Evercore Inc. (NYSE: EVR):

Evercore Inc. (NYSE: EVR) today announced its results for the fourth quarter and full year ended December 31, 2022.

LEADERSHIP COMMENTARY

John S. Weinberg, Chairman and Chief Executive Officer, "Evercore's results demonstrate our strong competitive and financial positioning. 2022 also marked a year of investment for our firm as we continued to invest in our businesses and serve our clients. We remain focused on executing our growth strategy and we believe the breadth and depth of our diverse platform will continue to drive long-term value."

Roger C. Altman, Founder and Senior Chairman, "Evercore realized the second best year in its history, and again gained market share, despite weakening macroeconomic conditions as the year progressed. We don't yet know how 2023 will unfold, but, competitively speaking, the Firm has never been more strongly positioned."

Evercore's quarterly results may fluctuate significantly due to the timing and amount of transaction fees earned, as well as other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.

Business Segments:

During the fourth quarter of 2022, the Company changed the name of its "Investment Banking" segment to "Investment Banking & Equities".

Evercore's business results are categorized into two segments: Investment Banking & Equities and Investment Management. Investment Banking & Equities includes providing advice to clients on mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Investment Management includes Wealth Management and interests in private equity funds which are not managed by the Company, as well as advising third-party investors through affiliates. See pages A-2 to A-9 for further information and reconciliations of these segment results to our U.S. GAAP consolidated results.

Non-GAAP Measures:

Throughout this release certain information is presented on an adjusted basis, which is a non-GAAP measure. Adjusted results begin with information prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and then those results are adjusted to exclude certain items and reflect the conversion of certain Evercore LP Units into Class A shares. Evercore believes that the disclosed adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore's results across several periods and facilitate an understanding of Evercore's operating results. Evercore uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.

Special Charges, Including Business Realignment Costs, have been excluded from Adjusted Net Income Attributable to Evercore Inc. These charges in 2022 relate to charges associated with the prepayment of the Company's $67 million aggregate principal amount of its 5.23% Series B senior notes, originally due March 30, 2023 (the "Series B Notes"), as well as certain professional fees, separation benefits and other charges related to the ongoing wind-down of the Company's operations in Mexico.

The gain on the sale of a portion of the Company's interests in ABS in the first quarter of 2022 has been excluded from Adjusted Net Revenues.

Evercore's Adjusted Diluted Shares Outstanding for the three and twelve months ended December 31, 2022 were higher than U.S. GAAP, as a result of the inclusion of certain Evercore LP Units and Unvested Restricted Stock Units.

Further details of these adjustments, as well as an explanation of similar amounts for the three and twelve months ended December 31, 2021 are included in pages A-2 to A-9.

Selected Financial Data – U.S. GAAP Results

The following is a discussion of Evercore's consolidated results on a U.S. GAAP basis. See pages A-5 to A-7 for our business segment results.

Net Revenues

Advisory Fees – Fourth quarter Advisory Fees decreased $267.0 million, or 27%, year-over-year, reflecting a decrease in the number of Advisory fees earned and a decline in revenue earned from large transactions during the fourth quarter of 2022. Full year Advisory Fees decreased $359.0 million, or 13%, year-over-year, reflecting a decrease in the number of Advisory fees earned.

Underwriting Fees – Fourth quarter Underwriting Fees decreased $20.9 million, or 32%, year-over-year, and full year Underwriting Fees decreased $124.1 million, or 50%, year-over-year. The decrease principally reflects a decrease in the number of transactions we participated in due to the decline in overall market issuances.

Commissions and Related Revenue – Fourth quarter Commissions and Related Revenue decreased $1.2 million, or 2%, year-over-year, primarily reflecting lower trading volumes, partially offset by increased revenues from research subscriptions. Full year Commissions and Related Revenue increased $0.4 million year-over-year, primarily reflecting increased revenues from research subscriptions, partially offset by lower trading volumes.

Asset Management and Administration Fees – Fourth quarter Asset Management and Administration Fees decreased $1.9 million, or 11%, year-over-year, driven by a decrease in fees from Wealth Management clients, as associated AUM decreased 14%, primarily from market depreciation. Full year Asset Management and Administration Fees decreased $1.3 million, or 2%, year-over-year, driven by a decrease in fees from Wealth Management clients, as associated AUM decreased 14%, primarily from market depreciation.

