NEW YORK, July 29 /PRNewswire-FirstCall/ --
Highlights
- Second Quarter Financial Summary:
- Adjusted Pro Forma Net Revenues of $71.3 million, up 21% versus the same period in 2008
- Adjusted Pro Forma earnings of $3.6 million, or $0.10 per share
- Earnings adversely affected by one-time expenses, including $8.5 million related to the hiring of the new Chief Executive Officer and other Corporate actions, and $3.8 million unrealized loss associated with U.S. Private Equity portfolio company valuations
- U.S. GAAP Net Revenues of $71.0 million, Net Loss Attributable to Evercore Partners Inc. of $6.0 million or $0.43 per share
- #1 M&A Advisory boutique both in the U.S. and globally
- Ralph Schlosstein, co-founder and former President of BlackRock, joined at the end of May as President and Chief Executive Officer; Roger Altman to continue as Chairman and work full-time in the Advisory business
- Advised General Motors on the largest restructuring transaction of the year and Wyeth on the largest M&A transaction of the year
Evercore Partners Inc. (NYSE: EVR) today announced that its Adjusted Pro Forma Net Revenues were $71.3 million and $121.9 million for the three and six months ended June 30, 2009, respectively, compared to Adjusted Pro Forma Net Revenues of $58.9 million and $102.9 million for the three and six months ended June 30, 2008, respectively. Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. was $3.6 million and $5.4 million or $0.10 and $0.15 per share for the three and six months ended June 30, 2009, respectively, compared to Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. of $5.8 million and $10.3 million or $0.17 and $0.30 per share for the three and six months ended June 30, 2008, respectively.
The results for the quarter were driven by strong revenue growth in the Advisory business, particularly restructuring. These results were offset by one-time costs of $8.5 million associated with recruiting the new Chief Executive Officer and other one-time Corporate actions, as well as a $3.8 million unrealized loss relating principally to the valuation of an energy investment in Evercore Capital Partners ("ECP") II. The combined impact of the Corporate actions and the unrealized loss was to decrease net income by $7.1 million, or $0.20 per share. Excluding the effect of the above items, Adjusted Pro Forma Net Income would be $10.7 million or $0.30 per share for the three months ended June 30, 2009.
U.S. GAAP Net Revenues were $71.0 million and $120.8 million for the three and six months ended June 30, 2009, respectively, compared to U.S. GAAP Net Revenues of $60.1 million and $104.6 million for the three and six months ended June 30, 2008, respectively. U.S. GAAP Net Loss Attributable to Evercore Partners Inc. was $6.0 million and $5.9 million or $0.43 and $0.42 per share for the three and six months ended June 30, 2009, respectively, compared to a U.S. GAAP Net Income Attributable to Evercore Partners Inc. of $2.1 million and $1.1 million or $0.16 and $0.08 per share for the three and six months ended June 30, 2008, respectively. The U.S. GAAP net loss for the three and six months ended June 30, 2009 reflects a previously disclosed $16.1 million charge primarily for U.S. Private Equity restructuring related to equity that existing Senior Managing Directors have forfeited in connection with downsizing ECP and other cost reducing steps, in addition to the items described above. U.S. GAAP results would reflect a profit excluding these items.
Evercore's quarterly results may fluctuate significantly due to the timing and amount of Advisory fees earned, as well as gains or losses relating to the Firm's Investment Management business and other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.
"The results for the quarter reflect both the potential of the Evercore franchise and the work that needs to be done to ensure that our revenue growth is reflected in our earnings," said Ralph Schlosstein, President and Chief Executive Officer. "Our partners are among the very best and brightest senior advisors in the business; a key differentiator in the marketplace. We continue to attract new partners, broadening our capabilities in key market sectors, with the addition of George Ackert (Transportation), Robert Pacha (Mid-stream Energy and MLP), Mark Friedman (Transportation, Shipping and Infrastructure) and Mark Burton (Depository Financial Institutions). These recent additions increase expenses and depress earnings in the short run, but should position the firm to participate more fully in the recovery of merger and acquisition activity when that recovery occurs."
Mr. Schlosstein continued, "Our Investment Management business results continue to reflect the start-up nature of these businesses. While assets under management and revenues are growing, these businesses generate significantly less revenue than their costs, depressing earnings and adversely affecting both our margins and our compensation ratios. This business will receive significant attention in the near term. Our management team is deeply committed to ensuring that more of our revenue success is translated into earnings growth in the coming quarters."
"The business environment for Evercore continues to be challenging," said Roger Altman, Chairman. "But, between Ralph's joining as CEO, and the improving financing climate, I am quite optimistic for the Firm over the medium term. We just had a strong revenue performance but must start converting more of that into earnings. I believe that, with the newly strengthened management, we can do that."
