PJT Partners, Inc. Class A Aktie

Good day, everyone. Welcome to the PJT Partners First Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Sharon Pearson, Head of Investor Relations. Ms. Pearson, please go ahead, ma'am.

Thanks very much, Bo, and good morning, and welcome to the PJT Partners First Quarter 2026 Earnings Conference Call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners. And joining me today is Paul Taubman, our Chairman and Chief Executive Officer; and Helen Meates, our Chief Financial Officer.

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. 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. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2025 Form 10-K, which is available on our website at pjtpartners.com.

I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on non-GAAP metrics and their GAAP reconciliations, 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.

Thank you. Thank you, Sharon. Good morning, everybody, and thank you all for joining our earnings call. Earlier today, we reported revenues, adjusted pretax income and adjusted EPS that were all Q1 records. Our revenues increased 29%. Our adjusted pretax income increased 49%, and our adjusted EPS increased 47% from year ago levels. The substantial progress we have made is even more apparent when viewed through a longer lens. In just 3 years, our quarterly revenues have doubled, while our adjusted pretax income and adjusted EPS have nearly tripled. In this dislocated market environment, we delivered strong performance in all of our businesses with Strategic Advisory leading the way.

Our consistent efforts to attract talent drove our increased partner count as we added 8 new partners in the first quarter. Our hiring pipeline continues to be robust, and we expect to remain very active in recruiting senior professionals to our firm. While geopolitical uncertainties and other risks pressured many companies' prospects and valuations during the quarter, our outlook for our business remained unchanged.

During the first quarter, we repurchased 1.6 million share equivalents, more than offsetting our year-end 2025 equity issuances. Even after this record $244 million of repurchases, we still ended the first quarter with record first quarter cash balances of nearly $400 million. All told, we have allocated almost $1 billion to repurchase shares and partnership units in just over 2 years. Our Board of Directors has authorized a new $800 million open market share repurchase program, reflecting our continuing confidence in our prospects as well as the strength of our balance sheet.

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 first quarter were $418 million, up 29% year-over-year, and as Paul mentioned, a record first quarter for our firm. Our businesses all delivered strong results in the quarter with record first quarter performance in both Strategic Advisory and Restructuring.

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. We accrued compensation expense at 66.5% of revenues for the first quarter compared to 67.5% for the first quarter in 2025 and 67.1% for the full year 2025. The 66.5% ratio represents our current best estimate for the full year 2026.

Turning to adjusted non-compensation expense. Total adjusted non-compensation expense was $56 million in the first quarter, up 14% year-over-year. The main drivers of the increase were higher travel and business-related expenses, higher occupancy costs driven by the expansion of our global office footprint and higher professional fees. As a percentage of revenues, our adjusted non-compensation expense was 13.4% for the first quarter, which compares to 15.2% for the same period last year. We continue to expect our total non-compensation expense in 2026 to grow at approximately 12%, a similar rate to 2025. So growth rates in travel expenses as well as AI-related investments are more uncertain this year, and we will provide an updated view on our non-comp expense outlook when we release our first half results.

Turning to adjusted pretax income. We reported record first quarter adjusted pretax income of $84 million compared with $56 million for the same period last year, and our adjusted pretax margin was 20.1% for the first quarter compared with 17.3% for the same period last year. The provision for taxes, as with prior quarters, we presented our results as if all partnership units had been converted to shares and all of our income was taxed at a corporate tax rate.

Our effective tax rate for the first quarter was 20.5% compared with 14.1% for the full year 2025. The increase in the effective tax rate compared to both last year and our prior guidance was principally a result of a lower tax benefit from the delivery of vested shares in the first quarter. As a reminder, we take a full year view of that benefit, and we currently expect our full year effective tax rate to be around 20.5%.

Our adjusted if-converted earnings was a record for the first quarter at $1.54 per share compared with $1.05 per share for the same period last year. On the share count for the quarter, our weighted average share count was 43.3 million shares, down 3% versus a year ago. During the first quarter, we repurchased approximately 1.6 million shares and share equivalents, and we committed a record $244 million to share repurchases in the first quarter. We are in receipt of exchange notices for 149,000 partnership units and subject to Board approval, we intend to exchange these units for cash. Additionally, our Board has authorized a new $800 million open market share repurchase program.

On the balance sheet, we ended the quarter with $388 million in cash, cash equivalents and short-term investments and $535 million in net working capital, and we have no funded debt outstanding. And finally, the Board has approved a quarterly dividend of $0.25 per share.

Back -- Paul?

Thank you, Helen. Beginning with Restructuring. We continue to operate in a period of sustained demand for liability management and restructuring advice, with Restructuring revenues for the first quarter comfortably above year ago levels. We expect this level of activity to continue as companies around the globe across a wide array of industries contend with overleveraged balance sheets, challenged business models, pressures resulting from technological disruption and an increasingly complex geopolitical environment. As our coverage footprint grows, so too does our ability to connect our leading liability management team to additional opportunities.

