Q1 2021 PJT Partners Inc Earnings Call
Please standby were about to begin.
Good day welcome to the P. J T partners first quarter, 'twenty, 'twenty, one and earnings call.
Today's conference is being recorded at this time I'd like to turn the conference over to Sharon Pearson head of Investor Relations. Please go ahead.
And thanks, very much Jennifer good morning, and welcome to the P. J T partners first quarter of 2021 earnings conference call I'm, Sharon Pearson head of Investor Relations of P. J T partners and joining me today is Paul Taubman of Chairman and Chief Executive Officer, and Telematics and Chief Financial Officer.
Before I turn the call average Paul I want to point out the during the course of this conference call. We may make the number of forward looking statements.
These forward looking statements the subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated and these statements.
We believe that these factors are described and the risk factors section contained and P. J T partners.
The 'twenty form 10-K, which is available on our web site at P. J T part and the stock comp.
I want to remind you that the company assumes no duty to update any forward looking statements and the presentation. We make today contains non-GAAP financial measures, which we believe of meaningful.
And the company's performance.
The detailed disclosures on the non-GAAP metrics and the 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 out of its Paul.
Thank you Sharon good morning, and thank all of you for joining us today.
We're pleased to report strong first quarter results.
With revenues of 207 million and.
Adjusted pre tax income of 50 million and and.
Adjusted earnings per share of 89 cents.
Our strategic advisory and P. J T Park Hill businesses.
Both delivered their strongest first quarters ever more than offsetting declines and restructuring.
Compared to year ago levels.
Adjusted pretax income and adjusted earnings per share grew 26% and.
25% respectively.
Far outpacing our growth and revenues.
And we benefited from the operating leverage inherent in our business.
Now turning to each of our businesses in more detail.
Beginning with restructuring.
Well 2020 was certainly a near term high watermark for restructuring.
The damage caused by COVID-19 is long lasting.
With many companies now irreparably broken notwithstanding the fiscal and monetary stimulus that continues to be pumped into the economy.
Against this macro backdrop, we currently expect our market leading restructuring franchise.
The generate 2021 revenues, which are meaningfully above 2019 levels, but meaningfully below 2020 levels.
Drilling down further.
A number of restructuring assignments that might have been resolved this past quarter.
We're either accelerated into 2020 or pushed out later into 2021.
As a result.
The first quarter of 2021 shouldn't be our weakest restructuring revenue quarter of the year.
We expect our restructuring revenues to be greater in the second quarter than the first quarter.
And to be greater and the second half of the year does that and.
And the first half of the year.
Turning to P. J T Park Hill.
The P. J T Park Hill, our roster of best in class managers.
Combined with our differentiated global distribution capabilities is the backbone of our leading franchise.
And the first quarter stronger investor demand for alternatives drove significant revenue growth.
Per two a year ago levels.
We had favorable comparisons in all verticals.
With private equity and secondaries and showing the highest year over year gains.
After a record first quarter P. J T Park Hill is on track to achieve record full year performance and 2021.
Turning to strategic advisory.
Strategic advisory revenues were also up year over year.
As the breadth and depth of our practice has increased.
So too has the number of discrete revenue events from.
Reflecting our expanded the advisory capabilities and global footprint.
While the dollar value of our completed transactions declined substantially from year ago levels. Our strong revenue performance was driven by a significant increase and the number of completed M&A transactions.
Record contributions from capital markets Advisory and.
And continuous strength and P. J T camera view.
Three months ago, we talked about a record pipeline of pre announced mandates.
However, we also cautioned that we were unable to predict the timing of and success in turning many of these mandates into announced and ultimately completed transactions.
Since then our number of active mandates has continued to grow and.
And as has our confidence and our full year strategic advisory outlook.
We now expect strategic advisory to be up meaningfully in 2021.
With most of the growth weighted towards the back half of the year.
While each of our businesses are demonstrably stronger today than they were five years ago strategic advisory has been.
And we will continue to be our biggest and most powerful growth engine.
We see increasing opportunities to grow our market share.
Given how well our model of integrated advice and.
Cross mergers and acquisitions cash.
<unk> markets capital structure fund, raising and shareholder engagement has resonated with clients.
The reviewing our capital priorities.
Our approach to capital investment and capital return remains unchanged.
Investing in talent, and it's still far and away our highest priority.
