Evercore Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Evercore First Quarter 2021 Financial Results Conference Call. During today's presentation, all parties will be in listen-only mode. Following the presentation, the conference call will be opened for questions. If you have a question, please press the star followed by the one on your touchtone telephone. Please press star zero for operator assistance at any time. For participants using speaker equipment, it is necessary to pick up your handset before making your selection. This conference call is being recorded today, Wednesday, April 28th, 2021. I would now like to turn the conference call over to your host, Evercourse Head of Investor Relations, Hallie Miller. Please go ahead, ma'am.

Thank you, Crystal. Good morning, everyone, and thank you for joining us today for Evercore's first quarter 2021 financial results conference call. I'm Hallie Miller, Evercore's head of investor relations. Joining me today on the call are John Weinberg and Ralph Schlossstein, 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 first quarter 2021 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 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 EverCorp's filings with the FCC, 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 Evercourse 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 John.

Thank you, Hallie, and good morning, everyone. What a difference a year makes. This time last year, we were in the early stages of the global pandemic. There was uncertainty about the science and trajectory of the virus, and there was no visibility on vaccines. The economic environment was weak, and the pace and shape of an economic recovery was unclear. With so much uncertainty and the weak economic environment and outlook, most of our clients turned inward to focus on operations, liquidity, and in many cases, restructuring, while restructuring activity and strategic activity was paused. From an operational perspective, I don't think any of us expected to spend the remainder of 2020 and a good portion of 2021 working predominantly remotely. Fast forward one year, and we've made tremendous progress. Monetary and fiscal stimulus helped stabilize the economy, and financial markets and recovery is well underway. Vaccine distribution is gaining momentum, and as a firm, we are actively planning for a gradual return to our offices over the next several months. In fact, Ralph, Bob, and I are in the office today for this call, and our business is robust as we continue to act as an advisor to clients on strategic, financial, investment and capital initiatives. The momentum we experienced through the first half of last year has continued into the first quarter. Our results, which represent our best first quarter ever, reflect our team's client focus, the breadth of capabilities that we can offer, and the continued favorable environment for M&A and capital raising activity. Transactions announced in the second half of 2020 and some even earlier, moved towards completion during the quarter and translated to revenues. We've also realized revenues from transactions announced and closed within the first quarter and have benefited from increased demand for activist defense advice over the past several months. Capital advisory, both public and private, has continued its strong contribution. The breadth of our equity capital markets capabilities, including IPOs, follow-ons, convertibles, and SPACs, has enabled us to participate in a meaningful way in the sustained strong levels of market issuance. In the first quarter, we participated in nearly 40 public market transactions that raised more than $22 billion in total proceeds. In private capital advisory, GP-led transactions remained strong during the quarter, and we have seen a strong recovery of volumes in new capital needs. In the face of economic recovery and strength in M&A and capital raising, classic restructuring activity has slowed and is concentrated among key sectors and issuers that have not rebounded as quickly as some others have. Our equities business, Evercore ISI, has continued to stay connected and engaged with our clients and has provided valuable research insight and sales and trading execution. And solid performance drove AUM growth in our wealth management business. We continue to focus on expanding coverage of key industries and building out our capabilities. We welcomed Mark Mahaney in March to Evercore ISI as head of internet research and Juan Pedro Perez-Cozar joined our advisory business in Madrid as our new head of Iberia earlier this month. And we are benefiting from Christy Grippe joining us earlier this year as our new head of ECM, as well as other strategic ads we've made on our ECM team. With the key ingredients for M&A activity in place, a positive economic outlook, strong equity markets, and available credit, high CEO confidence, and continued private equity activity. The momentum for strategic activity continues, and the desire for capital raising persists. Several of our key markets continue to be busy, and our backlogs are strong. The strategic merger market accelerated in the first quarter. Global and U.S. announced M&A dollar volume increased 95% and 164%, respectively. compared to the first quarter of 2020, and increased 3 percent and 13 percent, respectively, from a strong fourth quarter. In ECM, the desire for capital raising remains strong, though we have seen a cooling off in the SPAC underwriting market over the past several weeks. Our investments in SPAC capabilities have positioned us well to serve many new clients, though we remain selective in our participation in underwriting opportunities. We continue to see activity in shareholder advisory and activist defense. The number of new activist positions in the U.S. reached its highest level in more than two years at the end of 2020, and activists are focusing on larger targets. On the private capital advisory side of things, we are seeing accelerating activity in both capital raising for new funds as well as secondary and GP-level activity. We feel continuing momentum in our business, and we are excited by the prospects we see in front of us. Our broad capabilities have positioned us well to offer more services to clients as they execute on their priorities. Let me now turn to our financial results. We achieved record first quarter adjusted operating income, adjusted operating margin, adjusted net income, and adjusted earnings per share, driven by solid revenue growth and good operating leverage. First quarter adjusted net revenues of $669.9 million grew 54% year over year. First quarter advisory fees of $512.1 million grew 43% year over year. Based on current consensus estimates and actual results, we expect to maintain our number four ranking on advisory fees among all publicly traded investment banking firms for the last 12 months and to grow our market share relative to these same firms. We also continued to narrow the gap between us and the number three ranked firm on a latest 12-month advisory revenue and market share basis. Our first quarter underwriting fees of $79.3 million more than tripled year over year. As we said last quarter, this business experienced a step up in 2020 as the demand for capital raising increased substantially and the expansion of our capabilities and enhanced sector coverage enabled us to work on diverse assignments for clients. We've continued to broaden our participation across sectors, which we believe is helping us grow our business. While healthcare still represents the largest portion of revenues, TMT and industrials more than tripled their combined portion of revenues in the first quarter compared to full year 2020. First quarter commissions and related revenue of $53.5 million decreased 4% year over year as volumes declined relative to the elevated levels in the first quarter of 2020. First quarter asset management and administration fees of $17.8 million increased 16% year over year on higher AUM, which was $10.6 billion at quarter end, an increase of 11% year over year. Turning to expenses, our adjusted compensation revenue for the first quarter is 59%. First quarter non-comp costs of $72.7 million declined 12% year over year. Our non-compensation ratio for the first quarter is 10.9%. Bob will comment more on our non-comp expenses in his comments. First quarter adjusted operating income and adjusted net income of $201.8 million and $162.5 million increased 145% and 181% respectively. We delivered a first quarter adjusted operating margin of 30.1% and a first quarter adjusted EPS of $3.29, increased 172% year over year. Finally, we continued to execute on our capital return strategy. We returned $275.3 million to shareholders during the quarter through dividends and the repurchase of 1.9 million shares. And we achieved our commitment to offset the dilution associated with our annual bonus RSU grants through share repurchase in the first quarter. Our board declared a dividend of 68 cents, an increase of 11.5 percent. We expect to continue our annual reassessment of the dividend each April. Our board also approved a refresh of our share repurchase authority to 750 million. we will resume our historical policy of returning cash not needed for investment in our business to our shareholders through additional share repurchases. Now, let me turn the call over to Ralph to discuss some of our business highlights in the first quarter and update on our 2021 priorities.