Q4 2024 Earnings Summary
- Evercore's restructuring business had its second-best year ever, with continued strong activity levels that are expected to stay elevated, driven by an expanded scope including liability management services, which enhances revenue potential.
- The firm has significantly increased its number of Senior Managing Directors (SMDs), adding 60 new SMDs over the past 3 years, resulting in a higher percentage of ramping SMDs than at any point in recent history. Management expects these new hires to drive productivity and revenue growth as the market recovers.
- Evercore anticipates increased M&A activity, particularly in large deals, with a strengthening backlog and robust client dialogues. Management is optimistic about a continued build in activity throughout 2025, which should contribute to revenue growth.
- Despite adding approximately 60 new Senior Managing Directors (SMDs) over the past three years, productivity per SMD remains only in the high teens, not significantly above long-term averages, raising concerns about the firm's ability to achieve higher productivity levels in the near to intermediate term.
- Ongoing aggressive recruitment in a highly competitive market is impacting compensation expenses, with management indicating that progress in improving the compensation ratio will be gradual. This may continue to pressure margins and limit profitability improvements.
- The strong performance in the restructuring business, which was the firm's second-best year ever, may not be sustainable, as management cannot guarantee that elevated activity levels will continue, potentially leading to a decline in revenues from this segment.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue (Income Statement) | +24% (Q4 2024: $975.33M vs Q4 2023: $784.17M) | Total Revenue increased by 24% YoY, driven by an across-the-board improvement in revenue streams including stronger advisory activity and higher transaction volumes. This reflects robust market conditions and increased deal flow compared to the previous period, setting a positive forward-looking tone for future growth. |
Operating Income (EBIT) | +81% (Q4 2024: $212.56M vs Q4 2023: $117.69M) | Operating Income surged by 81% YoY, as revenue growth significantly outpaced the rise in operating expenses. Enhanced cost management and operational efficiencies contributed to this sizeable margin improvement relative to Q4 2023. |
Net Income | +68% (Q4 2024: $154.79M vs Q4 2023: $92.05M) | Net Income rose by 68% YoY owing to the combined effects of increased revenues and expanded operating margins, which offset higher expense levels. This robust bottom-line performance compared to last year underlines effective expense control and favorable transaction dynamics. |
EPS – Basic/Diluted | Basic EPS: from $2.19 to $3.67; Diluted EPS: from $2.04 to $3.30 | EPS improvements reflect the net income growth and margin expansion, with Basic EPS rising by approximately 68% and diluted EPS by a similar magnitude. This indicates that increased earnings more than offset any dilution from share count adjustments, setting a positive signal for shareholder value. |
Investment Banking & Equities Segment | +27% (Q4 2024: $975.12M vs Q4 2023: $766.33M) | Segment revenue grew by 27% YoY, primarily driven by enhanced performance in advisory, underwriting, and commissions. The upgrade in this segment’s performance stems from a higher number of large advisory transactions and robust market activity, representing a turnaround from previous period trends. |
Advisory Fees | +29% (Q4 2024: $849.59M vs Q4 2023: $659.3M) | Advisory Fees increased by 29% YoY, largely due to a surge in revenue from large-scale transactions and an increase in the number of fees earned. This significant jump, compared to the prior period, underscores improved market conditions and a successful client deal pipeline that may continue to boost future advisory performance. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Compensation Ratio | FY 2025 | “Anticipation of gradual improvement in the compensation ratio over the near‑to‑medium term” | “Striving for meaningful improvement, similar to the 190 basis point improvement achieved in 2024” | raised |
Restructuring and Liability Management | FY 2025 | “Strong activity levels in restructuring and liability management expected to continue into 2025” | “Activity levels expected to remain strong, driven by liability management among sponsor clients” | no change |
Equity Capital Markets (ECM) | FY 2025 | “Optimism about the IPO market becoming more active in 2025, with continued activity over the medium‑to‑long term” | “Anticipated to have a stronger year in 2025, particularly in the IPO market” | no change |
Market Activity | FY 2025 | no prior guidance | “Expect a gradual improvement in the deal‐making environment throughout 2025, supported by increasing CEO confidence, healthy sponsor dialogue, and improving equity capital markets” | no prior guidance |
Private Capital Advisory and Private Funds Group | FY 2025 | no prior guidance | “Both businesses expected to continue benefiting from a secular growth trend, with a strong pipeline heading into 2025” | no prior guidance |
Expense Management | FY 2025 | no prior guidance | “Aim to continue improving expense margins over the near‑to‑medium term” | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Increased M&A Activity and Backlog | Repeated emphasis on robust pipeline and large deals through Q1–Q3, with healthy sponsor dialogues and a strong backlog. | In Q4 2024, management highlights a strengthening backlog and continued broad-based M&A activity, advising on 3 of the 7 largest global deals. | Consistently strong, with optimism for 2025. |