The greatest return on investment and continues to be the people, we attract to our platform.
And the last 12 months against the backdrop of the pandemic.
We grew our partner of head count by 13%.
And our total head count by 10%.
We remain keenly focused on offsetting the share issuances.
<unk> from this investment and we continue to view share repurchases as a compelling investment opportunity.
Over the past four quarters, we have spent almost $230 million on repurchases.
Buying back near the three and a half million shares and share equivalents.
These repurchases have entirely offset the two and a half million earn out units that vested during the second half of 2020.
Our repurchases have continued and the second quarter.
And with our decision to cash settle the 221000 partnership units presented for exchange.
We will have entirely offset our 2020 year and employee equity awards as well.
Our first quarter cash balances stand at the highest levels ever.
At this point and the year EBIT with the accelerated pace of repurchases.
Now over to Helen to review, our financial results in more detail.
Thank you Paul good morning, beginning.
Beginning with revenues.
Total revenues for the quarter with 207 million up 3% by the year. The breakdown of revenues advisory revenues of 153 million down 3% year over year with the decline and restructuring revenues largely offset by an increase and strategic advisory, particularly and capital markets Advisory.
Placement revenues of 50 million of.
29% year or the year.
Reflecting a strong increase and from placement of meetings.
Turning to expenses consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments. These adjustments are more fully described in our 8-K.
So the suggests the compensation expense.
The accrued adjusted compensation expense of $62 five per cent of revenues for the first quarter, which is our current expectation for the year and is based on our current outlook of the business.
As a percentage of revenue this ratio of 100 basis points lower than the two 2020 full year adjusted comp ratio of 63 point type of thing.
Turning to adjusted non compensation expense.
Total adjusted non comp expense was 28 million and the first quarter down from $30 6 million and the first quarter 2020.
As a percentage of revenues and non compensation expenses of $13 five per cent for the first quarter down from $15 three per cent and the same period last year.
The here the year decline reflects the significant reduction and travel and related expense compared with normal travel activity and much of the first quarter last year one.
One area of higher expenses, the highlight was professional fees.
We had higher consulting expenses relating to the turns business activities as well as increased.
And costs.
Excluding travel and related expense.
And first quarter non comp expense increased eight five per cent compared with the same period last year.
And for the full year, we expect that expense to be out the debt more than 10% versus last year, driven by continued investment and communications and I T and increase in the number of senior advisors and higher recruiting costs.
In terms of our travel and related expense. It is still too soon to forecast when and by how much travel activity will pick up and as a reference point and travel and related expense was approximately $2 million 10 months and 2019.
Turning to adjusted pretax income we reported adjusted pretax income of $49 5 million for the first quarter up 26% year over year.
And our adjusted pretax margin was 24% for the first quarter compared with $19, 7% at the same period last year.
The provision for taxes as with prior quarters, we have presented our results as the full partnership units had been converted to shares and the all of our income was taxed at a corporate tax rate.
The tax rate also takes into account the tax benefit relating to the delivery of vested shares during the first quarter and the value higher than the amortized cost the.
And this benefit resulted in the three six per cent reduction and the annualized effective tax rate to 22.2%, which is the rate and we applied and the first quarter.
Earnings per share our adjusted if converted earnings of 18 nine cents per share for the fifth quarter of 25 per cent compared with 71 cents per share and the first quarter last year.
Share count for the quarter and weighted average share count was $43 1 million shares during the first quarter, we repurchase the equivalent of approximately one 6 million shares, including approximately 658000 shares and the open market the.
The balance of repurchase says came from the exchange of partnership units of cash and net share settlement of employee tax obligations.
We're currently and receipt of exchange notices for approximately 221000 partnership units and as we have done on the past we were the exchange these units of cash.
And on the balance sheet, we ended the quarter with $172 million and cash cash equivalents and short term investments, which was a record for this course of cash balance and 292 million and net working capital we have no debt outstanding and our full line of credit is available to us.
Finally, the board has approved the dividend of five cents per share the dividend will be paid on June 16th 2021 to class a common shareholders of record as of June taken in 2021, and with that I'll turn it back to Paul.
Thank you Helen.
In terms of our outlook.
Our distinctive and differentiated mix of businesses is highly complementary position.
Position for growth.
And it provides us with the diversification and ballast to enable their firm to succeed in most of any environment.
