PJT - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the PJT Partners Second Quarter 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please proceed.

Sharon Pearson

Good morning, and thank you very much, Jake, and welcome to the PJT Partners Second Quarter 2020 Earnings Conference Call. of at Head Partners. Pearson, Sharon Investor PJT Relations I'm

Chairman Paul Executive Chief Joining is our Financial and our me today Meates, Taubman, Chief Helen Officer; Officer. and

are Factors contains pjtpartners.com. to point no in to I non-GAAP and the update and conference believe We this uncertainties, materially various any Partners' available indicated PJT important forward-looking may in differ of today are that I Before want statements call factors number that these we which during are we factors over meaningful our duty and to the in on a described cause statements. you the want the assumes course I section there contained turn is call, company actual statements, XX-K, to those make Form that Risk risks performance. financial forward-looking forward-looking to in we at statements. out make evaluating of are which that the to outcomes presentation website Paul, measures, from remind could these These XXXX the that subject company's believe

press the detailed GAAP reconciliations, to I'll that, and over disclosures Paul. metrics contained call morning, to financial available issued we their data website. on within refer should For And with this you these the also release our non-GAAP on turn the

Paul Taubman

and commitment our strategic Good you for today. to all morning, sustained, business Sharon. thank have about our through investment. we and firm, of Thank consistently an the building you, start joining us value-added spoken Since unwavering

adjusted income a XX% share firm-wide second earnings adjusted $XXX continuous performance grew investment. This to XX% year from grew the pretax part, and while XX% grew financial this to quarter's strong million, revenues ago. compared quarter, resulted, in per In

Strategic coupled XXX% share and income grew year firm-wide Advisory from million, Our ago. were continued our earnings to performance in performance per Year-to-date, grew XX% adjusted pretax grew propelled by with XXX%, revenues restructuring. strong business, strong $XXX in results standout adjusted a

have The purpose. the collaboration by extraordinary wellness to facilitated worked shared environment seamlessly we our conduct well and business. to And responded to teamwork, transition this remote culture diligently environment greatly as enhance these of extensive through and creativity, work reorienting initiatives. a We as of our been engagement, sense times have a by ongoing way employee we has training

the and to During individuals and onboard continued summer at undergraduate this new period, levels, have from around welcomed a also recruit including analysts remote talented have associates, we interns all world. full-time class and and programs graduate of

activity they insights. and to the both have On new to slowed business deepen front, and clients, our this we continue M&A has used considerably, time highest quality receive with while the broaden ensuring and existing relationships advice

when emerge none are crisis, that firm. will of us the stronger depth, of this confident While period breadth we we a passes, duration can and predict this

Now bit detail. turning our of to each more businesses in a

restructuring. to Turning

a Our maintained The its corresponding caused dramatic announced of global the XXXX, spike leadership #X first X in in franchise pandemic world-class globally #X restructuring restructuring economic shutdown completed activity. ranking in volumes volumes. the restructuring and restructuring and in position have months

team has increase our restructuring its result, seen a of As activity. significant restructuring level the market-leading in a

business quarter these reflect momentum results financial of from across restructuring our uplift the into industries, principally heading higher the restructuring our levels financial in distress While some the second reflects performance year.

economic health a companies. global by for considerable persist dislocations as this crisis of number to activity restructuring elevated the impact of an increasing caused period time expect We

PJT Park to Hill. Turning

year-ago the a has it Notwithstanding revenues Hill, benefited to also While continue in Park the revenues levels. Park to fundraising to macroeconomic business, we our our to in quarter in fundraises Park declined significantly of down restructuring XXXX. quarter. caused Hill's the slowdown close PJT PJT Park environment, the has successfully April be activity. was Hill's In able in significant number backdrop comments, fundraising dislocated versus Similar Hill expect a PJT PJT meaningfully

the and investors its due able trajectory to on-site business is to However, stabilize managers we to pre-COVID expect return growth when resume. between valuations diligence market and

Advisory. for X-month the results Strategic Strategic In and we Advisory, enjoyed to period. Turning record the quarter

