- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Perella Weinberg Partners Third Quarter 2022 Earnings Conference Call [Operator Instructions]. Please be advised that today's call is being recorded. I will now turn the call over to Taylor Reinhardt, Head of Investor Relations.

You may begin.

Taylor Reinhardt

Thank you, operator and welcome to our third quarter 2022 earnings call.

Peter Barancik, Executive Chief are Co-President; Andrew today Gary and Financial me Weinberg, Officer; Chief Bednar, Joining Officer. following website Replay available of XX, X XXXX. company's through through be of hours approximately the Investors live this page of November call broadcast the conclusion will this the

earnings we have to are For today, as listen presentation, November rebroadcast not the subsequent that call. X, of the who you initial remarks and been of the updated those this XXXX to remind made herein

begin, PWP's financial we and statements performance this to call may that Before conditions I'd note expectations like contain and industry forward-looking and including outlook. future of business

the statements Forward-looking most or certain of uncertainties to and statements based to a and on and guarantees recent our The to statements statements. of of these and undertakes actual performance. risk, those for results to differ SEC cause beliefs inherently are forward-looking PWP's assumptions materially and Please uncertainties. that update forward-looking any discussed refer are are future firm discussion subject current forward-looking not no events obligation could from filing the in risks expectations

to be over on company's call Web the most in comparable measures, will Weinberg GAAP X-K, be management the turn non-GAAP measures the in to there are some believes our of financial the results. the press business. financial the found During Form metrics, reconciled call, which are which site. of discussion these items performance release also filed will to relevant with can today's the now discuss assessing I has which PWP Peter

Peter Weinberg

and third third pre-tax morning, quarter current I terms environment, terms all $XXX for you activity This would us the of very our $XX global quarterly with but the quarter per of are Today, given the for only revenue XXXX the platform. reported and across Particularly income positioned million EPS the the market of revenues performance we discuss pleased firm's call. earnings year-to-date adjusted adjusted of of current stability, client share. and the are our significant performance, we on million, future. conditions, in we how firm like morning, not to also in thank $X.XX Good of joining

inflicted today's that a solutions relates the not Structural significant leverage Capital macro than credits. typically in increase certainly have around it macroeconomic all new of factors geopolitical issues out sensitivities debt down is to stressed interest have economies the followed amongst prices a to is markets a bright advisory a amongst are particularly slowed we moment. suit, M&A of trickle, as in causing declined it plus more inflation woods on a new is world, and these world our being confidence markets environment, are symptom industry in issues yet. rates the the spot corporate XX% when around this in and and more of As significantly, both and have a Equity markets more blow is leadership to investors. year. that have

firm. our this of are there context two for themes the Within environment, overarching

across advice extremely The Wall to complexity I provide. that years type first actively the clients for prior we Street Unlike create business. need stress ago, and the since and got count of that being find and eight I with enormous engaged are ourselves an downcycles we busy

full, as and events step stable close, risk is our down elevated broadly and year-to-date but as completion a be announcement deal a gross Our pipeline extremely announced experiencing longer key and timeline to given pushed can out. get backlog characterized has been

our it and coverage healthy seeing to areas and As areas. we're relates the broad of across activity, product dialog

have than are of been a fully in recent platform. partners ramped our current on conversations are who encouraged being especially by our more for in partners less not driven years. than are three areas their investment, Today, We which third position by of

you've The that is before. heard theme something say us second

enhance profitability, grow undaunted to long-term our revenues plan global and footprint. We our our suite brand, in are and and our our product

partners talent do managing not and in client directors from our and continue manner. We the in share quite We in businesses in disciplined investing recruiting and a hire feel either firms, constrained or other senior to people promote our market opposite.

of see environment. current of engines in to both continue growth We opportunity the great these in spite

includes of restructuring strategic clients In significance, addition M&A in increase advisory business, an firm. we franchise depending having engagement our In placement solutions matters and management, this private for which traditional investment out and letters management, on markets liability is the been nearly our we conversations has capital the all advisory of show capital capital strategic the and environment, and of areas in to building liability an restructuring in area our pitches and seeing capital recovery timing to on results likely XXXX. are with are which and

future, While the to business about for we're and thinking I don't do to in convey want it. the I want how of predicting planning be

most markets issue the the point, is new would recovery unknown precise is, clear. catalyst financing the of bottom some financial in of in that an While and market will a and timing agree course, at activity not the M&A

