What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 173 added, 169 removed, 419 unchanged (45% of the section changed)

31 unchanged sentences

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, restructuring or capital advisory 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.

Revenue trends in our equities business are correlated, in part, to market volumes, which generally decrease in periods of low market volatility or unfavorable market or economic conditions.

See "Liquidity and Capital Resources" below for further information.

41 unchanged sentences

The vesting period for the 2017 Long-term Incentive Plan ended on March 15, 2023 and in conjunction with this plan we made cash distributions in 2023, 2022 and 2021.

Amounts due pursuant to the 2021 Long-term Incentive Plan are due to be paid, in cash or Class A Shares, at our discretion, in the first quarter of 2025, 2026 and 2027, subject to employment at the time of payment.

Amounts accrued pursuant to the 2021 Long-term Incentive Plan may be paid, in cash or Class A Shares, at our discretion, in the first quarter of 2025, 2026 and 2027, subject to employment at the time of payment.

We periodically assess the probability of the benchmarks being achieved and expense the probable payout over the requisite service period of the award.

9 unchanged sentences

Other Expenses relate to Special Charges, Including Business Realignment Costs, which include the following:

• 2023 – Other Expenses for the six months ended June 30, 2023 include expenses related to the write-off of non-recoverable assets in connection with the wind-down of our operations in Mexico

• 2022 – Other Expenses for the three and six months ended June 30, 2022 include expenses related to charges associated with the prepayment of our Series B Notes during the second quarter, as well as certain professional fees related to the wind-down of our operations in Mexico

• 2023 – Other Expenses for the nine months ended September 30, 2023 include expenses related to the write-off of non-recoverable assets in connection with the wind-down of our operations in Mexico

• 2022 – Other Expenses for the nine months ended September 30, 2022 include expenses related to charges associated with the prepayment of our Series B Notes during the second quarter, as well as certain professional fees related to the wind-down of our operations in Mexico

Income from Equity Method Investments

16 unchanged sentences

Results of Operations

The following is a discussion of our results of operations for the three and six months ended June 30, 2023 and 2022.

The following is a discussion of our results of operations for the three and nine months ended September 30, 2023 and 2022.

For a more detailed discussion of the factors that affected the revenue and operating expenses of our Investment Banking & Equities and Investment Management business segments in these periods, see the discussion in "Business Segments" below.

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

23 unchanged sentences

Common Shareholders $ 1.30 $ 2.03 (36 %) $ 4.33 $ 8.18 (47 %)

As of June 30, 2023 and 2022, we employed approximately 2,245 and 2,135 people, respectively.

Three Months Ended June 30, 2023 versus June 30, 2022

As of September 30, 2023 and 2022, we employed approximately 2,230 and 2,160 people, respectively.

Three Months Ended September 30, 2023 versus September 30, 2022

Net Income Attributable to Evercore Inc.

was $37.2 million for the three months ended June 30, 2023, a decrease of $58.4 million, or 61%, compared to $95.6 million for the three months ended June 30, 2022.

was $52.1 million for the three months ended September 30, 2023, a decrease of $30.3 million, or 37%, compared to $82.4 million for the three months ended September 30, 2022.

The changes in our operating results during these periods are described below.

Net Revenues were $499.4 million for the three months ended June 30, 2023, a decrease of $131.5 million, or 21%, versus Net Revenues of $630.9 million for the three months ended June 30, 2022.

Advisory Fees decreased $201.7 million, or 35%, Underwriting Fees increased $24.7 million, or 183%, and Commissions and Related Revenue decreased $2.4 million, or 5%, compared to the three months ended June 30, 2022.

Asset Management and Administration Fees increased $0.6 million, or 4%,

compared to the three months ended June 30, 2022.

Net Revenues were $570.2 million for the three months ended September 30, 2023, a decrease of $6.7 million, or 1%, versus Net Revenues of $576.9 million for the three months ended September 30, 2022.

Advisory Fees decreased $20.8 million, or 4%, Underwriting Fees increased $2.1 million, or 7%, and Commissions and Related Revenue decreased $0.5 million, or 1%, compared to the three months ended September 30, 2022.

Asset Management and Administration Fees increased $1.7

million, or 11%, compared to the three months ended September 30, 2022.

See "Business Segments" and "Liquidity and Capital Resources" below for further information.

Ot her Revenue, Including Interest and Investments, increased $47.3 million compared to the three months ended June 30, 2022, primarily reflecting a shift from losses of $26.4 million in the second quarter of 2022 to gains of $12.2 million in the second quarter of 2023 on our investment funds portfolio due to overall market appreciation, as well as higher returns on our fixed income investment portfolios, which primarily consist of U.S.

Ot her Revenue, Including Interest and Investments, increased $10.8 million compared to the three months ended September 30, 2022, primarily reflecting higher returns on our fixed income investment portfolios, which primarily consist of U.S.

treasury bills.

The investment funds portfolio is used as an economic hedge against our deferred cash compensation program.

Total Operating Expenses were $441.7 million for the three months ended June 30, 2023, compared to $484.2 million for the three months ended June 30, 2022, a decrease of $42.5 million, or 9%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $338.4 million for the three months ended June 30, 2023, a decrease of $50.6 million, or 13%, versus expense of $389.0 million for the three months ended June 30, 2022.

The decrease in the amount of compensation recognized for the three months ended June 30, 2023 principally reflects a lower accrual for incentive compensation, partially offset by higher amortization of prior period deferred compensation awards and higher base salaries.

Non-compensation expenses, as a component of Operating Expenses, were $103.3 million for the three months ended June 30, 2023, an increase of $8.1 million, or 9%, versus $95.2 million for the three months ended June 30, 2022.

The increase was primarily driven by an increase in communications and information services, reflecting higher license fees and research expenses, as well as an increase in travel and related expenses, which was impacted by both increased activity and pricing, and charitable contributions made to the Evercore Foundation in the second quarter of 2023.

Non-Compensation expenses per employee were approximately $47.2 thousand for the three months ended June 30, 2023, versus $46.2 thousand for the three months ended June 30, 2022.

Total Other Expenses of $0.5 million for the three months ended June 30, 2022 reflected Special Charges, Including Business Realignment Costs, related to charges associated with the prepayment of our Series B Notes during the second quarter, as well as certain professional fees related to the wind-down of our operations in Mexico.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 67.8% for the three months ended June 30, 2023, compared to 61.7% for the three months ended June 30, 2022.

Income from Equity Method Investments was $1.5 million for the three months ended June 30, 2023, compared to $2.3 million for the three months ended June 30, 2022, primarily driven by lower income from Atalanta Sosnoff in the second quarter of 2023.

Total Operating Expenses were $493.4 million for the three months ended September 30, 2023, compared to $446.5 million for the three months ended September 30, 2022, an increase of $46.9 million, or 10%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $391.7 million for the three months ended September 30, 2023, an increase of $35.9 million, or 10%, versus expense of $355.8 million for the three months ended September 30, 2022.

