Evercore Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023; filed February 22, 2024. Evercore is a global independent investment banking and investment management firm. Investment Banking & Equities generated the substantial majority of revenue.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total revenue | $2.443 billion | $2.779 billion | Down 12% |
| Net revenue | $2.426 billion | $2.762 billion | Down 12% |
| Income before taxes | $365.8 million | $704.0 million | Down 48% |
| Net income attributable to Evercore Inc. | $255.5 million | $476.5 million | Down 46% |
| Diluted earnings per share | $6.37 | $11.61 | Down 45% |
| Operating cash flow | $458.0 million | $531.4 million | Down 14% |
- Advisory fees fell 18% to $1.964 billion, mainly reflecting fewer large transactions. Underwriting fees fell 9% to $111.0 million; commissions and related revenue fell 2% to $202.8 million.
- Investment Banking & Equities net revenue was $2.356 billion, down 13%; segment pre-tax income fell 50% to $342.9 million. Investment Management net revenue rose 6% to $70.0 million and segment pre-tax income increased 16% to $22.9 million.
- Compensation and benefits were $1.657 billion, down 2%; compensation was 68.3% of net revenue, versus 61.5% in 2022. Non-compensation operating expenses rose 11% to $407.0 million, including higher travel, technology and research costs.
- Cash, cash equivalents and restricted cash ended the year at $605.5 million, down $66.6 million. Investing activities provided $15.6 million; financing activities used $557.2 million, principally for share repurchases, dividends and distributions.
- At year-end, cash and cash equivalents were $596.9 million and investment securities and certificates of deposit were $1.437 billion. Current assets were $2.605 billion versus current liabilities of $910.1 million.
- Notes payable totaled $373.9 million; the company reported compliance with debt covenants. It had $160 million of revolving credit facilities available and no drawings on them at year-end. Interest expense was $16.7 million.
- Wealth Management AUM rose 16% to $12.3 billion, primarily due to $1.77 billion of market appreciation; flows were $965 million of inflows and $1.00 billion of outflows. Wealth Management fees increased 4% to $67.0 million.
- The effective tax rate was 22.0%, compared with 24.5% in 2022. The board declared $3.00 per share in dividends during 2023; share repurchases under the program totaled $259.9 million.
Material changes and unusual items
- Worldwide announced M&A value declined 16% and completed M&A value declined 28% year over year. Evercore recorded 666 advisory and underwriting client fees, up 2%, but fees of at least $1 million decreased 8% to 378.
- Other revenue, including interest and investments, improved to $98.0 million from a $7.4 million loss. A major factor was the investment-fund portfolio’s $31.7 million gain in 2023 versus a $29.8 million loss in 2022; the portfolio economically hedges deferred cash compensation.
- FY2023 special charges were $2.9 million, primarily for writing off non-recoverable assets in the wind-down of Mexico operations. No impairment charges were recorded in 2023; annual goodwill testing found reporting-unit fair values substantially above carrying values.
- The company commenced a new New York office lease in 2023. Year-end operating lease liabilities were $470.5 million; an additional lease for space at its headquarters was signed in January 2024.
Outlook, risks and contingencies
- No specific financial guidance or quantified forecast is provided. Management described continued macroeconomic uncertainty and market volatility, including inflation, interest rates, financing availability, geopolitical tensions and regulatory change. These conditions slowed transaction announcements, lengthened closing timelines and suppressed underwriting activity.
- Results are exposed to volatile deal activity and success-fee timing, client decisions and transaction approvals. A substantial share of revenue comes from advisory and underwriting fees, which are not long-term contracted and often depend on successful transaction completion.
- Other key risks include retaining senior professionals, competition and fee pressure, fixed costs, conflicts of interest, litigation and regulatory scrutiny, cybersecurity and third-party operational risks, foreign exchange exposure, and possible AUM declines or client outflows.
- Management stated it was not currently party to material pending legal proceedings expected to have a material effect, but noted that outcomes and potential losses in ordinary-course matters could not be estimated. The auditor issued unqualified opinions on the financial statements and internal controls; success-fee revenue recognition was identified as a critical audit matter because of judgment in assessing reversal risk near period-end.
- Regulated subsidiaries held $937.4 million of cash and investment securities, some of which may be subject to regulatory notification or approval before distribution. Evercore also has a $63.3 million estimated tax receivable agreement obligation and $2.6 million of unfunded private-equity commitments.
Most important facts for investors to verify
- Whether M&A and other advisory activity, large transaction completions and success-fee conversion recover, and how any recovery affects revenue and earnings.
- Whether compensation and non-compensation costs adjust appropriately if revenue remains weak; track the compensation-to-net-revenue ratio.
- Whether Wealth Management AUM growth is sustained by client flows as well as markets, and how investment performance affects fees.
- How much reported liquidity is accessible outside regulated entities, and the timing of debt, lease, deferred-compensation and tax-receivable-agreement payments.
- How subsequent transaction outcomes validate year-end advisory-fee recognition, the auditor’s identified critical audit matter.