||||||||
Investment Banking: | |||||||||||||||||||||||
Advisory Fees | $ | 696,214 | $ | 221 | (1) | $ | 696,435 | $ | 1,743,473 | $ | 518 | (1) | $ | 1,743,991 | |||||||||
Underwriting Fees | 8,907 | — | 8,907 | 71,691 | — | 71,691 | |||||||||||||||||
Commissions and Related Fees | 60,568 | — | 60,568 | 200,015 | — | 200,015 | |||||||||||||||||
Other Revenue, net | (6,375 | ) | 2,340 | (2) | (4,035 | ) | (3,156 | ) | 9,201 | (2) | 6,045 | ||||||||||||
Net Revenues | 759,314 | 2,561 | 761,875 | 2,012,023 | 9,719 | 2,021,742 | |||||||||||||||||
Expenses: | |||||||||||||||||||||||
Employee Compensation and Benefits | 423,017 | (3,771 | ) | (5) | 419,246 | 1,166,169 | (15,241 | ) | (5) | 1,150,928 | |||||||||||||
Non-compensation Costs | 86,068 | (3,642 | ) | (7) | 82,426 | 307,486 | (10,113 | ) | (7) | 297,373 | |||||||||||||
Special Charges | 1,148 | (1,148 | ) | (6) | — | 5,012 | (5,012 | ) | (6) | — | |||||||||||||
Total Expenses | 510,233 | (8,561 | ) | 501,672 | 1,478,667 | (30,366 | ) | 1,448,301 | |||||||||||||||
Operating Income (a) | $ | 249,081 | $ | 11,122 | $ | 260,203 | $ | 533,356 | $ | 40,085 | $ | 573,441 | |||||||||||
Compensation Ratio (b) | 55.7 | % | 55.0 | % | 58.0 | % | 56.9 | % | |||||||||||||||
Operating Margin (b) | 32.8 | % | 34.2 | % | 26.5 | % | 28.4 | % | |||||||||||||||
Investment Management Segment | |||||||||||||||||||||||
Three Months Ended December 31, 2018 | Twelve Months Ended December 31, 2018 | ||||||||||||||||||||||
U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | ||||||||||||||||||
Net Revenues: | |||||||||||||||||||||||
Asset Management and Administration Fees | $ | 11,643 | $ | 2,231 | (1) | $ | 13,874 | $ | 48,246 | $ | 8,776 | (1) | $ | 57,022 | |||||||||
Other Revenue, net | 449 | — | 449 | 4,436 | — | 4,436 | |||||||||||||||||
Net Revenues | 12,092 | 2,231 | 14,323 | 52,682 | 8,776 | 61,458 | |||||||||||||||||
Expenses: | |||||||||||||||||||||||
Employee Compensation and Benefits | 7,619 | — | 7,619 | 31,004 | — | 31,004 | |||||||||||||||||
Non-compensation Costs | 3,348 | — | 3,348 | 12,957 | (21 | ) | (7) | 12,936 | |||||||||||||||
Total Expenses | 10,967 | — | 10,967 | 43,961 | (21 | ) | 43,940 | ||||||||||||||||
Operating Income (a) | $ | 1,125 | $ | 2,231 | $ | 3,356 | $ | 8,721 | $ | 8,797 | $ | 17,518 | |||||||||||
Compensation Ratio (b) | 63.0 | % | 53.2 | % | 58.9 | % | 50.4 | % | |||||||||||||||
Operating Margin (b) | 9.3 | % | 23.4 | % | 16.6 | % | 28.5 | % | |||||||||||||||
(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 TWELVE MONTHS ENDED DECEMBER 31, 2017 | |||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||
Investment Banking Segment | |||||||||||||||||||||||
Three Months Ended December 31, 2017 | Twelve Months Ended December 31, 2017 | ||||||||||||||||||||||
U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | ||||||||||||||||||
Net Revenues: | |||||||||||||||||||||||
Investment Banking: | |||||||||||||||||||||||
Advisory Fees | $ | 384,571 | $ | 388 | (1) | $ | 384,959 | $ | 1,324,412 | $ | 277 | (1) | $ | 1,324,689 | |||||||||
Underwriting Fees | 15,657 | — | 15,657 | 45,827 | — | 45,827 | |||||||||||||||||
Commissions and Related Fees | 56,732 | — | 56,732 | 205,630 | — | 205,630 | |||||||||||||||||
Other Revenue, net | 61,830 | (58,803 | ) | (2)(4)(8) | 3,027 | 58,399 | (51,309 | ) | (2)(4)(8) | 7,090 | |||||||||||||
Net Revenues | 518,790 | (58,415 | ) | 460,375 | 1,634,268 | (51,032 | ) | 1,583,236 | |||||||||||||||
Expenses: | |||||||||||||||||||||||
Employee Compensation and Benefits | 266,261 | (6,464 | ) | (5) | 259,797 | 926,494 | (11,444 | ) | (5) | 915,050 | |||||||||||||
