Earnings call transcript Q1 2023

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Operator

Good morning and welcome to the Perella Weinberg Partners First Quarter 2023 Earnings Conference Call. [Operator Instructions] This conference call is being recorded.

At this time, I'd like to turn the conference over to Taylor Reinhardt, Head of Investor Relations. Please go ahead.

Taylor Reinhardt

Thank you, operator, and welcome to our first quarter 2023 earnings call.

Andrew Officer. Executive are Barancik, and today Financial Chief me Bednar, Officer; Chief Gary Joining of call two replay May on conclusion A this this XX, the Investors through of company's page XXXX. the website broadcast approximately live hours the will following through be available

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

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

not inherently are of performance. or materially statements could those future cause uncertainties, results subject Forward-looking are and from assumptions. forward-looking It guarantees to risks, the expressed events differ to in actual and statements

PWP's no to most forward-looking uncertainties. and SEC beliefs and the recent these a expectations on current filings forward-looking The of certain discussion our obligation refer and Please update undertakes to any of statements. risks statements based are for firm

During discussion GAAP items press are Form of has in filed the these also PWP website. the management most which the which financial X-K, some be the be are assessing believes business. a the financial the measures, can which performance company's non-GAAP reconciled metrics, measures of today's will in on to comparable call, there release relevant with found

call turn to Bednar our Andrew the now over I will to discuss results.

Andrew Bednar

traditional challenging first-quarter business. we for of ago, environment XX% Today Thank million, and that's the reported revenues and operating morning. you, M&A a good Taylor, the year from $XXX against down

our as to tuned US, split Europe. transactions. more between [tentative] United a and longer see fewer Geographically, our of within fees During the the historical transaction related continued transaction large-scale the to recorded we environment towards still range and generally result and the States more a so even revenues timelines quarter,

[capital] infrastructure. healthcare platform, and financial energy and be technology well as to as our continued Across active

meaningfully were this up result sizable financing which driven comparison. traditional business a year, our business capital the over by restructuring to in year and financing versus Although restructuring, in quarter last fees down solutions for difficult the are made transaction solutions QX 'XX, mandated our capital for largely attributable year, and

now advisory policy which from by [closings]. effect markets decisions seeing worsened business, specifically, as conditions capital lag has in And capital companies we of and in valuation remained are we slowed expectations our in still experiencing of markets, market the of resetting and In are Fed this quarter. pace investors, a process private challenging both the 'XX

traditional has affected in bank less and the at our confidence]. merger ushered in pushed uncertainty the to to for QX business to mentioned that market, of shook forced in [CEO beyond, failures get that earlier. broader I M&A, with contributing transaction new elongated witnessed and deals urgency and we With markets or QX, relating Looking and spring boardroom expected a has this the importantly close global across announce number timelines to platform conviction our

conviction. range Continued related affect forward. And timing and influence important deal these uncertainty, confidence as the of a that instability are market clarity, adversely perhaps broad as economic lack to conditions likely of and going

base. in we even Notwithstanding closer scale we to attractive on remaining these to here our an our same challenging build business. vigilant recruiting expense the are remains focus what capitalizing long teams the the always are our control, getting current game. environment can times, And conditions, about coverage our we opinion And time our playing to and spent clients on

conditions our in join coverage footprint. talent areas, we to the client compared continue PWP With for bankers, strategically firm Recruiting our partners, in have excited With ahead. to three senior opportunity year and coming market-leading key all efforts, our five to two business, added we're MDs position growth the to prior ambition this in scale months. strategic increase materially improved are periods. We all and to investing

our lifecycle, robust. unique to are offers and we where our value Given platform our in pipeline recruiting proposition experienced remains very hires,

to promoted directors in organically date, two as continue to six well. managing and we Importantly, Year partners business. grow our we advisory

are with [value and that small enclosing a gap]. size of We is a brand firm big the

continue reach clients. So we expanding world-class we will capabilities, and best, our to doing product breadth of always our providing do what industry while advice

of built like is and weather advantage Deferral to take cycles cycles indeed to this.

