Executive Summary / Key Takeaways

• Evercore's diversified platform across investment banking and investment management, coupled with strategic investments in talent and capabilities, is enabling solid performance even amidst current market volatility and geopolitical uncertainty.
• First Quarter 2025 results demonstrated significant year-over-year growth in Net Revenues (up 20% to $694.8 million) and Net Income Attributable to Evercore Inc. (up 71% to $146.2 million), driven by strength in Advisory and Equities, despite a challenging environment impacting some areas.
• The firm maintains robust backlogs and high levels of client dialogue, indicating significant pent-up demand for transactions among both strategic and sponsor clients, positioning Evercore for a potential pickup once market stability improves.
• Management remains focused on improving expense margins over the near to medium term through cost discipline, while continuing strategic investments in talent and technology to drive long-term growth and enhance competitive positioning against peers like Lazard (LAZ) and PJT Partners (PJT).
• A strong balance sheet, significant cash and investment securities ($2.4 billion at YE 2024), and a commitment to capital return via dividends and share repurchases underscore the firm's financial health and focus on shareholder value.

A Foundation Built on Strategic Evolution

Evercore Inc. stands as a prominent independent investment banking and investment management firm, a position forged through strategic evolution and a commitment to high-quality client service. Its history includes the significant merger with ISI, marking its 10th anniversary in October 2024. This integration expanded Evercore's capabilities beyond traditional M&A advisory into a robust equities platform encompassing research, sales, and trading, a move that has proven differentiating and contributed to strong performance in that segment, including its best year since 2016 in 2024 and strongest first quarter since Q1 2020 in 2025.

The firm operates through two primary segments: Investment Banking Equities and Investment Management. The former is the powerhouse, providing advice on complex strategic transactions, liability management, restructuring, capital markets activities (underwriting, fundraising), and the aforementioned equities services. The latter focuses on wealth management for high-net-worth individuals and holds interests in private equity funds. This diversified structure across products, client types (strategic, sponsor), geographies (Americas, Europe, Middle East, Asia), and deal sizes is a core tenet of Evercore's strategy, designed to enable performance across varied market environments.

In the competitive landscape of independent investment banking, Evercore competes directly with firms like Lazard, PJT Partners, Moelis & Company (MC), and Greenhill & Co. (GHL), as well as indirectly with larger bulge bracket banks and increasingly, fintech platforms offering automated services. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Evercore's performance, including advising on three of the seven largest global M&A deals in 2024 and consistently gaining market share in advisory fees, indicates a strong and improving position.

Compared to peers, Evercore demonstrates solid operational efficiency and cash flow generation. Its free cash flow margin, for instance, stands around 25%, comparing favorably to peers often in the 20-25% range. However, it has historically lagged some competitors like Lazard and PJT Partners in metrics like Return on Invested Capital (ROIC), with EVR's ROIC around 10-12% compared to LAZ's 12-15% and PJT's 15-18%. This suggests potential areas for further capital efficiency improvements. Evercore's balance sheet strength, characterized by lower debt levels (debt-to-equity ratio around 0.62) compared to some peers like Lazard (around 0.8), provides greater resilience during market downturns.

Evercore's strategic response to this competitive environment has centered on aggressive investment in talent and capabilities. Over the three years ending in 2024, the firm added approximately 60 new senior bankers (external hires and internal promotions), resulting in a significant increase in its Investment Banking Senior Managing Director ranks. This expansion targets key industry coverage groups (TMT, healthcare, sponsors, financials, energy transition, software, etc.), geographic regions (recent expansion in Paris and Dubai), and product capabilities (PCA, restructuring, structured finance). This build-out is a deliberate effort to deepen client relationships, broaden service offerings, and capture market share as the transaction environment improves.