Our we engagement made management, markets, and strength increasingly across strategic results footprint quarter and our capabilities. increase to financial our reflect The M&A, investments capital the in broad-based this business IR. liability have was shareholder

number active of substantially. continues to grow mandates Our

uncertain these are transactions, and in will we financial a lead our mandates activity, to be and how transaction completed operating is environment and if when of given challenging However, in for reflected transactions results. will it announced many these

over Board. and turn corporate has leader has to served her the the a in expertise, Boards the Grace and some public She welcome experience, consequential deep governance of community member, of business Helen? we our our Grace international companies. years, company our Board newest me on to most largest extensive results, are Skaugen. review Helen have has honored many been European the to call join to I Before for please allow Reksten and

Helen Meates

up with placement $XXX Thank breakdown revenues. XX% increase you, XX% were in revenues Beginning driven a by strategic year-over-year, of million, year-over-year, million, The increase an morning. Paul, up by good up Placement activity. Advisory $XXX in Total corporate revenues: private significant quarter the XX revenues for XX% advisory year-over-year. were revenues. revenues driven million, were

were placement Advisory $XXX corporate XX, For placement X-month up the both $XX revenues of Strategic by and year-over-year. $XXX million, ended and driven XX% total were growth in revenues up breakdown by X million, increase driven XX% up year-over-year, activity. year-over-year, The revenues million, XX% private June restructuring; in Advisory revenues: months were an

with Consistent fully expenses. more our in to certain are turning described adjustments with These X-K. prior non-GAAP expenses adjustments. the presented quarters, we've Now

compensation This ratio continues expense. ratio be at represents estimate current year. to for Adjusted XX%. First, our best adjusted for expense accrued compensation full compensation the the

due XX% to of was expense the quarter compensation significantly costs a for Total compared pandemic. the the expense. reduced million entertainment The decrease the adjusted as $XX $XX travel to noncompensation to quarter decreased global and adjusted Turning consequence year. second for expense to in million in prior

percentage last revenues, compared for the expense a non-compensation of As was in same quarter year. XX.X% the our XX.X% with period

$XX adjusted months, expense decreased with non-compensation total the X million For for million year. $XX XX% to the prior compared

As decrease decline reduction quarter, partially in the additional the with some we rent half in first travel entertainment second as This in offices in due year we took the in a last global and moved Francisco. well pandemic. San relating year-over-year by by to overlap as an significant the to was offset activity was costs the as driven occupancy increase space London

compared percentage the a of X As months revenues, with non-compensation same in the expense was last XX.X% year. XX.X% for our period

adjusted we pretax significantly adjusted income the for million million period to We with the for $XX And of of pretax same second up million year. adjusted quarter, income first $XX pretax last reported XX months, year. $XX reported compared Turning with million X for compared income. last the

for from same period pretax XX.X% same for the XX.X% margin year XX.X% taxes. for period up The second the adjusted provision last months, was quarter, for and for last X XX.X% year. the the up Our from

quarter. a As of rate. the our been taxed results and all income as benefit we presented tax also vested our with of had prior quarters, the related at annualized was first if converted delivery all shares, partnership to during corporate that the We've shares to units

quarter, $X.XX effective tax the to $X.XX the adjusted full the year. in XX.X% to in the quarter, for same had quarter rate tax share, compared per In view the Our in up earnings compared of the significantly first if-converted we months, refreshed second the $X.XX per We second $X reflect year. earnings with resulting year. our the XX.X%. for so last were XX% period expected adjusted rate year slightly tax rate share, last applied And significantly per second with X the of is up share effective first for have quarter for higher a rate be a

For was the average quarter, shares. weighted share million our XX count

primarily repurchased the approximately equivalent for the of quarter, During units partnership shares, we cash. second exchange through of the XXX,XXX

total past, receipt cash. repurchases we the in exchange in including first And approximately for currently Our exchange units will of We're units. in partnership for for done approximately million, of have X.X X notices the months totaled we approximately partnership cash. the as XXX,XXX units XXX,XXX these exchange

highest short-term cash in balance the working quarter million in net cash we ever the $XXX On and $XXX with cash, our and million balance sheet, investments equivalents capital. ended of

funded our to full available and remains of We outstanding, us. have credit line debt no

paid the be XX, Board common shareholders dividend September Finally, approved X. to it has A Class The on a dividend will September $X.XX I'll turn per back of as record share. of to Paul. now XXXX of