Other Revenue – Fourth quarter Other Revenue, net, increased $6.6 million, or 90%, year-over-year, primarily reflecting higher gains in our fixed income investment portfolios, which primarily consist of U.S. treasury bills, and higher interest income, partially offset by lower performance of our investment funds portfolio due to the overall market decline. The investment funds portfolio is used as an economic hedge against our deferred cash compensation program. Full year Other Revenue, net, decreased $43.4 million year-over-year, primarily reflecting a shift from gains of $29.0 million in 2021 to losses of $29.8 million in 2022 on our investment funds portfolio due to the overall market decline. The decrease was also driven by a $4.4 million gain on the redemption of the G5 debt security in 2021. This was partially offset by higher gains in our fixed income investment portfolios and higher interest income, as well as a $1.3 million gain on the sale of a portion of our interests in ABS during 2022.

Expenses

Employee Compensation and Benefits – Fourth quarter Employee Compensation and Benefits decreased $36.1 million, or 6%, year-over-year, reflecting a compensation ratio of 62.9% for the quarter versus 50.1% for the prior year period. The decrease in Employee Compensation and Benefits compared to the prior year period principally reflects a lower accrual for incentive compensation, partially offset by higher base salaries and higher amortization of prior period deferred compensation awards. Full year Employee Compensation and Benefits decreased $151.2 million, or 8%, year-over-year, reflecting a full year compensation ratio of 61.5% versus 56.2% for the prior year period. The decrease in Employee Compensation and Benefits compared to the prior year period principally reflects a lower accrual for incentive compensation, partially offset by higher base salaries and higher amortization of prior period deferred compensation awards. The Compensation Ratio was also impacted by the lower performance of our investment funds portfolio during the current year period. See "Deferred Compensation" for more information.

Non-Compensation Costs – Fourth quarter Non-Compensation Costs decreased $5.0 million, or 5%, year-over-year, primarily driven by a decrease in other operating expenses related to charitable contributions made to the Evercore Foundation in 2021, partially offset by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021 and increased throughout 2022. The fourth quarter Non-Compensation ratio of 11.5% increased from 9.0% for the prior year period. Full year Non-Compensation Costs increased $35.6 million, or 11%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021 and increased throughout 2022, as well as an increase in professional fees and bad debt expense. This was partially offset by a decline in the fair value of contingent consideration owed to former equity interest holders in our RECA business, as well as charitable contributions made to the Evercore Foundation in 2021. The full year Non-Compensation ratio of 13.2% increased from 10.0% for the prior year period.

Special Charges, Including Business Realignment Costs – Fourth quarter Special Charges, Including Business Realignment Costs, relate to separation benefits and other charges related to the ongoing wind-down of the Company's operations in Mexico. Full year 2022 Special Charges, Including Business Realignment Costs, relate to charges associated with the prepayment of the Company's Series B Notes during the second quarter, as well as certain professional fees, separation benefits and other charges related to the ongoing wind-down of the Company's operations in Mexico.

Full year 2021 Special Charges, Including Business Realignment Costs, relate to the write-down of certain assets associated with a legacy private equity investment relationship which, consistent with the Company's investment strategy, the Company decided to wind down during the third quarter of 2021.

Effective Tax Rate

The fourth quarter effective tax rate was 27.7% versus 23.9% for the prior year period. The full year effective tax rate was 24.5% versus 22.2% for the prior year period. The effective tax rate in 2022 reflects higher state and local taxes and a lower amount of earnings allocated to noncontrolling interest holders. The full year provision for income taxes for 2022 reflects an additional tax benefit of $19.6 million versus $18.7 million for the prior year period, due to the net impact associated with the appreciation or depreciation in our share price upon vesting of employee share-based awards above or below the original grant price.

Selected Financial Data – Adjusted Results

The following is a discussion of Evercore's consolidated results on an Adjusted basis. See pages 3 and A-2 to A-9 for further information and reconciliations of these metrics to our U.S. GAAP results. See pages A-5 to A-7 for our business segment results.

Adjusted Net Revenues

See page 4 for additional business metrics.

