Good morning, and welcome to the Perella Weinberg Second Quarter 2024 Earnings Conference Call. During today's discussion, all callers will be placed in listen-only mode, and following management's prepared remarks, the conference call will be open for questions from the research community. This conference call is being recorded. At this time, I'd like to turn the conference over to Taylor Reinhardt, Head of Communications & Marketing. Please go ahead.

Thank you, operator, and welcome all. Joining me today are Andrew Bednar, Chief Executive Officer, and Alex Gottschalk, Chief Financial Officer. Before we begin, I'd like to note that this call may contain forward-looking statements, including Perella Weinberg's expectations of future financial and business performance and conditions and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guarantees of future events or performance. Please refer to Perella Weinberg's most recent SEC filings for a discussion of certain of these risks and uncertainties. The forward-looking statements are based on our current beliefs and expectations and the firm undertakes no obligation to update any forward-looking statements. During the call, there will also be a discussion of some metrics that are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. Perella Weinberg has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8-K, which can be found on the company's website. I will now turn the call over to Andrew Bednar to discuss our results.

Okay, thank you, Taylor, and good morning. Today we reported second quarter revenues of $272 million, a record for our firm, up 64% year-over-year and more than doubling quarter-over-quarter. And our first half revenues of $374 million were up 26% versus a year ago. In the quarter, we experienced a material increase in large transaction closings with relatively larger associated fees compared to the first quarter. Included in the quarter was more than $40 million in revenue related to closings that occurred within the first few days of the third quarter and which, in accordance with relevant accounting principles, we were required to record in the second quarter. We are very pleased with our results, but one quarter doesn't define our business. We are still very hard at work building a world-class franchise. We recognize that both the timing of certain transaction closings and the favorable positioning of our platform were factors in our outperformance this quarter, and our forward progress continues now with a distinct market tailwind that we have not enjoyed in over two years. Contribution and collaboration across our business drove our results, with revenue from M&A as well as restructuring and liability management up significantly year-over-year. The momentum we are seeing across our business is in part a reflection of putting the right partners in the right place over the past few years, both from a strategic and a geographic perspective. These teams continue to deliver for our clients, both for new clients and more and more for repeat clients who view us not just as a fee-for-service provider, but as a key partner as they tackle strategic and financial challenges. The game has changed in high-stakes, complex transactions. In that market today, the boutique firm is a go-to advisor, not simply a second opinion provider. To be the go-to advisor, you need the talent, and year-to-date, we have added three advisory partners and have another two slated to join the firm later this year. We are confident that they will increase our client touchpoints and add revenue, both by introducing new clients to our firm, as well as servicing our current client relationships with expanded expertise. As we look ahead, we see signs of better conditions on the ground: inflation receding, large pools of undeployed capital, and benchmark rates now declining in anticipation of the next Fed move. Though risks remain, especially around elections, global conflicts and other geopolitical uncertainty, our clients are navigating through the fog, taking advantage of the conditions as they are and leaning in rather than shying away, especially in the larger deal market. We see these dynamics reflected in our announced impending backlog, which, alongside a record revenue quarter, continues to build. The M&A rebound we are experiencing has been led more by corporates than funds, but we did see an increase in sponsor activity this quarter, representing a potential source of revenue growth long-term. The return to a more normal level of sponsor activity is a matter of when, not if. Across our financing and capital solutions business, we continue to see elevated activity and strong engagement with clients. While we don't see a watershed event and bankruptcies on the horizon, more and more we see opportunities to assist clients with complex and stressed financing situations, as well as with more proactive maturity management. And we are extremely proud of our restructuring team for their recent awards and distinctions highlighted in publication Reorg; congratulations to the Rx team. Before I turn the call over to Alex, let me reflect for a moment. We recently marked three years since our public listing, and while this represents only a portion of the firm's rich history, we have accomplished quite a lot in that time. To date, our shares have risen over 80%, we have returned more than $400 million to equity holders, and we have managed our share count down while simultaneously increasing our publicly traded float, allowing new long-term investors to enter our shareholder roster. We have invested in growth by expanding our partnership, increased the visibility, recognition, and reputation of our brand, and diversified our advisory offering to support our clients whenever and wherever they need us. Most importantly, we continue to add new clients. These are world-class companies and investors who we are proud and honored to work with through thick and thin. We remain always on for our clients and for our teammates here at Perella Weinberg as we continue on our mission to scale our business. Thank you to all our loyal clients and thank you to all our teammates for an excellent quarter and importantly for your exceptional business building that positions our firm to deliver for our clients and our shareholders. Alex, I'll now turn the call over to you to review our financial results and capital management in more detail.