Turning to PJT Park Hill. PJT Park Hill revenues were comfortably above year ago levels as significant growth in private capital solutions more than offset a decline in primary fundraising revenues. While this is shaping up to be another challenging year for the overall primary fundraising market, we expect our primary fundraising revenues to broadly match our high water levels as we benefit from a high-quality fundraising pipeline that is receiving strong investor interest. In contrast to pressures in the primary market, the secondaries market is positioned for another year of robust growth as rising demand from GPs and LPs for liquidity solutions is being matched by growing secondary investor appetite. Clients are increasingly recognizing the power of our integrated platform given the close collaboration with Strategic Advisory and the ability to access an extensive network of global LPs through PJT Park Hill's strong distribution relationships.

Turning to Strategic Advisory. For the quarter, our Strategic Advisory business delivered record performance with revenues increasing significantly compared to year ago levels. On our last earnings call, we noted the many positive dynamics supporting a highly constructive deal environment, including strength in the debt and equity capital markets, greater confidence regarding regulatory outcomes and increased CEO confidence.

We also sounded a cautionary note that market sentiment could turn on a dime and that geopolitical risks as well as debate surrounding AI would continue to loom large in shaping the year ahead. The first quarter did, in fact, see large swings in market sentiment as investors grappled with significant geopolitical events and profound AI debates. These dislocations were a reminder of the many risks and uncertainties facing CEOs and Boards of Directors as they evaluate strategic alternatives.

Adding to the list of potential worries are the implications of higher oil prices and potential supply disruptions emanating from the conflict with Iran. This heightened volatility is fueling a greater sense of urgency to play both offense and defense as companies continuously reimagine and reposition their business models to fortify their competitive standing. In this uncertain environment, our mandate count continues to increase and is now at record levels, up about 15% from a year ago. Our preannounced revenue pipeline has increased even more and also stands at record levels. And while our announced pending close backlog is below year ago levels, we have seen the pace of our announcements begin to pick up appreciably.

As we look ahead, our firm remains well positioned to thrive across a broad range of market environments, given the growth opportunities before us in each of our businesses. As before, we remain confident in our near, intermediate and long-term growth prospects.

And with that, we will now take your questions.

[Operator Instructions] We'll go first this morning to Brennan Hawken with BMO Capital Markets.

Paul, I was hoping -- thanks for your comments on the Restructuring outlook and all the uncertainty. Would appreciate maybe getting a bit more color there. It seems like we're likely to get at least a slowing of capital in the private credit markets, even though the retail vehicles are roughly 1/5 of the AUM. Certainly, there've been a lot of the capital flowing in, and that looks to be slowing at best and maybe even more dramatic than that. So what impact do you expect that could have on the outlook for Restructuring? And what are your updated expectations there?

I appreciate the call. Look, we've maintained for a long time that we're in a long cycle of elevated restructuring liability management activity. And it's driven by a whole host of things. One is there's no doubt that lending standards, if you go back to the 2019, 2022 period were not as rigorous as they are today. Rates were very low. People were chasing yield and perhaps the loans and the credit that was extended or the standards were laxer than they are today. So some of that is just dealing with that. Some of it is clearly the fact that we have a very dynamic world and the outlook for some of these businesses is fundamentally different than it was before.

I think private credit has a larger exposure to some of these issues because of how much growth they saw during those benign credit years and also because they have a greater-than-average allocation to the broader software marketplace. We don't see systemic issues. We do think that this will undoubtedly slow the pace and potentially cause a retreat in retail flows. I think there's a period of time when all of this was characterized as gates and limited liquidity was the best of both worlds. I think in this environment, it may be the worst of both worlds. And I do think that expectations for liquidity are being magnified by some of the new stories and the like.

But inevitably, this probably has more of an implication for what's the long-term appetite for retail interest in this product than it is for anything more systemic. But we see the overall trends as being quite consistent with an increase in overall liability management exercises. And if you just look at all of the industries that rely on energy, cost of energy, how sensitive that is, and if you see a pinching of supply, you could see another leg up. But we're in a period of significant volatility and uncertainty, and that typically is not constructive for credit that was underwritten in a different environment.

I'd love to hear your thoughts on Strategic Advisory. Strategics are clearly driving the market with M&A right now. That's an area where you've been leaning into as you've been building out the Strategic Advisory business. So you were pretty optimistic on growth in those revenues coming into the year. We started out the year yet again on a bit of a roller coaster. Has that impacted your view? And I believe you touched on the fact that mandate count is up 15%. Is that in the Strategic Advisory business? And can you help us maybe frame what that statistic would mean in the long-term outlook for the company?

Sure. So look, the basic message to me -- from me is strategic activity. I think corporates, Boards of Directors are bigger and bolder than ever before. We've talked about this for a long period of time. I think there is a secular shift to constantly reimagining companies. The cost of standing still in a dynamic environment is far greater companies that don't move are putting themselves in increasing peril. And that's a secular shift, and that's why we believe that the level of M&A activity, which has been by most macro metrics sort of meaningfully below trend, is quickly getting back closer to trend and may well operate above trend line.

