Perella Weinberg Partners (NASDAQ:PWP) Q1 2024 Earnings Call Transcript May 3, 2024

Perella Weinberg Partners misses on earnings expectations. Reported EPS is $-0.39598 EPS, expectations were $0.07. Perella Weinberg Partners isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Perella Weinberg First 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 question 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 and Marketing. Please go ahead.

Taylor Reinhardt: 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, which 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.

Andrew Bednar: Thank you, Taylor, and good morning. Today, we reported first quarter revenues of $102 million, results that do not reflect the underlying strength of our business. We are the lead adviser in 3 of the 15 largest transactions announced year-to-date, and our announced and pending transaction revenue backlog stands today at a record high for the firm, nearly double the level last year at this time. This quarter, we experienced an unusually large amount of transaction announcements with elongated closing time lines and where closing and revenue recognition are expected to occur in subsequent periods. The market backdrop continues to improve, especially for larger transactions. For many of our clients, as market values increase, even more scale is needed to move the needle and drive growth.

This is something we are seeing across industries and geographies along with increased complexity. So we see more corporate carve-outs, sponsors and joint bids with strategic buyers and asset contribution transactions, trends that are broadly aligning very favorably with our stated strategy and our firm's capabilities. We and our industry also are benefiting from a market that values independent advice more than ever, with 14 of the top 20 announced transactions this year, having a boutique as the exclusive or as a co-adviser. The higher-for-longer consensus on interest rates, combined with impending maturities continues to fuel the need for liability management advice and demand from both investors and borrowers for capital solutions remain strong.

While base rates are higher, spreads have narrowed and corporate and sponsor clients have plenty of access to capital. It's financing terms and valuations that present hurdles to transactions, not credit availability. Recruiting remains a strategic priority in our mission to scale the firm. We welcomed the Managing Director of Financial Institutions earlier this year. And in April, we welcomed a new partner with a focus on media and interactive entertainment, including gaming, a very active sector, which we believe will be accretive to our business. We are executing on our growth strategy and enhancing our franchise globally with the addition of exceptional talent and world-class clients, who choose Perella Weinberg as their trusted adviser.

We are focused on serving our clients with the highest caliber advice, strengthening our relationships across corporates, sponsors and beyond, investing to operate at scale and, in turn, delivering for our shareholders. We are confident that in time, our reported results will reflect the underlying strength and progress of our business. Alex, I'll now turn the call over to you to review our financial results and capital management in more detail.

Alex Gottschalk: Thank you, Andrew. For the first quarter, our adjusted compensation expense as a percentage of revenues was 84%. This was a result of a low revenue denominator and is not reflective of a full year accrual. We expect this ratio to normalize toward our historic target as the year progresses. Our adjusted non-compensation expense was $37 million in the quarter, up 7% from a year ago and trending within the range we indicated on our last call. We continue to manage these expenses prudently to drive earnings. Shifting to taxes. Our adjusted if converted effective tax rate for the first quarter reflects a tax benefit and includes the impact of stock compensation awards vesting at a higher price than granted. Excluding this impact, the adjusted tax rate would have been 32% and we expect the full year tax rate to be below 30%.

We ended the quarter with a very strong balance sheet with $157 million in cash and no debt. On March 1st, we successfully completed a 5.75 million share offering, increasing our float and trading liquidity. With the offering proceeds and using some of our cash on hand, we expect to settle certain partnership units for tax purposes in Q2, which will result in at least a six million reduction in our share equivalents outstanding. As we've indicated previously, proactively managing our share count is a priority. In the first quarter, we returned $32 million to our equity holders through the net settlement, share equivalents, distributions and dividends. And this morning we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions.

Operator: Thank you. [Operator Instructions] And we will take our first question from Devin Ryan with Citizens JMP.

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