Paul Taubman

new ahead. unprecedented This me Thank provided and has to experience Please period our team. you, expertise to leverage of the opportunities Helen. now look allow

firm. ever, to These than execute strategies own particular on more our markets, navigate advice and financial dynamics. seasoned relying seeking their better play imperatives understand as and strengths to a industry are Now clients

to time we this our our in uncertain unwavering been our businesses. our We the stay invest our view our course. in to notwithstanding, invest always to communities. people, have continue environment infrastructure unique a this and capabilities, in partnerships, our our We clients, commitment And will as

continue connect new We clients, mandates. with relationships and trusted to build new adviser secure

global a Middle expand to East. in continue recent reach franchise our strategic the alliance of We our of with announcement the

to our senior recruit advisory to count platform XX. advisory partner with X continue hires year-to-date, partner We to strategic bringing partners our strategic

firm as continue We capabilities competencies capabilities further ESG. and our like develop to activism, shareholder of the such in expand establish areas and new

important IT are initiatives, infrastructure in also support analytics invest We local of communities. our investing we to continue our in through the and and data

million $X our COVID-related to to social amount. donated match and partners relief has and that more causes, employees firm and than Our committed have justice

consistent continue accumulating incurring no a maintaining important these repurchase make level all debt balances, cash of and share of We record activity. to while investments

and environment. combination take evolution, are pleased early that, our correlations long-term than synergistic of unique prospects a remain complementary growth optimistic stages before. the with in to have And its of We be Helen I drivers to macro will the ever businesses, with we particular and and highly more and questions. your company's each our We about own

Operator

[Operator Instructions].

Securities. hear Devin Ryan from first will with JMP We

Devin Ryan

Great.

to guess, didn't And So just green stabilize wanted growth the uncertainty. financings for have here in if still more of the sure the to that's activity want with on the started as early apologize I market M&A hear to markets I outlook. expectations about in I start earnings of some a then kind but still but several And catch year. shoots any and maybe but this, I calls heard of recovered make that, missed around a lot just bit here, broadly I We've expectation off. revenue didn't the on first landscape. I the broader I update just from guess I

could today curious still you you guys think some whether backdrop with and election uncertainty, I'm specifically seeing that So the in the kind are of change. coming what and

Paul Taubman

of year. we this first Okay. revenues our grow expect do to all, Well, continue to

results prospects these and that think bear optimism. everything just I our out about said our have we

that clarify Devin. to So opportunity point, thank giving you for us that

long is, implications sorts who the with where as to others health stages Second, I the knew of shifts our and slog back, forward for in I more quick clearly are that a think, early that clearly, consistent and that and from spring has, very activity. which the long-term who any think to And looks with steps business more is be been has benefit in hopes will that just restructuring macro be remote it will term. be unfortunately, life and and previously, companies and of will really backdrop. respect movements, consumer from we steps will increasingly I and this the all fighting behaviors, back mean this change for challenged for initial there will what there And global crisis. X, distant. a is Day there we Then be view

think in strengthen as or companies. to or ask have been the stand-alone cause will competencies period I now will will or a avail opportunities time, will while time. be elevated considerable who to who've activity as a not markets. restructuring to same they is capabilities economies for wave, or some I stronger to ask seeing asking then of holes companies right they're persist weakened, their whether to not And more whether that believe is or their scale strategic expect deleveraging the certainly capital upon emerged of to at And think or we acquiring a as business of importantly, for appropriately or operate and order. process, themselves not we're continue scope. can companies capitalized extent, continue and this there most next those world more themselves core it that's the whether independent We themselves they companies new public embark Those at what are with efficiencies levels themselves through creating And result,

that will they that, restore we companies, the believe believe sheets. that to we activity. for that void brought to these to well-positioned financial which for do provide that of balance be of -- will also We and be M&A some attempt the continue pair that shed appetite inevitably many believe and And step are sponsors next into will to wave of noncore And market. to assets, businesses, their some

