Good morning, and welcome to the Evercore Second Quarter 2024 Earnings Conference Call. This call is expected to last approximately one hour, including comments from Evercore management and a question-and-answer session. I will now hand the call over to Katy Haber, Managing Director of Investor Relations and ESG at Evercore. Please proceed.

Thank you, operator. Good morning, and thank you for joining us today for Evercore’s second quarter 2024 financial results conference call. I'm Katy Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO, and Tim LaLonde, our CFO. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore's second quarter 2024 financial results. Our discussion of our results today is complementary to the press release, which is available on our website. This conference call is being webcast live in the For Investors section of our website, and an archive of it will be available for 30 days beginning approximately one hour after the conclusion of this call. During the course of this conference call, we may make a number of forward-looking statements. Any forward-looking statements that we make are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. These factors include, but are not limited to, those discussed in Evercore's filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. I want to remind you that the company assumes no duty to update any forward-looking statements. In our presentation today, unless otherwise indicated, we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP reconciliations, you should refer to the financial data contained within our press release, which is posted on our website. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closings. I will now turn the call over to John.

Thank you, Katy, and good morning, everyone. This past quarter represents our best second quarter for firm-wide adjusted net revenues on record. We delivered $695 million, in part driven by our second quarter adjusted advisory fees of $568 million, which increased 52% year-over-year. We've been involved in a number of significant transactions, including three of the six largest global announced deals year-to-date. Broad market indicators suggest the M&A markets are in the midst of a gradual recovery with year-to-date global M&A announced dollar volume greater than $100 million, up 24% year-over-year, following a very slow year for the market in 2023. We remain encouraged by the market outlook and the opportunity it presents for Evercore. Internally, we've seen an increase in activity levels as both our corporate and sponsor clients prepare for what is expected to be a busy second half supporting our robust backlogs. That said, we continue to monitor the economic and geopolitical risks that could impact the timing and trajectory of the recovery. Nonetheless, given current market dynamics, we expect the recovery for both the market and our results to continue through the balance of this year and into next. We believe we are well-positioned to capitalize on the return of the M&A market, which has already begun, as we now provide a broader range of products than we ever have before. We also cover a larger, more diverse set of clients. Further, today, we have approximately 25% more Investment Banking Senior Managing Directors than we did at the end of 2021, which presents significant opportunity for us. Importantly, we continue to have success in attracting high-quality talent. As I discussed at an industry conference last month, so far this year, six senior individuals have started at or have committed to join the firm. As we have mentioned in past calls, France has been a focus as our next step in progressing our European business. We're pleased to have hired three senior professionals in Paris who will join later this year. We maintain a strong pipeline of high-quality candidates and remain open to recruiting talent in strategically important areas in addition to promoting talent internally. Separately, we continue to invest in our Evercore ISI business by recruiting top-tier research analysts, including three senior analysts so far this year: our Chief Strategist of International Political Affairs and Public Policy; our new Head of Sales; and a senior analyst covering semiconductors. Now let me briefly discuss the quarter. There were several highlights in our Investment Banking business. As I mentioned at the start of this call, we advised on some of the largest announced transactions year-to-date, including GE on its spin-off of GE Vernova for nearly $36 billion; Synopsys on its approximately $35 billion acquisition of Ansys; and ConocoPhillips on its $22.5 billion acquisition of Marathon Oil. Our financial sponsors practice has recently seen an uptick in activity in part stemming from improved market conditions, including leveraged finance and pressure from LPs to return capital. We have advised on several significant sell-side sponsored transactions, including Prometheus, a Genstar portfolio company on a strategic investment from Advent International and Leonard Green; and TAIT, a portfolio company of Providence Equity Partners on its equity investment from Goldman Sachs Alternatives' Private Equity business. We remain highly focused on the opportunity within this client group and expect more robust sponsor activity will reinforce the broader recovery. The European advisory team saw some improvement in the market and our results compared to the first quarter. The backlog in the region continues to build and we expect a stronger second half of the year. Our strategic defense business continues to be active as there is a heightened focus among activists on breakups, management changes, and cross-border listings. Momentum on our liability management and restructuring practice has continued in line with the first quarter. Liability management, particularly with sponsors, remains a primary driver of activity. The business continues to be active across both debtor and creditor assignments. Our market-leading Private Capital Advisory business had a strong second quarter in large part driven by robust activity in the GP part of the business. Overall, the pipeline for PCA is very strong and we expect the remainder of the year to be active. Our Private Funds Group continues to strengthen as the broader fundraising market improves. We've invested in this business over the years, positioning ourselves as a leader in this space with a top-tier client base. Following a strong first quarter, underwriting activity moderated as the much-anticipated IPO reopening has yet to fully materialize. Although our second quarter results were lower relative to a very strong first quarter, we were actively engaged in follow-ons, demonstrating strong diversification across sectors and a focus on increasing our role in underwriting deals. Notably, Evercore was a left-lead bookrunner on two follow-ons in the quarter, including AZZ's $322 million offering and Lithium America's $275 million offering. Our Equities business had a solid quarter despite continued low levels of volatility, which has persisted for several quarters, as macroeconomic and geopolitical factors are of heightened focus among investors. We continue to provide our clients with preeminent content, differentiated corporate access and exceptional execution. Lastly, in Wealth Management, we set another new quarterly record for assets under management, which is now over $13 billion. Before I turn it over to Tim to discuss the financial results, I want to reiterate a few points. We remain steadfast in the execution of our long-term strategic plan, which includes: first, continuing to build out certain industry coverage groups, including TMT, healthcare, sponsors, financials, and other fast-growing segments of the economy; second, remaining focused on our geographic expansion as most recently seen with our investment in Paris; and lastly, continuing to deepen and broaden our product capabilities in adjacent areas. Over the past several years, we have greatly expanded our client coverage, diversified our client services, and strengthened our position across key businesses. We are seeing results from the execution of our strategy. Looking forward, we will continue to invest in our firm and execute on our strategic plan while also remaining focused on improving our expense margins over time. As the deal environment continues to improve, we're excited for what is ahead for both us and the market. Evercore is stronger today than we have ever been before. With that, let me turn it over to Tim.