us our on our work encouraged the to and grow recognize and So more footprint. opportunity five want in market-leading our their we helped I continued mission. right the team to our you, XX now quarter now are detail. Thank hard moment in turn commitment to call I results teams the very you conditions. in results offices difficult in effectively Across clients, of our deliver in this to the to by Gary, scale over take PWP front collaborated business, focused a discuss team. stayed to to our for countries, will

Gary Barancik

Andrew. you, Thank

our expense already Andrew of his In range accrued top-line spoke revenues, to and our below a term review I'll in adjusted year begin of expenses. XX% within guidance we mid-XXs keeping XXXX As quarter, full of to compensation the was accrual medium level. remarks, talent revised year with business our first the bringing end performance our be on at pace the industry platform based compensation based year our and of end conditions senior accrual expense compensation on This assumptions could at progressed levels. margin set quarter as and

both over largely million expense quarter, up year rent. and the adjusted and by Our and quarter related overlapping over driven an $XX was increase in travel and first for quarter year expenses non-compensation X%

depreciation in to growth into XXXX, XX% the we and continue with of in rents year, to in New tied quarter the headquarters For fourth related expense the the new step-up overlapping over York XX% non-comp spend expect our to full projects.

and Expected not including contributing base. a representative expenses, and technology expense in increase. for increased Potential the go-forward items, inflationary example, pressures growth rents, this is overlapping some some for legal non-comp overall expense of in cost in travel investment to continued growth entertainment XXXX, one-time rate

opportunities certain progress we environment, expenses. more may challenging through rationalize eliminate look that the this In year. continue managed as for to We expenses expenditures our we or tightly lead to to defer

For the of income operating $XX million, net income first an income $X adjusted million Adjusted income $XX.X we million margin reported and adjusted if-converted and totaled respectively. adjusted and of net operating X%. quarter,

if-converted earnings same during the $X.XX Adjusted was period.

We to continued distributions. to generate repurchases, strong flow cash returned our share settlement through release pro dividends, $XX investors and common and and stock million rata net issuances,

And still authorization we in $XX buyback capacity million our original Our [payable]. have remaining. authorization approximately $XXX second has million

dividend call operator for the back we quarterly Additionally, turn this the of we'll to morning, now $X.XX share. to the declared line questions. that, a With per open

Operator

Securities. JMP Ryan, Devin Instructions] [Operator

Devin Ryan

morning, How you? Gary. Hey, are Andrew and good

Andrew Bednar

are Devin? you, How good. Very

Devin Ryan

as wanted it Yes, recruiting just being touch the attractive. we're that you to Right Andrew, first on environment. from question, others talked hearing fairly well. about now

want normal kind obviously just comp in kind quarter. of talk so the the was of And first expectation comp and the in then ratio there interplay with set to target about because the ratio, the range

But of to call your maybe would extent just maybe year, the Thanks. to far to the you in type extent environment do evolve want environment? recruiting into ratio the curious kind you that recruiting that? you of this this could [interplay], expect really a higher where a lean And decade] then that migrate comp in once how allow [we're do to to

Andrew Bednar

Yes, thanks, Devin.

well said. a think is environment. once-in-a-decade I that's It recruiting

in 'XX I saw think timeframe. the last the probably 'XX, time this we

our shown on increasing to very, ambitions, in already, So that just also and are we active all seeing client very leaning matching And we're of I which for We've continue be around a to we candidates sure. up strategic very recruiting. quality well and are think our footprint.

we're So very excited very, the environment. about

year. I terms in of think in it's comp the early margin,

last we took as think fourth year our quarter. I So headed into margin the we up

I up. one But to we're regarding year the explain secondly, in to part our end margin number make is early a is I've just always think forecast going that of that it's CapEx. comp where to tried

perspective, from it all well the up so ends P&L. that And aware in we're accounting an

at business, revenue. way CapEx. the to our hires actually on year, two-plus of years producing more ramp It comp takes up part for begin look average new a our margin probably is But and than the we

we're all hires now. of time our years And so in to and have that really cycle usually markets we capital deploy one experiencing two-plus CapEx is the depressed as for

of mismatch you're timing to that bit hires when going So a new have deploy and you're capital the of return. for the a necessarily going see to you when in

are we in. leaning definitely So

we it's think early where investing in we're that I but as cycle 'XX on are forecasting this going and margin we think up, we into will and the rewarded end comp for beyond. head be to

