Evercore reports third quarter 2022 results; quarterly dividend of $0.72 per share
New york--(business wire)--evercore inc. (nyse: evr): third quarter results year to date results u.s. gaap adjusted u.s. gaap adjusted q3 2022 q3 2021 q3 2022 q3 2021 ytd 2022 ytd 2021 ytd 2022 ytd 2021 net revenues ($ mm) $ 576.9 $ 823.6 $ 583.2 $ 831.6 $ 1,930.7 $ 2,173.7 $ 1,948.9 $ 2,192.7 operating income ($ mm) $ 130.4 $ 245.2 $ 136.6 $ 261.8 $ 485.9 $ 646.4 $ 504.7 $ 673.9 net income attributable to evercore inc. ($ mm) $ 82.4 $ 159.5 $ 95.2 $ 188.3 $ 336.1 $ 444.3 $ 376.3 $ 504.9 diluted earnings per share $ 2.03 $ 3.74 $ 2.20 $ 3.96 $ 8.18 $ 10.19 $ 8.52 $ 10.41 compensation ratio 61.7 % 59.1 % 61.0 % 58.5 % 60.8 % 59.3 % 60.3 % 58.8 % operating margin 22.6 % 29.8 % 23.4 % 31.5 % 25.2 % 29.7 % 25.9 % 30.7 % effective tax rate 30.8 % 24.0 % 27.4 % 25.6 % 23.2 % 21.0 % 22.8 % 22.8 % business and financial highlights ■ third quarter and year-to-date net revenues were $576.9 million and $1.9 billion, respectively, on a u.s. gaap basis and $583.2 million and $1.9 billion, respectively, on an adjusted basis, decreasing on both a u.s. gaap and an adjusted basis versus 2021; our results represent the second best third quarter and september year-to-date net revenues on both a u.s. gaap and an adjusted basis ■ evercore advised store capital on its $14 billion sale to gic and oak street, which was one of the top 10 largest m&a deals in the u.s. and the second largest reit deal year-to-date ■ evercore was a bookrunner on the largest ipo year-to-date, corebridge financial, for $1.7 billion ■ evercore private funds group ranked #1 in multiple categories in preqin's 2022 service providers report for its fundraising efforts in the private equity, private debt, and infrastructure space ■ we added several senior bankers to our u.s. financial sponsors group, which provides resources and capabilities to enhance our sponsor coverage ■ evercore isi recognized as the top independent research firm in the institutional investor all-america equity research team rankings for the ninth straight year and ranked #1 among all firms for analysts on a weighted basis talent ■ we have hired seven advisory senior managing directors in 2022, most recently announcing alexander krolick in the private capital markets group to lead and expand our infrastructure and energy debt advisory activities. of the seven, one advisory senior managing director is committed to join later in 2022, contributing to our european business ■ in addition, a senior advisor is committed to join later in 2022, who will bring new expertise and capabilities to the franchise capital return ■ quarterly dividend of $0.72 per share ■ returned $565.3 million to shareholders during the first nine months of 2022 through dividends and repurchases of 3.9 million shares at an average price of $118.28 evercore inc. (nyse: evr) today announced its results for the third quarter ended september 30, 2022. leadership commentary john s. weinberg, chairman and chief executive officer, "evercore continues to perform well in the current, challenging environment. our diverse capabilities allow us to advise and assist our clients throughout the cycle. we remain steadfast in our commitment to providing the highest level of client service." roger c. altman, founder and senior chairman, "evercore continues to expand, adding talented newcomers and broadening our platform, as we consistently do. business conditions may be softer than they were last year at this time, but our performance is still solid. and, our medium and long term growth outlook, and our competitive position, remain strong." 