Evercore Inc.

Good morning and thank you for standing by. Welcome to Evercore's second quarter 2021 financial results conference call. During today's call, 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 touchstone 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. As a reminder, this conference call is being recorded today, Wednesday, July 28, 2020. I would now like to turn the conference call over to your host, Evercore's Head of Industrial Relations, Holly Miller. Please go ahead.

Thank you, Mary. Good morning, and thank you for joining us today for Evercore's second quarter 2021 financial results conference call. I'm Hallie Miller, Evercore's head of investor relations. Joining me on the call today are John Weinberg and Roush Lastine, our co-chairmen and co-CEOs, and Bob Walsh, our CFO. Celeste Millay, who joined Evercore earlier this month and will be taking over as CFO on September 1st, is also with us this morning. After our prepared remarks, we will open up the call for questions. Earlier today, we issued a press release announcing Evercore's second quarter 2021 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 four investor sections 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 Evercourt'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 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 Ralph.

Thank you very much, Hallie, and good morning to everyone. We began our last earnings call commenting on what a difference a year had made. And as we sit here today, not only are things dramatically different from a year ago, but things are also somewhat better than even three months ago. Over the past three months, we have witnessed a material improvement in the global economy, in global markets, and in Evercore's business. The rollout of COVID-19 vaccines accelerated in the U.S. and in many countries around the world during the quarter, and we experienced a decline in new daily cases in areas where vaccination rates are high. We are grateful for the progress being made against the pandemic, but we also are cognizant that there are many around the world who have not been as fortunate to date and are in earlier stages of overcoming this pandemic. And while we are encouraged by the progress being made overall, we continue to monitor the new COVID variants, the ongoing vaccine rollout in the U.S. and other parts of the world, and the data on infection rates, which unfortunately seem to be rising right now, particularly in areas with lower vaccination rates. We have delivered strongly for our clients over the past 17 months, advising them on their most important strategic, financial, and capital requirements during one of the most uncertain and volatile periods of our lifetimes. And we produced extraordinary financial results for our shareholders. And while we achieved a lot while operating as a predominantly remote firm, we are genuinely energized by the reopening of our offices that began toward the end of the second quarter. Many of us are using the summer months to come into the office, so I am pleased to be here at our headquarters with my colleagues in person on this call this morning. We remain firmly committed to our culture of in-office collaboration, apprenticeship, and mentorship, and we look forward to bringing our teams back to the office over the next several weeks and months. That said, we have learned a lot about operating flexibly over the past 17 months, and we are committed to integrating more flexible work arrangements into the way we work going forward. As the macroeconomic environment continued to strengthen throughout the quarter, our business did as well. Our results, which represent the best first half in our history, reflect the breadth and diversity of our capabilities, our team's relentless client focus, and the continued favorable environment for M&A and capital raising. And while we continue to believe that we are in the early stages of the next M&A upcycle, we are mindful that the resurgence of the virus in certain geographies the outlook for inflation and interest rates, and potential regulatory scrutiny and tax changes could affect the trajectory and the length of that upcycle, even though there is absolutely no evidence of that today. High levels of announced M&A transaction volume continued during the quarter. The total dollar volume of announced M&A increased 17% sequentially from as the number of transactions increased 7% and the average deal size increased 10%. In fact, the second quarter represents the fourth straight quarter to surpass $1 trillion in announced M&A activity, and the first time ever. the trailing 12 months activity exceeded $5 trillion. And large transactions are making a significant comeback compared to this time last year. This continued high level of activity led to record second quarter revenues and is adding yet again to our already strong backlogs. All of our capital advisory businesses, public and private, debt and equity, continue to be meaningful contributors to our firm-wide results. While the hot market for equity issuance cooled a bit during the quarter, it still remains well above historical averages. The investments that we have made in our ECM capabilities and our enhanced sector coverage enable us to participate in a wide array of assignments across many sectors and to take an increasingly large role in these assignments. In the private capital advisory businesses, momentum in capital raising for financial sponsors continued, and secondary market activity remained high, particularly activity related to single-asset and multi-asset continuation funds. Traditional restructuring opportunities have been more limited given the strength of the the strong availability of credit, and the positive environment for M&A and capital raising. But our team is adapting to meet client needs, working with financial sponsors and creditors on liability management and debt advisory assignments, though admittedly not as busy as they were in July of last year. Our equities business, Evercore ISI, continues to produce and deliver high-quality research and service to our clients, and we continue to make investments in our platform. The team