As we continue to integrate and leverage our relationships and capabilities across our firm.
All of our businesses become more powerful and more formidable.
The enormous opportunities to grow each of our businesses abound.
And as before.
We remain extremely confident and our future prospects.
And with that we will now take your questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on the telephone keypad. If you are using a speaker phone. Please make sure youre on mute function is turned off the virus signals from your chocolate net again press star one to ask a question.
Well pause for just a moment to allow everyone an opportunity to signal for questions.
And we'll go first to Devin Ryan with JMP Securities.
Caller. Your line is open you may be on mute.
Yeah.
Oh, Hey, this is Devin can you guys hear me.
Yes, debit and we can now good morning, sorry.
Sorry about the little tiny.
The difficulty of your.
I guess, Paul first proof of it are all of the outlook on Thursday.
Very clear.
It's about the restructuring business, though I appreciate.
Kind of the revenue trajectory on all of it.
Your line.
How are you thinking about yeah the.
I guess total on for that business more broadly and what type of catalyst and what we need to see for something to change here has adjusted the credit backdrop changing or there.
The dynamics and the market that that could create the kind of a resurgence and activity just companies potentially capitulating or something on the regulatory front just curious.
What could definitely change kind of new mandate activity there.
Sure.
Let's first start with with some of the basics, which we've talked about for a while.
And what COVID-19 has done is it has disrupted and enormous number of business models.
And it has shaken up the playing field and a way that we now have clear winners and clear losers.
And the business marketplace and that is really irrespective of the macro backdrop. So what we've said consistently is the.
The baseline level of restructuring post COVID-19 is going to be higher than it was pre COVID-19 and that's why when we talk about our 'twenty one prospects, we've talked about it being meaningfully greater than 2019, we see that trend continuing for some considerable peer.
<unk> of time, just because of the damage and dislocation cause too many businesses that have been severely hurt by change in customer preferences business buying habits, and the way in which people are.
Move about the world.
And on top of that restructuring is always keenly.
Tethered to the macro backdrop and.
And right now there's no doubt that we are on a were in a risk on environment and.
And if that changes and if the capital markets become less hospitable and if there are fewer of refinancing opportunities and less capital available and clearly that will be an accelerant to take the current level of restructuring activity up a notch or two or may.
To be more I think another as interest rates if interest rates move higher that then creates its own series of dislocation. So we are absolutely of the belief that and this macro environment, we're going to see more restructuring as a baseline. We also believe that the overall.
Conditions are about as favorable as one could imagine for debtors and that inevitably is going to change because you know the world of ebbs and flows and when that does youre going to find record amounts record quantum of debt outstanding and that should take restructuring levels.
Meaningfully, but where we see that has the potential opportunity, but we're certainly not banking on it and the and the near or intermediate term.
Okay, great. Thanks, Paul and then just one on.
The head count expansion and and just thinking about the push.
Push and pull and the current environment clearly the most of the banks had.
And a pretty solid 2020 activity starting at the very good level.
And 2021 until just kind of thinking about that backdrop the appeal.
The lead to recruit people out of banks of where you have a pretty active current the backlog.
Backlog of deals that they're working on and maybe just talk a little bit about that and expectations.
And for recruiting all of the year given that you guys are benefiting quite a bit and it sounds like what can you do in 2021 from.
Stinker, particularly recruited over the past couple of years.
Yeah, we continue to be and employer of choice. We continue to have very significant growth aspirations, we continue to expect to.
Be very active on the recruiting front, but like anything else, there's always puts and takes in any given market environment. What I would say is if you think about this the sort of a three legged stool.
Right now we're.
Non.
Headwind the that May stop blowing in our face is just the the virtual world. It is clearly more difficult to recruit and.
And of virtual world than it is where people can be and physical proximity and have direct conversations and engagement.
Our hope is.
Debt as the health crisis recede somewhat that we'll be able to do more and more of this face to face, which should be helpful and additive to our recruiting efforts.
The second is everyday that goes by there is increasing recognition about the power of the firm the special culture that we've built and that this is a winning platform and the best way for from any senior practitioners to practice their trade and it's the right place for junior.
The.
The professionals with career aspirations to learn the trade and to be nurtured and to learn both of those are certainly going to be favorable to us.
In 2021, but as you point out you never get everything all at once.
