Q3 2025 PJT Partners Inc Earnings Call
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Good morning.
Welcome to the pjt partners, third quarter, and 9 months 2025 earnings conference call.
Joining the earnings conference call. Today is Paul Topman. Chairman and chief executive officer, Holland mates, Chief Financial Officer
During the course of this conference, call management 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.
These factors are described in the risk. Factors section. Contained in pjt Partners, 2024 form, 10 K, which is available on, pjt partners website at pjt partners.com,
The company assumes no duty to update any forward-looking statements.
Also, the presentation made today contains non-gaap Financial measures which the company believes are meaningful and evaluating the company's performance.
For detailed disclosures on these non-gaap metrics and their Gap, reconciliations, please refer to the financial data contained. Within the press release, the firm issued this morning also available on the firm's website
With that, I'll turn the call over to Paul Topman.
Good morning. Thank you all for joining us today.
This morning, we reported record results.
Revenue, adjusted pre-tax income, and adjusted EPS.
All reaching record highs.
For both the 3 and 9 month periods.
Third quarter Revenue was 447 million.
Up 37%.
Adjusted pre-tax income was 94 million up 86%.
And adjusted EPS was $1.85, up 99% from a year ago levels.
For the nine months, revenues increased 16%.
And adjusted EPS, increased 43%.
From year ago levels.
Since our last earnings call, we have seen further improvements in the macro environment.
Equity prices are near record highs.
Volatility across equities and credit is near historic lows.
Debt issuance is strong and the IPO Market has reopened.
This favorable Capital markets backdrop has been an important Catalyst in the m&a recovery.
Greater Clarity and Regulatory outcomes as well as increased CEO confidence.
Has further Amplified deal-making momentum with many companies. Revisiting, their strategic wish list.
that said,
We still operate in a world fraught with risk.
Continuing geopolitical, uncertainty.
Stubbornly High interest rates.
Tariff, dislocations. Coupled with concerns of an AI bubble have the potential to derail this pickup in activity levels.
while we remain optimistic about the near to intermediate operating environment,
It is a tempered optimism, when balanced against these risks.
After Helen takes you through our financial results,
I will review our business performance and Outlook in Greater detail. Helen, thank you, Paul good morning.
Beginning with revenues.
total revenues for the third quarter of 447 million up 37% year-over-year and for the 9 months, ended September, 30 total revenues, were 1 billion 179 million up 16% year-over-year
Revenue growth for the third quarter and the first nine months was primarily driven by strategic advisory, which was up significantly for both periods.
Restructuring revenues Rose slightly in the third quarter and first 9 months.
Well, pjt Park Hill, revenues were flat in the third quarter and down modestly for the first 9 months.
Turning to expenses consistent with prior quarters were presented, the expenses with certain non-gaap adjustments, which are more fully described in our 8K. First adjusted compensation expense
We accrued compensation expense at 67.5% of revenues for the first 9 months of the year compared to 69.5% for the same period last year. This ratio represents our current best estimate for the full year. 2025
Turning to adjusted non-compensation expense.
Total adjusted. Non-compensation expense was 51 million million in the third quarter up 5% year-over-year and 153 million for the first 9 months up 10.5%. Year-over-year.
As a percentage of revenues 11.5% in the third quarter and 13% in the first 9 months.
The main drivers of the expense increased for the first 9 months of the year were higher. Occupancy costs, which are up 19% year-over-year. Reflecting the expansion expansion of our New York and London offices.
and higher travel and related expenses, which are up 25% year-over-year, primarily reflecting higher levels of business related travel
Overall, for the full year, we continue to expect that our non-comp expense will grow at around 12%. A similar rate to our 2024 growth rate.
Turning to adjust the pretext income. We reported just a pretext income of 94 million in the third quarter and 230 million for the first 9 months.
Our adjusted pretext margin for the third quarter was 21%, compared with 15.5% for the same period last year and 19.5% for the first 9 months.
Compared with 16.9% for the same period last year.
The provision for taxes as with prior years were presented. Our results as if all partnership units had been converted to shares and that all of our income was taxed at the corporate tax rate.
Our effective tax rate for the first 9 months of 2025 was 15.5%, which now represents our current expectation for the full year.
