Exhibit 99.1

E V E R C O R E
EVERCORE REPORTS THIRD QUARTER AND NINE MONTHS 2018 RESULTS;
QUARTERLY DIVIDEND OF $0.50 PER SHARE
 
Third Quarter 2018 Results
 
2018 Year to Date Results
 
U.S. GAAP
 
Adjusted
 
U.S. GAAP
 
Adjusted
 
 
vs.
Q3 2017
 
 
vs.
Q3 2017
 
 
vs.
YTD 2017
 
 
vs.
YTD 2017
Net Revenues ($ millions)
$
381.3

(6%)
 
$
376.0

(7%)
 
$
1,293.3

11%
 
$
1,280.1

10%
Operating Income ($ millions)
$
74.5

(14%)
 
$
87.0

(16%)
 
$
291.9

19%
 
$
327.4

12%
Net Income Attributable to Evercore Inc. ($ millions)
$
49.5

8%
 
$
62.8

3%
 
$
213.9

48%
 
$
259.7

31%
Diluted Earnings Per Share
$
1.08

4%
 
$
1.23

1%
 
$
4.70

46%
 
$
5.13

32%
Operating Margin
19.6
%
(186) bps
 
23.1
%
(258) bps
 
22.6
%
155 bps
 
25.6
%
38 bps
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Business and Financial
 Highlights

g
Record Net Revenues, Net Income Attributable to Evercore Inc. and Earnings Per Share for the first nine months of 2018, on both a U.S. GAAP and an Adjusted basis. Net Revenues for the three months ended September 30, 2018 declined in comparison with the prior year period. Record third quarter Net Income Attributable to Evercore Inc. and Earnings Per Share on both a U.S. GAAP and an Adjusted basis.

g
Advisory Revenues for the first nine months of 2018 increased 11% versus the prior year on a U.S. GAAP and an Adjusted basis. Advisory Revenues for the third quarter decreased 8% and 9% on a U.S. GAAP and an Adjusted basis, respectively. The third quarter of 2018 was positively impacted by revenue recognized from the application of ASC 606, adopted in January 2018.

g
Commissions and Related Fees for the first nine months of 2018 decreased 6% versus the prior year on a U.S. GAAP and an Adjusted basis. Such fees in the quarter were flat to the third quarter of 2017.

g
Underwriting Revenues for the first nine months of 2018 increased 108% and 95% versus the prior year on a U.S. GAAP and an Adjusted basis, respectively. Underwriting Revenues for the third quarter increased 4% and 3% on a U.S. GAAP and an Adjusted basis, respectively.

g
Effective tax rate reduced by 12 and 13 percentage points for the first nine months of 2018 on a U.S. GAAP and an Adjusted basis, respectively, and 12 and 14 percentage points in the third quarter on a U.S. GAAP and an Adjusted basis, respectively, due to the Tax Cuts and Jobs Act

g
Evercore ISI ranked as the top independent research firm (#2 on a weighted basis and #4 overall) in the Institutional Investor All-America Equity Research team rankings for the fifth consecutive year
 
 
 
 
 
 
Governance

g
Kendrick R. Wilson III, a leader in the financial services industry, appointed to the Board of Directors
 
 
 
 
 
 
Capital Return

g
Quarterly dividend of $0.50 per share

g
$251.9 million returned to shareholders for the first nine months of 2018 through dividends and share repurchases, including repurchases of 1.9 million shares/units at an average price of $98.20

 
 
 




NEW YORK, October 24, 2018 – Evercore Inc. (NYSE: EVR) today announced its results for the third quarter ended September 30, 2018.

LEADERSHIP COMMENTARY

Ralph Schlosstein, President and Chief Executive Officer
"Despite a reduced number of closings in our Advisory business this quarter, the momentum in our business remains very strong, as we work closely with clients to complete Advisory assignments in 2018 and to announce transactions that will complete next year. Growth in Equity Capital Markets activity is high and our capabilities here are becoming more widely recognized. Our Equities team continues to deliver high quality research while working with clients to receive appropriate compensation for our services, earning revenues that were equal to those in the third quarter of 2017. And our Wealth Management team continues to deliver steady growth," said Ralph Schlosstein, President and Chief Executive Officer. "We are pleased with our results year to date and are working hard to finish the year strongly. These strong results year to date have enabled us to return more than $251 million to our shareholders."


John S. Weinberg, Executive Chairman
"We are pleased to once again be recognized by our clients through the recent Institutional Investor All-America Research survey as a top-tier quality research provider," said John S. Weinberg, Executive Chairman. "We remain in active dialogues with additional talent for all of our businesses as we look ahead to the 2019 recruiting class."

Mr. Weinberg also noted, "We are pleased to welcome Ken Wilson to our Board. He is an established leader in finance, government and philanthropy, and his expertise will further enhance our Board’s capabilities."


Roger C. Altman, Founder and Senior Chairman
"The tone and breadth of client dialogue and activity remains healthy. The M&A and capital markets environment continues to be favorable and our backlog is strong," said Roger C. Altman, Founder and Senior Chairman.








2




Selected Financial Data - U.S. GAAP Results:

The following is a discussion of Evercore's results on a U.S. GAAP basis.

 
U.S. GAAP
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands, except per share data)
Net Revenues
$
381,259

 
$
406,601

 
(6
%)
 
$
1,293,299

 
$
1,164,318

 
11
%
Operating Income(1)
$
74,540

 
$
87,070

 
(14
%)
 
$
291,871

 
$
244,665

 
19
%
Net Income Attributable to Evercore Inc.
$
49,461

 
$
45,911

 
8
%
 
$
213,935

 
$
144,866

 
48
%
Diluted Earnings Per Share
$
1.08

 
$
1.04

 
4
%
 
$
4.70

 
$
3.23

 
46
%
Compensation Ratio
59.1
%
 
60.7
%
 
 
 
59.3
%
 
59.2
%
 
 
Operating Margin
19.6
%
 
21.4
%
 
 
 
22.6
%
 
21.0
%
 
 
Effective Tax Rate
22.8
%
 
32.4
%
 
 
 
16.1
%
 
27.8
%
 
 
Trailing Twelve Month Compensation Ratio
56.7
%
 
59.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Operating Income for the three and nine months ended September 30, 2018 includes Special Charges of $2.0 million and $3.9 million, respectively, recognized in the Investment Banking segment. Operating Income for the nine months ended September 30, 2017 includes Special Charges of $21.5 million recognized in the Investment Banking and Investment Management segments.

Net Revenues
For the three months ended September 30, 2018, Net Revenues of $381.3 million decreased 6% versus the three months ended September 30, 2017, primarily driven by a decrease in Advisory Fees. For the nine months ended September 30, 2018, Net Revenues of $1.3 billion increased 11% versus the nine months ended September 30, 2017, primarily driven by increases in Advisory Fees and Underwriting Fees. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.

The Company adopted the new accounting standard, ASC 606, "Revenue from Contracts with Customers," on January 1, 2018. Under ASC 606, revenue is recognized when all material conditions for completion have been met and it is probable that a significant revenue reversal will not occur in a future period. The application of this standard resulted in advisory revenue of $50.8 million being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard. In addition, beginning in 2018, client related expenses for underwriting transactions are presented gross (previously presented net) in related U.S. GAAP reported revenues and expenses.

