Good morning, and welcome to Evercore's First Quarter 2025 Earnings Conference Call. Today's call is expected to last around 1 hour, which will include comments from Evercore management and a question-and-answer session. I will now hand over the call to Katy Haber, Managing Director of Investor Relations at Evercore. Please proceed.

Thank you, operator. Good morning, and thank you for joining us today for Evercore's First Quarter 2025 Financial Results Conference Call. I'm Katy Haber, Evercore's Head of Investor Relations. Joining me on the call today is John Weinberg, our Chairman and CEO; and Tim LaLonde, CFO. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore's first quarter 2025 financial results. Our discussion of our results today is complementary to the press release, which is available on our website at evercore.com. This conference call is being webcast live in the Investors section of our website, and an archive of it will be available for 30 days beginning approximately 1 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. Before we turn to the quarter, I want to first address the current environment as a result of heightened geopolitical and trade tensions; we are experiencing increased volatility in global financial and asset markets. This reflects growing concerns about inflation, interest rates and the global and domestic economic outlook. While there are many unanswered questions at this time, Evercore today is far better positioned than Evercore in the past. Our diversified platform across geographies, sectors, products, client types, and deal sizes enables us to perform across varied market environments. Our global M&A advisory franchise has proven resilient through different markets. In addition, our capabilities in liability management and restructuring, Private Capital Advisory and Fundraising, Debt Capital Markets Advisory, Equity Underwriting, Equity Research, and Sales and Trading continue to contribute meaningfully amid shifting market conditions. We service clients in all environments, including ones like this. In challenging markets, our ability to provide thoughtful strategic and financial advice is more important than ever. Based on what we see today, market complexity has prompted greater caution and has weighed on CEO and Board confidence levels, which in turn has impacted the broader transaction environment. We expect transaction levels to pick up once there is greater clarity and stability in the macroeconomic backdrop and financial markets. Client dialogues remain active and constructive, supporting our robust backlogs and new engagement letter signings, and there is a high degree of pent-up demand to transact among both strategic and sponsored clients. While the timing and shape of the market recovery is uncertain at this time, we will continue to operate with the same long-term client-centric focus that has always defined Evercore. As we've discussed on prior calls, we continue to believe in our business model and expect to invest in talent through the cycle. In the first quarter, two senior managing directors have joined our investment banking practice, both of whom were announced in 2024. Two additional investment banking SMDs have committed to join our franchise, three of whom will be in our Industrials, Healthcare, and Private Capital Advisory Practices and one in Europe. Also, earlier this month, we announced that Bill Burns, former Director of the CIA, will be joining Evercore in June as a Senior Advisor with a focus on global affairs. In addition to our externally hired SMDs, we started the year with a class of 11 promoted investment banking SMDs and an additional four in other areas of the firm. Developing our internal talent has always been a core priority for us. Now let me briefly discuss the quarter. We delivered solid year-over-year growth across nearly all areas of the firm, reflecting the strength of our diversified revenue base. In the first quarter, more than 50% of total Evercore revenues were from non-M&A sources. In advisory, we've advised on a number of notable and complex transactions in the quarter, including Calpine on its sale to Constellation Energy for $29.1 billion, which is one of the largest transactions so far this year, and Ampere on its $6.5 billion sale to SoftBank. The momentum has carried into April, with several significant transactions announced in recent weeks, including advising the shareholders of Colonial Enterprises on its $9 billion sale to Brookfield Infrastructure Partners, Woodside Energy on its $5.7 billion sale of a 40% interest in Louisiana LNG Infrastructure to Stonepeak, Dotmatics on its $5.1 billion sale to Siemens, and EQT on the minority stake sale of IFS for over EUR 15 billion. Turning to financial sponsors. Industry-wide global volumes increased in the first quarter compared to the prior year, though the number of transactions declined due to the recent macroeconomic and market headwinds. Sponsored deal activity remains selective, dependent on asset quality and sector. That said, our sponsors team has meaningfully expanded its global client base and continues to see strong dialogue levels. Our strategic defense and shareholder advisory group remains busy as the number of activist campaigns hit new records last quarter. Our liability management and restructuring group continues to see strong activity in the quarter, driven in part by private equity-led liability management situations. Currently, we are focused on sectors expected to be impacted by newly announced tariffs. Our team continues to collaborate closely across the firm to support clients as they navigate increased uncertainty. Our industry-leading private capital advisory group had a record first quarter. We continue to lead in GP-led continuation vehicles, which remain the primary revenue driver for PCA. We also achieved a record quarter in LP secondaries and made significant progress in our securitized capital solutions business. Our Private Funds Group continues to perform well as it broadens its client base. Underwriting had a strong first quarter with issuance activity showing solid momentum compared to historical periods. As we've experienced a slowdown in underwriting in the first few weeks of the quarter, we note that market conditions for this business can shift quickly in either direction. Our equities franchise had its strongest first quarter since the first quarter of 2020, driven by market volatility and increased trading volumes. Our market-leading macro and sector research teams have been highly engaged throughout the recent market volatility, and together with sales and trading, are supporting our institutional clients as they navigate a rapidly evolving environment. Lastly, Wealth Management delivered a solid quarter, achieving net new business amid a volatile environment. Before I turn it over to Tim to discuss the financial results, I want to wrap up with a few points. As we move through this period, we will continue to focus on long-term value creation for our clients and shareholders. Our capital return philosophy has not changed, and we have returned a record amount of capital to our shareholders in the quarter. We remain optimistic about our prospects over the medium and long term and are committed to building our firm across the cycle. Historically, we've emerged from challenging periods stronger than when we entered them, and we believe we have the opportunity to do so again. And with that, let me turn it over to Tim.