more that We long we translate credit believe return at quickly visibility conditions. the Fed, before their improve. economic are see as term, around not matter the CEOs improvement central and direction We and the said, but at the anticipate That that public meaningful a and will of expect world. predictability the resulting that from least in banks of conditions and markets rate for in in the slowing will rises we equity confidence the only continue into environment change favorable will statistics increase near economic and sentiment

to forward ready occurs, are extreme our put plan on continuing poised we that on need. our being when with clients our whenever business a in firm's stock. capital no strong and in to public impact across the of serving of of in cash became XX% and see million value the on successful of it simplifying we outstanding. this focused returning our were debt capital which a deliver are completion have The and million warrants, to of eliminated approximately focused end future for X.X businesses the dilutive structure. repurchase Since and the exchange And potential We our continue investing previously time shareholders we're we warrant $XXX continue March, to our position, again utilized authorization our company, on

we Lastly, Goldman met Sachs Bednar Xst. I Andrew a that me Andrew I want few in the transition regarding January to known the early in September about late things CEO, at years, say as come succeeding having have leadership XX for announced days.

been be banker, well as leader proven firm Andrew's years. skills manager to last exceptional of and alike received addition very X.X investment justly The an In and our excellent team he to has ascension Andrew's so. and an Co-President the by of clients the as news has for

never it believe detail. As a firm positioned Chairman, results that to discuss in partners' has today. a been shareholder, Gary better turn than I the note, to more our a On I will is founder, continuing it over

Gary Barancik

Thank you, Peter.

has already expenses. with discussion begin discussed Peter I'll revenue performance, our As a of our

reminder, in the a non-GAAP of comments assessing metrics, our relevant we believe are which As on performance business. financial my focus will

earnings adjusted press measures website. and be in reconciliation on release, can is to GAAP of results our GAAP Our found a our which

quarters accrued quarter, first compensation in of side, expense of the consistent with XX% at adjusted XXXX. revenues, we third expense the two On the

reassess the the year year the the quarter new needed plays this on we'll in based last to investment environment, the business accrual rate for full talent talent. compensation out, As retain key overall and current level of our

conditions. ratio the compensation of by up While could few it's increasing our a we too full-year on at see early market to possibility make percentage points a depending call, to year-end

public expense adjusted non-compensation $XX revenues. expense third third D&O was and as the XX% costs, consulting benefited down year-over-year company. a represented quarter-over-quarter XX% year to quarter, prior were quarter, of from our reduced quarter and year which last insurance for Our non-compensation incurred and the million our XX% legal, Relative newly

in addition, near D&A periods. prior in quarter, as end New York their were the of this headquarters the year, offices unusually In those as to our are quarters and relating low London lease charges third

quarter will September hand, travel, fourth versus $XX year in On be including T&E spend million month. T&E the increase the up the prior We $X.X average million $X.X XXXX the over million. reaching per an $XX quarter other non-compensation quarter million to foresee that of non-comp entertainment, of million quarter and expect over in $X.X and meals expense with range the quarter fourth current was

expenses space for the in is GAAP non-comp with quarter-over-quarter is as current increased in advisors, our This due increase professional to as quarterly well and overlapping full-year space our New certain of versus period full prior below anticipated discretionary legal expectations. mainly XXXX a in fees of summer QX, certain expense and in our for expense, well related and non-compensation T&E increase to sequential Even rent year-end higher onset new this coming London. York senior projects, technology quarter the payments

of an ahead, the investments we assumed quarters of and in York, year time, completed, T&E. reported our and operating for strength adjusted savings margin business. $XX of and XX.X%. looking realize third aggressively increase two due technology-related higher Looking in in overlapping We build-outs growth D&A some increase increase income same At quarter in New rent expect an an we're to current some cost over XXXX adjusted without our spending operating as the in to headquarter anticipated the non-comp opportunities are million the continued of impacting GAAP three

nine the third included quarter $X FX $XX of and $X months $XX for respectively million income non-operating first approximately revaluation million gains adjusted of for and Our and the realizations. million to related net million

this believe Adjusted FX totaled economic we dollar-denominated The which for prior our hold third income of that created the As quarter, in we dollar the for consolidated majority revaluation report or have to gains, how net we majority currency from must the in million given subsidiaries, resulted quarter. the business intercompany account our unrealized receivables. dollars. not of which significant foreign strengthening cash income $XX of substance net does