Non-compensation Costs | 74,240 | (2,683 | ) | (7) | 71,557 | 270,843 | (9,966 | ) | (7) | 260,877 | |||||||||||||
Special Charges | — | — | — | 14,400 | (14,400 | ) | (6) | — | |||||||||||||||
Total Expenses | 340,501 | (9,147 | ) | 331,354 | 1,211,737 | (35,810 | ) | 1,175,927 | |||||||||||||||
Operating Income (a) | $ | 178,289 | $ | (49,268 | ) | $ | 129,021 | $ | 422,531 | $ | (15,222 | ) | $ | 407,309 | |||||||||
Compensation Ratio (b) | 51.3 | % | 56.4 | % | 56.7 | % | 57.8 | % | |||||||||||||||
Operating Margin (b) | 34.4 | % | 28.0 | % | 25.9 | % | 25.7 | % | |||||||||||||||
Investment Management Segment | |||||||||||||||||||||||
Three Months Ended December 31, 2017 | Twelve Months Ended December 31, 2017 | ||||||||||||||||||||||
U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | U.S. GAAP Basis | Adjustments | Non-GAAP Adjusted Basis | ||||||||||||||||||
Net Revenues: | |||||||||||||||||||||||
Asset Management and Administration Fees | $ | 12,611 | $ | 2,943 | (1) | $ | 15,554 | $ | 59,648 | $ | 8,561 | (1) | $ | 68,209 | |||||||||
Other Revenue, net | 8,630 | (7,808 | ) | (3) | 822 | 10,433 | (7,808 | ) | (3) | 2,625 | |||||||||||||
Net Revenues | 21,241 | (4,865 | ) | 16,376 | 70,081 | 753 | 70,834 | ||||||||||||||||
Expenses: | |||||||||||||||||||||||
Employee Compensation and Benefits | 7,065 | — | 7,065 | 36,018 | — | 36,018 | |||||||||||||||||
Non-compensation Costs | 4,389 | (249 | ) | (7) | 4,140 | 16,746 | (1,118 | ) | (7) | 15,628 | |||||||||||||
Special Charges | 3,930 | (3,930 | ) | (6) | — | 11,037 | (11,037 | ) | (6) | — | |||||||||||||
Total Expenses | 15,384 | (4,179 | ) | 11,205 | 63,801 | (12,155 | ) | 51,646 | |||||||||||||||
Operating Income (a) | $ | 5,857 | $ | (686 | ) | $ | 5,171 | $ | 6,280 | $ | 12,908 | $ | 19,188 | ||||||||||
Compensation Ratio (b) | 33.3 | % | 43.1 | % | 51.4 | % | 50.8 | % | |||||||||||||||
Operating Margin (b) | 27.6 | % | 31.6 | % | 9.0 | % | 27.1 | % | |||||||||||||||
(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 | Twelve Months Ended | ||||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||
Investment Banking | |||||||||||||||
Net Revenues: | |||||||||||||||
Investment Banking: | |||||||||||||||
Advisory Fees | $ | 696,214 | $ | 384,571 | $ | 1,743,473 | $ | 1,324,412 | |||||||
Underwriting Fees | 8,907 | 15,657 | 71,691 | 45,827 | |||||||||||
Commissions and Related Fees | 60,568 | 56,732 | 200,015 | 205,630 | |||||||||||
Other Revenue, net | (6,375 | ) | 61,830 | (3,156 | ) | 58,399 | |||||||||
Net Revenues | 759,314 | 518,790 | 2,012,023 | 1,634,268 | |||||||||||
Expenses: | |||||||||||||||
Employee Compensation and Benefits | 423,017 | 266,261 | 1,166,169 | 926,494 | |||||||||||
Non-compensation Costs | 86,068 | 74,240 | 307,486 | 270,843 | |||||||||||
Special Charges | 1,148 | — | 5,012 | 14,400 | |||||||||||
Total Expenses | 510,233 | 340,501 | 1,478,667 | 1,211,737 | |||||||||||
Operating Income (a) | $ | 249,081 | $ | 178,289 | $ | 533,356 | $ | 422,531 | |||||||
Investment Management | |||||||||||||||
Net Revenues: | |||||||||||||||
Asset Management and Administration Fees | $ | 11,643 | $ | 12,611 | $ | 48,246 | $ | 59,648 | |||||||
Other Revenue, net | 449 | 8,630 | 4,436 | 10,433 | |||||||||||
Net Revenues | 12,092 | 21,241 | 52,682 | 70,081 | |||||||||||
Expenses: | |||||||||||||||
Employee Compensation and Benefits | 7,619 | 7,065 | 31,004 | 36,018 | |||||||||||
Non-compensation Costs | 3,348 | 4,389 | 12,957 | 16,746 | |||||||||||
Special Charges | — | 3,930 | — | 11,037 | |||||||||||