Devin Ryan

just then And Park on business. Great. to Okay. the Hill follow-up

So quarter overall Hill obviously our down still quarter, beat we for quarter. this Park revenue and again last and this call reasonably, expectations that to heard the comment the substantially model with be

flows it quite like Advisory sounds revenues was strong guess piece So relative, softer. through with that placement I or the

better placement. been know than don't of kind I better activities if it's of expected. -- expected. just advisory to we whether fundraising parse than It So some obviously the ended has versus possible through had up And placement

you're Park the of ago maybe play the out of today seeing whether raising. expectations for just I'm better kind capital Hill at months with curious So was a all backdrop, and than how it are of kind parts three bit just changing

Paul Taubman

I by exactly before stand placement perhaps, can think challenged through report Helen, everyone what to we environment our in business components. term. how what in and we the Hill near elements do are you Park we've the But about in fundraises the take advisory and both said

Helen Meates

Yes. Sure.

just advisory which piece one growth. that estate, year-over-year, is fee Park the a placement placement placement typically that is flow that fund that the The fund is Advisory corporate that Hill and was of fee. the in So Devin, increased significant business, that's through in business, so advisory. contributor And of real placement placements. -- more placement the there private hedge is in that that private business the secondary a And booked the business piece to areas, the is equity the area and reminder

Devin Ryan

softer. the all of put half trying that sure apologize, terms I be moving make right, Hill. in overall Park just would it just of back the to I quite understand kind bit And that I fully within the then. Terrific. that various of understand placement the but of model, I I'm outlook the outlook side, just would together, on parts What Okay. the suggest a the parts want to

is trying for placements activity And that But has be certain, about through placement year. and fundraising expect through remainder Hill having processes constantly soft. I the Advisory challenged at provide from conversations Hill proven the units, derived capital to how we think the that placement to resilient. robust expect have Park business, the is And Clearly, year-to-date, be flows business continue all to crystal the don't of I and Park to the business, that to our clients. line, I Strategic think I'm private least business through ball. be the XXX% various a when I corporate not

Operator

Sachs. and with We'll now Goldman question, it Ramsden from to move our Richard next come will

Richard Ramsden

revenue So I couple follow-up had could Maybe a the questions. on just of expectations. I

full year. for revenue about growth the So you're talking

lot if get much a pieces. just a this decline need But Paul, of too Or willing there's this to point? revenue There's growth feel flat you I the I you'd XX% half to moving at band revenue, commit you'd I'm stage, uncertainty. would of revenues uncertainty a year. to you think just calculations be there's lot look, see for a to do XXXX? at second that to of in right see -- in appreciate, in the my

Paul Taubman

was expect Richard. thought safe we praise. be [indiscernible] funny, the revenues I It's remarks I off year continue that because for I up the with -- left deliberately our to to that

to financial do rest how I quarter-by-quarter has express it that also it true. for I that my way not leaving as our tried through the business year the left So a positioned. basis. to do can my and that, uncertainties. that But commentaries, creates run gone optimism on in provide confidence, of and we've that want some about every I guidance possible I to And hope continue it understand business certainly our is the out we're out, yet. by

Richard Ramsden

All right. Okay. fine. That's

a business. me Let on the you couple ask questions of

there's about the your that cadence a new the obviously relative result course mandates of How business became were view markets in end XXXX lot or terms revenue that for And up playing over quarter where available fact did terms little of There's as quarter? can or of in this of liquidity in in generation that talk restructuring of the the about -- year we financial say, in more were, April business? has that? restructuring the May, earlier business broadly of discussion the either on to corporates, including for the distressed. changed a So to let's in we out bit ones a that reopened,

Paul Taubman

Our changed. perspectives haven't

think caused were pandemic. I that changed. revenue has We And companies of who crisis they there global mandates a could focus businesses And where very always that that came maybe for by extended consensus business business sheets that the the simply not a on challenged, would cessation and as any with withstand extraordinarily quick thought the from. outside result and were into of was came be shutdown this all of this all balance that models activities early the time. period