Thank you, John. Our second quarter financial results reflect an improving market environment, as John just discussed. Our pipelines remain robust. We are monitoring the velocity at which new deals are added and existing deals in process reach fruition. We are committed to improving our expense margins, recognizing that this improvement is positively influenced by an increase in revenue, but also requires serious cost discipline, and we are actively engaged in that; yet it is important to note that we are building the firm, making strategic investments, and we are balancing these two objectives. Accordingly, we will drive improvement gradually over the near to medium term. With that, I will now discuss our second quarter financial results. For the second quarter of 2024, net revenues, operating income, and EPS on a GAAP basis were $689 million, $108 million, and $1.81 per share, respectively. My comments from here will focus on non-GAAP metrics, which we believe are useful when evaluating our results. Our second quarter adjusted net revenues of $695 million increased 38% versus the second quarter of 2023. These adjusted net revenues represent a record second quarter for Evercore. Second quarter adjusted operating income of $114 million increased 80% versus the second quarter of 2023. Adjusted earnings per share of $1.81 increased 89% versus the second quarter of last year. Our adjusted operating margin was 16.4% for the second quarter, up from 12.6% in the second quarter of last year. Turning to the businesses. Second quarter adjusted advisory fees of $568 million increased 52% year-over-year, reflecting a strengthening market environment and improved market share compared to a year ago. Our second quarter underwriting fees were $31 million, down 19% from a year ago. In any quarter, the results in this business depend on the size and number of transactions in which we are involved, and that fluctuates from quarter to quarter. For the first half of 2024, underwriting fees were up nearly 42% year-over-year. Commissions and related revenue of $53 million in the second quarter was up 6% year-over-year despite continued low volatility and flat conventional single stock market volumes. Second quarter adjusted asset management and administration fees of $21 million increased 16% year-over-year, primarily driven by higher fees as AUM increased due to market appreciation. Second quarter adjusted other revenue, net was approximately $22 million, which compares to $24 million a year ago. Turning to expenses. The adjusted compensation ratio for the second quarter is 66% compared to 67% a year ago. This ratio represents our best judgment of the accrual for this quarter, taking into consideration our view of full-year revenue and compensation expense when factoring in SMD hiring, headcount levels, market levels of compensation at year-end and other relevant factors. As I discussed on our first quarter call, we are striving to make improvements in our compensation ratio while we concurrently continue to build the firm strategically. Next, non-compensation expenses in the quarter were $122 million, up 18% from a year ago, and the adjusted non-comp expense ratio for the quarter is 17.6% compared to 20.5% a year ago, a 290-basis-point improvement. Together, the comp expense ratio and the non-comp expense ratio represent a nearly 400-basis-point improvement versus a year ago. The non-compensation expense increase from the year prior is primarily driven by three items: First, professional fees reflect higher client-related expenses, which are potentially recoverable and generally are correlated with higher levels of revenue in addition to higher consulting and search and placement costs. Second, travel and related fees reflect a combination of continued post-COVID normalization of travel expenses and higher client-related activity levels. Third, an increase in other operating expenses reflect education and training costs for our summer analyst and associate classes, increased regulatory filing and annual fees, and certain other costs, some of which also may be seasonal or in some cases, episodic. We continue to closely monitor our non-comp expenses, which on a per employee basis for the first half of the year are only about 7% higher than 2019, the pre-COVID year, reflecting a less than 2% compound annual increase, which is less than the rate of inflation. We believe we can make progress on our non-comp ratio in the near to medium term, though we faced some pressures from increased information services costs, investment in technology, and headcount related to the implementation of our strategic growth plan. In line with my comments from our first quarter earnings call, we anticipate that our full-year non-comp expense ratio should be consistent with or compare favorably to our pre-COVID non-comp expense ratio. Our adjusted tax rate for the quarter was 26.9% compared to 29.6% in the second quarter of last year. We anticipate that our tax rate in the third and fourth quarters will continue to be similar to our recent historical tax rates in those quarters. Turning to our balance sheet. As of June 30, our cash and investment securities totaled nearly $1.7 billion, which is approximately $200 million higher than last year's levels at this time. In the first six months of this year, we returned a total of $396 million to shareholders through dividends and repurchases of 1.8 million shares at an average price of $178.61. Our second quarter diluted share count was 43.4 million, up slightly from the prior year. The increase in our share count primarily was due to the impact of our higher share price on unvested RSUs. We are encouraged by what we see and proud of what we have accomplished in the first half of the year. We believe the broader market recovery will progress throughout 2024 and into 2025 based on what we see internally and the continued improvement in market conditions. We remain focused on the build-out of our firm while managing our expenses responsibly. We are appreciative of our shareholders and are focused on increasing Evercore's value over the medium and longer term. With that, we will now open the line for questions.

