Perella Weinberg Partners (PWP) Q2 2026 Earnings Call Transcript

Good morning, everyone, and welcome to the Perella-Weinberg second quarter 2026 earnings conference call. Currently, all callers have been placed in a listen-only mode, and following management's prepared remarks, the call will be open for your questions. If you would like to ask a question at that time, please press star 1 on your telephone. If you would like to remove yourself from the queue, press star 2. And finally, at any time, if you should need any operator assistance, please press star 0. Please be advised that today's call is being recorded. I will now turn the call over to Ms. Taylor Reinhart, Head of Communications and Marketing. Please go ahead, ma'am.

Thank you, Operator, and welcome all. Joining me today are Andrew Bednar, Chief Executive Officer and Chairman, and Alex Gottschalk, Chief Financial Officer and Chief Operating 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 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, which are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. Rola Weinberg has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8K, which can be found on the company's website. I will now turn the call over to Andrew Bednar to discuss our results.

Thank you, Taylor, and good morning. Today we reported second quarter revenues of $157 million, up 1% from a year ago, bringing our first half revenues to $305 million, down 17% compared to last year. Our booked revenue does not yet reflect the momentum we're seeing across our business. Announced transactions have picked up significantly. We're running ahead of where we were at this point in 2025, and the pace has accelerated this summer with nearly 40% of our year-to-date announcements occurring since the start of June. Our announcements are M&A-weighted with recent elevated activity in our healthcare, industrials, energy, and TMT businesses. In addition, our restructuring and liability management pipeline continues to grow with new mandates and with 10 transactions announced in the quarter. The number of companies facing significant 2028 and 2029 maturities and increasing rating agency pressure is larger than ever, and we expect the environment for our financing and capital solutions business to remain robust. We also reach an important milestone this quarter by closing transactions in our private funds advisory business. We're encouraged by the pipeline we're building in that business, and we're pleased with how quickly this capability is gaining traction with our teams and with our clients. There are two metrics that are the strongest leading indicators of our business. Our announced and pending backlog, and this metric is up nearly two and a half times from a year ago. And adding that to booked revenue, our total booked plus announced and pending backlog is up over 30% year over year as of today. The A&P backlog includes a number of large fee events, which won't all show up in our 2026 results, but we feel great about the direction of travel and our setup into the back half of 26 and into 2027. As we indicated on the first quarter call, we expected the year to be back half-weighted, and that is exactly what we are seeing. And we continue to invest in talent to scale our business. We have six partners joining in the coming months from the Gleacher Shacklock acquisition and from continued lateral hiring. And we announced a new class of eight partner promotes earlier this week. Today, our internally promoted partners represent roughly 45% of our overall partnership, which is a real testament to the depth of talent we've developed and our ability to grow leaders from within. These are important features of our brand. Congratulations to our new partners. It's an honor to have them join our partnership, and it's also very well deserved recognition. Looking at the partnership as a whole, more than a third are in the ramp-up stage with under three years as a partner, which gives us meaningful runway as that group seasons on our platform. Taken together, the acceleration announcements, the related growth and revenue backlog, our continued investment in partner-led talent, and the build-out of new capabilities and private funds advisory, along with broader coverage in the UK, our platform continues to strengthen. And this gives us great confidence in our business heading into the back half of the year and well beyond. With that, I'll now turn the call over to Alex to review our financial results and capital management in more detail.

Thank you, Andrew. Starting with expenses, our adjusted compensation ratio was 71% for the first half of the year. With revenue weighted to the back half, we expect that ratio to come down toward our full year target of 67% as additional revenue is recognized. Our adjusted non-compensation expense of $31 million for the quarter was down $5 million from the prior year period and $6 million from the prior quarter period, driven in part by an insurance recovery and lower bad debt expense. For the first half, adjusted non-compensation expenses totaled $69 million, down 20% from the same period last year. While we expect higher spend in the back half of the year, we remain on track for a single digit percent decrease in full-year adjusted non-comp versus 2025. As it relates to taxes, we expect our underlying adjusted tax rates, excluding the benefit from RSU vesting, to be in the low to mid-30% range for the remainder of 2026. Turning to capital management, year-to-date, we have returned $73 million to equity holders through a combination of dividends, distributions, and RSU settlements. In our five years as a public company, we have returned over $765 million in aggregate, including the retirement of 40 million shares or share equivalents. We remain committed to delivering value to our shareholders through prudent capital management. We ended the quarter with $116 million in cash, no debt, and 74 million Class A shares and 20 million partnership units outstanding. This morning, we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions.