markets capital we seen up. have Now open the

the think and an are "You runway I extended to just reality snapback, more very may ripples restructuring ways you have will to going that more His month-by-month famous up dramatic I continue think But will we've of are fundamentally to road. Lewis, is don't then can Joe boxer And wave. The don't And metronome inevitably, clumps. distress in and time. the But some of some that yes, and have these some of can't as here to they create That's for the altered businesses, those opportunities. extend that And the And of the find that, But monetary our this and tends you capital to from economic for of severely and environment the seen just quote the that you businesses run that period that understand but down more and because their right. lot to be were more XXXXs, for also view. to quote the dislocation be the been restructuring folks so create as know We that, quick runway. heavyweight challenged will fiscal for It stimulus. can who Joe a more markets will was, there's Lewis, kick champion. long-term a the everything be and there not more able go there activity. these like you accumulating is certainly I see assume hit just the always mandates the think can week-by-week, you been to persists, and to keep companies first hide."

but wave, we've foundation of think prospects that slowdown a I first who -- in second of wave challenged. some see all unfortunately, we quite their seen companies the that find for are will

Richard Ramsden

the even result margin home a from bounce there's will that a Helen improvement? forward? we I'll the wanted mean, it's to you from it some I terms the just be It's to And was going expenses? should should back that subsides add the result coming question, what I a How ask we more to margin let that's it it. do the then As as just broadly. to pandemic the things as think think of see the to operating that, last start about to Or great was normalize, changes a that great assume was permanent working and question margin. side. you Obviously adopted, going higher Okay. of on should in of in noncomp improvement lot in think

because see, at And job terrific cuts wasteful sure focus we've early output I we're need or because spend Helen and or think to and incurred grow, we're at on the an normal of in and think way should the normal. in that to know with as higher and an improvement. is them extended the end our But describe the day, you focused were but an there to made not of to very benefits too really remotely the the have to it's what we of to a do I I that grown quarter a back always revenues quarters costs suspect that I is. see safer model. tell, think where of that leverage a not period to are is margin expenses X well-positioned all beginning input. with And think result travel revenues. I then deal culture new does a and by over operating one-off the our to find is of world one of operating we much always of said the that I can offices Richard, not And when there's translate driven another. case that our just one base spending don't I And you're we know do And that up to But invest, new which no have number and that it the time as on the firm work ways fundamentally, enough relate and the the I that have experience, for too term, higher virtually you'll to where make that no think we I people sustainable long-term. particularly believe a the that retrofit money team spending. revenues. this to there's working margin any more a how we've diligent that longer of reality benefit investments any exactly done think into get lot hopefully, we'll see it's certainly making streamline normal have way that to is will margin world to if certainly our other. as try

Helen Meates

virtually our add, second historically look travel reflects quarter noncomp expense it and at with would at a quarter really Richard, has just no month. And I that add just expense, that million or if $X run about you entertainment. a would I

we not revenues also it that extended we we our back maintained, QX in certainly grow expect faster whether noncomp clear low it period. But as will said, assume to it but to than an don't that it's So for level, stay will as get our that as ever expense. Paul did have

so And deliver we that's way the would leverage. our operating

Operator

we'll final Chubak Steven Research. question take And our with from Wolfe

Steven Chubak

Paul, hit until to I wanted pretty on a financial quote, but everyone been Joe going was sponsor off certain, were they've you appreciate actually question you, still has I just to plan a Lewis start with referenced activity. nonetheless.

potential pickup just think powder remarks disappoint dry constructive. quarter, deployment Your simply given the the bit sanguine for of your Paul, that back relatively you I regarding If frothy a in of others market. sponsor was pace was could than relatively to less last and valuations maybe expectation know

Just evolved the been your there's space has any wondering pace change regarding how thinking material -- activity, of whether there. the sponsor

Paul Taubman

all this we Pre-pandemic, to and always falling that we been sponsor on love with in concept return like needs because dry of that is consistent. sponsors, earn a becoming not have were a shock everyone absorber the of dislocations. sensitive dislocations. much valuations that more saw think were absorber we and sponsors you're world, are as investing they in the we've highly financial they pretty financial seeing been said And were the there extent of think and I their investment the what shock there I to to powder

as financial to to would when just periods through adding we more difficult the fire activity opposed fuel have activity increase in expected M&A So sponsor was roof. going to the always