Advisory Fees – Fourth quarter adjusted Advisory Fees decreased $266.8 million, or 27%, year-over-year, reflecting a decrease in the number of Advisory fees earned and a decline in revenue earned from large transactions during the fourth quarter of 2022. Full year adjusted Advisory Fees decreased $359.1 million, or 13%, year-over-year, reflecting a decrease in the number of Advisory fees earned.

Underwriting Fees – Fourth quarter Underwriting Fees decreased $20.9 million, or 32%, year-over-year, and full year Underwriting Fees decreased $124.1 million, or 50%, year-over-year. The decrease principally reflects a decrease in the number of transactions we participated in due to the decline in overall market issuances.

Commissions and Related Revenue – Fourth quarter Commissions and Related Revenue decreased $1.2 million, or 2%, year-over-year, primarily reflecting lower trading volumes, partially offset by increased revenues from research subscriptions. Full year Commissions and Related Revenue increased $0.4 million year-over-year, primarily reflecting increased revenues from research subscriptions, partially offset by lower trading volumes.

Asset Management and Administration Fees – Fourth quarter adjusted Asset Management and Administration Fees decreased $5.0 million, or 23%, year-over-year, primarily attributed to a 76% decrease in equity in earnings of affiliates, primarily driven by lower income earned by ABS, principally reflecting a decrease in our ownership following the sale of a portion of our interests during the first quarter of 2022. The decrease was also driven by a decrease in fees from Wealth Management clients, as associated AUM decreased 14%, primarily from market depreciation. Full year adjusted Asset Management and Administration Fees decreased $7.3 million, or 9%, year-over-year, primarily attributed to a 47% decrease in equity in earnings of affiliates, driven by lower income earned by ABS, principally reflecting a decrease in our ownership following the sale of a portion of our interests during the first quarter of 2022. The decrease was also driven by a decrease in fees from Wealth Management clients, as associated AUM decreased 14%, primarily from market depreciation.

Other Revenue – Fourth quarter adjusted Other Revenue, net, increased $6.4 million, or 55%, year-over-year, primarily reflecting higher gains in our fixed income investment portfolios, which primarily consist of U.S. treasury bills, and higher interest income, partially offset by lower performance of our investment funds portfolio due to the overall market decline. The investment funds portfolio is used as an economic hedge against our deferred cash compensation program. Full year adjusted Other Revenue, net, decreased $41.1 million year-over-year, primarily reflecting a shift from gains of $29.0 million in 2021 to losses of $29.8 million in 2022 on our investment funds portfolio due to the overall market decline. This was partially offset by higher gains in our fixed income investment portfolios and higher interest income.

Adjusted Expenses

Employee Compensation and Benefits – Fourth quarter adjusted Employee Compensation and Benefits decreased $36.1 million, or 6%, year-over-year, reflecting an adjusted compensation ratio of 62.5% for the quarter versus 49.7% for the prior year period. The decrease in Employee Compensation and Benefits compared to the prior year period principally reflects a lower accrual for incentive compensation, partially offset by higher base salaries and higher amortization of prior period deferred compensation awards. Full year adjusted Employee Compensation and Benefits decreased $151.2 million, or 8%, year-over-year, reflecting a full year adjusted compensation ratio of 60.9% versus 55.7% for the prior year period. The decrease in Employee Compensation and Benefits compared to the prior year period principally reflects a lower accrual for incentive compensation, partially offset by higher base salaries and higher amortization of prior period deferred compensation awards. The adjusted Compensation Ratio was also impacted by the lower performance of our investment funds portfolio during the current year period. See "Deferred Compensation" for more information.

Non-Compensation Costs – Fourth quarter adjusted Non-Compensation Costs decreased $5.0 million, or 5%, year-over-year, primarily driven by a decrease in other operating expenses related to charitable contributions made to the Evercore Foundation in 2021, partially offset by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021 and increased throughout 2022. The fourth quarter adjusted Non-Compensation ratio of 11.4% increased from 8.9% for the prior year period. Full year adjusted Non-Compensation Costs increased $35.6 million, or 11%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021 and increased throughout 2022, as well as an increase in professional fees and bad debt expense. This was partially offset by a decline in the fair value of contingent consideration owed to former equity interest holders in our RECA business, as well as charitable contributions made to the Evercore Foundation in 2021. The full year adjusted Non-Compensation ratio of 13.1% increased from 9.9% for the prior year period.

