Share-Based and Other Deferred Compensation

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Share-Based and Other Deferred Compensation

Share-Based and Other Deferred Compensation

LP Units

Equities business – In conjunction with the acquisition of the operating businesses of International Strategy & Investment ("ISI") in 2014, the Company issued Evercore LP units and interests which have been treated as compensation.

In July 2017, the Company exchanged all of the previously outstanding 4,148 Class H limited partnership interests of Evercore LP ("Class H LP Interests") for 1,012 vested (963 of which were subject to certain liquidated damages and continued employment provisions) and 938 unvested Class J LP Units. These units converted into an equal amount of Class E LP Units, and became exchangeable into Class A Shares of the Company, ratably on February 15, 2018, 2019 and 2020. These Class J LP Units had the same vesting and delivery schedule, acceleration and forfeiture triggers, and distribution rights as the Class H LP Interests. In connection with this exchange, one share of Class B common stock has been issued to each holder of Class J LP Units, which entitles each holder 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. As the number of Class J LP Units exchanged was within the number of Class H LP Interests that the Company determined were probable of being exchanged on the date of modification, the Company expensed the previously unrecognized grant date fair value of the Class H LP Interests ratably over the remaining vesting period of the Class J LP Units. Compensation expense related to the Class J LP Units was $1,067 for the six months ended June 30, 2020.

On February 15, 2020, 223 Class J LP Units vested and were converted to an equal amount of Class E LP Units. Following the conversion, no Class J LP Units remain issued and outstanding.

Class I-P Units – In November 2016, the Company issued 400 Class I-P Units in conjunction with the appointment of a current Co-Chief Executive Officer (then Executive Chairman). These Class I-P Units convert into a specified number of Class I LP Units, which are exchangeable on a one-for-one basis to Class A Shares, contingent on the achievement of certain market and service conditions, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following January 15, 2022, subject to a one year prior written notice requirement) or a change in control. These Class I-P Units are segregated into two groups of 200 units each, with share price threshold vesting conditions which are required to exceed a certain level for 20 consecutive trading days (which were met as of March 31, 2017). The Company determined the fair value of the award to be $24,412 and is expensing the award ratably over the implied service period, which ends on March 1, 2022. As the award contains market-based conditions, the entire expense will be recognized if

the award does not vest for any reason other than the service conditions. Compensation expense related to this award was $1,130 and $2,366 for the three and six months ended June 30, 2021, respectively, and $1,152 and $2,303 for the three and six months ended June 30, 2020, respectively.

Class K-P Units – In November 2017, the Company issued 64 Class K-P Units to an employee of the Company. These Class K-P Units convert into a specified number of Class K LP Units (which are exchangeable on a one-for-one basis to Class A Shares), contingent upon the achievement of certain defined benchmark results and continued service through December 31, 2021.

In June 2019, the Company issued 220 Class K-P Units to an employee of the Company. These Class K-P Units convert into a number of Class K LP Units (which are exchangeable on a one-for-one basis to Class A Shares), contingent and based upon the achievement of certain defined benchmark results and continued service through February 4, 2023 for the first tranche, which consists of 120 Class K-P Units, and February 4, 2028 for the second tranche, which consists of 100 Class K-P Units.

These Class K-P Units may convert into a maximum of 460 Class K LP Units, contingent upon the achievement of certain defined benchmarks and continued service, as described above. The Company determined the grant date fair value of these awards probable to vest as of June 30, 2021 to be $34,684, related to 403 Class K LP Units which were probable of achievement, and recognizes expense for these units over the respective service periods. Compensation expense related to the Class K-P Units was $1,881 and $3,741 for the three and six months ended June 30, 2021, respectively, and $1,233 and $2,326 for the three and six months ended June 30, 2020, respectively.

Class L Interests – In April 2021, the Company's Board of Directors approved the issuance of Class L Interests in Evercore LP ("Class L Interests") to named executive officers of the Company, pursuant to which the named executive officers may receive a discretionary distribution of profits from Evercore LP, to be paid in the first quarter of 2022. Distributions pursuant to these interests are anticipated to be made in lieu of any cash incentive compensation payments which may otherwise have been made to the named executive officers of the Company in respect of their service for 2021. The Company records expense related to these interests as part of its accrual for incentive compensation within Employee Compensation and Benefits on the Unaudited Condensed Consolidated Statements of Operations.