Having said that, the reality is that strategic activity is highly linked to the market environment at that moment in time. And when we, 3 months ago, sounded a cautionary tale, we just made the point that these market windows are going to open and close and they're not going to stay open all the time, and there are going to be shocks to the system and that there's perhaps an underappreciation for some of the tail risks out there. So we see a world where the secular trends are pushing activity up and to the right, but we do see more oscillation and volatility around that where there will be moments in time where you've got launch conditions that are perfect or near perfect. You'll have other periods of time when people will be digesting and retrenching as they wait to assimilate the implications of additional news flow. That's kind of our view.

And we also made the point that 2025 was a really strong year in Strategic Advisory for the overall market. And while we expected a steady increase from there, we didn't think that there were going to be step function increases from there and that we were probably going to have a stronger year this year, but not by crazy amounts.

Now as far as our business, we're in the CEO engagement and mandate accumulation game. That's what we do. Our footprint and our dialogues are all designed to have a long-term view to identify companies where we can add significant value. We have a compelling value proposition to go from not being on their radar screen on their radar screen, to being the adviser of choice and being the strategic adviser who's helping them prosecute all of their many strategic activities. The leading indicator for that is new client mandates, new companies that we've "broken into as a trusted adviser". The mandate count is up about 15%.

Our preannounced pipeline, which is a better measure of revenue potential is up meaningfully more than that. But at the end of the day, quarter-to-quarter, it's just simply a function of the quickly -- how quickly the pace of preannouncements become announcements and then what's the time to close. And we'll have much more clarity as the year progresses on that specifically. But right now, I think when we look at kind of the most important KPIs, we're seeing a meaningful step function increase in the level of activity.

We go next now to Devin Ryan with Citizens Bank.

I want to dig in a little bit on the software sector specifically, just given some of the comments that you made. Obviously, an important part of the M&A market, a lot of uncertainty directly there and then kind of emanating off of that. And there's been a lot of valuation disruption as well. So would love to just get some thoughts around whether you're expecting this part of the market is just going to remain particularly challenged with those dynamics? Or do you see buyers maybe starting to get ready to step in and see more value or these companies need to consolidate? I'd love to get some thoughts around how you view that specific part of the market playing out over the next year or so here.

Sure. So look, I don't think you can sort of paint the entire industry with one broad brush. And the reality is that within the software ecosystem writ large, there are clearly winners, but they're not all winners. That would be the first point. I think the second point is the debates are much less about near-term cash generation profitability and more about what's the long-term value, what's the terminal value of these businesses. The debates that are underway are not likely to be resolved across the board in the near term. And you can end up with operating performance that's quite positive while questions linger about long-term value.

And in a world where many of these companies were financed in the credit markets with a loan-to-value mindset, if there's real questions about the value, the ability to refinance that entire capital stack without further equitizations or some other catalyst may, in some instances, be a challenge, which is why you're starting to see the earliest signs of this bleeding into the credit markets as it relates to liability management. And that's less about near-term fundamentals and just more about quantum of debt, loan-to-value and whether or not that entire cap stack is the right cap stack when there are questions about long-term value. I think there's that.

I think it also makes monetizations by private equity firms more challenging. And I suspect that there were probably monetization goals overall for individual asset managers that may be a bit more challenging if some of those assets need to be held back waiting for greater clarity. I think that, that trend plays very nicely into our private capital solutions business as alternative asset managers are going to look increasingly to alternative liquidity options to maintain the pace of capital return and that you'll see more, and it may be on assets that are away from these where there are still question marks. But clearly, monetizations -- if you're finding it challenging with parts of your portfolio, you may rethink monetization opportunities in other parts of your portfolio. And probably for some of these companies, there will be a sense that creating more scale is important.

So I think at the right time, you'll see more strategic activity as it relates to some of these companies. But it's challenging when there's that much headline risk and people are still trying to calibrate what the new equilibrium is. So I sort of see this as sort of the waiting and watching and absorbing before there's full assimilation, repricing. And then inevitably, you're going to see an increase in activity.

That's great color, Paul. And just a follow-up here on recruiting. You obviously had a record year of partner additions last year, and I know some of that was promotions as well. It sounds like the pipeline right now is still quite strong. So can you talk a little bit about the pipeline, kind of what your expectations are in the year? And then just interrelated, the ramp time of productivity, I'm assuming that as the firm scales and kind of get some of those network effects in certain industries that potentially the production would scale faster. So I would love to hear a little bit about that. Like are the partners from last year increasing production faster? Just any thoughts around the second component to that question as well?

Let's start with the second component first. It all depends on whether it's the tip of the spear into a new area or whether it's going from strength to strength. So if you think about it, if you built out an industry vertical and you have real traction, real coverage footprint, real impact in boardrooms and you're adding another partner, the expectation is the ramp should be quickest. If you're going into a new geography or this is really ground zero for a hire in a space that you haven't previously been in, it will be longer. And I've always talked about this. We're out there building lots of networks. And every time you come closer to completing a network, it lights up.

