Q1 2025 PJT Partners Inc Earnings Call
Please standby we're about to begin.
Speaker Change: Good day, everyone and welcome to the P. J T partners first quarter 2025 earnings Conference call. Just a reminder, today's conference is being recorded and at this time I would like to turn the conference over to MS. Sharon Pearson head of Investor Relations. Please go ahead ma'am.
Speaker Change: Thank you very much so I'm good morning, and welcome to the P. J G partners first quarter 2025 earnings call I'm, Sharon Pearson head of Investor Relations at P. J T partners.
Paul Taubman: Joining me today is Paul Taubman, our chairman and Chief Executive Officer, and eliminates our Chief Financial Officer.
Paul Taubman: Before I turn 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.
Paul Taubman: These forward looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes.
Paul Taubman: To differ materially from those indications in these statements.
Paul Taubman: We believe that these factors are described in the risk factors section contained in P. J G partners 'twenty to 'twenty four 'twenty 'twenty four Form 10-K, which is available on our web site at P. J T partners Dotcom I.
Paul Taubman: 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 are meaningful in evaluating the company's performance.
Paul Taubman: For detailed disclosures on these non-GAAP metrics and they got pregnant validation 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 and thank all of you for joining us this morning.
Paul Taubman: Earlier today, we reported first quarter revenues.
Paul Taubman: $325 million.
Paul Taubman: Adjusted pre tax income of $56 million.
Paul Taubman: And adjusted EPS of $1 five.
Paul Taubman: These first quarter results reflect record Q1, adjusted net income and record Q1, adjusted EPS and revenues nearly equal to last year's record Q1 levels.
Paul Taubman: The current environment poses significant risks to the U S and global economies.
Paul Taubman: As reflected in volatile capital markets subdued M&A activity fragile business confidence and delayed investments.
How long these uncertainties persist.
Paul Taubman: Economic consequences of these uncertainties.
Paul Taubman: And the degree to which global trading relationships.
Paul Taubman: We'll be reshaped.
Paul Taubman: Paul weigh heavily on market sentiment.
Paul Taubman: Our firm is uniquely positioned for these uncertain times.
Paul Taubman: Given our strength of franchise.
Paul Taubman: And broad mix of businesses.
Paul Taubman: While the operating environment has shifted dramatically since the start of the year.
Paul Taubman: Our full year outlook has not.
Speaker Change: After how it takes you through our financial results.
Paul Taubman: I will review our business performance and outlook.
Paul Taubman: In greater detail.
Helen: Helen thank.
Paul Taubman: Thank you Paul good morning.
Paul Taubman: Beginning with revenues.
Paul Taubman: So really used the first quarter were $325 million, 1% below the same period last year.
Paul Taubman: Revenues increased modestly in strategic advisory compared to a year ago, while revenues in restructuring and P. J T Park Hill decreased modestly year over year.
Paul Taubman: Turning to expenses consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8-K first adjusted compensation expense.
Paul Taubman: We accrued compensation expense at 67, 5% of revenues for the first quarter compared to 69, 5% for the first quarter in 2024 <unk>.
Paul Taubman: This ratio of 67, 5% represents our current best estimate for the full year 2025.
Paul Taubman: Turning to adjusted non compensation expense.
Paul Taubman: Total adjusted non compensation expense was 49 million in the first quarter.
Paul Taubman: From 45 million in the first quarter last year, an increase of 9% year over year.
Paul Taubman: The higher expense was primarily driven by increases in travel and related occupancy costs as well as continued investment in communications and information services.
Paul Taubman: We continue to expect our full year 2025, non comp expense to grow at around 12% a similar growth rate to last year with the highest contributions to growth coming from travel expense driven by increased business related activity occupant.
Paul Taubman: Occupancy costs as well as continued investment in technology and data infrastructure.
Paul Taubman: Turning to adjusted pretax income we reported adjusted pre tax income of 56 million in the first quarter compared with 55 million for the same period last year.
And our adjusted pretax margin was 17, 3% for the first quarter compared with 16, 8% for the same period a year ago.