Thank you, John. Evercore delivered strong performance in the first quarter. Our results reflected the early stages of a gradual recovery that began last year. That said, based on what we know today, we expect results in the second and third quarters to experience an impact from the volatility in the markets and broader uncertainty in the environment. I will now discuss our financial results. For the first quarter of 2025, net revenues, operating income, and EPS on a GAAP basis were $695 million, $111 million, and $3.48 per share, respectively. My comments from here will focus on non-GAAP metrics, which we believe are useful in evaluating our results. Our first quarter adjusted net revenues of $700 million increased 19% versus the first quarter of 2024. First quarter adjusted operating income of $116 million increased 28% versus the first quarter of 2024. Adjusted earnings per share of $3.49 increased 64% versus the first quarter of last year. Our adjusted operating margin was 16.6% for the first quarter, up from 15.4% in the prior year period. In addition, we had a significant net tax benefit this quarter for which we will provide additional commentary. Turning to the businesses, first quarter adjusted advisory fees of $557 million increased 29% year-over-year, representing the strength of both our M&A and non-M&A advisory businesses. Our first quarter underwriting revenues were $54 million, down 2% from a year ago. Lower levels of follow-on activity were offset by improvement in the IPO market in the quarter and an increase in our business in the convertible area. Of course, activity in the equity capital markets business is sensitive to volatility and the overall health of public capital raising activities, and that market can open and close quickly. Commissions and related revenue of $55 million in the first quarter increased 14% year-over-year, primarily reflecting increased trading volume relating to higher levels of volatility. That business has gotten off to a good start in the second quarter. First quarter adjusted asset management and administration fees of $22 million rose 8% year-over-year, driven by an increase in fees as AUM increased. First quarter adjusted other revenue net was approximately $11 million, which compares to $33 million a year ago. The primary driver of the other revenue reflects lower performance of our DCCP hedge, which is correlated to the performance of the broader equity market, and had a negative impact of $5.9 million this year compared to a positive impact of $14.9 million in the year ago quarter, representing an approximately $20.8 million swing. The interest income was very similar to last year. Turning to expenses, the adjusted compensation ratio for the first quarter is 65.7%, down 30 basis points from the prior year period and consistent with our 2024 full-year compensation ratio. As a reminder, on our last earnings call, we noted that we were striving to achieve meaningful improvement in our compensation ratio in 2025, which may prove more challenging in the current environment. As we have discussed in the past, one of the most significant drivers of the comp ratio is revenue. It is still early in the year, and therefore, our best judgment is to accrue at 65.7%, and we will adjust appropriately as we progress through the year and obtain better visibility. Non-compensation expenses in the quarter were $124 million, up 14% from a year ago and less than 1% versus last quarter. The increase from a year ago is primarily driven by two things. First, communication and information services expense rose due to vendor rate increases and IT spend attributable to headcount growth. Subscription rates on information services generally have increased at a rate higher than inflation, and we believe this is broadly true in the industry. Second, occupancy and equipment increase related to the addition of new floors in our New York headquarters and the transition to a new location for some of our corporate employees due to the expiration of a lease as well as a new office in Paris and one in Dubai. We are maintaining a disciplined focus on managing our non-compensation expenses. Our non-comp expense ratio for the year will also be influenced by our revenues. While activity levels are good, full year revenues are difficult to predict with a high level of certainty. Our adjusted tax rate for the quarter was negative 39.7%, which included a benefit of $78 million related to the vesting of our RSUs and our share price at the time of vesting in relation to the price at the time of grant. This year, we received a greater benefit as our stock price appreciation at the time of vesting was significantly higher than the appreciation a year ago. We anticipate that our effective tax rate in the remaining three quarters of this year will be more similar to or slightly higher than what we experienced in those quarters during prior years.