Compensation Ratio
For the three months ended September 30, 2018, the compensation ratio was 59.1% versus 60.7% for the three months ended September 30, 2017. The compensation ratio was higher for the three months ended September 30, 2017 due to the expense associated with acquisition-related LP Units/Interests. For the nine months ended September 30, 2018, the compensation ratio was 59.3% versus 59.2% for the nine months ended September 30, 2017. The compensation ratio was lower for the nine months ended September 30, 2017 due to the expense reversal associated with acquisition-related LP Interests during the first quarter of 2017. The compensation ratio for the three and nine months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.


3




Operating Income
For the three months ended September 30, 2018, Operating Income of $74.5 million decreased 14% versus the three months ended September 30, 2017, driven by a decrease in Net Revenues, partially offset by a decrease in compensation costs in the Investment Banking business. For the nine months ended September 30, 2018, Operating Income of $291.9 million increased 19% versus the nine months ended September 30, 2017, driven by an increase in Net Revenues and a reduction in special charges, partially offset by increased compensation and non-compensation costs in the Investment Banking business. See the Business Line Reporting - Discussion of U.S. GAAP Results below for further information.

Effective Tax Rate
For the three months ended September 30, 2018, the effective tax rate was 22.8% versus 32.4% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, the effective tax rate was 16.1% versus 27.8% for the nine months ended September 30, 2017.

In conjunction with the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which reduced income tax rates in the U.S. in 2018 and future years, our effective tax rate for the three and nine months ended September 30, 2018 was reduced by 12 percentage points before the impact of the application of the share-based compensation accounting standard, described below.

The provision for income taxes for the three and nine months ended September 30, 2018 includes a benefit of $0.6 million and $22.8 million, respectively, and $0.5 million and $23.7 million for the three and nine months ended September 30, 2017, respectively, following the application of a new accounting standard, effective January 1, 2017, related to share-based compensation, which requires that the tax deduction associated with the appreciation in the Firm's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. This benefit resulted in a decrease in the effective tax rate of 0.8 and 7.6 percentage points for the three and nine months ended September 30, 2018, respectively, and 0.6 and 9.5 percentage points for the three and nine months ended September 30, 2017, respectively.

The effective tax rate is also impacted by the non-deductible treatment of compensation associated with Evercore LP Units/Interests.

Net Income and Earnings Per Share
For the three months ended September 30, 2018, Net Income Attributable to Evercore Inc. and Earnings Per Share of $49.5 million and $1.08, respectively, increased 8% and 4%, respectively, versus the three months ended September 30, 2017, principally driven by a decrease in compensation costs in the Investment Banking business and a decrease in the effective tax rate.

For the nine months ended September 30, 2018, Net Income Attributable to Evercore Inc. and Earnings Per Share of $213.9 million and $4.70, respectively, increased 48% and 46%, respectively, versus the nine months ended September 30, 2017, principally driven by an increase in Net Revenues in the Investment Banking business and a decrease in the effective tax rate.


4




Selected Financial Data - Adjusted Results:

The following is a discussion of Evercore's results on an Adjusted basis. See pages 7 and A-2 to A-12 for further information and reconciliations of these non-GAAP metrics to our U.S. GAAP results.

 
Adjusted
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands, except per share data)
Net Revenues
$
376,026

 
$
402,857

 
(7
%)
 
$
1,280,070

 
$
1,160,300

 
10
%
Operating Income
$
87,026

 
$
103,625

 
(16
%)
 
$
327,400

 
$
292,305

 
12
%
Net Income Attributable to Evercore Inc.
$
62,768

 
$
60,972

 
3
%
 
$
259,749

 
$
198,373

 
31
%
Diluted Earnings Per Share
$
1.23

 
$
1.22

 
1
%
 
$
5.13

 
$
3.90

 
32
%
Compensation Ratio
59.0
%
 
59.0
%
 
 
 
59.0
%
 
59.0
%
 
 
Operating Margin
23.1
%
 
25.7
%
 
 
 
25.6
%
 
25.2
%
 
 
Effective Tax Rate
24.2
%
 
37.0
%
 
 
 
17.6
%
 
28.7
%
 
 
Trailing Twelve Month Compensation Ratio
58.5
%
 
58.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Adjusted Net Revenues
For the three months ended September 30, 2018, Adjusted Net Revenues of $376.0 million decreased 7% versus the three months ended September 30, 2017, primarily driven by a decrease in Advisory Fees. For the nine months ended September 30, 2018, Adjusted Net Revenues of $1.3 billion increased 10% versus the nine months ended September 30, 2017, primarily driven by increases in Advisory Fees and Underwriting Fees. See the Business Line Reporting - Discussion of Adjusted Results below for further information.

The Company adopted the new accounting standard, ASC 606, "Revenue from Contracts with Customers," on January 1, 2018. Under ASC 606, revenue is recognized when all material conditions for completion have been met and it is probable that a significant revenue reversal will not occur in a future period. The application of this standard resulted in advisory revenue of $50.8 million being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard.

Adjusted Compensation Ratio
For the three and nine months ended September 30, 2018, the Adjusted compensation ratio was 59.0%, flat compared to the three and nine months ended September 30, 2017. The Adjusted compensation ratio for the three and nine months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017. See the Business Line Reporting - Discussion of Adjusted Results below for further information.

Adjusted Operating Income
For the three months ended September 30, 2018, Adjusted Operating Income of $87.0 million decreased 16% versus the three months ended September 30, 2017, driven by a decrease in Net Revenues, partially offset by a decrease in compensation costs in the Investment Banking business. For the nine months ended September 30, 2018, Adjusted Operating Income of $327.4 million increased 12% versus the nine months ended September 30, 2017, driven by an increase in Net Revenues, partially offset by increased compensation and non-compensation costs in the Investment Banking business. See the Business Line Reporting - Discussion of Adjusted Results below for further information.

5




Adjusted Effective Tax Rate
For the three months ended September 30, 2018, the Adjusted effective tax rate was 24.2% versus 37.0% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, the Adjusted effective tax rate was 17.6% versus 28.7% for the nine months ended September 30, 2017.

In conjunction with the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which reduced income tax rates in the U.S. in 2018 and future years, our Adjusted effective tax rate for the three and nine months ended September 30, 2018 was reduced by 14 and 13 percentage points, respectively, before the impact of the application of the share-based compensation accounting standard, described below.

The Adjusted effective tax rate includes a benefit of $0.7 million and $23.9 million for the three and nine months ended September 30, 2018, respectively, and $0.5 million and $26.1 million for the three and nine months ended September 30, 2017, respectively, following the application of a new accounting standard, effective January 1, 2017, related to share-based compensation, which requires that the tax deduction associated with the appreciation in the Firm's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. This benefit resulted in a decrease in the Adjusted effective tax rate of 0.8 and 7.4 percentage points for the three and nine months ended September 30, 2018, respectively, and 0.5 and 9.2 percentage points for the three and nine months ended September 30, 2017, respectively.

Adjusted Net Income and Earnings Per Share
For the three months ended September 30, 2018, Adjusted Net Income Attributable to Evercore Inc. and Adjusted Earnings Per Share of $62.8 million and $1.23, respectively, increased 3% and 1%, respectively, versus the three months ended September 30, 2017, driven by a decrease in compensation costs in the Investment Banking business and a decrease in the effective tax rate.