This rate is slightly below our previous full year estimate of 16.5%. And as a result, the effective tax rate for the third quarter was 14%,
The reduction in the full-year rate is primarily due to an updated estimate of our income allocation across state and foreign entities.
Earnings per share are adjusted if converted earnings were a dollar 85 per share for the third quarter up, 99% and $443 per share for the first 9 months up 43% from the same periods last year.
For the quarter, our weighted average share count was 43.8 Million shares down 2% versus a year ago. And during the third quarter, we repurchased the equivalent of approximately 186,000 shares primarily through exchanges.
A repurchases. And the first 9 months of the year totaled, approximately 2.3 million shares,
we are in receipt of exchange notices for an additional 115,000 partnership units and subject to a board approval. We intend to exchange these units for cash.
On the balance sheet, we enter the quarter with 520 million in cash cash equivalents and short-term Investments and 558 million in networking capital and we have no funded debt outstanding. Finally the borders approved. A quarterly dividend of 25 cents per share.
Back to full.
Thank you, Helen.
Beginning with restructuring.
Notwithstanding favorable economic and capital markets conditions, demand for liability management and restructuring activity remains High.
Even with a relatively benign credit environment.
A market leading restructuring, team continues to deliver strong performance.
With third quarter and year to date revenues at record levels.
At the same time, certain corners of the economy.
Are feeling the weight of relatively High interest rates.
Dislocations caused by higher tariffs.
Disruptions resulting from accelerating technological innovation.
And changing consumer preferences.
While these headwinds may not yet be broad-based,
they are being felt in certain industries, including technology media.
Healthcare.
Automotive and consumer.
For the current year. We expect our restructuring results to meet or exceed last year's record results.
Looking ahead. We expect our restructuring Bankers to remain highly active as they continue to address. Liability management opportunities resulting from this concentrated stress.
Turning to pjt Park Hill.
The primary fundraising environment continues to be challenged by historically, low levels of capital return.
Coupled with a significant increase in the number of managers.
This in turn has elongated fundraising timelines.
And pressured the Quantum of capital raised.
As GPS and LPS seek additional paths to liquidity.
The same forces that have dampened primary.
Fundraising activity.
Have also served to catalyze continuation fund activity.
And more Capital has flowed into the space as investors have come to better appreciate.
The attractive return profiles associated with secondary products.
Creating a virtuous cycle.
For pjt Park Hill, third quarter revenues were comparable to a year ago with strength in private Capital Solutions offsetting lower primary revenues.
For the full year. We expect overall pjt Park Hill, revenues substantially in line.
With last year's record levels.
Turning to strategic advisory.
Many of the pieces necessary for a meaningful Rebound. In m&a, activity have fallen into place as the year has progressed.
However, the recovery has been uneven.
While we have seen a market increase in larger m&a, transactions, we have not yet seen an increase in the overall number of transactions.
even though the average deal size is up almost 40%,
the aggregate number of transactions has actually declined.
For the 3 and 9 month periods. Our strategic advisory business delivered, record revenues,
Substantially above prior year levels.
Our mandate count has increased meaningfully from a year ago.
And now stands at record levels.
Overall, our strategic advisory business remains on track to deliver another record year.
Continue to bear fruit.
On the talent front.
We continue to add Talent as we invest in our strategic advisory franchise.
And the firm more, broadly.
As a result of our active recruiting efforts, our headcount overall has increased 7%.
From a year ago.
And 4 Partners joined our strategic advisory franchise in the third quarter.
A decade ago, we set out to build a Next Generation Investment Bank.
We envisioned a firm where complex challenges would meet Creative Solutions.
Impact and integrity.
10 years in our firm has grown substantially. And so too, have our aspirations.
Today's mission is clear.
To be the world's best investment Bank.
As we celebrate our 10th anniversary?
We would like to take this opportunity to acknowledge the dedication of our colleagues.
And the trust and support of our clients.
And to our shareholders, thank you for your partnership.
We continue to see tremendous opportunity ahead.
And we remain determined to capitalize on our enormous potential.
As before we remain confident, in our near intermediate and long-term growth prospects.
and with that,
we will now take your questions.