Adjusted Effective Tax Rate

The fourth quarter adjusted effective tax rate was 28.2% versus 25.2% for the prior year period. The full year adjusted effective tax rate was 24.5% versus 23.8% for the prior year period. The adjusted effective tax rate in 2022 reflects higher state and local taxes and an increase in non-deductible expenses. The full year adjusted provision for income taxes for 2022 reflects an additional tax benefit of $20.2 million versus $19.5 million for the prior year period, due to the net impact associated with the appreciation or depreciation in our share price upon vesting of employee share-based awards above or below the original grant price.

Liquidity

The Company continues to maintain a strong balance sheet. As of December 31, 2022, cash and cash equivalents were $663.4 million, investment securities and certificates of deposit were $1.4 billion and current assets exceeded current liabilities by $1.6 billion. Amounts due related to the Notes Payable were $371.8 million at December 31, 2022.

Headcount

As of December 31, 2022 and 2021, the Company employed approximately 2,120 and 1,950 people, respectively, worldwide.

As of December 31, 2022 and 2021, the Company employed 169⁽¹⁾ and 154⁽²⁾ total Senior Managing Directors, respectively, in its Investment Banking & Equities segment, of which 130⁽¹⁾ and 114⁽²⁾, respectively, were Advisory Senior Managing Directors.

Deferred Compensation

During 2022, the Company granted to certain employees approximately 3.0 million unvested restricted stock units ("RSUs") (including 2.5 million granted in conjunction with the 2021 bonus awards) with a grant date fair value of approximately $368.6 million.

In addition, during the first quarter of 2022, the Company granted approximately $124 million of deferred cash awards to certain employees, related to our deferred cash compensation program, principally pursuant to 2021 bonus awards.

The Company recognized compensation expense related to RSUs and our deferred cash compensation program of $87.8 million and $369.4 million for the three and twelve months ended December 31, 2022, respectively, and $82.4 million and $344.5 million for the three and twelve months ended December 31, 2021, respectively.

As of December 31, 2022, the Company had approximately 5.7 million unvested RSUs with an aggregate grant date fair value of $644.3 million. RSUs are expensed over the service period of the award, subject to retirement eligibility, and generally vest over four years.

As of December 31, 2022, the Company expects to pay an aggregate of $304.3 million related to our deferred cash compensation program at various dates through 2026, subject to certain vesting events. Amounts due pursuant to this program are expensed over the service period of the award, subject to retirement eligibility, and are reflected in Accrued Compensation and Benefits, a component of current liabilities.

Capital Return Transactions

On January 31, 2023, the Board of Directors of Evercore declared a quarterly dividend of $0.72 per share to be paid on March 10, 2023 to common stockholders of record on February 24, 2023.

During the fourth quarter, the Company repurchased 23 thousand shares from employees for the net settlement of stock-based compensation awards at an average price per share of $109.92, and 0.5 million shares at an average price per share of $109.99 in open market transactions pursuant to the Company's share repurchase program. The aggregate 0.5 million shares were acquired at an average price per share of $109.99. During 2022, the Company repurchased 1.0 million shares from employees for the net settlement of stock-based compensation awards at an average price per share of $127.02, and 3.4 million shares at an average price per share of $114.39 in open market transactions pursuant to the Company's share repurchase program. The aggregate 4.4 million shares were acquired at an average price per share of $117.27.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Wednesday, February 1, 2023, accessible via telephone and the Internet. Investors and analysts may participate in the live conference call by dialing (800) 245-3047 (toll-free domestic) or (203) 518-9765 (international); passcode: EVRQ422. Please register at least 10 minutes before the conference call begins.

A live audio webcast of the conference call will be available on the For Investors section of Evercore’s website at www.evercore.com. The webcast will be archived on Evercore’s website for 30 days after the call.

About Evercore

Evercore (NYSE: EVR) is a premier global independent investment banking advisory firm. We are dedicated to helping our clients achieve superior results through trusted independent and innovative advice on matters of strategic significance to boards of directors, management teams and shareholders, including mergers and acquisitions, strategic shareholder advisory, restructurings, and capital structure. Evercore also assists clients in raising public and private capital and delivers equity research and equity sales and agency trading execution, in addition to providing wealth and investment management services to high net worth and institutional investors. Founded in 1995, the Firm is headquartered in New York and maintains offices and affiliate offices in major financial centers in the Americas, Europe, the Middle East and Asia. For more information, please visit www.evercore.com.