But it's those early investments in a new geography or a new industry where we haven't previously had presence, where by definition, it's not the productivity of the first couple of hires, it's the productivity of the third, fourth, fifth individual that completes the circle and lights up that network. And the reality is, no matter how much we've grown, our investment at any point in time is a little bit of everything, where we're taking really greenfield initiatives and recruiting. At the same time, we're fortifying real strengths. And then we have other initiatives that are somewhere in between. And that's the challenge in sort of talking about that.

Having said that, whatever the time would be in any of those scenarios, that time to ramp is less today than it was 5 years ago because the firm has a much stronger field position is much better known. There's greater likelihood that there are others in this firm that have connectivity at the Board level and the C-suite with their other trusted advisers, be they law firms or other trusted advisers where we have clear credibility or where the Board members have seen us in action in other boardrooms. So you've got lots of cross currents here. All else equal, it should be quicker than it was, but it really depends on where the investment is.

And if you look at our footprint, we've entered new markets. We've made a commitment to Italy. We've made a commitment to the Nordic region. Those are, to some extent, greenfield operations. But I think they'll scale faster than other markets would have because we've built a strong reputation for ourselves.

And as far as the recruiting environment overall, look, it's challenging. It's competitive, but we have a unique value proposition. And I do think that when things slowed a little bit after all the hype of December, early January, I think there were some people who were saying, I couldn't possibly think of leaving at the apex of the gold rush. When it turned out in the first quarter, this wasn't necessarily the apex of the gold rush. We probably at the margin had more engagement with high-quality individuals than we were expecting just because the market, while still quite robust, maybe wasn't as frenetic as initially advertised. So at the margin, that's been helpful. But we're in a lot of active discussions. We have a lot of white space, and we have a lot of enthusiasm to continue to grow the business. And how much we do, we'll be able to report back with greater clarity in the second and third quarter, what the full year report is going to look like.

We'll go next now to James Yaro with Goldman Sachs.

Paul, I just want to touch on financing conditions today. Is it fair to say that the mix of M&A financing shifts at least for some period to more bank-led financing and private credit financing costs have already increased? I'd love to get your perspective there. To what extent are these impacting the health of financing markets and in turn, M&A? And finally, to what degree could the mix of M&A financing change more permanently as a result of the issues in private credit?

Look, I think it's going to coexist, but maybe the view that everything is going to private credit, which was a narrative at one point in all of this, is not the way this all plays out. And we've seen a lot of deals that were originally done in the private credit market were then refinanced in the syndicated market. I suspect you're going to see a little bit of both and probably a lot of both. And therefore, it still has significant advantages to it, but it is a competitive world. And the banks are not looking to give up their field position and what's still a very lucrative origination business.

And I suspect that we're going to get to a new equilibrium. And one of the beauties of our firm is we're agnostic about where our clients finance. We don't have any reason to favor one versus the other. And we can give the best independent advice. And I think increasingly, clients value our perspectives as what is the best way to finance a specific transaction and to do it clear-eyed and only thinking about what's in the best interest of our clients.

And increasingly, we're seeing that clients will come to us to ask for those clear-eyed judgments as to how best to tap the markets and whether this should be done through private credit or whether they should be done in the syndicated market. And we believe it's very situation specific, and we can add real value in that regard. So I suspect that, that business is going to continue to increase in importance for our firm as we increasingly find ourselves able to originate and to advise clients on the best place to raise capital.

I don't believe that there's a systemic risk to all of this from what we've seen. Obviously, no one sees everything and you don't know everything. But from what we see today, this is probably more of a PR challenge and an asset gathering challenge for the private credit world writ large than it is a systemic issue. And we're watching it very carefully, but that continues to be our view.

That's extremely helpful. I hope you might be able to shed some additional detail on the secondaries business, specifically around perhaps the mix of LP versus GP secondaries, which you alluded to previously. Do the issues in software impact the growth of continuation vehicles volume specifically in which they were a meaningful component of activity? And then discretely, I'd love to just get your perspective on the LP market -- LP secondary market specifically as well.

Look, we've always maintained that you need to open up a third way for liquidity. If you just look at -- this is a math problem as much as anything else. If you just look at all of the capital that's been invested, all of the capital that needs to be returned and every dollar that was invested, isn't worth $1 today. On average, it's worth significantly more than $1 this sheer volume. And there are real challenges in trying to use the IPO markets as your sole avenue or to rely on another sponsor to sponsor passing of the parcel, there needs to be that third way. And if you look at it on any dimension, we think it's an underinvested marketplace.

The biggest governor to date has not been the desire on the part of asset managers to consider secondary transactions is can they be done at scale, big assets, big size, big liquidity desires. And can it be done where there is the appropriate competitive tension where you don't need all these big anchor orders to be able to get to the number.