And a world, where there's a lot of M&A activity.
Often times its difficult for people to make a switching decision.
They're fearful that by doing that they may be leaving existing clients and the lurch. So.
We always have some things in our favor of some things that are not perfectly aligned but year end of the year out we're confident and our ability to continue to meaningfully grow the platform and the meaningfully grow the franchise.
Okay, great. Thanks, Paul.
Oh on more of them I'm getting some questions here. This morning, just on the comp ratio of six.
Okay.
Okay.
Okay.
Sorry, we lost you you just said on the comp ratio.
Yeah on the comp ratio of the 62 and a half per cent accrual and the first quarter is the 100 basis points, obviously, the lower than the full year 2020 level. So I'm getting a couple of questions.
And I view it as just a kind of up and indicated mitigate or on just the outlook on the year for revenues and and some of the flexibility and the model, but a question just around whether there's any shift and kind of a stock based comp accruals or anything else, that's giving additional flexibility.
And that the accrual this quarter.
Look.
And I'd say, a few things number one we always look at our compensation.
Expense over a multiyear period and if you look at where we were pre the pandemic we were.
We're at 64.1% I believe in the last year pre pandemic, what we're talking about is the 160 basis points of comp leverage over two years, which are the two pandemic years and if you look at the total revenue growth that we will deliver over those two years in absolute terms or revenue.
In terms of its entirely consistent with that model. So we start there I think the second is we also start with a very strong position and that our absolute compensation expense last year grew the most of the any of our peers. It grew the most and percentage terms.
It grew the most of the per capita basis and therefore, we start from a position of strength and.
And this year I think we're going to.
It'd be very comfortable with this as the accrual unless there is some exogenous event later in the year, which causes us to move of either up or down. It is our best estimate of full year accrual.
Great.
Thanks, very much I appreciate it.
Thank you Devin.
We will go next tier of Richard Ramsden with Goldman Sachs.
Hey, good morning, everyone. So perhaps I can ask a follow up on the restructuring business line and I guess my question is are you seeing a substitution between restructuring mandates and the M&A.
Are you seeing some of these restructuring restructuring mandates shifting into M&A mandates as a result of the better economic environment on the bet of financing environment or is it much more of a delay which is I guess kind of what you alluded to and you and your comments upfront.
That's a little bit of everything right, Richard we have a broad based business. So are.
We are in a risk on environment, so and a risk on environment that clearly is going to be a headwind for restructuring, but it also is going to be of tailwind for the stock market. As an example, so there's constantly and it's not like we're just losing here, where we may see this business more challenging but.
It's creating an environment, which is inviting more activity elsewhere, and what I have seen and I think others have noted this as well is the spec market has and a number of instances created opportunities for companies that might not have otherwise had refinancing.
The opportunity is available to them to be.
Taken public through a spec merger and all of the sudden all of that debt gets refinanced rather than than trying to figure out how the interest payment. So there is some of that I don't think it's anywhere near one the one but at 50000 feet. We're in a risk on environment, which is inviting activity over here, while it's Curt.
<unk> activity over here, but the basic fact remains which is we have a lot of businesses that are dislocated and restructuring has always been and idiosyncratic issue. So.
If you want to have elevated levels of restructuring you don't want to see 10 units of pain and every company you want to see 90 units of pain and a subset of those companies. So the more concentrated the pain is where the dislocation or the disruption the more likely that those companies will not be able.
To withstand ordinary shocks and we'll need to to restructure and I think that's.
That the fundamental element remains unchanged.
Okay.
Helpful. And then as we think about year on year comparisons for the restructuring business can you give us the census to which quarter and 2020 of restructuring revenues peaked and I'm just thinking about how we model this out over the course of the year.
Yes, it was back half of the year I mean, clearly as the pandemic as the pandemic began to rear its teeth. The back half of the year was was meaningfully more active.
And then the first half of the year.
Okay got it and.
Perhaps we can talk a little bit about the strategic advisory business and it looks like on an extraordinary start to the of at least in terms of just announced deals and.
And it also looks like it's very broad based by geography and client type.
And when do you think about the start of the year and you think about the pace of activity do you think this is indicative of what you could see over the course of 2021 or do you think there is some sort of catch up effect of pull forward effect.
Just given how quickly things have changed from an economic standpoint, and the first quarter.