The increase in the amount of compensation recognized for the three months ended September 30, 2023 principally reflects a higher accrual for incentive compensation, as well as higher amortization of prior period deferred compensation awards and higher base salaries.

Non-compensation expenses, as a component of Operating Expenses, were $101.7 million for the three months ended September 30, 2023, an increase of $11.0 million, or 12%, versus $90.7 million for the three months ended September 30, 2022.

The increase was primarily related to the reversal of expense in the third quarter of 2022 associated with the decline in fair value of contingent consideration owed to former equity interest holders in our RECA business.

The increase was also attributed to an increase in communications and information services, primarily reflecting higher research expenses and license fees in the third quarter of 2023.

Non-Compensation expenses per employee were approximately $45.5 thousand for the three months ended September 30, 2023, versus $42.3 thousand for the three months ended September 30, 2022.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 68.7% for the three months ended September 30, 2023, compared to 61.7% for the three months ended September 30, 2022.

Income from Equity Method Investments was $1.7 million for the three months ended September 30, 2023, compared to $2.0 million for the three months ended September 30, 2022, primarily driven by lower income from Luminis in the third quarter of 2023.

See Note 7 to our unaudited condensed consolidated financial statements for further information.

The provision for income taxes for the three months ended June 30, 2023 was $17.1 million, which reflected an effective tax rate of 28.9%.

The provision for income taxes for the three months ended June 30, 2022 was $38.6 million, which reflected an effective tax rate of 26.0%.

The provision for income taxes for the three months ended June 30, 2023 and 2022 reflects the net impact associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price of $0.1 million and $0.7 million, respectively.

Net Income Attributable to Noncontrolling Interest was $5.0 million for the three months ended June 30, 2023, compared to $14.3 million for the three months ended June 30, 2022.

The decrease in Net Income Attributable to Noncontrolling Interest reflects lower income at Evercore LP during the three months ended June 30, 2023.

The provision for income taxes for the three months ended September 30, 2023 was $19.7 million, which reflected an effective tax rate of 25.1%.

The provision for income taxes for the three months ended September 30, 2022 was $40.8 million, which reflected an effective tax rate of 30.8%.

The provision for income taxes for the three months ended September 30, 2023 reflects an additional tax benefit of $0.3 million, and for the three months ended September 30, 2022 an additional tax expense of $0.1 million due to the net 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.

Net Income Attributable to Noncontrolling Interest was $6.6 million for the three months ended September 30, 2023, compared to $9.2 million for the three months ended September 30, 2022.

The decrease in Net Income Attributable to Noncontrolling Interest reflects lower income at Evercore LP during the three months ended September 30, 2023.

See Note 12 to our unaudited condensed consolidated financial statements for further information.

Six Months Ended June 30, 2023 versus June 30, 2022

Nine Months Ended September 30, 2023 versus September 30, 2022

Net Income Attributable to Evercore Inc.

was $120.6 million for the six months ended June 30, 2023, a decrease of $133.1 million, or 52%, compared to $253.6 million for the six months ended June 30, 2022.

was $172.7 million for the nine months ended September 30, 2023, a decrease of $163.4 million, or 49%, compared to $336.1 million for the nine months ended September 30, 2022.

The changes in our operating results during these periods are described below.

Net Revenues were $1.07 billion for the six months ended June 30, 2023, a decrease of $282.2 million, or 21%, versus Net Revenues of $1.35 billion for the six months ended June 30, 2022.

Advisory Fees decreased $363.7 million, or 30%, Underwriting Fees increased $11.3 million, or 23%, and Commissions and Related Revenue decreased $5.3 million, or 5%, compared to the six months ended June 30, 2022.

Asset Management and Administration Fees decreased $0.6 million, or 2%, compared to the six months ended June 30, 2022.

Net Revenues were $1.64 billion for the nine months ended September 30, 2023, a decrease of $288.9 million, or 15%, versus Net Revenues of $1.93 billion for the nine months ended September 30, 2022.

Advisory Fees decreased $384.5 million, or 23%, Underwriting Fees increased $13.4 million, or 17%, and Commissions and Related Revenue decreased $5.8 million, or 4%, compared to the nine months ended September 30, 2022.

Asset Management and Administration Fees increased $1.1 million, or 2%, compared to the nine months ended September 30, 2022.

See "Business Segments" and "Liquidity and Capital Resources" below for further information.

Ot her Revenue, Including Interest and Investments, increased $75.9 million compared to the six months ended June 30, 2022, primarily reflecting a shift from losses of $31.5 million in 2022 to gains of $22.3 million in 2023 on our investment funds portfolio due to overall market appreciation, as well as higher returns on our fixed income investment portfolios, which primarily consist of U.S.

Ot her Revenue, Including Interest and Investments, increased $86.7 million compared to the nine months ended September 30, 2022, primarily reflecting a shift from losses of $39.0 million in 2022 to gains of $17.4 million in 2023 on our investment funds portfolio due to overall market appreciation, as well as higher returns on our fixed income investment

portfolios, which primarily consist of U.S.

treasury bills.

The increase from 2022 was partially offset by a $1.3 million gain on the sale of a portion of our interests in ABS that occurred during the first quarter of 2022.

See Note 7 to our unaudited condensed consolidated financial statements for further information.

Total Operating Expenses were $904.0 million for the six months ended June 30, 2023, compared to $997.7 million for the six months ended June 30, 2022, a decrease of $93.7 million, or 9%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $705.2 million for the six months ended June 30, 2023, a decrease of $113.5 million, or 14%, versus expense of $818.7 million for the six months ended June 30, 2022.

The decrease in the amount of compensation recognized for the six months ended June 30, 2023 principally reflects a lower accrual for incentive compensation, partially offset by higher amortization of prior period deferred compensation awards and higher base salaries.

Non-compensation expenses, as a component of Operating Expenses, were $198.8 million for the six months ended June 30, 2023, an increase of $19.8 million, or 11%, versus $179.0 million for the six months ended June 30, 2022.

The increase was primarily driven by increases in travel and related expenses, which was impacted by both increased activity and pricing, and bad debt expense, as well as charitable contributions made to the Evercore Foundation in 2023.

Non-Compensation expenses per employee were approximately $91.8 thousand for the six months ended June 30, 2023, versus $88.2 thousand for the six months ended June 30, 2022.

Total Other Expenses of $2.9 million for the six months ended June 30, 2023 reflected Special Charges, Including Business Realignment Costs, related to the write-off of non-recoverable assets in connection with the wind-down of our operations in Mexico.

Total Other Expenses of $0.5 million for the six months ended June 30, 2022 reflected Special Charges, Including Business Realignment Costs, related to charges associated with the prepayment of our Series B Notes during the second quarter, as well as certain professional fees related to the wind-down of our operations in Mexico.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 65.8% for the six months ended June 30, 2023, compared to 60.5% for the six months ended June 30, 2022.

