Evercore Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore fourth quarter and full year 2020 financial results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference call will be open for questions. If you have a question, please press the star, followed by the one on your touch-tone telephone. Please press star zero for operator assistance at any time. For participants using speaker equipment, it may be necessary to pick up your handset before making your selection. This conference call is being recorded today, Wednesday, February 3rd, 2021. I would now like to turn the conference call over to your host, Evercore's Head of Investor Relations, Hallie Miller. Please go ahead, ma'am.

Thank you, Joelle. Good morning, everyone, and thank you for joining us today for Evercore's fourth quarter and full year 2020 financial results conference call. I'm Hallie Miller, Evercore's Head of Investor Relations, and joining me today on the call are Ralph Schlossstein and John Weinberg, our co-chairmen and co-CEOs, and Bob Walsh, our CFO. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore's fourth quarter and full year 2020 financial results. The company's 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 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. I want to point out that during the course of this conference call, we may make a number of forward-looking statements. Any forward-looking statements that we make, including those about COVID-19 and its effect on our business, are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially than those indicated in these statements. These factors include, but are not limited to, those discussed in EverCorp'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 gap 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 EverCorp's performance on an annual basis. As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closing. I'll now turn the call over to Ralph.

Thank you very much, Hallie, and good morning to everyone. It's hard to believe that when we reported our 2019 earnings at this time last year, everything was quote unquote normal. Our team was energized and ready for the new year. Our expectations were for another strong year and many of the analysts and investors on this call were probably looking forward to wrap up earnings season and attending investor conferences in Miami. The past 12 months, however, have been anything but normal. So please indulge me a brief review of the year. When faced in mid-March with two simultaneous crises, a global pandemic, and the sharpest economic downturn in decades, our entire business and way of life disrupted. Our clients' needs changed rapidly, and many of their strategic initiatives, particularly their M&A plans, were placed on hold. Corporate leaders and financial sponsors became focused almost exclusively on cost control, reducing capital spending, increasing liquidity, amending debt covenants, and strengthening their balance sheets. And while most previously committed M&A transactions were complete, new strategic activity essentially stopped. Later in the second quarter, fiscal and monetary stimulus stabilize the debt and equity markets, we helped clients capitalize on the opportunity to build liquidity and, in certain cases, to initiate large restructuring and recapitalization transactions. These balance sheet and liquidity-focused assignments, which drove demand for capital-raising advice and execution in both the equity and debt markets, dominated our advisory services in the second quarter and into the beginning of the third quarter. As the third quarter evolved, strategic and M&A discussions began to resume. Despite the sharp decline in M&A activity, which lasted several months starting the beginning of March, our revenues were essentially flat year over year through the first nine months. So how did this happen? First, over the last few years, we have made significant investments that have materially broadened the services that we can provide to our clients. We acquired ISI, which materially enhanced our research, underwriting, and distribution capabilities. We greatly strengthened our restructuring team by adding five new SMDs globally. We dramatically enhanced our equity underwriting team. We enhanced our private capital raising capabilities for both sponsors and public and private companies. We strengthened our debt advisory capabilities. We added the best activist defense and shareholder engagement team in our entire industry. And we added best-in-class capabilities in corporate restructuring, split-offs, spins, Morris Trust, reverse Morris Trust, et cetera, and best-in-class capabilities in SPAC capital raising and SPAC merger advice. So first, the first nine months of 2020, we demonstrated that we have in place best-in-class capabilities to advise our clients in widely varied environments. And we demonstrated that our team has the talent and the entrepreneurial spirit to deploy these capabilities rapidly in support of our clients. In the latter half of 2020, the M&A market began to recover meaningfully. Global and U.S. M&A volume increased 92% and 163% respectively compared to the first half, and the number of global and U.S. deals increased 18% and 16% respectively. Still for the year, M&A volume was down 4%, and in the U.S., the largest M&A market for all firms and for Evercore particularly, M&A volume was down 21%. The recovery in M&A, coupled with continued momentum and the broader advisory capabilities that I just described, led to a spectacular fourth quarter by any measure and fueled the many records that we achieved as a firm in 2020. The point of this review is simple. In 2020, we proved that while M&A is still our largest source of revenue, our capabilities to advise our clients and to be paid for that advice is much broader than many of our shareholders and many of our analysts and perhaps even we would have anticipated. So while there clearly is some cyclicality in various parts