Evercore Inc. Q1 FY2025 earnings call

Current Environment

• Heightened geopolitical and trade tensions causing market volatility; Evercore's diversified platform is resilient.

Business Segments

• M&A: Notable transactions like Calpine's $29.1B sale to Constellation Energy and Ampere's $6.5B sale to SoftBank; momentum into April with several significant transactions.
• Financial Sponsors: Industry-wide global volumes up, but transactions selective; sponsors team expanded client base.
• Strategic Defense: Busy due to record activist campaigns.
• Liability Management: Strong activity, especially private equity-led; focused on sectors impacted by tariffs.
• Private Capital Advisory: Record first quarter, led by GP-led continuation vehicles; strong in LP secondaries and securitized capital solutions.
• Underwriting: Strong first quarter, but market conditions can shift quickly.
• Equities Franchise: Strongest Q1 since 2020, driven by market volatility and increased trading volume.
• Wealth Management: Solid quarter with net new business.

Talent Investment

• Hired two senior managing directors in investment banking; promoted 11 investment banking SMDs and 4 in other areas; added Bill Burns as Senior Advisor.

For the first quarter of 2025, adjusted net revenues were $700 million, up 19% vs Q1 2024. Adjusted operating income was $116 million, up 28% vs Q1 2024. Adjusted EPS was $3.49, up 64% vs Q1 2024. Advisory fees: $557 million, up 29% y-o-y, strong M&A and non-M&A. Underwriting revenues: $54 million, down 2% y-o-y, lower follow-on offset by IPO improvement and convertible increase. Commissions and related revenue: $55 million, up 14% y-o-y, due to increased trading volume. Asset management and administration fees: $22 million, up 8% y-o-y, driven by AUM increase. Other revenue net: ~$11 million, down from $33 million y-o-y, primarily due to DCCP hedge performance.

• Adjusted net revenues up 19% y-o-y; adjusted operating income up 28% y-o-y; adjusted EPS up 64% y-o-y.
• Expect second and third quarters to be impacted by market volatility.
• Compensation ratio at 65.7%, consistent with 2024, and will adjust as visibility improves.

• Geopolitical and trade tensions leading to market volatility.
• Uncertainty in macroeconomic backdrop affecting transaction levels.
• Sensitivity of equity capital markets to volatility and public capital raising.
• Performance of DCCP hedge correlated to broader equity market.

Q: On backlogs and what's needed for progress?

A: Backlogs are strong, but uncertainty will take time to lift, but clients are ready.

Q: Outlook for secondaries in weaker sponsor M&A?

A: General partner business strong with continuity funds, LP business also strong.

Q: Europe M&A compared to US?

A: Europe activity healthy, but not stronger recovery than US yet.

Q: Comp ratio and revenue growth needed?

A: Revenues important for comp ratio improvement, but uncertainty makes prediction hard.

Q: Restructuring environment?

A: Restructuring business healthy, no limitation in debt markets for liability management.

Q: Hiring in slower M&A backdrop?

A: Continue hiring strong talent across areas, talent drives opportunity.

Q: Equity capital markets backlogs?

A: Backlog exists, optimistic for IPOs to start as uncertainty diminishes.

Q: Non-comp expense flex?

A: Non-comp expenses up, but some flexibility, revenue leverage helps comp ratio.