converted adjusted for share September Class $XX $X.XX our results Adjusted XXXX. Our income for partnership as to million per if-converted quarter ended if-converted presents income all if had the was of and diluted net the stock. units A common X was XX, third shares net months

satisfy $XX.X $X.X related the payable declared of as holders allowed December XXXX. has tax period, as-if-converted of which dividend shares tax million. approximately X, limited XX%, in at of line repurchase adjusted through obligations year-to-date, was to management, pay On nearly rate PWP expectation $X.XX million payment net million $XX the its of dividends in partners, The issuances and to to the nearly share record shares million For pro-rata market, capital of approximately of distributions a million X.X quarterly XXth, XX. our we've the with share in open the to November XXXX settlements our per and June X relatively Board about year-to-date returned on

Treasury US of We As securities. revolving debt we in September undrawn held equivalents, With call back of million me cash, short-term $XXX and XX, facility. an to the had credit that, XXXX, had cash let no turn investments Peter. and

Peter Weinberg

Thank Gary. you,

line you Before we if few the a for say could words. Andrew, open questions,

Andrew Bednar

the also teamwork I role. day. firm to Peter. just that transition deliver and honored integrity who talent I'm with and you, every and more lead wanted who closely and trust, to across especially for growth new embody of I values my analyst Great, to exceptional forward working shareholders thank community our I development engaging and I'm PWP's say look with and next looking of as the forward phase our to our our serve the and firm through into excited clients

to we Operator, will to long-term Thank for the results clients and and echo very has top better deliver PWP's up much. continue we our sentiment position open for exceptional you superior now it questions. maintain Lastly, firm shareholders. as finance value our for that Peter's talent strongly never I hard a for can create positioned working choice to been

Operator

Securities. will Instructions] first come Our JMP with Devin [Operator Ryan question from

Devin Ryan

advisory First kind of story? then non-M&A will I relative pricing want some is franchise to type in be a the much sounds should it appreciate those them on much we magnitude, like more advisory. think question, you look revenue see headcount go overall mentioned. about acceleration should the advisory, XXXX think today, comments maybe I best businesses How of like of a focus capital to mentioned about of maybe, think you Peter's to businesses, bigger you how just basis? we capital the How the of way touching there today, just as could the outlook be about And be would to to order some growing for on you're which the you it or improvement seeing in

Peter Weinberg

having raising Yes, capital Clients just an this set, so benefit advisor mean considering during very our Current the level for a underwriter is accentuate through to significant underwriting and I who's stress. really need conditions between is this from are stressed an that of the who or and opportunity of d'etre. amplify firm. an kind advisor is underwriter alignment because also really raison not market times

So growth area. there business, in we're is area very exciting area really that -- we're this building our building our us, a is and for team a it's

course, why -- can, act We placement of this necessary. the independent credit seized that market, importance reason that this is is is Another have us privatization growing of opportunities markets in large sense for in as which markets even as no has credit underwriter the up. creates because agent also segment on the the exciting taken of and for is public the advisors more

it's top disclose one don't of right our in the now revenues, we of percentage firm. initiatives So, specifics but on

Devin Ryan

here. Gary probably One for

desired kind end I quarter, the of cash, of appreciate comments return the in million $XXX So, the excess. believe

how much you pay excess had here and think So, how level, cetera. expansion at should I is bonuses, appreciate to recruiting even we high if about et office a

then, think the is you've translates first slower should So that given outlook buyback as or quarter, then and like slower how of how third there much pace of done in maybe is well? much market restrictions excess? of kind quarter in a or the pace that that the obviously about how what was just just half for repurchases just And was to we dynamic third

Gary Barancik

build-outs base of look, and can for we that cash the want right have, liquidity for general really that for we we thinking So we the broadly be cash do retaining of we're on reserving working investment, capital you're your question, some investment are it, I of terms about be cash, obviously have can that any opportunities. And it's build-outs. our keep on point, needs which which still of first how talent importantly, We some needs. see kind the some purposes to think think in kind excess

things we in keep And mind. that so, those all are

that moving comp point that, is accrued is one as think the what I component you of be see we -- which mentioned target time, any correctly. a going excess at obviously to in other

guidance month of to it. some pacing $X really date give give just to that, tell don't the to just we that the give is, our what's to want of million market again the that's all But opportunistic as not over I long-term, we're in flexibility part is repurchases so can a metric second and want So, business, on relates kind that I say kind question the is dovetail to for of I to approach time. this by the at far the seeing we're quarter another going continue right to you, liquidity we but specific retaining really spent to cash, about do it we not for -- think our we're of year, you will right have October, here because the your where to on we is at here, only is of anytime, that sense. terms something it to where bit in look little

