PJT Partners Inc. Q4 FY2025 earnings call

• 2025 was record-setting with record revenues, adjusted pretax income, and adjusted EPS. Firm-wide investment continued with 12% increase in partner headcount and 7% increase in total headcount.
• Ended 2025 with record cash balances of $586 million after $384 million share repurchases. Capital priority is to invest in firm and people then return capital to shareholders via repurchases.
• Revenue reporting will change to single line item, no longer breaking out advisory, placement, etc. due to business expansion and integration.
• Restructuring demand elevated due to overleveraged balance sheets, etc. PJT Park Hill benefited from client interest in private capital solutions. Strategic Advisory benefited from strong M&A activity.

Full year 2025 total revenues were $1.714 billion, up 15% year over year. All businesses had record revenues, with strategic advisory driving growth. Fourth quarter total revenues were $535 million, up 12% year over year, driven by restructuring and PJT Park Hill. Full year adjusted pretax income was $357 million, with adjusted pretax margin 20.8%. Fourth quarter adjusted pretax income was $127 million, with margin 23.7%. Adjusted if-converted earnings were $6.98 per share for full year compared with $5.20 in 2024, and $2.55 for fourth quarter compared with $1.90 in 2024's fourth quarter. Restructuring had record Q4 and full-year results. PJT Park Hill had strongest quarter ever, with private capital solutions driving growth. Strategic Advisory had record revenues in 2025 due to strong M&A activity.

• 2026 compensation estimate to be provided when first quarter results reported.
• Expect total non-compensation expense in 2026 to grow at similar rate to 2025, more guidance in first quarter.
• Current tax rate estimate for 2026 is high teens, updated estimate in first quarter.
• Pipeline of pre-announced transactions in Strategic Advisory up meaningfully from year ago and near record levels.

• Geopolitical risks, debates surrounding pace of AI development and capital deployment, and economic returns associated with AI investment can impact market sentiment.
• Competition for talent in restructuring business could be a risk.

Q: Good morning, Paul. Good morning, Helen. How are you? Very well. Good morning. Want to start with restructuring. Obviously, I think a lot of interest in that business in the industry just as new firms are saying kind of slightly different things on kind of the outlook there. And so I'm curious if you can just give a little more color around the type of activity that you're seeing. Is it kind of amend and extend or kind of comprehensive liability management? Is there more in court? And then just expectations there as we go out, I know you don't have a crystal ball here, but in a world where your M&A activity is kind of normalizing and accelerating nicely, does restructuring maintain? Can it still grow? Or does the normal pattern of it kind of falling off a little bit kind of play out? I'm just curious how thinking about not necessarily the next couple of months, but probably the next twelve to eighteen months.

A: Sure. I think we've been remarkably consistent on this point. Which is we're in a multiyear period of elevated restructuring activity. There are lots of reasons for that. Some of which is the benchmarks and the mindset relate back to historically low interest rates. That were aberrational and we're dealing in a more normalized rate environment today than before. The second is we're dealing in a world that is speeding up, not slowing down. And the technological innovation is fueling our global economy, but at the same time, it's creating winners, and those winners are redefining who the losers are left behind companies are in what industries and which companies. And as a result, you can have a world where you have robust GDP growth, you have broad consensus that the macroeconomic environment is constructive but at the same time, have very concentrated stress in certain industries and with certain companies. And I think that suggests to us that this has legs and is going to continue to play out for a period of time. The reality is we haven't really hit a recessionary environment for an extended period of time. If we were to, then all this commentary sort of gets taken off the board and you're looking at a meaningful leg up. But if you just assume the current economic environment, we think you're going to continue to see robust liability management and restructuring. We have not seen any diminution in that activity. And if anything, we think we're starting to see the very early signs of that growing. In addition, we have every day的 goal of broadening our footprint. Broadening our footprint with sponsors, broadening our footprint in industry groups, broadening our footprint geographically. And every day that we broaden that footprint gives us a greater addressable market in which to market those leading liability management and restructuring capabilities. And as we're able to reach a broader group and become relevant to a broader group, that gives us the prospect of continuing to grow our business at rates that may be greater than what the overall liability management or restructuring data suggests.

Q: 2025 was a mega cap M&A driven backdrop. So can do you think can this part of market continue at this pace or improve further in 2026?