Persistently Elevated Compensation Ratio | Q1–Q3 noted high comp ratio driven by talent investments, with slight improvements but still above targets. | Q4 sees a 190 basis point improvement year-over-year to 65.7%, but executives remain unsatisfied and seek further reductions. | Gradual improvement but remains elevated. |
Continued Strength of the Restructuring Business | Q1–Q3 underscore robust restructuring, led by liability management and steady demand. | Q4 marks the second-best year ever in restructuring, driven by broader engagement on capital structures. | Remains robust though long-term sustainability is uncertain. |
Sponsor Activity Growth Highlighted in Q2 but Slower Realization in Q3 | In Q2, sponsor dialogs picked up significantly; by Q3, realization was slower but expected to hit in 2025. | Not specifically discussed in Q4 [no references]. | Unclear as Q4 provides no direct update. |
ECM Momentum in Q3 Not Mentioned in Q4 | Q3 call pointed to growing ECM market share and ambition to enter top 10, with strong pipeline. | No reference to ECM gains or momentum in Q4 [no references]. | No update in Q4. |
New Concerns About Productivity of Expanded SMD Hires | Q1 referenced confidence in the ramp-up of new SMDs. | In Q4, management raised concerns about slower productivity while these hires ramp. | Emerging caution on near-term productivity. |
European Advisory Slowdown Mentioned Only in Q1 | Q1 noted slower start and elongated deal timelines in Europe. | By Q4, management cites a stronger European backlog and improving sentiment, no further slowdown mentioned. | No ongoing slowdown. |
High Non-Compensation Expenses Continuing to Pressure Margins | Q1–Q3 highlighted rising travel, professional fees, and technology costs, though the firm aims to improve the expense ratio. | Q4 shows non-comp expenses rising 16% year-over-year; however, the non-comp expense ratio improved to around 15.7%. | Costs remain high, but ratio is improving. |
Liability Management Opportunities | Q1 called out robust liability management as a key part of restructuring. | Q4 reinforces that liability management remained a major driver, adding breadth to restructuring. | Core component of sponsor and restructuring segments. |
Underwriting Revenue Spike in Q1 Not Repeated Later | Q1 saw a 143% surge in underwriting fees, with management cautioning not to annualize it. | No additional spike in Q4 [no references]. | No renewed surge. |
Potential Large Impact from Sponsor Transactions, M&A Backlog, and Restructuring Demand | Q1–Q3 consistently flagged these areas as key future growth drivers. | Q4 underscores sizable deals in M&A, ongoing sponsor dialogues, and a robust restructuring pipeline. | Significant potential heading into 2025. |
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M&A Outlook and Large Deals
Q: How is the M&A market for large deals evolving?
A: We're seeing robust activity at the board and management levels, with our backlog strengthening and large deals being a significant part of it. The environment is trending toward improvement, possibly aided by a loosening of regulatory constraints. Management teams are increasing activity, and we're optimistic about a build through the year. -
Pace of M&A Activity Build
Q: Are you seeing acceleration in M&A activity?
A: Activity levels remain very robust across all our businesses and sectors, including technology, healthcare, and industrials. January had fewer announcements, but we expect a continued gradual build throughout the year. There was no significant pull forward in M&A contributing to this quarter's results. -
Restructuring Outlook
Q: Can restructuring stay strong or even grow?
A: Last year was our second-best year ever in restructuring, and we continue to see strong activity. The business now includes not just bankruptcies but also liability management. We're engaging more with clients on critical aspects of their capital structure, and expect activity levels to stay elevated for quite some time. -
Productivity and Ramp-up of SMDs
Q: Can productivity reach $20 million per SMD soon?
A: We have many new SMDs ramping up, and we're confident they'll drive productivity as the market offers opportunities. Currently, productivity is in the high teens, and through the cycle we've reached the $20 million range. As the market recovers and deal announcements increase, we expect to drive more revenue and improve productivity ratios. -
Recruiting and Compensation
Q: Expectations for recruiting and comp expenses?
A: Our commitment to recruiting remains robust despite a competitive environment. We're aggressively adding high-quality people to drive growth. We have 30 SMDs ramping now and have added 60 new people over the past 3 years. Recruiting impacts compensation costs, but we're balancing hiring costs with growth benefits. -
Compensation Ratio Outlook
Q: Expectations for comp ratio improvement in 2025?
A: After improving from 67.6% to 65.7%—a 190 basis point improvement—we consider it meaningful. We're striving to achieve meaningful improvement again this year. We don't provide guidance, but as the year progresses, we'll have better visibility. -
Private Capital Advisory Competition
Q: How will you defend PCA market share amid competition?
A: Last year was a record year for our PCA businesses, and we're optimistic about their future. We're competing effectively and adding new products like structured capital solutions and collateralized fund obligations. Activity levels in our private funds group are building despite increased competition, and we feel good about our market position. -
Capital Position and Share Repurchases
Q: Plans for excess capital and cash build?
A: We've seen a healthy cash build and returned $591 million to shareholders last year through $144 million in dividends and $447 million in share repurchases. We expect to repurchase more shares than RSUs granted again this year, which will utilize some of the cash build.
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