Evercore - Earnings Call - Q2 2025

Executive Summary

• Record quarter: Net revenues were $833.8M GAAP (+21% YoY) and $838.9M adjusted (+21% YoY); adjusted EPS was $2.42 (+34% YoY), and adjusted operating margin rose 230 bps to 18.7%.
• Significant beat vs consensus: Q2 revenue and EPS materially exceeded S&P Global consensus; revenue by +$114.2M (+15.9%) and EPS by +$0.64 (+36.2%). Bold beats driven by large advisory closings, record Private Capital Advisory (PCA), and stronger equities trading; estimates table below (Values retrieved from S&P Global).
• Strategic catalyst: Evercore announced the acquisition of Robey Warshaw (GBP 146M/~$196M), expected EPS accretive in first full year; enhances UK/EMEA platform and large-cap franchise breadth.
• Operating leverage: Compensation ratio improved to 65.4% adjusted (65.8% GAAP); non-comp ratio fell to 15.9% adjusted on higher revenue, despite tech/data investments and footprint expansion.

What Went Well and What Went Wrong

• What Went Well

  • “Record Second Quarter and First Half Net Revenues” with adjusted net revenues of $838.9M (+21% YoY); adjusted operating income up 37% YoY; adjusted operating margin 18.7% (+228 bps).
  • Large-cap advisory momentum: advised on Cox–Charter ($34.5B), WBD separation, Foot Locker sale to Dick’s ($2.5B); July pipeline includes BD–Waters ($17.5B RMT) and Huntington–Veritex ($1.9B).
  • PCA delivered “record second quarter and first half results”; equities had strongest Q2 ever on volatility and volume; AUM reached ~$14.5B, a record quarter-end level.

• What Went Wrong

  • Non-comp costs rose 9–10% YoY (tech/data licenses, occupancy, travel); management expects lag before comp ratio can move meaningfully lower given continued investment and hiring.
  • Other revenue variability: the hedge/investment portfolio drove mixed results intra-year; adjusted Other Revenue +34% YoY in Q2, but down 26–30% YTD vs prior year given lower fund returns and treasury yields.
  • Tax rate kinetics: adjusted ETR rose to 30.0% (vs 26.9% PY) on higher non-deductibles and state/local apportionment; GAAP ETR 29.3% (vs 25.8% PY).

Transcript

Speaker 5

Good morning and welcome to Evercore Second Quarter 2025 earnings conference call. Today's call is scheduled to last about one hour, including remarks by Evercore management and the question-and-answer session. In order to ask a question, please press the star key followed by the number one on your touchstone phone at any time. I will now turn the call over to Katy Haber, Managing Director of Investor Relations at Evercore. Please go ahead.

Speaker 0

Thank you, Operator. Good morning and thank you for joining us today for Evercore's Second Quarter 2025 financial results conference call. I'm Katy Haber, Evercore's Head of Investor Relations. Joining me on the call today is John Weinberg, our Chairman and CEO, and Tim LaLonde, our CFO. After our prepared remarks, we will open up the line for questions. Earlier today, we issued a press release announcing Evercore's Second Quarter 2025 financial results. Our discussion of our results today is complimentary 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 reconciliation, 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 closing. I will now turn the call over to John.

Speaker 2

Thank you, Katy. Before we review our second quarter financial results, I would like to spend a few minutes discussing our announcement from earlier this morning. We've entered into an agreement to acquire Robey Warshaw, a leading U.K.-based advisory firm with an extraordinary client franchise and relationships with some of the most prominent multinational companies in Europe. For 30 years, Evercore has been committed to delivering for clients by expanding our capabilities and talent each and every year, building a firm grounded in excellence and long-term high-quality growth. This acquisition continues that approach, enhancing our ability to create value for all of our stakeholders. Robey Warshaw's partners have advised on some of the largest and most complex transactions globally, including seven of the ten largest in U.K. history.

