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TheStreet Open House

Evercore Partners Reports Second Quarter 2012 Results; Quarterly Dividend Of $0.20 Per Share

Expenses

For the quarter ended June 30, 2012, compensation costs were $89.8 million, an increase of 33% from the second quarter of last year and 65% from the previous quarter. The trailing twelve-month compensation ratio was 60%, down from 61% in Q2 2011 and flat from Q1 2012. For the three months ended June 30, 2012, Evercore’s Investment Banking compensation ratio was 59%, versus the compensation ratio reported for the three months ended June 30, 2011 and March 31, 2012 of 60% and 64%, respectively.

Non-compensation costs for the current quarter of $25.9 million increased 43% from the same period last year and 12% from last quarter. The year-over-year increase in costs reflects the Lexicon acquisition and continued growth of the Investment Banking business. The sequential quarter-over-quarter increase was driven principally by higher occupancy and business development costs. The ratio of non-compensation costs to revenue for the current quarter was 17%, compared to 16% in the same quarter last year and 27% in the previous quarter. Expenses in the Institutional Equities business were $6.6 million for the second quarter, in line with first quarter expenses.

Investment Management

For the quarter ended June 30, 2012, Investment Management reported net revenues and operating income of $20.9 million and $0.9 million, respectively. Investment Management reported an operating margin of 4% for the current quarter . As of June 30, 2012, Investment Management had $11.8 billion of AUM.

               
 
Adjusted Pro Forma
Three Months Ended Six Months Ended
   
June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Net Revenues: (dollars in thousands)
Investment Management Revenues $ 20,699 $ 20,388 $ 27,843 $ 41,087 $ 52,567
Other Revenue, net   206     153     135     359     300  
Net Revenues   20,905     20,541     27,978     41,446     52,867  
 
Expenses:
Employee Compensation and Benefits 12,962 11,972 15,460 24,934 30,379
Non-compensation Costs   7,014     7,145     7,852     14,159     15,353  
Total Expenses   19,976     19,117     23,312     39,093     45,732  
 
Operating Income $ 929   $ 1,424   $ 4,666   $ 2,353   $ 7,135  
 
Compensation Ratio 62 % 58 % 55 % 60 % 57 %
Operating Margin 4 % 7 % 17 % 6 % 13 %
 
 
U.S. GAAP
Three Months Ended Six Months Ended
 
June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Net Revenues: (dollars in thousands)
Investment Management Revenues $ 20,036 $ 19,764 $ 27,987 $ 39,800 $ 53,431
Other Revenue, net   (703 )   (751 )   (759 )   (1,454 )   (1,484 )
Net Revenues   19,333     19,013     27,228     38,346     51,947  
 
Expenses:
Employee Compensation and Benefits 13,536 12,498 18,724 26,034 34,459
Non-compensation Costs   7,185     7,360     8,014     14,545     15,936  
Total Expenses   20,721     19,858     26,738     40,579     50,395  
 
Operating Income (Loss) $ (1,388 ) $ (845 ) $ 490   $ (2,233 ) $ 1,552  
 
Compensation Ratio 70 % 66 % 69 % 68 % 66 %
Operating Margin (7 %) (4 %) 2 % (6 %) 3 %
 
 

Revenues

For the quarter ended June 30, 2012, Investment Management reported revenue of $20.7 million, which reflects a decrease from the same period last year of 26% and an increase from the previous quarter of 2%. AUM of $11.8 billion declined 8% in comparison to the first quarter on net outflows of ($0.7) billion and market depreciation of ($0.4) billion. AUM decreased by 27% from the same period last year, due primarily to outflows in our institutional business.

             
 
Investment Management Revenue Components
Adjusted Pro Forma

Three Months Ended

Six Months Ended

 
June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012

June 30, 2011

Investment Advisory and Management Fees (dollars in thousands)
Wealth Management $ 4,906 $ 4,525 $ 3,764 $ 9,431 $ 7,232
Institutional Asset Management (1) 12,415 12,466 17,562 24,881 35,376
Private Equity 1,810 1,735 1,714 3,545 3,429
Total Investment Advisory and Management Fees 19,131 18,726 23,040 37,857 46,037
 
Realized and Unrealized Gains (Losses)
Institutional Asset Management 1,117 1,212 990 2,329 2,157
Private Equity (301) (307) 3,878 (608) 4,820
Total Realized and Unrealized Gains 816 905 4,868 1,721 6,977
 
Equity in Earnings (Loss) of Affiliates (2) 752 757 (65) 1,509 (447)
Investment Management Revenues $ 20,699 $ 20,388 $ 27,843 $ 41,087 $ 52,567
 
(1) Management fees from Institutional Asset Management were $12.5 million, $12.6 million and $25.1 million for the three months ended June 30, 2012, March 31, 2012 and six months ended June 30, 2012, respectively, on a U.S. GAAP basis, excluding the reduction of revenues for client-related expenses.
(2) Equity in Pan, G5 and ABS on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income from Equity Method Investments.
 
 

The decline in revenue relative to the prior year was due to a decrease in both Investment Advisory and Management Fees, and in Realized and Unrealized Gains on investments. Investment Advisory and Management Fees of $19.1 million for the quarter ended June 30, 2012 declined compared to the same period a year ago, as higher fees in Wealth Management were offset by declines in Institutional Asset Management. Fees earned in the current quarter increased in comparison to the previous quarter driven principally by increased AUM in Wealth Management.

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