Paul Taubman: The provision for taxes as with prior years, we presented our results as if all partnership units had been converted to shares and did all of our income was taxed at a corporate tax rate.
Paul Taubman: Our effective tax rate for the first quarter was 16, 5% as we realize a significant tax benefit from the delivery of vested shares.
Paul Taubman: We take a full year view of that benefit and we currently expect our full year effective tax rate to be around 16, 5%.
Paul Taubman: Our adjusted if converted earnings is a record for the fifth quarter of $1 five per share compared with 19 eight cents per share in the first quarter last year.
Paul Taubman: On the share count for the quarter, our weighted average share count was 44.46 million shares.
Paul Taubman: 2% versus a year ago.
Paul Taubman: During the quarter, we repurchased the equivalent of approximately one 5 million shares primarily through open market repurchases.
Paul Taubman: We commissioned a record dollar amount to repurchases in the first quarter.
Paul Taubman: We are in receipt of exchange notices for an additional 170000 partnership units and we intend to exchange these units for cash.
Paul Taubman: On the balance sheet, we ended the quarter with $227 million in cash cash equivalents and short term investments and.
Paul Taubman: 438 million of net working capital and we have no funded debt outstanding.
Paul Taubman: Finally, the board has approved a dividend of <unk> 25 cents per share the dividend will be paid on June 18th 2025 to class a common shareholders of record as of June four.
Paul Taubman: I'll now turn back to Paul.
Paul Taubman: Thank you Helen.
Paul Taubman: Beginning with restructuring.
Paul Taubman: We're in a multiyear period of elevated activity levels for liability management.
Paul Taubman: Our full year expectations continue to closely track last year's record setting results.
Paul Taubman: Our first quarter revenues were modestly below last year's very strong Q1 results.
Paul Taubman: This outlook does not reflect the stresses and strains that had been building in the economy. These past few weeks.
Paul Taubman: If these pressures persist.
Paul Taubman: There is the potential.
Paul Taubman: But by no means a certainty.
Paul Taubman: For a meaningful increase in restructuring and liability management activity above and beyond current levels.
Paul Taubman: Turning to P. J T Park Hill.
Paul Taubman: First quarter P. J T Park Hill revenues were modestly below last year's strong results.
Paul Taubman: So dude levels of IPO and M&A activity are clearly weighing on capital return in the Alt space.
Paul Taubman: While this lack of capital return continues to make primary fundraising challenging.
Paul Taubman: It Hasnt turned created an unprecedented demand.
Paul Taubman: For alternative liquidity options from GPS and Lp's alike.
Paul Taubman: Our private capital solutions business is seeing increased activity levels.
Paul Taubman: <unk> to both L P state sales and <unk>.
Paul Taubman: <unk> life fund continuation vehicles.
Paul Taubman: Turning to strategic advisory.
Paul Taubman: Notwithstanding all the post election optimism.
Paul Taubman: For a significant resumption of global M&A activity.
Paul Taubman: First quarter activity remained muted.
Paul Taubman: While first quarter dollar value of global announced M&A increased modestly.
Paul Taubman: The number of announced transactions declined by more than 15% versus a year ago levels.
Paul Taubman: Our strategic advisory revenues increased in Q1.
Paul Taubman: And we expect full year 2025 strategic advisory revenues to be up strongly from 2024 levels.
Paul Taubman: Given the cadence of anticipated closings.
Paul Taubman: <unk> transaction as previously announced but not yet completed.
Paul Taubman: Most of this revenue increase should be reflected in our second half results.
Paul Taubman: Despite this turbulence our mandate count continues to grow.
Paul Taubman: And now stands at all time highs.
Paul Taubman: However, if current macro uncertainties persist for an extended period.
Paul Taubman: Benefit of this pipeline build may be considerably delayed.
Paul Taubman: On the talent front.
Paul Taubman: We added 10 partners in the first quarter.
Paul Taubman: Most of this increase resulted from the promotion to partner.
Paul Taubman: Individuals who had been recruited to our firm as managing directors.
Paul Taubman: We are on pace for another strong recruiting year.
Paul Taubman: With most of our senior hires expected to join in the back half of the year.
