Evercore Inc. (EVR) Earnings

Management highlights

- Overall Business Performance - The firm delivered record Q2 2026 and record first half 2026 results, marking broad-based strength across nearly all business lines, with record Q2 revenues for North American strategic advisory, private funds group, equities, and all-time record results for underwriting and wealth management. - Global industry M&A activity remains healthy, tracking above year-ago 2025 levels (the second most active M&A year on record), driven primarily by large-cap strategic M&A; middle market and sponsor-related activity remains below historical averages, but is improving year-over-year for Evercore. - Strategic Talent Investment - Year-to-date 2026, Evercore has added 19 new Senior Managing Directors (11 external hires, 8 internal promotions), bringing total SMDs in global investment banking to 188, with over 50 new SMDs currently ramping. Hires have been made across key practices including healthcare, industrials, restructuring, private capital advisory, equity capital markets, and new European regional hubs including Frankfurt. - Investing in top tier talent remains a core long-term strategy, with the firm actively sourcing A-plus talent across both bulge bracket and independent firms, with a healthy hiring pipeline. - Operational and Product Highlights - The private capital advisory (PCA) business maintains market leading position and delivered another strong Q2, with healthy activity across GP, LP and secondary transactions, benefiting from integrated coordination with the firm's sponsor M&A coverage. - The private funds group delivered a record Q2 even amid a generally subdued fundraising market, driven by strong demand for high quality funds. - The equity capital markets business had its best quarter ever, acting as active bookrunner on 19 balanced IPO/follow-on transactions, including the largest biotech IPO of all time (Parabolus Medicine's $771 million offering). - European operations have seen accelerating activity post the Robey-Warshaw acquisition, with smooth integration and new local market expansion including new offices in Frankfurt and Stockholm, and growing strength in Milan and Paris, positioning the firm for continued share gains in the region. - AI is a growing catalyst for M&A activity, as large corporates pursue acquisitions to gain scale and AI capabilities, and it has also driven increased activity in liability management and restructuring for software firms impacted by AI disruption. - Capital Return - Evercore returned $150 million of capital to shareholders in Q2 2026 via share repurchases and dividends; year-to-date 2026 total capital return reached $823 million, of which $734 million was for share repurchases (already surpassing the full year record for dollar volume of repurchases). As of Q2 end, the firm held $2.4 billion in cash and investment securities, maintaining a strong balance sheet.

Guidance

- Management maintained that Evercore's quarterly results are heavily impacted by deal timing, and performance should be evaluated across multiple quarters rather than single periods. - Management expects full year 2026 non-compensation expenses to have a modestly higher growth rate than the prior couple of years, but targets an annual non-compensation ratio approximately in line with 2025 levels. Higher Q2 non-compensation expenses are largely driven by episodic, seasonal and growth investment costs that are expected to decline in coming quarters. - Effective tax rate for the remaining 2026 quarters is expected to be consistent with levels seen in recent years. - Management is optimistic for continued strong activity in the second half of 2026 and into 2027, supported by near-record backlog and strong client engagement, but declined to provide explicit quarterly revenue guidance given market uncertainties. - Management expects the M&A cycle to continue expanding over the medium to long term, supported by large cap activity and rising financial sponsor participation in the middle market, with AI acting as a sustained cross-sector driver of deal activity.

Segment performance

Evercore reported Q2 2026 GAAP net revenues of $990 million, with adjusted net revenues reaching a record $1 billion, up 19% year-over-year. First half 2026 adjusted net revenues hit $2.4 billion, up 56% YoY. By business segment: 1. **Advisory**: Adjusted advisory fees of $776 million in Q2 2026, up 11% YoY, representing 77.6% of total adjusted net revenues; first half advisory revenues grew 61% YoY to a record level. North American strategic advisory delivered record Q2 revenues, with particular strength in healthcare, technology and industrials; EMEA strategic advisory had a strong quarter and record first half post the Robey-Warshaw acquisition. 2. **Underwriting**: Underwriting fees of $97 million (all-time best quarter, up 201% YoY), representing 9.7% of total adjusted net revenues; first half underwriting revenues grew 76% YoY, driven by strong IPO and follow-on issuance activity. 3. **Commissions and Equities**: Commissions and related revenue of $64 million (record Q2, up 9% YoY), representing 6.4% of total adjusted net revenues; the overall equities business delivered record Q2 revenues. 4. **Asset Management & Wealth Management**: Adjusted asset management and administration fees of $25 million, up 15% YoY, representing 2.5% of total adjusted net revenues; wealth management had its best quarter ever, with quarter-end AUM of $16.2 billion. 5. **Other Revenue**: Adjusted other net revenue of $39 million, representing 3.9% of total adjusted net revenues; ~52% of this came from gains on the DCCP hedge portfolio, with the remainder from interest income. 6. Non-M&A businesses generated over 40% of total revenues across the last 12 months ending Q2 2026.