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: evercore's business results are categorized into two segments: investment banking and investment management. investment banking 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"), during the second quarter, as well as certain professional fees related to the ongoing liquidation 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 nine months ended september 30, 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 nine months ended september 30, 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 u.s. gaap three months ended nine months ended september 30, 2022 september 30, 2021 % change september 30, 2022 september 30, 2021 % change (dollars in thousands) investment banking: advisory fees $ 488,224 $ 708,333 (31 %) $ 1,689,033 $ 1,781,065 (5 %) underwriting fees 28,697 54,381 (47 %) 78,519 181,686 (57 %) commissions and related revenue 49,200 46,763 5 % 152,583 151,014 1 % investment management: asset management and administration fees 15,641 16,960 (8 %) 48,724 48,092 1 % other revenue, net (4,825 ) (2,882 ) (67 %) (38,151 ) 11,873 nm net revenues $ 576,937 $ 823,555 (30 %) $ 1,930,708 $ 2,173,730 (11 %) three months ended nine months ended september 30, 2022 september 30, 2021 % change september 30, 2022 september 30, 2021 % change total number of fees from advisory client transactions(1) 229 257 (11 %) 494 586 (16 %) total number of fees of at least $1 million from advisory client transactions(1) 99 130 (24 %) 285 349 (18 %) total number of underwriting transactions 11 28 (61 %) 34 98 (65 %) total number of underwriting transactions as a bookrunner 11 26 (58 %) 29 82 (65 %) 1. includes advisory and underwriting transactions. as of september 30, 2022 2021 % change assets under management ($ mm)(1) wealth management(2) $ 9,986 $ 11,316 (12 %) total assets under management $ 9,986 $ 11,316 (12 %) advisory fees – third quarter advisory fees decreased $220.1 million, or 31%, year-over-year, reflecting a decrease in the number of advisory fees earned and a decline in revenue earned from large transactions during the third quarter of 2022. year-to-date advisory fees decreased $92.0 million, or 5%, year-over-year, reflecting a decrease in the number of advisory fees earned. underwriting fees – third quarter underwriting fees decreased $25.7 million, or 47%, year-over-year, and year-to-date underwriting fees decreased $103.2 million, or 57%, 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 – third quarter commissions and related revenue increased $2.4 million, or 5%, year-over-year, primarily reflecting higher trading volumes and increased revenues from research subscriptions. year-to-date commissions and related revenue increased $1.6 million, or 1%, year-over-year, primarily reflecting increased revenues from research subscriptions. asset management and administration fees – third quarter asset management and administration fees decreased $1.3 million, or 8%, year-over-year, driven by a decrease in fees from wealth management clients as associated aum decreased 12%, primarily from market depreciation. year-to-date asset management and administration fees increased $0.6 million, or 1%, year-over-year, driven by an increase in fees from wealth management clients. other revenue – third quarter other revenue, net, decreased $1.9 million, or 67%, year-over-year, primarily reflecting lower performance of our investment funds portfolio due to the overall market decline. the portfolio is used as an economic hedge against our deferred cash compensation program. year-to-date other revenue, net, decreased $50.0 million, year-over-year, primarily reflecting a shift from gains of $15.8 million to losses of $39.0 million 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 the second quarter of 2021. this was partially offset by a $1.3 million gain on the sale of a portion of our interests in abs during the first quarter of 2022. expenses u.s. gaap three months ended nine months ended september 30, 2022 september 30, 2021 % change september 30, 2022 september 30, 2021 % change (dollars in thousands) employee compensation and benefits $ 355,794 $ 486,471 (27 %) $ 1,174,500 $ 1,289,659 (9 %) compensation ratio 61.7 % 59.1 % 60.8 % 59.3 % non-compensation costs $ 90,744 $ 83,377 9 % $ 269,731 $ 229,143 18 % non-compensation ratio 15.7 % 10.1 % 14.0 % 10.5 % special charges, including business realignment costs $ — $ 8,554 nm $ 532 $ 8,554 (94 %) employee compensation and benefits – third