Evercore Inc.

Good morning and thank you for standing by. Welcome to Evercore's second quarter 2022 financial results conference call. During today's call, 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 11 on your touchtone telephone. 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 27th, 2022. I would now like to turn the conference call over to your host, Evercore's Head of Investor Relations and ESG, Katie Haber. Please go ahead.

Thank you, Operator. Good morning, and thank you for joining us today for Evercore's second quarter 2022 financial results conference call. I'm Katie Haber, Evercore's Head of Investor Relations and ESG. Joining me on the call today is John Weinberg, our Chairman and CEO, and Celeste Millay, 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 2022 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 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 Evercourse 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 every course 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, Katie, and good morning, everyone. Since we last spoke a quarter ago on our earnings call, macroeconomic uncertainty and market volatility have intensified. The outlook from here remains clouded given numerous macro challenges including historically high inflation, supply chain constraints, rising interest rates, geopolitical tensions, and the current regulatory environment. With this backdrop, the equity markets too continue to experience instability. The S&P 500 suffered its worst first half decline in over 50 years. In addition, financing markets have also continued to tighten, making it harder to access capital and now at higher rates and wider credit spreads. This is a notable change from where we were just a few months ago. All of these macroeconomic and market factors have impacted our businesses as uncertainty is never good for M&A or capital raising. However, with all that said, Evercore generated a solid second quarter. For the second quarter, we generated $637 million in adjusted net revenues, $576 in adjusted advisory revenues, and $2.46 in adjusted earnings per share. These results underscore the breadth and depth of our franchise, coupled with our focus on managing the firm for the long term. Consistent with last quarter, our backlogs remain strong, but with more risk as we continue to face headwinds that I just noted. These headwinds have led to a continuation of the slowing of the pace of announcements and an elongation of the timing of transaction closings. Looking at the overall M&A market year to date, global and U.S. M&A announced dollar volume decreased 20% and 28%, respectively, compared to the first half of 2021. Also, the number of announced deals decreased 17% globally and 21% in the U.S. versus the first half of 2021. For the largest deals, those above $5 billion, global activity remains below the record levels in 2021 with dollar volume down 8% and the number of announced deals down 24% as compared to the first half of last year. That said, When comparing volumes to a more normalized year and not last year's records, M&A activity is still quite solid. We continue to have high levels of dialogue and activity with clients. This is seen across a broad spectrum of sectors and capabilities. It is in environments such as this one when interaction, connectivity, and thoughtful advice are most valued. It is critical that we remain deeply engaged with our clients. This is when they need our advice and support the most. We believe we are well positioned to address our clients' needs and to help them plan for the dynamics of this environment, highlighting the significant investments that we've made over time. And although some of the conditions needed for a strong M&A environment in the short term are not in place, the fundamental themes that drive M&A activity in the intermediate to long term remain intact. Turning to the quarter, The previously mentioned macroeconomic and industry forces impacted investment banking revenues. However, our business diversity enabled us to achieve solid results for the firm, indicative of the revenue-generating power of this franchise. In advisory, we saw continued strength in some of the largest sectors, including technology, media and telecom, healthcare, industrials, and the beginnings of an improved environment for energy, driven both by our corporate and sponsor clients. In addition, our European advisory team had a very strong quarter as a result of investments that we have made over time, and we continue to fill white spaces both geographically and from a sector perspective in the region. In capital advisory, we saw continued activity in our GP-led transactions, fundraising, secondary investments, continuation fund opportunities, and real estate capital advisory. In terms of restructuring, we are starting to see an increase in dialogues as it is becoming harder for companies to access the public debt markets, in addition to the cost of debt rising materially. That said, corporate balance sheets generally remain healthy, default rates are still low historically versus averages, and the environment is setting up differently than the restructuring cycle seen in 2020. We believe we are well positioned to advise our clients as activity picks up. Underwriting experienced a difficult quarter. Activity continued to be impacted by the significant spikes in volatility and macro headwinds that weighed on issuers and kept them on the sidelines. Away from traditional IPO and follow-on activity, which has been extremely quiet, we've seen a strong uptick across our platform in at-the-market offerings, also known as ATMs, as well as private placements. Overall, our ECM business is becoming more diverse from a sector and product perspective. We continue to build our pipeline and would expect to see the conversion of the pipeline when markets stabilize and as financing needs in some sectors become more acute into the year end. In our equities franchise, while the market volatility has had varied impacts on our business and our clients, our team is deeply engaged with clients, guiding them through the volatility. The business continues to consistently deliver market-leading research and differentiated client service. The firm also successfully hosted 10 conferences and symposiums in the second quarter, including our inaugural Global Clean Energy Summit. That was a cornerstone event for Evercore's ISI and advisory energy transition efforts and was well-received by our clients. And lastly, in wealth management, long-term performance remains strong, and we continue to generate new businesses in quarter despite some shrinkage in AUM linked to market performance. We remain optimistic about our future and continue to invest in our business by opportunistically adding A-plus talent in areas of targeted growth. Across our advisory teams, we are pleased to have added seven senior managing directors so far this year, all in key strategic areas, which we have previously identified, including TMT, debt advisory and placement, ECM, and Europe. As it relates to compensation, we are mindful of the environment and are focused on building our franchise prudently as we continue to invest in the key areas of growth that support our medium to long-term strategy. Celeste will discuss the compensation financial matrix in more detail shortly. Lastly, our capital return strategy. We remain committed to our goal of returning excess cash not invested in the business in the form of dividends and share repurchases to our shareholders. Even in this less certain environment, we've bought back a significant amount of stock and will opportunistically buy back shares while maintaining a durable balance sheet. As we look ahead, we remain optimistic about our future, and we have a clear strategy for the firm. Despite today's uncertain environment, we are confident that we have the team and capabilities to serve our clients throughout all environments, and we will continue to drive towards achieving our long-term goals. Now, let me turn the call over to Celeste.