Yahoo Finance PJT Partners Inc. (NYSE:PJT) Q1 2024 Earnings Call Transcript
PJT Partners Inc. (NYSE:PJT) Q1 2024 Earnings Call Transcript May 2, 2024
PJT Partners Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to the PJT Partners First Quarter 2024 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 go ahead.
Sharon Pearson: Thanks very much. Good morning and welcome to the PJT Partners first quarter 2024 earnings conference call. I’m Sharon Pearson, Head of Investor Relations at PJT Partners. And joining me today is; Paul Taubman, our Chairman and Chief Executive Officer; and Helen Meates, our Chief Financial Officer. Before I hand the call over to Paul, I want to point out that during the course of this conference call we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners’ 2023 Form 10-K, which is available on our website at pjtpartners.com.
I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company’s performance. For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website. And with that, I’ll turn the call over to Paul.
Paul Taubman: Thank you, Sharon. Good morning, everyone and thank you for joining our earnings call. Earlier today, we reported first quarter revenues of $329 million, up 65%; adjusted pre-tax income of $55 million, up 81%; and adjusted EPS of $0.98, up 81% from year ago levels. We had our second highest revenue quarter ever, reflecting strong performance in all of our businesses, as we benefited from continued momentum in restructuring, significantly improved results in PJT Park Hill and strong performance in Strategic Advisory. While we report results quarterly, we measure our progress not in quarters, but in years. After a highly successful quarter, our focus remains on ending the year a meaningfully stronger firm than when we began the year.
A core element of that progress is the continued addition of highly talented professionals with particular emphasis on filling out our Strategic Advisory footprint. The recruiting environment continues to be conducive to senior hiring. And we expect our hiring to remain elevated this year even if it does not match 2023’s record recruiting. In the first quarter, we had our highest open market repurchases ever as we remain focused on offsetting dilution from these investments. After Helen takes you through our financial results, I will review our business performance and outlook in greater detail. Helen?
Helen Meates: Thank you, Paul. Good morning. Beginning with revenues. Total revenues for the quarter was $329 million, a record first quarter, up 65% year-over-year. Revenues were meaningfully higher across all businesses with the highest growth coming from restructuring. We had a number of transaction completions that met the criteria for revenues to be pulled forward in the first quarter, totaling $25 million. Excluding the impact of pull forwards in both periods, our revenue growth would have been 52%. Turning to expenses. Consistent with prior quarters, we’ve presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8-K. First, compensation expense. We accrued compensation expense of 69.5% of revenues for the first quarter compared with 69.8% for the full year 2023.
This ratio represents our current best expectation for the full year 2024. Turning to adjusted non-compensation expense. Total adjusted non-compensation expense was $45 million in the first quarter, up from $36 million in the first quarter last year. The higher expense was primarily driven by increases in occupancy costs, travel and related as well as bad debt expense, which is included in other expenses. Despite the high year-over-year increase in first quarter non-comp expense, we continue to expect that our full year 2024 non-comp expense will grow at a similar rate to the growth rate we experienced in 2023. This growth will be primarily driven by an increase in our occupancy costs as well as increased travel and related expense. Turning to adjusted pretax income.
Our adjusted pretax income was $55 million in the first quarter compared with $30 million for the same period last year and our adjusted pretax margin was 16.8% for the first quarter compared with 15.2% for the same period a year ago. The provision for taxes, as with prior quarters, we presented our results as if all partnership units had been converted to shares and that all of our income was taxed at a corporate tax rate. Our effective tax rate was 22% for the first quarter, below our full year 2023 rate of 25.3%. The tax benefit relating to the delivery of vested shares during the first quarter was greater than last year’s benefit. We take a full year view of that benefit and we currently expect our full year effective tax rate to be around 22%.