Certainly, Ms. Gostrock. Thank you, ma'am. Ladies and gentlemen, at this time, if you do have any questions, again, that's star one. And if you would like to remove yourself from the queue, it's star two. We'll go first this morning to Devin Ryan of Citizens Bank.

Thanks. Good morning, Andrew and Alex. How are you? Very good. Hi, Devin.

Hi, Devin.

Hi. I want to just maybe start on the backlog commentary and just, Andrew, the momentum that you talked about and heard the comment that I think 40% of the year-to-date announced activity has occurred since June. So, obviously, things have been picking up quite a bit over the last couple months here. So, can you just talk about maybe what is changing to move conversations to announcement or speed things up? Is it conditions shifting or is it just the way these specific deals are evolving? And then if you just can, give a little bit more color around what you're seeing across kind of both the spectrum of kind of large deals versus smaller deals. And, you know, anything from a geographic perspective, too, would be helpful.

Thanks, Evan. It's more idiosyncratic, I think, just to the nature of our investments and the boots that we have on the ground. So, you know, we're not really tethered to the broader market as other firms might be where their market share leaders were. market share takers and growing our market share. So for us, it's all about where we've made investments. Those investments, as you know, take time. They're not light switch operations. And so we've been very dogged in thinking about our client coverage. We've been very disciplined. I think we've made very good investments in our industrials business, in our consumer business, healthcare especially, and around some of our infrastructure and tech franchises. And, you You know, those bankers have been on the platform now for a while, and these transactions and relationships and then transactions follow. It just takes time. That curve for us is, you know, very evident, and we just feel very good about people we have on the ground now and the progress they're making. So it's less about something that's fundamentally changed. We haven't really changed what we're doing. It's more just the investments we've made in those particular client segments. They've been active, and we see, again, really great progress, in particular the last six weeks or so, and the backlog has built up very nicely. On the question of large versus small, I think that when you look at the broader markets, you don't need me to tell you this. You can look at the data, but the transactions over $10 billion are accounting for a pretty large percentage of overall volume. I think the $1 to $5 billion category on transaction count is down a bit. But, again, because we're not tethered to the broader market stats, you know, we continue to feel good about the investments we've made. We've had transactions in the, you know, over $20 billion level. We've had transactions in the $700 to $2 billion level. And, you know, those are all good fee events for us. And, again, building our franchise in a market where transactions beget transactions as you increase your relevance, you know, does have a compounding effect. So we're just in that stage of our investment cycle. In terms of the question about the United States or North America versus the rest of the world, for us, the mix is pretty much the same as it's always been. Something around 80-20, we're not seeing much divergence there. And we're seeing the same pace of activity in both of our key markets in Europe and the United States. I would say that a lot of the historic barriers to transactions and the excuses for not doing transactions have largely been removed from the boardroom. We're seeing now a very open-minded investment, in some cases, a very aggressive stance toward thinking about how to drive business forward, create value for stakeholders. So a lot of the prior excuses, whether it was tariffs or inflation or Iran war or whatever it might have been, we're just not feeling that in the boardrooms anymore. People are in transaction mode, and we like that, particularly for our larger strategic clients.