Income from Equity Method Investments was $3.0 million for the six months ended June 30, 2023, compared to $4.8 million for the six months ended June 30, 2022, reflecting lower contributions from all of our equity method investments in 2023.

The investment funds portfolio is used as an economic hedge against our deferred cash compensation program.

Total Operating Expenses were $1.40 billion for the nine months ended September 30, 2023, compared to $1.44 billion for the nine months ended September 30, 2022, a decrease of $46.8 million, or 3%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $1.10 billion for the nine months ended September 30, 2023, a decrease of $77.5 million, or 7%, versus expense of $1.17 billion for the nine months ended September 30, 2022.

The decrease in the amount of compensation recognized for the nine months ended September 30, 2023 principally reflects a lower accrual for incentive compensation, partially offset by higher amortization of prior period deferred compensation awards and higher base salaries.

Non-compensation expenses, as a component of Operating Expenses, were $300.4 million for the nine months ended September 30, 2023, an increase of $30.7 million, or 11%, versus $269.7 million for the nine months ended September 30, 2022.

The increase was primarily related to increases in travel and related expenses, as well as communications and information services, primarily reflecting higher license fees and research expenses in 2023.

The increase was also attributed to the reversal of expense in 2022 associated with the decline in fair value of contingent consideration owed to former equity interest holders in our RECA business.

Non-Compensation expenses per employee were approximately $137.7 thousand for the nine months ended September 30, 2023, versus $130.8 thousand for the nine months ended September 30, 2022.

Other Expenses of $2.9 million for the nine months ended September 30, 2023 reflected Special Charges, Including Business Realignment Costs, related to the write-off of non-recoverable assets in connection with the wind-down of our operations in Mexico.

Other Expenses of $0.5 million for the nine months ended September 30, 2022 reflected Special Charges, Including Business Realignment Costs, related to charges associated with the prepayment of our Series B Notes during the second quarter, as well as certain professional fees related to the wind-down of our operations in Mexico.

As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 66.8% for the nine months ended September 30, 2023, compared to 60.8% for the nine months ended September 30, 2022.

Income from Equity Method Investments was $4.7 million for the nine months ended September 30, 2023, compared to $6.8 million for the nine months ended September 30, 2022, reflecting lower contributions from all of our equity method investments in 2023.

See Note 7 to our unaudited condensed consolidated financial statements for further information.

The provision for income taxes for the six months ended June 30, 2023 was $33.2 million, which reflected an effective tax rate of 19.8%.

The provision for income taxes for the six months ended June 30, 2022 was $73.3 million, which reflected an effective tax rate of 20.4%.

The provision for income taxes for the six months ended June 30, 2023 and 2022 reflects the net impact associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price of $13.8 million and $19.8 million, respectively, which resulted in a reduction in the effective tax rate of 8.2 and 5.5 percentage points for the six months ended June 30, 2023 and 2022, respectively.

Net Income Attributable to Noncontrolling Interest was $13.8 million for the six months ended June 30, 2023, compared to $33.3 million for the six months ended June 30, 2022.

The decrease in Net Income Attributable to Noncontrolling Interest reflects lower income at Evercore LP during the six months ended June 30, 2023.

The provision for income taxes for the nine months ended September 30, 2023 was $52.9 million, which reflected an effective tax rate of 21.5%.

The provision for income taxes for the nine months ended September 30, 2022 was $114.1 million, which reflected an effective tax rate of 23.2%.

The provision for income taxes for the nine months ended September 30, 2023 and 2022 reflects the net impact associated with the appreciation in our share price upon vesting of employee share-based awards above the original grant price of $14.1 million and $19.7 million, respectively, which resulted in a reduction in the effective tax rate of 5.7 and 4.0 percentage points for the nine months ended September 30, 2023 and 2022, respectively.

Net Income Attributable to Noncontrolling Interest was $20.4 million for the nine months ended September 30, 2023, compared to $42.5 million for the nine months ended September 30, 2022.

The decrease in Net Income Attributable to Noncontrolling Interest reflects lower income at Evercore LP during the nine months ended September 30, 2023.

See Note 12 to our unaudited condensed consolidated financial statements for further information.

3 unchanged sentences

The following table summarizes the operating results of the Investment Banking & Equities segment.

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

14 unchanged sentences

Pre-Tax Income $ 73,392 $ 127,370 (42 %) $ 230,318 $ 475,815 (52 %)

(1) Includes interest expense on Notes Payable and lines of credit of $4.2 million and $8.4 million for the three and six months ended June 30, 2023, respectively, and $4.3 million and $8.5 million for the three and six months ended June 30, 2022, respectively.

(1) Includes interest expense on Notes Payable and lines of credit of $4.2 million and $12.5 million for the three and nine months ended September 30, 2023, respectively, and $4.2 million and $12.7 million for the three and nine months ended September 30, 2022, respectively.

(2) Equity in Luminis and Seneca Evercore is classified within Income from Equity Method Investments.

For the three months ended June 30, 2023, the dollar value of North American announced and completed M&A activity decreased 21% and 41%, respectively, compared to the three months ended June 30, 2022, and the dollar value of Global announced and completed M&A activity decreased 29% and 37%, respectively, compared to the three months ended June 30, 2022.

For the three months ended June 30, 2023, the dollar value of North American and Global completed M&A activity over $100 million decreased 43% and 38%, respectively, compared to the three months ended June 30, 2022.

For the six months ended June 30, 2023, the dollar value of North American announced and completed M&A activity decreased 33% and 40%, respectively, compared to the six months ended June 30, 2022, and the dollar value of Global announced and completed M&A activity decreased 36% and 43%, respectively, compared to the six months ended June 30, 2022.

For the six months ended June 30, 2023, the dollar value of North American and Global completed M&A activity over $100 million decreased 41% and 45%, respectively, compared to the six months ended June 30, 2022.

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the three months ended September 30, 2023, the dollar value of North American announced and completed M&A activity increased 39% and decreased 3%, respectively, compared to the three months ended September 30, 2022, and the dollar value of Global announced and completed M&A activity decreased 2% and 15%, respectively, compared to the three months ended September 30, 2022.

For the three months ended September 30, 2023, the dollar value of North American and Global completed M&A activity over $100 million decreased 1% and 14%, respectively, compared to the three months ended September 30, 2022.

For the nine months ended September 30, 2023, the dollar value of North American announced and completed M&A activity decreased 16% and 29%, respectively, compared to the nine months ended September 30, 2022, and the dollar value of Global announced and completed M&A activity decreased 26% and 37%, respectively, compared to the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, the dollar value of North American and Global completed M&A activity over $100 million decreased 30% and 39%, respectively, compared to the nine months ended September 30, 2022.

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

15 unchanged sentences

10 11 (9 %) 36 29 24 %

Refinitiv July 11, 2023

Refinitiv October 9, 2023

(2) Includes Equity and Debt Underwriting Transactions.