Ladies and gentlemen, at this time, the floor is open for your questions.
Let's ask a question please press star 1 on your telephone keypad.
Get out of the queue press star 2.
We'll take a question from Devin Ryan of citizens, please go ahead. Your line is open.
Great, good morning, Paul. Good morning Helen. Uh, congratulations on 10 years.
Thank you, good, good to speak Devin. Good morning. Yeah, yeah, absolutely. So, um, want to start Paul on the restructuring, um, Outlook and, and appreciate the framing that you gave and still sounds like, you expect, um, a strong kind of backdrop there. You know, we've been hearing, you know, somewhat mixed Trends. I would say through earnings. Um, and so, I just want to get a sense of of how you're thinking about, you know, pjt specific relative to the broader, uh, macro backdrop for for Trends because you guys have a leading practice and so, um, you know, potentially outperform the industry in in different.
Environment. So do, do you still see the environment being very good? Or is this more just about pjt maintaining or even gaining share as you're kind of always going to be active in that business. Thank you.
Well, it's, it's always hard to deconstruct, you know, the market versus your position in the market precisely, but, but we don't see.
Any real Demunn in restructuring activity, we just don't see it. So we're operating at
Elevated levels relative to Historic levels. But as I pointed out repeatedly,
From most of that history.
We're looking back at a baseline where the macroeconomic environment.
Was far more constructive than it is today, and where money was nearly free and interest rates were nearly zero. We're also looking at a baseline where the Quantum of debt outstanding was meaningfully less. And we're also looking at a baseline where there was not as much disruption Innovation and what we refer to as concentrated stress. So in a overall, uh,
Accommodative environment.
You can have a higher, you know, Baseline of restructuring activity. We've talked about this repeatedly, we continue to see that. Now as it relates to
Our practice.
The growth pillars beyond what the overall market conditions are or continued.
Continued, penetration of sponsored clients.
Which will give us a broader addressable Market.
Second is continued growth outside the United States. As we build out local presence around the globe, and the third is, as we continue to build out our industry footprint.
The 2. But as we look at our activity levels, they were made elevated and we expect them to be elevated for
The foreseeable future. And I do think there's a call option on, you know, a meaningful, you know, shock to the system because we're not experiencing any of that today. I'm not predicting it but none of this you know assumes. You know any any real deviation from the current environment
Yeah.
Got it. Okay. Uh, appreciate all that color Paul. Um and then just from my follow-up. Um, when I look at partner productivity, I appreciate it. It's kind of a crude uh number from the outside but you know on a blended basis looks like you're you know on track for a record year productivity on my numbers at least um and you appreciate some of that you know, very strong restructuring. And then you have strategic advisory ramping pretty materially as those Partners on the platform mature. So love to just get an update on on how you think about the productivity potential of Partners from here. Particularly as strategic advisory still feels like, you know, the environment is getting better. But then also, uh, the bankers on the platform are maturing as they've been doing and, uh, you know, I guess in, in that question, just love to hear about, you know, how you think about, what is a reasonable number of, you know, kind of Revenue per partner for strategic advisory when you're hiring somebody externally. Uh, you know, are you you targeting, you know, 15 to 20 million.
Dollars or is there a number just you know, any more color you can give on how you're thinking about the potential from here given that you're going to have. It looks like a record year there. Thank you.
Yeah, I I never think about a number. I never talked about a number. I don't believe in a number. Um, what I believe is if you hire a difference makers.
You'll ultimately make a difference in your financial results to the positive. I really do and I think
It's so hard to come up with a number because you need to assume an environment.
You need to assume how active that sector or that product is at that time. You need to look at what else has been built out at the firm which creates either Tailwind or a headwind for those individuals and then you need to ask yourself, are you looking in year, 2 year 4 year, 6 year 8. So we don't believe in in that and as far as the number
in a perverse way, I'd love nothing more than to take the number down. I mean if tomorrow we could find 10 incredible Partners to add to the platform on day 1, by definition, our so-called partner productivity would go down because those same revenues would be divided by an extra 10 individuals. So it it's a number that we don't spend a lot of time with but we have great confidence that what we're what we're building.
is highly additive and creative to our overall Financial results and to our brand and to the service of our clients,
And that's, that's how we think about it. And I think it's more of a relative construct. And if you ask me, do I think we
We've hit maximum levels. I'd say, no not not close because
There are a lot of partially built systems.