For the nine months ended September 30, 2018, Adjusted Net Income Attributable to Evercore Inc. and Adjusted Earnings Per Share of $259.7 million and $5.13, respectively, increased 31% and 32%, respectively, versus the nine months ended September 30, 2017, driven by an increase in Net Revenues in the Investment Banking business and a decrease in the effective tax rate.






6




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.

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 vested and certain unvested Evercore LP Units and Interests 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.

Evercore's Adjusted Net Income Attributable to Evercore Inc. for the three and nine months ended September 30, 2018 was higher than U.S. GAAP as a result of the exclusion of expenses associated with awards granted in conjunction with certain of the Company's acquisitions, and certain other business acquisition-related charges and Special Charges.

Acquisition-related compensation charges for 2018 include expenses associated with awards granted in conjunction with the Company's acquisition of ISI. Acquisition-related charges for 2018 also include professional fees incurred and amortization of intangible assets.

Special Charges for 2018 relate to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York.

In addition, for Adjusted purposes, client related expenses have been presented as a reduction from Revenues and Non-compensation costs.

Evercore's Adjusted Diluted Shares Outstanding for the three and nine months ended September 30, 2018 were higher than U.S. GAAP as a result of the inclusion of certain Evercore LP Units.

This release also presents changes in Adjusted Investment Management Operating Income and Adjusted Investment Management Operating Margin from the prior-year periods assuming that the restructuring of certain Investment Management affiliates occurred on December 31, 2016. This includes the sale of the Institutional Trust and Independent Fiduciary business of ETC that occurred on October 18, 2017. Evercore believes this is useful additional information for investors because it improves the comparability of period-over-period results and aligns with management's view of business performance.

Further details of these adjustments, as well as an explanation of similar amounts for the three and nine months ended September 30, 2017 are included in Annex I, pages A-2 to A-12. 

Certain balances in the prior period were reclassified to conform to their current presentation in this release. "Investment Banking Revenue" has been disaggregated into "Advisory Fees," "Underwriting Fees" and "Commissions and Related Fees" and "Investment Management Revenue" has been renamed to "Asset

7




Management and Administration Fees." "Other Revenue, Including Interest" has been renamed to "Other Revenue, Including Interest and Investments" and principal trading gains and losses and realized and unrealized gains and losses on private equity investments have been reclassified from Investment Banking Revenue and Investment Management Revenue to "Other Revenue, Including Interest and Investments."


8




Business Line Reporting - Discussion of U.S. GAAP Results

The following is a discussion of Evercore's segment results on a U.S. GAAP basis.

Investment Banking
 
U.S. GAAP
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands)
Net Revenues:
 
 
 
 
 
 
 
 
 
 
 
Investment Banking:
 
 
 
 
 
 
 
 
 
 


     Advisory Fees(1)
$
305,949

 
$
332,753

 
(8
%)
 
$
1,047,259

 
$
939,841

 
11
%
     Underwriting Fees(2)
11,440

 
11,034

 
4
%
 
62,784

 
30,170

 
108
%
     Commissions and Related Fees
45,337

 
45,390

 
%
 
139,447

 
148,898

 
(6
%)
Other Revenue, net(3)
4,108

 
(878
)
 
NM

 
3,219

 
(3,431
)
 
NM

Net Revenues
366,834

 
388,299

 
(6
%)
 
1,252,709

 
1,115,478

 
12
%
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Employee Compensation and Benefits
217,471

 
236,564

 
(8
%)
 
743,152

 
660,233

 
13
%
Non-compensation Costs
76,259

 
68,448

 
11
%
 
221,418

 
196,603

 
13
%
Special Charges
1,967

 

 
NM

 
3,864

 
14,400

 
(73
%)
Total Expenses
295,697

 
305,012

 
(3
%)
 
968,434

 
871,236

 
11
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
$
71,137

 
$
83,287

 
(15
%)
 
$
284,275

 
$
244,242

 
16
%
 
 
 
 
 
 
 
 
 
 
 
 
Compensation Ratio
59.3
%
 
60.9
%
 
 
 
59.3
%
 
59.2
%
 
 
Non-compensation Ratio
20.8
%
 
17.6
%
 
 
 
17.7
%
 
17.6
%
 
 
Operating Margin
19.4
%
 
21.4
%
 
 
 
22.7
%
 
21.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory Client Transactions(4)
196

 
210

 
(7
%)
 
458

 
429

 
7
%
Advisory Fees in Excess of $1 million(4)
62

 
67

 
(7
%)
 
210

 
181

 
16
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) The application of the new revenue accounting standard, ASC 606, resulted in advisory revenue of $50,829 being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard.
 
 
 
 
 
 
 
 
 
 
 
 
(2) The application of the new revenue accounting standard, ASC 606, resulted in client related expenses for underwriting transactions being presented gross (previously presented net) in related revenues and expenses on a U.S. GAAP basis for the three and nine months ended September 30, 2018. Underwriting Fees are gross of related non-compensation expenses of $116 and $3,913 for the three and nine months ended September 30, 2018, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
(3) Includes ($343) and ($606) of principal trading losses that were previously included in Investment Banking Revenue for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.
 
 
 
 
 
 
 
 
 
 
 
 
(4) Includes Advisory and Underwriting Transactions.

Revenues

During the three months ended September 30, 2018, fees for Advisory services decreased 8% versus the three months ended September 30, 2017, reflecting a decline in the number of Advisory fees in excess of $1 million. Underwriting Fees of $11.4 million for the three months ended September 30, 2018 increased 4% versus the third quarter of last year. We participated in 12 underwriting transactions (vs. 13 in Q3 2017); 6 as a bookrunner (vs. 8 in Q3 2017). Commissions and Related Fees for the three months ended September 30, 2018 were flat from the third quarter of last year.

During the nine months ended September 30, 2018, fees for Advisory services increased 11% versus the nine months ended September 30, 2017, as we continued to advise clients on a wide variety of matters including strategic M&A, activism, restructuring and capital raising. Underwriting Fees of $62.8 million for the nine months ended September 30, 2018 increased 108% versus the nine months ended September 30, 2017, as

9
    



we participated in 43 underwriting transactions (vs. 39 in 2017); 31 as a bookrunner (vs. 19 in 2017). Commissions and Related Fees for the nine months ended September 30, 2018 decreased 6% from the nine months ended September 30, 2017 principally driven by the trend of institutional clients adjusting the level of payments for research services.

Expenses

Compensation costs were $217.5 million for the three months ended September 30, 2018, a decrease of 8% from the third quarter of last year. The compensation ratio was 59.3% for the three months ended September 30, 2018, compared to 60.9% for the three months ended September 30, 2017. The compensation ratio was higher for the three months ended September 30, 2017 due to the expense associated with acquisition-related LP Units/Interests. Compensation costs were $743.2 million for the nine months ended September 30, 2018, an increase of 13% from the nine months ended September 30, 2017. The compensation ratio was 59.3% for the nine months ended September 30, 2018, compared to 59.2% for the nine months ended September 30, 2017, reflecting the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017. The compensation ratio was also lower for the nine months ended September 30, 2017 due to the expense reversal associated with acquisition-related LP Interests during the first quarter of 2017.

