Evercore Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with Evercore Inc.'s unaudited condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q. Forward-Looking Statements This report contains, or incorporates by reference, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Exchange Act, which reflect our current views with respect to, among other things, our operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "backlog," "believes," "expects," "potential," "probable," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. All statements, other than statements of historical fact, included in this report are forward-looking statements, including with respect to the worldwide COVID-19 pandemic, and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. All statements other than statements of historical fact are forward-looking statements and, based on various underlying assumptions and expectations, are subject to known and unknown risks, uncertainties and assumptions and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore's business. We believe these factors include, but are not limited to, those described under "Risk Factors" discussed in the Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A. "Risk Factors" of our Form 10-Q for the first quarter of 2020. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included or incorporated by reference in this report, including those statements herein with respect to the negative effect that the COVID-19 pandemic has had on our business and is expected to continue to have on our business, which we expect to be significant. At this time, it is uncertain how long our business will be negatively impacted by COVID-19 and the associated economic and market downturn. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise except as required by law. We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Key Financial Measures Revenue Total revenues reflect revenues from our Investment Banking and Investment Management business segments that include fees for services, transaction-related client reimbursements plus other revenue. Net revenues reflect total revenues less interest expense. Investment Banking. Our Investment Banking business earns fees from our clients for providing advice on mergers, acquisitions, divestitures, leveraged buyouts, restructurings, activism and defense and similar corporate finance matters, and from underwriting and private placement activities, as well as commissions and fees from research and our sales and trading activities. The amount and timing of the fees paid vary by the type of engagement or services provided. In general, advisory fees are paid at the time we sign an engagement letter, during the course of the engagement or when an engagement is completed. The majority of our investment banking revenue consists of advisory fees for which realizations are dependent on the successful completion of transactions. A transaction can fail to be completed for many reasons which are outside of our control, including failure of parties to agree upon final terms with the counterparty, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals, or due to adverse market conditions. In the case of bankruptcy engagements, fees are subject to approval of the court. Underwriting fees are recognized when the offering has been deemed to be completed and placement fees are generally recognized at the time of the client's acceptance of capital or capital commitments. Commissions and Related Fees includes commissions, which are recorded on a trade-date basis or, in the case of payments under commission sharing arrangements, on the date earned. Commissions and Related Fees also include subscription fees for the sales of research. Cash received before the subscription period ends is initially recorded as deferred revenue (a contract liability) and recognized as revenue over the remaining subscription period. 39 Table of Contents Revenue trends in our advisory business generally are correlated to the volume of merger and acquisition ("M&A") activity and/or restructuring activity, which tends to be counter-cyclical to M&A. However, deviations from this trend can occur in any given year or quarter for a number of reasons. For example, changes in our market share or the ability of our clients to close certain large transactions can cause our revenue results to diverge from the level of overall M&A or restructuring activity. Revenue trends in our equities business are correlated to market volumes, which generally decrease in periods of low market volatility or unfavorable market or economic conditions. For further information see COVID-19 in "Liquidity and Capital Resources" . Investment Management. Our Investment Management business includes operations related to the Wealth Management and Institutional Asset Management businesses and interests in private equity funds which we do not manage. Revenue sources primarily include management fees, fiduciary fees, performance fees (including carried interest) and gains (or losses) on our investments. Management fees for third party clients generally represent a percentage of assets under management ("AUM"). Fiduciary fees, which are generally a function of the size and complexity of each engagement, are individually negotiated. We record performance fees upon the earlier of the termination of the investment fund or when the likelihood of clawback is mathematically improbable. Gains and losses include both realized and unrealized gains and losses on principal investments, including those arising from our equity interest in investment partnerships. Transaction-Related Client Reimbursements . In both our Investment Banking and Investment Management segments, we incur various transaction-related expenditures, such as travel and professional fees, in the course of performing our services. Pursuant to the engagement letters with our advisory clients, these expenditures may be reimbursable. We define these expenses, which are associated with revenue activities earned over time, as transaction-related expenses and record such expenditures as incurred and record revenue when it is determined that clients have an obligation to reimburse us for such transaction-related expenses. Client expense reimbursements are recorded as revenue on the Unaudited Condensed Consolidated Statements of Operations on the later of the date an engagement letter is executed or the date we pay or accrue the expense. Other Revenue and Interest Expense. Other Revenue and Interest Expense is derived from investing customer funds in financing transactions. These transactions are principally repurchases and resales of Mexican government and government agency securities. Revenue and expenses associated with these transactions are recognized over the term of the repurchase or resale transaction. Other Revenue also includes interest income and income (losses) earned on investment securities, including our investment funds and futures contracts which are used as an economic hedge against our deferred cash compensation program, certificates of deposit, cash and cash equivalents and on our debt security investment in G5, as well as adjustments to amounts due pursuant to our tax receivable agreement, subsequent to its initial establishment, related to changes in enacted tax rates, and gains (losses) resulting from foreign currency fluctuations, principal trading and realized and unrealized gains and losses on interests in private equity funds which we do not manage. Interest Expense also includes interest expense associated with our Notes Payable and lines of credit. Operating Expenses Employee Compensation and Benefits Expense. We include all payments for services rendered by our employees, as well as profits interests in our businesses that have been accounted for as compensation, in employee compensation and benefits expense. We maintain compensation programs, including base salary, cash, deferred cash and equity bonus awards and benefits programs and manage compensation to estimates of competitive levels based on market conditions and performance. Our level of compensation, including deferred compensation, reflects our plan to maintain competitive compensation levels to retain key personnel, and it reflects the impact of newly-hired senior professionals, including related grants of equity awards which are generally valued at their grant date. Increasing the number of high-caliber, experienced senior level employees is critical to our growth efforts. In our advisory businesses, these hires generally do not begin to generate significant revenue in the year they are hired. Our annual compensation program includes share-based compensation awards and deferred cash awards as a component of the annual bonus awards for certain employees. These awards are generally subject to annual vesting requirements over a four-year period beginning at the date of grant, which occurs in the first quarter of each year; accordingly, the expense is generally amortized over the stated vesting period, subject to retirement eligibility. With respect to annual awards, our retirement eligibility criteria generally stipulates that if an employee has at least five years of continuous service, is at least 55 years of age and has a combined age and years of service of at least 65 years, the employee is eligible for retirement. Beginning in 2019, we implemented 40 Table of Contents additional retirement eligibility qualifying criteria, for awards issued in 2019 and after, that stipulates if an employee has at least 10 years of continuous service and is at least 60 years of age, the employee is also eligible for retirement. Retirement eligibility allows for continued vesting of awards after employees depart from the Company, provided they give the minimum advance notice, which is generally six months to one year. We estimate forfeitures in the aggregate compensation cost to be amortized over the requisite service period of the awards. We periodically monitor our estimated forfeiture rate and adjust our assumptions to the actual occurrence of forfeited awards. A change in estimated forfeitures is recognized through a cumulative adjustment in the period of the change. Our Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers, who exceed defined benchmark results over four -year performance periods beginning January 1, 2013 and January 1, 2017. The 2013 Long-term Incentive Plan was paid in cash in installments in 2017, 2018 and 2019 (for the performance period beginning on January 1, 2013). The 2017 Long-term Incentive Plan is due to be paid, in cash or Class A Shares, at our discretion, in three equal installments in the first quarter of 2021, 2022 and 2023 (for the performance period beginning on January 1, 2017), subject to employment at the time of payment. These awards are subject to retirement eligibility requirements after the performance criteria has been achieved. We periodically assess the probability of the benchmarks being achieved and expense the probable payout over the requisite service period of the award. From time to time, we also grant performance awards to certain individuals which include both performance and service based vesting requirements. See Note 16 to our unaudited condensed consolidated financial statements for further information. We believe that the ratio of Employee Compensation and Benefits Expense to Net Revenues is an important measure to assess the annual cost of compensation and provides a meaningful basis for comparison of compensation and benefits expense between