Technology plays a crucial role in Evercore's operational effectiveness and competitive positioning. While specific proprietary technologies with quantifiable performance metrics like speed or yield improvements in the manner of a manufacturing firm are not detailed, the firm highlights investments in technology, IT spend, and platforms that support data analytics, research services, and transaction structuring. Management commentary indicates that these technological capabilities contribute to the firm's ability to provide differentiated advice and execution, enabling efficiencies in processes like data analytics for deal sourcing and transaction structuring. The strategic intent behind these investments is to enhance client service, improve internal workflows, and maintain a competitive edge in a digitally evolving industry. The increase in communications and information services expenses, partly reflecting higher IT spend related to headcount and new platforms, underscores the ongoing investment in this area.

Performance Amidst Shifting Tides

The first quarter of 2025 provided a clear illustration of Evercore's ability to perform in a complex market. Despite heightened geopolitical tensions, increased volatility, and caution weighing on CEO and Board confidence, the firm delivered strong year-over-year growth.

Net Revenues for the three months ended March 31, 2025, rose by 20% to $694.8 million, up from $580.8 million in the same period of 2024. This growth was primarily fueled by the Investment Banking Equities segment, where Net Revenues increased by 20% to $674.5 million. Within this segment:

• Advisory Fees saw a substantial 30% increase, climbing to $557.3 million from $429.8 million. Management attributed this rise to higher revenue from large transactions and an increase in the number of advisory fees earned across both M&A and non-M&A assignments. Notable deals advised on in Q1 2025 and early April included Calpine's $29.1 billion sale, Ampere's $6.5 billion sale, Colonial Enterprises' $9 billion sale, Woodside Energy's $5.7 billion stake sale, Dotmatics' $5.1 billion sale, and EQT's over EUR 15 billion minority stake sale.
• Commissions and Related Revenue grew by 14% to $55.1 million, driven by higher trading commissions reflecting increased market volatility and trading volumes.
• Underwriting Fees decreased slightly by 2% to $54.3 million, reflecting a decrease in the number of transactions the firm participated in compared to the prior year period, although issuance activity showed solid momentum overall.

The Investment Management segment also saw an increase in Net Revenues, up 6% to $20.3 million, primarily driven by a 12% increase in Asset Management and Administration Fees ($21.0 million vs. $18.7 million), reflecting growth in Assets Under Management (AUM). Wealth Management AUM stood at $13.7 billion at March 31, 2025.

Other Revenue, net, however, decreased significantly by 65% to $11.3 million, primarily due to lower performance of the investment funds portfolio used as an economic hedge against the deferred cash compensation program. Income from Equity Method Investments also decreased by 62% to $0.9 million, mainly due to the sale of interests in ABS and Luminis in 2024, partially offset by higher earnings from Atalanta Sosnoff.

Total Expenses increased by 18% to $583.6 million. Employee Compensation and Benefits Expense rose by 19% to $459.8 million, primarily reflecting a higher accrual for incentive compensation and higher base salaries, consistent with the firm's strategic investments in talent and the competitive environment for bankers. The compensation ratio stood at 66.2% for the quarter. Non-compensation expenses increased by 14% to $123.8 million, driven by higher communications and information services costs, increased occupancy and equipment rental from office expansion, higher travel expenses due to increased business activity and headcount, and an increase in bad debt expense.

Despite the expense increases, the strong revenue growth led to a 32% increase in Income Before Income from Equity Method Investments and Income Taxes, reaching $111.2 million. Net Income Attributable to Evercore Inc. saw a significant 71% jump to $146.2 million ($3.48 per diluted share), compared to $85.7 million ($2.09 per diluted share) in Q1 2024. The effective tax rate for Q1 2025 was 37.2%, significantly impacted by a large net excess tax benefit ($74.3 million) associated with the appreciation in the share price upon vesting of employee share-based awards.

Looking back at the full year 2024, Evercore achieved its second-best year ever for revenue, with firm-wide adjusted net revenues just over $3 billion, up 23% from 2023. This momentum built throughout the year, with net revenues increasing sequentially each quarter. The firm made meaningful progress on adjusted expense ratios in 2024, improving the comp ratio by 190 basis points and the non-comp ratio by over 90 basis points, resulting in a 280 basis point improvement in the adjusted operating margin to 18.6%.