Consistent with historical practice, we bought back stock through net settlements of vesting RSUs and in the open market, offsetting the dilution from the RSU grants that were issued in the quarter as part of our annual bonus compensation process. It is important to note that of the 1.6 million shares we repurchased in the quarter, nearly 60% were through net settlements at an average price of approximately $285, which has been our practice since our IPO in 2006. In most recent years, this has been beneficial as our share price has trended upward. But this year, it resulted in the net settlement of shares at a price materially higher than current levels. The remaining 40% was repurchased prior to quarter end at an average price of $227, with the last 400,000 shares repurchased at an average price of $201. Separately, our Board declared a dividend of $0.84 per share, an increase of 5% from the prior dividend declared. Our first quarter adjusted diluted share count was 44.4 million shares, an increase from the prior year, but down nearly 600,000 shares from the fourth quarter. We expect that the same accounting impact with regard to unvested RSUs that increased our weighted average share count as our share price was rising should cause a modest decrease in share count during the second quarter due to the decline in our share price. We continue to maintain a strong cash position considering the current economic and business environment, cash needs for the implementation of our strategic initiatives, including hiring plans and preserving a solid financial footing, which is particularly important in moments of volatility and uncertainty. It is still early in the year and there are some bright spots. Since the beginning of April, we have announced a number of significant transactions, which John mentioned in his comments. Our backlogs, activity levels, engagement letter signings, and client discussions remain strong, and our firm is durable and broadly diversified. We have confidence in the strength of our firm and our financial condition. We believe we are well positioned to execute on our strategy in all environments, including this one. With that, we will now open the line for questions.

Our first question will come from Devin Ryan with Citizens.

I wanted to just start off on the backlogs. And obviously, heard in the comment wrapping up, Tim, just about kind of backlogs and activity levels being strong. Would be great to get any of the nuance just amongst kind of client types or even geography, and more than anything, I think people just are trying to figure out, so I'd love to get your thoughts around what you guys think it will take to actually see things that are in the backlog progressing? Is it just a few weeks of the market settling down? Or is it just data suggesting the economy is not rolling over? Or just what do you think it will take to kind of get people to build conviction to actually move forward on these deep backlogs that as you're talking about still sound like they're pretty healthy?

Thank you for your question, Devin. I want to express my satisfaction with how our business and team are navigating these conditions. As you mentioned, there is significant uncertainty in the environment. However, our backlogs are strong, reaching record levels and increasing. Our communication is high across the board, and engagement letters are being processed at a strong pace. Several areas of our business are performing exceptionally well, while others are more affected by current uncertainties related to tariffs and other factors. To address your question directly, we believe that our businesses performing well, such as software, PCA, restructuring, activism, defense, infrastructure, and power, will continue to do so. We expect the deals in those backlogs will materialize. The timeline for clarity across our entire client base is uncertain, as it takes time for the current uncertainties to dissipate. Nevertheless, once there is more certainty and reduced volatility, we anticipate a strong recovery, particularly in sponsors and other major industry sectors that are actively preparing for market conditions to improve. It is difficult to say precisely when this uncertainty will subside, as it will influence market volatility. However, progress toward stabilizing perceptions of the economy and reducing fears of drastic changes will facilitate a quicker recovery. While predicting the end of uncertainty is challenging, it is clear that the market and clients are prepared. Regarding our backlog, we are not seeing many cancellations, only a few pauses.