Total Expenses | 10,967 | 15,384 | 43,961 | 63,801 | |||||||||||
Operating Income (a) | $ | 1,125 | $ | 5,857 | $ | 8,721 | $ | 6,280 | |||||||
Total | |||||||||||||||
Net Revenues: | |||||||||||||||
Investment Banking: | |||||||||||||||
Advisory Fees | $ | 696,214 | $ | 384,571 | $ | 1,743,473 | $ | 1,324,412 | |||||||
Underwriting Fees | 8,907 | 15,657 | 71,691 | 45,827 | |||||||||||
Commissions and Related Fees | 60,568 | 56,732 | 200,015 | 205,630 | |||||||||||
Asset Management and Administration Fees | 11,643 | 12,611 | 48,246 | 59,648 | |||||||||||
Other Revenue, net | (5,926 | ) | 70,460 | 1,280 | 68,832 | ||||||||||
Net Revenues | 771,406 | 540,031 | 2,064,705 | 1,704,349 | |||||||||||
Expenses: | |||||||||||||||
Employee Compensation and Benefits | 430,636 | 273,326 | 1,197,173 | 962,512 | |||||||||||
Non-compensation Costs | 89,416 | 78,629 | 320,443 | 287,589 | |||||||||||
Special Charges | 1,148 | 3,930 | 5,012 | 25,437 | |||||||||||
Total Expenses | 521,200 | 355,885 | 1,522,628 | 1,275,538 | |||||||||||
Operating Income (a) | $ | 250,206 | $ | 184,146 | $ | 542,077 | $ | 428,811 | |||||||
(a) Operating Income excludes Income (Loss) from Equity Method Investments. |
(1) | Income (Loss) from Equity Method Investments has been reclassified to Revenue in the Adjusted presentation. |
(2) | Interest Expense on Debt is excluded from Net Revenues and presented below Operating Income in the Adjusted results and is included in Interest Expense on a U.S. GAAP basis. |
(3) | The gain resulting from the sale of the Institutional Trust and Independent Fiduciary business of ETC in the fourth quarter of 2017 is excluded from the Adjusted presentation. |
(4) | Release of cumulative foreign exchange losses resulting from the restructuring of our equity method investment in G5 in the fourth quarter of 2017 are 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) | Expenses during 2018 that are excluded from the Adjusted presentation relate to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Expenses during 2017 that are excluded from the Adjusted presentation 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 in the second quarter and the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter. |
(7) | Non-compensation Costs on an Adjusted basis reflect the following adjustments: |
Three Months Ended December 31, 2018 | |||||||||||
U.S. GAAP | Adjustments | Adjusted | |||||||||
(dollars in thousands) | |||||||||||
Occupancy and Equipment Rental | $ | 15,722 | $ | — | $ | 15,722 | |||||
Professional Fees | 25,812 | — | 25,812 | ||||||||
Travel and Related Expenses | 17,896 | — | 17,896 | ||||||||
Communications and Information Services | 9,685 | — | 9,685 | ||||||||
Depreciation and Amortization | 6,845 | (2,157 | ) | (7a) | 4,688 | ||||||
Execution, Clearing and Custody Fees | 3,652 | — | 3,652 | ||||||||
Other Operating Expenses | 9,804 | (1,485 | ) | (7c) | 8,319 | ||||||
Total Non-compensation Costs | $ | 89,416 | $ | (3,642 | ) | $ | 85,774 | ||||
Three Months Ended December 31, 2017 | |||||||||||
U.S. GAAP | Adjustments | Adjusted | |||||||||
(dollars in thousands) | |||||||||||
Occupancy and Equipment Rental | $ | 13,257 | $ | — | $ | 13,257 | |||||
Professional Fees | 21,368 | — | 21,368 | ||||||||
Travel and Related Expenses | 17,203 | — | 17,203 | ||||||||
Communications and Information Services | 10,528 | — | 10,528 | ||||||||
Depreciation and Amortization | 6,552 | (2,235 | ) | (7a) | 4,317 | ||||||
Execution, Clearing and Custody Fees | 3,806 | — | 3,806 | ||||||||
Acquisition and Transition Costs | 697 | (697 | ) | (7b) | — | ||||||
