Good morning and thank you for standing by. Welcome to Evercore's Fourth Quarter and Full-Year 2021 Financial Results Conference Call. During today's call, all parties will be in listen-only mode. Following the presentation, the conference call will open up for questions. [Operator Instructions] As a reminder, this conference call is being recorded today, Wednesday, February 2, 2022. I would now like to turn the conference call over to your host, Evercore's Interim Head of Investor Relations, Jamie Easton. Please go ahead.

Thank you, Michelle. Good morning and thank you for joining us today for Evercore's fourth quarter and full-year 2021 financial results conference call. I'm Jamie Easton, Evercore's Interim Head of Investor Relations. Joining me on the call today are John Weinberg and Ralph Schlosstein, our Co-Chairmen and CEOs, and Celeste Mellet, our CFO. After our prepared remarks, we will open the call for questions. Earlier today, we issued a press release announcing Evercore's fourth quarter and full-year 2021 financial results. A discussion of our results today is complementary to the press release, which is available on our website at evercore.com. This conference call is being webcast live in the For Investors section of our website, and an archive of it will be available for 30 days beginning approximately one hour after the conclusion of this call. During the course of this conference call, we may make a number of forward-looking statements. Any forward-looking statements that we make are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. These factors include, but are not limited to, those discussed in Evercore's filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. I want to remind you that the company assumes no duty to update any forward-looking statements. In our presentation today, unless otherwise indicated, we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP reconciliations, you should refer to the financial data contained within our press release, which is posted on our website. We continue to believe that it is important to evaluate Evercore's performance on an annual basis. As we have noted previously, our results for any particular quarter are influenced by the timing of transaction closings. I'll now turn the call over to John.

Thank you, Jamie. And good morning, everyone. When we spoke this time last year, we never imagined that, a year later, we would still be wrestling with COVID, and yet here we are. And although these times continue to be trying and volatile, Evercore has continued to effectively serve its clients while sustaining our unique culture and fostering deep collaboration across our firm. While we look forward to our return to office after Omicron subsides, our teams have successfully adjusted to the ebbs and flows of pandemic life and, importantly, remain intensely focused on advising our clients on their most pressing strategic priorities. Before we go into results, I want to note that today is Ralph's final earnings call. It is hard to believe that this is his 51st quarterly call. There's no better way to salute his impressive leadership than with the successful quarter we've had and the year that we've all just announced. It is a year of records and 2021 was by far the best year in our firm's history. We exceeded $3 billion and adjusted revenue for the first time ever and achieved record adjusted operating income, record adjusted net income and record adjusted EPS. We continued to invest in our future, adding more senior talent our team in 2021. In Advisory, we recruited eight senior managing directors, had two additional SMD recruits join last month, and promoted our largest class ever. We also added two important coverage sectors in equity research, and expanded our capabilities and reach in most of our businesses. As a result, our firm is well positioned to begin 2022. Celeste will discuss our financials in more detail later in the call. But as a preview, I would like to highlight a few important achievements. We reported our fifth straight quarter of…

Thank you, John. As John mentioned, this is my 51st and last earnings call. And as you may have seen in our earnings release this morning, another record in every respect, both for the quarter and for the year. During my almost 13 years here, we have experienced both significant growth and very strong financial performance. Total net revenues adjusted have grown 17 fold from $194 million in 2008 to over $3.3 billion in 2021. And Advisory revenues have grown 15 fold from $178 million to well over $2.7 billion. Our adjusted operating income has grown from $9 million in 2008 to over $1.1 billion in 2021. Adjusted earnings per share has grown from $0.12 in 2008 to $17.50 in 2021. And adjusted operating margins have increased from 4.6% in 2008 to 34% in 2021. 12 of those 13 full years have been records for revenues and earnings per share, with the only exception being 2019 when revenues were down 2% and earnings per share somewhat more. And our stock has risen roughly 8 fold from $16 a share when I joined to 126-and-a-fraction at yesterday's close. And I have to say it might even have been a little bit better if we didn't trade at a paltry 7.5 times trailing 12 months earnings. There are also a number of things which I am extremely proud that are not necessarily evident from our financials or our stock price. And let me review a few of these. First, we have globalized the firm. In 2008, roughly $5 million of our $178 million of Advisory revenues were from clients outside of North America. Over the last four years, roughly a third of our revenues have come from clients outside of this continent. Second, we have dramatically expanded the matters on which we…