Paul Taubman: Notwithstanding current market conditions, we remain committed to further investments in our strategic advisory franchise too.
Paul Taubman: To best position us for future opportunities.
Paul Taubman: As we look ahead.
Paul Taubman: Current geopolitical uncertainties have certainly weighed on business and Royal capital markets around the world.
Paul Taubman: While our crystal ball for 2025, economic and market conditions.
Paul Taubman: Has gotten markedly cloudier.
Paul Taubman: We see clearly a full year firm outlook that is substantially unchanged from before.
Paul Taubman: We remain confident in our near intermediate and long term growth prospects.
Paul Taubman: And with that we.
Paul Taubman: We will now take your questions.
Speaker Change: Thank you Mr Taubman, ladies and gentlemen at this time the floor is open for your questions to ask a question. Please press star one on your telephone keypad and to get out of the queue Press Star. Two we will go first this morning to Ryan Devin of JMP Securities.
Alex Jacob: Hey, Paul Hey, Helen This is Alex Jacob filling in for Devin I Hope you guys are doing well.
Alex Jacob: I appreciate you taking my questions just to start on strategic advisory partner productivity. There I would just love to get your thoughts on how you think about the order of magnitude to the upside for partner productivity. You think you could get to if we got back to what like a more normal operating environment. Thank you.
Alex Jacob: Sure well again I think the first the first point is that in your question is the most important which is you have to assume it environment.
Alex Jacob: And if we're in a normalized environment, we think that theres meaningful increase in partner productivity and we've talked about this repeatedly because.
Alex Jacob: Productivity is is the end result of a lot of elements working together.
Alex Jacob: So if you think about it a lot of our investment.
Alex Jacob: Continues where we have partially built networks.
Alex Jacob: We have our first partner in a particular geography, we have our first or second partner and industry vertical.
Alex Jacob: And those are necessary, but not sufficient for us to really show.
Alex Jacob: The power of our firm, but as more and more of those individual networks.
Alex Jacob: Go from unbuilt or partially built to fully built there should be a meaningful increase in the economic results from that investment that's one element.
Alex Jacob: I think another element is there's simply the network effect and the franchise value of the firm and the more talented individuals who join this platform the greater of that network effect the more walk in business the easier it is to sell through.
Alex Jacob: And our fee realizations go up so all of that works to increase partner productivity, but it's it's not a formula.
Alex Jacob: And it's not a precise input output result, but if we continue to do the things that we're doing for any given economic environment that we're in that productivity should be meaningfully higher than it is today.
Alex Jacob: Yeah.
Speaker Change: Okay, great. Thank you for that color.
Speaker Change: And then just a quick follow up on the restructuring business. Obviously, you touched on in your remarks, there's a lot more economic uncertainty maybe you could speak to the growth algorithm for that business off what is already a really productive group.
Speaker Change: What are your bankers be more selective and just trying to understand how much capacity there might be from what already is a great level of production. Thank you.
Speaker Change: Sure well look we where we're deeply committed to the business we have the world's best liability management bankers in the World. We have the best franchise and we continue to do everything to make sure that we support all of those initiatives I think.
Speaker Change: That there's this wonderful.
Speaker Change: Virtuous circle between the rest of the firm and the liability management initiatives, because the greater our coverage footprint the greater the network effect.
Speaker Change: The better off we are as a firm enable to showcase our leading restructuring and liability management capabilities. So I think there is that.
Speaker Change: That benefit as we continue to expand our geographic footprint, our access to sponsors and corporates alike. Our geographic presence all of those have significant knock on effects for the rest of the firm.
Speaker Change: I think the second thing is that we have a lot of individuals who can help support the capabilities and the direction of our best in class liability management and restructuring team, but at the end of the day, we don't view ourselves as at all capacity constrained and I think our ops.
Speaker Change: Accretion is continues to be we're in a multiyear elevated cycle. It's elevated only when you look at the last 10 years, because the last 10 years have been aberrational, a low in terms of rates default rates financial stress in the system.
Speaker Change: And what has happened is we're now getting back to more quote unquote normalized levels and we're doing that with.