Non-compensation Costs for the three months ended September 30, 2018 were $76.3 million, up 11% compared to the third quarter of last year. The increase in Non-compensation Costs versus last year reflects the addition of personnel, increased occupancy costs and the inclusion of underwriting expenses in 2018 pursuant to the new accounting requirements. The ratio of Non-compensation Costs to Net Revenues for the three months ended September 30, 2018 was 20.8%, compared to 17.6% for the third quarter of last year, driven by lower revenues in 2018. Non-compensation Costs for the nine months ended September 30, 2018 were $221.4 million, up 13% from the nine months ended September 30, 2017. The increase in Non-compensation Costs versus last year reflects the addition of personnel, increased occupancy costs and the inclusion of underwriting expenses in 2018 pursuant to the new accounting requirements. The ratio of Non-compensation Costs to Net Revenues for the nine months ended September 30, 2018 was 17.7%, compared to 17.6% for the nine months ended September 30, 2017.

Special Charges for the three months ended September 30, 2018 reflect separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Special Charges for the nine months ended September 30, 2018 reflect separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Special Charges for the nine months ended September 30, 2017 reflect an impairment charge related to our former equity method investment in G5, resulting from the sustained negative economic and political climate in Brazil.

10
    



Investment Management
 
U.S. GAAP
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands)
Net Revenues:
 
 
 
 
 
 
 
 
 
 
 
Asset Management and Administration Fees(1)
$
12,678

 
$
16,284

 
(22
%)
 
$
36,603

 
$
47,037

 
(22
%)
Other Revenue, net(1)
1,747

 
2,018

 
(13
%)
 
3,987

 
1,803

 
121
%
Net Revenues
14,425

 
18,302

 
(21
%)
 
40,590

 
48,840

 
(17
%)
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Employee Compensation and Benefits
7,981

 
10,208

 
(22
%)
 
23,385

 
28,953

 
(19
%)
Non-compensation costs
3,041

 
4,311

 
(29
%)
 
9,609

 
12,357

 
(22
%)
Special Charges

 

 
NM

 

 
7,107

 
NM

Total Expenses
11,022

 
14,519

 
(24
%)
 
32,994

 
48,417

 
(32
%)
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
$
3,403

 
$
3,783

 
(10
%)
 
$
7,596

 
$
423

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
Compensation Ratio
55.3
%
 
55.8
%
 
 
 
57.6
%
 
59.3
%
 
 
Non-compensation Ratio
21.1
%
 
23.6
%
 
 
 
23.7
%
 
25.3
%
 
 
Operating Margin
23.6
%
 
20.7
%
 
 
 
18.7
%
 
0.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets Under Management (in millions)(2)
$
9,896

 
$
8,961

 
10
%
 
$
9,896

 
$
8,961

 
10
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) $1,952 and $1,427 of net realized and unrealized gains on private equity investments have been classified in Other Revenue, net, for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.
 
 
 
 
 
 
 
 
 
 
 
 
(2) Assets Under Management reflect end of period amounts from our consolidated subsidiaries.

Revenues
 
U.S. GAAP
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands)
Asset Management and Administration Fees:
 
 
 
 
 
 
 
 
 
 
 
      Wealth Management
$
11,560

 
$
10,232

 
13
%
 
$
33,826

 
$
29,736

 
14
%
      Institutional Asset Management
1,118

 
1,079

 
4
%
 
2,777

 
2,638

 
5
%
      Disposed and Restructured Businesses(1)

 
4,973

 
NM

 

 
14,663

 
NM

Total Asset Management and Administration Fees
$
12,678

 
$
16,284

 
(22
%)
 
$
36,603

 
$
47,037

 
(22
%)
 
 
 
 
 
 
 
 
 
 
 
 
(1) Reflects the Institutional Trust and Independent Fiduciary business of ETC, which was previously a consolidated business.
On October 18, 2017, the Company completed the sale of the Institutional Trust and Independent Fiduciary business of ETC.

Asset Management and Administration Fees of $12.7 million for the three months ended September 30, 2018 decreased 22% compared to the third quarter of last year, following the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 13% as associated AUM increased 16%.

Asset Management and Administration Fees of $36.6 million for the nine months ended September 30, 2018 decreased 22% compared to the nine months ended September 30, 2017, following the sale of the Institutional

11
    



Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 14% as associated AUM increased 16%.

Expenses

Investment Management's expenses for the three months ended September 30, 2018 were $11.0 million, a decrease of 24% compared to the third quarter of last year principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Investment Management expenses for the nine months ended September 30, 2018 were $33.0 million, down 32% from the nine months ended September 30, 2017 principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017 and a reduction in Special Charges.



12
    



Business Line Reporting - Discussion of Adjusted Results

The following is a discussion of Evercore's segment results on an Adjusted basis. See pages 7 and A-2 to A-12 for further information and reconciliations of these metrics to our U.S. GAAP results.

Investment Banking
 
Adjusted
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands)
Net Revenues:
 
 
 
 
 
 
 
 
 
 
 
Investment Banking:
 
 
 
 
 
 
 
 
 
 
 
     Advisory Fees(1)(2)
$
296,296

 
$
324,786

 
(9
%)
 
$
1,024,599

 
$
922,931

 
11
%
     Underwriting Fees(3)
11,324

 
11,034

 
3
%
 
58,871

 
30,170

 
95
%
     Commissions and Related Fees
45,337

 
45,390

 
%
 
139,447

 
148,898

 
(6
%)
Other Revenue, net(4)
6,361

 
1,610

 
295
%
 
10,033

 
4,063

 
147
%
Net Revenues
359,318

 
382,820

 
(6
%)
 
1,232,950

 
1,106,062

 
11
%
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Employee Compensation and Benefits
213,707

 
227,315

 
(6
%)
 
731,682

 
655,253

 
12
%
Non-compensation Costs
64,286

 
58,057

 
11
%
 
188,030

 
172,521

 
9
%
Total Expenses
277,993

 
285,372

 
(3
%)
 
919,712

 
827,774

 
11
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
$
81,325

 
$
97,448

 
(17
%)
 
$
313,238

 
$
278,288

 
13
%
 
 
 
 
 
 
 
 
 
 
 
 
Compensation Ratio
59.5
%
 
59.4
%
 
 
 
59.3
%
 
59.2
%
 
 
Non-compensation Ratio
17.9
%
 
15.2
%
 
 
 
15.3
%
 
15.6
%
 
 
Operating Margin
22.6
%
 
25.5
%
 
 
 
25.4
%
 
25.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory Client Transactions(5)
196

 
210

 
(7
%)
 
458

 
429

 
7
%
Advisory Fees in Excess of $1 million(5)
62

 
67

 
(7
%)
 
210

 
181

 
16
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Advisory Fees on an Adjusted basis reflect the reduction of revenues for client related expenses and provisions for uncollected receivables of $9,653 and $7,892 for the three months ended September 30, 2018 and 2017, respectively, and $22,957 and $16,799 for the nine months ended September 30, 2018 and 2017, respectively, as well as the reclassification of earnings related to our equity investment in Luminis of $297 for the nine months ended September 30, 2018 and $54 and $111 for the three and nine months ended September 30, 2017, respectively, and the reclassification of losses related to our equity investment in G5 - Advisory of ($129) and ($222) for the three and nine months ended September 30, 2017, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
(2) The application of the new revenue accounting standard, ASC 606, resulted in advisory revenue of $50,829 being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard.
 