Great color. Thank you, Andrew. And then just a follow-up on just kind of the partner composition. Appreciate, you know, a fair amount of changes, just even this year with the three-year review and then, you know, kind of recent acquisitions and a big promote class, which is good to see. Can you just talk a little bit about the team on the field today and how you think that compares to kind of the kind of team heading into the year? And appreciate kind of the comment on there's a lot of partners kind of still scaling their productivity. So how do you feel about kind of their ability to ramp? I don't know if it's to $15 million revenue or how you guys think about kind of a more mature partner productivity level. and just intertwined with the question is, if productivity is increasing, what does that mean for margin potential of the company? And the last part of the question, sorry for multi-parts here, but just how to think about just the growth now from here. You've kind of reset the base. You've brought some people in. Some people have been moved to advisor or moved out. How do we think about growing from now this level? Thanks. Okay.

I'll try to get all that. Devin, if I missed something, just let me know. Fundamentally, it's a question about our business. And at its core, we're investors and business builders, and we invest in people. So in effect, the product is our people. And when you invest in people, you have to make the investment up front. As you know, I've had debates with the accountants on this, but our investments in people are not capitalized. They're extensed. And so it's a unique feature of the business where we're investing in people. We have to take that investment up front. But then as people mature in this business, as they build their network, as they build transactions and build relevance and get more experience, actually, unlike products, which depreciate and then you have to figure out how to reinvent the product and innovate the product, our products actually get more valuable over time. So it's a great feature to our business. Now, we have to make the right decisions about the people we bring into the firm, the people we promote and develop, but it's just a great feature of the business. Now, the reality of the business also is at some point you have people that will retire, will age out, will get less productive. So I think the changes we've made, without me being too derogatory, I think they've been misinterpreted by the marketplace, which, you know, is okay. I'm not trying to correct everyone's viewpoint, but these are very natural and necessary changes if you're going to have a high-performing partnership and you're being positioned for future growth and you're always investing in the next generation. We have a really great class of partners we've announced earlier this week. As you mentioned, these are all highly qualified and highly productive people that we believe in to be highly productive partners in the future, and we're still targeting that 15 million, But when we have promotions in particular, it takes time to ramp up. And so there is a differential when we hire talent from the outside versus promote from within. The promotion from within does take longer to ramp. But the primary reason we have chosen this class of partners is that we believe in them and believe that they can ramp. So, you know, our profile right now is if you look at, you know, a third, even a little more than a third of the partnership is here less than three years. we have experienced, particularly in post-COVID, though I don't know that it's a post-COVID thing. It just means that's when we looked at this inflection, where historically we'd start to ramp up people one to two years, and that ramp is really three-plus years. And so we're managing the business as though our promotions are going to be three-plus-year ramps, and from external hires maybe a little faster, but generally that ramp up is taking a bit longer. So we're too good about the growth from within here. Again, we're really disciplined on how we're thinking about coverage, and we feel like some of the investments we've made, particularly from outside, within and from the outside are actually paying some real dividends now as we build up the scale in those businesses. I hope I got all the questions. Devin, I started to forget what you asked as I was talking.

You did. And, you know, the fundamental piece, you know, we – and I appreciate the multi-part of it, but I think we covered everything. So, thank you. Okay, Jeff.

Thank you. We'll go next now to Alex Bond with KBW.

Hey, good morning, everyone. Thanks for taking the questions. Just wanted to start on – hey, good morning. Just wanted to start on the compensation outlook for the year here. So, the first half of the adjusted compensation ratio was 71 percent. But just wondering how you're thinking about just the full year, just given the visibility and the back half. Obviously, a lot can change between now and the end of the year. But as we sit here, just would be great to kind of get your updated take on full year expectations. And I think you've previously cited, like, that 67% ratio. Just wondering if that is still a reasonable target here for the full year. Yeah, as Alex said, the other Alex, our Alex said in the upfront commentary, we're still targeting 67 there'll be you know some noise and lumpiness as we get there through the year because we said that revenue will be back half uh weighted this year but our target's still 67 no change from what we said on the other on the prior call got it okay great um and then maybe just just wanted to try and drill a little bit deeper around expectations for the second half of the year um i mean it certainly does seem like in from what we've seen the public data and you noted you know the strength of the total pipeline um that it's that it's going to be um you know much stronger than the first half um but maybe just trying to get a better sense of how um you're thinking about the the revenue um generation potential there um given that you know you did highlight some of the the there are some mandates that are going to um you know flow into 2027 that are currently in the pipeline um so just just any other color there would be would be great as well Thank you.