A: I certainly think we're we haven't tasted the full extent of how robust the M&A market can be. But when you have a year like 2025, where depending upon how one counts, volumes are up 35, 40, even even higher than 40%. And you're looking at the second highest revenue year, it becomes a difficult comparison. But I focus less on whether we're going to ring the bell and top tick last year I asked myself, are we in a multiyear period of elevated deal activity? And I think given the current macroeconomic backdrop, the regulatory posture this administration the desire in Europe to address certain issues in terms of industry consolidation and the like, which is perhaps been a a negative for the continent. When I think about the attractive capital markets backdrop, and a world that is speeding up and not slowing down, which means you either need to press your competitive advantage. And one of the ways to do that is with more scale and to use your capabilities to continue to build moats or you find yourself left behind and you need to think about the corporate structure that you have, or you're vulnerable to shareholder activism or you need to pair the mission and focus on areas where you have clear core competencies and advantages. All of that suggests that we should be in a multiyear period of elevated deal activity. It's easy to talk about inflection points or things are going to get better or things are going to get worse. But when you're dealing with quite attractive macro backdrop, the issue is just simply how long is it going to continue, and we think it has legs. But whether we're continuously hitting new highs that's much harder to call.

Q: You delivered a meaningful step down in the comp ratio in the quarter. Can you please help us think through the outlook for the comp ratio from here?

A: Well, I think we've said a couple of years ago that when we were delivering our financial results that we thought that based on everything we had seen our compensation as a percentage of revenue had peaked. And it had peaked because we had maximal investment in a period of relatively low velocity M&A activity, and that confluence had caused that ratio to gap out in the short term but we expected that to continue to work its way down. And我 think we're done working it down. The question is just simply the pace and rate of that. And that's in part going to be a function of how the markets develop. Over the next couple of years and how strong they are and how much operating leverage we get by revenue growth, but some of it's also going to be the pace of investment. Which is still very much TBD. And we'll report at the end of the first quarter when we deliver our Q1 results our best estimate for what that ratio should be for 2026.

Q: Good morning. Thanks for taking my questions. Was hoping you can help me with something because I'm struggling a little bit here. So hear you loud and clear that restructuring the outlook is pretty good. when we look at the revenues here in the fourth quarter, know you guys flagged in the press release that restructuring was up, but the multiple on the Dealogic revenue was one of the lowest that we've seen in years. So side than what we've been seeing. Me, that suggests that the actual quarter was a little bit lighter on the restructuring. So number one, I'd love to hear you maybe speak to those I know restructuring is chunky, right? So like, that can happen quarter to quarter. But maybe help reconcile when you're thinking about restructuring, could you speak to maybe certain sectors and where you're seeing a lot of activity? There's a lot of out there around software. So curious about what you're seeing in your business there.

A: I don't spend a lot of time looking at deal logic data. I just focus on the business that we do. And we are pretty clear in how we communicate to our investors. We had our record quarter in restructuring. Q4 was the best restructuring quarter we've ever had. The year was the best restructuring year we've ever had. And we continue to be constructive and optimistic about the future prospects for our franchise. There can't be any clearer than that. Those are the facts.

Q: Okay. And sectors?

A: Were you busy in restructuring? Sectors. Look, we're really busy across the board, but我 think there are areas. I think you look at challenged industries, of the healthcare complex, there's a lot of pain. Software is an area where will be elevated focus just given events and pressures coming from AI. We've talked consistently about the fact that AI is going to be a disruptor. The whole digitization and the consumption of media has created significant opportunities in media. There are issues in retail, which also come from online versus offline shopping and changing consumer behavior. I think it's broad-based. It's not narrow. Because in many industries, there are companies that are being left behind and their business models took on or suggested they could support a quantum of debt, that as the world moves forward, it's clear that, that was not the right capital structure and companies are increasingly trying to get ahead of these issues, and they're looking at where they're choke points might be in the future as far as covenants for significant maturities and they're using the creativity and deep capital markets and the ability to access public or private markets to come up with a better capital solution. So it's really quite broad-based. And our focus is not narrow. And that's another reason why I have greater confidence that this trend continues. If it was just a couple of very narrow verticals, there's always the risk that, that well runs dry. But that's not what we see.