Our adjusted if-converted earnings were $0.98 per share for the first quarter compared with $0.54 per share in the first quarter last year. On the share count for the quarter, our weighted average share count was 43.7 million shares, up 5% versus a year ago. This increase primarily reflects the full share count impact of 1.3 million performance shares, which reached the price hurdles at the end of 2023. During the first quarter, we repurchased the equivalent of approximately 1.5 million shares, primarily through open market repurchases. In addition, we plan to exchange 116,000 partnership units for cash on May 9, 2024. And on the balance sheet, we ended the quarter with $236 million in cash, cash equivalents and short-term investments and $408 million in net working capital and we continue to have no funded debt outstanding.
And finally, the Board has approved a dividend of $0.25 per share. The dividend will be paid on June 20, ‘24 to Class A common shareholders of record as of June 5. With that, I’ll turn back to Paul.
Paul Taubman: Thank you, Helen. Beginning with PJT Park Hill. Revenues in our PJT Park Hill business were up significantly quarter-on-quarter and year-over-year driven by meaningful growth in Private Capital Solutions. GPs and LPs alike continued to be attracted to Private Capital Solutions as they seek to enhance liquidity, particularly given the current low levels of portfolio monetization. This combined with a more constructive environment in which to execute secondary transactions, helped drive strong Q1 results in PJT Park Hill. On the primary side, the fundraising environment remains challenged, although somewhat improved from year ago levels as higher equity valuations have served to bring alternatives allocations better into line for many LPs. Turning to restructuring.
Our leading restructuring team continues to be extremely active in both liability management assignments as well as in-court restructurings. Revenues in our restructuring business were up sharply year-over-year, but up more modestly quarter-on-quarter, reflecting continued high levels of activity. We are in a multiyear cycle of elevated activity in liability management and in-court restructurings. In many instances, more favorable financing markets will prove insufficient to [stable up] [ph] broader restructuring activity. With each passing day, it is clearer that rates will remain higher for longer, that increasing numbers of companies are being disrupted by technological innovation and changing consumer preferences and that companies continue to contend with challenges to their business models that link back to the pandemic.
While the near-term maturity wall has largely been addressed, another one looms in 2028. In this highly constructive restructuring environment, we expect our 2024 restructuring revenues to remain elevated and to approach last year’s record performance. Turning to Strategic Advisory. In the first quarter, our Strategic Advisory business delivered strong revenue growth compared to the prior year. As we highlighted on our last earnings call, we began 2024 with a new record pre-announced pipeline, but in a typically low backlog of announced pending closed transactions. Our mandate count continues to grow and stands at record levels. Our announced pending closed pipeline has also grown appreciably year-to-date. And given the momentum we see in our business, we expect it to continue to build as 2024 progresses.
In 2023, announced global M&A volumes declined to levels not seen in a decade. Over the past several months, the pieces necessary for an M&A recovery have increasingly fallen into place, driven by stronger than expected economic prints, rising global equity valuations, a significant recovery in the debt and equity capital markets and increasing pent-up demand for strategic assets following two years of sharply reduced transaction activity. Amidst broad-based expectations for a sharp uptick in global M&A activity in 2024, annualized year-to-date activity is tracking only modestly ahead of 2023 levels. We expect to see a gradual increase in M&A activity until certain catalysts are in place, which should further propel activity, namely Central Bank rate clarity and election results in the US and elsewhere.
The highest strategic priority for our Strategic Advisory business is to ensure we are best positioned to capitalize on the multiyear M&A upturn that is ahead of us. The continued addition of senior talent is an important element of that positioning. To close. Looking back, we delivered differentiated performance in 2022 and 2023 as we continue to invest in our franchise. As we look forward, we are equally committed to further investment to ensure that we are best positioned to capitalize on the future, regardless of market conditions. As before, we remain confident in our long-term growth prospects. And with that, we will now take your questions.
See also
12 Best Alternatives to Adidas Samba and
25 Best Self-Help Books for Women According to Reddit.
To continue reading the Q&A session, please click here.