 
 
 
 
 
 
 
 
 
 
 
(3) The application of the new revenue accounting standard, ASC 606, resulted in client related expenses for underwriting transactions being presented gross (previously presented net) in related revenues and expenses on a U.S. GAAP basis for the three and nine months ended September 30, 2018. Underwriting Fees on an Adjusted basis reflect the reduction of revenues for non-compensation expenses of $116 and $3,913 for the three and nine months ended September 30, 2018, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
(4) Other Revenue, net, on an Adjusted basis reflects the reduction of revenues for provisions for uncollected receivables of $47 for the three and nine months ended September 30, 2018. Also includes ($343) and ($606) of principal trading losses that were previously included in Investment Banking Revenue for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.
 
 
 
 
 
 
 
 
 
 
 
 
(5) Includes Advisory and Underwriting Transactions.

Adjusted Revenues

During the three months ended September 30, 2018, fees for Advisory services decreased 9% versus the three months ended September 30, 2017, reflecting a decline in the number of Advisory fees in excess of $1 million. Underwriting Fees of $11.3 million for the three months ended September 30, 2018 increased 3% versus the third quarter of last year. We participated in 12 underwriting transactions (vs. 13 in Q3 2017); 6 as a bookrunner

13
    



(vs. 8 in Q3 2017). Commissions and Related Fees for the three months ended September 30, 2018 were flat compared to the third quarter of last year.

During the nine months ended September 30, 2018, fees for Advisory services increased 11% versus the nine months ended September 30, 2017, as we continued to advise clients on a wide variety of matters including strategic M&A, activism, restructuring and capital raising. Underwriting Fees of $58.9 million for the nine months ended September 30, 2018 increased 95% versus the nine months ended September 30, 2017, as we participated in 43 underwriting transactions (vs. 39 in 2017); 31 as a bookrunner (vs. 19 in 2017). Commissions and Related Fees for the nine months ended September 30, 2018 decreased 6% from the nine months ended September 30, 2017 principally driven by the trend of institutional clients adjusting the level of payments for research services.

Adjusted Expenses

Adjusted compensation costs were $213.7 million for the three months ended September 30, 2018, a decrease of 6% from the third quarter of last year. Evercore's Investment Banking Adjusted compensation ratio was 59.5% for the three months ended September 30, 2018, up versus the Adjusted compensation ratio reported for the third quarter of last year of 59.4%. The Adjusted compensation ratio for the three months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017. Adjusted compensation costs for the nine months ended September 30, 2018 were $731.7 million, an increase of 12% from the nine months ended September 30, 2017. The Adjusted compensation ratio was 59.3% for the nine months ended September 30, 2018, up versus the Adjusted compensation ratio reported for the nine months ended September 30, 2017 of 59.2%. The Adjusted compensation ratio for the nine months ended September 30, 2018 reflects the elevated level of expense associated with the significant investment in Advisory talent in 2018, as well as increased expense from compensation associated with recruiting senior talent in 2016 and 2017.

Adjusted Non-compensation Costs for the three months ended September 30, 2018 were $64.3 million, up 11% from the third quarter of last year. The increase in Adjusted Non-compensation Costs versus last year reflects the addition of personnel and increased occupancy costs. The ratio of Adjusted Non-compensation Costs to Adjusted Net Revenues for the three months ended September 30, 2018 was 17.9%, compared to 15.2% for the third quarter of last year, driven by lower revenues in 2018. Adjusted Non-compensation Costs for the nine months ended September 30, 2018 were $188.0 million, up 9% from the nine months ended September 30, 2017 due to the addition of personnel and increased occupancy costs. The ratio of Adjusted Non-compensation Costs to Adjusted Net Revenues for the nine months ended September 30, 2018 was 15.3%, compared to 15.6% for the nine months ended September 30, 2017, driven by higher revenues in 2018.



14
    



Investment Management
 
Adjusted
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands)
Net Revenues:
 
 
 
 
 
 
 
 
 
 
 
Asset Management and Administration Fees(1)
$
14,961

 
$
18,019

 
(17
%)
 
$
43,133

 
$
52,435

 
(18
%)
Other Revenue, net(1)
1,747

 
2,018

 
(13
%)
 
3,987

 
1,803

 
121
%
Net Revenues
16,708

 
20,037

 
(17
%)
 
47,120

 
54,238

 
(13
%)
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Employee Compensation and Benefits
7,981

 
10,208

 
(22
%)
 
23,385

 
28,953

 
(19
%)
Non-compensation Costs
3,026

 
3,652

 
(17
%)
 
9,573

 
11,268

 
(15
%)
Total Expenses
11,007

 
13,860

 
(21
%)
 
32,958

 
40,221

 
(18
%)
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
$
5,701

 
$
6,177

 
(8
%)
 
$
14,162

 
$
14,017

 
1
%
 
 
 
 
 
 
 
 
 
 
 
 
Compensation Ratio
47.8
%
 
50.9
%
 
 
 
49.6
%
 
53.4
%
 
 
Non-compensation Ratio
18.1
%
 
18.2
%
 
 
 
20.3
%
 
20.8
%
 
 
Operating Margin
34.1
%
 
30.8
%
 
 
 
30.1
%
 
25.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets Under Management (in millions)(2)
$
9,896

 
$
8,961

 
10
%
 
$
9,896

 
$
8,961

 
10
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) $1,952 and $1,427 of net realized and unrealized gains on private equity investments have been classified in Other Revenue, net, for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.

 
 
 
 
 
 
 
 
 
 
 
 
(2) Assets Under Management reflect end of period amounts from our consolidated subsidiaries.

Adjusted Revenues
 
Adjusted
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
(dollars in thousands)
Asset Management and Administration Fees:
 
 
 
 
 
 
 
 
 
 
 
      Wealth Management(1)
$
11,545

 
$
10,232

 
13
%
 
$
33,811

 
$
29,736

 
14
%
      Institutional Asset Management
1,118

 
1,079

 
4
%
 
2,777

 
2,638

 
5
%
      Disposed and Restructured Businesses(2)

 
4,806

 
NM

 

 
14,443

 
NM

Equity in Earnings of Affiliates(3)
2,298

 
1,902

 
21
%
 
6,545

 
5,618

 
17
%
Total Asset Management and Administration Fees
$
14,961

 
$
18,019

 
(17
%)
 
$
43,133

 
$
52,435

 
(18
%)
 
 
 
 
 
 
 
 
 
 
 
 
(1) Fees from Wealth Management on an Adjusted basis reflect the reduction of revenues for client related expenses and provisions for uncollected receivables of $15 for the three and nine months ended September 30, 2018.
 
(2) Reflects the Institutional Trust and Independent Fiduciary business of ETC. Fees from ETC on an Adjusted basis reflect the reduction of revenues for client related expenses of $167 and $220 for the three and nine months ended September 30, 2017, respectively.
 
(3) Equity in ABS, Atalanta Sosnoff and G5 - Wealth Management (through December 31, 2017, the date the Company exchanged all of its outstanding equity interests for debentures of G5) on a U.S. GAAP basis are reclassified from Asset Management and Administration Fees to Income from Equity Method Investments.

On October 18, 2017, the Company completed the sale of the Institutional Trust and Independent Fiduciary business of ETC.

Adjusted Asset Management and Administration Fees of $15.0 million for the three months ended September 30, 2018 decreased 17% compared to the third quarter of last year, following the sale of the Institutional

15
    



Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 13% as associated AUM increased 16%.