There's look there's no doubt that this is a very constructive environment for our merger activity and we <unk>.
The expected to continue for a considerable period of time I can't predict whether it will persist at the current levels of activity that we're seeing but it is quite broad based and if you look at the increase and M&A activity. The most encouraging sign is not the dollar values. It's the it's just the broad base.
As the number of transactions as the number of $1 billion plus transactions the number of $5 billion plus transactions. The fact that it's across many different geographies, many industries, which does speak to a broad based health.
When we started the year, we had a very strong.
And increasing backlog of mandated assignments that had not matured enough to <unk>.
Reached the announcement phase and in many respects. This year is the polar opposite for us of last year last year, we came into the year with a bevy of announced pending closed transactions and then when the pandemic hit it did not move that much. This year, we came into the year with.
Paucity of announced pending close transactions, but the pace at which we're acquiring new mandates the accelerated pace of which many of these mandates are maturing and.
Leading either already or likely in the near term to announced transactions the ability to.
The complete transactions inside of the year is a very different tone and that's why we were appropriately cautious three months ago I think we're more forward leaning three months later.
Okay. Thanks, a lot of that's very helpful.
Thank you Richard.
Yeah.
We'll go next to Stephen to Buck what the Wolfe research.
Hey, good morning.
Good morning, Steve how are you.
And I'm doing okay, the drastic and Paul I had a question just on that potential changes to the tax regime and I was hoping you could just speak to how changes to either of the corporate tax rate of our capital gains on the has impacted.
Realize the of corporates, if at all and maybe just specific the P J T and.
Any guy and so you could share on how it items tax proposal could actually impact your own tax rate.
Well, let's start with the <unk>.
First of all of its kind of hard to talk about how it's going to affect our tax rate since we haven't seen the proposal and there is an awfully long way to go between the administration and putting forth a proposal and.
And trying to get something done.
And Congress, so I would prefer to not speculate on any of that because these.
These tax reforms or increases or whatever.
Whatever you want to refer to them as can take all sorts of different shapes going forward, what I will say on the macro point.
Is if you go back into 2020.
I think the conventional wisdom early in the year.
And was a Republican victory and the Trump administration administration of remaining in the empower and therefore, there wasn't much focus early in the year.
On a change and capital gains rates or changes and the.
And tax policy I think as the market began to absorb that there might in fact be a change and that with that might be and increase in taxes. You did not see what we typically see which is a lot of positioning, particularly from individuals and family owned businesses and the like to.
And to optimize their portfolio because you are dealing with the depth of COVID-19 and even if there was the right time to manage your taxes. It was certainly not the right time to optimize the value of an asset by running a process and the middle of COVID-19.
I think now we're in a different environment, where you clearly have a very attractive macro backdrop of valuations are robust.
And with a strong potential for and increase in rates and the capital gains I would expect that there's likely to be some path and activity as you coax out a number of the.
Sellers, most likely our families or estate planning or or others, who want to take advantage of current capital gains rates, but.
As all of these things are they tend to be a pull forward.
And they tend to be relatively short duration, because once there is a new regime and a new rate people adjust and you get to a new equilibrium.
And thanks for that perspective, Paul and just a follow up on some of the earlier discussion on the stock market and your company has had really solid momentum and winning a couple of very large back engagements and we are hearing more concerns around the sustainability of stack fund raising activity and.
Admittedly there are still some significant events tied to those funds already raised but just wanted to get your thoughts on the outlook for fund raising activity from here and maybe how that informs your expectations for M&A beyond 2020, why the at some of the events are set to expire.
I'm I'm quite constructive on the long term M&A market and we've talked about this for a long time, where I've said that.
The increasing dislocation the cost of standing still.
Becomes greater and greater companies all else equal will be more active and while I cannot share.
Peel the laws of the.
Of business cycles and the.
And the cyclicality of the business for any given macro economic backdrop, we would expect to see higher levels of M&A I think the spec market is.
Market, we've always said that.
Does benefiting in part not exclusively but impart on regulatory arbitrage.
And we've always said that we expect over time those benefits many of them to be.
Take it away as the playing field becomes leveled so that phenomenon, we've always expected, which would cause the number of spec transactions to be reduced but we've also talked about the fact that in many respects the price discovery and the pipe process and a truncated period.
And from start to finish is a real long term.