And the way that happens is more allocations to secondaries funds as an asset class. And we've always maintained that if you step back and look at this as an asset class, it's a compelling asset class for reasons we've talked about previously, the ability to better match commitment and investment, the lack of J-curve, clear identification with an operating history track record of the asset you're investing in, continuing sponsorship from the manager, and it's proven out that the returns have been strong. And as there's a better appreciation for that, we think that this asset class continues to grow in assets under management, assets deployed and then the better execution you can get, the more secondary activity will be coaxed out. And that's why we've spent so much of our time in building out this practice as really focusing on the ability to attract new sources of capital so that we can deliver better executions.

And all that we've seen is that in a volatile world where I'm sure the January 1 internal plans as to which assets were likely going to be harvested in 2026, my guess is that for most managers, names have come off that list and in an effort to be able to return their targeted amounts of capital to their LPs, they're going to have to create more alternative liquidity vehicles. And that's why we're seeing such strong interest and strong take-up, but it needs to be matched with continued allocation of capital to the space. And we're seeing that. And I think we're in this virtuous circle, and we're going to continue to see that as well.

And in other instances, you're starting to see more needs on the part of LPs to be more forward thinking about how they themselves reallocate their own commitments, and we're seeing more interest also in LP sales. But our real growth driver in this environment is on the GP side.

We'll go next now to Jim Mitchell with Seaport Global Securities.

Paul, so it sounds like you're not -- the thought process around sponsor activity on the M&A side is still kind of depressed and really being driven by secondaries and not really going the M&A route. So just curious, maybe taking a step back, how do you kind of view the environment this year will be very similar to last year, driven by strategics and still depressed financial sponsor activity? Or are you starting to see any of that change where middle market versus large cap starts to pick up on the M&A side?

Sure. Well, again, I want to be really clear. We're talking about trends. We're not talking about individual situations. So on any high-quality asset that we're in market with, there's very robust interest from a broad group of sponsors. It's not as if people aren't active, aren't deploying capital, and it's not as if they're not looking to bring some of their own assets to market. I want to be really clear. The market is open, it's operating, it's healthy. The question is, compared to last year, how much have we seen an improvement?

And the fact is, I think where software matters is software as an industry has created some overhang or plans for liquidity in 2026. And if some of the comps that you were looking at for an IPO are down considerably, that's obviously going to have a dampening effect on your own IPO plans and it's going to make your confidence in being able to monetize these assets relative to where they're marked, it's just going to reduce that activity.

So if your own monetization machine is behind plan, probably at the margin, your own deployment schedule is going to be dialed down a little bit relative to what might have been the case at the beginning of the year. And therefore, we're not seeing the rebound that everyone was hoping for. We've always thought that this was going to be far more strategic-led for a variety of reasons. One is when you think about changes in regulatory posture, that tends to affect decision-making on strategic assets than assets that were originally sold to sponsors. So as a result, when you see more degrees of freedom in thinking about consolidation 4 into 3, 5 into 4 type transactions, that's going to coat out more strategic firepower.

You also have incredibly robust corporate balance sheets. So when rates are higher, they may make it harder to pencil out for a sponsor in a way that you don't feel the same pressures strategically. And then also the ability to use equity as a currency. And when you have market indices, while it may not be across the board, you have many companies trading at all-time highs, their willingness or comfort in using their own currency. So all of that is going to continue to make this in the near to intermediate term, we believe, more sponsor-led -- I'm sorry, more strategic-led. And if you ask me what are the 3 takeaways, if you look at this environment right now, it's strategics versus sponsors, it's larger deals versus smaller deals and it's rest of world deals versus the United States as sort of trends.

Okay. That's really helpful. And maybe just on the buyback, a nice increase from the $500 million previously authorization. Does that imply a faster pace going forward? I know you tend to do more in the first quarter, but how do we think about, I guess, the cadence of buybacks in the context of record cash and the bigger authorization?

Well, I'll let Helen speak to it. But before she does, I'll just make the point that we always want to neutralize the dilution as quickly as possible, but we're also looking at the value in our share price. And to the extent we find that to be compelling or the balance sheet backs it up, then we're going to back it up by putting our own money to work.

So Jim, I would say no real change to our strategy. As Paul said, we tend to be more front-end weighted year in our buybacks. Goal #1 is to offset dilution, but we're also opportunistic. So I think the strategy would continue. And I think the $800 million reflects a higher share price. The last buyback program we used in just over 2 years. So maybe it's a little longer, but no significant change.

We'll go next now to Mike Brown with UBS.

So I wanted to ask about Restructuring. So LME has really been driving a lot of the restructuring activity over the past few years. How should we think about how the mix could shift going forward? Do you think we'll see more Chapter 11s here? And then, Paul, you touched on the global opportunities. Maybe can you talk a little bit about your capabilities outside of the U.S.? How does it compare maybe which regions, countries do you have a larger presence? And then how does that mandate mix debt or credit or differ from your domestic business?

Well, first thing I would say is, we have an addressable market that we still haven't come close to fully tapping. So if you think about just all the industry verticals, that are partially or unbuilt where having that coverage footprint would enhance our liability management practice. There's no doubt there's a high correlation there. So as we build out industry groups.