present, historical and future years. Non-Compensation Expenses. Our other operating expenses include costs for occupancy and equipment rental, professional fees, travel and related expenses, communications and information technology services, depreciation and amortization, execution, clearing and custody fees, acquisition and transition costs and other operating expenses. We refer to all of these expenses as non-compensation expenses. Other Expenses Other Expenses include the following: • Amortization of LP Units and Certain Other Awards – Includes amortization costs associated with the vesting of Class J LP Units issued in conjunction with the acquisition of ISI and certain other related awards. • Special Charges, Including Business Realignment Costs – Includes expenses in 2020 related to separation and transition benefits and related costs as a result of our review of operations and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives. Includes expenses in 2019 related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York. • Acquisition and Transition Costs – Includes costs incurred in connection with acquisitions, divestitures and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services. • Intangible Asset and Other Amortization – Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions. Income from Equity Method Investments Our share of the income (loss) from our equity interests in ABS, Atalanta Sosnoff and Luminis are included within Income from Equity Method Investments, as a component of Income Before Income Taxes, on the Unaudited Condensed Consolidated Statements of Operations . Provision for Income Taxes We account for income taxes in accordance with ASC 740 , which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax basis of our assets and liabilities. Excess tax benefits and deficiencies associated with the appreciation or depreciation in our share price upon vesting of employee share-based awards above or below 41 Table of Contents the original grant price are recognized in our Provision for Income Taxes. In addition, net deferred tax assets are impacted by changes to statutory tax rates in the period of enactment. Noncontrolling Interest We record noncontrolling interest relating to the ownership interests of certain of our current and former Senior Managing Directors and other officers and their estate planning vehicles in Evercore LP, as well as the portions of our operating subsidiaries not owned by Evercore. As described in Note 14 to our unaudited condensed consolidated financial statements herein, Evercore Inc. is the sole general partner of Evercore LP and has a majority economic interest in Evercore LP. As a result, Evercore Inc. consolidates Evercore LP and records a noncontrolling interest for the economic interest in Evercore LP held by the limited partners. We generally allocate net income or loss to participating noncontrolling interests held at Evercore LP and at the operating entity level, where required, by multiplying the relative ownership interest of the noncontrolling interest holders for the period by the net income or loss of the entity to which the noncontrolling interest relates. In circumstances where the governing documents of the entity to which the noncontrolling interest relates require special allocations of profits or losses to the controlling and noncontrolling interest holders, the net income or loss of these entities is allocated based on these special allocations. 42 Table of Contents Results of Operations The following is a discussion of our results of operations for the three and six months ended June 30, 2020 and 2019 . For a more detailed discussion of the factors that affected the revenue and operating expenses of our Investment Banking and Investment Management business segments in these periods, as well as the impact of the COVID-19 pandemic, see the discussion in "Business Segments" and "Liquidity and Capital Resources" below. For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 Change 2020 2019 Change (dollars in thousands, except per share data) Revenues Investment Banking: Advisory Fees $ 336,436 $ 443,580 (24 %) $ 695,000 $ 769,424 (10 %) Underwriting Fees 93,565 16,910 453 % 114,683 43,830 162 % Commissions and Related Fees 54,119 48,660 11 % 109,500 90,597 21 % Asset Management and Administration Fees 12,953 12,419 4 % 25,700 24,802 4 % Other Revenue, Including Interest and Investments 15,331 13,640 12 % 568 25,975 (98 %) Total Revenues 512,404 535,209 (4 %) 945,451 954,628 (1 %) Interest Expense 5,329 4,163 28 % 11,369 8,255 38 % Net Revenues 507,075 531,046 (5 %) 934,082 946,373 (1 %) Expenses Operating Expenses 411,183 397,303 3 % 763,629 721,454 6 % Other Expenses 9,163 6,909 33 % 34,421 14,275 141 % Total Expenses 420,346 404,212 4 % 798,050 735,729 8 % Income Before Income from Equity Method Investments and Income Taxes 86,729 126,834 (32 %) 136,032 210,644 (35 %) Income from Equity Method Investments 2,313 2,453 (6 %) 5,441 4,664 17 % Income Before Income Taxes 89,042 129,287 (31 %) 141,473 215,308 (34 %) Provision for Income Taxes 21,814 32,030 (32 %) 35,365 39,851 (11 %) Net Income 67,228 97,257 (31 %) 106,108 175,457 (40 %) Net Income Attributable to Noncontrolling Interest 10,816 15,515 (30 %) 18,521 26,483 (30 %) Net Income Attributable to Evercore Inc. $ 56,412 $ 81,742 (31 %) $ 87,587 $ 148,974 (41 %) Diluted Net Income Per Share Attributable to Evercore Inc. Common Shareholders $ 1.35 $ 1.88 (28 %) $ 2.08 $ 3.40 (39 %) As of June 30, 2020 and 2019 , we employed approximately 1,775 and 1,800 people, respectively, worldwide. Three Months Ended June 30, 2020 versus June 30, 2019 Net Income Attributable to Evercore Inc. was $56.4 million for the three months ended June 30, 2020 , a decrease of $25.3 million, or 31% , compared to $81.7 million for the three months ended June 30, 2019 . The changes in our operating results during these periods are described below. Net Revenues were $507.1 million for the three months ended June 30, 2020 , a decrease of $24.0 million , or 5% , versus Net Revenues of $531.0 million for the three months ended June 30, 2019 . Advisory Fees decreased $107.1 million , or 24% , Underwriting Fees increased $76.7 million , or 453% , and Commissions and Related Fees increased $5.5 million , or 11% , compared to the three months ended June 30, 2019 . Asset Management and Administration Fees increased 4% compared to the three months ended June 30, 2019 . Other Revenue, Including Interest and Investments, increased 12% compared to the three months ended June 30, 2019 , which was primarily attributable to gains on the investment funds portfolio, which is used as an economic hedge 43 Table of Contents against our deferred cash compensation program. For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements . Interest Expense increased 28% compared to the three months ended June 30, 2019 , which was primarily attributable to interest expense on the 2019 Private Placement Notes which were issued in August 2019. Total Operating Expenses were $411.2 million for the three months ended June 30, 2020 , compared to $397.3 million for the three months ended June 30, 2019 , an increase of $13.9 million , or 3% . Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $334.0 million for the three months ended June 30, 2020 , an increase of $23.4 million , or 8% , versus expense of $310.6 million for the three months ended June 30, 2019 . The increase in the amount of compensation recognized in the three months ended June 30, 2020 is driven by higher levels of incentive compensation, higher base salaries, primarily due to promotions, and increased expense due to the amortization of unvested deferred compensation awards. Non-compensation expenses as a component of Operating Expenses were $77.2 million for the three months ended June 30, 2020 , a decrease of $9.5 million, or 11% , versus $86.7 million for the three months ended June 30, 2019 . Non-compensation operating expenses decreased compared to the three months ended June 30, 2019 , primarily driven by decreased travel and related expenses, partially offset by increased bad debt expense. Total Other Expenses of $9.2 million for the three months ended June 30, 2020 included Special Charges, Including Business Realignment Costs, of $8.6 million related to separation and transition benefits and related costs (see below for further information) and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives, intangible asset and other amortization of $0.5 million and Acquisition and Transition Costs of $0.1 million. Total Other Expenses of $6.9 million for the three months ended June 30, 2019 included compensation costs of $3.7 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $2.2 million and Special Charges of $1.0 million , primarily related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York. In the first quarter of 2020, we substantially completed a review of operations focused on markets, sectors and people which have delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position ourself for future growth. This review, which began in the fourth quarter of 2019, will generate reductions of approximately 6% of our headcount. In conjunction with the employment reductions, we expect to incur aggregate separation and transition benefits (including costs related to the acceleration of deferred compensation) and related costs of approximately $38.0 million , $8.2 million of which has been recorded in Special Charges, Including Business Realignment Costs, in the second quarter of 2020. Our estimates of charges are based on a number of assumptions. Actual results may differ materially if actual activity deviates from these assumptions. As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 65.9% for the three months ended June 30, 2020 , compared to 59.2% for the three months ended June 30, 2019 . The compensation ratio is 67.5% for the three months ended June 30, 2020 when the $8.2 million of separation and transition benefits expense, which is presented within Special Charges, Including Business Realignment Costs, is also included. The increase in the compensation ratio is due to the higher levels of incentive compensation, higher base salaries, primarily due to promotions, and increased expense due to the amortization of unvested deferred compensation awards. The compensation ratio in any given period is subject to fluctuation based, in part, on the amount of revenue earned in that period. Given the uncertainty about both revenues for the remainder of the year and market compensation for our employees, we have significantly more uncertainty about the full year compensation ratio than at this time in prior years. For further information see COVID-19 below. Income from Equity Method Investments was $2.3 million for the three months ended June 30, 2020 , as compared to $2.5 million for the three months ended June 30, 2019 . The decrease was primarily a result of a decrease in earnings from ABS and Luminis during the three months ended June 30, 2020 . The provision for income taxes for the three months ended June 30, 2020 was $21.8 million , which reflected an effective tax rate of 24.5% . The provision for income taxes for the three months ended June 30, 2019 was $32.0 million , which reflected an effective tax rate of 24.8% . The provision for income taxes for the three months ended June 30, 2020 and 2019 reflects an additional tax expense of $0.5 million and $0.03 million, respectively, due to the impact associated with the appreciation or depreciation in our share price upon vesting of employee share-based awards above or below the original grant price, the effect of certain nondeductible expenses, including expenses related to Class J LP Units and Class I-P and K-P Units, as well as the noncontrolling interest associated with LP Units and other adjustments. 