Thank you, Ralph. Again, our firm, our clients and our shareholders all thank you deeply for your incredible dedication to Evercore, which we know will continue in your new role. I want to now turn to a more detailed review of our past year, which I will do at the end of each calendar year going forward. I will also provide more context behind some of the biggest drivers of our future growth. In Advisory, our sources of revenue in 2021 were broad, broad as defined by transaction size, geography, sector, capability, and client type. First, regarding transaction size, merger volume was up significantly across the board, which drove our high activity levels and strong fees. For the market overall, looking at the largest deals, defined as those above $5 billion, dollar volume increased 42% globally and the number of these large deals increased 61% from 2020. We also saw increased year-over-year activity at Evercore. Further, we advised on 3 of the top 10 largest global transactions in 2021, including advising GE Capital Aviation on its pending $30 billion sale to AerCap Holdings, advising the board of directors of Canadian Pacific on its $29 billion acquisition of Kansas City Southern, which notably was the largest transportation deal in 2021. And serving as the lead advisor to grab on its $40 billion SPAC merger, the largest SPAC deal ever. While we remain active and advising on the largest M&A transactions globally, a significant portion of our business stems from deals defined as midcap in the $1 billion to $5 billion range. For the market, the $1 billion to $5 billion range doubled in both volume and number of deals. And corresponding with that, we saw an uptick in the volume and number of our completed deals in this range. Next, in…

Thank you, John. For the fourth quarter of 2021, net revenues, net income and EPS on a GAAP basis were a record $1.1 billion, $296 million and $6.96 respectively. For the full year, record net revenues, net income, EPS and EPS on a GAAP basis were $3.3 billion, $740 million and $17.08 respectively. My comments from here will focus on non-GAAP metrics, which we believe are useful when evaluating our results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results can be found in our press release, which is on our website. Fourth quarter adjusted net revenues of $1.1 billion grew 16% year-over-year. On a full year basis, adjusted net revenues of $3.3 billion increased 43% compared to 2020. Fourth quarter Advisory revenues of $971 million grew 23% year-over-year and were $2.8 billion for the full year, a 57% increase compared to 2020. This represents our best quarter and best year ever, and the first time adjusted net revenue surpassed $3.3 billion for the 12 months. Our revenue includes approximately $21 million from transactions that closed in early January and/or had other conditions pending at period-end and according with relevant accounting principles. Along those lines, we recognized $93 million in the third quarter of 2021 and $32 million in the fourth quarter of 2020. Given our record results and based on current consensus estimates, we expect to maintain our number 4 ranking in advisory fees among all publicly traded investment banks and maintain our number 1 position among independent banks. Fourth quarter underwriting fees of $65 million were down 32% compared to Q4 2020. For the full year, underwriting fees were $247 million, down 11% year-over-year. The decrease for the year is attributed to the fact that we had two very significant fees in 2020. And in…

Thank you, Celeste. We feel very good about the future and believe that a strong underlying global economy, coupled with rapidly evolving technology, and further growth in the financial sponsor community will continue to drive high activity levels in the market. While economic conditions today are strong, we continue to monitor issues which could impact activity levels, including equity market volatility, inflation, set actions, interest rates, the regulatory environment, and credit availability, as well as the competition for talent and, of course, pandemic relation issues. As proven by our financial results, we have the scale, tools, intellectual capital, intelligent teams to advise our clients holistically across strategic and capital needs, and we are positioned better than ever before to address those needs in almost any environment. Our business continues to perform extremely well, and the prospects for Evercore's long-term growth are exciting. We see a huge opportunity ahead of us to strengthen our franchise even further. With that, we are pleased to answer questions. Operator, please open the lines.

[Operator Instructions]. Our first question comes from Steven Chubak with Wolfe Research.