In the discussion below of Evercore and the business segments, information is presented on an adjusted pro forma basis which is a non-generally accepted accounting principles ("non-GAAP") measure and is unaudited. Adjusted pro forma 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. Evercore believes that the disclosed adjusted pro forma 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 reflect what management views as ongoing operations. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. For more information about the adjusted pro forma basis of reporting used by management to evaluate the performance of Evercore and each line of business, including reconciliations of U.S. GAAP results to an adjusted pro forma basis, see pages A-1 through A-9 included in Annex I. These adjusted pro forma amounts are allocated to the Company's two business segments: Advisory and Investment Management.
Consolidated Adjusted Pro Forma and U.S. GAAP Results
Three Months Ended June 30,
-----------------------------------------------------
Adjusted Pro Forma U.S. GAAP
------------------------- -------------------------
% %
2009 2008 Change 2009 2008 Change
------- ------- ------ ------- ------- ------
(dollars in thousands)
Net Revenues (1) $71,312 $58,865 21% $71,043 $60,118 18%
------- ------- ------- -------
Expenses:
Employee
Compensation and
Benefits 51,859 38,512 35% 51,859 38,512 35%
Non-compensation
Costs (1) 13,376 10,699 25% 32,121 13,737 134%
------ ------ ------ ------
Total Expenses 65,235 49,211 33% 83,980 52,249 61%
------ ------ ------ ------
Operating Income
(Loss) 6,077 9,654 (37%) (12,937) 7,869 NM
Interest Expense
on Long-term
Debt (2) 1,897 - NM - - NM
----- --- --- ---
Pre-Tax Income
(Loss) 4,180 9,654 (57%) (12,937) 7,869 NM
Provision for
Income Taxes 1,757 3,877 (55%) 1,373 2,461 (44%)
----- ----- ----- -----
Net Income (Loss) 2,423 5,777 (58%) (14,310) 5,408 NM
Noncontrolling
Interest (1,127) - NM (8,267) 3,352 NM
------ --- ------ -----
Net Income (Loss)
Attributable to
Evercore
Partners Inc. $3,550 $5,777 (39%) $(6,043) $2,056 NM
====== ====== ======= ======
Earnings (Loss)
Per Share $0.10 $0.17 (41%) $(0.43) $0.16 NM
===== ===== ====== =====
Six Months Ended June 30,
------------------------------------------------------
Adjusted Pro Forma U.S. GAAP
-------------------------- --------------------------
% %
2009 2008 Change 2009 2008 Change
-------- -------- ------- -------- -------- ------
(dollars in thousands)
Net Revenues (1) $121,918 $102,900 18% $120,769 $104,606 15%
-------- -------- -------- --------
Expenses:
Employee
Compensation and
Benefits 87,713 64,315 36% 87,713 71,767 22%
Non-compensation
Costs (1) 24,023 22,478 7% 44,538 27,572 62%
------ ------ ------ ------
Total Expenses 111,736 86,793 29% 132,251 99,339 33%
------- ------ ------- ------
Operating Income
(Loss) 10,182 16,107 (37%) (11,482) 5,267 NM
Interest Expense
on Long-term
Debt (2) 3,789 - NM - - NM
----- --- --- ---
Pre-Tax Income
(Loss) 6,393 16,107 (60%) (11,482) 5,267 NM
Provision for
Income Taxes 2,693 5,835 (54%) 2,431 2,167 12%
----- ----- ----- -----
Net Income (Loss) 3,700 10,272 (64%) (13,913) 3,100 NM
Noncontrolling
Interest (1,655) - NM (8,061) 2,009 NM
------ --- ------ -----
Net Income (Loss)
Attributable to
Evercore
Partners Inc. $5,355 $10,272 (48%) $(5,852) $1,091 NM
====== ======= ======= ======
Earnings (Loss)
Per Share $0.15 $0.30 (50%) $(0.42) $0.08 NM
===== ===== ====== =====
(1) For Adjusted Pro Forma purposes reimbursable client related expenses
and expenses associated with revenue sharing arrangements with third
parties have been presented as a reduction from the associated Non-
compensation Costs for all periods. In prior years, such amounts
were included in Net Revenues. Included in the U.S. GAAP non-
compensation costs are Special Charges which are discussed further
under "Other U.S. GAAP Expenses."
(2) Interest Expense on Long-term Debt represents interest expense on the
Senior Notes and is presented below Operating Income (Loss) on an
Adjusted Pro Forma basis.