of our business, we truly are very much an all-weather firm that can advise clients on their most important strategic, financial, and capital needs in widely varied environments and a firm that can generate significant revenues by providing that advice to our clients in widely varied environments, all the while sticking religiously to our fee-only, no capital risk business model. As we begin 2021, M&A dialogues and strategic activity discussions are strong. Growth companies continue to access the public markets for capital. Financial sponsors and other private businesses are seeking capital and acquisition in the private and public markets, and institutional investors continue to value high-quality research, investment analysis, and advice. So as we enter 2021, our momentum continues to be significant in all of our business. The level of activity of our teams is high, and our backlog remains very strong. While there certainly still are challenges related to the pandemic and the economy, and all of us at Evercore most certainly have enormous empathy for those in our society who have not been as fortunate as we have been, we begin 2021 in a very strong position. As we look forward, we continue to focus on long-term and trusted relationships with both current and prospective clients, determined to advise them on their most important strategic, financial, and capital decisions. We are planning for our eventual return to our offices globally with the health and safety of our team paramount as we develop these plans. We are focused on maintaining our strong culture that is grounded in our core values and in collaboration, both of which are hugely important contributors to our many accomplishments in 2020. We, of course, are actively pursuing opportunities to add talent strategically throughout the firm, and we are optimistic about our ability to recruit this talent. We see significant opportunities to continue to grow our business, both by expanding our coverage of key sectors and geographies and by deepening our product capabilities. And we are committed to continuing to operate with financial discipline, delivering strong returns to our shareholders while maintaining a strong and liquid balance sheet and resuming our historical approach of returning any excess capital to our shareholders through dividends and share repurchases. Let me now turn to our financial results. We achieved record fourth quarter and full year adjusted revenues adjusted operating income, adjusted net income, and adjusted EPS, driven by extremely strong revenue growth and good operating leverage. Fourth quarter adjusted net revenues of $969.9 million grew 45% year over year, and full year adjusted net revenues of $2.33 billion grew 14% compared to 2019, the highest annual revenues in our history. Fourth-quarter advisory fees of $790 million grew 40 percent year-over-year, and full-year advisory fees of $1.76 billion grew 6 percent compared to 2019 and also were the highest in our history. Based on current consensus estimates and actual results, we expect to remain our number four ranking on advisory fees among all publicly traded investment banking firms. And we also expect to grow our market share among these firms. Importantly, our growth in 2020 combined with declining advisory revenues at the three top bulge bracket firms resulted in a nearly 50% reduction in the gap between us and the number three ranked firm. And we narrowed the gap between Evercore and the number one and number two firms as well. fourth quarter underwriting fees of $95 million, and full year underwriting fees of $276.2 million, each more than tripled year over year. This business experienced a true step up in 2020, in large part due to the expansion of our capabilities that allowed us to work on a variety of assignments for our clients, including IPOs, follow-ons, convertibles, SPACs, and CAPs. as well as the more prominent role we played in virtually all transactions with which we were involved. Fourth quarter commissions and related fees of $52.4 million increased 1% year over year, and full year commissions and related fees of $205.8 million increased 9% compared to 2019. Fourth quarter asset administration fees of $20.1 million increased 20% year over year, And full-year asset management and administration fees of $67.2 million increased 11% compared to 2019. Turning to expenses, our adjusted compensation rate for the fourth quarter is 52.3%, and for the full year is 58.9%. Fourth quarter non-compensation costs of $85.8 million declined 12% year over year. and full-year non-compensation costs of $316.7 million declined 10 percent versus 20 percent. Fourth quarter adjusted operating income and adjusted net income of $376.4 million and $277.4 million increased 110 percent and 113 percent respectively, and adjusted earnings per share of $5.67 increased 108 percent versus the fourth quarter of 2019. Full-year operating income and adjusted net income of $639.3 million and $459.6 million increased 28 and 23 percent respectively, and adjusted earnings per share of $9.62 increased 25 percent versus 2019. We produced a full-year operating, adjusted operating margin of 27.5 percent, roughly 300 basis points of margin expansion compared to 2019. Finally, we remain committed to returning excess capital to our shareholders. Our board declared a dividend of 61 cents, and we will resume our normal annual reassessment of that dividend in April. We remain committed to offsetting the dilution of our upcoming bonus RSU grants and RSU grants to new hires through share buybacks. and we will resume our historical policy of returning excess earnings not reinvested in the business to our shareholders through dividends and share repurchases. Bob will comment later on our GAAP results and provide additional detail on our balance sheet. Let me now turn the call over to John to discuss some of our achievements in 2020 and our opportunities for growth in 2021 and beyond. Thank you, John.