quarter employee compensation and benefits decreased $130.7 million, or 27%, year-over-year, reflecting a compensation ratio of 61.7% for the quarter versus 59.1% 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 tied to lower revenue, partially offset by higher base salaries and higher amortization of prior period deferred compensation awards. year-to-date employee compensation and benefits decreased $115.2 million, or 9%, year-over-year, reflecting a year-to-date compensation ratio of 60.8% versus 59.3% 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 tied to lower revenue, 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 – third quarter non-compensation costs increased $7.4 million, or 9%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, as well as higher professional fees. the third quarter non-compensation ratio of 15.7% increased from 10.1% for the prior year period. year-to-date non-compensation costs increased $40.6 million, or 18%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, as well as higher professional fees. the year-to-date non-compensation ratio of 14.0% increased from 10.5% for the prior year period. special charges, including business realignment costs – year-to-date 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 related to the ongoing liquidation of the company's operations in mexico. third quarter and year-to-date 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 third quarter effective tax rate was 30.8% versus 24.0% for the prior year period. the year-to-date effective tax rate was 23.2% versus 21.0% for the prior year period. the effective tax rate is principally impacted by the deduction associated with the appreciation in the firm's share price upon vesting of employee share-based awards above the original grant price. the year-to-date provision for income taxes reflects an additional tax benefit of $19.7 million versus $17.4 million for the prior year period, due to the net impact associated with the appreciation in our share price upon vesting of employee share-based awards above 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 adjusted three months ended nine months ended september 30, 2022 september 30, 2021 % change september 30, 2022 september 30, 2021 % change (dollars in thousands) investment banking: advisory fees(1) $ 488,675 $ 708,897 (31 %) $ 1,690,022 $ 1,782,347 (5 %) underwriting fees 28,697 54,381 (47 %) 78,519 181,686 (57 %) commissions and related revenue 49,200 46,763 5 % 152,583 151,014 1 % investment management: asset management and administration fees(2) 17,217 20,077 (14 %) 54,548 56,909 (4 %) other revenue, net (637 ) 1,511 nm (26,749 ) 20,768 nm net revenues $ 583,152 $ 831,629 (30 %) $ 1,948,923 $ 2,192,724 (11 %) 1. 2. see page 4 for additional business metrics. advisory fees – third quarter adjusted advisory fees decreased $220.2 million, or 31%, year-over-year, reflecting a decrease in the number of advisory fees earned and a decline in revenue earned from large transactions during the third quarter of 2022. year-to-date adjusted advisory fees decreased $92.3 million, or 5%, year-over-year, reflecting a decrease in the number of advisory fees earned. underwriting fees – third quarter underwriting fees decreased $25.7 million, or 47%, year-over-year, and year-to-date underwriting fees decreased $103.2 million, or 57%, 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 – third quarter commissions and related revenue increased $2.4 million, or 5%, year-over-year, primarily reflecting higher trading volumes and increased revenues from research subscriptions. year-to-date commissions and related revenue increased $1.6 million, or 1%, year-over-year, primarily reflecting increased revenues from research subscriptions. asset management and administration fees – third quarter adjusted asset management and administration fees decreased $2.9 million, or 14%, year-over-year, primarily attributed to a 49% 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. the decrease was also driven by a decrease in fees from wealth management