The second is while we've done a terrific job in expanding our breadth of sponsors who work with us on liability management exercises, there's an extraordinary amount of white space. And as we continue to expand our coverage footprint with sponsors, we have real growth opportunities.

And then the third is as we continue to build out our footprint rest of world in Europe, Asia and the Middle East, we have tremendous opportunities. And we've seen success in France, Germany, Sweden, elsewhere, U.K. as we continue to build out presence. So the way we think about it, the coverage footprint continues to grow, becomes more powerful, and that can only be a real positive for the rest of our businesses.

I would say there's probably more of an effort to focus on creditor assignments outside the U.S., particularly in Asia. So we've done a lot in Asia, but a lot of that has been represented in creditor groups as opposed to onshore creditors -- sorry, onshore debtors. And I think that, that's probably a difference in mix between U.S. and rest of world.

Great. Helen, I wanted to ask you about the non-comps. So you mentioned that some of the uncertainty due to the AI-related investments you're making makes a little tough to give some guidance there. Can you maybe just talk about how much investment came through in 1Q? Talk a little bit about where you were investing? And then when we think about AI, can you talk a little bit about what that can mean for the margin, maybe near term, longer term? Is there an opportunity on the comp side? And then maybe just one final one on 2Q, is there kind of a guide there at least as we think about our models?

I'll start with the last question first. I don't think we have a clearer guideline for Q2 than what we've said, which is 12% for the full year. So I think that would be still where we are. In terms of the AI spend, we have been buying licenses. But the reality is that you need to invest, we intend to invest. And in the short term, that probably means that it's got an impact on margins as a cost as opposed to a benefit. And there are lots of investments, making sure that we have our data structure organized, investments in security, infrastructure to support whatever we're putting in place. There's probably going to be some technical consulting expense that we need to incur. So we're looking broadly with a mindset of investment and then figuring out how we can best use it. So I think it's too early to say what the impact will be. But certainly in the short term, we think there'll be a cost from that investment.

We'll go next now to Brendan O'Brien with Wolfe Research.

I guess to start, you guys gave a lot of color on the pipelines. And if I heard you correctly, preannounced pipeline at record levels, while your announced backlog is down but improving. Obviously, got off to a strong start to the year, which helps, but I was just hoping you could give some color on what you're assuming in terms of deal conversion in the 66.5% comp accrual. And just given the trends in the announced backlog, is it fair to assume that revenues this year could be a bit more back-half weighted?

Well, I think our comp accrual reflects our best estimate of a variety of factors where trying to give our best assessment about what our overall year financial results will be. We have some views on what our recruiting gets will be throughout the year. We also are making some judgments about the competitive environment, and it's our best estimate at this time. But as we said, I think, in our prepared remarks, our view for the year is pretty much unchanged from where it was 3 months ago because we had predicted some of this volatility in the marketplace. So I think it's sort of been part of what we've expected. And as it's played out, it hasn't caused us to adjust in any material manner our views for the year.

Great. And my for my follow-up, Paul, your comments on rest of world versus U.S. in response to one of the previous questions caught my attention. I just was hoping you could maybe drill down a bit more in terms of what you're seeing in terms of activity by geography, what's driving some of those divergences and how you see that playing out throughout the balance of this year?

Well, we always got to be careful whether you're looking at percentage change or absolute market size. So there's no confusion. The market that's the biggest, deepest, most vibrant is the U.S. market. If you're just asking me though, where is there probably an uptick in growth year-on-year, I think Europe would be that place. And you can see it in the numbers, you can see it in the data. I think some of that is there's an increasing appreciation. And we've talked about this previously that you need to create more scaled European competitors in defense, in financials, in communications, in all sorts of critical areas. And I think the regulatory posture in Europe is going to continue to relax to allow more of this to occur.

At the same time, there's been a valuation disconnect for many companies that operate on the global stage, but happen to be listed in Europe. So you're seeing more opportunities to capitalize on these valuation disequilibriums with more take-privates and the like in Europe. And I think that's probably 2 of the most important factors as to why European activity is up relative to rest of world this past year.

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

I have a follow-up on the Restructuring commentary from earlier. Paul, you noted that revenues were comfortably above the year ago levels in the quarter. But wondering how that maybe compares to other quarters last year, just given the seemingly strong results in 1Q? And then also it would be great to get a little bit more color around the outlook for the rest of the year here. I know you said you expect activity levels to remain elevated, but do you think restructuring results over the remainder of the year can or will also come in comfortably above the year ago levels?

Well, look, there's a lot to play out. I think I would say we feel very comfortable about our competitive position. We think that this dislocated environment is going to continue for a considerable period of time. It's certainly quite possible that we'll be up a bit. We could be up comfortably. But I suspect that it's going to be a very positive year. But it's just too early in the year to really put too fine a point on any of our businesses as to the actual quantification because there are a lot of transactions that could slip into next year. They could accelerate into this year. And when you have a lot of chunky assignments, whether they're in Strategic Advisory, the PCS business or Restructuring, it's just too early in the year to know exactly where the revenue recognition falls. But if you're asking about levels of activity, I think all of our businesses are going to be quite active in 2026.