Thank you, Andrew. Our adjusted compensation ratio for the first half of the year was 68% and represents our current estimate for our full-year accrual. Our adjusted non-compensation expense was $41 million for the second quarter and $78 million for the first half. Adjusted non-compensation grew 10% in the first half compared to the same period last year. We will continue to aggressively manage our expenses, consistent with prudently operating our business. Our adjusted tax rate for the second quarter was 32%, and it was 26% for the first half. We anticipate that our tax rate for the full year will be approximately 30%. At the end of the second quarter, we had 52.5 million shares of Class A common stock and 33.3 million partnership units outstanding. This includes the impact of a 5.75 million share offering in March, the proceeds from which were used with cash on hand to retire 7.5 million units in May. We remain committed to actively managing our share count. Not only have we fully offset dilution from RSU vesting, but as Andrew just mentioned, our share count is lower than when we first listed. Additionally, we have increased our publicly traded float by more than 20%. We ended the quarter with $185 million in cash and no debt. In the first six months of this year, we returned $162 million to equity holders while still investing for future growth. This morning we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions.

Thank you. Our first question comes from Devin Ryan with Citizens JMP.

Hey, good morning, Andrew. Good morning, Alex. How are you?

Good morning, Devin.

Good morning.

Just want to start on the backlog. So obviously, record quarter, I believe I heard the announced impending backlog is still at a record and building. So just a two-part question on that. I'd love to just get a little color around where you feel like you're gaining market share in the backdrop? Because clearly, we're not in a record M&A market, we're far from that. So, to the extent you're driving these types of results, where is the market share coming from? And then as you look at the backlog, it also appears the speed to move deals through the process is accelerating. So just want to get some color on what's driving that as well? Thank you.

Yes, sure, Devin. Look, I don't want to get too excited about the period-over-period changes. There's a lot of nuance and idiosyncratic issues that come about in these transactions as to exactly when they close, so we were fortunate in the current period that we had some very large fee closings, and that's great. I think what we're seeing, as I said on the last call, is that we're very focused on our corporate clients. We've got a bit more weighting toward corporate clients versus our sponsor and fund clients. They're both important clients to us. So we're just a bit more indexed on the corporate side. And I think everyone's been reporting and we've said the same, that corporates are really leading us out of the trough in M&A and recovering quite nicely out of that trough. I do think we'll see sponsor activity coming back, as I said in my opening remarks; it's just a matter of when, not if. But we are a beneficiary of the weighting toward corporate activity, number one. In terms of transactions and generally the timeline from engagement to announcement and announcement to closing, not really seeing a material difference to what we've reported in the last few quarters. It's still taking more time to get engagement and taking more time to announce and taking more time to close, and there are many factors that drive that, some of which is related to the regulatory regimes, both here in the United States as well as in Europe and around the world for that matter. That is just taking longer and is putting some time constraints on these transactions between sign and close, but also the period from engagement to signing. I think people are just being more careful and taking their time. There's less sense of urgency, but I actually think that's quite healthy and I think leads to a bit less remorse as people sometimes rush to transactions and have second thoughts. So I think actually the engagement to announcement timelines, even though they're elongated, I think it leads to healthier transactions.