clients, as associated aum decreased 12%, primarily from market depreciation. year-to-date adjusted asset management and administration fees decreased $2.4 million, or 4%, year-over-year, primarily attributed to a 34% 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. this was partially offset by an increase in fees from wealth management clients. other revenue – third quarter adjusted other revenue, net, decreased $2.1 million, year-over-year, primarily reflecting lower performance of our investment funds portfolio due to the overall market decline. the portfolio is used as an economic hedge against our deferred cash compensation program. year-to-date adjusted other revenue, net, decreased $47.5 million, year-over-year, primarily reflecting a shift from gains of $15.8 million to losses of $39.0 million on our investment funds portfolio due to the overall market decline. adjusted expenses adjusted three months ended nine months ended september 30, 2022 september 30, 2021 % change september 30, 2022 september 30, 2021 % change (dollars in thousands) employee compensation and benefits $ 355,794 $ 486,471 (27 %) $ 1,174,500 $ 1,289,659 (9 %) compensation ratio 61.0 % 58.5 % 60.3 % 58.8 % non-compensation costs $ 90,744 $ 83,377 9 % $ 269,731 $ 229,136 18 % non-compensation ratio 15.6 % 10.0 % 13.8 % 10.4 % employee compensation and benefits – third quarter adjusted employee compensation and benefits decreased $130.7 million, or 27%, year-over-year, reflecting a compensation ratio of 61.0% for the quarter versus 58.5% 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 tied to lower revenue, partially offset by higher base salaries and higher amortization of prior period deferred compensation awards. year-to-date adjusted employee compensation and benefits decreased $115.2 million, or 9%, year-over-year, reflecting a year-to-date adjusted compensation ratio of 60.3% versus 58.8% 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 tied to lower revenue, 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 – third quarter adjusted non-compensation costs increased $7.4 million, or 9%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, as well as higher professional fees. the third quarter adjusted non-compensation ratio of 15.6% increased from 10.0% for the prior year period. year-to-date adjusted non-compensation costs increased $40.6 million, or 18%, year-over-year, primarily driven by an increase in travel and related expenses, as travel began to resume during the fourth quarter of 2021, as well as higher professional fees. the year-to-date adjusted non-compensation ratio of 13.8% increased from 10.4% for the prior year period. adjusted effective tax rate the third quarter adjusted effective tax rate was 27.4% versus 25.6% for the prior year period. the year-to-date adjusted effective tax rate was 22.8%, flat versus the prior year period. the adjusted effective tax rate is principally impacted by the deduction associated with the appreciation in the firm's share price upon vesting of employee share-based awards above the original grant price. the year-to-date adjusted provision for income taxes for 2022 reflects an additional tax benefit of $20.2 million versus $18.5 million for the prior year period, due to the net impact associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price. liquidity the company continues to maintain a strong balance sheet. as of september 30, 2022, cash and cash equivalents were $473.1 million, investment securities and certificates of deposit were $1.3 billion and current assets exceeded current liabilities by $1.5 billion. amounts due related to the notes payable were $369.3 million at september 30, 2022. headcount as of september 30, 2022 and 2021, the company employed approximately 2,160 and 1,950 people, respectively, worldwide. as of september 30, 2022 and 2021, the company employed 169(1) and 152(2) total senior managing directors, respectively, in its investment banking business, of which 130(1) and 112(2), respectively, were advisory senior managing directors. (1) (2) deferred