Celeste, I was hoping to start off with a question actually on the expense outlook. One of your competitors did hint that significant expansion in non-comps in addition to some of the inflationary pressures on the comp side. You guys did a really nice job of managing expenses this year. You did allude to some of the inflationary pressures. But to what extent can you flex expenses if the revenue backdrop remains a little bit more challenged beyond the next six months where visibility is a bit more limited?

On non-comps, as I said, we'd expect T&E to normalize as the world hopefully gets back to normal. In the fourth quarter, T&E or travel was around a third of what we saw sort of pre-pandemic with a bigger increase in November and then tailing off a bit. But we would expect those to increase as people start to do business in ways they used to. And then, as the firm and our headcount grows, we will see the expense growth from occupancy and equipment. You saw some of that this year. That will continue to increase next year – in 2022 – and then the cost associated with that. And then, as you know, every time you hire a person, you have tech-related expenses, like licenses and things like that. So, those will grow with our headcount growth, which was about 9% last year. And we'll continue to have headcount growth this year, at least based on where we are today. And then, as you mentioned, the inflationary pressures. So, obviously, if the revenue environment isn't great, we'll do what we can to manage our expenses and we will be very careful with them. We have great cost controls in place that Bob implemented, and we will continue to have those in place. As it relates to comp, that is much more related to revenue. And the bulk of our comp is driven by our revenue performance. Our SMDs are based on performance – are paid based on their revenue performance. And below SMD, bonuses are paid based on firm performance as well as individual performance. So, that's where we would have the most flex from an expense perspective and, obviously, over the overwhelming percentage of our expenses for the firm.

First off, shame on me, Ralph, you've accomplished a great deal over the last 13 years. I should have started with that. So, wishing you the best in the new role. And maybe just for my follow-up, just a question for John. Given the recent market volatility, the market cap declines, the investors have indicated some growing aversion to companies with heavier capital markets gearing or just higher beta sensitivity, just at large, and many of your primary businesses are certainly strongly correlated to equity market levels, traditional M&A and ECM, in particular. I was hoping you could just speak to how the market cap declines are impacting a willingness to transact for both sponsors and strategics. And to what extent were the higher fee rates on transactions that we've been seeing over the last couple of years? How much of that was a function of the recent bull market that may not be sustainable?

Steve, as we look out and look at our backlog, it continues to be strong and very diverse. It's really across the board. At high beta companies, low beta companies, financial sponsor portfolio companies, we're really seeing that diversity really be impactful, in that as we look at what we expect, we just expect that there will be continuing momentum from this strong backlog. I would say, anecdotally, the conversations that we're seeing and transactions that are coming in are quite full. So, we don't really see three to six months out any change as to what we're really dealing with right now. Clearly, things could change and the market could turn down more dramatically, there could be even more instability. And of course, one of the things that we always look at when we're thinking about the merger businesses, CEO confidence and the stability of the markets, which gives companies the confidence to really be aspirational and strategic way. Right now, we don't see that impacting where we are right now or our merger business. But we clearly are watching it carefully.

Next question comes from Manan Gosalia with Morgan Stanley.

I was wondering how are you advising clients on the interest rate environment here? I know we've gone through this in the past, but we could have four, maybe five rate hikes along with the Fed shrinking its balance sheet this year. What do you think that this means for the back half of the year? Is this sort of pulling forward the activity as companies try to get in while cheap financing is still widely available? Or do you think that four hikes with a stock point of zero still not enough to impact deal activity, provided the economy is pretty robust as it is right now?

Well, I think we would say that because rates are so low right now, four hikes clearly are nothing to discount. We do believe that rates will still be relatively low historically. There's no question, though, that clients who need to do financings are really leaning on doing financings because they really understand that the rates will be going up. Transactions, though, as we're really dealing with clients, are really still on tap to be moving forward. And we don't see anybody desperately thinking that they have to get things done. Having said that, one of the things that we are seeing is that there is a very healthy activity level of financial sponsors wanting to get deals done now. Obviously, when they're buying the rates in which they borrow, impact their returns, but also they believe that selling is advantaged by lower rates also. So, you see sponsor activity very much focused on the rates and the levels. But I would say that, as we really look at our backlog and we look at what we see ahead, we don't think that that is going to be impacted materially. Although I would say that everybody is aware, everybody's watching both the rate hikes and inflation. And I'd say that there's no question that boards and CEOs are focused.