That's great color, Andrew. Thank you. And then, a follow-up, probably for Alex just on the comp ratio. So, 68% for the first half is still above the normal target in the mid-60s. So just trying to think through kind of how to read that for what that implies for the rest of the year? How much is conservatism versus given where the backlogs are? Is there anything else that's keeping you elevated? And then just within that kind of what you're targeting for new hires in the back half of the year, that would be helpful. Thank you.

Yes, Devin. So as you know, that's a bit of a multivariable equation for all of us because we're thinking about not only what we need to compensate our teams, so that they're firmly in their seats and are being fairly and properly rewarded for their efforts, number one. Number two, we do have investment that we continue to be very deliberate and steady about, we will continue to grow our firm with the addition of talent, so we have to factor that in. And lastly, we have to look at where the competitive set is and what's happening in the marketplace. So, those three variables will come together as we head toward the third and fourth quarter. We'll make adjustments as we see as needed. Right now, what we've accrued for the first half is our best estimate, and that's what we put out as our comp margin today, but that is subject to some change. We do like to stay within our target range. We indicated in our public listing, which was mid-60s. We've been at the outer bounds of that, more recently, I think, for good reason. As you know, I've said this many times, a lot of our comp is, in effect, capital expenditure, and I lose the battle with account and false time on that. But we have to look at some of that comp ratio as really investing for the future and driving revenue going forward.

That's great. And then I guess just the other part of that is, is there any flavor you can give around what that CapEx, in terms of just bringing in folks through the remainder of the year, like how the recruiting pipeline looks? Because I would assume that's one of the variables that you are just suggesting, Andrew.

Yeah, we're seeing good opportunities in the pipeline. I would say that much like the transaction timelines, the recruiting timelines are a bit more elongated. I think that's a function of people being busy a little bit now, time of year. But generally, we have still more people interested in our firm than we will probably admit to our firm, which is a good dynamic. And I also think, much like I said earlier about transactions, I think the more deliberative people are, the more thoughtful before they rush into a job change, the better off both parties are. So again, I think that's a pretty healthy dynamic. We're still on track with what we said, on average, we probably have five or six partners a year, and we probably have one or two retirements every year or two. I don't see much aberration from that this year. So, we're still on that pace. And every once in a while, we may have one-off opportunities where we have a little bit more investment, but I think generally we're still on pace with what we've indicated early on in our public listing that we'll grow the partnership five or six people, and then probably have one or two retirements between year-over-year periods.

Okay, that's great color. Thanks, Andrew. I'll leave it there.

Thanks, Devin.

Thank you. And we will take our next question from Brendan O'Brien with Wolfe Research.

Good morning, and thank you for taking my questions. I guess to start, I just wanted to touch on Europe, and I just want to get a sense as to how you would compare activity in Europe relative to the US. We've heard some of your peers indicate that trends there have lagged. And specifically with sponsors, I want to see if you've seen any pickup in activity following the recent moves by the ECB?

I believe Europe is falling behind when it comes to announcements, which is clear from publicly available data. Our revenue mix has shifted slightly, with the US leading the way in announced revenue. However, if we look at other metrics on our dashboard, activity levels appear to be more aligned. When assessing aspects like new business reviews and engagement letters, our interactions with clients on both sides of the Atlantic are strong. There are different reasons for this; Europe has various pressure points and growth opportunities, with many European companies reconsidering their global presence, particularly wanting to increase their exposure to the US, which aligns with where we have a presence. We primarily operate in the US and Europe. In the M&A markets, 75% of announced activities are noted, which likely accounts for a larger share of the fee pool, positioning us well for such activities. However, different factors drive transactions, leading to distinctions between the types of transactions happening in Europe and the US. Over time, I believe revenue will begin to equalize. Typically, as you noted, there is a lag effect, but given current activity levels, I expect European revenue for our business, as well as the sector overall, to likely improve as we move into the latter half of '24 and into '25. Regarding sponsor activity, there hasn't been a significant change due to ECB movements and I don't foresee any major shifts from a potential Fed move in September. There's a considerable backlog of assets that sponsors need to monetize—whether through continuation vehicles, sales, or IPOs. That supply chain and the sponsor community need to find some momentum, which will naturally lead to more capital deployment. However, we are still in the early stages of a recovery for sponsors, and their activity currently represents an unusually low proportion of overall activity. I firmly believe it’s a matter of when, not if, sponsors return. There are sophisticated pools of capital and investors, with estimates ranging from $3 trillion to $4 trillion in dry powder across private equity, credit, and infrastructure—likely even more than that. So, I anticipate significant activity from that community over time.