compensation year-to-date, 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 $365.9 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 $94.1 million and $281.6 million for the three and nine months ended september 30, 2022, respectively, and $84.6 million and $262.1 million for the three and nine months ended september 30, 2021, respectively. as of september 30, 2022, the company had approximately 5.8 million unvested rsus with an aggregate grant date fair value of $652.5 million. rsus are expensed over the service period of the award, subject to retirement eligibility, and generally vest over four years. as of september 30, 2022, the company expects to pay an aggregate of $292.1 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 october 25, 2022, the board of directors of evercore declared a quarterly dividend of $0.72 per share to be paid on december 9, 2022 to common stockholders of record on november 25, 2022. during the third quarter, the company repurchased approximately 17 thousand shares from employees for the net settlement of stock-based compensation awards at an average price per share of $93.64, and approximately 0.3 million shares at an average price per share of $98.98 in open market transactions pursuant to the company's share repurchase program. the aggregate approximately 0.3 million shares were acquired at an average price per share of $98.71. year-to-date, the company repurchased approximately 1.0 million shares from employees for the net settlement of stock-based compensation awards at an average price per share of $127.41, and approximately 2.9 million shares at an average price per share of $115.18 in open market transactions pursuant to the company's share repurchase program. the aggregate approximately 3.9 million shares were acquired at an average price per share of $118.28. conference call evercore will host a related conference call beginning at 8:00 a.m. eastern time, wednesday, october 26, 2022, accessible via telephone and the internet. investors and analysts may participate in the live conference call by dialing (800) 343-4849 (toll-free domestic) or (203) 518-9856 (international); passcode: evrq322. 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. evercore inc. condensed consolidated statements of operations three and nine months ended september 30, 2022 and 2021 (dollars in thousands, except per share data) (unaudited) three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 revenues investment banking: advisory fees $ 488,224 $ 708,333 $ 1,689,033 $ 1,781,065 underwriting fees 28,697 54,381 78,519 181,686 commissions and related revenue 49,200 46,763 152,583 151,014 asset management and administration fees 15,641 16,960 48,724 48,092 other revenue, including interest and investments (637 ) 1,511 (25,455 ) 25,142 total revenues 581,125 827,948 1,943,404 2,186,999 interest expense(1) 4,188 4,393 12,696 13,269 net revenues 576,937 823,555 1,930,708 2,173,730 expenses employee compensation and benefits 355,794 486,471 1,174,500 1,289,659 occupancy and equipment rental 19,680 19,191 58,465 55,413 professional fees 29,294 24,851 81,207 67,859 travel and related expenses 12,862 5,895 35,474 11,902 communications and information services 15,333 14,082 45,745 42,191 depreciation and amortization 7,065 7,122 20,772 20,914 execution, clearing and custody fees 2,378 2,484 7,806 8,949 special charges, including business realignment costs — 8,554 532 8,554 acquisition and transition costs — — — 7 other operating expenses 4,132 9,752 20,262 21,908 total expenses 446,538 578,402 1,444,763 1,527,356 income before income from equity method investments and income taxes 130,399 245,153 485,945 646,374 income from equity method investments 2,027 3,681 6,813 10,099 income before income taxes 132,426 248,834 492,758 656,473 provision for income taxes 40,790 59,712 114,134 137,871 net income 91,636 189,122 378,624 518,602 net income attributable to noncontrolling interest 9,198 29,577 42,543 74,346 net income attributable to evercore inc. $ 82,438 $ 159,545 $ 336,081 $ 444,256 net income attributable to evercore inc. common shareholders $ 82,438 $ 159,545 $ 336,081 $ 444,256 weighted average shares of class a common stock outstanding: basic 39,114 39,467 39,375 40,492 diluted 40,527 42,697 41,104 43,597 net income per share attributable to evercore inc. common shareholders: basic $ 2.11 $ 4.04 $ 8.54 $ 10.97 diluted $ 2.03 $ 3.74 $ 8.18 $ 10.19 (1) includes interest expense on long-term debt. 