Business Line Reporting
A discussion of Adjusted Pro Forma revenues and expenses is presented below for the Advisory and Investment Management segments. Unless otherwise stated, all the financial measures presented in this discussion are Adjusted Pro Forma measures.
Advisory
Evercore continues to strengthen its Advisory business adding high quality partners, expanding its industry coverage (transportation and infrastructure, midstream oil and gas, shipping and depository financial institutions) and geographic coverage (opening a Houston office), and enhancing its restructuring business, which is now among the market leaders.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------
2009 2008 % Change 2009 2008 % Change
------- ------- -------- ------- ------- ---------
(dollars in thousands)
Net Revenues:
Advisory (1) $68,439 $56,566 21% $116,488 $96,964 20%
Other Revenue, net (71) 727 NM 531 1,509 (65%)
--- --- --- -----
Net Revenues 68,368 57,293 19% 117,019 98,473 19%
------ ------ ------- ------
Expenses:
Employee
Compensation and
Benefits 39,682 34,095 16% 68,894 55,232 25%
Non-compensation
Costs (1) 8,468 8,313 2% 15,759 17,977 (12%)
----- ----- ------ ------
Total Expenses 48,150 42,408 14% 84,653 73,209 16%
------ ------ ------ ------
Adjusted Pro Forma
Operating Income 20,218 14,885 36% 32,366 25,264 28%
Interest Expense on
Long-term Debt (2) 683 - NM 683 - NM
--- --- --- ---
Adjusted Pro Forma
Pre-Tax Income $19,535 $14,885 31% $31,683 $25,264 25%
======= ======= ======= =======
(1) Reimbursable client related expenses and expenses associated with
revenue sharing arrangements with third parties have been presented
as a reduction from the associated Non-compensation Costs for all
periods. In prior years, such amounts were included in Net Revenues.
(2) Interest expense related to the Senior Notes is presented in Interest
Expense on Long-term Debt in order to clearly reflect the operating
results of the business.
Revenues
Advisory revenue was $68.4 million and $117.0 million for the three and six months ended June 30, 2009, respectively, compared to $57.3 million and $98.5 million for the three and six months ended June 30, 2008, respectively. The increase in revenues reflects the growing contribution from restructuring assignments including General Motors, MGM Mirage, LyondellBasell and CIT Group and participation on prominent advisory transactions including advising Frontier Communications on its transaction with Verizon Communications, and in the first quarter, advising Wyeth on its proposed transaction with Pfizer.
Industry-wide M&A volumes continue to be down from 2008 levels with the dollar value of global completed M&A transactions down 48% and U.S. completed M&A transactions down 29% during the first six months of 2009 over the prior year according to ThomsonReuters. Restructuring activity levels remain high.
According to ThomsonReuters, among boutiques, Evercore was ranked number one both globally and in the U.S. as measured by the value of announced transactions during the first half of 2009. The Company earned Advisory revenues in excess of $1 million from ten clients during the second quarter of 2009, down slightly from the second quarter of 2008 but up from seven last quarter. The number of fee paying clients for the first half of 2009 grew to 103 in comparison with 97 in the first half of 2008.
Expenses
Compensation costs for the Advisory segment for the three and six months ended June 30, 2009, were $39.7 million and $68.9 million, respectively, up from $34.1 million and $55.2 million for the three and six months ended June 30, 2008, respectively. The year-on-year increase in compensation is due to higher revenues earned this quarter and the impact of new senior executive hires. For the three and six months ended June 30, 2009, Evercore's Advisory compensation ratio was 58.0% and 58.9%, respectively, versus the compensation ratio reported for the three and six months ended June 30, 2008 of 59.5% and 56.1%, respectively. Excluding stock compensation costs of $3.8 million and $7.5 million for the three and six months ended June 30, 2009, respectively, related to new Advisory Senior Managing Directors(1), the ratio would have been 52.5% for both periods.
Non-compensation costs for the three months ended June 30, 2009 of $8.5 million increased slightly from the same period last year due to higher professional and regulatory filing fees. Through the first six months of the year, non-compensation expenses declined 12% from the same period last year driven by lower travel and professional fees and reflecting our ongoing focus on cost control.
(1) Defined as Senior Managing Directors hired in the past twenty-four months
Investment Management
The results for the Investment Management business reflect the start-up nature of operations for many of the segment's operating units and the restructuring of its U.S. Private Equity business as disclosed in the first quarter. Assets under management ("AUM") grew to approximately $3 billion, including AUM from the Wealth Management business of $1 billion. These new business initiatives, including the acquisition of Bank of America's Special Fiduciary Services ("SFS") business, the consolidation of the results of Evercore Asset Management and the ongoing growth of Evercore Wealth Management drove the growth in revenues and expenses for the three and six month periods.