Outlook and Strategic Trajectory

Management remains optimistic about the medium and long-term prospects, believing the market is in the early stages of a gradual recovery that will continue to build throughout 2025 and beyond. This outlook is supported by robust backlogs, high levels of client dialogue, and significant pent-up demand, particularly from strategic and sponsor clients.

However, the near-term outlook is tempered by current market volatility and uncertainty stemming from geopolitical tensions and macroeconomic concerns. Management explicitly expects results in the second and third quarters of 2025 to experience an impact from these conditions, with transaction levels anticipated to pick up once greater clarity and stability return.

The firm's strategic focus remains on executing its long-term growth plan. This includes continuing to invest in talent acquisition and development (with new SMDs joining and promoted in Q1 2025, and Bill Burns joining as a Senior Advisor), expanding geographic reach, and deepening product capabilities, particularly in high-growth areas and those serving financial sponsors. The strength in non-M&A areas like Private Capital Advisory (record Q1 2025), restructuring (strong activity), and equities (strong Q1 2025) provides resilience during periods of slower M&A.

Expense management remains a key focus. While strategic investments, particularly in talent, are ongoing in a competitive environment, the firm is striving for gradual improvement in compensation and non-compensation expense ratios over the near to medium term. The effective tax rate for the remainder of 2025 is expected to be more in line with or slightly higher than prior year quarters, absent significant share price appreciation impacts.

Liquidity and capital return are central to Evercore's financial strategy. The firm ended 2024 with a strong cash and investment securities position totaling $2.4 billion. It maintains revolving credit facilities for working capital and regulatory capital support, with no drawings as of March 31, 2025. The firm has significant future payment obligations related to deferred compensation ($322.3 million through 2029 with $236.1 million unrecognized expense), long-term incentive plans ($37.8 million remaining for 2021 plan through March 2027, plus the new 2025 plan), and operating leases ($723.0 million undiscounted as of March 31, 2025, plus future commitments like the London office lease expected to add $12 million annually starting late 2026). These obligations are expected to be funded primarily through cash flows from operations.

Evercore is committed to returning capital to shareholders. The Board declared a quarterly cash dividend of $0.84 per share in April 2025, a 5% increase. The firm also actively repurchases shares, including through net settlement of equity awards and under its authorized program (up to the lesser of $1.6 billion or 8 million shares as of April 29, 2025), with significant repurchases made in Q1 2025. The expectation is to repurchase shares in excess of RSU grants to offset dilution.

Risks and Considerations

Despite the positive momentum and strategic positioning, Evercore faces significant risks. The business is highly sensitive to global financial market conditions and economic cycles. Market volatility, geopolitical tensions (including tariffs), inflation, interest rate changes, and regulatory environments can directly impact transaction volumes and values, affecting revenue realization, which is inherently irregular and dependent on deal completion. The inability to quickly scale back fixed costs in response to revenue declines could adversely impact profitability and liquidity. Competition for talent remains intense, potentially driving up compensation costs. While the firm believes it is not currently party to any material pending legal or regulatory proceedings, such matters are inherent in the industry and could result in significant costs or penalties. Furthermore, the interpretation of complex tax laws, as highlighted by a recent judicial challenge in an unrelated case, could potentially impact the firm's tax position.

Conclusion

Evercore's First Quarter 2025 results underscore the resilience and growing strength of its diversified platform and the effectiveness of its strategic investments in talent, capabilities, and geographic reach. Despite the headwinds posed by current market volatility and uncertainty, the firm's core advisory and equities businesses demonstrated robust performance, supported by strong backlogs and client engagement. While the near-term outlook acknowledges potential impacts from the uncertain environment, the underlying fundamentals of significant pent-up demand and a strategically enhanced franchise position Evercore favorably for a market recovery. The firm's commitment to expense discipline, coupled with a strong balance sheet and consistent capital return, provides a solid foundation. Investors should weigh the potential for continued growth driven by strategic execution and market normalization against the risks associated with macroeconomic volatility and the competitive landscape, recognizing Evercore's efforts to build a durable and broadly diversified firm capable of performing across cycles.