Our first question will come from James Yaro with Goldman Sachs. Please go ahead.

Good morning, and thanks for taking my question. As the part of the market that has lagged so far in the cycle, maybe John, could you speak to the sponsor dialogues that you're having on the M&A side, whether these have improved and also perhaps a perspective on sponsor engagement around IPOs and whether those could increase from here?

Sure. So, activity levels for sponsors are definitely picking up. And as you've seen statistically, it's up about 17% to 20% year-to-date half year. Having said that, I think our experience would be that there is a continual ramp up right now. We're seeing a significant number of bake-offs, significantly larger than we have seen in the past. We also are seeing real activities in the sponsors, looking at portfolios and trying to figure out how do they get moving with their portfolios, some portfolios, companies that have really been invested in over a period of time. I think sponsors are really trying to think about bringing them out. And there's a dynamic here that I think is at play, which is really positive towards ramping. And that is that I think LPs are looking for a return of capital and they're pretty vocal about the fact that they want that to happen. In addition, I think that the sponsors have a significant amount of dry powder, some of it aging. And I think if it doesn't get used, it may go away. And so, I think that you have this very positive dynamic of real pressure to get moving with portfolios. In addition, the markets are positive, both the leverage finance side and private credit. There's really an appetite for real activity. And so, all of those things together, I think, are really building the ramp. And from our perspective, it's going to ramp over time. It's not going to happen all at once, but we're feeling a very positive tone to the market. And in terms of the IPO, I think IPOs are being considered as well as the M&A side for these portfolios. And so, I think what we're seeing is just a very high activity level in our leverage — our sponsor coverage group is really seeing tremendous activity right now. So, from our perspective, I think the momentum is growing.