Speaker Change: A far greater quantum of debt outstanding. So when you have a return to more normalized levels in terms of rates.
Speaker Change: Distress.
Speaker Change: And default rates and you're doing that across a much greater quantum of.
Speaker Change: Debt outstanding around the world, it's not much of a leap of faith to.
Speaker Change: To whom it at a point that you end up with much greater levels of activity and that's what we're seeing.
Speaker Change: What is starting to build in the system as the stresses and strains.
Speaker Change: All of this uncertainty the need to onshore to disrupt the existing supply.
Speaker Change: Chain that are in place.
Speaker Change: Implications for pricing power and the increased costs, resulting from tariffs and how April individual companies and industries are to pass that on to end users all of that uncertainty is reflected right now in strains in the high yield marketplace. If you.
Speaker Change: Just look at credit spreads, they're up meaningfully from the beginning of the year with about half of that increase since the first of April. So we see those stress is building in the system. It is certainly possible that those stresses will subside and we'll come back to a more normalized economic environment and wished.
Speaker Change: Chase I think the environment that we're in is the environment, but if those stresses and strains continue to build there is the potential at least for a meaningful increase in activity levels from here.
Speaker Change: Yeah.
Speaker Change: Great. Thank you that's great color I appreciate it.
Speaker Change: Thank you.
Speaker Change: Thank you we'll go next to James <unk> of Goldman Sachs.
James: Good morning, and thanks for taking my questions I wanted to touch on the discussions that youre, having with private equity today to what extent are they slowing their previous plans to conduct M&A and ipos this year and potentially beyond.
James: And then as a corollary what are your expectations for the growth of the secondaries business for perhaps for this year in 2026 as well.
James: Look I think.
James: <unk>.
James:
James: In the alternatives space sponsors continue to transact.
James: There's there's not a cessation of activity.
James: But there is a slowing of activity and it starts with capital return the reality as capital return is far more challenged today.
James: Then what it should be.
James: Normalized economic cycle the.
James: The IPO market is clearly challenged they've been relatively few companies that have gone public most of those that have gone public have not traded particularly well.
James: And then also if you do take a company public and most of the proceeds or primary as opposed to secondary youre still not getting capital return you are simply positioning a portfolio company for future capital return and with all of the volatility in the market.
James: Run the risk that having recently listed one of your assets. It is trading meaningfully below where you have it Marc so all of that has slowed the return of capital.
James: In the ecosystem and that does hamper deployment of capital at the same time.
James: Private equity when they see quality assets.
James: Our available are still bidding and bidding robustly and if you look in the marketplace recently, you've seen a few instances of high quality assets, where you have a line around the block from sponsors to acquire those assets, but those are fewer and those are farther between.
James: Then we would all like.
James: So activity continues in an interesting way when we're dealing with maximum uncertainty and you're a sponsor the ability to take a couple of shots on goal.
James: In disrupted or dislocated markets.
James: Is arguably easier because you're taking a diversified portfolio approach.
James: Then it is for our corporate to have the conviction to.
James: To.
James: Bring to their shareholders a significant transaction in the midst of all of this market uncertainty. So we see activity not stopping but clearly it's slowing.
James: And it's not anywhere near normalized levels, but this too shall pass and we're going to get back to a more normal cadence, while that's being sorted out there is undoubtedly a very significant uptick.
James: And interest in continuation of vehicles, there's more.
James: Allocated monies.
James: Being directed to these strategies and we think it continues to be a significant growth engine.
James: And we are well positioned to be a leader and to continue to participate in that and that should over time be reflected in our financials as well.
James: Excellent maybe just a follow up on the dynamics you spoke about maybe you could also just give us your outlook for for LP secondaries, given the same dynamics and then separately.
James: I'd imagine.
James: Weaker private equity deployment backdrop could weigh on the fund raising business, which I think you alluded to a little bit maybe you could just help us think through the backdrop for primary fundraising.
James: The extent to which the longer term opportunity set and the business could change if irr's on DPI are lower on current vintages.
James: Well, there's a lot there's a lot.
James: In that question, let me try and be succinct.
James: Inquiries for Lps related to monetizing their stakes in selected P firms.