Stock Incentive Plan

During 2020, the Company's stockholders approved the Amended and Restated 2016 Evercore Inc. Stock Incentive Plan (the "Amended 2016 Plan"), which amended the prior Amended and Restated 2016 Evercore Inc. Stock Incentive Plan. The Amended 2016 Plan, among other things, authorizes an additional 6,000 shares of the Company's Class A Shares. The Amended 2016 Plan permits the Company to grant to certain employees, directors and consultants incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, RSUs and other awards based on the Company's Class A Shares. The Company intends to use newly-issued Class A Shares to satisfy any awards under the Amended 2016 Plan and its predecessor plan. Class A Shares underlying any award granted under the Amended 2016 Plan that expire, terminate or are canceled or satisfied for any reason without being settled in stock again become available for awards under the plan. The total shares available to be granted in the future under the Amended 2016 Plan was 5,124 as of June 30, 2021.

The Company also grants, at its discretion, dividend equivalents, in the form of unvested RSU awards, or deferred cash dividends, concurrently with the payment of dividends to the holders of Class A Shares, on all unvested RSU grants awarded in conjunction with annual bonuses, as well as new hire awards. The dividend equivalents have the same vesting and delivery terms as the underlying RSU award.

The Company estimates forfeitures in the aggregate compensation cost to be amortized over the requisite service period of its awards. The Company periodically monitors its estimated forfeiture rate and adjusts its assumptions to the actual occurrence of forfeited awards. A change in estimated forfeitures is recognized through a cumulative adjustment in the period of the change. 

    Equity Grants – During the six months ended June 30, 2021, pursuant to the Amended 2016 Plan, the Company granted employees 2,028 RSUs that are Service-based Awards. Service-based Awards granted during the six months ended June 30, 2021 had grant date fair values of $111.03 to $141.07 per share, with an average value of $118.63 per share, for an aggregate fair value of $240,568, and generally vest ratably over four years. During the six months ended June 30, 2021, 2,142 Service-based Awards vested and 106 Service-based Awards were forfeited. Compensation expense related to Service-based Awards was $58,054 and $109,762 for the three and six months ended June 30, 2021, respectively, and $50,176 and $100,472 for the three and six months ended June 30, 2020, respectively.

Deferred Cash

Deferred Cash Compensation Program – The Company's deferred cash compensation program provides participants the ability to elect to receive a portion of their deferred compensation in cash, which is indexed to notional investment portfolios selected by the participant and vests ratably over four years and requires payment upon vesting. The Company granted $96,511 of deferred cash awards pursuant to the deferred cash compensation program during the first quarter of 2021.

Compensation expense related to the Company's deferred cash compensation program was $34,858 and $65,747 for the three and six months ended June 30, 2021, respectively, and $35,626 and $57,861 for the three and six months ended June 30, 2020, respectively. As of June 30, 2021, the Company expects to pay an aggregate of $326,219 related to the Company's deferred cash compensation program at various dates through 2025 and total compensation expense related to these awards not yet recognized was $225,591. The weighted-average period over which this compensation cost is expected to be recognized is 27 months. Amounts due pursuant to this program are expensed over the service period of the award and are reflected in Accrued Compensation and Benefits, a component of current liabilities, on the Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2021.

Other Deferred Cash Awards – In November 2016, the Company granted a restricted cash award in conjunction with the appointment of a current Co-Chief Executive Officer (then Executive Chairman) with a target payment amount of $35,000, of which $11,000 vested on March 1, 2019, $6,000 vested on each of March 1, 2020 and 2021, and $6,000 is scheduled to vest on each of the next two anniversaries of March 1, 2021, provided that the current Co-Chief Executive Officer continues to remain employed through each such vesting date, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following May 1, 2019, subject to a six month prior written notice requirement) or a change in control. The Company had the discretion to increase (by an amount up to $35,000) or decrease (by an amount up to $8,750) the total amount payable under this award.

In 2017, the Company granted deferred cash awards of $29,500 to certain employees. These awards vest in five equal installments over the period ending June 30, 2022, subject to continued employment. The Company recognizes expense for these awards ratably over the vesting period.

In addition, the Company periodically grants deferred cash awards to certain employees. The Company recognizes expense for these awards ratably over the vesting period.

Compensation expense related to other deferred cash awards was $2,180 and $5,521 for the three and six months ended June 30, 2021, respectively, and $3,808 and $7,153 for the three and six months ended June 30, 2020, respectively.