This year, Robey Warshaw advised Banco Santander on a $3.9 billion acquisition of TSB, Direct Line Insurance Group on its $4.5 billion acquisition via Viva, and Johnson Matthey on a $2.4 billion sale of its CT division to Honeywell International. In the U.K., Robey Warshaw has been a trusted advisor to over a quarter of the FTSE 100 and has significant reach in the continent and globally. Robey Warshaw's business is highly complementary to Evercore's broad and growing AMEA platform. This acquisition is a significant step in our global expansion strategy. By combining Robey Warshaw's long-standing trusted relationships with large-cap clients and Evercore's relationships, broad product capabilities, deep sector expertise, and global reach, we are enhancing the value we can deliver to clients around the world. As you have seen, we've been accelerating our growth in AMEA in recent years, including key additions in France, Spain, and most recently, Italy.

This acquisition will further strengthen our presence in the U.K. and the broader region. It will also strengthen our global efforts as we continue to serve large multinational companies on their most important transactions, including cross-border. With the addition of Robey Warshaw, Evercore will have more than 400 bankers across nine countries in the region. We believe this transaction will unlock synergies, creating value for our shareholders and enhancing our ability to serve clients. Importantly, their values are an excellent match with ours, a commitment to partnership and collaboration, and to long-term client relationships, excellence, integrity, and independence. We are looking forward to welcoming the Robey Warshaw team to Evercore and to what we will achieve together on behalf of our clients. Now, let me discuss our business and Second Quarter results.

Despite the rapidly changing market conditions experienced throughout the Second Quarter, Evercore delivered strong results, generating adjusted net revenues of $839 million, up nearly 21% year-over-year. In the first half of 2025, Evercore generated over $1.5 billion in adjusted net revenues, a 20% increase compared to the same period a year ago. These results represent record revenues for both Second Quarter and First Half. The strength and resilience we have demonstrated so far this year reflect the execution of our growth strategy and the versatility of our business model, which enable us to serve our clients and deliver results for our shareholders in various types of environments. Since the market disruption in late March and in early April, business conditions have improved with increasing CEO confidence levels, receptive debt and equity issuance markets, and healthy engagement with both corporates and sponsors.

Year-to-date, through the end of the Second Quarter, industry-wide, global M&A volumes were 30% higher than a year ago, with volumes increasing steadily each month. Our backlogs continue to build throughout the quarter, and our client dialogue activity remains robust. While uncertainties remain, we continue to be optimistic about the path forward. As we move through the year, we expect greater clarity and stability in the markets, which should support continued improvement in the investment banking environment. Shifting to talent, we continue to make progress on our recruiting goals. Since our last earnings call, four senior managing directors have joined our investment banking practice in private capital advisory, healthcare, industrials, and in Italy. Three investment banking SMBs have committed to join our franchise: two focused on logistics and transportation, and one focused on ratings advisory.

So far for the year, nine investment banking SMBs and one senior advisor have started at the firm or will be joining later in the year, and we continue to have a solid pipeline of external candidates. Attracting and developing the highest quality talent continues to be a core priority for us. The senior-level talent we've hired and promoted over the past several years is contributing meaningfully to our results. Now, let me briefly discuss the quarter. As noted earlier, we delivered strong year-over-year growth across our diversified mix of businesses in both the second quarter and the first half. In fact, in the second quarter and over the last 12 months, approximately 50% of our total revenues were from non-M&A sources, reflecting the strength of our diversified platform.

In M&A, we advised on a number of notable and complex transactions in the quarter, including Cox Communications' merger with Charter Communications, valuing Cox Communications at $34.5 billion, Warner Bros. Discovery on its separation into two leading media companies, a transaction that leveraged the expertise of multiple teams across the firm, and the sale of Foot Locker to Dick's Sporting Goods for $2.5 billion. We've continued to experience strong momentum in July, advising Becton Dickinson on the combination of its biosciences and diagnostic solutions business with Waters in a $17.5 billion reverse Morris Trust transaction, and advising Huntington Bancshares on its acquisition of Veritex Holdings for $1.9 billion. Year-to-date, we have advised on four of the ten largest global transactions and remain active in a wide range of high-quality, complex transactions spanning mid-cap, large-cap, and mega-cap deal sizes.