James: That continues to trend upward and that's a way for <unk> two in one fell swoop.
James: Re weight their portfolios.
James: Two more dynamically create weightings.
Two potentially no longer need to monitor.
James: Investments, a GPS where they're not going to have continuing relationships because they've made the decision not to invest in future funds. All of that is correct. We're seeing it and we're benefiting from it and we are a leading practice in the space and it it works to our advantage at the same time.
James: If you have a more pressure.
James: From Lps to unwind investments.
James: If you have less capital return because the installed M&A markets.
James: Slower IPO monetization opportunities.
James: Not much of a leap of faith to realize that that does not make primary fund raising easier. It only makes it more difficult at the same time.
James: Like anything else when the going gets tougher.
James: You are much more discerning about who you select.
James: To be your adviser and.
James: In an M&A world, where anything and everything gets sold clients may not care, if theyre going to a good not great M&A firm.
James: In a difficult environment, they want great M&A bankers that works to our advantage in an environment, where youre seeing it more difficult for primary fundraisings to be successfully done.
James: Doing it all in house, you're starting to think about placement Asia. Instead of just any placement agent you want P. J T Park Hill, So all of that works to our advantage, but what we're seeing is greater opportunities for us.
James: Ability to be highly selective.
James: Ability to use that as an opportunity to expand the relationship more holistically with the private equity firm, but at the same time the time to raise a fund and the expected fundraise size is all is all being weighed down by these are difficult.
James: <unk> environments.
Paul Taubman: That's very clear thanks, Paul.
James: Thank you.
Speaker Change: Thank you. We'll go next now to Jim Mitchell of Seaport Global Securities.
Jim Mitchell: Hey, good morning.
Speaker Change: Paul you kind of highlighted.
Jim Mitchell: You highlighted.
Jim Mitchell: The high yield market, showing some signs of stress right.
Jim Mitchell: Does that at all or at least temporarily hurt your ability to execute liability management assignments and I guess, if that persists can we start to see some of those assignments get pushed into towards chapter 11, just curious how youre seeing that dynamic.
Jim Mitchell: Look I think I think the reality is.
Jim Mitchell: Were in a risk off environment, we're not in a risk on environment when youre in a risk off environment.
Jim Mitchell: That tends to be.
Jim Mitchell: We're.
Jim Mitchell: Borrowers and.
Jim Mitchell: And lenders alike recognize that there needs to be a restructuring in the transaction I think theres always been a view that liability management as a more efficient way to do it.
Jim Mitchell: Then chapter 11, not exclusively but principally it's a it's a way with fewer friction cost and for parties to come together more quickly and with prices starting to reflect a more distress, there's probably more opportunity to capitalize on some of that so I actually think you're going to see more of both.
Jim Mitchell: Youre going to see more liability management and you were going to see more more bankruptcies I think both are going to.
Jim Mitchell: The present as we move into this next economic phase.
Jim Mitchell: That's my own personal belief.
Jim Mitchell: I think at a minimum you'll see some modest upticks.
Jim Mitchell: And we will end up somehow averting a more pronounced.
Jim Mitchell: Economic.
Jim Mitchell: A recession, but if we Don youre going to see a major league uptick in both.
Jim Mitchell: Imported out of court restructuring.
Ken: Okay Ken.
Jim Mitchell: Private capital.
Speaker Change: Private credit pick up some of the slack if the public markets are closed or is it just not there and I'm just curious.
Speaker Change: If they if that's a source of funding for the liability management.
Speaker Change: Space.
Speaker Change: Well, it's certainly a source of a lot of this to for liability management is taking the existing claims.
Speaker Change: Our dealing with existing lenders, they just simply restructuring it with different collateral packages different tranches different securities and converting some of it to equity. So there's all of that opportunity. It's always easiest to restructure companies with those that already have skin in the game and our economic stake.
Speaker Change: Holders and I think those motivations are only going to increase to your point about private credit whether it's private credit.
Speaker Change: Or is in the syndicated market, but the asset is owned by private equity firms. So willing this to be more creative and to think across the credit spectrum as to how to restructure balance sheets. So that companies have the runway to navigate these dip.