Got it. Okay. Fair enough. That's helpful. And then a question on the increase in the Restructuring MD headcount. This is the first time we've seen a step-up there in a couple of years. So curious if this was a concerted effort to add talent in this area or if there's just any other color you could add in that step-up in the quarter?

And you're talking about partner headcount?

Correct, yes.

Yes. Yes. Look, I think it just demonstrates the investment that we make. We hire MDs that get promoted to partner. That's one of the increases. And then we've got homegrown talent that we promote. So it is an investment in the overall franchise, and you're starting to see it come through as the headcount in that group increases. So I think it went from 18 up to 21.

And ladies and gentlemen, that concludes our question-and-answer period. I would now like to turn the conference back over to Mr. Taubman for any closing remarks.

Just want to once again thank everybody for their interest, for spending the last hour with all of us, and we look forward to reporting on our second quarter earnings and doing this again in the summertime. Thank you all very much.

Good day, and welcome to the PJT Partners Fourth Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma'am.

Thank you very much. Good morning, and welcome to the PJT Partners Full Year and Fourth Quarter 2025 Earnings Conference Call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners. And joining me today are Paul Taubman, our Chairman and Chief Executive Officer; and Helen Meates, our Chief Financial Officer. 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. .

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. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2024 Form 10-K, which is available on our website at pjtpartners.com. I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations, 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.

Thank you, Sharon. Good morning, everyone, and thank you for joining us to review our fourth quarter and full year results. Across the board, our 2025 results were a record-setting as we reported record revenues, record adjusted pretax income and record adjusted EPS. The strong performance reflects our sustained investment in building the best advisory focused firm possible. A firm distinguished by its best-in-class talent and its unwavering commitment to a culture of collaboration and teamwork. This firm line investment continued in 2025 as we added senior talent across industries, capabilities and geographies.

For the year, firmwide partner head count increased 12%, while total head count increased 7%. We ended the year with record cash balances of $586 million after directing a record $384 million to share repurchases. Our capital priority remains, first and foremost, to invest in our firm and our people; and second, to return capital to shareholders and to do so principally through repurchases. 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. For the full year 2025, total revenues were $1.14 billion, up 15% year-over-year. As Paul mentioned, this was a record result for our firm. All of our businesses had record revenues with Strategic Advisory, the primary driver of revenue growth for the year. For the fourth quarter, total revenues of $535 million, up 12% year-over-year, also reflecting a record revenue quarter for our firm. The growth in the fourth quarter was primarily driven by growth in restructuring and PJT Park Hill.

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. Full year adjusted compensation expense was $1.15 billion, representing a compensation ratio of 67.1%, which compares to 69% for the full year 2024. Given the higher compensation accrual for the first 9 months of the year, the resulting rate for the fourth quarter was 66.2%. We will provide guidance on our 2026 compensation estimate when we report our first quarter box. Turning to adjusted noncompensation expense. Total adjusted noncompensation expense was $207 million for the full year 2025, up 12% year-over-year.

The main drivers of the year-over-year increase were higher occupancy costs driven by additional space in New York and London and higher travel and business-related expenses. In the fourth quarter, total adjusted noncompensation expense was $54 million, up 16% year-over-year with the same drivers of year-over-year growth, higher occupancy costs and higher travel and related and business-related expenses. As a percentage of revenues, our adjusted noncompensation expense was 12.1% for the full year 2025 and 10.1% for the fourth quarter.

We expect our total non-compensation expense in 2026 and to grow at a similar rate to 2025, and we will provide more guidance on our outlook for the year when we report our first quarter results. We reported adjusted pretax income of $357 million for the full year 2025, and $127 million for the fourth quarter. Our adjusted pretax margin was 20.8% for the full year and 23.7% for the fourth quarter. The provision for taxes. As with prior quarters, we presented our results as if all partnership units had been completed to shares and that all of our income was taxed at a corporate tax rate.

Our effective tax rate for the full year was 14.1% as we realized a significant tax benefit from the delivery of vested shares. The 14.1% rate was below our previous estimate of 15.5%, primarily due to the final non-allocation across state, local and foreign entities. For 2026, our current estimate for the tax rate is in the high teens percentage, which is between the 2024 rate and the 2025 rate, we'll provide an updated estimate when we report first quarter results.

Our adjusted if converted earnings was $6.98 per share for the full year compared with $5.02 in 2024 and and $2.55 for the fourth quarter compared with $1.90 for the fourth quarter 2024. On the share count for the year ended 2025, our weighted average share count was 43.9 million shares slightly down year-over-year. During the year, we repurchased approximately 2.4 million shares and share equivalents, and as Paul manned, we spent a record $384 million on share repurchases.