delivered a solid quarter in line with its historical three-year quarterly average as the impact of lower volatility and trading was partially offset by investments we have made to support our clients more broadly, particularly in converts and agency options. And solid performance continues to drive assets under management growth in our wealth management business. We continue to add talent in all parts of the firm, providing the fuel for future growth, And John will talk more about this in his remarks. And we welcome Celeste Mellett to Evercore earlier this month, who is transitioning this summer to become our next CFO, succeeding Bob Walsh, who has been here for the last 14 years. We look forward to working with Celeste as she helps to drive the next stage of our firm's growth. Let me now turn to our financial results. We achieved record second quarter and first half adjusted net revenues, adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share, driven by continued revenue growth and strong operating leverage. Second quarter adjusted net revenues of $691.2 million grew 34% year over year. Year-to-date adjusted net revenues of $1.36 billion increased 43% compared to the prior year period. Second quarter advisory fees of 561.4 grew 67% year-over-year. Year-to-date advisory fees of $1.07 billion increased 54% versus the prior year period and represent the first time that we have exceeded $1 billion in advisory revenues for the first half of the year. Our trailing 12-month advisory fees exceeded $2 billion for the first time in our history. Based on current consensus estimates and actual results, we expect to maintain our number four ranking in advisory fees among all publicly traded investment banking firms for the last 12 months and to grow our market share relative to these firms. In the first half of the year, We also continue to narrow the gap between Evercore and the number three ranked firm in terms of trailing 12 months advisory fees. Our efforts to solidify further our position as the leading independent investment bank and to compete with firms larger than us have been recognized by clients and by industry observers as we were recently selected by Euromoney to to be North America's best bank for advisory in 2021. And that was among all firms, not just among the independent firms. Second quarter underwriting fees of $48 million declined 49% year over year, but excluding two sizable fees during the second quarter of 2020, one from PNC BlackRock and one from Danaher, underwriting fees were essentially flat year over year. Year-to-date underwriting fees of $127.3 million increased 11% versus the prior year period, even including the PNC, BlackRock, and Danaher fees. While there was a slowdown in equity issuance during the quarter, largely driven by fewer SPAC IPOs, demand for capital raising continues to be strong more broadly. The breadth of our capabilities and enhanced sector coverage have enabled us to work on diverse assignments for clients, and our second quarter underwriting revenues include engagements from seven different sectors. Second quarter commissions and related revenue of $50.7 million declined 7% year over year, as both volumes and volatility were lower relative to the elevated levels in the second quarter of 2020. Year-to-date commissions and related revenues of $104.3 million declined 5% versus the prior year period. Year-to-date revenues are 6% higher than the first-half average of the prior three years, which includes the extreme volatility during the first half of last year. Second quarter asset management and administration fees of $19 million increased 25% year-over-year, as quarter-end AUM were $11.1 billion, an increase of 23% year-over-year, principally related to positive investment performance and market appreciations. Year-to-date asset management and administration fees of $36.8 million increased 21% versus the prior year period. Turning to expenses, our adjusted compensation ratio for the second quarter and year-to-date is 59%. This reflects our current best judgment on compensation for the year, recognizing both the factors that may affect revenues in the second half of the year and the current pressures on market compensation for our industry. As always, we will reassess our compensation ratio at the end of the third quarter and again at year-end and make adjustments then, if appropriate. Second quarter non-compensation costs of $73.1 million declined 5% year-over-year. Our non-compensation ratio for the second quarter is 10.6%. Year-to-date non-compensation costs of $145.8. million declined 9% versus the prior year period, and Bob will comment more on non-comp expenses in his remarks. Second quarter adjusted operating income and adjusted net income of $210 million and $154 million increased 105% and 115% respectively. Year-to-date adjusted operating income and adjusted net income of $412 million and $316.5 million, increased 122% and 144% respectively. We delivered a second quarter operating margin of 30.4% and second quarter adjusted EPS of $3.17, an increase of 107% year-over-year. Year-to-date adjusted margin is 30.3% and adjusted EPS of $6.47, increased 136% versus the prior year. Finally, we continued to execute our capital return strategy, and we resumed our historical policy of returning cash not needed for investment in our business to our shareholders through share repurchases and, of course, dividends. We returned $221 million to shareholders during the quarter through dividends and the repurchase of 1.4 million shares. Year-to-date, we returned nearly $500 million through dividends and the repurchase of 3.3 million shares, a record level of capital return for our shareholders. We achieved our commitment to offset the dilution associated with our annual bonus RSU grants through share repurchases in the first quarter. So these additional repurchases in the second quarter represent discretionary buyback activity that shrinks the shareholder base. Our board declared a dividend of 68 cents. Let me now turn the call over to John to discuss some of our business highlights from the second quarter and the first half and to provide an update on our 2021 priorities.