Other Operating Expenses | 5,218 | — | 5,218 | ||||||||
Total Non-compensation Costs | $ | 78,629 | $ | (2,932 | ) | $ | 75,697 | ||||
Twelve Months Ended December 31, 2018 | |||||||||||
U.S. GAAP | Adjustments | Adjusted | |||||||||
(dollars in thousands) | |||||||||||
Occupancy and Equipment Rental | $ | 58,971 | $ | — | $ | 58,971 | |||||
Professional Fees | 82,393 | — | 82,393 | ||||||||
Travel and Related Expenses | 68,754 | — | 68,754 | ||||||||
Communications and Information Services | 41,319 | — | 41,319 | ||||||||
Depreciation and Amortization | 27,054 | (8,628 | ) | (7a) | 18,426 | ||||||
Execution, Clearing and Custody Fees | 11,470 | — | 11,470 | ||||||||
Acquisition and Transition Costs | 21 | (21 | ) | (7b) | — | ||||||
Other Operating Expenses | 30,461 | (1,485 | ) | (7c) | 28,976 | ||||||
Total Non-compensation Costs | $ | 320,443 | $ | (10,134 | ) | $ | 310,309 | ||||
Twelve Months Ended December 31, 2017 | |||||||||||
U.S. GAAP | Adjustments | Adjusted | |||||||||
(dollars in thousands) | |||||||||||
Occupancy and Equipment Rental | $ | 53,448 | $ | — | $ | 53,448 | |||||
Professional Fees | 63,857 | — | 63,857 | ||||||||
Travel and Related Expenses | 64,179 | — | 64,179 | ||||||||
Communications and Information Services | 41,393 | — | 41,393 | ||||||||
Depreciation and Amortization | 24,819 | (9,411 | ) | (7a) | 15,408 | ||||||
Execution, Clearing and Custody Fees | 14,778 | — | 14,778 | ||||||||
Acquisition and Transition Costs | 1,673 | (1,673 | ) | (7b) | — | ||||||
Other Operating Expenses | 23,442 | — | 23,442 | ||||||||
Total Non-compensation Costs | $ | 287,589 | $ | (11,084 | ) | $ | 276,505 |
(7a) | The exclusion from the Adjusted presentation of expenses associated with amortization of intangible assets and other purchase accounting-related amortization from the acquisition of ISI and certain other acquisitions. |
(7b) | Primarily the exclusion from the Adjusted presentation of professional fees incurred and costs related to transitioning acquisitions or divestitures. |
(7c) | The exclusion from the Adjusted presentation of the expense, or reversal of expense, associated with the changes in fair value of contingent consideration issued to the sellers of certain of the Company's acquisitions. |
(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 the Adjusted earnings to assume that the Company is subject to the statutory tax rates of a C-Corporation under a conventional corporate tax structure 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 the assumed exchange would change the tax structure of the Company. |
(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. Further, as a result of the Company incurring a loss on a U.S. GAAP basis for the three months ended December 31, 2017, the additional shares of the Company's common stock assumed to be issued per the computation of diluted shares outstanding were antidilutive and consequently the additional shares have been excluded from the calculation of Diluted Shares Outstanding - U.S. GAAP. These shares have been included in the reconciliation to Diluted Shares Outstanding - Adjusted. |
(11) | Assumes the sale of the Institutional Trust and Independent Fiduciary business of ETC had occurred as of the beginning of the prior period presented and reflects adjustments to eliminate revenue and expenses that were previously consolidated from the Institutional Trust and Independent Fiduciary business of ETC. Management believes this adjustment is useful to investors to compare Evercore's results across periods. |