The advantage that is likely to persist and.
And the third is we have talked about the fact that we're in and extraordinary risk on market, which is enabling a lot of companies that otherwise would not be able to find their way to the public markets to get listed we don't expect all of those conditions to exist.
At this pace indefinitely, we don't expect it to continue for that much longer but in many respects because the companies that we're working with are the best of the best a flight to quality is not likely to impact us nearly as much as it may others. So in many respects we.
See the numerator of transactions that we're doing to not moved very much. We do think the denominator of the total number of transactions that get done to shrink and I think where we're well positioned relative to others because of the.
And the discerning lens with which we've taken to which companies we do business with.
That's great. Thanks, and thanks for that color, Paul and I could just squeezing one more here.
The better for you on how and just the we've had some inquiries on it.
The incentive awards for of management I know those are set to expire at the end of the year admittedly.
Admittedly.
Gave of constructive comp guide just now that we're five years into your journey as the public company and how is the approach the compensating leadership of evolving if at all any insights you can share and just how those changes might impact the trajectory beyond 2021, as we think about your next leg of growth.
On a guy.
We put in place of six years ago. This incentive program.
Which I think has worked extraordinarily well.
While we're talking about.
And setting our most senior leadership, that's really for the board to decide and at the appropriate time I'm sure.
And the path forward is will we will try and figure out how the best communicate that after its designed but the reality is we've always believed and shareholder alignment we've.
We've always believed and put a shareholders first and I cant imagine that we're going to do anything of that won't continue that that approach.
That's great color, Paul and thanks, so much for taking my questions.
<unk>. Thank you.
We'll go next to Jim Mitchell with Seaport Global Securities.
Hey, good morning.
Jim maybe.
Maybe just ask about a little bit of about the partner growth again, I think if I look at your presentation you had about a 11, new partners and <unk> could you maybe.
Is there a lot of promotes and there is or is that all hires how do we think about that growth and I and I was kind of struck by the fact that we had or saw growth and partners and both park Hill and restructuring.
Kind of on the first time and a few years, so is that kind of and.
Imply that you see a greater.
Set of growth opportunities and those two businesses.
And as post COVID-19 is that the way to think about that.
As you can imagine there's a different a different story for each of the businesses depending upon how you drill down and if you look at the Park Hill business and the restructuring business.
We have had extraordinary stability and those businesses.
We also have extraordinary deep benches and both of those businesses.
And over time as those individuals' grow up on the platform.
Now a number of them.
Have become partners and we also have and.
And some of these businesses individuals who have had 30 year careers, where at some point they want to step back from the business I think you need to look at the Park Hill and restructuring businesses through the entirety of the arc of I believe if you look at the partner count and you'll see more growth and.
Park Hill, and the near term and you will and restructuring, which is probably more reflective of the the near term opportunities.
But.
It's really sort of broad based and both of those.
And if you look at strategic advisory, it's a hybrid which is we're now into the 60 year. There are a considerable number of individuals who we recruited to the platform who would be partners any place else, but come in as managing directors.
And after some period of time they are promoted to partners. So whether you want to think about those as an internal promote or really and external hire is there's a bit of six of one half of dozen of the other and then also apropos of my earlier comment when you have six years of operating.
Tree and strategic advisory we have a very strong bench of individuals. So we're going to increasingly see a hybrid approach to growth and strategic advisory and a way that that wasn't possible. When we were 123 years into our journey now that we're six years and many of our.
Professionals and colleagues are.
And our growing up with us.
Alright.
Helpful. And then just maybe thinking about the the risk on environment that you've been talking about it.
It has clearly helped I think some of the capital markets businesses.
Clearly the park Hill business and demand for alternatives.
How do we think about the.
What you see there if if we do get pulled back you'd kind of get the offset from essentially and restructuring growing so how do we think about the impact of potentially a slowdown and capital markets activity and what that could mean for park Hill.
And and capital markets Advisory.
From an <unk>.
Of macro impact versus just the fact that you are trying to grow those businesses organically.
I think they both are quite capable of growing and most any environment Theres just a lot of the you know and.
The inherent demand for those services.
Park Hill has always been very discriminating and the managers that it brings to market and.
And therefore, it's sort of similar to my stock comment, which is the number that they take the market doesn't change very much every year the number of.