In our franchise, whether it's just beginning to put our toe in the water, in a geography or just beginning the journey to build out an industry group, or we have that, but we don't yet have full recognition or we have the recognition from the clients but it hasn't yet translated into into revenues. So, I think we, we feel very good about the direction of travel, but, but I don't spend a lot of time thinking about it as a number.
Got it. Okay. Well appreciate the uh response there Paul and uh look forward to catching up soon.
Absolutely, thanks for your questions.
We'll take care of your question from James yarrow of Goldman Sachs. Your line is open, please go ahead.
Good morning, and thanks for taking the questions, Paul, I'd love to just get your perspective, um, on the impact of the government shutdown on the business. Um, do you expect this to have an impact on the fourth quarter? But but really more importantly, how are you thinking about? Um, the impact going forward? Is there any, uh, anything beyond a temporary impact?
Uh,
look, I think it has it has real implications to a lot of, you know, individuals in this country who are suffering because of
Uh, what does this do to the broader macroeconomic environment in the country, which is really a function of how long does this? Shut down? Continue. Uh, which workers aren't paid for how long what resolution do we end up with? And what are those implications? I think it's the macro implications that matter more and and the reality is No 1 has answers to that. So we're all we're all watching and and waiting, I think that's the, the bigger question is, what if anything does this do to overall? Um uh economic output and uh consumer confidence and business confidence.
That's super clear. Thanks. Um, just maybe turning to the primary fundraising business. I'd love to just get your perspective on, on the ability for that to continue to improve. Obviously, it was down for a couple of years there, and, and you've seen a, a nice bounce back there, over the past few quarters. So, uh, is is the sustainable and, and how are you thinking about the, the outlook for that business? Well, well there's there's, uh, good news, bad news and then back to good news. So, the good news is, it's getting better.
The bad news is as it gets better. Everyone is going to want to, you know, come to tap the market because they've been on the sidelines, so that's going to make it a crowded trade.
And then the good news from the bad news is in a crowded Market. They're going to want you know the best fundraising team and that's going to play to our strengths. So I think overall it's positive but it's it's like everything else. It's never 100% positive. There are some some puts and takes their
thanks a lot for the caller.
Sure.
We'll take our next question, from Brennan Hawkins of Bank of Montreal. Your line is open.
Uh, good morning, Paul. Good morning Helen, thanks for taking my question. Um,
Was hoping that you could, um, I know, uh, Paul, I heard you sort of loud and clear that the 67 and a half is your expectation for the full year but you know, taking a step back, uh, what's the best way we should be thinking about operating leverage, right? And the path for pre-tax margin as you continue to see this strong Revenue. Growth is, you see the, uh, you know, is the Investments that you've made in strategic advisory begin to bear fruit? Um, you know, how should we be thinking about that either in the year end and then, of course, you know, into the coming years, thanks.
Well, I think into into your end we've given you our best estimate for, for this year, you you talked about operating leverage which I appreciate the question because to me, operating Leverage is what's the pre-tax margin? Because ultimately, that's what drives.
Shareholder value. And if you look at our operating margin
For this year, and if you look at it in the historical context of where we've operated, I suspect that if you X out 2020 and 2021, when we lived in this surreal world where there was no travel, there was no entertainment, there was no discretionary spend, and margins were overly affected.
You know, inflated. I think our our margins this year are going to be at the high end of anything. We've produced in our 10 year Journey.
As a public company. So we're quite proud of that.
And we are focused on it. We we don't like to focus on any 1 individual component of that because a, there's a lot of inter relationship between all of these.
These, uh, line items. And B, you're trying not to manage the firm for the here. And now you're trying to manage it for for the long term, but if you're asking me, do we think that there's, you know, further margin Improvement, along the journey, I think the answer is, is yes. And, uh, I just don't want to lose sight of the fact that while we may be running with comp to revenue margins that are higher than
our historical levels have been, we also have
run this farm at. I think the lowest non-comp to revenue margins that we've, we've had as a firm and if you take all of that together, you know, the overall output is quite, uh, is quite attractive. But an answer to your question. There's there's more. Um, there's more upside from here.
and we're going to get at it, but exactly how and when I don't know, but when I look at it over 10 years,
Uh, this is going to be exposed to aberrational years. I think our best operating margin.