Speaker Change: <unk> environments.
Speaker Change: That's greater so we're always going to see more of a bias towards liability management when the owners of the debt and the owners of the assets come from highly sophisticated.
Speaker Change: Organizations that are deeply steeped in credit that's just reality.
Speaker Change: Alright, very helpful and just maybe a longer term question.
Speaker Change: The tariff uncertainty it seems it seems pretty clear, it's going to drive a lot of companies to move.
Speaker Change: Or diversify their supply chain. So in the longer run do you see that as an incremental catalyst for deal activity or is it just more more of a pain point rather than an opportunity set longer term just curious how you think about it.
Speaker Change: Well look right now it's hard for companies to make profound decisions to reorient supply chains if.
Speaker Change: What exists today could be rescinded tomorrow. So I think we're in this difficult environment, where.
Speaker Change: You don't know whether to start to pivot to a plan b because he may be back to plan a in a short period of time. So I think what this is really doing is just freezing activity as a general matter to your point, though there are always second order third order consequences of all of this.
Speaker Change: I think what we're seeing in Europe as an example.
Speaker Change: As a real appreciation.
Speaker Change: They need to close the innovation gap they need to be more into advanced tech they need to be less reliant on the U S and China they need to figure out how to have increased security and reduced dependencies on the United States and that is going to drive additional economic.
Speaker Change: <unk>, that's going to drive additional M&A activity and youre going to see more consolidation.
Speaker Change: And governments in Europe, and the EU writ large much more willing to embrace consolidation than they were before so like any any bit of news flow. It's never all one way Theres always you know multi directional implications and I think wallet. It makes the current environment more difficult.
Speaker Change: <unk>.
Speaker Change: When the clouds lift and there is greater clarity, there's no doubt that's going to be a meaningful if it is for additional activity. So that's consistent with this view that less activity now more activity in the future and things are getting pushed.
Speaker Change: Alright, great. Thanks for the color.
Speaker Change: Absolutely.
Speaker Change: We'll go next now to Brendan O'brien of Wolfe Research.
Brendan O'brien: Hi, and thanks for taking the question.
Speaker Change: This is just a lot of other noise in there.
Speaker Change: I was just wondering if you could.
Speaker Change: On the regulatory front.
Speaker Change: There's obviously a lot of optimism.
Speaker Change: And that would accommodate.
Speaker Change: So I just wanted to get a sense as to whether there is.
Speaker Change: Are you seeing a scrutiny relative to what we saw.
Speaker Change: Okay.
Speaker Change: I I heard.
Speaker Change: Every other word because of the port connection, but I think the gist of it is can.
Speaker Change: Can we try and make sense of what the current administration's regulatory posture is on M&A deals and what are the implications for M&A did I get that mostly right.
Speaker Change: Yes, sorry about the connection.
Okay. So if that's the question let me give it a go.
Speaker Change:
Speaker Change: Look it's a mixed it's a mixed bag right because you know with with new administrations you typically want.
Speaker Change: No.
Speaker Change: Early.
Speaker Change: Declarations on large deals.
Speaker Change: As a weather vane.
Speaker Change: How much the weather has changed from before.
Speaker Change: And part of the challenge here is you're not seeing enough.
Speaker Change: Deal flow and Youre, not seeing enough regulatory review.
Speaker Change: Really determine what is the direction of travel.
Speaker Change: And this administration contrasted with the last administration and there's also no doubt.
Speaker Change: Well a different approach there are within this administration some reasonably consistent views about competition in certain areas that align more closely than some had thought with the prior administration. So my own view is it's.
Better.
Speaker Change: I think there is no more confidence in moving forward in most industries, but not all I think when it comes to media technology.
Speaker Change: Areas that affect and prices of what consumers pay in groceries and and the like that are there.
Speaker Change: Not a relaxed view on consolidation.
Speaker Change: But in other parts of the economy I think theres no doubt that this is a a more favorable climate, but maybe not as favorable as some had thought.
Speaker Change: And for a lot of companies around all of this world and with a lot of rhetoric, what they're looking for are a couple of large defining transactions to come before them. So that they have a much clearer sense as the roadmap. So I think thats also.