are businesses should to They're mode about are what in how their afloat. get to and they're where the tending and to companies had leverage we require needed kept which of have ones which their be early longer-term out and rather time said care. see we portfolio and more be the which also financial they which to days that conserve on now be now sponsor see of would the more where the and keep to and experience, that view opportunities, business to new I future it businesses implications balance and We month first the extremist that there to world of dedicated And survey we should unit in to trying are then sponsors, figure actionable, said of to capital focus cetera. they're with come they just is companies their and and into, fifth expect in from foremost, think we're ones would more they financial balance would imperiled pools own then pocket with were being unfortunately, that the activity. the of trying I us crisis, believe now would which their that started And prudent paradigm a valuation levels, been to sober everyone that's probably and also business strategics their to getting now than why and able as sheets, more companies think that not investment dealing more the using take the target time. -- for thinking were this to seems that that, And I liquidity own et have have a sheet. first

activity, by is while sheet wave balance next repair So be expectation of strategic financial will be our there any the led will class. that other sponsors asset more than

Steven Chubak

of to that environment? side? All backdrop. on I that Are could outlook type strength of your for How for given position recruitment. post-COVID? bulge ensure just some seeing you talent little of they any retain I right. attrition this evolving they're to their in aggressive bit the better question brackets you discussions me get them on And a the the trading senior the more banker seeing one to limit speak just hoping was recruitment are

Paul Taubman

one, financial Number we've I is, think our has our can't And that pandemic or suggest the a to anything elsewhere. and are I related said is not where we a has changed to thriving they a entrepreneurial, could clients. platform this do doing, continues business serve think things. an been don't on institutions better an joining come experience their bankers what always than And maker based they that would platform really I X relative evidence recruitment believe be way to speak that individual want better provide but philosophy to more opportunity to second can comparison. clients. to that senior that I their to And are serve can all fast-growing, a difference in

the principal So more much today, as when think than we them previously. view evidence if are an we so drivers, about what not recruiting

Steven Chubak

hoping activity, might me impacting the tax the deal uncertainty And regarding administration was just well. policy as uncertainty you more election. in be change I upcoming just election just speak risk and future potential given on around how for one the could to

Paul Taubman

consolidation edge the to issues. I think whether on have which be a unclear the is it's to industries, review. with Whether DOJ antitrust And job campaign transactions, whether in which involve trend in existing it where they're being the freezing but a only significant of not pushing and they politically office subset really clearly benefits sensitive and start transactions. or the team involves elections of will the pivot risk they dock effect cuts, run

to year. deal-making because appreciably of the that's But else controversial size be So a the election a do why equal one you subset, deal is which in reality transactions, tend hold tends I an to think issue. but on see being to fall deals, of wants they reasons one somewhat make small no their all put large is largest the campaign

this global global health but slowdown year, we're crisis. fallen a economic of Now and in deal also size has a

policy the as of office, positions consistent sense think causing with will is tell do maybe think others, contributed have what. but what a slowdown, hard who benefit then potentially will be White election be we've that the are, some both margin, depending greenlighted which as I will initiatives because and then implications. this year and certain in won't. occupies seen it adjust deals always their roadmap, primacy some is than I I public realistic much, anything probably major new not and I our year. entirely it's back public has be think traditional a clarity to election at And have party and about this And what always rapidly once that. that probably factors microscope but But just will that other upon policy the But suspect some the there once do. traditional those So to the -- put then be there's under that more has and a what's policy in will industries acknowledge year House the markets to and given is is candidates, we they is

provide some tailwind. in that like else will is the when world, will be clarity, suspect I helpful. M&A And modest probably clarity So everything there that

Operator

Paul gentlemen, and conclude session. the call I'll for closing question-and-answer this back will over Taubman turn to Ladies your remarks.

Paul Taubman

much. under everyone in normal that welcome circumstances, we way conducting time and we wish normal rather later. this do more Thank and that they well, they can safe, very Well, again, call this that offices a their everyone joining we remain you appreciate stay when we than sooner our our can call and today do interest We the more back company. in the be in

Operator

your ladies may for that, will for gentlemen, do today. and you now you conclude participation, disconnect. We with thank And and your this conference

PJT Partners (PJT) 28 Jul 202020 Q2 Earnings call transcript