44 Table of Contents Net Income Attributable to Noncontrolling Interest was $10.8 million for the three months ended June 30, 2020 compared to $15.5 million for the three months ended June 30, 2019 . The decrease in Net Income Attributable to Noncontrolling Interest primarily reflects lower income allocated to noncontrolling interest for Evercore LP during the three months ended June 30, 2020 . Six Months Ended June 30, 2020 versus June 30, 2019 Net Income Attributable to Evercore Inc. was $87.6 million for the six months ended June 30, 2020 , a decrease of $61.4 million, or 41% , compared to $149.0 million for the six months ended June 30, 2019 . The changes in our operating results during these periods are described below. Net Revenues were $934.1 million for the six months ended June 30, 2020 , a decrease of $12.3 million , or 1% , versus Net Revenues of $946.4 million for the six months ended June 30, 2019 . Advisory Fees decreased $74.4 million , or 10% , Underwriting Fees increased $70.9 million , or 162% , and Commissions and Related Fees increased $18.9 million , or 21% , compared to the six months ended June 30, 2019 . Asset Management and Administration Fees increased 4% compared to the six months ended June 30, 2019 . Other Revenue, Including Interest and Investments, decreased 98% compared to the six months ended June 30, 2019 , which was primarily attributable to losses of $6.8 million on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, for the six months ended June 30, 2020 , compared to $8.7 million of gains for the six months ended June 30, 2019, and lower performance of our legacy private equity investments. For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements . Interest Expense increased 38% compared to the six months ended June 30, 2019 , which was primarily attributable to interest expense on the 2019 Private Placement Notes which were issued in August 2019. Total Operating Expenses were $763.6 million for the six months ended June 30, 2020 , compared to $721.5 million for the six months ended June 30, 2019 , an increase of $42.2 million , or 6% . Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $603.7 million for the six months ended June 30, 2020 , an increase of $49.5 million, or 9% , versus expense of $554.2 million for the six months ended June 30, 2019 . The increase in the amount of compensation recognized in the six months ended June 30, 2020 is driven by higher levels of incentive compensation, higher base salaries, primarily due to promotions, and increased expense due to the amortization of unvested deferred compensation awards. Non-compensation expenses as a component of Operating Expenses were $159.9 million for the six months ended June 30, 2020 , a decrease of $7.4 million , or 4% , versus $167.3 million for the six months ended June 30, 2019 . Non-compensation operating expenses decreased compared to the six months ended June 30, 2019 , primarily driven by decreased travel and related expenses and professional fees, partially offset by increased bad debt expense. Total Other Expenses of $34.4 million for the six months ended June 30, 2020 included Special Charges, Including Business Realignment Costs, of $32.2 million related to separation and transition benefits and related costs (see below for further information) and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives, compensation costs of $1.1 million associated with the vesting of Class J LP Units and certain other awards, intangible asset and other amortization of $1.0 million and Acquisition and Transition Costs of $0.1 million . Total Other Expenses of $14.3 million for the six months ended June 30, 2019 included compensation costs of $7.8 million associated with the vesting of Class J LP Units and certain other awards, intangible asset and other amortization of $4.3 million , Special Charges of $2.1 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York and Acquisition and Transition Costs of $0.1 million. In the first quarter of 2020, we substantially completed a review of operations focused on markets, sectors and people which have delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position ourself for future growth. This review, which began in the fourth quarter of 2019, will generate reductions of approximately 6% of our headcount. In conjunction with the employment reductions, we expect to incur aggregate separation and transition benefits (including costs related to the acceleration of deferred compensation) and related costs of approximately $38.0 million , $30.3 million of which has been recorded in Special Charges, Including Business Realignment Costs, in the first six months of 2020. Our estimates of charges are based on a number of assumptions. Actual results may differ materially if actual activity deviates from these assumptions. As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 64.7% for the six months ended June 30, 2020 , compared to 59.4% for the six months ended June 30, 2019 . The compensation ratio is 68.0% for the six months ended June 30, 2020 when the $30.2 million of separation and transition benefits expense, which is presented within Special Charges, Including Business Realignment Costs, is also included. The increase in the compensation ratio is due to higher levels of incentive compensation, higher base salaries, primarily due to promotions, and increased expense 45 Table of Contents due to the amortization of unvested deferred compensation awards, as well as lower Other Revenue earned during the six months ended June 30, 2020 resulting from lower performance on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, and legacy private equity investments. The compensation ratio in any given period is subject to fluctuation based, in part, on the amount of revenue earned in that period. Given the uncertainty about both revenues for the remainder of the year and market compensation for our employees, we have significantly more uncertainty about the full year compensation ratio than at this time in prior years. For further information see COVID-19 below. Income from Equity Method Investments was $5.4 million for the six months ended June 30, 2020 , as compared to $4.7 million for the six months ended June 30, 2019 . The increase was primarily a result of an increase in earnings from Atalanta Sosnoff, ABS and Luminis during the six months ended June 30, 2020 . The provision for income taxes for the six months ended June 30, 2020 was $35.4 million , which reflected an effective tax rate of 25.0% . The provision for income taxes for the six months ended June 30, 2019 was $39.9 million , which reflected an effective tax rate of 18.5% . The provision for income taxes for the six months ended June 30, 2020 and 2019 reflects the net impact of the deduction associated with the appreciation or depreciation in our share price upon vesting of employee share-based awards above or below the original grant price of $0.1 million and $12.1 million, respectively, the effect of certain nondeductible expenses, including expenses related to Class J LP Units and Class I-P and K-P Units, as well as the noncontrolling interest associated with LP Units and other adjustments. Net Income Attributable to Noncontrolling Interest was $18.5 million for the six months ended June 30, 2020 compared to $26.5 million for the six months ended June 30, 2019 . The decrease in Net Income Attributable to Noncontrolling Interest primarily reflects lower income allocated to noncontrolling interest for Evercore LP during the six months ended June 30, 2020. 46 Table of Contents Business Segments The following data presents revenue, expenses and contributions from our equity method investments by business segment. Investment Banking The following table summarizes the operating results of the Investment Banking segment. For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 Change 2020 2019 Change (dollars in thousands) Revenues Investment Banking: Advisory Fees (1) $ 336,436 $ 443,580 (24 %) $ 695,000 $ 769,424 (10 %) Underwriting Fees (2) 93,565 16,910 453 % 114,683 43,830 162 % Commissions and Related Fees 54,119 48,660 11 % 109,500 90,597 21 % Other Revenue, net (3) 11,254 7,236 56 % (10,153 ) 13,723 NM Net Revenues 495,374 516,386 (4 %) 909,030 917,574 (1 %) Expenses Operating Expenses 399,476 385,378 4 % 739,271 697,288 6 % Other Expenses 9,163 6,909 33 % 34,389 14,167 143 % Total Expenses 408,639 392,287 4 % 773,660 711,455 9 % Operating Income 86,735 124,099 (30 %) 135,370 206,119 (34 %) Income from Equity Method Investments (4) 65 219 (70 %) 601 474 27 % Pre-Tax Income $ 86,800 $ 124,318 (30 %) $ 135,971 $ 206,593 (34 %) (1) Includes client related expenses of $2.9 million and $7.8 million for the three and six months ended June 30, 2020 , respectively, and $7.1 million and $14.6 million for the three and six months ended June 30, 2019, respectively . (2) Includes client related expenses of $6.3 million and $8.3 million for the three and six months ended June 30, 2020 , respectively, and $0.8 million and $3.3 million for the three and six months ended June 30, 2019, respectively . (3) Includes interest expense on the Notes Payable and lines of credit of $4.5 million and $9.4 million for the three and six months ended June 30, 2020 , respectively, and $2.3 million and $4.6 million for the three and six months ended June 30, 2019, respectively . (4) Equity in Luminis is classified as Income from Equity Method Investments. For the three months ended June 30, 2020 , the dollar value of North American announced M&A activity decreased 84% , while the dollar value of North American completed M&A activity increased 39% compared to the three months ended June 30, 2019 . For the three months ended June 30, 2020 , the dollar value of Global announced M&A activity decreased 52% , while the dollar value of Global completed M&A activity increased 14% compared to the three months ended June 30, 2019 . For the three months ended June 30, 2020 , the dollar value of North American and Global announced M&A activity between $1 - $5 billion decreased 69% and 65% , respectively, compared to the three months ended June 30, 2019 . For the six months ended June 30, 2020 , the dollar value of North American announced and completed M&A activity decreased 69% and 2% , respectively, compared to the six months ended June 30, 2019 , and the dollar value of Global announced and completed M&A activity decreased 41% and 10% , respectively, compared to the six months ended June 30, 2019 . For the six months ended June 30, 2020 , the dollar value of North American and Global announced M&A activity between $1 - $5 billion decreased 32% and 39% , respectively, compared to the six months ended June 30, 2019 : 47 Table of Contents For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 Change 2020 2019 Change Industry Statistics ($ in billions) * Value of North American M&A Deals Announced $ 104 $ 642 (84 %) $ 363 $ 1,182 (69 %) Value of North American M&A Deals Announced between $1 - $5 billion $ 31 $ 100 (69 %) $ 111 $ 163 (32 %) Value of North American M&A Deals Completed $ 452 $ 326 39 % $ 746 $ 758 (2 %) Value of Global M&A Deals Announced $ 509 $ 1,054 (52 %) $ 1,194 $ 2,013 (41 %) Value of Global M&A Deals Announced between $1 - $5 billion $ 78 $ 222 (65 %) $ 242 $ 396 (39 %) Value of Global M&A Deals Completed $ 803 $ 702 14 % $ 1,377 $ 1,535 (10 %) Evercore Statistics ** Total Number of Fees From Advisory Client Transactions 222 225 (1 %) 358 362 (1 %) Investment Banking Fees of at Least $1 million from Advisory Client Transactions 77 81 (5 %) 150 149 1 % * Source: Refinitiv July 2, 2020 ** Includes revenue generating clients only from Advisory and Underwriting transactions Investment Banking Results of Operations Three Months Ended June 30, 2020 versus June 30, 2019 Net Investment Banking Revenues were $495.4 million for the three months ended June 30, 2020 , compared to $516.4 million for the three months ended June 30, 2019 , which represented a decrease of 4% . We earned 222 fees from Advisory clients for the three months ended June 30, 2020 , compared to 225 for the three months ended June 30, 2019 , representing a 1% decrease . We had 77 fees earned in excess of $1.0 million for the three months ended June 30, 2020 , compared to 81 for the three months ended June 30, 2019 , representing a 5% decrease . The decrease in revenues from the three months ended June 30, 2019 primarily reflects a decrease of $107.1 million , or 24% , in Advisory Fees, reflecting a decrease in the number of advisory fees earned and a decline in revenue earned from large transactions during the three months ended June 30, 2020 . Underwriting Fees increased $76.7 million , or 453% , compared to the three months ended June 30, 2019 , as we participated in several of the largest underwritings in our history. We participated in 36 underwriting transactions for the three months ended June 30, 2020 (compared to 16 for the three months ended June 30, 2019 ), 21 of which were as a bookrunner (compared to 10 for the three months ended June 30, 2019 ). Commissions and Related Fees increased $5.5 million , or 11% , compared to the three months ended June 30, 2019 , as volatility remained elevated during 2020. Other Revenue, net, for the three months ended June 30, 2020 , increased 56% compared to the three months ended June 30, 2019 , primarily reflecting gains of $15.5 million on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, for the three months ended June 30, 2020 , compared to $2.1 million of gains for the three months ended June 30, 2019. For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements . Operating Expenses were $399.5 million for the three months ended June 30, 2020 , compared to $385.4 million for the three months ended June 30, 2019 , an increase of $14.1 million , or 4% . Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $325.7 million for the three months ended June 30, 2020 , compared to $302.2 million for the three months ended June 30, 2019 , an increase of $23.5 million , or 8% . The increase in the amount of compensation recognized in the three months ended June 30, 2020 is driven by higher levels of incentive compensation, higher base salaries, primarily due to promotions, and increased expense due to the amortization of unvested deferred compensation awards. Non-compensation expenses, as a component of Operating Expenses, were $73.8 million for the three months ended June 30, 2020 , compared to $83.2 million for the three months ended June 30, 2019 , a decrease of $9.4 million , or 11% . Non-compensation operating expenses decreased from the prior year primarily driven by decreased travel and related expenses, partially offset by increased bad debt expense. Other Expenses of $9.2 million for the three months ended June 30, 2020 included Special Charges, Including Business Realignment Costs, of $8.6 million related to separation and transition benefits and related costs and the acceleration of depreciation 48 Table of Contents expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives, intangible asset and other amortization of $0.5 million and Acquisition and Transition Costs of $0.1 million. Other Expenses of $6.9 million for the three months ended June 30, 2019 included compensation costs of $3.7 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $2.2 million and Special Charges of $1.0 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York. Six Months Ended June 30, 2020 versus June 30, 2019 Net Investment Banking Revenues were $909.0 million for the six months ended June 30, 2020 , compared to $917.6 million for the six months ended June 30, 2019 , which represented a decrease of 1% . We earned 358 fees from Advisory clients for the six months ended June 30, 2020 , compared to 362 for the six months ended June 30, 2019 , representing a 1% decrease . We had 150 fees earned in excess of $1.0 million for the six months ended June 30, 2020 , compared to 149 for the six months ended June 30, 2019 , representing a 1% increase . The decrease in Advisory Fees from the six months ended June 30, 2019 of $74.4 million , or 10% , reflects a decrease in revenue earned from large transactions during the six months ended June 30, 2020 . Underwriting Fees increased $70.9 million , or 162% , compared to the six months ended June 30, 2019 , as we participated in several of the largest underwritings in our history. We participated in 48 underwriting transactions for the six months ended June 30, 2020 (compared to 39 for the six months ended June 30, 2019 ), 29 of which were as a bookrunner (compared to 27 for the six months ended June 30, 2019 ). Commissions and Related Fees increased $18.9 million , or 21% , compared to the six months ended June 30, 2019 , as volatility remained elevated during 2020. Other Revenue, net, for the six months ended June 30, 2020 , was lower than the six months ended June 30, 2019 , primarily reflecting losses of $6.8 million on the investment funds portfolio, which is used as an economic hedge against our deferred cash compensation program, for the six months ended June 30, 2020 , compared to $8.7 million of gains for the six months ended June 30, 2019. For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements . Operating Expenses were $739.3 million for the six months ended June 30, 2020 , compared to $697.3 million for the six months ended June 30, 2019 , an increase of $42.0 million , or 6% . Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $586.6 million for the six months ended June 30, 2020 , as compared to $537.2 million for the six months ended June 30, 2019 , an increase of $49.4 million , or 9% . The increase in the amount of compensation recognized in the six months ended June 30, 2020 is driven by higher levels of incentive compensation, higher base salaries, primarily due to promotions, and increased expense due to the amortization of unvested deferred compensation awards. Non-compensation expenses, as a component of Operating Expenses, were $152.7 million for the six months ended June 30, 2020 , compared to $160.1 million for the six months ended June 30, 2019 , a decrease of $7.4 million, or 5% . Non-compensation operating expenses decreased from the prior year primarily driven by decreased travel and related expenses and professional fees, partially offset by increased bad debt expense. Other Expenses of $34.4 million for the six months ended June 30, 2020 included Special Charges, Including Business Realignment Costs, of $32.2 million related to separation and transition benefits and related costs and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of our headquarters in New York and our business realignment initiatives, compensation costs of $1.1 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $1.0 million and Acquisition and Transition Costs of $0.1 million. Other Expenses of $14.2 million for the six months ended June 30, 2019 included compensation costs of $7.8 million associated with the vesting of Class J LP Units and certain other awards granted in conjunction with the acquisition of ISI, intangible asset and other amortization of $4.3 million and Special Charges of $2.1 million related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of our headquarters in New York. 49 Table of Contents Investment Management The following table summarizes the operating results of the Investment Management segment. For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 Change 2020 2019 Change (dollars in thousands) Revenues Asset Management and Administration Fees: Wealth Management $ 12,632 $ 11,815 7 % $ 24,960 $ 23,253 7 % Institutional Asset Management 321 604 (47 %) 740 1,549 (52 %) Asset Management and Administration Fees 12,953 12,419 4 % 25,700 24,802 4 % Other Revenue, net (1,252 ) 2,241 NM (648 ) 3,997 NM Net Revenues 11,701 14,660 (20 %) 25,052 28,799 (13 %) Expenses Operating Expenses 11,707 11,925 (2 %) 24,358 24,166 1 % Other Expenses — — NM 32 108 (70 %) Total Expenses 11,707 11,925 (2 %) 24,390 24,274 — % Operating Income (Loss) (6 ) 2,735 NM 662 4,525 (85 %) Income from Equity Method Investments (1) 2,248 2,234 1 % 4,840 4,190 16 % Pre-Tax Income $ 2,242 $ 4,969 (55 %) $ 5,502 $ 8,715 (37 %) (1) Equity in ABS and Atalanta Sosnoff is classified as Income from Equity Method Investments. Investment Management Results of Operations Our Investment Management segment includes the following activities: • Wealth Management – conducted through EWM and ETC. Fee-based revenues from EWM are primarily earned on a percentage of AUM, while ETC primarily earns fees from negotiated trust services. • Institutional Asset Management – conducted through ECB. Fee-based revenues from ECB are primarily earned on a percentage of AUM. In April 2020, we entered into an agreement for the leaders of our business in Mexico to purchase ECB. This sale will be completed following regulatory approval. See Note 5 to our unaudited condensed consolidated financial statements for further information. • Private Equity – conducted through our investment interests in private equity funds. We maintain a limited partner's interest in Glisco II, Glisco III and Glisco IV, as well as Glisco Manager Holdings LP and the general partners of the Glisco Funds. We receive our portion of the management fees earned by Glisco Partners Inc. ("Glisco") from Glisco Manager Holdings LP. We are passive investors and do not participate in the management of any Glisco sponsored funds. We are also passive investors in Trilantic IV, Trilantic V and Trilantic VI. In the event the private equity funds perform below certain thresholds we may be obligated to repay certain carried interest previously distributed. As of June 30, 2020 , $0.5 million of previously distributed carried interest received from the funds was subject to repayment. • We also hold interests in ABS and Atalanta Sosnoff that are accounted for under the equity method of accounting. The results of these investments are included within Income from Equity Method Investments. Assets Under Management AUM for our Investment Management businesses of $10.4 billion at June 30, 2020 decreased compared to $10.7 billion at December 31, 2019 . The amounts of AUM presented in the table below primarily reflect the assets which we manage. These assets reflect the fair value of assets managed on behalf of Institutional Asset Management and Wealth Management clients. As defined in ASC 820, valuations performed for Level I investments are based on quoted prices obtained from active markets generated by third parties and Level II investments are valued through the use of models based on either direct or indirect observable inputs in the use of models or other valuation methodologies performed by third parties to determine fair value. For both the Level I and Level II investments, we obtain both active quotes from nationally recognized