Equity in Earnings of Affiliates of $2.3 million for the three months ended September 30, 2018 increased relative to the third quarter of last year, driven principally by higher income earned in the third quarter of 2018 by ABS.

Adjusted Asset Management and Administration Fees of $43.1 million for the nine months ended September 30, 2018 decreased 18% compared to the nine months ended September 30, 2017, following the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Fees from Wealth Management clients increased 14% as associated AUM increased 16%.

Equity in Earnings of Affiliates of $6.5 million for the nine months ended September 30, 2018 increased relative to the nine months ended September 30, 2017, driven principally by higher income earned by ABS in 2018.

Adjusted Expenses

Investment Management's Adjusted expenses for the three months ended September 30, 2018 were $11.0 million, down 21% compared to the third quarter of last year principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017. Adjusted Investment Management expenses for the nine months ended September 30, 2018 were $33.0 million, down 18% from the nine months ended September 30, 2017 principally due to the sale of the Institutional Trust and Independent Fiduciary business of ETC during the fourth quarter of 2017.

Assuming the restructuring of our Investment Management affiliate noted above had occurred on December 31, 2016, Investment Management's Adjusted Operating Income would have increased 19% and 46%, respectively, when compared to the three and nine months ended September 30, 2017, respectively, and Investment Management's Adjusted Operating Margin would have been 31.5% for the third quarter of last year and 24.5% for the nine months ended September 30, 2017.

16
    



Balance Sheet
 
The Company continues to maintain a strong balance sheet, holding cash, cash equivalents, marketable securities and certificates of deposit of $736.3 million at September 30, 2018. Current assets exceed current liabilities by $624.1 million at September 30, 2018. Amounts due related to the Long-Term Notes Payable were $168.5 million at September 30, 2018.

Capital Transactions

On October 22, 2018, the Board of Directors of Evercore declared a quarterly dividend of $0.50 per share to be paid on December 14, 2018 to common stockholders of record on November 30, 2018.

During the three months ended September 30, 2018, the Company repurchased approximately 24 thousand shares from employees for the net settlement of stock-based compensation awards at an average price per share of $110.87 and approximately 0.2 million shares at an average price per share of $108.51 in open market transactions pursuant to the Company's share repurchase program. The aggregate approximately 0.2 million shares were acquired at an average price per share of $108.74. During the nine months ended September 30, 2018, the Company repurchased approximately 1.1 million shares primarily from employees for the net settlement of stock-based compensation awards at an average price per share of $99.92 and approximately 0.8 million shares/units at an average price per share/unit of $96.05 in open market transactions pursuant to the Company's share repurchase program. The aggregate approximately 1.9 million shares/units were acquired at an average price per share/unit of $98.20.

During the nine months ended September 30, 2018, the Company granted to certain existing and new employees approximately 1.9 million unvested RSUs. The total shares available to be granted in the future under the Amended and Restated 2016 Evercore Inc. Stock Incentive Plan was approximately 5.4 million as of September 30, 2018.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Wednesday, October 24, 2018, accessible via telephone and the internet. Investors and analysts may participate in the live conference call by dialing (877) 359-9508 (toll-free domestic) or (224) 357-2393 (international); passcode: 2128949. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for one week via telephone starting approximately one hour after the call ends. The replay can be accessed at (855) 859-2056 (toll-free domestic) or (404) 537-3406 (international); passcode: 2128949. 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 North America, Europe, South America, the Middle East and Asia. For more information, please visit www.evercore.com.


17
    





Investor Contact:    Jamie Easton
Head of Investor Relations, Evercore
212-857-3100

Media Contact:    Dana Gorman
The Abernathy MacGregor Group, for Evercore
212-371-5999

18
    



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 reflect management's view of 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 Annex I.

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 presentation 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, 2017, 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.

With respect to any securities offered by any private equity fund referenced herein, such securities have not been and will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.







19
    



ANNEX I



Schedule
Page Number
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017
A-1
Adjusted:
 
Adjusted Results (Unaudited)
A-2
U.S. GAAP Reconciliation to Adjusted Results (Unaudited)
A-4
U.S. GAAP Segment Reconciliation to Adjusted Results for the Three and Nine Months ended September 30, 2018 (Unaudited)
A-7
U.S. GAAP Segment Reconciliation to Adjusted Results for the Three and Nine Months ended September 30, 2017 (Unaudited)
A-8
U.S. GAAP Segment Reconciliation to Consolidated Results (Unaudited)
A-9
Notes to Unaudited Condensed Consolidated Adjusted Financial Data
A-10




























20



EVERCORE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(dollars in thousands, except per share data)
(UNAUDITED)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
Investment Banking:(1)
 
 
 
 
 
 
 
     Advisory Fees(2)
$
305,949

 
$
332,753

 
$
1,047,259

 
$
939,841

     Underwriting Fees(3)
11,440

 
11,034

 
62,784

 
30,170

     Commissions and Related Fees
45,337

 
45,390

 
139,447

 
148,898

Asset Management and Administration Fees(1)
12,678

 
16,284

 
36,603

 
47,037

Other Revenue, Including Interest and Investments(4)
10,058

 
6,553

 
20,826

 
13,363

Total Revenues
385,462

 
412,014

 
1,306,919

 
1,179,309

Interest Expense(5)
4,203

 
5,413

 
13,620

 
14,991

Net Revenues
381,259

 
406,601

 
1,293,299

 
1,164,318

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Employee Compensation and Benefits
225,452

 
246,772

 
766,537

 
689,186

Occupancy and Equipment Rental
15,367

 
13,531

 
43,249

 
40,191

Professional Fees(6)
19,698

 
15,836

 
56,581

 
42,489

Travel and Related Expenses
16,880

 
15,113

 
50,858

 
46,976

Communications and Information Services
10,590

 
10,613

 
31,634

 
30,865

Depreciation and Amortization
6,815

 
6,421

 
20,209

 
18,267

Execution, Clearing and Custody Fees(6)
3,068

 
3,455

 
7,818

 
10,972

Special Charges
1,967

 

 
3,864

 
21,507

Acquisition and Transition Costs

 
599

 
21

 
976

Other Operating Expenses(6)
6,882

 
7,191

 
20,657

 
18,224

Total Expenses
306,719

 
319,531

 
1,001,428

 
919,653

 
 
 
 
 
 
 
 
Income Before Income from Equity Method Investments and Income Taxes
74,540

 
87,070

 
291,871

 
244,665

Income from Equity Method Investments
2,298

 
1,827

 
6,842

 
5,507

Income Before Income Taxes
76,838

 
88,897

 
298,713

 
250,172

Provision for Income Taxes
17,539

 
28,815

 
48,018

 
69,566

Net Income
59,299

 
60,082

 
250,695

 
180,606

Net Income Attributable to Noncontrolling Interest
9,838

 
14,171

 
36,760

 
35,740

Net Income Attributable to Evercore Inc.
$
49,461

 
$
45,911

 
$
213,935

 
$
144,866

 
 
 
 
 
 
 
 
Net Income Attributable to Evercore Inc. Common Shareholders
$
49,461

 
$
45,911

 
$
213,935

 
$
144,866

 
 
 
 
 
 
 
 
Weighted Average Shares of Class A Common Stock Outstanding:
 
 
 
 
 
 
 
Basic
40,966

 
39,045

 
40,762

 
39,873

Diluted
45,858

 
44,036

 
45,542

 
44,887

 
 
 
 
 
 
 
 
Net Income Per Share Attributable to Evercore Inc. Common Shareholders:
 
 
 
 
 
 
 
Basic
$
1.21

 
$
1.18

 
$
5.25

 
$
3.63

Diluted
$
1.08

 
$
1.04

 
$
4.70

 
$
3.23

 
 
 
 
 
 
 
 
(1) Certain balances in the prior period were reclassified to conform to their current presentation. "Investment Banking Revenue" has been disaggregated into "Advisory Fees," "Underwriting Fees" and "Commissions and Related Fees" and "Investment Management Revenue" has been renamed to "Asset Management and Administration Fees."
 