Investment Banking & Equities Results of Operations

Three Months Ended June 30, 2023 versus June 30, 2022

Net Revenues were $482.2 million for the three months ended June 30, 2023 , compared to $615.3 million for the three months ended June 30, 2022 , a decrease of $133.0 million, or 22%.

The decrease in revenues for the three months ended June 30, 2023 was primarily driven by a decrease of $201.7 million, or 35%, in Advisory Fees, primarily reflecting a decline in revenue earned from large transactions during the second quarter of 2023.

Underwriting Fees increased $24.7 million, or 183%, compared to the three months ended June 30, 2022, reflecting an increase in the number of transactions we participated in due to the increase in overall market issuances.

Commissions and Related Revenue decreased $2.4 million, or 5%, compared to the three months ended June 30, 2022 , primarily reflecting lower trading revenues .

Other Revenue, net, increased $46.4 million compared to the three months ended June 30, 2022 , primarily reflecting a shift from losses of $26.4 million in the second quarter of 2022 to gains of $12.2 million in the second quarter of 2023 on our investment funds portfolio due to overall market appreciation, as well as higher returns on our fixed income investment portfolios, which primarily consist of U.S.

Three Months Ended September 30, 2023 versus September 30, 2022

Net Revenues were $552.6 million for the three months ended September 30, 2023 , compared to $560.5 million for the three months ended September 30, 2022 , a decrease of $7.9 million, or 1%.

The decrease in revenues for the three months ended September 30, 2023 was primarily driven by a decrease of $20.8 million, or 4%, in Advisory Fees, reflecting a decrease in the number of advisory fees earned and a decline in revenue earned from large transactions during the third quarter of 2023.

Underwriting Fees increased $2.1 million, or 7%, compared to the three months ended September 30, 2022 .

Commissions and Related Revenue decreased $0.5 million, or 1%, compared to the three months ended September 30, 2022 , primarily reflecting lower trading revenues .

Other Revenue, net, increased $11.3 million compared to the three months ended September 30, 2022 , primarily reflecting higher returns on our fixed income investment portfolios, which primarily consist of U.S.

treasury bills.

The investment funds portfolio is used as an economic hedge against our deferred cash compensation program .

Operating Expenses were $428.3 million for the three months ended June 30, 2023 , compared to $470.5 million for the three months ended June 30, 2022 , a decrease of $42.2 million, or 9%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $328.5 million for the three months ended June 30, 2023 , compared to $378.8 million for the three months ended June 30, 2022 , a decrease of $50.3 million , or 13% .

Non-compensation expenses, as a component of Operating Expenses, were $99.8 million for the three months ended June 30, 2023, compared to $91.7 million for the three months ended June 30, 2022, an increase of $8.1 million , or 9% .

Non-compensation operating expenses increased from the prior year period, primarily driven by an increase in communications and information services, reflecting higher license fees and research expenses, as well as an increase in travel and related expenses, which was impacted by both increased activity and pricing, and charitable contributions made to the Evercore Foundation in the second quarter of 2023.

Six Months Ended June 30, 2023 versus June 30, 2022

Net Revenues were $1.04 billion for the six months ended June 30, 2023, compared to $1.32 billion for the six months ended June 30, 2022 , a decrease of $282.5 million, or 21%.

The decrease in revenues for the six months ended June 30, 2023 was primarily driven by a decrease of $363.7 million, or 30%, in Advisory Fees, primarily reflecting a decline in revenue earned from large transactions during 2023.

Underwriting Fees increased $11.3 million, or 23%, compared to the six months ended June 30, 2022, reflecting an increase in the number of transactions we participated in due to the increase in overall market issuances.

Commissions and Related Revenue decreased $5.3 million, or 5%, compared to the six months ended June 30, 2022 , primarily reflecting lower trading revenues .

Other Revenue, net, increased $75.2 million compared to the six months ended June 30, 2022 , primarily reflecting a shift from losses of $31.5 million in 2022 to gains of $22.3 million in 2023 on our investment funds portfolio due to overall market appreciation, as well as higher returns on our fixed income investment portfolios, which primarily consist of U.S.

Operating Expenses were $479.4 million for the three months ended September 30, 2023 , compared to $433.6 million for the three months ended September 30, 2022 , an increase of $45.8 million, or 11%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $381.1 million for the three months ended September 30, 2023 , compared to $346.3 million for the three months ended September 30, 2022 , an increase of $34.8 million , or 10% .

Non-compensation expenses, as a component of Operating Expenses, were $98.3 million for the three months ended September 30, 2023, compared to $87.3 million for the three months ended September 30, 2022, an increase of $11.0 million , or 13% .

Non-compensation operating expenses increased from the prior year period, primarily related to the reversal of expense in the third quarter of 2022 associated with the decline in fair value of contingent consideration owed to former equity interest holders in our RECA business.

The increase was also attributed to an increase in communications and information services, primarily reflecting higher research expenses and license fees in the third quarter of 2023.

Nine Months Ended September 30, 2023 versus September 30, 2022

Net Revenues were $1.59 billion for the nine months ended September 30, 2023, compared to $1.88 billion for the nine months ended September 30, 2022 , a decrease of $290.4 million, or 15%.

The decrease in revenues for the nine months ended September 30, 2023 was primarily driven by a decrease of $384.5 million, or 23%, in Advisory Fees, reflecting a decrease in the number of advisory fees earned and a decline in revenue earned from large transactions during 2023.

Underwriting Fees increased $13.4 million, or 17%, compared to the nine months ended September 30, 2022, reflecting an increase in the number of transactions we participated in due to the increase in equity issuance activity.

Commissions and Related Revenue decreased $5.8 million, or 4%, compared to the nine months ended September 30, 2022 , primarily reflecting lower trading revenues .

Other Revenue, net, increased $86.5 million compared to the nine months ended September 30, 2022 , primarily reflecting a shift from losses of $39.0 million in 2022 to gains of $17.4 million in 2023 on our investment funds portfolio due to overall market appreciation, as well as higher returns on our fixed income investment portfolios, which primarily consist of U.S.

treasury bills.

Operating Expenses were $877.4 million for the six months ended June 30, 2023 , compared to $971.1 million for the six months ended June 30, 2022 , a decrease of $93.7 million, or 10%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $685.5 million for the six months ended June 30, 2023 , compared to $798.7 million for the six months ended June 30, 2022 , a decrease of $113.2 million , or 14% .

Non-compensation expenses, as a component of Operating Expenses, were $191.9 million for the six months ended June 30, 2023, compared to $172.4 million for the six months ended June 30, 2022, an increase of $19.5 million , or 11% .

Non-compensation operating expenses increased from the prior year period, primarily driven by increases in travel and related expenses, which was impacted by both increased activity and pricing, and bad debt expense, as well as charitable contributions made to the Evercore Foundation in 2023.