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
% %
2009 2008 Change 2009 2008 Change
------- ------- ------ ------- ------- --------
(dollars in thousands)
Net Revenues:
Private
Equity (1) $(1,812) $3,305 NM $(342) $5,431 NM
Institutional
Asset
Management 3,450 (1,603) NM 2,380 (1,314) NM
Wealth
Management 522 - NM 688 - NM
--- - --- -
Investment
Management
Revenues 2,160 1,702 27% 2,726 4,117 (34%)
Other Revenue,
net (2) 784 (130) NM 2,173 310 601%
--- ---- ----- ---
Net Revenues 2,944 1,572 87% 4,899 4,427 11%
----- ----- ----- -----
Expenses:
Employee
Compensation
and
Benefits 12,177 4,417 176% 18,819 9,083 107%
Non-compensation
Costs (1) 4,908 2,386 106% 8,264 4,501 84%
----- ----- ----- -----
Total Expenses 17,085 6,803 151% 27,083 13,584 99%
------ ----- ------ ------
Adjusted Pro
Forma
Operating
Income (Loss) (14,141) (5,231) (170%) (22,184) (9,157) (142%)
Interest
Expense on
Long-term
Debt (2) 1,214 - NM 3,106 - NM
----- - ----- -
Adjusted Pro
Forma Pre-Tax
Income (Loss) $(15,355) $(5,231) (194%) $(25,290) $(9,157) (176%)
======== ======= ======== =======
(1) Reimbursable client related expenses have been presented as a
reduction from the associated Non-compensation Costs for all periods.
In prior years, such amounts were included in Net Revenues.
(2) Other Revenue, net includes interest income and expense on short-term
reverse repurchase and repurchase agreements. Interest expense
related to the Senior Notes is presented in Interest Expense on Long-
term Debt in order to clearly reflect the operating results of the
business.
Investment Management Revenue Components
Three Months Ended Six Months Ended
--------------------------- ---------------------------
% %
2Q 2009 2Q 2008 Change 2Q 2009 2Q 2008 Change
------- ------- ------ ------- ------- ------
Management Fees (dollars in thousands)
Wealth
Management $707 $- NM $1,077 $- NM
Institutional
Asset
Management 3,311 561 490% 4,316 2,018 114%
Private
Equity 2,002 1,934 4% 4,149 3,753 11%
----- ----- ----- -----
Total
Management
Fees 6,020 2,495 141% 9,542 5,771 65%
----- ----- ----- -----
Realized and
Unrealized
Gains
Institutional
Asset
Management 139 (2,089) NM (682) (3,057) 78%
Private
Equity (3,814) 1,371 NM (4,491) 1,678 NM
------ ----- ------ -----
Total
Realized and
Unrealized
Gains (3,675) (718) (412%) (5,173) (1,379) (275%)
------ ---- ------ ------
Highview - - NM (920) - NM
Equity in
EAM Losses - (75) NM (334) (275) (21%)
Equity in Pan
Losses (185) - NM (389) - NM
---- --- ---- ---
Investment
Management
Revenues $2,160 $1,702 27% $2,726 $4,117 (34%)
====== ====== ====== ======
Revenues
Management Fees earned from the management of client portfolios and other investment advisory services increased by 141% and 65% for the three and six months ended June 30, 2009 compared to the prior periods. The growth was driven by the new business initiatives.
Revenue growth from management fees was offset by mark-to-market losses relating to investments in the private equity funds we sponsor. During the second quarter and first half of 2009 the Company recognized a loss of $3.8 million and $4.5 million, respectively, relating principally to a reduction in carrying value of an energy investment in ECP II due to the weak commodity price environment and the associated reversal in previously recognized carried interest income.
At June 30, 2009, Evercore had $11.9 million invested in the private equity funds it sponsors, which includes $0.5 million of previously recognized carry.
Expenses
The growth in expenses was driven by the acquisition of the SFS business, the consolidation of EAM and the growth of the Wealth Management business, as well as the impact of Corporate actions.
Other U.S. GAAP Expenses
Included in the three and six months ended June 30, 2009 and 2008 U.S. GAAP results are the following expenses that have been excluded from the Adjusted Pro Forma results:
- $16.1 million of Special Charges for the three months ended June 30, 2009 incurred in conjunction with Evercore's decision to suspend capital raising for ECP and other ongoing strategic cost management initiatives. The charge relates to the expense required to be recorded under U.S. GAAP for stock-based compensation awards that are voluntarily forfeited by employees who remain with the Company. During the second quarter of 2009 employees voluntarily forfeited 416,878 unvested restricted stock units and 250,230 Evercore LP partnership units.