Of funds that want to be taken the market moves up and down every year and we've always said that our capital advisory business is an enormous growth business and it's just another arrow and our quiver and it's not so much tied to it being risk on is tied to the fact that our client base wants.
Integrated advice, they want sophisticated advice they want advice that encompasses all of the elements and making good decisions, which is they want deep domain expertise. They want the best negotiation skills. They want the best of read of the debt and equity markets. They wanted to be able to engage with shareowners they want broad.
Graphic reach they want all of those things and they would prefer to be on a smaller more focused firm. So I see those trends of playing out favorably for us for an awfully long time.
Alright, thats great color. Thanks.
Absolutely.
We'll go next to Michael Brown with K B W.
Great. Thank you good morning, Paul.
Good morning, Michael.
Wanted to start with strategic advisory and I. Appreciate the comments that you that you gave earlier, but I guess one area. That's been somewhat soft this year has been the mega cap deals and deals greater than from 10 billion.
We saw some recent green shoots there with kind of Microsoft you on steel and the grabs back but overall the the contribution to the total amount of announcements is really lagged historical years, where it might be 20 to 25 per cent of the volume and that's kind of high single digits.
So just wanted to get your thoughts there about that segment of the market is there a lot more dialogues that are kind of happening behind the scenes do you expect that to really pick up.
And and and.
And and see some strength, there and you get into the back half of the year because that's the kind of what we saw last year. So just curious how you think about that segment of the market.
And there is.
There's there's large deals and then there are of Mega deals and I I think there is still a very robust.
Appetite for large deals, but when you talk about mega deals with.
Mergers of hundred billion dollar plus the market cap companies with one another et cetera, I think and the current political environment and.
And the inevitable regulatory scrutiny and.
And with desires for more and National Champions and.
And protectionist policies and the like it's more difficult.
And we had.
Joe talked about our cautious outlook for some of this heading into <unk>.
Presidential election year.
I don't think that at this point and the cycle, there's probably as much receptivity.
For those types of transactions, but there's still an awful lot below the sort of mega plus transactions and very large transactions that are and the tens of billions of dollars and I don't think there's a size limit per se I just state the reality is.
As you get larger and larger you're inevitably DLA with horizontal combinations, which will create regulatory scrutiny or some issues.
In terms of the the geographic and political chessboard and so we're a bit more cautious on that but we don't really see that as is really what drives overall M&A activity. It doesn't drive overall M&A profitability and those things tend to wax and wane and.
Probably it will return at some point, but I think it's a bit premature as we're still DLA and with the real effects of.
Of the COVID-19, and it's it's the aftermath.
Okay, Great and I appreciate all the color there just one more follow up for me.
Just wanted to try and tie together some of your comments on.
I guess the.
We think about the share repurchase your record first quarter cash levels.
And just the higher issuance.
Volumes and the share count this quarter so as.
And we think about maybe modeling out the share count here and obviously there was also on the comment about some of the awards that could pass later this year.
Is it possible for your share count to stay flattish or I guess up modestly year over year once we get to the fourth quarter just how.
Should we think about that from a modeling perspective. Thanks.
I think if you I'll turn it to Helen but I think if you look over time and.
Leave aside the earn outs, we've done quite a good job and and.
And avoiding any any share creep, even though we've grown our business massively the pellet and you want to take the yes. If you remember we added two and a half million share to the share kind of at the end of last year with the dance.
And I think we've demonstrated with the one of the exchanges and the cash that debt is a way for us to to installation without impacting of outflows and that is the preferred way of going and getting back shares do you have.
We don't control of the volume that comes to us and.
And then to supplement that we and both have been and the open market buying back shares, but we're off and mindful of the Florida. So I think you have to take all the pieces together and what we've said is that over time.
We do expect to be able to manage dilution.
Kind of be able to achieve it in any particular quarter. So as we look at threat throughout the rest of and here I think it's too hard to predict.
We will end up and tens of share count, but I think our.
History would demonstrate that we have been and we have been mindful of dilution.
Okay, great. Thank you for the commentary there.
Great.
Okay.
Well if there.
Are there any other questions or we are.
I think query from.
I think we're good to see you on the next or listen to you on the next earnings call. So thank you all for joining US. This morning. Thank you for your interest and our company stay safe and be well. Thank you.
This does conclude today's conference we thank you for your participation.
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