Devin Ryan

just And last, then couple clarifications. quick just of

you the think wanted to Peter, we just make holding sure steady. about that. So understand talked pipeline I I

mandates So you're are but is we I'm firm but taking formal the longer, referring to to the see domain, complicated announcement, more that a the to it's what which public just is assuming steady. mandates, in on, it's maybe get just holding

And year percent that fourth make a on then ratio, to percent the move a want heard also the quarter, quarter be the to take away sure few correctly? Just fourth I I the could the in could few is sure pipeline make comp comment to the understand that in or full comment. Gary's up

Peter Weinberg

question and the first second. to answer answer ask I'll the I'll Gary Devin,

is backlog because that's and deal strong for reasons is difference but gross backlog the The closings of very mandates last described pipeline it's picture from otherwise, our elongation going the of Pipeline just between You difficult and the the and cited lower and accurately. engagements level what's market. really slightly net down only you forward, a financing year. is of and maintained

Gary Barancik

the And accrual ratio actually -- my -- year on X%. our comment being that comment rate on was full comp the the up

Operator

next Our will come with Sachs. Yaro Goldman from James question

James Yaro

if that do start greater specifically reopen, And the to do think environment percentage absolute then you you rates sponsors differentiate and you think less maybe that and about strategics are whether you with want comprise the maybe structurally talk financing the could when there the level changes sponsors in? advisory will between just just of rates the question think will think whether and a activity, that market? here, of is of markets is strategics some you M&A I just cadence sort I could permanently those rates higher of baked

Peter Weinberg

way a even less one, available are look grade to it's the at that very capital M&A. in Equity are right expensive, LPs and simple we all, affect is sponsor below-investment now, caution. The number urging just financing more markets is, closed but is sense markets the credit

grade capital to were more So the cheaper. macro it's below of grade. times year, thing due at is with the And the that because goes volatility rates one expensive issue market are issue. same of they third just is uncertainty. obviously of significant is course expensive. to beginning Two, investment And equity X course Investment what is availability is the

definition, ambitions Confidence out believe quickly enormous specific we rate in mentioned as do say there, there now. capital is strategic that's level of that comments is change all that, think change I amount there an and can is not by are stop. where paused. I but So sentiment, We kind that don't I can there quite my quickly. a of the will but still it's changes

seeing believe a cost debt confidence what well. but do the the With financing sponsors is they a M&A think and it's as sponsor down in don't going and have in the do don't stable And markets for strategics, where the time we've is open. I more strategics first a of capital-rich dynamic to very prior respect to your particularly to at continued for is question core believe more been on right that with because that bit come bit transacting a will market, capital capital have of interesting just which are open capital-rich market will the I competition strategics. time, that the crisis we so, asset we're versus looking a And have a of seen now them. real significantly, is the transactions. strong That community, long the lot assets, the from a

James Yaro

Maybe given most if has the been the Europe, I can economic this rates is a into US next of two year. of could and a with dollar, just broadly, strongest all you year M&A far guess, just about And more any I'd -- activity which talk Europe on stronger ask market is whether that catalyzing the one say there? so part Europe? geopolitical then could higher that Maybe into the part, just sort concerns over and continue I

Peter Weinberg

question, affected markets materially it currencies, and really your much. hasn't dislocation I values. been affected has first been indeed that on has foreign M&A small the significant in the changes So really the there years when in exchange mean over have it

with we're regard. in it think I well that cross-border and respect here may conversations having certainly discussions to

stresses, are parts their and are Energy one be cases higher. mentioned is with our present. think solvency. more to Number focused result economy we one of a US of has as than versus different They're which focused and Europe, of I've is in inwardly share; on the as which their insecurity but they really finding clients is severe Europe another Europe more higher ambitions couple is sort that and of more some are respect delayed. there set the US, weaker the The stresses, focused. inflation there that of that. availability more we're macro are look there and profound before. is people the Europe not US extinguished, I on is though They're and is, some at confidence to capital cost way a and strategic

stresses are the than will US. Europe significant time, and be think so but to continue active over more we the So, short-term