Q: last you mentioned that M&A volumes are the second-best year ever. But when we look at sort of the number of deals down for the fourth year in a row last year, so very much a mega cap kind of environment. So I guess number one, are you seeing activity starting to broaden out to more the middle market? And down? And then secondly, for you specifically for PJT, I know you've been looking to build out your touch points with financial sponsors. So just any kind of update on how你're positioned for that maybe middle market recovery among financial sponsors?

A: So volumes are up meaningfully. Deal count down. Although if you really double click on that, a lot of the reduction in deal count is in the sub-billion dollar transaction. And that's not a place that we play as much in. So in some respects, that's not as broad-based as people might think because a lot of that reduction in deal count is at the much, much smaller level than it is in chunky three, five, $10 billion transactions. That would be the first point. I think the second point is if you look at the buying bench, in private equity in 2021, and then the painful come up as in 2023, when there were somewhere like nine rate hikes in 2023. You've got a very low velocity private equity environment. And我 think what we're doing is we're getting back to equilibrium between capital expended and DPI. And we've talked about this. It's not always the easiest way to shift from a fundamental imbalance where all this capital has been called and relatively little of it is monetized. If you do that for a period of time, you create stresses and strains in the system. I think the industry has worked through a lot of it. They haven't worked through all of it. But I would expect that we will continue to see some increasing activity amongst private equity firms as they become more comfortable in monetizing investments at these valuations. And the more that they can monetize, I think that will make it easier for them to be more forward-leaning and commit more capital, and we'll get the ecosystem better linked between sort of capital and capital return. I don't think that it's going to be perfectly imbalanced, which is why we're so constructive on the Private Capital Solutions business. I think that's an arrow in one's quiver that's going to continue. For a considerable period of time. And as far as the private equity ecosystem and how we touch it and how we cover it, one way we touch it and cover it is through all the liability management exercises we do. And as we continue to broaden our sponsor coverage, it shouldn't be a surprise that some of that benefits our restructuring special situations liability management effort. I think the next is we have a leading private capital solutions business. The more developed that business is, the more opportunities we have to use those distinctive capabilities and also our distribution and our ability to raise new capital to further penetrate the middle market or sub-mega fund complexes and that's an area where PJT Park Hill is particularly strong. And has real deep relationships. And as we continue to build out our industry groups and strategic advisory become more relevant to more sponsored firms. Because of our industry expertise and our industry verticals better matching where there might be investor focus. So we're continuing that journey to further grow that business. But我've always believed it needs to start with best-in-class advice. It needs to start with best-in-class corporate access. And then from there, you have things of real relevance that resonate with your sponsored clients.

Q: Great. Thanks, Paul, for all of that color there. Just wanted to follow-up on the restructuring side. So very positive outlook here for restructuring. That was clear.

A: Just wanted to ask, you seeing any competition for talent in the restructuring business? You've obviously got premier franchise and leading share. But we did observe that a partner looks like they spun out and creating their own restructuring business and just curious how你're thinking about the war for talent and that restructuring side of the business.

A: Look, we're a talent-focused firm, so we're always focused on making sure that we have the best talent and we believe we have the best talent. We believe we have the best culture. And we believe we have tremendous opportunities ahead of us as we start to get at the white space that we have. And我 think our franchise enjoys more white space than most anyone else. So we're very comfortable that it is a highly attractive destination. And we'd love nothing more than to continue to invest in our franchise and to add more talent if those opportunities rise.

Q: Thanks. Good morning, everyone. Most of my questions have been asked already, but maybe a quick one for Helen just on non-comp side. I heard the guide for the year of roughly similar to the year-over-year increase to last year. But maybe if you could just help us think through what are going to be the main drivers there of the higher nominal amount in 2026, that would be helpful.

A: Yes. So as I said, we'll give a more refined view in the first quarter. But if you think of the tailwinds going into 2026, we definitely should experience less occupancy growth. We've made some pretty significant investments in New York and London. So that growth should slow. And we're always going to get leverage out of some of our costs around IT infrastructure or some of the professional fees that we have relating to being a public company. So they would be the tailwinds. And我 think the headwinds more people bring more travel, more market data, more IT and comm support. So我think against that, that's where we're going to see the growth and just trying to figure out how we manage that. I think it will be fair to say we've been very disciplined in how我们manage our expenses. But there are some just activity-related expenses that are going to drive those non-comp up.