exchanges and third-party pricing services to determine market or fair value quotes, respectively. For Level III investments, pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair 50 Table of Contents value require significant management judgment or estimation. Wealth Management maintained 69% of Level I investments, 27% of Level II investments and 4% of Level III investments as of June 30, 2020 and December 31, 2019 . Institutional Asset Management maintained 84% and 85% of Level I investments and 16% and 15% of Level II investments as of June 30, 2020 and December 31, 2019 , respectively. The fees that we receive for providing investment advisory and management services are primarily driven by the level and composition of AUM. Accordingly, client flows, market movements, foreign currency fluctuations and changes in our product mix will impact the level of management fees we receive from our investment management businesses. Fees vary with the type of assets managed and the channel in which they are managed, with higher fees earned on equity assets and alternative investment funds, such as hedge funds and private equity funds, and lower fees earned on fixed income and cash management products. Clients will increase or reduce the aggregate amount of AUM that we manage for a number of reasons, including changes in the level of assets that they have available for investment purposes, their overall asset allocation strategy, our relative performance versus competitors offering similar investment products and the quality of our service. The fees we earn are also impacted by our investment performance, as the appreciation or depreciation in the value of the assets that we manage directly impacts our fees. The following table summarizes AUM activity for the six months ended June 30, 2020 : Wealth Management (1) Institutional Asset Management Total (dollars in millions) Balance at December 31, 2019 $ 9,058 $ 1,634 $ 10,692 Inflows 520 319 839 Outflows (389 ) (301 ) (690 ) Market Depreciation (108 ) (324 ) (432 ) Balance at June 30, 2020 $ 9,081 $ 1,328 $ 10,409 Unconsolidated Affiliates - Balance at June 30, 2020: Atalanta Sosnoff $ — $ 6,772 $ 6,772 ABS $ — $ 5,516 $ 5,516 (1) Assets Under Management includes Evercore assets which are managed by Evercore Wealth Management of $223.4 million and $319.8 million as of June 30, 2020 and December 31, 2019 , respectively. The following table represents the composition of our AUM for Wealth Management and Institutional Asset Management as of June 30, 2020 : Wealth Management Institutional Asset Management Equities 56 % 28 % Fixed Income 26 % 72 % Liquidity (1) 13 % — % Alternatives 5 % — % Total 100 % 100 % (1) Includes cash, cash equivalents and U.S. Treasury securities. Our Wealth Management business serves individuals, families and related institutions delivering customized investment management, financial planning, and trust and custody services. Investment portfolios are tailored to meet the investment objectives of individual clients and reflect a blend of equity, fixed income and other products. Fees charged to clients reflect the composition of the assets managed and the services provided. Investment performance in the Wealth Management businesses is measured against appropriate indices based on the AUM, most frequently the S&P 500 and a composite fixed income index principally reflecting BarCap and MSCI indices. For the six months ended June 30, 2020 , AUM for Wealth Management was flat. Wealth Management outperformed the S&P 500 on a 1 and 3-year basis by approximately 9% and 4%, respectively, during the period. Wealth Management lagged the fixed 51 Table of Contents income composite on a 1 and 3 year basis by approximately 130 basis points and 50 basis points, respectively. For the period, the S&P 500 was down approximately 3% and the fixed income composite was up 3%. Our Institutional Asset Management business reflects assets managed by ECB, which primarily manages Mexican Government and corporate fixed income securities, as well as equity products. ECB utilizes the IPC Index, which is a capitalization weighted index of leading equities traded on the Mexican Stock Exchange and the Cetes 28 Index, which is an index of Treasury Bills issued by the Mexican Government, as benchmarks in reviewing their performance and managing their investment decisions. For the six months ended June 30, 2020 , AUM for Institutional Asset Management decreased 19% , primarily reflecting a decrease due to market depreciation. ECB's AUM market depreciation reflects market volatility, as well as the impact of the fluctuation of foreign currency. ECB outperformed the equities index and outperformed the fixed income index on two of their three portfolios for the six months ended June 30, 2020 . AUM from our unconsolidated affiliates decreased 4% compared to December 31, 2019 , primarily related to market depreciation and negative investment performance in the current market environment from ABS. Three Months Ended June 30, 2020 versus June 30, 2019 Net Investment Management Revenues were $11.7 million for the three months ended June 30, 2020 , compared to $14.7 million for the three months ended June 30, 2019 , which represented a decrease of 20% . Asset Management and Administration Fees earned from the management of client portfolios increased 4% from the three months ended June 30, 2019 , primarily driven by an increase of $0.8 million in fees from Wealth Management clients, as associated AUM increased 9% . Fee-based revenues included $0.01 million of revenues from performance fees for the three months ended June 30, 2020 and 2019 . Other Revenue, net, decrease d from the three months ended June 30, 2019 , primarily as a result of lower performance from our legacy private equity investments. Income from Equity Method Investments increased from the three months ended June 30, 2019 , primarily as a result of an increase in earnings from our investment in Atalanta Sosnoff. Operating Expenses were $11.7 million for the three months ended June 30, 2020 , compared to $11.9 million for the three months ended June 30, 2019 , a decrease of $0.2 million , or 2% . Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $8.3 million for the three months ended June 30, 2020 , compared to $8.4 million for the three months ended June 30, 2019 , a decrease of $0.1 million , or 1% . Non-compensation expenses, as a component of Operating Expenses, were $3.4 million for the three months ended June 30, 2020 , compared to $3.5 million for the three months ended June 30, 2019 , a decrease of $0.1 million , or 3%. Six Months Ended June 30, 2020 versus June 30, 2019 Net Investment Management Revenues were $25.1 million for the six months ended June 30, 2020 , compared to $28.8 million for the six months ended June 30, 2019 , which represented a decrease of 13% . Asset Management and Administration Fees earned from the management of client portfolios increased 4% from the six months ended June 30, 2019 , primarily driven by an increase of $1.7 million in fees from Wealth Management clients, as associated AUM increased 9% . Fee-based revenues included $0.07 million and $0.01 million of revenues from performance fees for the six months ended June 30, 2020 and 2019 , respectively. Other Revenue, net, decrease d from the six months ended June 30, 2019 , primarily as a result of lower performance from our legacy private equity investments. Income from Equity Method Investments increased from the six months ended June 30, 2019 , primarily as a result of an increase in earnings from our investments in Atalanta Sosnoff and ABS in 2020. Operating Expenses were $24.4 million for the six months ended June 30, 2020 , compared to $24.2 million for the six months ended June 30, 2019 , an increase of $0.2 million, or 1% . Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $17.1 million for the six months ended June 30, 2020 , compared to $17.0 million for the six months ended June 30, 2019 , an increase of $0.1 million , or 1% . Non-compensation expenses, as a component of Operating Expenses, were $7.3 million for the six months ended June 30, 2020 , compared to $7.2 million for the six months ended June 30, 2019 , an increase of $0.1 million, or 1% . Other Expenses of $0.03 million for the six months ended June 30, 2020 included Special Charges, Including Business Realignment Costs, related to separation and transition benefits and related costs. Other Expenses of $0.1 million for the six months ended June 30, 2019 included Acquisition and Transition Costs. 52 Table of Contents Cash Flows Our operating cash flows are primarily influenced by the timing and receipt of investment banking and investment management fees (for further information see COVID-19 below), and the payment of operating expenses, including incentive compensation to our employees and interest expense on our repurchase agreements, Notes Payable and lines of credit, and the payment of income taxes. Investment Banking advisory fees are generally collected within 90 days of billing. However, placement fees may be collected within 180 days of billing, with fees related to private funds capital raising being collected in a period exceeding one year. Commissions earned from our agency trading activities are generally received from our clearing broker within 11 days. Fees from our Wealth Management and Institutional Asset Management businesses are generally billed and collected within 90 days. We traditionally pay a substantial portion of incentive compensation to personnel in the Investment Banking business and to executive officers during the first three months of each calendar year with respect to the prior year's results and prior year's deferred compensation. Likewise, payments to fund investments related to hedging our deferred cash compensation plans are generally funded in the first three months of each calendar year. Our investing and financing cash flows are primarily influenced by activities to invest our cash in highly liquid securities or bank certificates of deposit, deploy capital to fund investments and acquisitions, raise capital through the issuance of stock or debt, repurchase of outstanding Class A Shares, and/or noncontrolling interest in Evercore LP, as well as our other subsidiaries, payment of dividends and other periodic distributions to our stakeholders. We generally make dividend payments and other distributions on a quarterly basis. We periodically draw down on our lines of credit to balance the timing of our operating, investing and financing cash flow needs. A summary of our operating, investing and financing cash flows is as follows: For the Six Months Ended June 30, 2020 2019 (dollars in thousands) Cash Provided By (Used In) Operating activities: Net income $ 106,108 $ 175,457 Non-cash charges 233,773 203,240 Other operating activities (221,111 ) (513,776 ) Operating activities 118,770 (135,079 ) Investing activities 483,616 68,267 Financing activities (214,410 ) (347,536 ) Effect of exchange rate changes (6,842 ) (1,133 ) Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 381,134 (415,481 ) Cash, Cash Equivalents and Restricted Cash Beginning of Period 643,886 800,096 End of Period $ 1,025,020 $ 384,615 Six Months Ended June 30, 2020 . Cash, Cash Equivalents and Restricted Cash were $1.0 billion at June 30, 2020 , an increase of $381.1 million versus Cash, Cash Equivalents and Restricted Cash of $643.9 million at December 31, 2019 . Operating activities resulted in a net inflow of $118.8 million , primarily related to earnings, partially offset by