Thank you very much.

Thank you. Our next question will come from Ryan Kenny with Morgan Stanley. Please go ahead.

Hi, good morning. You mentioned that European M&A is picking up. Can you speak into what's driving that and how the pipeline in Europe compares to US? Are they growing at roughly the same pace or is one stronger than the other?

Our experience is that the US market is out ahead, that the European market is actually finding a positive tone, but the US market is ahead. There's just, I think, a real activity build in the US. I think there is also in Europe. But I think if you ask which is really ahead, I think that US is slightly ahead. I think the activity on both markets, though, is positive, and we think there's a real build.

Thank you.

Thank you. Our next question will come from Brennan Hawken with UBS. Please go ahead.

Good morning. Thank you for taking my questions. Tim, I was a bit unclear about your comments on the comp ratio. Could you clarify? Were you indicating that 66% aligns with the full year expectation? Or were you implying that there might be some potential downward pressure, considering you usually have a good grasp on the revenue outlook about six months in advance? I would think that by now, while there is always some uncertainty, there would be somewhat less uncertainty at this stage. Thanks.

Yeah. Sure, Brennan. 66% is what I would say is generally similar to what we would expect for the full year. And we do foresee a strengthening environment, and along with that, strengthening revenue. It's impossible for us to know exactly the steepness of the ramp or the timing of transaction closings, but there's a possibility and we're certainly striving to achieve some improvement, but it's just that we lack the clarity at this point with respect to ramp and timing to be more precise than that.

That's fair. Would you categorize the 66% as a bit conservative? Is it a worst-case scenario, or could you provide an indication of where it stands on that SKU?

Yeah. I wouldn't characterize it as one way or another, other than to say it reflects our best judgment of the appropriate accrual for this quarter.

Okay. Thanks for taking my questions.

Thank you. Our next question will come from Devin Ryan with Citizens JMP. Please go ahead.

Great. Good morning, John. Good morning, Tim. Just a question on some of the non-M&A advisory businesses. It sounds like a really healthy activity both in restructuring and shareholder advisory. Just want to think about kind of as we look out, maybe not even in the next couple of quarters, but just over the next couple of years, like how you expect those businesses to grow and the contribution would be overall from our level to evolve, meaning if we get into an M&A recovery scenario, do those businesses just become smaller pieces but larger than the absolute? Or just based on what you're seeing in the environment and obviously, restructuring feels like it could be a multiyear cycle here, they can actually become larger proportional to the overall firm-wide revenues? Thanks.

Sure. The restructuring business continues at pace. And I think our view of the restructuring business is that it will continue really at this level and it will be at this healthy level for quite some time. We do have, as you said, several businesses, which are non-M&A related. Obviously, about over a third of our businesses are non-M&A related. Our Private Capital Advisory businesses are very healthy. We see real growth in those businesses. They're actually performing extremely well right now. And we anticipate that there will be real growth in those businesses. Our Equity Capital Markets business is also performing well. We anticipate that it will continue and there will be a ramp in that business also. But the one thing I would really say, though, is that merger business is really our biggest business. And I don't know whether the businesses that are non-mergers are going to grow in terms of their proportion of our business just because I think that the merger business is going to continue to ramp. The merger business will take some time to ramp all the way up. As we've said, it's going to take the balance of this year and into next to really get to what we would call full recovery, but that is a very powerful engine for us. And so, what I'd say is, I feel like we have good balance. We will continue to have good balance. I feel like our businesses generally are all quite healthy. And so, I don't really see any weakening in any of those businesses, but I do think that the merger business is going to continue to strengthen. I hope that helps.

It does. Thank you.

Thank you. Our next question will come from Aidan Hall with KBW. Please go ahead.