Our European business saw growth in the quarter with an increase in activity across most sectors and products, and momentum for deal activity in the region continues to build. Activity among financial sponsors continues to strengthen, and we are experiencing strong levels of sponsor dialogue. Our strategic defense and shareholder advisory group remains highly active as the number of activist campaigns in the U.S. reached new records in the first half of the year. The liability management and restructuring group continues to see strong activity levels. Private equity-led situations remain a key driver, and we expect the business to stay active in the near term as sponsors and corporates navigate upcoming maturity walls, elevated interest rates, and broader market uncertainty. Our industry-leading private capital advisory business delivered a record first half and second quarter, driven by unprecedented volumes in GP-led continuation funds, LP secondaries, and securitizations.

We advised on many of the most significant transactions across these products, including several high-profile secondary market deals for endowments and pension funds. Trends in our private funds group remain in line with the first quarter as fundraising conditions continue to be challenging. However, our team remains active and expects a pickup in activity towards the end of the year, consistent with seasonal patterns. After a slowdown in activity in April, the equity capital markets have seen signs of recovery, with dollar issuance volumes in the second quarter reaching the highest level since the first quarter of 2021, though the number of transactions is still down year-over-year. Our underwriting business experienced an uptick in activity in May and June, and we expect these positive trends to continue as we enter the second half.

Our equities franchise had its strongest second quarter ever, driven by market volatility, increased trading volumes, and strong client engagement. Lastly, wealth management reached a record quarter-end AUM of approximately $14.5 billion, driven by market appreciation and net inflows. Before I turn it over to Tim, I'd like to make one final comment. We remain committed to executing on our growth strategy and on creating value for both our clients and our shareholders. This is evident in our year-to-date financial results and in our acquisition of Robey Warshaw. With that, let me turn it over to Tim.

Speaker 3

Thank you, John. We are excited to have the Robey Warshaw team joining and believe this will provide significant benefits to Evercore. Over the last three years, Robey Warshaw has produced average annual revenues of over GBP 60 million, or more than $80 million. As you can see in the press release, the consideration we are paying is GBP 146 million, or approximately $196 million, payable in two tranches, with the first payment in Evercore stock at closing and the second payment at the one-year anniversary in stock or cash to be mutually agreed by Evercore and Robey Warshaw. There is also potential additional consideration, which is based on defined performance criteria over a multi-year period of time. The transaction is expected to close around the beginning of the Fourth Quarter of this year.

We expect it to be accretive to Evercore's adjusted and GAAP EPS in our first full year together and thereafter. We will continue to maintain strong liquidity and conservative debt levels and are committed to building value for our shareholders. Now, I will discuss our financial results for the Second Quarter. Evercore's Second Quarter reflected improving market conditions and strong results across our diversified mix of businesses. The Second Quarter of 2025. Net revenues, operating income, and EPS on a GAAP basis were $834 million, $150 million, and $2.36 per share, 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.

Our Second Quarter adjusted net revenues of $839 million increased 21% versus the Second Quarter of 2024, which was a record for the Second Quarter, and we also achieved record revenues for the first six months of the year. Second Quarter adjusted operating income of $157 million increased 37% versus the Second Quarter of 2024. Adjusted earnings per share of $2.42 increased 34% versus the Second Quarter of last year. Our adjusted operating margin was 18.7% for the Second Quarter, up from 16.4% in the prior year period, an improvement of 230 basis points. Turning to the businesses. Second Quarter adjusted advisory fees of $698 million increased 23% year-over-year, which is a record for the Second Quarter. First Half results also represented a record for the advisory business. Our second quarter underwriting revenues were $32 million, up 4% from a year ago.