John, I appreciate all the thoughts on midsize deal activity, the activist defense practice and the restructuring business in your opening comments. Is there any color you can give on how much those businesses contributed to revenues over the last year? Or how we should think about them contributing to total revenues over the next couple of years?

We really can't give that kind of detail. But what I would say, we did say in the call that, in our sponsor business, it's 30% to 45% of our revenues in Advisory. And I would just say that these businesses are very healthy, and they continue to have real upside potential.

Ralph, congrats on a great tenure. And all the very best.

Thank you very much. And John is going to continue the tradition of not giving business line by business line revenues. And it's not that we don't want to be transparent. It's that the lines between some of these are very blurred. And so, it's really hard to give you the kind of granularity that you're asking for.

Next question comes from Jim Mitchell with Seaport Research.

Maybe we can speak to sort of intermediate long-term growth opportunities with more detail. You guys continue to put up strong growth. But as Ralph pointed out, the low multiple on your stock kind of implies the market doesn't believe this level of revenue can continue. So, can you speak to that disconnect, where you see the most growth from current levels of the intermediate long term, what can be a counterweight if M&A slows down? I think it's just key for shareholders to get a sense of – you guys seem very optimistic about growth, shareholders don't.

We'll do our best in talking a little bit about our growth. As we've articulated before, we really think about growth in several different ways. One is that that we continue to invest in areas where we see whitespace, whether those be geographic or whether they're sectors that we think are important sectors that we can invest in. So, for example, sectors like fin tech, biotech, clean tech, there are definitely large whitespaces in those sectors where we can really grow. In addition, and very importantly, we have a number of client coverage initiatives that we are very excited about, whether those are financial sponsors where we think we can cover these sponsors more holistically and leverage off of the very strong relationships we have, buying and selling stakes for GP and LP, raising funds, or in addition driving continuity funds, but then using those strong relationships, really, to the basic M&A side. That's a very strong, important investment area for us, and we feel very good about that. In addition, there's so much dry powder there that the more we invest there, the more we're seeing that it's happening. And we hired a Brad David out in the West Coast already, and we continue to look for opportunities to invest there. In addition, geographically, we think there is a lot of opportunity in Europe. And we are looking closely at those opportunities, whether those be in places like investing in France or Germany, but we really feel like there's great whitespace there. In addition, we are investing in our relationships with multinationals. We have an effort to really increase our coverage for some of those multinationals, and we are doubling down in terms of investing in that client franchise. Also, we are looking at our capabilities. One of the…

I would just add that we're not number one in advisory revenues. We're number four. So we have plenty of room to grow. John identified a lot of whitespace, and there definitely is that. And if you look at our largest business, the Advisory business, which is well over 80% of our revenues, revenues in that business are driven by multiplying the number of senior managing directors we have by our industry leading productivity. And as John said in his opening remarks, through our internal promotes and new hires, we have roughly 40 senior managing directors who are still ramping up in their activity. So, with that, and all of the whitespace that John identified, it certainly feels to me that our investors have consistently underestimated our growth opportunities.

That's a good point. And, by the way, one of the things that you didn't ask, but one of the questions that I think is an important one, which is how do we feel about recruiting and the discussions that we're having. We're continuing to be out in the market talking to very talented people in areas where they think they could be additive. And those conversations are fulsome and going well. And so, we're going to continue that aspect of growth also.

Maybe if I had one follow-up just on the restructuring comments since that's been one area that's quite weak right now and not firing on all cylinders. How do you think about restructuring? It has been a very positive environment. But as rates go up, do you feel like that's a business that could start to grow in the next year or two? How do you think about the outlook there?

Well, as history would point, as rates go up, companies do become more distressed. For restructuring to really kick into full blast, it would mean there would be some distress in the system, sector by sector. We're well positioned. I think we have the best restructuring business on Wall Street. I think we've got outstanding professionals there. They're finding ways to really add value to clients now. I think that as the environment becomes even more uncertain and there's more risk in the environment, I think their activity levels are going to pick up. But even now, they're really finding ways to add value to clients and they're quite busy.

Our next question comes from Devin Ryan with JMP securities.

Echo the comments, best wishes to you and you've really set a high bar in the industry. So it's been a pleasure. In terms of the, I guess, first question, want to maybe hone in a little bit more on kind of the banker productivity comments. Your productivity has roughly doubled over the past five years. You are kind of leading the industry by a number of metrics. And I think when we take a step back, it makes sense. Valuations have more than doubled over the past five years. You're having kind of bigger deals. You've added more resources per deal. And then maybe the greater efficiency in this new Zoom economy. And so, I'm curious kind of how you would frame some of the puts and takes on kind of the baseline for productivity. Also appreciating you have a lot of bankers that are still ramping on the platform. And kind of connected to that, just the opportunity actually to drive more fees per transaction. Are there other situations where you're still kind of missing on opportunity in transactions where you can actually get more fees out of the deals?

As we look at our capabilities, we think that as we've broadened our capabilities, that is an opportunity to do two very important things. Number one, to bring more advisory capacity to every transaction and every client relationship, but also to be more fulsome in what we're able to provide the clients longer in transactions and, therefore, we are able to go longer as the exclusive advisor in transactions and, therefore, take a larger fee because we're adding more value through the whole life of the transaction. I think what we really believe is that we have a number of capabilities that are just being built out now. For example, in equity capital markets, we have a long way to go in terms of what we can do. We've made tremendous progress. But we feel really good about the momentum of that business. And I think we can really build out and leverage those capabilities and grow the volume that comes through ECM. And as we add resources and we really begin to build out our reach in terms of sectors, I think you're going to see that build. In debt capital markets, we're continuing to build out that area. And we continue to have real opportunities there to to add value to clients and really be really helpful in terms of both their day-to-day managing of their business, but also when they're in transactions. In activism, one of the key things that you'll see is that activism and activism defense has really been a tremendous marketing vehicle for us. And we've been able to really expand relationships and drive even further capabilities into those relationships by using the activism defense group, which has really given us access to many, many more clients. So, I think our productivity ratios can continue at these high levels. Now to say that we could double them from here, I think, is quite a stretch. I think, clearly, that would be something that would be hard to do. But I think we really have upside here. And I think that, as we add more capable people in our whitespaces, we will continue to have real possibilities in terms of growing that. In addition, if you look at the financial sponsor business, as you know, the financial sponsor business has tremendous upside. There's just so much dry powder, and there's so many portfolio companies and the activity levels of financial sponsors are extremely high. So, as we continue to add resources and get momentum there and make inroads, I think you'll see that that will also be a very large contributor to really what we're able to do in bringing in revenue.

Devin, my perspective on this is really, if you look at the productivity growth, which has been – I think has exceeded all of our expectations, there are a number of secular factors. And John hit on the fact that we're doing – that we have so much broader capabilities and we're doing more with clients is important in two respects. Number one, it allows us to get additional fee opportunities on the same transactions. And very importantly, it allows us to be the sole advisor or the lead advisor and, therefore, to capture all or the majority of the fees on a transaction. That's a secular trend that I think continues. The second is our brand. The brand of Evercore today versus five years is just stronger. And what that means is that the same SMD is going to get in, any given year, a few more at bats and the batting average is going to be a little bit higher just because of the brand of the firm. So, those two things are secular trends which we see continuing. What we can't predict is the cyclical element of it. And, obviously, last year was a record year in M&A activity, the only year that there was more than $5 trillion of announced activity, and that certainly also contributed to productivity last year. So, the secular trends definitely continue. And then there's the cyclical overlay, which we can't predict.

I'm going to squeeze one more quick one in for Celeste just coming back to compensation and the comp ratio. Obviously, some nice operating leverage there this quarter and in really year, 42% revenue increase, 35% comp increase in aggregate. How much did deferrals [indiscernible] the percentage change, obviously, coming off of huge revenue years. Want to be thoughtful about kind of what that sets up for future years. So I'm curious if you guys manage deferrals and what that percentage did on a relative basis to prior years? So, we generally try to really balance recognizing expense in current year when we know our revenue with retention. And given the strong revenue environment, we tried to recognize as much expenses made possible, trying to balance those two things. So, we do think about that and the various environments.

Our next question comes from Richard Ramsden with Goldman Sachs.

Ralph, just to add to the chorus, all the best for the next chapter in your life. I really hope it's as successful as the last one. So, my question is around the environment for large cap M&A in the US. And it does seem, at least anecdotally, that a growing number of transactions across a broad number of sectors are getting flagged for competition review. Can you just talk a little bit about the impact you think that's having on the willingness for corporate boards to transact? And is it something that's coming up more in discussions? And do you think it could lead to a slowdown in activity?

I'll answer it. I'm sure Ralph will want to say something about this also. This is not new. We've known for quite some time that there would be more regulatory oversight with respect to transactions. And I think this has been part of the dialogue in boards for some time now. It clearly is louder now in terms of the volume of it, but it's clearly been around for some time. Basically, companies are looking at growth. And some of the very large cap deals could be focused on and we're very focused on that as something that could put a dampener on those. I would say right now, as we look at the transactions in the boardrooms and the ones that I'm having also, I would say people are looking at this certainly with an eye toward what could happen. But I think the transactions are still being developed and thought about. Depending on how it plays out, it could have some impact. Clearly, the law would have to change for it to have a major impact. And that hasn't happened yet. But I think we're all watching it. One of the things you're seeing, though, is that in things like sponsors, the competition element is not a big issue with respect to buying and selling companies. So that sector alone is not going to be impacted at all. In fact, it may be strengthened by the fact that there's just a lot of opportunity out there to really buy and sell. So, I think as we look at it, number one, we clearly know that it's something to be focused on, and we're focused on it, and boards I think are talking about it. I think that there's still a need to drive growth. And in this market where there continues to be opportunity, you're seeing boards and companies really aggressive. CEO confidence continues to be quite high. And therefore, as we see the transactions play through the system, they're actually being developed and they're being thought about very aggressively. It remains to be seen how much it'll dilute the atmosphere and whether the deals will be put on hold. But right now, as we look out three to six months, we don't see a major overlay in terms of the dampening.

I think John hit it. It's definitely discussed. But it has really not had an effect on many, if any, transactions that we've been involved with. And I think the point that John made about – to really have a sea change in anti-trust regulation, you need law change. And there's no talk of that at this point in time. So, it's definitely something to be monitored, but it certainly has not yet had an effect on all of the indicators that we look at for forward activity.

As a follow-up, can you just talk a little bit about geographic skews that are emerging in the business? And, John, I think you said on the last call that you've seen a pickup in your European activity in particular. Has that continued? Or has some of the geopolitical uncertainty and concerns around elections in, say, France impacted pipelines in Europe?

Well, our European business has done well. And we see that having real momentum. And so, as I look at it from our lens, we are really optimistic because we really see that those dialogues and the transactions being developed and coming out of Europe are quite strong. And so, as we look at it and as we experience it, we are really finding it to be quite a powerful vehicle going forward. Having said that, our US business is larger than our European business, as you know. And so, we're going to watch carefully. But we really feel like it's a real growth area for us and we see momentum in that business. And so, from our perspective, we think those patterns continue.

We have reached the end of the allotted time. I would now like to turn the floor to John Weinberg and Ralph Schlosstein for any closing comments.

Thank you, operator. Thank you all for joining us today. We are obviously around. If you have other questions, you can call us. Ralph, thank you for everything.

Thank you. Richard, I look forward to interviewing you next year at the Goldman Sachs financial institutions conference.

Thank you all.

This concludes today's Evercore first quarter and full-year 2021 financial results conference call. You may now disconnect. Everyone, have a great day.