Great. Thanks for taking my question. Maybe just a follow-up on the comp ratio commentary. It seems like given the elevated level of hiring and just the way that the year is playing out, the comp ratio would be coming in maybe a little higher than initially expected for the year. So, I know it's still early, but is there any way to frame how to think about leverage in 2025 as it relates to kind of compensation expense, especially as a rebound in activity remains pretty sustainable, or at least that's the base case expectation here on the revenue side? Thank you.

Yeah, sure. I can talk a little bit about it. First, let me start in order to create the context with what our comp ratio, reminding people what our comp ratio was last year, it was 67.6% for the full year. As you'll recall, last year, we started a little bit lower, but as conditions did not improve in the latter part of the year and we also had a full slate of high-quality candidates we had hired, there was an upward drift. And so, comparing quarter over last year quarter is probably not quite appropriate. I would think about looking at this quarter in relation to last full year, again, which was 67.6%, and of course, higher than that in the latter part of the year. So, we have made some progress already year-to-date and we're focused on this. And we think that, number one, we will get some leverage from increased revenues over time. We expect that. And so, we don't look at this current comp ratio for this quarter as being our steady state in terms of go forward in the near to medium term. We're looking to improve on it, but that improvement will be a gradual improvement. This is not something that happens overnight, return to normalcy.

Understood. Thank you.

Thank you. Our next question will come from Jim Mitchell with Seaport Global. Please go ahead.

Good morning. Tim, you mentioned velocity. Could you discuss the elongation of the process? Are we seeing improvements in timing from announcements to closings? What are your thoughts on the current activity level and its potential to translate into revenue? Additionally, when you mention the second half being better, are you referring to activity levels or revenue? Thank you.

Certainly. Let me begin by reiterating what was mentioned in our prepared remarks, which is that we consider the backlogs to be strong. This is indeed true. However, for revenues to reflect this, we need to assess both the backlog size and the speed at which transactions are progressing. Currently, we are in an upward trend, but this will not yet be visible from a historical perspective. What we do have is anecdotal evidence from our bankers indicating that processes are becoming more active and are moving faster. As John noted, the leveraged finance markets show that issuance is up significantly, with high-yield issuance and leveraged loans increasing about 100% year-over-year. The necessary components are in place, and we expect to see improvements in transaction speed as we move forward. Regarding the second part of your question on activity levels, we have been noticing an increase in activity for several months, which we also mentioned during our first-quarter earnings call. There is typically a lag, but we anticipate that this heightened activity will soon be reflected in our revenues as we near the end of the year and into the next year.

Okay. Thanks.

Our next question will come from Brendan O'Brien with Wolfe Research. Please go ahead.

Good morning. So, I just want to touch on the Private Capital Advisory business. Secondary activity was very strong in the first half and is expected to accelerate meaningfully over the next couple of years as sponsors look to return capital to LPs. Just wanted to get a sense as to how meaningful the growth engine could be for your firm going forward. And as we think about the potential recovery in sponsor M&A activity, do you expect the strength of this franchise and your improved sponsor coverage model to enable you to capture a greater share?

We would hope so. We have really made great efforts to make sure that we bring together all of the businesses that are touching sponsors so that we really can holistically service sponsors and bring a much more diverse and broad set of skill sets to bear on what they're trying to accomplish. And I think that clearly, the Private Capital Advisory businesses are strengthening. The market is growing for those businesses, especially for continuity-type vehicles. And frankly, as sponsors make decisions about portfolio companies, they really look in a much more diverse set of options, whether it's an IPO, whether it's a sale, whether it's more investment, whether there's some continuity vehicle, all of those things are options. And so, we think that really bringing it all together, which we've worked hard to do, is giving us a real leverage upward with respect to those businesses. I think that the sponsor business for us is going to continue to grow and improve. I think that it will have an increasingly high percentage of the things that we do. Having said that, obviously, we're developing all of our businesses broadly throughout the whole portfolio of advisory services. And so, we're hoping the strategy of investing broadly is going to bring real opportunity for our revenue growth. Having said that, I think your question about sponsors and the concentration of Private Capital Advisory services is that those businesses will continue to improve and grow, and we feel really good about the investments we're making there.