Speaker Change: In a nuanced way curtailing some large M&A.
Speaker Change: For the moment, but not necessarily for for very long.
Speaker Change: That's helpful and hopefully you can hear me better now.
Speaker Change: But.
Speaker Change: For follow up.
Speaker Change: Last quarter I believe you alluded to maybe a slight slowdown in recruiting lash this year after year.
Speaker Change: A couple of years of recruiting previously, but just given the softer levels of activity year to date I just wanted to get a sense as to whether you're seeing any improvement in the recruiting environment and whether this might cause you to reaccelerate hiring in a way that you weren't expecting at the start of the year.
Speaker Change: Yeah. That's a great question look it's not a it's never about us re accelerating hiring we're always available to hire.
Speaker Change: The best most talented people. The question is just separately given the environment. We're operating in what's the ability to get individuals to take the time and to take the breakage costs to come off the field to come join so think about it this way the demand on our part it's unwavering.
Speaker Change: The opportunity set is what fluctuates.
Speaker Change: That commentary was predicated on this being a much more robust deal environment.
Speaker Change: Where those friction costs would have been greater as those friction costs have come down we're starting to see more interest in moving now and more of a realization that now is a perfectly good time to.
Speaker Change: To change it come to this platform and as a result, I do expect.
Speaker Change: To see our yields increase but it's not because we have more desire a more conviction today. It's just that the world is coming closer our way than perhaps we had thought.
Speaker Change: That's great color and thanks for taking my questions and apologies for the connection issues.
Speaker Change: Perfect well, hopefully I did a reasonable job in interpreting in answering your question.
Paul Taubman: You hit the nail on the head Paul.
Speaker Change: Okay, good well with that.
Paul Taubman: Oh I'm sorry.
Speaker Change: Thank you we'll go next to Matthew Thank you Mr Rubin of UBS.
Matthew: Hi, Thanks for taking my questions.
Matthew: Of course, I thought the commentary that your full year outlook has not changed was actually pretty encouraging and in 2024. Obviously you guys had record revenue across your three businesses. So I'm. Just curious how are you thinking about the different growth trajectories across park Hill restructuring and strategic advisory in light of the uncertainty.
Matthew: And then also you mentioned in your prepared remarks that your backlog remains at record levels. So just curious has there been any shift in either the quality or expected timing of your M&A pipeline. Thus far in April. Thank you.
Matthew: Sure.
Matthew: Let me, let me try and since you started out asking about the totality of the firm let me start there and then we'll come back I think.
Matthew: We are coming off record results in all three of our principal businesses.
Matthew: What I have said repeatedly is that restructuring and liability management, we don't see any meaningful slowdown and we expect levels to be.
Matthew: Consistent with last year.
Matthew: Certainly in the same range.
Matthew: I do think that with every passing day.
Matthew: Maybe that that vector goes from flattish to slightly up but that's we're.
Matthew: We're going to need to see more of the year playing out, but if you said to me as the year progresses.
Matthew: Or are we thinking about.
Matthew: That it's reasonably consistent with last year's record levels and as I've said, none of that reflects.
Matthew: That call option, if you will that if the stresses and strains persist for an extended period of time, we could see a meaningful uplift. So we're kind of flattish with maybe watch and wait that maybe if a if the world becomes.
Matthew: Stuck for longer and if the markets continue to be challenged there could be an uptick from here.
Matthew: What we've also said about our.
Matthew: Capital raising fundraising businesses.
Matthew: Is that the primary business continues to be quite difficult and challenging from a macro perspective theres ever more interest.
Matthew: Interest in LP monetization and <unk> solutions to create liquidity and you sort of got that gang and the Yang there. So those those two businesses.
Matthew: Should should approach last year's levels and as the year progresses.
Matthew: Yeah.
Matthew: How it affects individuals sub sectors and you know a more precise view, we will need more of the year to play out but those two forecasts are substantially intact from where they were at the beginning of the year, even though the composition may change and in strategic advisory we had the benefit of a record announced pending close pipeline.
Matthew: We have the benefit of a.
