PJT Partners Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Devin Ryan - Citizens JMP Securities, LLC - Analyst : Great. First question, in the M&A advisory practice in Strategic Advisory, obviously, Paul, you highlighted the material level of headcount growth there, and you're seeing significant seasoning of bankers on the platform. And so given the level of change we've seen in your business specifically over the past handful of years, I think people are having a hard time just trying to understand the capacity of the Strategic Advisory business today and kind of how that's evolved relative to maybe the prior upcycle that you referenced. So just wanted to get a sense of whether there's any type of range of productivity expectations that you guys expect when you hire a partner or any other frameworks you would suggest to think about that from the outside, just given that degree of change in the business over the past few years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 12:30PM, PJT.N - Q3 2024 PJT Partners Inc Earnings Call

Question: Devin Ryan - Citizens JMP Securities, LLC - Analyst : Got it. And then just a follow-up here on the Restructuring commentary and kind of the contribution that you're seeing there. Good to hear the outlook. Just to go a layer deeper. It would be great to just get a sense of kind of the pace of new restructuring mandates coming in because I know you're executing on a lot of deals that were announced last year and early this year. But just how that pace of mandate has evolved just over the past couple of quarters?and whether you're seeing a stronger effort to maybe kick the can as rates are coming down and capital markets reopen or just any other kind of nuance within the business that you're seeing?

Question: James Yaro - Goldman Sachs & Company, Inc. - Analyst : Paul, maybe just on Strategic Advisory, I do appreciate your comments on why 2025 look so much stronger, but maybe you could just comment on what exactly gives you that confidence. Is it that we're past the US election, economic factors, geopolitical or something else?

Question: James Yaro - Goldman Sachs & Company, Inc. - Analyst : Excellent. That's extremely helpful. Just one follow-up here on sponsors, which have comprised nearly 40% of the M&A market in 2021 and 2022, but less than 30% in '23 and this year so far. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 12:30PM, PJT.N - Q3 2024 PJT Partners Inc Earnings Call So I guess, the question is, is it conceivable that sponsors could return to comprising this much of the M&A market? Or is that more of a function of the near 0% interest rate backdrop?

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : Paul, maybe you can talk -- since you're talking about sponsors there, can you talk about how you're sort of leveraging Park Hill's touch points with sponsors to kind of improve the win rate in sponsor M&A, where you are in that sort of evolution?

Question: Jim Mitchell - Seaport Global Securities LLC - Analyst : Makes sense. And great color. Maybe just a follow-up on just sort of the comp leverage. I think you've talked -- said today that every business line has had record revenues year-to-date, including M&A. I know that's been the fulcrum of getting comp ratio improvements. As we look to next year, the pipeline is good. M&A does seem likely to be improving pretty materially. So is that sort of the key to getting the comp leverage out of the franchise? And any thoughts on it would be helpful.

Question: Brennan Hawken - UBS Securities LLC - Analyst : 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 20% -- or nearly 21%. So can you maybe help us understand what's missing with the lack of comp leverage coming through this year? Because it looks like at this point, you're basically saying 69.5 is right, which would mean 30 basis points of comp leverage versus what was reported in 2023. So is the -- is there some movement going on under the surface? What's causing the comp leverage to not show up this year? And why would that be different next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 12:30PM, PJT.N - Q3 2024 PJT Partners Inc Earnings Call

Question: Brennan Hawken - UBS Securities LLC - Analyst : Okay. Great. We'll be looking forward to that meaningful leverage then next year. You also had some interesting comments on Park Hill. It sounds like things are really picking up nicely in that business. When we think about the market currently, and as I'm trying to think about what should happen in that market, it feels like we're going to have probably a handoff from the continuation funds, a lot of secondary activity into more of a regular way fundraising market as things pick back up here in the beginning of next year. Do you think that that's a fair expectation? And then can you talk about that handoff and what that would mean for economics and the revenue in the business and how it should translate into effectively growth for Park Hill?

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : I just want 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?

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : 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.

Question: Aidan Hall - Keefe, Bruyette & Woods, Inc. - Analyst : Great. Most have been asked, but maybe just one on deNovo. Obviously, relatively small, few partners. But strategically, it sounds like it made a lot of sense to extend beyond the initial partnership. So wondering if you could 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, what are your aspirations? And what would success really look like for PJT in the Middle East?