Commissions and related revenue of $58 million in the quarter increased 10% year-over-year. The strength in the quarter was primarily driven by heightened trading volumes in April, resulting from increased levels of volatility. Second quarter adjusted asset management and administration fees of $21 million rose 3% year-over-year, driven by market appreciation and net inflows. Second quarter adjusted other revenue, net, was approximately $29 million, which compares to $22 million a year ago. Slightly more than half of that is related to gains in our DCCP hedge portfolio, which is correlated to the performance of the broader equity market, and the balance of the other revenue is primarily related to interest income. Turning to expenses, the adjusted compensation ratio for the second quarter is 65.4%, down 60 basis points from the prior year period and down 30 basis points from last quarter.

Our compensation ratio for the quarter reflects a gradual improvement in the investment banking environment and an improvement in our revenue. As you have seen from the recent announcements, we are continuing to invest and execute on our strategic growth plan, which may create a time lag for making meaningful improvement in our comp ratio in the near term. Adjusted non-compensation expenses in the quarter were $133 million, up 9% from a year ago. The increase year-over-year is primarily driven by two things. The first is technology and information services expense, which rose due to higher renewal costs for market data and licensing fees, and those costs tend to rise faster than the rate of inflation. The other is the implementation and development of new software applications, which are intended to create efficiencies and facilitate our client coverage and service efforts.

The second is occupancy and equipment expense, which increased due to higher rents and costs associated with the addition of new floors in our New York headquarters and new offices related to our expansions in Chicago, Paris, Dubai, and London. Our adjusted non-comp ratio for the quarter is at 15.9%, 170 basis points below the ratio for the prior year period and 180 basis points below last quarter's ratio, benefiting from our revenue increase. Over a significant period of time, there is a correlation between headcount and non-comp expenses, with some additional increase related to inflation. If we look at our non-comp expense on a per-head basis, year-over-year, our Second Quarter adjusted non-comp expense would be up 2.4% per employee. As I've mentioned in the past, we are maintaining a disciplined focus on managing our non-compensation expenses while investing in areas that are necessary to support our growth.

Our adjusted tax rate for the quarter was 30% compared to 26.9% in the Second Quarter of last year. The year-over-year increase in the tax rate is primarily related to an increase in non-deductible expenses and an increase in taxes related to state and local apportionment. Turning to our balance sheet. As of June 30, our cash and investment securities totaled over $1.7 billion. We continue to be cash flow positive. In the first six months of the year, we returned $532 million of capital to shareholders through the repurchase of shares and the payment of dividends. During the Second Quarter, we repurchased just under 200,000 shares at an average price of $236.05 per share. Year-to-date, we have repurchased approximately 1.7 million shares at an average price of $258.50 per share.

We fully offset the dilution associated with RSU grants from our 2024 bonus cycle and returned more capital to our shareholders in the first half of this year than in any other consecutive two-quarter period in our history. Our Second Quarter adjusted diluted share count was 43.5 million shares, relatively in line with the prior year, and down approximately 850,000 shares from the First Quarter. The decline in the share count reflects a full quarter impact of repurchases during the First Quarter and the accounting impact with respect to unvested RSUs as our weighted average share price declined in the Second Quarter. Given the increase in our share price Third Quarter to date, we would expect to see our share count modestly increase in the Third Quarter due to the same accounting impact on RSUs from our share price that caused our share count to decrease this quarter.

Additionally, in July, we issued two tranches of senior notes in the form of a private placement for a total of $250 million. We issued $125 million of 5.17% Series K notes due in 2030 and $125 million of 5.47% Series L notes due in 2032. The use of proceeds is to repay two tranches of notes that are maturing, one in August of 2025 and one in March of 2026, totaling about $86 million, and the remainder is for general corporate purposes. We continue to maintain a strong cash position and take into consideration our regulatory requirements, the current economic and business environment, cash needs for the implementation of our strategic initiatives, including hiring plans, and preserving a solid financial footing.

As we enter the second half of the year, we remain confident in our ability to deliver solid results as we have continued to demonstrate that our diversified business model performs well in all types of environments. With that, we will now open the line for questions.