Operator

next come Our Instructions] [Operator Brown KBW. Mike from question will with

Mike Brown

line an in like So last revenues to first quarter you half, expectation we the expecting. in guys be about relatively talked the Street the for better second than came third looks were quarter with in half

just think the the expectation check for wanted as full I still year we So, right to that's fourth here quarter? if about the

Peter Weinberg

broadly it the Yes, as the quarter. are expectations is they in last same our were

Mike Brown

make then And driving next comp sure the is, what's any clarify what then potential points it I couple Is year year of apologize, the I of a percentage ratio is year? implies I I impact what's XQ message time? for well? like does increase, just correct. thoughts full the And for that rate up a have cost follow-on bit higher into imply message think, in Gary, a I just that, that that one that wanted to just on about got next guess what more kind you it Can a and as that just could initial that inflationary therefore of -- run

Gary Barancik

the on to see increasing that few I what question, could percentage comp full-year points. a up just was, potential So ratio said the we our of mechanical

for come that So the that it a question. we with on be average year, had larger to mean quarter would the just did would up fourth that, if

good think early on we necessary of really to decided frankly QX tell too visibility keep comp your other make wanted what's to I sure year, we on ratio question and for had part full it's our we year. the very was next for to why about

of we that going at year something mid though, general so, conditions. is obviously say which our will the look me, changing not on And said before. what we mid-year, I comp very is the based our guidance XXs, excuse closely we'll are next mid-term to be

Peter Weinberg

add in our work outstanding shares here. firm by that people are who I'll the mind of also that, to Mike, of owned keep XX%

same. employees And shareholders and and the because on one in focused so both they we're are cases many

Operator

next with Research. from will Wolfe question come Chubak Our Steven

Brendan O'Brien

in filling This Steven. is O'Brien Brendan for

you see an to hovering which sector that strong said is still strength with guys. you oil continues energy, amount prices to more momentum kind of fears level cautious to expect generating weighing stance maybe in oil previously the for of they you that at term immediate expect the or relatively cash. a recessionary in Do are to area prices, Peter business on is here? that And companies which a $XX, do significant So with one continue you've start, activity take these of

Peter Weinberg

with dramatically energy Well, times one in to this that the with the cash down is to flow. is question the way that kind the thing start and sector respect leverage one sector, leverage on is we look at it, of

conversations or there's are the way acquisition sectors through increasing we're to across it start of dividends upstream, that not of and not oil it and that tracked and all in to excess so, to that an been many different M&A too been share them. want will is increase whether years there of the distribute message active services M&A opportunity of they different different a And lots than energy trail sense the has environment. et the cetera. with was from we companies forward, decide this be to feel time it And market be have flow, price but in cash of price there we middle a in continues last not there repurchase ago, in continue The we opportunity But the on to and restructuring they pieces has the that energy to or like activity downstream lots shareholders that continue is big the to rebound do that the about think energy saw market of going think significant. do

Brendan O'Brien

has business? in the my messaging to levels I to we've some restructuring. and exposure our and US get mixed on both I improved, for compare relative your as then in these drilling you about could environment the a us wanted sense two if that clear wanted remind how of follow-up, activity areas to activity regions you It's And would on the heard Europe. within

Peter Weinberg

is restructuring, growing. respect overall, would Yes, opportunity to I with say the

cost, entered and the to chain this respect supply who multiplied, environment labor others, stressed, not For not companies rate and floating is costs softening. but into only economic revenue costs costs to stress interest also -- interest mention with

the has say market opportunity. that, industries different growing stress. all and would and overall, touches of top have really on showing I so, And technological is create obsolescence, And very which you a many, many interesting

because Europe, I market it's and was think the the to different with higher you a stress in of the complex restructuring but is level more in restructuring jurisdictions, know respect as significant Europe. opportunity Europe

as the so and an increase an an it fueled result, and we're position than was a footprint, was we're a it broader economy in And in seeing that's letters by and US the engagement last is Europe, much in conversations, in increase time than really both seeing we're seeing in pitches is increase our which macro that really today.

Operator

additional the This to Peter over today's concludes remarks. the Weinberg call turn Q&A any closing to for portion or of call. like I now back would

Peter Weinberg

forward everybody operator. you, year-end our as Thanks joining with we a to and for Thank group today look reconnecting results.

Operator

concludes you. and third webcast. Weinberg Perella the Thank quarter Partners call XXXX This earnings

day. time line You any at wonderful may and your disconnect have a

Perella Weinberg Partners (PWP) 5 Nov 222022 Q3 Earnings call transcript