Long-term Incentive Plan

The Company's Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers of the Company, who exceed defined benchmark results over four-year performance periods beginning January 1, 2017 (the "2017 Long-term Incentive Plan") and January 1, 2021 (the "2021 Long-term Incentive Plan", which was approved by the Company's Board of Directors in April 2021). Remaining amounts due pursuant to the 2017 and 2021 Long-term Incentive Plans, which aggregate $48,455 of current liabilities and $35,405 of long-term liabilities on the Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2021, are due to be paid, in cash or Class A Shares, at the Company's discretion, in equal installments in the first quarter of 2022 and 2023 (for the 2017 Long-term Incentive Plan), and in the first quarter of 2025, 2026 and 2027 (for the 2021 Long-term Incentive Plan), subject to employment at the time of payment. The performance period for the 2017 Long-term Incentive Plan ended on December 31, 2020 and the first cash distribution pursuant to this plan of $48,461 was made in March 2021. Awards issued under the 2017 Long-term Incentive Plan are subject to retirement eligibility requirements after the performance criteria has been achieved. The Company periodically assesses the probability of the benchmarks being achieved and expenses the probable payout over the requisite service period of the award. During the first half of 2020, in assessing the potential impact of the COVID-19 pandemic on the Company's full year 2020 results, management determined it would be appropriate to decrease its expectation for the probable payout of the 2017 Long-term Incentive Plan, which included a review of both historical and projected performance for those eligible under the plan. The Company recorded $8,209 and $13,102 of compensation expense for the three and six months ended June 30, 2021, respectively, and recorded $2,989 of compensation expense for the three months ended June 30, 2020 and reversed $3,821 of compensation expense for the six months ended June 30, 2020 related to these plans.

As of June 30, 2021, the total remaining expense to be recognized for the 2017 Long-term Incentive Plan over the future vesting period ending March 15, 2023 is $17,133. As of June 30, 2021, the total remaining expense to be recognized for the

2021 Long-term Incentive Plan over the future vesting period ending March 15, 2027 is $125,984, which reflects the current anticipated probable payout for the plan.

Employee Loans Receivable

Periodically, the Company provides new and existing employees with cash payments in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to five years and in certain circumstances, subject to the achievement of performance requirements. Generally, the terms of these awards include a requirement of either full or partial repayment of these awards based on the terms of their employment agreements with the Company. In circumstances where the employee meets the Company's minimum credit standards, the Company amortizes these awards to compensation expense over the relevant service period, which is generally the period they are subject to forfeiture. Compensation expense related to these awards was $6,296 and $10,446 for the three and six months ended June 30, 2021, respectively, and $3,980 and $8,415 for the three and six months ended June 30, 2020, respectively. The remaining unamortized amount of these awards was $25,356 as of June 30, 2021.

Separation and Transition Benefits

In 2020, the Company completed a review of operations focused on markets, sectors and people which delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position itself for future growth. This review generated reductions of approximately 8% of the Company's headcount. In conjunction with the employment reductions, for the three and six months ended June 30, 2020, the Company incurred expenses related to separation benefits, stay arrangements and accelerated deferred cash compensation (together, the "Termination Costs") of $6,385 and $22,816, respectively, and the acceleration of the amortization of share-based payments previously granted to affected employees of $1,806 and $7,335, respectively, (related to 104 RSUs) each recorded in Special Charges, Including Business Realignment Costs, primarily within the Investment Banking segment, on the Company's Unaudited Condensed Consolidated Statements of Operations.

The following table presents the change in the Company's Termination Costs liability for the six months ended June 30, 2021 and 2020:

	For the Six Months Ended June 30,
	2021		2020
Beginning Balance	$	4,589	$	1,151
Termination Costs Incurred	1,053		22,816
Cash Benefits Paid	(3,033)		(17,978)
Non-Cash Charges	(25)		(603)
Ending Balance	$	2,584	$	5,386

In addition to the above Termination Costs incurred, for the three and six months ended June 30, 2021, the Company also incurred expenses related to the acceleration of the amortization of share-based payments previously granted to affected employees of $1,663 and $1,948, respectively, (related to 29 RSUs) recorded in Employee Compensation and Benefits, within the Investment Banking segment, on the Company's Unaudited Condensed Consolidated Statements of Operations.