 
 
 
 
 
 
 
(2) The application of the new revenue accounting standard, ASC 606, resulted in advisory revenue of $50,829 being recognized in the third quarter of 2018, representing variable consideration under the standard, substantially all of which would have been recognized in the fourth quarter of 2018 under the legacy accounting standard.
 
 
 
 
 
 
 
 
(3) The application of the new revenue accounting standard, ASC 606, resulted in client related expenses for underwriting transactions being presented gross (previously presented net) in related revenues and expenses on a U.S. GAAP basis for the three and nine months ended September 30, 2018. Underwriting Fees are gross of related non-compensation expenses of $116 and $3,913 for the three and nine months ended September 30, 2018, respectively.
 
 
 
 
 
 
 
 
(4) "Other Revenue, Including Interest" has been renamed to "Other Revenue, Including Interest and Investments" and principal trading losses of ($343) and ($606) for the three and nine months ended September 30, 2017, respectively, and net realized and unrealized gains on private equity investments of $1,952 and $1,427 for the three and nine months ended September 30, 2017, respectively, have been classified in Other Revenue, Including Interest and Investments, to conform to the current presentation.
 
 
 
 
 
 
 
 
(5) Includes interest expense on long-term debt and interest expense on short-term repurchase agreements.
 
 
 
 
 
 
 
 
(6) Other Operating Expenses of $3,140 and $10,029 for the three and nine months ended September 30, 2017, respectively, and Professional Fees of $315 and $943 for the three and nine months ended September 30, 2017, respectively, were reclassified to a new expense line item "Execution, Clearing and Custody Fees" to conform to the current presentation.

A - 1
        



Adjusted Results
Throughout the discussion of Evercore's business segments, information is presented on an Adjusted basis (formerly called "Adjusted Pro Forma"), 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 vested and certain unvested Evercore LP Units and Interests, as well as Acquisition Related Share Issuances and Unvested Restricted Stock Units granted to ISI employees, 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:
1.
Assumed Vesting of Evercore LP Units and Exchange into Class A Shares. The Company incurred expenses, in Employee Compensation and Benefits, resulting from the vesting of Class E LP Units issued in conjunction with the acquisition of ISI, as well as Class G and H LP Interests and Class J LP Units. The amount of expense or the reversal of expense for the Class G and H LP Interests was based on the determination if it was probable that Evercore ISI would achieve certain earnings and margin targets in 2017 and in future periods. The Adjusted results assume these LP Units and certain Class G and H LP Interests have vested and have been exchanged for Class A shares. Accordingly, any expense or reversal of expense associated with these units and interests, and related awards, is excluded from the Adjusted results, and the noncontrolling interest related to these units is converted to a controlling interest. The Company's Management believes that it is useful to provide the per-share effect associated with the assumed conversion of these previously granted equity interests, and thus the Adjusted results reflect the exchange of certain vested and unvested Evercore LP partnership units and interests and IPO related restricted stock unit awards into Class A shares.
2.
Adjustments Associated with Business Combinations and Divestitures. The following charges resulting from business combinations and divestitures have been excluded from the Adjusted results because the Company's Management believes that operating performance is more comparable across periods excluding the effects of these acquisition-related charges:
a.
Amortization of Intangible Assets and Other Purchase Accounting-related Amortization. Amortization of intangible assets and other purchase accounting-related amortization from the acquisition of ISI and certain other acquisitions.
b.
Acquisition and Transition Costs. Primarily professional fees incurred and costs related to transitioning acquisitions or divestitures.
c. Gain on Sale of Institutional Trust and Independent Fiduciary business of ETC. The gain resulting from the sale of the Institutional Trust and Independent Fiduciary business of ETC in the fourth quarter of 2017 is excluded from the Adjusted Results.
d. Foreign Exchange Gains / (Losses). Release of cumulative foreign exchange losses resulting from the restructuring of our equity method investment in G5 in the fourth quarter of 2017 are excluded from the Adjusted presentation.
3.
Client Related Expenses. Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables have been classified as a reduction of revenue in the Adjusted presentation. The Company's Management believes that this adjustment results in more meaningful key operating ratios, such as compensation to net revenues and operating margin.
4.
Special Charges. Expenses during 2018 relate to separation benefits and costs of terminating certain contracts associated with closing the agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of

A - 2
        



depreciation expense for leasehold improvements in conjunction with the previously announced expansion of our headquarters in New York. Expenses during 2017 relate to a charge for the impairment of goodwill in the Institutional Asset Management reporting unit and a charge for the impairment of our investment in G5 in the second quarter.
5.
Income Taxes. Evercore is organized as a series of Limited Liability Companies, Partnerships, C-Corporations and a Public Corporation and therefore, not all of the Company's income is subject to corporate-level taxes. As a result, adjustments have been made to the Adjusted earnings to assume that the Company is subject to the statutory tax rates of a C-Corporation under a conventional corporate tax structure in the U.S. at the prevailing corporate rates and that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis. This assumption is consistent with the assumption that certain Evercore LP Units and Interests are vested and exchanged into Class A shares, as discussed in Item 1 above, as the assumed exchange would change the tax structure of the Company.
Excluded from the Company’s Adjusted results are adjustments related to the impact of the enactment of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017, which resulted in a reduction in income tax rates in the U.S. in 2018 and future years. The tax reform resulted in an estimated adjustment to Other Revenue for the fourth quarter of 2017 of $77.5 million related to the re-measurement of amounts due pursuant to our tax receivable agreement, which was reduced due to the lower enacted income tax rates in the U.S. in 2018 and future years.
6.
Presentation of Interest Expense. The Adjusted results present interest expense on short-term repurchase agreements, within the Investment Management segment, in Other Revenues, net, as the Company's Management believes it is more meaningful to present the spread on net interest resulting from the matched financial assets and liabilities. In addition, Adjusted Investment Banking and Investment Management Operating Income are presented before interest expense on debt, which is included in interest expense on a U.S. GAAP basis.
7.
Presentation of Income from Equity Method Investments. The Adjusted results present Income from Equity Method Investments within Revenue as the Company's Management believes it is a more meaningful presentation.
This release also presents changes in Adjusted Investment Management Operating Income and Adjusted Investment Management Operating Margin from the prior-year periods assuming that the restructuring of certain Investment Management affiliates occurred on December 31, 2016. This includes the sale of the Institutional Trust and Independent Fiduciary business of ETC that occurred on October 18, 2017. Evercore believes this is useful additional information for investors because it improves the comparability of period-over-period results and aligns with management's view of business performance.

