Evercore Inc.

Good morning and welcome to the Evercore fourth quarter and full year 2023 earnings conference call. Today's call is scheduled to last about one hour, including remarks by Evercore management and the question and answer session. In order to ask a question, please press the star key followed by the number one on your touchtone phone at any time. I will now turn the call over to Katie Haber, Managing Director of Investor Relations at ESG at Evercore. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today on Evercore's fourth quarter and full year 2023 Financial Results Conference Call. I'm Katie Haber, Evercore's Head of Investor Relations in ESG. Joining me on the call today is John Weinberg, our Chairman and CEO, and Tim Lalonde, 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 2023 financial results. Our discussion of our results today is complimentary 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 a number of 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 every course filing 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 closing. I will now turn the call over to John.

Thank you, Katie. Good morning, everyone. 2023 was a year of significant investment for Evercore, and the firm gained momentum, which has continued into 2024. Despite the challenging market environment, we've continued to strengthen our franchise by investing in and diversifying our business. We hired our largest class ever of advisory senior managing directors, and we expanded our client relationships and coverage universe. Our competitive positioning and strategic focus provided us with the opportunity to hire this new group of exceptional talent, and we expect to continue investing in our business in 2024. Over the past decade, we've broadened and deepened our capabilities, which have significantly transformed the firm. Aside from being a market leader in the M&A business, which has always been core to what we do, we've invested heavily in virtually all of our businesses in which we've built real scale. This build-out has led to a significant diversification of our revenues. In fact, in 2023, more than a third of our revenues came from non-M&A sources. This growth has provided us with the ability to comprehensively service our clients in nearly all areas of investment banking, which has positioned us once again as the fourth largest investment bank globally, based on advisory fees. We believe we are better positioned today than at any other point in our history. Today, our internal backlogs continue to strengthen. When coupled with a better market environment, and our current and ramping SMD base, comprised of both external hires and internal promotes, we expect to see higher activity levels and an increase in our firm's productivity over time. We are now a month into the new year, and we are encouraged by what we see. Activity and confidence levels have continued to improve, building off momentum we saw towards the end of last year. So far as a firm, we've been very active and involved in some of the largest and most notable transactions to date. We remain hopeful that 2024 will present an improved operating backdrop for the M&A and capital raising markets. However, it is still early days and we continue to closely monitor the geopolitical and economic uncertainties that could alter the timing and strength of an M&A recovery. as a result we expect the recovery to be a slow build before i discuss our businesses i want to touch further on our hiring activities we're pleased with our 11 newest advisory smd additions bringing on board some of the highest quality bankers in their respective areas of expertise these include technology in both u.s and europe sponsor coverage business services industrials real estate and capital advisory all areas of strategic significance to evercore looking at 2024 we will continue to be active in the market and recruit talent based on our strategic needs while maintaining our high standards additionally developing talent from within remains critical to our strategic build-up we begin 2024 with seven newly promoted SMDs in our advisory business across various sectors and capabilities, as well as one in our equities business. This expanding group of high-quality bankers will allow us to provide enhanced coverage and service to our growing client base. About 40% of our advisory SMDs have been promoted from what's inside the organization, and we are committed to further growing this group. Let me now spend a couple of minutes on highlights from the quarter and year. As we previously discussed, our full-year financial results reflect a challenging operating environment. Tim will discuss our financial results and metrics in detail in a few minutes. In the fourth quarter, confidence levels and credit availability started to improve. M&A activity subsequently picked up, notably with some large transactions. Nevertheless, in 2023, industry-wide M&A announcement activity remained below historical levels, particularly among sponsors. For the year, global announced M&A activity based on deal value was down almost 20%. Yet for Evercore specifically, announced global M&A activity as measured by deal value was up over 40% versus the year prior due in part to announcements late in 2023. In the fourth quarter, we advised on several transformative transactions, including Chevron on its $60 billion acquisition of Hess, U.S. Steel on its sale to Nippon Steel for $14.9 billion, and NFP on its sale to Aon for $13.4 billion. In 2023, we were involved in four of the 10 largest deals, all of which were announced in the second half of the year. This momentum has continued into the first few weeks of 2024. We have advised on three of the largest announced global strategic transactions, including Synopsys, on its $35 billion acquisition of Ansys, which is the largest deal year-to-date. Additionally, we advise global infrastructure partners on its sale to BlackRock for $12.5 billion and Chesapeake Energy on its $7.4 billion merger with Southwestern Energy. As we mentioned in our last earnings call, we continue to make progress on our sponsor coverage efforts. For the last several years, 30% to 45% of our advisory revenue has been sponsor-related. including deals in our private capital businesses our european advisory group had a solid quarter and year despite continued macro and geopolitical challenges the team has a very healthy pipeline as we enter 2024 yet execution and closing timelines remain elongated we continue to focus on further expanding in the region and we are excited about the opportunity set there Our private capital advisory and fundraising businesses finished 2023 on a strong note. This was driven in part by robust continuation fund activity in which we are the market leader. In the fourth quarter, we also priced our first ever collateralized fund obligation security, which marks the successful addition of a new product capability. Additionally, our private fundraising group had its second best year ever. demand for our private capital advisory businesses continues to grow. Our strategic defense and shareholder advisory business had a strong year as activist campaigns continued near record levels both in the U.S. and internationally. As markets remain challenged and interest rates elevated, our restructuring business had another strong year. Activity in the fourth quarter continued at a robust pace in a large part driven by liability management activity among sponsors. We're beginning 2024 with a strong pipeline for opportunities. In underwriting, the market and our business did not yield the level of activity or results many were hoping to see in the fourth quarter or for the full year. in the year we were a book runner on nearly all of our underwritten equity offerings of note we were the left lead book runner on a 2.2 billion dollar offering for ge healthcare technologies we remain focused on improving our market share by continuing to diversify across sectors and products as well as elevating our underwriting position on deals Our equities franchise closed out the year with its strongest fourth quarter performance in the last five years. Despite continued low volatility and market volumes, we recently announced the addition of top-ranked analysts in the biotech, consumer, and technology sectors, as well as in public policy. lastly in wealth management our assets under management ended the quarter at 12.3 billion which is the highest month-end aum point since the business's inception while 2023 was another challenging year for the industry and evercore we are proud of what we've accomplished as we begin a new year we're excited for the opportunities that lie ahead for the firm we remain focused on executing our strategic plan by continuing to invest in, expand, and deepen our capabilities and products, as well as further enhancing our intellectual capital. With that, let me turn the call over to Tim.