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 and investment management. the differences between the adjusted and u.s. gaap results are as follows: evercore inc. u.s. gaap reconciliation to adjusted results (dollars in thousands, except per share data) (unaudited) three months ended nine months ended september 30, 2022 september 30, 2021 september 30, 2022 september 30, 2021 net revenues - u.s. gaap $ 576,937 $ 823,555 $ 1,930,708 $ 2,173,730 income from equity method investments (1) 2,027 3,681 6,813 10,099 interest expense on debt (2) 4,188 4,393 12,696 13,269 gain on sale of interests in abs (3) — — (1,294 ) — gain on redemption of g5 debt security (4) — — — (4,374 ) net revenues - adjusted $ 583,152 $ 831,629 $ 1,948,923 $ 2,192,724 other revenue, net - u.s. gaap $ (4,825 ) $ (2,882 ) $ (38,151 ) $ 11,873 interest expense on debt (2) 4,188 4,393 12,696 13,269 gain on sale of interests in abs (3) — — (1,294 ) — gain on redemption of g5 debt security (4) — — — (4,374 ) other revenue, net - adjusted $ (637 ) $ 1,511 $ (26,749 ) $ 20,768 operating income - u.s. gaap $ 130,399 $ 245,153 $ 485,945 $ 646,374 income from equity method investments (1) 2,027 3,681 6,813 10,099 pre-tax income - u.s. gaap 132,426 248,834 492,758 656,473 gain on sale of interests in abs (3) — — (1,294 ) — gain on redemption of g5 debt security (4) — — — (4,374 ) special charges, including business realignment costs (5) — 8,554 532 8,554 acquisition and transition costs (6) — — — 7 pre-tax income - adjusted 132,426 257,388 491,996 660,660 interest expense on debt (2) 4,188 4,393 12,696 13,269 operating income - adjusted $ 136,614 $ 261,781 $ 504,692 $ 673,929 provision for income taxes - u.s. gaap $ 40,790 $ 59,712 $ 114,134 $ 137,871 income taxes (7) (4,545 ) 6,155 (1,805 ) 12,684 provision for income taxes - adjusted $ 36,245 $ 65,867 $ 112,329 $ 150,555 net income attributable to evercore inc. - u.s. gaap $ 82,438 $ 159,545 $ 336,081 $ 444,256 gain on sale of interests in abs (3) — — (1,294 ) — gain on redemption of g5 debt security (4) — — — (4,374 ) special charges, including business realignment costs (5) — 8,554 532 8,554 acquisition and transition costs (6) — — — 7 income taxes (7) 4,545 (6,155 ) 1,805 (12,684 ) noncontrolling interest (8) 8,199 26,399 39,195 69,111 net income attributable to evercore inc. - adjusted $ 95,182 $ 188,343 $ 376,319 $ 504,870 diluted shares outstanding - u.s. gaap 40,527 42,697 41,104 43,597 lp units (9) 2,650 4,840 3,078 4,871 unvested restricted stock units - event based (9) 12 12 12 12 diluted shares outstanding - adjusted 43,189 47,549 44,194 48,480 key metrics: (a) diluted earnings per share - u.s. gaap $ 2.03 $ 3.74 $ 8.18 $ 10.19 diluted earnings per share - adjusted $ 2.20 $ 3.96 $ 8.52 $ 10.41 operating margin - u.s. gaap 22.6 % 29.8 % 25.2 % 29.7 % operating margin - adjusted 23.4 % 31.5 % 25.9 % 30.7 % effective tax rate - u.s. gaap 30.8 % 24.0 % 23.2 % 21.0 % effective tax rate - adjusted 27.4 % 25.6 % 22.8 % 22.8 % (a) reconciliations of the key metrics from u.s. gaap to adjusted results are a derivative of the reconciliations of their components above. evercore inc. u.s. gaap segment reconciliation to adjusted results for the three and nine months ended september 30, 2022 (dollars in thousands) (unaudited) investment banking segment three months ended september 30, 2022 nine months ended september 30, 2022 u.s. gaap basis adjustments non-gaap adjusted basis u.s. gaap basis adjustments non-gaap adjusted basis net revenues: investment banking: advisory fees $ 488,224 $ 451 (1 ) $ 488,675 $ 1,689,033 $ 989 (1 ) $ 1,690,022 underwriting fees 28,697 — 28,697 78,519 — 