Matthew: Record level of mandates.
Matthew: We're stronger every day every day, we are a stronger and more powerful franchise.
Matthew: And all of that suggests that we should have very strong results and strong increases in strategic advisory year on year.
Matthew: And exactly the degree how much.
Matthew: There will be a function of how the environment plays out over the next.
Matthew: Eight months.
Matthew: And what our perspectives are for 26 will be defined by how the second half of.
Matthew: 25 plays out but it almost any scenario, we still think we're positioned for strong increases in strategic advisory for the year end.
Matthew: As a result that is an outlook, which is for markedly consistent to what we talked about three months ago.
Speaker Change: Great. Thanks for the color Paul I wanted to shift gears onto the comp ratio you mentioned heading into this year that you were set up well to begin delivering comp leverage in 'twenty five and you were able to do such in the first quarter I'll bring it down roughly 150 basis points. So I'm just curious what would you need to see in.
Speaker Change: Terms of the deal backdrop through the course of this year such that you would be more comfortable bringing it down further if possible and also how much incremental recruiting costs does the 67, 5% assume as far as additional hiring is concerned. Thank you.
Speaker Change: Well, it's the 67, 5% as Helen said is our best estimate for the full year. So by definition. It reflects our estimate of our business performance for the full year and it reflects our estimate of the recruiting.
Speaker Change: We will continue to occur throughout the year. So it's only deviations from that.
Speaker Change: If there's a meaningful deviation in our actual revenue performance.
Speaker Change: Or our actual recruiting or.
Speaker Change: If we come to a later in the year and we have been.
Speaker Change: <unk> ability on 26.
Speaker Change: That causes us to reflect that as well into our twenty-five accrual rates. So I think it's those those three legs of the stool will will define our ability, but as Helen said this is our.
Speaker Change: First you know.
Speaker Change: Estimate of full year call.
Speaker Change: And until there are factors that would materially change that that's the number and then just to remind you we do refresh that every call.
Speaker Change: So when it comes to the second quarter earnings.
Speaker Change: We will take a refresh view an update on what's changed.
Speaker Change: Great and then just a quick follow up the 67, 5% reflects your best estimate as of the end of the quarter $3 31 or as of April.
Speaker Change: As of today as of today.
Speaker Change: Alright.
Speaker Change: Officially done when we when we close the books for the quarter, but theres nothing that ive seen I'm going to go out on a linear I'd say, there's nothing we've seen in the last few weeks that caused us to.
Speaker Change: To think that that's not just us.
Speaker Change: Alright, great. Thanks, guys for answering my questions.
Speaker Change: Yeah.
Speaker Change: Thank you we'll take a follow up question now from James <unk> of Goldman Sachs.
Speaker Change: Thanks for taking the follow up just on the on your buybacks you repurchased a healthy quantity of stock in the quarter and I think that a bet on.
Speaker Change: Understates underscores the unchanged guidance you provided maybe you could just help us think through the cadence for buybacks from here and perhaps the timeframe over which you believe you could fully offset the share count dilution from the past few years.
Speaker Change: Hey, James.
Speaker Change: As in the past, we've typically been more heavily weighted to buybacks.
Speaker Change: It would be early part of the year and we try them as best we can match the issuance that happens in the first quarter. So that has been a consistent pattern that we've also been buying back shares throughout the year.
Speaker Change: We would anticipate that we will continue to be opportunistic.
Speaker Change: I think she is going forward with.
Speaker Change: <unk> utilized all the issuance this year, but as you know there are some other issuances in past years that we haven't completely got back and so.
Speaker Change: While the timing might be perfect. We do intend to go and get that this year as well.
Speaker Change: Yeah.
Speaker Change: Okay I appreciate the color. Thank you.
Speaker Change: Great. Thank you James.
Speaker Change: Thank you that will conclude our question and answer period I would now like to turn the call back over to Mr. Taubman for any closing comments.
Paul Taubman: Well. Thank you very much we as always appreciate your interest in your company. We appreciate your participation in these earnings updates and we look forward to speaking to you. When we report second quarter results. This summer. Thank you very much.
Speaker Change: Okay.
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