Our next question will come from James Yaro with Goldman Sachs.

You indicated that you had a record first quarter contribution from Private Capital Advisory. Could you speak to the outlook for the secondaries business from here in a weaker sponsor M&A backdrop that I think at the beginning of the year? And relatedly, is there any ability to provide anything more quantitative on how big this business has become?

So our private capital advisory business is actually, as you indicated, strong. As you know, there's the limited partner business and there's general partner business. The general partner business is very much driven right now by continuity funds, and continuity funds are actually doing really quite well in terms of being a method if sponsors are thinking about to actually try to monetize. One of the things we all know is that there's a lot of pressure on financial sponsors to return capital to LPs. The continuity fund does that quite well. You asked in your question whether the M&A market slowing might impact how this business really fares. In fact, I think there's a lot more interest in continuity funds right now because it's a very strong and effective method of monetizing some of these assets and returning capital to the LPs. There's no question this is impacting that business, and we think it will sustain over the period. The LP business is actually doing quite well. As we said, we're running at record levels there in the first quarter. That one is not going to be quite as buoyant, I think, but it will be strong through the end of the year. I think it's not going to be lifted as much by that overall economic power and things that we talked about, which is the fact that the continuity funds are being driven by the lack of mergers. But generally, I think that business is going to continue to go along quite strongly. In terms of the size of that business, I don't think we disclosed that. Just to say it's a very significant and effective business.

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

I just wanted to ask on Europe. There's been a lot more positivity on the M&A backdrop in the region relative to the U.S., just given some of the potential positive actions by local governments there and a little bit more protection from tariffs. So I just want to get a sense as to how your conversations compare in Europe relative to those in the U.S. and whether we could see a recovery in activity in the region more quickly, in your view?

I would say that from what I'm hearing from our European business, I don't think that market is being driven by forces stronger than where things are in the United States. I think that in the U.S., there is a clear focus on regulatory matters and how that's going to play out. I don't think any of us really know yet exactly how that's going to be. We've heard the sentiments. At one point, we were hearing that the current administration was going to echo the past administration. But on the other hand, there are many participants who believe that there will be a variation on that kind of regulation and that things may be in many cases loosened to a degree to allow business and allow deals that might not have transpired in the last administration. But frankly, it's just too early to know. With respect to Europe, we think there is good activity in terms of dialogues and transactions that are being contemplated. It really remains to be seen whether Europe is really going to recover faster. From what we see and what I see, it doesn't look like it's going to be particularly stronger in terms of its recovery. But we do think that there is a good healthy level of activity and velocity going on there.

Yes. The only other point I would add to that is that while the tariffs, of course, affect Europe-U.S. trade flow, the trade flow within Europe is not hindered at the moment, which is a helpful factor.

Our next question will come from Mike Brown with Wells Fargo Securities.

I wanted to follow up on the comp ratio. So Tim, what kind of revenue growth do you think you need in 2025 to deliver year-over-year improvement? And then just given the headcount is up, there's inflationary pressure, deferred comp dynamics. Can you just give us a little color about how we can think about the fixed cost component for 2025 relative to 2024?

Yes, certainly. We've previously discussed making progress, and in fact, we have made some progress. Overall, things were going quite well. Last year, each quarter generated better revenue than the previous one, leading to a 23% increase for the year. Our first quarter results showed a 19% rise in revenue. As John mentioned, our backlog remains strong. Without the trade issues and the resulting uncertainty, we felt we were on track for continued improvement. It's worth noting that Evercore has performed reasonably well this past month, as reflected in the transactions we've announced. Additionally, our backlog has actually increased in the last month, indicating more incoming than outgoing business. However, revenue is crucial for improving our comp ratio since we've developed a much stronger and more diversified firm compared to a few years ago. For us to make substantial progress, revenue must increase. John also pointed out that it’s hard to predict how long this level of uncertainty might persist, so I will refrain from making any predictions at this point.

And our next question will come from Jim Mitchell with Seaport Global Securities.