Other Expenses of $2.9 million for the six months ended June 30, 2023 reflected Special Charges, Including Business Realignment Costs, related to the write-off of non-recoverable assets in connection with the wind-down of our operations in Mexico .

The investment funds portfolio is used as an economic hedge against our deferred cash compensation program.

Operating Expenses were $1.36 billion for the nine months ended September 30, 2023 , compared to $1.40 billion for the nine months ended September 30, 2022 , a decrease of $47.9 million, or 3%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $1.07 billion for the nine months ended September 30, 2023 , compared to $1.15 billion for the nine months ended September 30, 2022 , a decrease of $78.3 million , or 7% .

Non-compensation expenses, as a component of Operating Expenses, were $290.2 million for the nine months ended September 30, 2023, compared to $259.7 million for the nine months ended September 30, 2022, an increase of $30.5 million , or 12% .

Non-compensation operating expenses increased from the prior year period, primarily related to increases in travel and related expenses as well as communications and information services, primarily reflecting higher license fees and research expenses in 2023.

The increase was also attributed to the reversal of expense in 2022 associated with the decline in fair value of contingent consideration owed to former equity interest holders in our RECA business.

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,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 Change 2023 2022 Change

3 unchanged sentences

Other Revenue, net (1)

598 (301) NM 1,972 1,137 73 %

275 778 (65 %) 2,247 1,915 17 %

Net Revenues 17,579 16,419 7 % 52,084 50,639 3 %

5 unchanged sentences

Pre-Tax Income $ 5,098 $ 5,056 1 % $ 15,802 $ 16,943 (7 %)

(1) Includes a gain of $1.3 million for the six months ended June 30, 2022, resulting from the sale of a portion of our interests in ABS.

(1) Includes a gain of $1.3 million for the nine months ended September 30, 2022, resulting from the sale of a portion of our interests in ABS.

(2) Equity in ABS and Atalanta Sosnoff is classified as Income from Equity Method Investments.

10 unchanged sentences

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, 2023, $0.4 million of previously distributed carried interest received from the funds was subject to repayment.

As of September 30, 2023, $0.3 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.

3 unchanged sentences

Assets Under Management

AUM in our Wealth Management business of $11.5 billion at June 30, 2023 increased $1.0 billion, or 9% , compared to $10.5 billion at December 31, 2022.

AUM in our Wealth Management business of $11.3 billion at September 30, 2023 increased $0.7 billion, or 7% , compared to $10.5 billion at December 31, 2022.

The amounts of AUM presented in the table below reflect the fair value of assets which we manage on behalf of Wealth Management clients.

2 unchanged sentences

For Level 3 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 value require significant management judgment or estimation.

Wealth Management maintained 75% and 74% of Level 1 investments, 20% and 21% of Level 2 investments and 5% and 5% of Level 3 investments as of June 30, 2023 and December 31, 2022, respectively.

The inputs into the determination of fair value require significant management judgment or

Wealth Management maintained 75% and 74% of Level 1 investments, 20% and 21% of Level 2 investments and 5% and 5% of Level 3 investments as of September 30, 2023 and December 31, 2022, respectively.

The fees that we receive for providing investment advisory and management services are primarily driven by the level and composition of AUM.

3 unchanged sentences

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 Wealth Management for the six months ended June 30, 2023:

The following table summarizes AUM activity for Wealth Management for the nine months ended September 30, 2023:

(dollars in millions)

2 unchanged sentences

Market Appreciation 848

Balance at June 30, 2023 $ 11,488

Unconsolidated Affiliates - Balance at June 30, 2023:

Balance at September 30, 2023 $ 11,273

Unconsolidated Affiliates - Balance at September 30, 2023:

Atalanta Sosnoff $ 6,847

The following table represents the composition of AUM for Wealth Management as of June 30, 2023:

The following table represents the composition of AUM for Wealth Management as of September 30, 2023:

Equities 63 %

8 unchanged sentences

Investment performance in the Wealth Management business is measured against appropriate indices based on the composition of 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, 2023, AUM for Wealth Management increased 9% , reflecting a 10% increase due to market appreciation, partially offset by a 1% decrease due to flows .

Performance for the six months ended June 30, 2023 reflected:

• Wealth Management lagged the S&P 500 on a 1 and 3-year basis by approximately 2% and 1%, respectively

• Wealth Management lagged the fixed income composite on a 1-year basis by approximately 20 basis points and outperformed the fixed income composite on 3-year basis by approximately 30 basis points

• The S&P 500 and fixed income composite were each up approximately 17% and 1%, respectively

For the nine months ended September 30, 2023, AUM for Wealth Management increased 7% , reflecting an 8% increase due to market appreciation, partially offset by a 1% decrease due to flows .

Performance for the nine months ended September 30, 2023 reflected:

• Wealth Management outperformed the S&P 500 on a 1-year basis by approximately 2% and lagged the S&P 500 on a 3-year basis by approximately 1%

• Wealth Management outperformed the fixed income composite on a 1 and 3-year basis by approximately 20 basis points and 60 basis points, respectively

• The S&P 500 was up approximately 13% and the fixed income composite was down approximately 2%

AUM from our unconsolidated affiliates increased 2% compared to December 31, 2022, reflecting increases in both Atalanta Sosnoff and ABS.

Three Months Ended June 30, 2023 versus June 30, 2022

Net Revenues were $17.2 million for the three months ended June 30, 2023, compared to $15.7 million for the three months ended June 30, 2022, an increase of $1.5 million, or 10%.

Asset Management and Administration Fees earned from the management of Wealth Management client portfolios increased $0.6 million, or 4%, for the three months ended June 30, 2023 as associated AUM increased 10%, primarily from market appreciation.

Operating Expenses were $13.4 million for the three months ended June 30, 2023, compared to $13.7 million for the three months ended June 30, 2022, a decrease of $0.3 million, or 2%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $9.9 million for the three months ended June 30, 2023, compared to $10.2 million for the three months ended June 30, 2022, a decrease of $0.3 million, or 3%.

Non-Compensation expenses, as a component of Operating Expenses, were $3.5 million for the three months ended June 30, 2023, flat compared to the three months ended June 30, 2022.

Income from Equity Method Investments decreased 34% from the three months ended June 30, 2022, primarily driven by lower income earned by Atalanta Sosnoff in the second quarter of 2023.

Three Months Ended September 30, 2023 versus September 30, 2022

Net Revenues were $17.6 million for the three months ended September 30, 2023, compared to $16.4 million for the three months ended September 30, 2022, an increase of $1.2 million, or 7%.

Asset Management and Administration Fees earned from the management of Wealth Management client portfolios increased $1.7 million, or 11%, for the three months ended September 30, 2023 as associated AUM increased 13%, primarily from market appreciation.

Operating Expenses were $14.0 million for the three months ended September 30, 2023, compared to $12.9 million for the three months ended September 30, 2022, an increase of $1.0 million, or 8%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $10.6 million for the three months ended September 30, 2023, compared to $9.5 million for the three months ended September 30, 2022, an increase of $1.1 million, or 12%.