78,519 commissions and related revenue 49,200 — 49,200 152,583 — 152,583 other revenue, net (5,603 ) 4,188 (2 ) (1,415 ) (40,066 ) 12,696 (2 ) (27,370 ) net revenues 560,518 4,639 565,157 1,880,069 13,685 1,893,754 expenses: employee compensation and benefits 346,280 — 346,280 1,145,006 — 1,145,006 non-compensation costs 87,319 — 87,319 259,705 — 259,705 special charges, including business realignment costs — — — 532 (532 ) (5 ) — total expenses 433,599 — 433,599 1,405,243 (532 ) 1,404,711 operating income (a) $ 126,919 $ 4,639 $ 131,558 $ 474,826 $ 14,217 $ 489,043 compensation ratio (b) 61.8 % 61.3 % 60.9 % 60.5 % operating margin (b) 22.6 % 23.3 % 25.3 % 25.8 % investment management segment three months ended september 30, 2022 nine months ended september 30, 2022 u.s. gaap basis adjustments non-gaap adjusted basis u.s. gaap basis adjustments non-gaap adjusted basis net revenues: asset management and administration fees $ 15,641 $ 1,576 (1 ) $ 17,217 $ 48,724 $ 5,824 (1 ) $ 54,548 other revenue, net 778 — 778 1,915 (1,294 ) (3 ) 621 net revenues 16,419 1,576 17,995 50,639 4,530 55,169 expenses: employee compensation and benefits 9,514 — 9,514 29,494 — 29,494 non-compensation costs 3,425 — 3,425 10,026 — 10,026 total expenses 12,939 — 12,939 39,520 — 39,520 operating income (a) $ 3,480 $ 1,576 $ 5,056 $ 11,119 $ 4,530 $ 15,649 compensation ratio (b) 57.9 % 52.9 % 58.2 % 53.5 % operating margin (b) 21.2 % 28.1 % 22.0 % 28.4 % (a) operating income for u.s. gaap excludes income (loss) from equity method investments. (b) reconciliations of the key metrics from u.s. gaap to adjusted results are a derivative of the reconciliations of their components above. evercore inc. u.s. gaap segment reconciliation to adjusted results for the three and nine months ended september 30, 2021 (dollars in thousands) (unaudited) investment banking segment three months ended september 30, 2021 nine months ended september 30, 2021 u.s. gaap basis adjustments non-gaap adjusted basis u.s. gaap basis adjustments non-gaap adjusted basis net revenues: investment banking: advisory fees $ 708,333 $ 564 (1) $ 708,897 $ 1,781,065 $ 1,282 (1) $ 1,782,347 underwriting fees 54,381 — 54,381 181,686 — 181,686 commissions and related revenue 46,763 — 46,763 151,014 — 151,014 other revenue, net (2,559 ) 4,393 (2) 1,834 11,258 8,895 (2)(4) 20,153 net revenues 806,918 4,957 811,875 2,125,023 10,177 2,135,200 expenses: employee compensation and benefits 476,217 — 476,217 1,261,063 — 1,261,063 non-compensation costs 80,060 — 80,060 219,907 (7 ) (6) 219,900 total expenses 556,277 — 556,277 1,480,970 (7 ) 1,480,963 operating income (a) $ 250,641 $ 4,957 $ 255,598 $ 644,053 $ 10,184 $ 654,237 compensation ratio (b) 59.0 % 58.7 % 59.3 % 59.1 % operating margin (b) 31.1 % 31.5 % 30.3 % 30.6 % investment management segment three months ended september 30, 2021 nine months ended september 30, 2021 u.s. gaap basis adjustments non-gaap adjusted basis u.s. gaap basis adjustments non-gaap adjusted basis net revenues: asset management and administration fees $ 16,960 $ 3,117 (1) $ 20,077 $ 48,092 $ 8,817 (1) $ 56,909 other revenue, net (323 ) — (323 ) 615 — 615 net revenues 16,637 3,117 19,754 48,707 8,817 57,524 expenses: employee compensation and benefits 10,254 — 10,254 28,596 — 28,596 non-compensation costs 3,317 — 3,317 9,236 — 9,236 special charges, including business realignment costs 8,554 (8,554 ) (5) — 8,554 (8,554 ) (5) — total expenses 22,125 (8,554 ) 13,571 46,386 (8,554 ) 37,832 operating income (loss) (a) $ (5,488 ) $ 11,671 $ 6,183 $ 2,321 $ 17,371 $ 19,692 compensation ratio (b) 61.6 % 51.9 % 58.7 % 49.7 % operating margin (b) (33.0 %) 31.3 % 4.8 % 34.2 % (a) operating income (loss) for u.s. gaap excludes income (loss) from equity method investments. (b) reconciliations of the key metrics from u.s. gaap to adjusted results are a derivative of the reconciliations of their components above. evercore inc. u.s. gaap segment and consolidated results (dollars in thousands) (unaudited) u.s. gaap three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 investment