the payment of 2019 bonus awards and deferred cash compensation. Cash flows for the first six months of 2020 also reflect the impact of lower tax payments resulting from the deferral of required federal income tax payments pursuant to the Coronavirus Aid, Relief, and Economic Security Act ("CARES" Act). Cash of $483.6 million was provided by investing activities primarily related to net proceeds from sales and maturities of investment securities and the maturity of certificates of deposit, partially offset by purchases of equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York. Financing activities during the period used cash of $214.4 million , primarily for purchases of treasury stock and the payment of dividends and distributions to noncontrolling interest holders. Cash is also impacted due to the effect of foreign exchange rate fluctuation when translating non-U.S. currencies to U.S. Dollars. Six Months Ended June 30, 2019. Cash, Cash Equivalents and Restricted Cash were $384.6 million at June 30, 2019, a decrease of $415.5 million versus Cash, Cash Equivalents and Restricted Cash of $800.1 million at December 31, 2018. Operating activities resulted in a net outflow of $135.1 million, primarily related to the payment of 2018 incentive compensation, partially offset by earnings. Cash of $68.3 million was provided by investing activities primarily related to the maturity of certificates of 53 Table of Contents deposit, partially offset by purchases of furniture, equipment and leasehold improvements, primarily related to the expansion of our headquarters in New York. Financing activities during the period used cash of $347.5 million, primarily for purchases of treasury stock and noncontrolling interests, the payment of dividends and distributions to noncontrolling interest holders. Liquidity and Capital Resources General Our current assets include Cash and Cash Equivalents, Investment Securities and Certificates of Deposit, Accounts Receivable and contract assets, included in Other Current Assets, relating to Investment Banking and Investment Management revenues. Our current liabilities include accrued expenses, accrued liabilities related to improvements in our leased facilities, accrued employee compensation and short-term borrowings. We traditionally have made payments for employee bonus awards and year-end distributions to partners in the first quarter of the year with respect to the prior year's results. In addition, payments in respect of deferred cash compensation arrangements and related investments are also made in the first quarter. From time to time, advances and/or commitments may also be granted to new employees at or near the date they begin employment, or to existing employees for the purpose of incentive or retention. Cash distributions related to partnership tax allocations are made to the partners of Evercore LP and certain other entities in accordance with our corporate estimated payment calendar; these payments are made prior to the end of each calendar quarter. In addition, dividends on Class A Shares, and related distributions to partners of Evercore LP, are paid when and if declared by the Board of Directors, which is generally quarterly. We regularly monitor our liquidity position, including cash, other significant working capital, current assets and liabilities, long-term liabilities, lease commitments and related fixed assets, principal investment commitments related to our Investment Management business, dividends on Class A Shares, partnership distributions and other capital transactions, as well as other matters relating to liquidity and compliance with regulatory requirements. Our liquidity is highly dependent on our revenue stream from our operations, principally from our Investment Banking business, which is a function of closing advisory transactions and earning success fees, the timing and realization of which is irregular and dependent upon factors that are not subject to our control. Our revenue stream funds the payment of our expenses, including annual bonus payments, a portion of which are guaranteed, deferred compensation arrangements, interest expense on our repurchase agreements, Notes Payable, lines of credit and other financing arrangements and income taxes. Payments made for income taxes may be reduced by deductions taken for the increase in tax basis of our investment in Evercore LP. Certain of these tax deductions, when realized, require payment under our long-term liability, Amounts Due Pursuant to Tax Receivable Agreements. We intend to fund these payments from cash and cash equivalents on hand, principally derived from cash flows from operations. These tax deductions, when realized, will result in cash otherwise required to satisfy tax obligations becoming available for other purposes. Our Management Committee meets regularly to monitor our liquidity and cash positions against our short and long-term obligations, as well as our capital requirements and commitments. The result of this review contributes to management's recommendation to the Board of Directors as to the level of quarterly dividend payments, if any. As a financial services firm, our businesses are materially affected by conditions in the global financial markets and economic conditions throughout the world. Revenue generated by our advisory activities is related to the number and value of the transactions in which we are involved. In addition, revenue related to our equities business is driven by market volumes and institutional investor trends, such as the trend to passive investment strategies. During periods of unfavorable market or economic conditions, the number and value of M&A transactions, as well as market volumes in equities, generally decrease, and they generally increase during periods of favorable market or economic conditions. Restructuring activity generally is counter-cyclical to M&A activity. In addition, during periods of unfavorable market conditions our Investment Management business may be impacted by reduced equity valuations and generate relatively lower revenue because fees we receive, either directly or through our affiliates, typically are in part based on the market value of underlying publicly-traded securities. Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame and in an amount sufficient to match any decreases in revenue relating to changes in market and economic conditions. Likewise, our liquidity may be adversely impacted by our contractual obligations, including lease obligations. Reduced equity valuations resulting from future adverse economic events and/or market conditions may impact our performance and may result in future net redemptions of AUM from our clients, which would generally result in lower revenues and cash flows. These adverse conditions could also have an impact on our goodwill impairment assessment, which is done annually, as of November 30th, or more frequently if circumstances indicate impairment may have occurred. For information on the current environment see COVID-19 below. Changes in regulation, market structure or business activity arising from the U.K.'s implementation of its separation from the European Union may have a negative impact on our business operations in the U.K., and globally, over the intermediate term. We will continue to monitor and manage the potential implications of the separation, including assessing opportunities that may arise, as the potential impact on the U.K. and European economy becomes more evident. 54 Table of Contents We assess our equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred. These circumstances could include unfavorable market conditions or the loss of key personnel of the investee. COVID-19 The worldwide COVID-19 pandemic has continued to have, and is expected to continue having, a significant negative effect on our business. Within the current environment caused by COVID-19, we have seen a significant decline in the number of global and domestic M&A transactions, and a prolonging of transaction closings as certain of the conditions typically required for global and domestic M&A are generally not present. Accordingly, we have pivoted our services to meet the evolving priorities and needs of our clients. While we observed an initial decline in equity underwriting activity during the early stages of the COVID-19 pandemic, subsequently our equity underwriting activity levels have meaningfully increased. Our restructuring, debt advisory and capital markets advisory businesses remain very active, and the volatility and increased volume in the equity markets have allowed our Equities business to maintain elevated levels of secondary revenues. However, as we have previously indicated, given that these businesses historically have produced less revenue than our M&A advisory business, we do not expect that the increased activity will be sufficient to offset weakness in M&A activity. Our Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2020 included $1.0 billion of Cash and Cash Equivalents and $99.7 million of Investment Securities, which are generally comprised of highly-liquid investments. However, at this time, it is uncertain how long our business will be negatively impacted by COVID-19 and any associated economic and market downturn. Although we anticipate that the decline in revenue will have a significant impact on our results of operations and cash flows, it is uncertain at this time how significant that impact will be. The degree of the impact will likely be directly correlated to the length and depth of any economic slowdown and the speed of any recovery. Market access to working capital, access to both short-term and long-term financing and/or the ability to raise capital likely will be impacted, and may be impacted significantly, during any resulting periods of economic distress. Our ability to fund operations, make capital investments, maintain compliance with our debt covenants and fund shareholder dividends and other capital commitments or stock repurchases may be adversely affected, depending on the length and depth of any disruption. We continue to monitor our cash levels, liquidity, regulatory capital requirements, debt covenants and our other contractual obligations regularly. This includes focusing on client billing activity, accounts receivable collections and cost management initiatives. Management is also carefully reviewing decisions related to capital projects and returning capital to investors, such as purchasing outstanding shares and dividend recommendations to the Board of Directors. For a further discussion of risks related to our business, refer to "Risk Factors" in our 2019 Form 10-K and in Item 1A. "Risk Factors" of our Form 10-Q for the first quarter of 2020. Treasury and Noncontrolling Interest Repurchases We periodically repurchase Class A Shares and/or LP Units into Treasury in order to offset the dilutive effect of equity awards granted as compensation (see Note 16 to our unaudited condensed consolidated financial statements for further information.) The amount of cash required for these share repurchases is a function of the mix of equity and deferred cash compensation awarded for the annual bonus awards (see further discussion on deferred compensation under Other Commitments below). In addition, we may from time to time, purchase noncontrolling interests in subsidiaries. On October 23, 2017, our Board of Directors authorized (in addition to the net settlement of equity awards) the repurchase of Class A Shares and/or LP Units so that from that date forward, we are able to repurchase an aggregate of the lesser of $750.0 million worth of Class A Shares and/or LP Units and 8.5 million Class A Shares and/or LP Units. Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately-negotiated transactions or otherwise. The timing and the actual amount of shares repurchased will depend on a variety of factors, including legal requirements, price, economic and market conditions and the objective to reduce the dilutive effect of equity awards granted as compensation to employees. This program may be suspended or discontinued at any time and does not have a specified expiration date. During the six months ended June 30, 2020 , we repurchased 854,134 Class A Shares, at an average cost per share of $75.93 , for $64.9 million pursuant to our repurchase program. In addition, periodically, we buy shares into treasury from our employees in order to allow them to satisfy their minimum tax requirements for share deliveries under our share equity plan. During the six months ended June 30, 2020 , we repurchased 1,016,681 Class A Shares, at an average cost per share of $76.45 , for $77.7 million primarily related to minimum tax withholding requirements of share deliveries. 55 Table of Contents The aggregate 1,870,815 Class A Shares repurchased during the six months ended June 30, 2020 , were acquired for aggregate purchase consideration of $142.6 million, at an average cost per share of $76.22 . For further information see COVID-19 above. Private Placements On March 30, 2016, we issued an aggregate $170.0 million of senior notes, including: $38.0 million aggregate principal amount of our 4.88% Series A Notes, $67.0 million aggregate principal amount of our 5.23% Series B Notes, $48.0 million aggregate principal amount of our 5.48% Series C Notes and $17.0 million aggregate principal amount of our 5.58% Series D Notes, pursuant to the 2016 Note Purchase Agreement dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. Interest on the 2016 Private Placement Notes is payable semi-annually and the 2016 Private Placement Notes are guaranteed by certain of our domestic subsidiaries. We may, at our option, prepay all, or from time to time any part of, the 2016 Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the 2016 Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the 2016 Private Placement Notes will have the right to require us to prepay the entire unpaid principal amounts held by each holder of the 2016 Private Placement Notes plus accrued and unpaid interest to the prepayment date. The 2016 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default. As of June 30, 2020 , we were in compliance with all of these covenants. On August 1, 2019, we issued $175.0 million and £25.0 million of senior unsecured notes through private placement. These notes reflect a weighted average life of 12 years and a weighted average stated interest rate of 4.26% . These notes include: $75.0 million aggregate principal amount of our 4.34% Series E Notes, $60.0 million aggregate principal amount of our 4.44% Series F Notes, $40.0 million aggregate principal amount of our 4.54% Series G Notes and £25.0 million aggregate principal amount of our 3.33% Series H Notes, each of which were issued pursuant to the 2019 Note Purchase Agreement, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. Interest on the 2019 Private Placement Notes is payable semi-annually and the 2019 Private Placement Notes are guaranteed by certain of our domestic subsidiaries. We may, at our option, prepay all, or from time to time any part of, the 2019 Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the 2019 Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the 2019 Private Placement Notes will have the right to require us to prepay the entire unpaid principal amounts held by each holder of the 2019 Private Placement Notes plus accrued and unpaid interest to the prepayment date. The 2019 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio and a minimum tangible net worth, and customary events of default. As of June 30, 2020 , we were in compliance with all of these covenants. Lines of Credit On June 24, 2016, East entered into a loan agreement with PNC for a revolving credit facility in an aggregate principal amount of up to $30.0 million , to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGL, including certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants, as well as certain debt covenants that prohibit East and us from incurring other indebtedness, subject to specified exceptions. We and our consolidated subsidiaries were in compliance with these covenants as of June 30, 2020 . Drawings under this facility bear interest at the prime rate. On March 11, 2019, East drew down $30.0 million on this facility, which was repaid on May 3, 2019. On June 21, 2019, East amended this facility with PNC such that, among other things, the interest rate provisions were modified to LIBOR plus 125 basis points and the maturity date was extended to October 31, 2020. On July 26, 2019, East entered into an additional loan agreement with PNC for a revolving credit facility in an aggregate principal amount of up to $20.0 million , to be used for working capital and other corporate activities. The facility is unsecured and matures on October 31, 2020, subject to an extension agreed to between East and PNC. In addition, the agreement contains certain reporting requirements and debt covenants consistent with the Existing PNC Facility. We and our consolidated subsidiaries were in compliance with these covenants as of June 30, 2020 . Drawings under this facility bear interest at LIBOR plus 150 basis points. East is only permitted to borrow under this facility if there is no undrawn availability under the Existing PNC Facility and must repay indebtedness under this facility prior to repaying indebtedness under the Existing PNC Facility. There have been no drawings under this facility as of June 30, 2020 . 56 Table of Contents ECB maintains a line of credit with BBVA Bancomer to fund its trading activities on an intra-day and overnight basis. The facility has a maximum aggregate principal amount of approximately $6.5 million and is secured by trading securities. No interest is charged on the intra-day facility. The overnight facility is charged the Inter-Bank Balance Interest Rate plus 10 basis points. There have been no significant draw downs on ECB's line of credit since August 10, 2006. The line of credit is renewable annually. Other Commitments We have a long-term liability, Amounts Due Pursuant to Tax Receivable Agreements, which requires payments to certain Senior Managing Directors. This liability was re-measured following the decrease in income tax rates in the U.S. in 2018 and future years in conjunction with the enactment of the Tax Cuts and Jobs Act on December 22, 2017. We have made certain capital commitments with respect to our investment activities, as well as commitments related to contingent consideration from our acquisitions, which are included in the Contractual Obligations section below. Pursuant to deferred compensation and deferred consideration arrangements, we are obligated to make cash payments in future periods. Further, we make investments to hedge the economic risk of the return on deferred compensation. For further information see Notes 7 and 16 to our unaudited condensed consolidated financial statements . Certain of our subsidiaries are regulated entities and are subject to capital requirements. For further information see Note 18 to our unaudited condensed consolidated financial statements . On July 1, 2018, we entered into a new lease agreement for office space at our headquarters at 55 East 52nd St., New York, New York, and subsequently entered into an amendment to this lease agreement for additional office space, as well as extending our original commitment, on December 6, 2019. We expect to spend approximately $25 million, net of a tenant improvement allowance, to improve the premises under this lease over the next twelve months. Our work at these premises, which was temporarily suspended at the end of the first quarter as a result of the COVID-19 pandemic, resumed in June. For further information see Note 10 to our unaudited condensed consolidated financial statements and COVID-19 above. Collateralized Financing Activity at ECB ECB enters into repurchase agreements with clients seeking overnight money market returns whereby ECB transfers to the clients Mexican government securities in exchange for cash and concurrently agrees to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor. ECB deploys the cash received from, and acquires the securities deliverable to, clients under these repurchase arrangements by purchasing securities in the open market or by entering into reverse repurchase agreements with unrelated third parties. We account for these repurchase and reverse repurchase agreements as collateralized financing transactions. We record a liability on our Unaudited Condensed Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase. We record as assets on our Unaudited Condensed Consolidated Statements of Financial Condition , Financial Instruments Owned and Pledged as Collateral at Fair Value (where we have acquired the securities deliverable to clients under these repurchase arrangements by purchasing securities in the open market) and Securities Purchased Under Agreements to Resell (where we have acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties). These Mexican government securities included in Financial Instruments Owned and Pledged as Collateral at Fair Value on the Unaudited Condensed Consolidated Statements of Financial Condition have an estimated average time to maturity of approximately four months , as of June 30, 2020 , and are pledged as collateral against repurchase agreements, which are collateralized financing agreements. Generally, collateral is posted equal to the contract value at inception and is subject to market changes. These repurchase agreements are primarily with institutional customer accounts managed by ECB, generally mature within one business day and permit the counterparty to pledge the securities. Increases and decreases in asset and liability levels related to these transactions are a function of growth in ECB's AUM, as well as clients' investment allocations requiring positioning in repurchase transactions. ECB has procedures in place to monitor the daily risk limits for positions taken, as well as the credit risk based on the collateral pledged under these agreements against their contract value from inception to maturity date. The daily risk measure is VaR, which is a statistical measure, at a 98% confidence level, of the potential daily losses from adverse market movements in an ordinary market environment based on a historical simulation using the prior year's historical data. The Committee has established a policy to maintain VaR at levels below 0.1% of the value of the portfolio. If at any point in time the threshold is exceeded, ECB personnel are alerted by an automated interface with ECB's trading systems and begin to make adjustments in the portfolio in order to mitigate the risk and bring the portfolio in compliance. Concurrently, ECB personnel must notify the Committee of the variance and the actions taken to reduce the exposure to loss. 57 Table of Contents In addition to monitoring VaR, ECB periodically performs discrete Stress Tests to assure that the level of potential losses that would arise from extreme market movements that may not be anticipated by VaR measures are within