That's great insight. Regarding the election, there are several factors to consider. On one hand, a potentially more accommodating FTC could provide some benefits, but on the other hand, we might face higher tariffs, which could either hinder or help economic activities. I'd like to understand how you perceive these potential factors, focusing on tariffs and any advantages from a friendlier FTC.

I'll just start with the public service announcements that I am not a politician and I'm not a macroeconomist. I'm just a banker. So, I'll give you my view, for what it's worth. I've now, in my career, have witnessed seven elections in my 30-year career. I, like many people, have probably really overthought what the implications of elections will mean for markets and other parts of our lives. I think they're really important and they do have consequences. I think that probably the effects have been overstated, at least in my lifetime. And I think that for M&A specifically, it seems now, given the commentary, that both party leaders are interested in having some change to antitrust review and antitrust regulation. So, on balance, I think that'll be a positive. I think that you have a Fed in motion now to begin at least looking at lowering rates. I think that is an important pivot and signal, and I do think that helps markets broadly. But we also have two candidates that seem to be less focused and have less of a priority on our national debt and probably place a high emphasis on spending. So, I do think we'll probably be in a higher rate than we've normally had over long-term periods. I don't see rates going down to zero the way they did during COVID or the financial crisis. So, I think we're going to live with just higher rates for a really long time, but not painfully high, just above the crisis levels that you probably wouldn't want to be in any way because it signals a troubled economy. So, we're not hearing from any clients that they're stopping processes because of the election. We're not hearing from clients that they're accelerating anything because of the election. But I do think once that is settled, it does remove an uncertainty out of people's thinking and their models. And generally, post-election periods are a good time for then planning out your next horizon and taking appropriate action. So that's generally a good time for people in our business.

Great. Thank you for taking my questions.

Thank you. And we will take our next question from James Yaro with Goldman Sachs.

Good morning, and thanks for taking my questions. Now that we're more than halfway into the year and results came in so much stronger this quarter, how are you thinking about the go-forward for revenue here? Just trying to anchor between the goalposts over the past two quarters. Is it conceivable for revenue to continue to rise off this level in the back half, or should we expect revenue to be likely more between the average, or between 1Q and 2Q? And then relatedly, how should we think about the impacts of the typical summer slowdown we sometimes see for deal making? And just I'll stop there.

Yeah. Hi, James. Good morning. Thanks for the question. We don't give any revenue guidance, as you know, so I'll just really stay far away from that. I think that what we've reported here in the first two quarters, we weren't overly excited on the downside in the first quarter, and we're not getting overly excited about the upside in the second quarter. Given our scale, there's going to be a bit more volatility and some mean reversion. So, we'd have to expect that. What I look at more is not trying to predict what's going to be quarter-over-quarter; it's just an impossible task. But just looking at all those important indicia of a really successful and strong franchise, how many clients are calling us, how many clients are engaging us, the fact that we're not seeing a lot of fee pressure, for example, in particularly larger, complex transactions that we see people paying for the value we bring. And I think that's a sign of a really healthy market and a healthy franchise. So, it'll be an unsatisfying answer to you and your job, James. But we're just not in the business of trying to think quarter-to-quarter. We're just trying to build this world-class franchise and we think we're on a great trajectory to do that. But we will have volatility. And I think most people don't simply take a quarter and multiply it by four.

Yeah, just trying to understand that. That's super clear. Maybe just on the non-comp dollars. I think they did rise a little bit more than the full-year 7% year-on-year growth number that you had previously given. Maybe you could just help us think about the non-comp trajectory as we look ahead, and I think, especially in light of the inflationary pressures that have been cited by many of your peers?