Risks & headwinds

- Revenue generation from backlog is dependent on uncertain deal closing timing, which can vary significantly quarter to quarter. - The middle market and sponsor-related M&A segments continue to run below historical averages, with no guarantee of a rapid near-term recovery. - Ongoing market uncertainty around interest rate changes could create stress for sponsor portfolio companies, though management does not currently view rate levels as a material near-term headwind to overall deal activity. - Higher near-term non-compensation expenses from growth investments could pressure operating margins in the short term, even as investments are expected to drive long term growth.

Analyst Q&A

• Q: Non-compensation expenses are up 30% year-to-date alongside headcount growth, why is there less operating leverage than peers, and what does the elevated deal pitch-related spend imply for second half activity? /

  A: The firm emphasizes that results should always be evaluated across multiple quarters; the first half 2026 non-comp ratio is 13.5%, below pre-COVID levels, and management targets a full-year ratio in line with last year. Most Q2 expense growth stems from three categories: near-term activity-related costs (client events, deal pitches), medium-term growth investments (new talent hires and AI/technology projects), and episodic seasonal items (intern programs, offsites) that will not repeat at the same scale. Management expects strong second half activity supported by near-record backlog, though notes 2025's second half was already a record period for comps.

• Q: The current M&A market is two-speed, with large-cap strategics outperforming mid-cap and sponsor activity. When will these segments improve, and how is Evercore positioned? /

  A: Evercore is already seeing meaningful year-over-year increases in sponsor pitch volumes and win rates, after expanding sponsor coverage teams and integrating private capital advisory with traditional sponsor M&A. Middle market dialogue is also healthy and building, though it has not kept pace with large-cap activity. Management expects gradual continued improvement in both segments rather than an immediate 'open the floodgates' rally, and is well positioned to capture growth as it emerges.

• Q: How has AI impacted M&A expectations and activity across sectors, especially software, and are you seeing fee spread changes? /

  A: After a short market pause for software M&A, activity has rebounded, especially for high-quality software companies, with both strategics and sponsors increasingly active. AI is a major catalyst for M&A broadly, as large corporates pursue acquisitions to gain needed AI capabilities and scale to compete. AI has also driven increased liability management and restructuring activity for software firms impacted by AI disruption. Management noted green shoots for M&A growth across both sponsor and strategic activity in the software space.

• Q: What is your long-term operating margin outlook, can margins return to the 26-28.5% historic range seen in the 2016-2022 period? /

  A: Management frames value creation as a combination of revenue growth and margins, not margins in isolation. Over the past 12 years, Evercore grew annual revenue from less than $1 billion to $4.7 billion in the last four quarters, with first half 2026 revenues already matching full year 2023 revenues. Short term margin compression comes from deliberate growth investments that are expected to drive long-term shareholder value, with operating leverage already visible in first half 2026 results (56% revenue growth vs 77% earnings growth).

• Q: What is driving higher non-comp growth, and will non-comp dollars be higher in the second half, and what drove the credit loss provision? /

  A: Baseline non-comp growth correlates with 10% headcount growth, plus inflation, with faster growth for data/information costs partially offset by lower travel per head post-COVID (still 30% lower per head than pre-COVID on an adjusted basis). Double-digit millions in Q2 non-comp costs are one-time/episodic, including bad debt expense, legal/audit fees, clustered search/placement fees, and seasonal items, and management does not expect another sequential Q2-level increase in non-comp expenses in the next quarter.