Year. Uh,
In our, in our decade.
You know, you never want to Anchor overly on 1 particular year obviously because things will move around. But but you know uh it it is that is that a decent way to be thinking about it going forward, or are there other factors? What are the factors? Should we consider? Thanks, but look, I think, I think it's a general matter. There's operate. We we believe in operating leverage in the business. Let's just start there.
Uh, we also believe in disciplined cost.
But not an obsession with cost, at the expense of, you know, long-term value, enhancing growth.
So that's that's the mix and since we we continue to believe that we should be able to grow our Top Line faster than our expenses. We think that there's more, there's more operating margin to to be had. But in any given quarter, any given year, you're buffeted by a lot of very specific things.
Which makes it very difficult to manage to a number in the short term, which is why I like to sort of step back a little bit.
And what I just suggested is, if you look back at our journey as a public company, over 10 years,
And you take out the 2 fantasy years, where it just wasn't.
A a a normalized world because no 1 was traveling know 1 was entertaining, there were no conferences, there was no uh, travel expense. There was no entertaining expense or you just strip those out. We're sitting here today, saying we're still seeing the fruits of our investment and we're going to post you know on a relative basis, our best or near best operating margin. So that to me is just a proof point that a there's operating leverage in the business and B we can get at that operating Leverage.
Thanks for taking my question, Paul.
Absolutely, thank you.
We'll take a question from Brendan O'Brien of wolf research. Your line is open, please go ahead.
Paul, thank you for taking my questions. Um, you know, start, I just wanted to touch on uh, a dynamic you flagged, which is the Divergence of deal value versus deal count. Um, which is something, we've been keeping an eye on ourselves and the drivers of the increase in the larger activity as a parent around Derek and things of that nature. But just wanted to get a sense as to what you think is behind the lack of breath and activity so far and what could maybe drive, you know, an improvement in that Dynamic over the next, you know, coming year.
look, I think there's there's some of this is there's um,
You have to, you have to really deconstruct the the market. So I'll just give you 2. I I don't want to turn this into a treat so I'll give you 2 2 thoughts number 1, we clearly are dealing in a more favorable regulatory environment.
Where is that going to create more momentum? It's going to be in the larger transactions.
And if you're dealing with, you know, sub billion dollar deals or or 1 to 5 billion sizes and everything, but it's probably a pretty good correlation that, that's not where there's regulatory complexity. So it should be no surprise that as you're dealing with a more progress Pro business administration you would see more of a skew to the high-end and that gets picked up in dollar values. Doesn't get picked up in number of transactions.
As much the second would be the velocity of capital with sponsors.
And I continue to think that we haven't really gotten the reset with sponsor activity. We will
We hope. And when we get that, you'll start to see
that reflective in, um,
Number of uh, transactions and in transaction count. I think those would be the 2 that I would highlight.
That's helpful color and for my follow-up I just wanted to unpack your commentary on the Park Hill business a bit you know in your prepared remarks that Park Hill revenues were down year on year so far this year and PCA s revenues were up but the placement line was also up. So I just wanted to
If you could just unpack, uh, that piece a bit more whether there's some, you know, non-park Hill fees in that placement line. And then also last quarter you noted that you expect a significant acceleration in PCS fees and second half based on the commentary, it doesn't seem like that came through in 3 cues. So just want to get an update here.
Well, just let me just take the latter part. I think it it did. And just to recall those get booked in advisory
Yep.
Replacement in most instances and that's reflected in our financials but on the former a turn it back to yeah. And then on the um
Just a reminder that the placement uh, line includes.
Uh, Park Hill placement, but it also includes any corporate placement. So we did have, uh, some placement fees earned that were outside of Park Hill.
Which is just another. I think all you're doing is you're putting a highlight on the fact that I think we
Maybe need to transition away from these advisory placement. Um,
Uh designations because I'm not sure it helps, give anybody any real Clarity on on the business. And we don't spend a lot of time.