Speaker 5

Thank you. We will now conduct the question and answer portion of the conference. Please limit to one question only. You are welcome to rejoin the queue for additional questions, time permitting. Again, in order to ask a question, please press the star key followed by one on your touch-tone phone. Our first question is from James Yarrow with Goldman Sachs. Please go ahead.

Speaker 1

Good morning and thanks for taking the questions. I wanted to start with the Robey Warshaw transaction. Would you be able to provide any additional color around the business profile for Robey Warshaw? Specifically, what aside from M&A advisory they offer today?

Speaker 2

Thanks, James. They are primarily a top-level advisor and spend a great deal of their time in the C-suite and with boards. They are very strategic and they have based their business on giving strategic advice. They are knowledgeable about a full line of products, but they really haven't been able to translate their knowledge and really the advisory position that they have into revenues. One of the great synergies of this transaction, we believe, is that we have this very full product set, a very extensive industry sector group and analyze. What we are going to be able to do is really marry their extraordinary relationships with our capabilities, and we think that's going to be a real source of revenue and growth.

I think that what they really have, which is absolutely extraordinary, is this amazing client franchise, trusted relationships with so many very important companies, and I think that marrying that with our capabilities will actually be quite powerful.

Speaker 1

That's great. Thank you for clarifying that. My second question, just around M&A, the backdrop. You sound constructive, but perhaps you could talk about whether in the boardroom you're still seeing impacts from tariffs and weighing on potential transactions.

Speaker 2

There is no question that there is not the full-on merger activity that you might have seen at the beginning of the year or that we anticipated. Having said that, I think that boards and management teams are getting more comfortable and they believe they have more certainty. There is absolutely some building of activity in our backlog to build throughout our firm, and I think that we really believe that the activity levels could continue to grow and the momentum could continue over the balance of this year. The answer to your question really is that we see that people are becoming more comfortable, there is more certainty, there is more clarity. Having said that, we do not think we have a full-on absolute roaring recovery at this moment.

Speaker 1

Thanks a lot. I'm sorry. Sorry for asking two questions. Thanks.

Speaker 2

That's okay. That's okay, James.

Speaker 5

Our next question will come from Ryan Kenny with Morgan Stanley. Please go ahead.

Speaker 4

Hi, good morning. On the Robey Warshaw deal, very clear overview on how it aligns with your global expansion strategy and your culture. My question is, when you think about Evercore's strategy for gaining global market share going forward, do you see yourself doing more acquisitions in the future to fuel growth, and is there any change in how you think about the mix of organic growth, hiring, M&A, and supporting growth? Thanks.

Speaker 2

Our most important means of growth is going to continue to be hiring high-quality talent. One by one. It's really the way we think is the best way to do it, and we're going to continue that. If you think about how we're going to grow, we're going to continue it the way we have, which is on the basis of finding high-quality people and recruiting them. The reason we did Robey Warshaw is that we found an extraordinarily high-quality organization, which really had such a good match with us culturally and had some really interesting synergies from a business perspective. We would not be doing an acquisition if it hadn't been for Robey Warshaw. Having said that, we'd not take anything off the table. If something comes up, we'll evaluate it.

I think if you think about us and how we're going to grow, we're going to aggressively grow one by one. We're going to continue to drive our pipeline, and I'd say that this year, as you probably know, we really have 10 senior bankers, 10 senior people in, and we have a really healthy pipeline, and we're going to continue to grow that pipeline and execute on that pipeline. I hope that helps.

Speaker 1

Thank you. That helps.

Speaker 5

Our next question comes from Devin Ryan with Citizens. Please go ahead.

Speaker 7

Good morning and congrats on the deal. The question just on kind of the diversification of the business. Obviously, you highlighted again the second quarter and actually the last 12 months, approximately 50% of revenues were from non-M&A sources. Obviously, terrific job just kind of diversifying the business and seeing growth in some of those non-M&A businesses like private capital and restructuring and shareholder advisory. It has also been a tougher M&A market. I'm just curious if we should think about this as kind of a new baseline or kind of where you want to be from a mix perspective, or is that simply as M&A kind of reaccelerates here, these other businesses maybe do not keep up until the mix goes back down to 40% or something less than that? Thanks.

