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TheStreet Open House

Evercore Partners Reports Record Fourth Quarter And Full Year 2012 Results

Stocks in this article: EVR

The Institutional Equities business contributed revenues of $7.1 million in the quarter and the Private Funds Group closed three capital raises during the quarter.

Expenses

Compensation costs were $110.2 million for the fourth quarter, an increase of 125% year-over-year and 43% sequentially. The trailing twelve-month compensation ratio was 59.7%, up from 59.3% a year ago and 59.5% compared to the previous quarter. Evercore’s Investment Banking compensation ratio was 57.5% for the fourth quarter, versus the compensation ratio reported for the three months ended December 31, 2011 and September 30, 2012 of 54.3% and 60.3%, respectively. Year-to-date compensation costs were $331.8 million, an increase of 33% from the prior year.

Non-compensation costs for the current quarter were $24.6 million, up 9% from the same period last year and 5% sequentially. The increase in costs reflects continued growth of the Investment Banking business. The ratio of non-compensation costs to net revenue for the current quarter was 12.8%, compared to 25.0% in the same quarter last year and 18.3% in the previous quarter. Year-to-date non-compensation costs were $96.9 million, up 27% from the prior year. The ratio of non-compensation costs to net revenue for the twelve months ended December 31, 2012 was 17.4%, compared to 18.1% last year.

Expenses in the Institutional Equities business were $9.2 million for the fourth quarter, an increase of 32% from the previous quarter, principally reflecting the addition of a team to cover the REIT sector.

Investment Management

For the fourth quarter, Investment Management reported net revenues and operating income of $20.4 million and $0.2 million, respectively. Investment Management reported a fourth quarter operating margin of 0.8% . For the twelve months ended December 31, 2012, Investment Management reported net revenue and operating income of $82.9 million and $4.5 million, respectively. The year-to-date operating margin was 5.4%, compared to 10.4% last year. As of December 31, 2012, Investment Management reported $12.1 billion of AUM, up 4% from the third quarter as the Mt. Eden acquisition added $0.6 billion at the end of the quarter and net outflows of $0.3 billion during the quarter offset market appreciation of $0.2 billion.

                             
Adjusted Pro Forma
Three Months Ended Twelve Months Ended
December 31,

2012

September 30,

2012

December 31,

2011

December 31,

2012

December 31,

2011

Net Revenues: (dollars in thousands)
Investment Management Revenues $ 19,862 $ 20,918 $ 21,251 $ 81,867 $ 98,375
Other Revenue, net   554     94     72     1,007     558  
Net Revenues   20,416     21,012     21,323     82,874     98,933  
 
Expenses:
Employee Compensation and Benefits 12,787 11,994 13,022 49,715 58,235
Non-compensation Costs   7,458     7,027     7,446     28,644     30,430  
Total Expenses   20,245     19,021     20,468     78,359     88,665  
 
Operating Income $ 171   $ 1,991   $ 855   $ 4,515   $ 10,268  
 
Compensation Ratio 62.6 % 57.1 % 61.1 % 60.0 % 58.9 %
Operating Margin 0.8 % 9.5 % 4.0 % 5.4 % 10.4 %
 
U.S. GAAP
Three Months Ended Twelve Months Ended
December 31,

2012

September 30,

2012

December 31,

2011

December 31,

2012

December 31,

2011

Net Revenues: (dollars in thousands)
Investment Management Revenues $ 19,556 $ 20,434 $ 21,007 $ 79,790 $ 99,161
Other Revenue, net   (362 )   (820 )   (829 )   (2,636 )   (3,021 )
Net Revenues   19,194     19,614     20,178     77,154     96,140  
 
Expenses:
Employee Compensation and Benefits 13,441 12,590 13,576 52,065 63,610
Non-compensation Costs   7,704     7,240     7,610     29,489     31,365  
Total Expenses   21,145     19,830     21,186     81,554     94,975  
 
Operating Income (Loss) $ (1,951 ) $ (216 ) $ (1,008 ) $ (4,400 ) $ 1,165  
 
Compensation Ratio 70.0 % 64.2 % 67.3 % 67.5 % 66.2 %
Operating Margin (10.2 %) (1.1 %) (5.0 %) (5.7 %) 1.2 %
 

Revenues

                               
Investment Management Revenue Components
Adjusted Pro Forma
Three Months Ended Twelve Months Ended
December 31,

2012

September 30,

2012

December 31,

2011

December 31,

2012

December 31,

2011

Investment Advisory and Management Fees (dollars in thousands)
Wealth Management $ 5,123 $ 5,269 $ 4,137 $ 19,823 $ 15,296
Institutional Asset Management (1) 11,053 11,459 13,828 47,393 65,220
Private Equity   2,397     1,856   2,437     7,798     7,544  
Total Investment Advisory and Management Fees   18,573     18,584   20,402     75,014     88,060  
 
Realized and Unrealized Gains (Losses)
Institutional Asset Management 840 1,296 871 4,465 4,297
Private Equity   (21 )   423   (348 )   (206 )   6,200  
Total Realized and Unrealized Gains   819     1,719   523     4,259     10,497  
 
Equity in Earnings (Loss) of Affiliates (2)   470     615   326     2,594     (182 )
Investment Management Revenues $ 19,862   $ 20,918 $ 21,251   $ 81,867   $ 98,375  
(1) Management fees from Institutional Asset Management were $11.2 million, $11.6 million and $13.9 million for the three months ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively, and $47.9 million and $65.8 million for the twelve months ended December 31, 2012 and 2011, respectively, on a U.S. GAAP basis, excluding the reduction of revenues for client-related expenses.
(2) Equity in G5, ABS and Pan on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income from Equity Method Investments.
 

Investment Advisory and Management Fees of $18.6 million for the quarter ended December 31, 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 were flat in comparison to the previous quarter.

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