Non-Compensation expenses, as a component of Operating Expenses, were $3.4 million for the three months ended September 30, 2023, flat compared to the three months ended September 30, 2022.

Income from Equity Method Investments decreased 6% from the three months ended September 30, 2022, primarily driven by lower income earned by Atalanta Sosnoff in the third quarter of 2023.

See Note 7 to our unaudited condensed consolidated financial statements for further information.

Six Months Ended June 30, 2023 versus June 30, 2022

Net Revenues were $34.5 million for the six months ended June 30, 2023, compared to $34.2 million for the six months ended June 30, 2022, an increase of $0.3 million, or 1%.

Asset Management and Administration Fees earned from the management of Wealth Management client portfolios decreased $0.6 million, or 2%, for the six months ended June 30, 2023.

Operating Expenses were $26.6 million for the six months ended June 30, 2023, flat compared to the six months ended June 30, 2022.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $19.7 million for the six months ended June 30, 2023, compared to $20.0 million for the six months ended June 30, 2022, a decrease of $0.3 million, or 2%.

Non-Compensation expenses, as a component of Operating Expenses, were $6.9 million for the six months ended June 30, 2023, compared to $6.6 million for the six months ended June 30, 2022, an increase of $0.3 million, or 5%.

Income from Equity Method Investments decreased 34% from the six months ended June 30, 2022, primarily driven by lower income earned by Atalanta Sosnoff in 2023.

Nine Months Ended September 30, 2023 versus September 30, 2022

Net Revenues were $52.1 million for the nine months ended September 30, 2023, compared to $50.6 million for the nine months ended September 30, 2022, an increase of $1.4 million, or 3%.

Asset Management and Administration Fees earned from the management of Wealth Management client portfolios increased $1.1 million, or 2%, for the nine months ended September 30, 2023, as associated AUM increased 13%, primarily from market appreciation.

Operating Expenses were $40.6 million for the nine months ended September 30, 2023, compared to $39.5 million for the nine months ended September 30, 2022, an increase of $1.0 million, or 3%.

Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $30.3 million for the nine months ended September 30, 2023, compared to $29.5 million for the nine months ended September 30, 2022, an increase of $0.8 million, or 3%.

Non-Compensation expenses, as a component of Operating Expenses, were $10.3 million for the nine months ended September 30, 2023, compared to $10.0 million for the nine months ended September 30, 2022, an increase of $0.3 million, or 3%.

Income from Equity Method Investments decreased 27% from the nine months ended September 30, 2022, primarily driven by lower income earned by Atalanta Sosnoff in 2023.

See Note 7 to our unaudited condensed consolidated financial statements for further information.

10 unchanged sentences

A summary of our operating, investing and financing cash flows is as follows:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(dollars in thousands)

12 unchanged sentences

End of Period $ 501,452 $ 482,171

Six Months Ended June 30, 2023.

Cash, Cash Equivalents and Restricted Cash were $529.5 million at June 30, 2023, a decrease of $142.6 million versus Cash, Cash Equivalents and Restricted Cash of $672.1 million at December 31, 2022.

Operating activities resulted in a net outflow of $205.5 million, primarily related to the payment of 2022 bonus awards and deferred cash compensation, which contributed to a decrease to Accrued Compensation and Benefits on our Unaudited Condensed Consolidated Statements of Financial Condition as of June 30, 2023, partially offset by earnings.

Nine Months Ended September 30, 2023.

Cash, Cash Equivalents and Restricted Cash were $501.5 million at September 30, 2023, a decrease of $170.7 million versus Cash, Cash Equivalents and Restricted Cash of $672.1 million at December 31, 2022.

Operating activities resulted in a net inflow of $42.3 million, primarily related to earnings, partially offset by the payment of 2022 bonus awards and deferred cash compensation, which contributed to a decrease to Accrued Compensation and Benefits on our Unaudited Condensed Consolidated Statements of Financial Condition as of September 30, 2023.

Cash of $290.5 million was provided by investing activities, primarily related to net proceeds from sales and maturities of investment securities and certificates of deposit, partially offset by purchases of equipment and leasehold improvements.

2 unchanged sentences

currencies to U.S.

Six Months Ended June 30, 2022.

Cash, Cash Equivalents and Restricted Cash were $453.4 million at June 30, 2022, a decrease of $133.9 million versus Cash, Cash Equivalents and Restricted Cash of $587.3 million at December 31, 2021.

Operating activities resulted in a net outflow of $168.6 million, primarily related to the payment of 2021 bonus awards and deferred cash compensation, partially offset by earnings.

Cash of $615.6 million was provided by investing activities, primarily related to net proceeds from sales and maturities of investment securities and proceeds received for the sale of a portion of our interests in ABS, partially offset by net purchases of certificates of deposit and purchases of equipment and leasehold improvements, principally related to the expansion of our headquarters in New York.

Financing activities during the period used cash of $561.8 million, primarily for purchases of treasury stock and noncontrolling interests, the payment of our Notes Payable and dividends and distributions to noncontrolling interest holders, partially offset by the issuance of the 2022 Private Placement Notes.

Nine Months Ended September 30, 2022.

Cash, Cash Equivalents and Restricted Cash were $482.2 million at September 30, 2022, a decrease of $105.1 million versus Cash, Cash Equivalents and Restricted Cash of $587.3 million at December 31, 2021.

Operating activities resulted in a net inflow of $157.2 million, primarily related to earnings, partially offset by the payment of 2021 bonus awards and deferred cash compensation.

Cash of $418.5 million was provided by investing activities, primarily related to net proceeds from sales and maturities of investment securities and proceeds received for the sale of a portion of our interests in ABS, partially offset by net purchases of certificates of deposit and purchases of equipment and leasehold improvements.

Financing activities during the period used cash of $631.5 million, primarily for purchases of treasury stock and noncontrolling interests, the repayment of our Notes Payable and dividends and distributions to noncontrolling interest holders, partially offset by the issuance of the 2022 Private Placement Notes.

Cash is also impacted due to the effect of foreign exchange rate fluctuation when translating non-U.S.

6 unchanged sentences

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;

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 generally made quarterly.

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.

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 capital requirements and restrictions of our regulated legal entities.

10 unchanged sentences

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 - which may result from the current or anticipated impact of inflation, changes in the level of interest rates, changes in the availability of financing, supply chain disruptions, an evolving regulatory environment, climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, including escalating military tension between Russia and Ukraine, terrorism or other geopolitical events - 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.

During periods of unfavorable market or economic conditions - which may result from the current or anticipated impact of inflation, changes in the level of interest rates, changes in the availability of financing, supply chain disruptions, an evolving regulatory environment, climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, including escalating military tensions, terrorism or other geopolitical events - 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.

20 unchanged sentences

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, 2023, we repurchased 1,752,488 Class A Shares, at an average cost per share of $126.27, for $221.2 million, pursuant to our repurchase program.

