DEFA14A: Evercore Seeks Shareholder Approval for Additional Equity to Fuel Growth Strategy

Evercore is requesting shareholder approval for 6 million additional shares under its equity plan to support its broad-based equity program and growth strategy over the next two to three years.

Summary

• Evercore is seeking approval for 6 million additional shares under its equity plan.
• The company states these shares are crucial for managing and growing the business over the next two to three years.
• Over 90% of equity awards in the last three years went to non-executive officers with client-facing and revenue-generating roles.
• Evercore has offset the dilutive effect of equity grants through stock repurchases, resulting in a negative net burn rate of -3.5% over the last three years.
• The company emphasizes that its equity compensation model aligns the interests of employees and shareholders.
• Evercore's equity compensation practices are comparable to its direct peers.
• The company hired a record number of external Advisory SMDs (11) in 2023 and promoted seven internal Advisory MDs to SMDs.

Sentiment

Score: 7

Explanation: The document presents a positive outlook, highlighting strong growth, prudent equity management, and alignment with shareholder interests. The request for additional shares is framed as necessary for continued success.

Positives

• Evercore has a strong track record of managing equity compensation, offsetting dilution through share repurchases.
• The company's equity compensation practices are comparable to its direct peers.
• Evercore's equity program is broad-based, extending to non-executive officers with revenue-generating responsibilities.
• The company's five-year TSR of 172% outperformed the S&P 500 Index by 65%, the S&P 500 Financial Index by 96%, and its independent peers by 18%.
• In 2023, Evercore returned over $523 million to shareholders through dividends and share/LP unit repurchases.

Negatives

• The company needs to request additional shares, indicating that the previously authorized shares are nearly exhausted.
• The request for additional shares could be perceived as dilutive, although Evercore has historically offset this through share repurchases.

Risks

• The company's future earnings and liquidity position could impact its ability to continue offsetting dilution through share repurchases.
• Failure to obtain shareholder approval for the additional shares could hinder Evercore's growth strategy and compensation model.
• Increased use of alternative forms of deferred compensation in lieu of equity could reduce the alignment between employees and shareholders.

Future Outlook

Evercore anticipates needing the requested 6 million shares to manage and grow its business over the next two to three years, based on its growth strategy and compensation model.

Management Comments

• We grant equity broadlymore than 90% of our equity awards over the last 3 years went to non-executive officers and were issued to people with direct, client-facing and revenue generating responsibilities.
• As our business continues to grow, the additional shares we are requesting are critical to our ability to maintain our compensation structure and align the interests of our employees and shareholders.
• We have offset the dilutive effect of our equity grants through our stock repurchases and, taking these into account, have had a negative net burn rate of -3.5% over the last 3 years.

Industry Context

The request for additional equity aligns with the human capital-intensive nature of the investment banking advisory industry, where equity compensation is a key tool for attracting and retaining talent.

Comparison to Industry Standards

• Evercore compares its equity compensation practices to publicly traded independent investment banking advisory peers such as Houlihan Lokey, Lazard, Moelis & Company, PJT Partners, and Perella Weinberg Partners.
• The company states that its equity compensation practices are in line with its most direct peers.
• Evercore's three-year average stock compensation expense as a percentage of net revenue per employee is 9.37%, compared to peers like Lazard (8.55%), Moelis (13.46%), and PJT Partners (14.29%).

Stakeholder Impact

• Shareholders: Approval of the equity plan could support continued growth and shareholder value, but also carries potential dilution.
• Employees: Equity grants are a key component of compensation, aligning their interests with shareholders and incentivizing performance.

Next Steps

• Shareholder vote on the proposal to approve the additional 6 million shares at the 2024 Annual Meeting.

Key Dates

Keywords

equity plan, share repurchase, compensation, dilution, shareholders, equity awards, net burn rate, Evercore