Devin Ryan

Okay. Terrific.

kind and Just the been just of macro that the that on here. follow-up continuing for this really just uncertainties elongation we've about past appreciate hearing I year theme here environment

have. you appreciate or have on quarter we So with ball give maybe that crystal a the any stuff and level dialogue clients of I to it's progress bit little the -- dig if progress two? to made just possible, but qualification or over more just here, around quantification more in even made the we past Have

also bankers, you've lot the added years. mentioned, And Andrew, a over you few as past of

kind the very versus still So Thanks. for first macro challenging to of this time bankers that coming there. maybe balance your starting contribute online between and just theme new just out

Andrew Bednar

is macro that. the Yes, There's challenging. about no question

into of January most better felt think us the February. I industry and coming in

And of of setback. clients was that just March ushered a mixed And most element in I it signals. my I really our think as I think in said are a seeing commentary, uncertainty. new

we're five we so client-centric in key And And a operate the very industries. model. coverage business

sell products to clients. don't So we we don't

We solve capital And of problems. the clients for structure. problems clients are help lot a around now, right financing our

M&A management of solutions mandates number our sure. Traditional are very terms team busy. is up for us. liability capital restructuring so flat in for and Those of are engagements And teams

advantage to got active are where make periods. clients need and But most among financing other strong that that looking private very which prior differentiated versus they've equity, continues we strategics balance our do versus moves have a strategic have to quite to relative inactive may a particularly remain healthy that dialogue, sheets

we're So very busy.

it strength of of our teams. brands our I to quality think the and speaks the

energy we for M&A We've rich and transition think those our investments around activity. strategic made team, technology energy our target and are around investments services, We've our just transition, very, team. infrastructure recent business and made very environments future very

no about of But for good right now, us. there's feel macro There's question. just I all headwind the So a positioning.

Operator

Goldman Sachs. Yaro, James

James Yaro

morning, longer-term on know, participate lot impact stress. And the Good restructuring on taking a affect your the just I'd bank margin banks questions. thoughts the of get -- and obviously maybe impacting wanted business views it but term, how my curious, I recent thanks the about business. near your syndicated to M&A just as you've Regional talked be could for financings. this as the well in in did you

So some ramifications could longer as imagine there be term I that would well.

Andrew Bednar

thanks, Yes, James.

saw is I May extent just the and I from so going and that contemplating it that in the the they're think pause, the we but our and all think to through into to situations just March moment moment, significant long-term it's have banking a April clients now the instance, impact to not first biggest of hits in clients. transactions affect for confidence Boards and of the planning

banking the clearly have that it forward tightened, move believe confidence banks stress where and more has on and I a just available. is our expensive think credit scale transactions action the to to So in on long-term I impact larger and impact unlikely M&A credit. do Credit around recent have conviction clients' less is is an regional conditions

That center to continuing now a community and banks traditional pulling business. that's what of credit credit a picked also less just significant the money is the of lot actually activity trend A do been but XX-year a been traditional for there's trend of of disintermediation traditional do. our extension. Traditional up of where That's lenders. used banks back very private non-bank been driver to banks, by

private the will credit. focused industry I firms trends and advisory in from benefit think our the

dislocation quite continued So that and disintermediation. we're by encouraged

James Yaro

you're Okay. recession just That's we forecasters the turn Maybe this think at then very to helpful. to would seeing much year how I restructuring recent just to of point. in talk weeks. And this and this you beyond? backdrop clearly for restructuring, expect XXXX have increased, impact if among odds Maybe versus

Andrew Bednar

question ago, I about restructuring that. companies. increase there's the a our moment There in and a are there's liability as of stress commentary management no lot clear mandates, Yes, in in a said so

as as in not seen broad-based we've cycles. it's think I prior

think it is I so selective, relative So quite to far a active it's year without question. quite but ago

with counter-cyclicality showing still is M&A in business. decline restructuring the The

think effect are M&A an pretty whereas in curve. the as there's impact immediate in revenue, decline we've curves that has fallen on a the though, restructuring. revenue off, M&A So in I lag seen restructuring, a increase has The different increase in

from So do today's as I QX realization is revenue be to head think into into likely 'XX. increased and activity the and be to QX restructuring and we realized

there. is countercyclicality the think I So

our for going impact revenue the of and But positive had and think strong very is business, we're lagging a decline think as year. I M&A, we advisory in restructuring but the to see financing revenue I in ballast that's is half that very helpful. the back effect

Operator

Chubak, Research. Steven Wolfe

Steven Chubak

to up restructuring some that hoping remarks, parsing for to the meaningfully closing tailwinds engagements was I mandates the expectation there are just your on potentially flat. Andrew, alluded and on follow of some being second about made language the So in side in on delays. that liability you up some remarks the the M&A just But latest half, prepared you are recognizing

in If XXXX we to you potentially of that in see even expect in more the Or back the to revenues closings given seen start materialize far? of the revenue just reasonable to delays a these cited? 'XX, face even some the these is are of thus tailwinds story, of headwinds it macro 'XX tailwinds in some we've grow half, versus

Andrew Bednar

thanks, Steven. Yes,

it's exact timing revenue have pinpoint accelerants that try when do have progression, think revenue. when hard to I points. business really our we need And the in mandates to get in think of inflection I to we our you

we the revenue. restructuring the to hard very pinpoint of future exactly we do have to I it's that our system. have But But timing. mandates So revenue I will very, think indicia in the convert think

I that think that back we'll of half year. start to see this

broad down continue lockstep declining an it making M&A. prediction moving XX% M&A not market but in certainly broader M&A, not with any announcements are completely is will while in broad the I how and we're think closings trends XX%. down think of into much I to offset we And and with I'm tied XXXX, that to about

we I We obviously harbinger that in the an to seeing revenue, 'XX. and market much still we feel seeing we're tied have think somewhat in announcement that's decline see which, but not said, We're closing activity. We're outperformed that we the and we're markets, have not definitely in were to I timelines. of it. future announcement, last overall that increase the year And substantially, seeing as do to getting just M&A elongated in a events activity, certainly

Steven Chubak

And Right. been buyback. on still have follow management, at consistent excess just the plenty capital for with relatively the appear you of liquidity my up moment, to

very of year? this revenue magnitude remainder but attractive just of backdrop, how the a get over uncertainty, Given should about the the the some or as the recruiting the thinking sense wanted at to same time, cadence buyback we to of be

Gary Barancik

that exactly Yes, Steven, I'll take sort right think kind that. And look, we of about, right. the you're considerations of raising

sheet balance strong. remains Our quite

are have very going to We potentially have a We environment in position. is great words, obviously use here. an cash there CapEx opportunities, no debt, but Andrew's accretive we where forward

deploy it So much monitor. something we put going way. future most purchasing not levels are. more but We're same opportunities shares, are opportunities If buybacks, going it's there we're project the to of to attractive where see than very really to capital out it the attractive we'll

Operator

Moon, KBW. Matt

Matt Moon

from figures revenue general But is divergence geographic the And of see geographies of phenomenon of term. Europe, data the seeing and to that comparison kind to data should the any in the at near industry on of would shifting this from hear. great the the some can cited kind From specifically? we PWP comments any the contributions be industry picture quarter. and continue curious this environment there's least US US the in if other primary You wide through announcement what

Andrew Bednar

Yes.

of band still mix are business business. between we and in our think US our European I our

seeing bands. that movement to I'm from structural or from anything from those our we're going sort mix. the we're to time. of And of But permanent so that time away I traditional average band that's within think still some movements generally, have not

on our similar conditions They ground are the report think in States. our ground as their bankers United in Europe with active on the clients. the bankers I

are very we said, client-centric I As model. a

capital are So our industry lot coverage clients teams needs. their of constantly A around those with and serving are needs structure.

portfolio, to with ways US versus optimize don't much respect Europe of ways distinction look their continue again, there grow. a companies for And to is and to to think I

continues dialogue Europe. to and the the toolkit of people that corporate will case M&A about, much and very in so part And think US be that's

Matt Moon

to bases of risk just community strategic teams, down the seeing strategic client Great. to on sponsor maybe or And between difference wanted sponsors, and different of you're still what of seeing higher levels of spots. topic sticking the kind degradation drill and

hand in things. you're of other of both what points the we turn on curious of the be markets those the kind seeing and or also could to kind On see kind quick need the of need we to for is just and that see fact

Andrew Bednar

Yes.

So the I seen much do. you've data as as think I

down. I broader So down the more is think than is activity market sponsor

active, an community. question, capital we're the still that sponsor So of equity their are in will Though financial sell to deployed, very slower amount capital. community private both for environment need we also buy in also be private will sides have they that be seeing the enormous of of will but optimistic no very sides terms businesses credit that terms and a deploy

mentioned I business. that earlier positive our trend for a is As

rate that had market believe X-plus in we that tougher the as zone. a activity. adjustment move a XXth re-emerge and a M&A conditions. strategics XXXX active private are similar and a private the And where of in we we credit very in business. had right In amount enormous had equity We're in yesterday. once now. We've have a have 'XX, tightening participant still targeted then I in and resetting think a an we now the advantage will Fed as the And funds equity to credit as Fed year I a full seeing settling of adjustment

still we're to we to adjustments credit activity I So And phase. different a will think environment. have that in just the full but to I get adjustment resume, think

Operator

Research. Wolfe Chubak, Steven

Steven Chubak

the XXXX not to recognize guidance want like number a are I does the it for of growth non-comp feel thanks are growth you're XXXX. indulging yet, Gary, ready trajectory. follow-ups. to inflating that give in level did but I about of the one-timers ask Hi, there probably

Just the should terms normalized how of cadence in reasonable the what's recruiting wanted to your outlined? think about targets growth, guys non-comp we that have you think expectation given about of some

Gary Barancik

of investment you tied Look, the ways. items this all really various look if and non-comp Yes. think most they that the I first to the increases, often are of growth at in year

rent forward. reiterate, have as So them. obviously have headquarter we'll out, depreciation significantly as the increased two bit, again, double are square aggregate lot, But two coming future actually a the to we those And But in our locations, actual year going flat down growth which rent an our basically we've build in square some stepped-up have this costs some even though been well much in but allow footage. footage that's for investment to a not higher on

another in Some of the has area, other area increase for the IT growth us. been of

a quite outsized. of this is So bit somewhat year

We year, But for level guidance aren't remarks, anticipated sustainable that that as isn't I over giving certainly into next it a see we my in 'XX. the year and year we see level mentioned prepared beyond.

in lot back. form thing are have that seeing more. the new their back we The on to clients that head good peers, of our but come investment. and is see But is are of another headcount business that's to front And of growth levels] are means a because seen for seeing our people it fund, getting numbers that's we per that thing we with a our similar look, our [Harriet out has really in below this [TME] XXXX, coming a basis, us saw in are other in still you what

Steven Chubak

to And full XX%, relates encouraging comp to just that of it's the year accrual accrual comp the Great. 'XX. comp it in ratio, the below see as

contemplating as have of what on baseline understand you year well full to XX% on as the that be based what in levels for reasonable recruitment. to Is modeling today? for 'XX visibility us wanted terms Just that's a activity

Andrew Bednar

based I number Steven, that mentioned what earlier it's Yes, we on seeing is what are a QX. QX in

the about where and not said to where I elevated in find item end comp any earnings company. up. that of CapEx think us terms an power of think we're you And having as guys to forecast to really you P&L situation it's early going need about earlier, margin about is steady-state I

CapEx advantage too year I have to again, to than say, earlier, the end I of we year, a it we are where other look in and to So very going we're by the as suggest at attractive as early be the our said That's numbers. building take not to very people we're needs going fit finding to build to of high-quality We're We're and with we're environment. desires. people do not recruiting and quality that that just that. strategic And what about.

Gary Barancik

just best early accounting year. add date. our view a the to said, was point, as That could But of in March full XX% as that matter, If view year XX. of as our of very was the Andrew I what to Andrew's it's technical

Operator

call. closing Thank Andrew you. the any conference Bednar portion Q&A now I for to to today's the of This remarks. like Mr. concludes additional would back turn or

Andrew Bednar

forward joining in Great. Thank to call everyone and We continued Thank firm everyone, for August. in call. you, talking support you. our your appreciate interest to QX look the and our on

Operator

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

may disconnect You line. your

Perella Weinberg Partners (PWP) 4 May 232023 Q1 Earnings call transcript