You know, a portioning, it 1 way, or the other. At the end of the day, they're they're advisory with a capital, A revenues because they all relate to intellectual capital and intellectual advice. But uh, I appreciate your question.
Thanks for the caller, guys.
Thank you.
We'll take a question from Alex Bond of KBW. Your line is open. Hey, good morning. Hey, good morning everyone. Um, just wondering if there's anything that stood out for you in your recent dialogues with clients in, regard to the overall credit backdrop, um, curious, how you're thinking about this? Probably giving your obviously strong presence in the restructuring Market. Uh, the fact that private credit remains in the headlines, and we've had a couple of high-profile bankruptcies here recently. So so any caller you can have here add here. Um, would be great. Thanks.
But look, I just made some general observations 1 is, you know, when you see spreads, you know, tighten as much. I'm not sure that credit's been appropriately priced. I think that's maybe more the issue and I suspect that over time, you'll probably see sort of more normalized, you know spreads
Uh and as it relates to these situations, unfortunately malfeasance. Um, you know, is a risk factor and it occurs in Bull markets, it occurs in bad markets. Um and I'm not yet seeing evidence that this is widespread but what you're putting out enormous Quantum of capital. It does, you know, put pressure on diligence diligence standards and if you're dealing with
Uh, individuals or entities that are, you know, not forthright and are um engaged in improper activity. You're not going to catch
All of it which is why I just come back to some of this may not have been fully reflected in, just how credit overall.
Has been priced what we're much more focused on. Is the fact that you can have a world of enormous technological dislocation.
All this Innovation changes in Market sizes, customer behaviors.
Demand and not have losers alongside winners. Everyone can't be a winner.
And as we're creating all of these new, uh, new economy technology companies and new ways for efficiency, there are going to be companies left behind. So I suspect.
That if you just take a slightly longer term lens than the number of companies that are going to need to address their balance sheets is, is probably more likely to grow than to, than to shrink. It may not happen immediately but I think there's a longer term. Um,
A longer term Trend at play here.
Got it, that makes sense. Um, and then maybe for my follow-up, um, I suppose, just trying to understand what degree, maybe the stronger structuring activity, has been a benefit, uh, to the comp ratio in recent periods. Um, you know, the head down here is obviously a little bit lower than the Strategic advisory business. Um, so yeah, I guess just, you know, in, in a scenario where maybe, maybe maybe the restructuring activity, does slow a bit, you know, is it, you know, is there anything that would lead you to believe that there might be less comp leverage. Um, just given, um, the smaller head count there and, and maybe if, if there's anything else we should be considering in in that regard, thank you.
Look obviously, if there were big dislocations to our Revenue good or good, or not, that, that will affect because this is a roll up of, of all of the businesses. But if we continue to have steady growth or if
We're going to have a reasonable match between headcount growth and revenue, then you're just going to see uh, you know, a steady decline in the in the comp ratio if you see a disconnect between those as we saw in 23.
Where you have the overall strategic advisory Market you know meaningfully down at the same time, you're at a meaningful heads you're going to see real pressure to the comp line so it's like anything else.
But if there is a shock to the system in 1, Place, good or bad, that could either accelerate or retard the um you know the Improvement.
But that's, that's why we we never want to lock in precisely to a number, we're much more comfortable talking about the direction of travel. And what factors would cause that, uh, to no longer, um,
Be um, operative.
Got it makes sense. Thank you, Paul.
Thank you.
We have a follow-up question from James yarrow of Goldman Sachs. Your line is open, please go ahead.
Uh, thanks for taking the follow-up. I, I just wanted to ask a, a, a nitty-gritty 1 any, um,
I guess pull forward in the quarter that we should be, uh, aware of
It was relatively modest of 8 million dollars this quarter last year. It was 6 million, so pretty similar.
Thanks so much.
Thank you. That concludes our question and answer period, I would now like to turn the call back over to Mr. Toddman for closing remarks.
Oh, we thank everyone for their interest and for participating in this morning's earnings report and we look forward to speaking with all of you in the new year when we were portfolio results. Thank you. And have a good day.