acceptable levels. The table below includes a key stress test monitored by the Committee, noted as the sensitivity to a 100 basis point change in interest rates. This analysis assists ECB in understanding the impact of an extreme move in rates, assuring the Collateralized Financing portfolio is structured to maintain risk at an acceptable level, even in extreme circumstances. The Committee meets monthly to analyze the overall market risk exposure based on positions taken, as well as the credit risk, based on the collateral pledged under these agreements against the contract value from inception to maturity date. In these meetings the Committee evaluates risk from an operating perspective, VaR, and an exceptional perspective, Stress Tests, to determine the appropriate level of risk limits in the current environment. We periodically assess the collectability or credit quality related to securities purchased under agreements to resell. As of June 30, 2020 and December 31, 2019 , a summary of ECB's assets, liabilities and risk measures related to its collateralized financing activities is as follows: June 30, 2020 December 31, 2019 Amount Market Value of Collateral Received or (Pledged) Amount Market Value of Collateral Received or (Pledged) (dollars in thousands) Assets Financial Instruments Owned and Pledged as Collateral at Fair Value $ 16,206 $ 12,431 Securities Purchased Under Agreements to Resell 5,144 $ 5,151 13,566 $ 13,572 Total Assets $ 21,350 $ 25,997 Liabilities Securities Sold Under Agreements to Repurchase $ (21,350 ) $ (21,341 ) $ (26,000 ) $ (25,992 ) Net Liabilities $ — $ (3 ) Risk Measures VaR $ 1 $ 1 Stress Test: Portfolio sensitivity to a 100 basis point increase in the interest rate $ (1 ) $ (1 ) Portfolio sensitivity to a 100 basis point decrease in the interest rate $ 1 $ 1 Contractual Obligations For a further discussion of our contractual obligations, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 . On July 1, 2018, we entered into a new lease agreement for office space at our headquarters at 55 East 52nd St., New York, New York. Under the terms of the agreement, we committed to extend the lease term for our current space and add space on up to seven additional floors, three of which commenced as of the lease’s effective date. We anticipate we will take possession of the remainder of these floors over the next four years. On December 6, 2019, the lease was modified to add an additional floor and to extend the lease term for all current and prospective space to end on December 31, 2035. When all floors have commenced, we will have approximately 375,000 square feet of space at this location. For further information see Note 10 to our unaudited condensed consolidated financial statements . We had total commitments (not reflected on our Unaudited Condensed Consolidated Statements of Financial Condition ) relating to future capital contributions to private equity funds of $13.7 million and $13.8 million as of June 30, 2020 and December 31, 2019 , respectively. We expect to fund these commitments with cash flows from operations. We may be required to fund these commitments at any time through June 2028, depending on the timing and level of investments by our private equity funds. 58 Table of Contents Off-Balance Sheet Arrangements We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any leasing activities that expose us to any liability that is not reflected in our unaudited condensed consolidated financial statements . Market Risk and Credit Risk We, in general, are not a capital-intensive organization and as such, are not subject to significant market or credit risks. Nevertheless, we have established procedures to assess both the market and credit risk, as well as specific investment risk, exchange rate risk and credit risk related to receivables. Market and Investment Risk We hold equity securities and invest in exchange-traded funds and mutual funds, principally as an economic hedge against our deferred compensation program. As of June 30, 2020 , the fair value of our investments with these products, based on closing prices, was $94.5 million. We estimate that a hypothetical 10%, 20% and 30% adverse change in the market value of the investments would have resulted in a decrease in pre-tax income of approximately $9.4 million, $18.9 million and $28.3 million, respectively, for the three months ended June 30, 2020 . In February 2020, we entered into four-month futures contracts on a stock index fund with a notional amount of $38.9 million , as an economic hedge against our deferred cash compensation program. These contracts settled in June 2020. In accordance with ASC 815, these contracts were carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . The Company had realized gains (losses) of $5.2 million and ($4.0) million for the three and six months ended June 30, 2020 , respectively. In April 2019, we entered into three-month futures contracts on a stock index fund with a notional amount of $14.8 million for $0.7 million , as an economic hedge against the deferred cash compensation program. These contracts settled in June 2019. In accordance with ASC 815, these contracts are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statements of Operations . The Company had net realized gains of $0.1 million for the three and six months ended June 30, 2019 . See "-Liquidity and Capital Resources" above for a discussion of collateralized financing transactions at ECB. Private Equity Funds Through our principal investments in private equity funds and our ability to earn carried interest from these funds, we face exposure to changes in the estimated fair value of the companies in which these funds invest. Valuations and analysis regarding our investments in Trilantic and Glisco are performed by their respective professionals, and thus we are not involved in determining the fair value for the portfolio companies of such funds. We estimate that a hypothetical 10% adverse change in the value of the private equity funds would have resulted in a decrease in pre-tax income of approximately $1.5 million for the three months ended June 30, 2020 . Exchange Rate Risk We have foreign operations, through our subsidiaries and affiliates, primarily in Europe, Asia and Mexico, as well as provide services to clients in other jurisdictions, which creates foreign exchange rate risk. We have not entered into any transactions to hedge our exposure to foreign exchange fluctuations in these subsidiaries through the use of derivative instruments or otherwise. An appreciation or depreciation of any of these currencies relative to the U.S. dollar would result in an adverse or beneficial impact to our financial results. A significant portion of our European, Asian and Latin American revenues and expenses have been, and will continue to be, derived from contracts denominated in foreign currencies (i.e. British Pounds sterling, Euros, Mexican pesos, Brazilian real, among others). Historically, the value of these foreign currencies has fluctuated relative to the U.S. dollar. For the six months ended June 30, 2020 , the net impact of the fluctuation of foreign currencies recorded in Other Comprehensive Income (Loss) within the Unaudited Condensed Consolidated Statement of Comprehensive Income was ($9.6) million . It is generally not our intention to hedge our foreign currency exposure in these subsidiaries, and we will reevaluate this policy from time to time. 59 Table of Contents Credit Risks We maintain cash and cash equivalents, as well as certificates of deposit, with financial institutions with high credit ratings. At times, we may maintain deposits in federally insured financial institutions in excess of federally insured ("FDIC") limits or enter into sweep arrangements where banks will periodically transfer a portion of our excess cash position to a money market fund. However, we believe that we are not exposed to significant credit risk due to the financial position of the depository institutions or investment vehicles in which those deposits are held. Accounts Receivable consists primarily of advisory fees and expense reimbursements billed to our clients. Other Assets includes long-term receivables from fees related to private funds capital raising. Receivables are reported net of any allowance for doubtful accounts. We maintain an allowance for doubtful accounts to provide coverage for probable losses from our customer receivables and determine the adequacy of the allowance by estimating the probability of loss based on the our analysis of historical credit loss experience of our client receivables, and taking into consideration current market conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The Investment Banking and Investment Management receivables collection periods generally are within 90 days of invoice, with the exception of placement fees, which are generally collected within 180 days of invoice, and fees related to private funds capital raising, which are collected in a period exceeding one year. The collection period for restructuring transaction receivables may exceed 90 days. We recorded bad debt expense of approximately $5.3 million and $1.8 million for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020 and December 31, 2019 , total receivables recorded in Accounts Receivable amounted to $310.2 million and $296.4 million , respectively, net of an allowance for doubtful accounts, and total receivables recorded in Other Assets amounted to $61.9 million and $63.6 million, respectively. Other Current Assets and Other Assets include arrangements in which an estimate of variable consideration has been included in the transaction price and thereby recognized as revenue that precedes the contractual due date (contract assets). As of June 30, 2020 , total contract assets recorded in Other Current Assets and Other Assets amounted to $6.8 million and $5.9 million , respectively. As of December 31, 2019 , total contract assets recorded in Other Current Assets and Other Assets amounted to $31.5 million and $2.5 million, respectively. With respect to our Investment Securities portfolio, which is comprised primarily of highly-rated corporate and municipal bonds, treasury bills, exchange-traded funds, mutual funds and securities investments, we manage our credit risk exposure by limiting concentration risk and maintaining investment grade credit quality. As of June 30, 2020 , we had Investment Securities of $99.7 million , of which 5% were treasury bills and notes. Critical Accounting Policies and Estimates The unaudited condensed consolidated financial statements included in this report are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions regarding future events that affect the amounts reported in our consolidated financial statements and their notes, including reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base these estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates. For a discussion of our critical accounting policies and estimates, refer to our Annual Report on Form 10-K for the year ended December 31, 2019 . We adopted ASU 2016-13 on January 1, 2020, which requires credit losses to be based on expected losses rather than incurred losses. See Notes 2 and 3 to our unaudited condensed consolidated financial statements for further information. Recently Issued Accounting Standards For a discussion of other recently issued accounting standards and their impact or potential impact on our consolidated financial statements, see Note 3 to our unaudited condensed consolidated financial statements .