Great. If I could ask a follow-up regarding the comp ratio. When considering the normalized comp ratio, some of your peers have mentioned that due to the ongoing increase in the cost of junior talent and wage inflation, their comp ratios are expected to be higher moving forward. Could you elaborate on your view of the normalized comp ratio in comparison to the historically sub-60% level you've maintained?

Sure. As I mentioned earlier, we anticipate a gradual improvement. We are focused on this. There is certainly a link between increasing revenue and enhancements in the comp ratio. We expect this gradual improvement to continue in the near to medium term. Currently, we are seeing a 160-basis-point improvement compared to last year. We are committed to delivering further improvements in the near to medium term. It would be premature for anyone to predict whether we will return to a comp ratio below 60%. What I can say is that we aim to make significant improvements this year, next year, and the following year. As we approach that stage, we will be better positioned to evaluate where we expect the final comp ratio to settle.

All right. Thank you for taking my questions.

Thank you. Our next question will come from James Yaro with Goldman Sachs. Please go ahead.

Thanks for taking my follow-up. Tim, the non-comp expenses rose 12% quarter-on-quarter. You noted that much of this is from travel expenses, which is obviously a positive for the top-line, but you did also talk about some inflationary factors. How should we think about non-comp expense dollars from here? Should they grow versus the 2Q level? Or is there some sort of seasonality in the quarter?

I believe there is some seasonality in our expenses, influenced by factors like SEC filing fees, annual fees, audit costs, and training costs for new analysts and associates. Regarding travel, it has seen some upward pressure. In the most recent quarter, travel was around 95% of the activity level in early 2019, before COVID. However, we need to factor in that our headcount has increased by about 23%. When we adjust for headcount, our travel is approximately 73% of pre-COVID levels. We are closely monitoring this to understand when we might see full normalization. We expect continued normalization over time, but we are glad to see this activity as it means we are actively serving our clients. Additionally, there are professional expenses associated with growing revenues, which we welcome as they relate to acquiring new business and executing deals. Furthermore, there is a strong correlation between headcount and non-compensation costs over the years. While this correlation may not be perfect in the short term, there is a significant relationship in the medium to long term. From the pre-COVID period in 2019 to now, the increase in non-comp cost per employee is about 7%. Annually, that translates to less than 2%, which is below the inflation rate. We believe we have managed expenses well thus far, although we acknowledge there are some upward pressures, including travel, professional costs, and investments in technology and information services. We are committed to exercising significant discipline regarding non-comp costs moving forward.

Excellent. Thanks a lot, Tim.

Thank you. Our next question will come from Brennan Hawken with UBS. Please go ahead.

Good morning. Thanks for taking my follow-up. Tim, apologies about another question on comp here, but I was hoping to take a slightly different track. So, your reported adjusted comp expense year-to-date is up about 20% versus last year. If we drill down and think about just the fixed component of the comp expense, in other words, salary and benefits and deferred comp, amortization, how much would that be up year-to-date as compared to the reported number?

Yes, and apologies to you, Brennan, but that's just not a figure we disclose.

Okay. Fine. How about this. Is the fixed comp growth rate less than the reported number or is it greater than the reported number?

Yeah. The fixed comp growth rate, this is a little bit of advice I gave on the non-comp, the growth in that is going to be related to growth in headcount. And then, as revenues go up, certainly to probably a greater extent at the partner level, a little lesser extent at the non-partner level, there will be some increase in bonuses that correlates to the increase in revenues. And so, from that, you could probably surmise that the fixed component of it since revenues, I think, are anticipated to grow at a faster rate than headcount, you could surmise that the fixed component might grow at a little less of a rate than the bonus.

A little less even though the headcount is only up about 4% year-over-year?

Yes, it would be less, yes. It would be less than the discretionary component.

Okay. Thanks for the patience with my persistence there.

Always happy to talk with you, Brennan.

Thank you. At this time, there are no further questions in queue. This concludes today's Evercore second quarter 2024 earnings conference call. You may now disconnect.