Yeah, we don't, as you know, give revenue guidance. And for us, it's a much better metric, as I said. And I realize you guys need to look at, you know, what's booked and what's in our financial reporting. But that's looking back, not looking forward. The looking forward when we measure the strength of our business, the momentum is really about the booked plus the A&T. And as I said in the upfront commentary, you know, that's up 30-plus percent from where we were this time last year. Now, because of the nature of the business where we do work on some very large fee events that are complex and have approval processes that take time, it's very, very difficult for anyone to predict when those various work streams and approvals are going to be completed. So we don't see completion risk in the pipeline that we currently have, but we do have timeline risk that's very hard to influence and to judge exactly when those will become booked revenue. But, again, that will be just something out of our control, but we eventually believe that we will get that revenue as those transactions close. So I know that may not be that helpful, Alex, but that's the reality of our business. No, it makes sense. And thank you for the call, Andrew.

Thanks. Thank you. We'll go next now to James Yarrow with Goldman Sachs.

Good morning, and thanks for taking the question. Andrew, I was hoping you might be able to speak to the – morning. Could you just speak to the impact of higher long and short interest rates on M&A with a particular focus on sponsor M&A? Do you see the recovery in this part of the M&A market being, once again, pushed out at all?

Yeah, thanks, James. And as you know from prior discussions and commentary that I've been more cautious on this floodgate opening from private equity. I think there are moments where we've had some surge activity from private equity, both buy side, sell side. We've got today about a little over a third of our business is private equity related. We've had historically a much heavier weighting on corporates, but given hiring we've done, we're, I think, making really good progress in that market. I think overall, you know, rates always affect the ability to finance. I think right now there's plenty of credit. Availability is enormous. In a lot of situations, there's probably more credit available than the buyer wants, with maybe the exception of software-related transactions where there's been a little bit of a cap on loan-to-value. I think that costs are a bit higher than people would like, but I think the main driver of the lack of a floodgate opening for private equity has really been valuation and just still continued disconnect between what buyers are willing to pay and sellers are prepared to part ways with. And so until that gets resolved, I think you're still going to see activity, for sure, because the nature of private equity is to transact. That's the business they're in. And ultimately, all of those assets will find some transaction, whether it's an outright sell side, an IPO, some sort of continuation vehicle, or recapitalization. So private equity will continue to be extremely busy, but it may not be in traditional buy-side-sell-side until you have a better alignment between buyers and sellers.

That's very clear. I hope you might be able to just comment at least at a high level about the secondaries business that you've built after the investments you've made over the past few years.

It's still early days. We've made the acquisition last summer. It closed in October. We've got a few transactions already closed. We've got a number in the pipeline. I think the take-up has been very good. Our teams are understanding that product and capability better because we've never had it. So I think having our relationship teams now focused on this particular product and capability has been, you know, very, very good in terms of how they've presented it to clients, and the client take-up has been very good so far. So we feel good about the business. and like the capability and gives us, again, that greater dialogue with our, in particular, our alternative asset manager clients who are looking for a broader set of capabilities from firms like ours.

Thank you for taking the questions.

Thanks, James. Thank you. Mr. Bednar, it appears we have no further questions this morning, sir. I'd like to turn the conference back to you for any closing comments.

Okay. Thank you, Operator. Thank you, everyone, for joining today. We really appreciate your support and look forward to speaking again in a few months. Take care. Bye-bye.

Thank you, Mr. Bednar. Thank you, Mr. Gossachalk. Again, this concludes the Perella-Weinberg second quarter 2026 earnings call and webcast. You may disconnect your line at this time and have a wonderful day.