During the nine months ended September 30, 2023, we repurchased 2,032,453 Class A Shares, at an average cost per share of $127.85, for $259.9 million, pursuant to our repurchase program.

In addition, we periodically 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, 2023, we repurchased 936,677 Class A Shares, at an average cost per share of $131.27, for $123.0 million, primarily related to minimum tax withholding requirements of share deliveries.

The aggregate 2,689,165 Class A Shares repurchased during the six months ended June 30, 2023 were acquired for aggregate purchase consideration of $344.2 million, at an average cost per share of $128.01.

During the nine months ended September 30, 2023, we repurchased 953,237 Class A Shares, at an average cost per share of $131.34, for $125.2 million, primarily related to minimum tax withholding requirements of share deliveries.

The aggregate 2,985,690 Class A Shares repurchased during the nine months ended September 30, 2023 were acquired for aggregate purchase consideration of $385.1 million, at an average cost per share of $128.97.

Noncontrolling Interest Purchases

During the second quarter of 2023, we purchased, at fair value, an additional 0.7% of the EWM Class A Units for $2.0 million.

This purchase resulted in a decrease to Noncontrolling Interest of $0.2 million and a decrease to Additional-Paid-In-Capital of $1.8 million on our Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2023.

During the first quarter of 2022, we purchased, at fair value, an additional 0.4% of the EWM Class A Units for $1.4 million, which was settled in cash during the three months ended June 30, 2022.

This purchase resulted in a decrease to Noncontrolling Interest of $0.1 million and a decrease to Additional-Paid-In-Capital of $1.4 million on our Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2022.

This purchase resulted in a decrease to Noncontrolling Interest of $0.2 million and a decrease to Additional Paid-In Capital of $1.8 million on our Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2023.

During the third quarter of 2022, we purchased, at fair value, an additional 0.5% of the EWM Class A Units for $1.7 million.

This purchase resulted in a decrease to Noncontrolling Interest of $0.1 million and a decrease to Additional Paid-In Capital of $1.6 million on our Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2022.

During the first quarter of 2022, we purchased, at fair value, an additional 0.4% of the EWM Class A Units for $1.4 million.

This purchase resulted in a decrease to Noncontrolling Interest of $0.1 million and a decrease to Additional Paid-In Capital of $1.4 million on our Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2022.

On December 31, 2021, we purchased, at fair value, all of the outstanding Class R Interests of Private Capital Advisory L.P.

from employees of the RECA business for $54.3 million.

Our consideration for this transaction included the payment of $6.0 million of cash in 2021, $27.7 million of cash during the six months ended June 30, 2022, and contingent cash consideration which is due to be settled in early 2024.

We paid $0.7 million of this contingent cash consideration during the six months ended June 30, 2023.

The fair value of the remaining contingent consideration is $2.6 million as of June 30, 2023, $2.2 million of which is included within Payable to Employees and Related Parties and the remainder of which is included within Other Current Liabilities on our Unaudited Condensed Consolidated Statements of Financial Condition, and $6.1 million as of December 31, 2022, $1.1 million of which was included within Other Current Liabilities and the remainder of which was included within Other Long-term Liabilities on our Unaudited Condensed Consolidated Statements of Financial Condition.

The amount of contingent consideration to be paid is dependent on the RECA business achieving certain revenue performance targets.

The decline in the fair value of contingent consideration reduced Other Operating Expenses by $2.5 million for the three and six months ended June 30, 2023, and $2.7 million and $3.3 million for the three and six months ended June 30, 2022, respectively, on the Unaudited Condensed Consolidated Statements of Operations.

Our consideration for this transaction included the payment of $6.0 million of cash in 2021, $27.7 million of cash during the nine months ended September 30, 2022, and contingent cash consideration which is due to be settled in early 2024.

We paid $0.2 million and $0.9 million of this contingent cash consideration during the three and nine months ended September 30, 2023, respectively.

The fair value of the remaining contingent consideration is $2.4 million as of September 30, 2023, $2.0 million of which is included within Payable to Employees and Related Parties and the remainder of which is included within Other Current Liabilities on our Unaudited Condensed Consolidated Statements of Financial Condition, and $6.1 million as of December 31, 2022, $1.1 million of which was included within Other Current Liabilities and the remainder of which was included within Other Long-term Liabilities on our Unaudited Condensed Consolidated Statements of Financial Condition.

The amount of contingent consideration to be paid is dependent on the RECA business achieving certain revenue performance targets.

The change in the fair value of contingent consideration increased Other Operating Expenses by $0.1 million for the three months ended September 30, 2023 and reduced Other Operating Expenses by $2.4 million for the nine months ended September 30, 2023, and reduced Other Operating Expenses by $8.8 million and $12.1 million for the three and nine months ended September 30, 2022, respectively, on the Unaudited Condensed Consolidated Statements of Operations.

The fair value of the contingent consideration reflects the present value of the expected payment due based on the current expectation for the business meeting the revenue performance targets.

In conjunction with this transaction, we also issued a payment in the first quarter of 2023 and

will issue another payment in early 2024, contingent on continued employment.

In conjunction with this transaction, we also issued a payment in the first quarter of 2023 and will issue another payment in early 2024, contingent on continued employment.

Accordingly, these payments are treated as compensation expense for accounting purposes in the periods earned.

These payments will also be dependent on the RECA business achieving certain revenue performance targets.

These payments are also dependent on the RECA business achieving certain revenue performance targets.

2016 Private Placement Notes

4 unchanged sentences

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, 2023, we were in compliance with all of these covenants.

As of September 30, 2023, we were in compliance with all of these covenants.

On June 28, 2022, we prepaid the $67.0 million aggregate principal amount of our Series B Notes plus the applicable make-whole amount.

In conjunction with the June 2022 prepayment and the acceleration of the remaining debt issuance costs, we recorded a loss of $0.5 million for the three and six months ended June 30, 2022, included within Special Charges, Including Business Realignment Costs, on our Unaudited Condensed Consolidated Statements of Operations.

In conjunction with the June 2022 prepayment and the acceleration of the remaining debt issuance costs, we recorded a loss of $0.5 million for the nine months ended September 30, 2022, included within Special Charges, Including Business Realignment Costs, on our Unaudited Condensed Consolidated Statements of Operations.

2019 Private Placement Notes

6 unchanged sentences

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, 2023, we were in compliance with all of these covenants.

As of September 30, 2023, we were in compliance with all of these covenants.

2021 Private Placement Notes

3 unchanged sentences

The 2021 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, 2023, we were in compliance with all of these covenants.

As of September 30, 2023, we were in compliance with all of these covenants.

2022 Private Placement Notes

3 unchanged sentences

The 2022 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, 2023, we were in compliance with all of these covenants.

As of September 30, 2023, we were in compliance with all of these covenants.

Lines of Credit

2 unchanged sentences

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, 2023.