Speaker 2

It's hard to know exactly what the percentages are going to fall out to, but I would say that mergers are building, and we are very leveraged on our merger business. As our merger business builds, we believe it will, over time, build and really continue to be the lion's—not the lion's share, but a significant piece of really what we're able to do with clients. PCA restructuring, activism defense, those are very, very good businesses. I don't see them really slowing right now. I think that they all have really healthy activity levels, and we really don't see that there's going to be weakness there. We do think the merger business will strengthen. By definition, the merger business will probably pick up and do a higher percentage, but we intend to continue to invest in our non-merger businesses.

Hopefully, over time, you'll see something that does approximate 40% or 50%. I don't know where it'll fall in the middle of that, but clearly, we think that all of those businesses will grow, and the merger business will probably grow faster as the market really does recover.

Speaker 7

That's great, Caller. Thank you.

Speaker 5

Our next question comes from Alex Bond with KBW. Please go ahead.

Speaker 4

Hey, good morning, everyone. Thanks for taking the question. It looks like industry secondary volumes reached a new high in the first half of the year, and you also mentioned that PCA revenues reached new highs in both Q2 and the first half. I am just wondering if you can go into a bit more detail on the outlook for industry volumes in this area in the back half of the year, and then also maybe how you think about how the competitive dynamics in the secondary space on the advisory side may evolve as broader momentum in this area continues. Thanks.

Speaker 2

Sure. Competitively, there's no question that there are many people who are talking about really ramping up their activity level here. I do believe the competition will heat up even more. We are very well positioned. We have an outstanding team. We have a lot of experience. We have a real track record of success. We think we're going to compete very well in that. In terms of the second half, it was a very good first half, as we said. We continue to see a very strong activity level on really all fronts, both on the GP level with continuity and the LP level, where we've been involved in some of the most high-profile secondary sales. We think that we're going to continue, and I think that from our standpoint, I don't see a slowdown.

I do believe that we may not ramp as fast in the second half as we did, but we feel very comfortable with the levels we're at right now.

Speaker 4

Understood. That's helpful. Thank you.

Speaker 5

Thank you. As a reminder, ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypads. We'll go next to Brandon O'Brien with Wolf Research. Please go ahead.

Speaker 6

Good morning and thanks for taking my questions. Just a two-parter here on expenses. I appreciate the potential top-line synergies you mentioned earlier, but I was hoping you could help us think through the cost side of the equation and your ability to drive synergies by consolidating office space and tech infrastructure and the like. As we think about margins for the combined entity, Tim, I heard your comments on the comp ratio improvement, but just want to get a sense of your confidence and your ability to get your comp ratio back down to the sub-60% level once the cadence of hiring goes back to a more normal level.

Speaker 3

Yeah, sure. Thanks for the question, Brandon. Look, as I've said on previous calls, both compensation and non-compensation expenses are a significant focus of the firm. On the compensation side, and I think I mentioned this in my prepared remarks, we're very focused on achieving optimal value for the shareholders by balancing our investing in people, which is how we grow our firm, along with managing our expenses. As you mentioned, we did make some progress on the comp ratio this quarter. We have made, what I would say, quite meaningful progress from where we were two years ago. I'm not satisfied with where we are. I think I'd like to take it lower.

I think the comp ratio you saw for this quarter is reflective of our best judgment in relation to an accrual that takes into consideration what happened during the quarter and also our outlook for the remainder of the year. As I sit here today, not seeing that in the next near term, which I would define as the next quarter or two, quite significant changes because our accrual reflects what we currently see today, but we certainly are going to strive to make improvements looking beyond that. That's on the compensation side. On the non-compensation side, as a percentage of revenues, you'll note that we made quite significant progress in this quarter. That is the first point. Second is what I would say there is we do have some investments we're making.

If you look at our non-comps, they were up about $11 million year over year, and that's really attributable to two primary areas, and one is the occupancy, which is up, and that's simply a reflection of our growth and our expansion. We've added office space in London, we've added office space in Paris and Dubai and Italy and in Chicago, as well as consolidating some of our corporate people into one location in Manhattan. That's what would explain that, and I think that's just a natural part of the growth. The other is investment in technology, and we all know that we're at, I would say, a historical inflection point in technology, and we're investing to make sure we take advantage of the improvements we're seeing and then hoping to realize productivity gains from that.

Now, one of the ways we look at our non-comps is we look at it on a per-head basis because, as I've said historically, there's a correlation between headcount growth and non-comp, factoring a little bit for inflation. If you look back to the pre-COVID year, on a per-head basis, our non-comps would be up about 13%. That's over six years, and that's just a little over 2% per year, which I would attribute to inflationary pressures. That's kind of how we think about it and where we think we're headed.

Speaker 6

That's great, Caller. Thank you for taking my questions.

Speaker 5

Thank you. We'll go next again to James Yarrow with Goldman Sachs. Please go ahead.

Speaker 4

Follow-up. I just wanted to ask a little bit about the Robey Warshaw financing, if there is any. Would you consider issuing stock for either of the first two tranches? Could you talk a little bit about the consideration between for the second tranche, stock versus cash? Perhaps you could talk a little bit about the performance incentives, to the extent you can, associated with potentially increasing the consideration.

Speaker 3

Sure, sure, James. Happy to. Now, during my prepared remarks, one thing I just want to make sure did not go unnoticed is we did do a private notes offering where we raised $250 million in the form of two notes. One a five-year note at 5.17% and the second is a seven-year note at 5.47%. I just wanted to make sure we noted that. On the Robey Warshaw transaction, you saw that our total what we call upfront consideration was in dollars about $196 million. It is payable in two tranches, one at closing, one a year from now. Think about it as about 49% and the one at closing about 51%. At the time of the one-year anniversary, the first tranche was payable in or will be payable in stock. As you know, we have been very disciplined about trying to manage our share count.

No guarantees because we take a lot of factors into consideration, but we certainly are giving strong consideration to repurchasing shares that would be similar to the number issued in the upfront payment on this. In a way, you might think about it as net cash. We love the idea of issuing shares and making sure our new colleagues are invested in the future as we all are. I think from a shareholder standpoint, you could think about it as maybe netting out as we proceed in time and are giving strong consideration to repurchasing those shares. If you look at the balance of payments too, you should think about it as it could be some combination of stock and/or cash, but to the extent it is stock, we, again, at that point, would consider giving strong consideration to repurchasing shares.

From a shareholder standpoint, over time, this should be thought of as a largely net cash transaction. That is the first point. Second, you asked about any additional consideration. Of course, we noted in our press release that there is the potential for future consideration. I think I am very pleased with the structure of the transaction because that potential future consideration is only earned to the extent of two things. Number one, that the Robey Warshaw outperforms our base assumptions in the projections that we used. Number two, in the event that significant synergies and aligned goals are achieved. If that happens and they earn additional potential consideration, that is a win-win because it also is very value-accretive for our shareholders the way it is structured.

Speaker 2

The only thing I would like to add is that there are two actual aspects that I think are important in addition. One is that the add-on value that they can be able to generate is really something that will bind them to the firm. The good news is we think we're going to get them for a good long time, and that's, I think, from our standpoint, very valuable. The second is that, obviously, by having something which is kind of somewhat of an earnout, it aligns their interests and the firm's interests. The fit between them culturally and us is extraordinary, but this kind of an arrangement will continue to carry forward the incentives that are very much aligned, and I think that's an important point.

Speaker 4

Extremely helpful. Thank you.

Speaker 5

Thank you. This concludes today's Evercore Second Quarter 2025 earnings conference call. You may now disconnect.