Maybe you could just talk a little bit about the restructuring environment. Obviously, a lot of it's been liability management. Is there any issue in the debt markets in sort of fulfilling liability management assignments? Does that sort of put a pause on that business or push deal flow more towards Chapter 11 filings? Or is there still a good environment and a good ability to execute on those?

Thanks, Jim. The restructuring business is running at a very healthy clip right now. It had a very strong first quarter and they had a really strong year last year, and they're running ahead at this time in their backlog of last year. On many different counts, the business is quite healthy. In terms of debt markets and liability management, we're not seeing any limitation on our ability to serve the clients on liability management. In fact, that part of the business continues to be strong and to power forward and to build. Obviously, there are people looking at bankruptcies and the fact that rates are relatively high and there is some kind of concern with respect to 2025 and the debt wall. But I'd say that the business is quite diversified. It's the debtor side. We have significant creditor business, and the liability management piece just continues to power forward. I don't think there's really any limitation right now. We feel very constructive about that business.

Our next question will come from Ryan Kenny with Morgan Stanley.

Can you talk a bit about the hiring environment and what your hiring plans are in a potentially slower M&A backdrop? Should we expect the pace of hiring versus last year to slow down or pick up? And any color on the areas that you're leaning into would be helpful.

Sure. As we've said before, our hiring philosophy is that we continue to look at the areas where we think we need talent and we hire. In addition, if there's A+ talent that would like to come over, we accommodate that. Frankly, we've been running at a pretty consistent clip in terms of the people coming over. We have a good pipeline, and we're going to continue to consistently hire very strong people who are available, and we're going to remain on that. I wouldn’t think we will change dramatically as we don't manage to numbers. To the extent that there are really good people available, we are going to move on that. If those people in our pipeline slow down, that may slow down, and it may take more time. We continue to look at many areas, whether it's in technology and TMT or Healthcare and services. We look at consumer, and we have expanded in Europe over time. We basically added a team in France and hired someone in Italy. We're going to continue in all of those areas. We feel that talent drives opportunity, and that's where we're going with that.

Next, we have a follow-up question from James Yaro with Goldman Sachs.

I just wanted to touch on the equity capital markets business. Could you perhaps update us on the backlogs there, your outlook for IPOs and perhaps how those have evolved year-to-date with the recent market volatility?

Sure, James. Equity capital markets right now, we're looking at it as somewhat episodic in that there are definitely movements to prepare for a window opening, and we'll see whether that happens. We have a pretty good backlog. We have several places where we're involved in sound and we think upward strong IPO transactions. We'll see whether those actually roll out. I think our equity capital markets group feels quite optimistic that we're going to start that activity up in the not-too-distant future. In terms of thinking about that, I would say that the market will actually take their cues from certainty and from volatility. To the extent those do allow the market to open, I think you'll see it open, and I think there's a pretty good backlog of transactions that are ready to go, which have gone through some of the filing processes and are loaded to go. I believe as the uncertainty starts to diminish, you'll see that build. We feel optimistic that this business will begin to unfold some in the not-too-distant future.

Next, we do have a follow-up question from Jim Mitchell with Seaport Global Securities.

Could you discuss the non-comp expense side? Is there flexibility in a challenging environment? What are your thoughts on the growth of non-comp expenses this year?

Yes, sure. If you look at our results, you saw they were up only slightly from the fourth quarter, and they were up 14% from the year earlier. These were really driven by two things. One was occupancy – we took three floors in the building here. We relocated our finance team from one location to another in New York as the lease was expiring. We opened a Paris office for the team we added and moved the team in Dubai. Some of that was occupancy, and some of it was what we call communication and information services, which also has certain IT costs. That's driven by two things, primarily. One is headcount increases, because that, of course, increases subscription cost. The second would be the rates on the subscriptions themselves. The information services companies are important to our business and many others; they have pricing power. Those rates have gone up faster than the rate of inflation. There's not a giant amount of flexibility in the short term. We've tried to run a pretty tight ship. Our comp ratios, in relation to the peer group, have been toward the lower end. We want our people out seeing clients. While there has been a benefit from the increased use of Zoom for meetings, we want to maintain engagement. So there's not much flexibility, but I think our non-comp ratio levels can improve as revenue improves.

Thank you. This concludes today's Evercore First Quarter 2025 Earnings Conference Call. You may now disconnect.