Basis of Alternative Financial Statement Presentation

Our Adjusted results are a non-GAAP measure. As discussed further under "Non-GAAP Measures", Evercore believes that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore's results across several periods and better reflects how management views its operating results. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of our U.S. GAAP results to Adjusted results is presented in the tables included in the following pages.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect our current views with respect to, among other things, Evercore's operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "backlog," "believes," "expects," "potential," "probable," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. All statements, other than statements of historical fact, included in this release are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore's business. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Evercore believes these factors include, but are not limited to, those described under "Risk Factors" discussed in Evercore's Annual Report on Form 10-K for the year ended December 31, 2021, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and Registration Statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Evercore to predict all risks and uncertainties, nor can Evercore assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and Evercore does not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Evercore undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Adjusted Results

Throughout the discussion of Evercore's business and elsewhere in this release, information is presented on an Adjusted basis, which is a non-generally accepted accounting principles ("non-GAAP") measure. Adjusted results begin with information prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), adjusted to exclude certain items and reflect the conversion of certain Evercore LP Units, as well as Unvested Restricted Stock Units, into Class A shares. Evercore believes that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore's results across several periods and facilitate an understanding of Evercore's operating results. The Company uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. These Adjusted amounts are allocated to the Company's two business segments: Investment Banking & Equities and Investment Management. The differences between the Adjusted and U.S. GAAP results are as follows:

1. Assumed Exchange of Evercore LP Units into Class A Shares. The Adjusted results assume substantially all Evercore LP Units have been exchanged for Class A shares. Accordingly, the noncontrolling interest related to these units is converted to a controlling interest. The Company's management believes that it is useful to provide the per-share effect associated with the assumed conversion of substantially all of these previously granted equity interests and IPO related restricted stock units, and thus the Adjusted results reflect their exchange into Class A shares.
2. Adjustments Associated with Business Combinations and Divestitures. The following charges resulting from business combinations and divestitures have been excluded from the Adjusted results because the Company's Management believes that operating performance is more comparable across periods excluding the effects of these acquisition-related charges:
   1. Acquisition and Transition Costs. Primarily professional fees incurred and costs related to transitioning acquisitions or divestitures.
   2. Gain on Sale of Interests in ABS. The gain on the sale of a portion of the Company's interests in ABS in the first quarter of 2022 is excluded from the Adjusted presentation.
   3. Gain on Redemption of G5 Debt Security. The gain on the redemption of the G5 debt security in the second quarter of 2021 is excluded from the Adjusted presentation.
3. Special Charges, Including Business Realignment Costs. Expenses during 2022 that are excluded from the Adjusted presentation relate to charges associated with the prepayment of the Company's Series B Notes during the second quarter, as well as certain professional fees, separation benefits and other charges related to the ongoing wind-down of the Company's operations in Mexico. Expenses during 2021 that are excluded from the Adjusted presentation relate to the write-down of certain assets associated with a legacy private equity investment relationship which, consistent with the Company's investment strategy, the Company decided to wind down during the third quarter.
4. Income Taxes. Evercore is organized as a series of Limited Liability Companies, Partnerships, C-Corporations and a Public Corporation in the U.S. as the ultimate parent. Certain of the subsidiaries, particularly Evercore LP, have noncontrolling interests held by management or former members of management. As a result, not all of the Company’s income is subject to corporate level taxes and certain other state and local taxes are levied. The assumption in the Adjusted earnings presentation is that substantially all of the noncontrolling interest is eliminated through the exchange of Evercore LP units into Class A common stock of the ultimate parent. As a result, the Adjusted earnings presentation assumes that the allocation of earnings to Evercore LP’s noncontrolling interest holders is substantially eliminated and is therefore subject to statutory tax rates of a C-Corporation under a conventional tax structure in the U.S. and that certain state and local taxes are reduced accordingly.
5. Presentation of Interest Expense. The Adjusted results present Adjusted Investment Banking & Equities Operating Income before interest expense on debt, which is included in interest expense on a U.S. GAAP basis.
6. Presentation of Income from Equity Method Investments. The Adjusted results present Income from Equity Method Investments within Revenue as the Company's Management believes it is a useful presentation.