Evercore (EVR) Q3 Earnings call transcript Oct 23, 2024

Evercore, a leading global independent investment banking advisory firm, recently held its third quarter 2024 earnings call, highlighting a strong recovery and strategic investments for future growth. The call was led by Katy Haber, the Managing Director of Investor Relations and ESG at Evercore, alongside John Weinberg, the Chairman and CEO, and Timothy LaLonde, the CFO.

Financial Performance and Outlook

Evercore reported a robust financial performance for the third quarter of 2024, with adjusted net revenues reaching approximately $740 million, marking a 28% increase from the previous year. This growth is attributed to the improving macroeconomic environment and capital markets, with the interest rate picture becoming clearer as the Fed lowered rates. The company believes it is in the midst of a recovery, albeit a gradual one, which will pave the way for a healthy multiyear cycle across the Advisory and Capital Markets businesses.

Despite uncertainties surrounding the upcoming U.S. election and geopolitical tensions, Evercore's internal metrics and market activity continue to strengthen, positioning the company for an active 2025. The firm expects to see activity levels gradually increase over the coming months and into the next year, although the exact timing of financial results remains uncertain due to market uncertainties.

Strategic Investments and Talent Acquisition

Evercore has been investing in its businesses to position itself for growth over the medium to long term. This includes strategic investments in its talent pool, with the recruitment of 8 investment banking Senior Managing Directors and 1 Senior Adviser so far in 2024. These hires are expected to strengthen the firm's capabilities, particularly in areas like structured finance, financial institutions, and sponsor coverage. The firm also welcomed new senior leaders in France, expanding its presence in Europe and increasing levels of client activity and dialogues.

Business Highlights and Performance

The third quarter of 2024 saw Evercore advising on several notable transactions across various sectors, including financial services, software, energy transition, and capabilities serving sponsor clients. The European Advisory Team has also been gathering strength, with strong third-quarter performance despite the European M&A market still lagging behind the U.S. The firm's Strategic Defense business remains busy, reflecting the high levels of global activist campaigns. The Liability Management practice is the primary driver of activity, with strong activity levels expected to continue into 2025.

Evercore's Private Capital Advisory businesses delivered a robust performance, with a record AUM of $13.9 billion driven by strong market appreciation and client engagement. The firm's equity franchise experienced the strongest third quarter in nearly a decade, marking the 10-year anniversary of the Evercore and ISI merger.

Financial Highlights and Future Outlook

Financially, Evercore reported strong activity in nearly all its businesses in the third quarter, with notable achievements like serving as a lead left bookrunner on Diamondback Energy's $2.6 billion follow-on offering. The firm also participated in tech IPO research, anticipating continued activity in the equity capital markets across the medium to longer term.

Despite the usual seasonality and equity market volatility, Evercore remains optimistic about the future, aiming to expand its industry and geographic reach while deepening and diversifying its product and coverage capabilities. The company is committed to enhancing client coverage, including investments in covering large, mid, and small-cap public and private companies as well as financial sponsors.

Market and Regulatory Environment

The company is aware of the uncertainties surrounding the upcoming U.S. election and geopolitical tensions, but remains optimistic about the market's recovery. The firm believes that further interest rate cuts and continued pressure from LPs to return capital will spur activity in the sponsor-related market, which is critical to the broader M&A recovery.

Conclusion

In summary, Evercore's third quarter 2024 earnings call highlighted a strong financial performance and strategic investments for future growth. The company's focus on talent acquisition and business expansion, particularly in Europe, positions it well for a healthy multiyear cycle across its Advisory and Capital Markets businesses. Despite uncertainties, Evercore remains optimistic about its prospects and the broader market recovery.