A - 3
        



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, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Net Revenues - U.S. GAAP
$
381,259

 
$
406,601

 
$
1,293,299

 
$
1,164,318

Client Related Expenses (1)
(9,831
)
 
(8,059
)
 
(26,932
)
 
(17,019
)
Income from Equity Method Investments (2)
2,298

 
1,827

 
6,842

 
5,507

Interest Expense on Debt (3)
2,300

 
2,488

 
6,861

 
7,494

Net Revenues - Adjusted
$
376,026

 
$
402,857

 
$
1,280,070

 
$
1,160,300

 
 
 
 
 
 
 
 
Compensation Expense - U.S. GAAP
$
225,452

 
$
246,772

 
$
766,537

 
$
689,186

Amortization of LP Units / Interests and Certain Other Awards (4)
(3,764
)
 
(9,249
)
 
(11,470
)
 
(4,980
)
Compensation Expense - Adjusted
$
221,688

 
$
237,523

 
$
755,067

 
$
684,206

 
 
 
 
 
 
 
 
Operating Income - U.S. GAAP
$
74,540

 
$
87,070

 
$
291,871

 
$
244,665

Income from Equity Method Investments (2)
2,298

 
1,827

 
6,842

 
5,507

Pre-Tax Income - U.S. GAAP
76,838

 
88,897

 
298,713

 
250,172

Amortization of LP Units / Interests and Certain Other Awards (4)
3,764

 
9,249

 
11,470

 
4,980

Special Charges (5)
1,967

 

 
3,864

 
21,507

Intangible Asset Amortization / Other Purchase Accounting-related Amortization (6a)
2,157

 
2,392

 
6,471

 
7,176

Acquisition and Transition Costs (6b)

 
599

 
21

 
976

Pre-Tax Income - Adjusted
84,726

 
101,137

 
320,539

 
284,811

Interest Expense on Debt (3)
2,300

 
2,488

 
6,861

 
7,494

Operating Income - Adjusted
$
87,026

 
$
103,625

 
$
327,400

 
$
292,305

 
 
 
 
 
 
 
 
Provision for Income Taxes - U.S. GAAP
$
17,539

 
$
28,815

 
$
48,018

 
$
69,566

Income Taxes (7)
2,989

 
8,627

 
8,450

 
12,139

Provision for Income Taxes - Adjusted
$
20,528

 
$
37,442

 
$
56,468

 
$
81,705

 
 
 
 
 
 
 
 
Net Income Attributable to Evercore Inc. - U.S. GAAP
$
49,461

 
$
45,911

 
$
213,935

 
$
144,866

Amortization of LP Units / Interests and Certain Other Awards (4)
3,764

 
9,249

 
11,470

 
4,980

Special Charges (5)
1,967

 

 
3,864

 
21,507

Intangible Asset Amortization / Other Purchase Accounting-related Amortization (6a)
2,157

 
2,392

 
6,471

 
7,176

Acquisition and Transition Costs (6b)

 
599

 
21

 
976

Income Taxes (7)
(2,989
)
 
(8,627
)
 
(8,450
)
 
(12,139
)
Noncontrolling Interest (8)
8,408

 
11,448

 
32,438

 
31,007

Net Income Attributable to Evercore Inc. - Adjusted
$
62,768

 
$
60,972

 
$
259,749

 
$
198,373

 
 
 
 
 
 
 
 
Diluted Shares Outstanding - U.S. GAAP
45,858

 
44,036

 
45,542

 
44,887

LP Units (9)
5,017

 
5,898

 
5,124

 
5,975

Unvested Restricted Stock Units - Event Based (9)
12

 
12

 
12

 
12

Diluted Shares Outstanding - Adjusted
50,887

 
49,946

 
50,678

 
50,874

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Key Metrics: (a)
 
 
 
 
 
 
 
Diluted Earnings Per Share - U.S. GAAP
$
1.08

 
$
1.04

 
$
4.70

 
$
3.23

Diluted Earnings Per Share - Adjusted
$
1.23

 
$
1.22

 
$
5.13

 
$
3.90

 
 
 
 
 
 
 
 
Compensation Ratio - U.S. GAAP
59.1
%
 
60.7
%
 
59.3
%
 
59.2
%
Compensation Ratio - Adjusted
59.0
%
 
59.0
%
 
59.0
%
 
59.0
%
 
 
 
 
 
 
 
 
Operating Margin - U.S. GAAP
19.6
%
 
21.4
%
 
22.6
%
 
21.0
%
Operating Margin - Adjusted
23.1
%
 
25.7
%
 
25.6
%
 
25.2
%
 
 
 
 
 
 
 
 
Effective Tax Rate - U.S. GAAP
22.8
%
 
32.4
%
 
16.1
%
 
27.8
%
Effective Tax Rate - Adjusted
24.2
%
 
37.0
%
 
17.6
%
 
28.7
%
 
 
 
 
 
 
 
 
(a) Reconciliations of the key metrics from U.S. GAAP to Adjusted results are a derivative of the reconciliations of their components above.

A - 4
        



EVERCORE INC.
RECONCILIATION TO RESTRUCTURING OF INVESTMENT MANAGEMENT ADJUSTED RESULTS
(dollars in thousands)
(UNAUDITED)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
September 30, 2018
 
September 30, 2017
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
Investment Management Net Revenues - U.S. GAAP
$
14,425

 
$
18,302

 
(21
%)
 
$
40,590

 
$
48,840

 
(17
%)
Adjustments - U.S. GAAP to Adjusted (a)
2,283

 
1,735

 
32
%
 
6,530

 
5,398

 
21
%
Investment Management Net Revenues - Adjusted
16,708

 
20,037

 
(17
%)
 
47,120

 
54,238

 
(13
%)
Sale of Institutional Trust and Independent Fiduciary Business of Evercore Trust Company (10)

 
(4,848
)
 
NM

 

 
(14,551
)
 
NM

Adjusted Investment Management Net Revenues - Including Restructuring of Investment Management Adjustments
$
16,708

 
$
15,189

 
10
%
 
$
47,120

 
$
39,687

 
19
%
 
 
 
 
 
 
 
 
 
 
 
 
Investment Management Expenses - U.S. GAAP
$
11,022

 
$
14,519

 
(24
%)
 
$
32,994

 
$
48,417

 
(32
%)
Adjustments - U.S. GAAP to Adjusted (a)
(15
)
 
(659
)
 
98
%
 
(36
)
 
(8,196
)
 
100
%
Investment Management Expenses - Adjusted
11,007

 
13,860

 
(21
%)
 
32,958

 
40,221

 
(18
%)
Sale of Institutional Trust and Independent Fiduciary Business of Evercore Trust Company (10)

 
(3,461
)
 
NM

 

 
(10,263
)
 
NM

Adjusted Investment Management Expenses - Including Restructuring of Investment Management Adjustments
$
11,007

 
$
10,399

 
6
%
 
$
32,958

 
$
29,958

 
10
%
 
 
 
 
 
 
 
 
 
 
 
 
Investment Management Operating Income - U.S. GAAP
$
3,403

 
$
3,783

 
(10
%)
 
$
7,596

 
$
423

 
NM

Adjustments - U.S. GAAP to Adjusted (a)
2,298

 
2,394

 
(4
%)
 
6,566

 
13,594

 
(52
%)
Investment Management Operating Income - Adjusted
5,701

 
6,177

 
(8
%)
 
14,162

 
14,017

 
1
%
Sale of Institutional Trust and Independent Fiduciary Business of Evercore Trust Company (10)

 
(1,387
)
 
NM