We and our consolidated subsidiaries were in compliance with these covenants as of September 30, 2023.

The interest rate provisions are Daily SOFR plus 161 basis points and the maturity date is October 27, 2024.

There were no drawings under this facility at June 30, 2023.

There were no drawings under this facility at September 30, 2023.

East entered into an additional loan agreement with PNC for a revolving credit facility, as amended on June 29, 2023, in an aggregate principal amount of up to $55.0 million to be used for working capital and other corporate activities.

1 unchanged sentence

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, 2023.

We and our consolidated subsidiaries were in compliance with these covenants as of September 30, 2023.

Drawings under this facility bear interest at Daily SOFR plus 191 basis points and the maturity date is October 27, 2024.

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 were no drawings under this facility at June 30, 2023.

There were no drawings under this facility at September 30, 2023.

EGL entered into a subordinated revolving credit facility with PNC, as amended on October 31, 2022, in an aggregate principal amount of up to $75.0 million, to be used as needed in support of capital requirements from time to time of EGL.

1 unchanged sentence

The interest rate provisions are Daily SOFR plus 191 basis points and the maturity date is October 27, 2024.

There were no drawings under this facility at June 30, 2023.

There were no drawings under this facility at September 30, 2023.

In addition, EGL's clearing broker provides temporary funding for the settlement of securities transactions.

11 unchanged sentences

For further information see " Noncontrolling Interest Purchases" above and Notes 12 and 15 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 $2.6 million and $2.4 million as of June 30, 2023 and December 31, 2022, respectively.

We expect to fund these commitments with cash flows from operations.

2 unchanged sentences

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.

As of June 30, 2023, our current and former Senior Managing Directors owned an aggregate of approximately 1.7 million vested Class A LP Units, 0.4 million vested Class E LP Units, 0.4 million vested Class I LP Units and 0.3 million vested Class K LP Units.

In addition, 0.8 million unvested Class K-P Units, which convert into a number of Class K LP Units based on the achievement of certain market and service conditions and defined benchmark results, were outstanding as of June 30, 2023.

As of September 30, 2023, our current and former Senior Managing Directors owned an aggregate of approximately 1.7 million vested Class A LP Units, 0.4 million vested Class E LP Units, 0.4 million vested Class I LP Units and 0.2 million vested Class K LP Units.

We have an obligation to exchange vested Class A, E, I and K LP Units to Class A Common Stock upon the request of the holder.

Our Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2023 included $520.6 million of Cash and Cash Equivalents and $962.1 million of Investment Securities and Certificates of Deposit, which are generally comprised of highly-liquid investments.

Our Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2023 included $492.6 million of Cash and Cash Equivalents and $1.14 billion of Investment Securities and Certificates of Deposit, which are generally comprised of highly-liquid investments.

For further information regarding other cash commitments and the timing of payments, refer to "General" above.

4 unchanged sentences

We hold equity securities and invest in exchange-traded funds principally as an economic hedge against our deferred compensation program.

As of June 30, 2023, the fair value of our investments with these products, based on closing prices, was $154.2 million.

We had net realized and unrealized gains of $11.6 million and $21.1 million for the three and six months ended June 30, 2023, respectively, from our exchange-traded funds portfolio.

As of September 30, 2023, the fair value of our investments with these products, based on closing prices, was $148.9 million.

We had net realized and unrealized gains (losses) of ($5.5) million and $15.5 million for the three and nine months ended September 30, 2023, respectively, from our exchange-traded funds portfolio.

See Note 6 to our unaudited condensed consolidated financial statements for further information.

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 $15.4 million, $30.8 million and $46.3 million, respectively, for the three months ended June 30, 2023.

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 $14.9 million, $29.8 million and $44.7 million, respectively, for the three months ended September 30, 2023.

Private Equity Funds

2 unchanged sentences

See Note 7 to our unaudited condensed consolidated financial statements for further information.

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 $0.6 million for the three months ended June 30, 2023.

Exchange Rate Risk

7 unchanged sentences

Historically, the value of these foreign currencies has fluctuated relative to the U.S.

For the six months ended June 30, 2023, 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 a gain of $11.5 million, net of tax.

For the nine months ended September 30, 2023, 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 a gain of $3.2 million, net of tax.

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.

Periodically, we enter into foreign currency exchange forward contracts as an economic hedge against exchange rate risk for foreign currency denominated accounts receivable or other commitments.

We entered into a foreign currency exchange forward contract during the first quarter of 2023 to buy 30.0 million British Pounds sterling for $36.9 million, which will settle during the third quarter of 2023.

The contract is recorded at its fair value of $1.2 million as of June 30, 2023, and is included within Other Current Assets on our Unaudited Condensed Consolidated Statement of Financial Condition.

We entered into a foreign currency exchange forward contract during the first quarter of 2023 to buy 30.0 million British Pounds sterling for $36.9 million, which settled during the third quarter of 2023.

We entered into a new foreign currency exchange forward contract during the third quarter of 2023, upon expiration of the above contract, to buy 30.0 million British Pounds sterling for $36.7 million, which will settle during the first quarter of 2024.

The contract is recorded at its fair value.

We recorded a loss of $0.03 million for the three and nine months ended September 30, 2023, which is included within Other Revenue, Including Interest and Investments, on the Unaudited Condensed Consolidated Statement of Operations.

We maintain cash and cash equivalents, as well as certificates of deposit, with financial institutions with high credit ratings.

6 unchanged sentences

Our 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 and certain fees related to the private capital businesses, 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 $1.5 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, total receivables recorded in Accounts Receivable amounted to $322.8 million and $385.1 million, respectively, net of an allowance for credit losses, and total receivables recorded in Other Assets amounted to $63.8 million and $64.1 million, respectively.

The collection period for restructuring

transaction receivables may exceed 90 days.

We recorded bad debt expense of approximately $5.0 million and $4.9 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023 and December 31, 2022, total receivables recorded in Accounts Receivable amounted to $333.0 million and $385.1 million, respectively, net of an allowance for credit losses, and total receivables recorded in Other Assets amounted to $79.0 million and $64.1 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, 2023, total contract assets recorded in Other Current Assets and Other Assets amounted to $53.0 million and $17.9 million, respectively.

As of September 30, 2023, total contract assets recorded in Other Current Assets and Other Assets amounted to $43.1 million and $7.4 million, respectively.

As of December 31, 2022, total contract assets recorded in Other Current Assets and Other Assets amounted to $110.5 million and $8.0 million, respectively.

With respect to our Investment Securities portfolio, which is comprised primarily of treasury bills and notes, exchange-traded funds and securities investments, we manage our credit risk exposure by limiting concentration risk and maintaining investment grade credit quality.

As of June 30, 2023, we had Investment Securities of $907.7 million, of which 83% were treasury bills and notes.

As of September 30, 2023, we had Investment Securities of $1.05 billion, of which 86% were treasury bills and notes.

Critical Accounting Policies and Estimates

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis