PJT Partners Inc. Q3 FY2024 earnings call

• Record third quarter revenues of $326 million, up 17% YOY; nine-month revenues at $1.016 billion, up 23% YOY. Adjusted pretax income up 16% in Q3 and 32% in nine months; adjusted EPS up 19% in Q3 and 35% in nine months.
• Closed acquisition of deNovo Partners on October 1. Committed to continued investment in capabilities, industry expertise, and geographic footprint.
• PJT Park Hill's revenues rebounded due to growth in primary and secondary businesses; year-to-date fundraising volumes more than double YOY.
• Restructuring business benefits from multiyear cycle of elevated restructuring levels and remains active with record nine-month revenues.
• Strategic advisory had solid year-on-year revenue growth with a growing backlog, near record mandate count, and favorable M&A backdrop.

Total revenues for the third quarter were $326 million, up 17% year-over-year. Nine-month revenues were a record $1.016 billion, up 23% year-over-year. PJT Park Hill revenues rebounded, with year-to-date fundraising volumes more than double year-ago levels. Restructuring revenues were at record levels for the nine months. Strategic advisory had solid year-on-year revenue growth with a growing backlog. PJT Park Hill's 2024 results will be significantly higher relative to 2023 and in line with 2022's record performance. Restructuring business benefits from elevated levels and is expected to continue. Strategic advisory sees growth with a built-out platform, growing backlog, and favorable M&A backdrop.

• Third quarter adjusted pretax income $51 million, nine-month adjusted pretax income $172 million. Full year 2024 non-comp expense growth rate expected to be in line with nine-month rate of 14%. Effective tax rate for full year expected to be 21%.
• Fourth quarter weighted average share count expected to increase by approximately 400,000 shares. Board approved dividend of $0.25 per share, paid December 18, 2024 to Class A common shareholders of record as of December 4, 2024.
• Nine-month repurchases total approximately 2.6 million shares, up from 2 million YOY; record open market repurchases of 1.9 million shares YTD.

• Forward-looking statements subject to risks and uncertainties described in PJT Partners’ 2023 Form 10-K.
• Macroeconomic headwinds dampening primary fundraising marketplace.
• Dependence on successful execution of continued investment and acquisition strategies to drive growth.

Q: Hey, good morning Paul and Helen. How are you? How are you seeing the capacity of the strategic advisory business today and kind of how that's evolved relative to maybe the prior up cycle that you referenced?

A: Look, we don't manage to a metric because it's very hard to say a partner should deliver X in revenue because it's a function of time horizon, macroeconomic backdrop, what's built around the banker, and strength of the franchise. The firm has made extraordinary progress in 9 years, with better built-out industry groups and geographic presence. Direction of travel is meaningfully more productive going forward, first seen in 2025.

Q: Good morning and thanks for taking my questions. Paul, maybe you can talk, since you were talking about sponsors there, can you talk about how you're sort of leveraging Park Hill's touchpoints with sponsors to kind of improve the win rate in sponsor M&A, where you are in that sort of evolution?

A: If you're going to have a best-in-class sponsored practice, you need a best-in-class strategic practice. Having corporate access and sell side mandates translates to sponsors. With every passing day, this mission is further advanced. Sponsors are important clients in liability management and restructuring, and leveraging best-in-class franchise and sponsor relationships helps spark growth in related businesses.

Q: Morning. Thanks for taking my question. So, Paul, I'd love to start on that last point. So it looks like Partner headcount year-over-year is up about 4%. If we look at total headcount, it's up a little more 10. But your total revenue is up nearly 21%. So can you maybe help us understand what's missing with the lack of comp leverage coming through this year?

A: You've got to look at headcount growth and strategic advisory revenue growth. This year, they're roughly in line. Investment is a multiyear process. We've had two years of revenue contraction, but now have an inflection point. We're highly confident that next year strategic advisory growth will meaningfully exceed headcount growth, leading to comp leverage.

Q: Good morning and thanks for taking my questions. I just wanted to follow up on the comp ratio commentary and specifically a few of your peers have cited that comp ratios are going to be structurally higher going forward, given the level of inflation seen specifically at the junior level. Could you speak to your confidence in your ability to get back to that 64% comp ratio that you were running to previously and whether you're seeing any of the similar dynamics playing out within your own business?

A: I don't see any reason sitting here today that we can't do that.

Q: Great. And I guess for my follow up, I want to touch on capital allocation and specifically whether you're more inclined to do an acquisition today versus returning capital to shareholders. I know you recently did the deal for deNovo Partners, but given where you and your peers are trained today, it feels like there could be a lot of interesting opportunities out there to leverage your multiple and do an accretive acquisition. So it would be great to get a sense as to how your thinking has evolved here, if at all.

A: We're building a best-in-class firm. We don't build it by leveraging our multiple. We still think our currency is undervalued and want to continue buying it back. We'll use it if there is a highly attractive combination, but those are few and far between. In our 9 year history, we've done it twice with modest scale that moves the needle but doesn't overwhelm the firm.

Q: Great. Thanks for taking my question. Most have been asked, but maybe just one on deNovo, obviously relatively small, few partners, but strategically sounds like it made a lot of sense to extend beyond the initial partnership. So wondering if you just expand on where you see the immediate impact. Is it really in making introductions on the strategic advisory side, maybe some benefit within Park Hill with primary fundraising and then over a longer term period, call it three plus years, like, what are your aspirations and what would success really look like for PJT in the Middle East?

A: Helen here, maybe I'll answer just more in the short term. As Paul mentioned, we have had a historical relationship. deNovo brings two Partners, two managing directors and some senior advisors, as well as licenses to operate in the region. We're very committed to the region and where it will have immediate impact. It's across the board in all businesses: advisory, restructuring, Park Hill. We've already had people flying down to the region to meet clients, and in three years, we expect to be well ingrained and successful there.