banking net revenues: investment banking: advisory fees $ 488,224 $ 708,333 $ 1,689,033 $ 1,781,065 underwriting fees 28,697 54,381 78,519 181,686 commissions and related revenue 49,200 46,763 152,583 151,014 other revenue, net (5,603 ) (2,559 ) (40,066 ) 11,258 net revenues 560,518 806,918 1,880,069 2,125,023 expenses: employee compensation and benefits 346,280 476,217 1,145,006 1,261,063 non-compensation costs 87,319 80,060 259,705 219,907 special charges, including business realignment costs — — 532 — total expenses 433,599 556,277 1,405,243 1,480,970 operating income (a) $ 126,919 $ 250,641 $ 474,826 $ 644,053 investment management net revenues: asset management and administration fees $ 15,641 $ 16,960 $ 48,724 $ 48,092 other revenue, net 778 (323 ) 1,915 615 net revenues 16,419 16,637 50,639 48,707 expenses: employee compensation and benefits 9,514 10,254 29,494 28,596 non-compensation costs 3,425 3,317 10,026 9,236 special charges, including business realignment costs — 8,554 — 8,554 total expenses 12,939 22,125 39,520 46,386 operating income (loss) (a) $ 3,480 $ (5,488 ) $ 11,119 $ 2,321 total net revenues: investment banking: advisory fees $ 488,224 $ 708,333 $ 1,689,033 $ 1,781,065 underwriting fees 28,697 54,381 78,519 181,686 commissions and related revenue 49,200 46,763 152,583 151,014 asset management and administration fees 15,641 16,960 48,724 48,092 other revenue, net (4,825 ) (2,882 ) (38,151 ) 11,873 net revenues 576,937 823,555 1,930,708 2,173,730 expenses: employee compensation and benefits 355,794 486,471 1,174,500 1,289,659 non-compensation costs 90,744 83,377 269,731 229,143 special charges, including business realignment costs — 8,554 532 8,554 total expenses 446,538 578,402 1,444,763 1,527,356 operating income (a) $ 130,399 $ 245,153 $ 485,945 $ 646,374 (a) operating income (loss) excludes income (loss) from equity method investments. evercore inc. u.s. gaap reconciliation to adjusted non-compensation costs (dollars in thousands) (unaudited) three months ended september 30, 2022 u.s. gaap adjustments adjusted (dollars in thousands) occupancy and equipment rental $ 19,680 $ — $ 19,680 professional fees 29,294 — 29,294 travel and related expenses 12,862 — 12,862 communications and information services 15,333 — 15,333 depreciation and amortization 7,065 — 7,065 execution, clearing and custody fees 2,378 — 2,378 other operating expenses 4,132 — 4,132 total non-compensation costs $ 90,744 $ — $ 90,744 three months ended september 30, 2021 u.s. gaap adjustments adjusted (dollars in thousands) occupancy and equipment rental $ 19,191 $ — $ 19,191 professional fees 24,851 — 24,851 travel and related expenses 5,895 — 5,895 communications and information services 14,082 — 14,082 depreciation and amortization 7,122 — 7,122 execution, clearing and custody fees 2,484 — 2,484 other operating expenses 9,752 — 9,752 total non-compensation costs $ 83,377 $ — $ 83,377 nine months ended september 30, 2022 u.s. gaap adjustments adjusted (dollars in thousands) occupancy and equipment rental $ 58,465 $ — $ 58,465 professional fees 81,207 — 81,207 travel and related expenses 35,474 — 35,474 communications and information services 45,745 — 45,745 depreciation and amortization 20,772 — 20,772 execution, clearing and custody fees 7,806 — 7,806 other operating expenses 20,262 — 20,262 total non-compensation costs $ 269,731 $ — $ 269,731 nine months ended september 30, 2021 u.s. gaap adjustments adjusted (dollars in thousands) occupancy and equipment rental $ 55,413 $ — $ 55,413 professional fees 67,859 — 67,859 travel and related expenses 11,902 — 11,902 communications and information services 42,191 — 42,191 depreciation and amortization 20,914 — 20,914 execution, clearing and custody fees 8,949 — 8,949 acquisition and transition costs 7 (7 ) (6 ) — other operating expenses 21,908 — 21,908 total non-compensation costs $ 229,143 $ (7 ) $ 229,136 notes to unaudited condensed consolidated adjusted financial data for further information on these adjustments, see pages a-2 to a-3. (1) (2) (3) (4) (5) (6) (7) (8) (9)