Sure. Alex, do you want to take that one?

Yeah, sure. Thanks, James. Look, our non-comp for the first half does reflect some, what I would characterize as regular items and a bit episodic to this year. In particular, we had a very unfortunate bad debt item and also have ongoing litigation costs, which are substantially higher relative to the prior period. I do think that those results are generally in line with what we expect to see for the year, but I wouldn't think of those on a long-term basis. We're doing very well with our controllable costs, and over time, with scale, we should see more leverage and improvement on that margin.

So just because when—you're talking about the dollars of non-comp or the comp ratio in terms of the near-term?

The dollars of non-comp in terms of the near-term, yes.

Okay, great. Thank you. The last one, I think that the share count was notably higher, which I think that was reflective of a difference in how you had calculated this versus historically. I guess, is this the right way to think about the share count going forward? And then, any update on any near-term potential share unlock—excuse me, unlocks and triggers we need to be thinking about over the next few quarters?

Yes. Alex, why don't you take us through the current share count, but then the forecast a little bit of what we're expecting? Thanks.

Yes, sure. So, look, I think the number to focus on is the outstanding count as of June 30th, which is just under 86 million. Obviously, that 100 million that you're seeing is really a function of the timing of when we affected the offering in Q1 relative to our very aggressive buybacks in Q2. So, from a forward-looking perspective, obviously, we do issue share-based comp. All of that is reflected in our public filings. For this year, we're anticipating an additional 2 million shares that's on a net settled basis, consistent with our past practice and intend to net settle those shares that would enter our account by the end of the year. And again, this is before any retirement of units or open market repurchases, if we choose to do that over the course of Q3 and Q4.

Okay, that's very helpful. Thank you.

Yeah, sure.

Thank you. And our next question comes from Aidan Hall with KBW.

Great. Thanks for taking my question. Good morning, everyone.

Good morning.

M&A has historically been a part of PWP's growth, acquisition of TPH, although it's really before going public three years ago. So, Andrew, I'd be curious to get your thoughts on kind of inorganic growth opportunities and if there's any complementary businesses, whether it's primary fundraising, secondary advisory or any other strategies where you think it would make more sense to buy versus build for PWP?

Yeah, good question. Look, we're in the M&A business, so we constantly think about ways to materially change the nature of our business rather than doing the job brick-by-brick, which is what we've been doing other than TPH, as you correctly point out. We haven't found something that would be strategically and financially and culturally compelling. We've looked at some things over time. There are some adjacencies that are interesting. We have been a core M&A and restructuring and liability franchise. We've added now a terrific shareholder advisory and activist team. We've added a terrific debt advisory team. We have not had to go to the acquisition market for that. We've acquired talent, but not companies. That's always a little more challenging on full-on company deals or large team deals. We're open-minded to that. We just haven't seen anything that makes sense for us. And so we will continue to build by brick, as I mentioned, which has worked very well for us. And I think on extending our product line, we're not going to stray off course from being an advisory-only firm. That's not something that we're actively looking at. But there are some additional capabilities outside of the core that are lucrative and attractive adjacencies, and we just have to keep looking for the right people and capabilities and that is something that we have a team that actively reviews that.

Got it. It's very helpful. Appreciate the color.

Thank you.

Thank you. And it appears that we have no further questions at this time. I will now turn the program back to our presenters for any additional or closing remarks.

Okay. Thank you, Madison. And thank you everyone for joining the call today. I really hope you have a relaxing and a reflective end of summer. We really appreciate your continued support, especially those of you who have believed in our firm since day one and who continue to believe, as we all do inside the firm, in the unique potential of the Perella Weinberg franchise. So thank you again for joining, and have a nice summer. Bye-bye.

Thank you. This does conclude today's Perella Weinberg second quarter 2024 earnings conference call. Thank you for your participation. You may disconnect at any time.