We are in receipt of exchange notices for an additional 850,000 partnership units and subject to board approval, we intend to exchange these units for cash. We view the partnership exchanges as an effective way to repurchase shares without impacting the float. And consistent with our capital priorities, we will continue to invest in the business while using excess cash to over time, reduce our share count. On the balance sheet, we ended the year with a record $586 million in cash, Cash equivalents and short-term investments and $652 million in net working capital, and we have no funded debt outstanding.

Additionally, the Board has approved a quarterly dividend of $0.25 per share. Finally, a note on our revenue reporting -- going forward, we will report our revenue as a single line item and will no longer break out the advisory placement and other designations. In our earlier years as a public company, the placement fee loan was a reasonable proxy for. Today, more than 10 years on with the expansion of our private capital solutions business and the growth in our corporate placement capabilities that is no longer the case.

Given our strategic priority of expanding and further integrating our broad advisory capabilities, these revenue designations do not reflect either how we manage our performance or how we measure our progress. As we have done in the past, we will continue to provide context around the key drivers of our performance. Back to Paul.

Thank you, Helen. Beginning with restructuring. Notwithstanding broadly favorable macroeconomic and capital market conditions, an increasing number of companies continue to grapple with over-leveraged balance sheets, challenged business models technological disruption and changing consumer preferences and governmental policies. In this environment, demand for our liability management and restructuring advice remained elevated and we delivered record Q4 and full year results. Turning to PJT Park Hill. Relatively modest capital returns have further strained an already challenged primary fundraising environment, topping GPs and LPs alike to pursue alternative liquidity options.

While investor interest in secondary products continues to grow, driven by an increasingly appreciated return profile. Against this backdrop, global primary funding volumes declined for the fourth straight year, while client interest in private capital solutions and other structured products continue to build. In this push-pull environment, our PJT Park Hill business delivered its strongest quarter ever, enabling full year results to exceed 2024s record results.

Turning to Strategic Advisory. M&A activity increased sharply in 2025 with global announced volumes up significantly as strength in debt and equity markets, greater confidence regarding regulatory outcomes as well as improved CEO confidence, all served to make this the second best year ever for announced M&A activity. Our 2025 strategic advisory results benefited from this favorable deal environment as well as the continued investment in and maturation of our advisory platform.

2025 strategic advisory revenues significantly outpaced 2024s record levels with revenues in our strategic advisory business, reaching record highs for both the fourth quarter and the year. As we look ahead, the broader capital markets M&A environment continue to be highly constructive for dealmaking. The momentum in global M&A activity observed in the second half of 2025 and is likely to carry over through 2026 with strength in debt and equity capital markets, greater confidence regarding regulatory outcomes and increased CEO confidence all providing ballast, but as events of the last couple of weeks have shown market sentiment can turn on a dime.

Geopolitical risks as well as debate surrounding the pace of AI development and capital deployment and the economic returns associated with this investment continue to loom large. How these factors evolve will play a central role in shaping the year ahead. As it relates to our firm, in PJT Park Hill, the strength in our private capital solutions business should more than offset any declines in primary fundraising. In the restructuring and liability management, we continue to operate in a sustained period of elevated activity, and our best-in-class team remains well positioned to capture additional market share.

In Strategic Advisory, while we began 2026 with a pipeline of announced transactions comparable to year-ago levels, our pipeline of preannounced transactions measured both by number of mandates and revenue opportunity is up meaningfully from a year ago and now stands near record levels. We are better positioned than ever before to capitalize on a favorable deal environment due to our expanded footprint, enhanced capabilities and growing brand awareness.

Given our differentiated mix of businesses and the growth opportunities before us in each of these businesses, our firm remains well positioned to prosper in nearly any market environment. As before, we remain confident in our near, intermediate and long-term growth prospects.

And with that, we will now take your questions.

[Operator Instructions] We'll take our first question from Devin Ryan with Citizens Bank.

I want to start with restructuring. Obviously, I think a lot of interest in that business in the industry just as new firms are expanding kind of slightly different things on kind of the outlook there. And so I'm curious if you can just give a little bit more color around the type of activity that you're seeing, is it kind of amend and extend or kind of comprehensive liability management? Is there more in court?

And then just expectations there as we go -- I know you don't have a crystal ball here, but in a world where your M&A activity is kind of normalizing and accelerating nicely does restructuring maintain? Can it still grow? Or does the normal pattern to kind of falling off a little bit kind of playing out? I'm just curious how you're thinking about not necessarily in the next couple of months, but probably the next 12 to 18 months.

Sure, I think we've been remarkably consistent on this point, which is we're in a multiyear period of elevated restructuring activity and there are lots of reasons for that. Some of which is the benchmarks and the mindset relate back to historically low interest rates that were aberrational and we're dealing in a more normalized rate environment today than before. The second is we're dealing in a world that is speeding up, not slowing down and the technological innovation is fueling our global economy, but at the same time, is creating winners and those winners are redefining who the losers or left behind companies are in what industries and which companies and as a result, you can have a world where you have robust G&P growth, you have broad consensus that the macroeconomic environment is constructive, but at the same time, have very concentrated stress in certain industries and with certain companies.

And I think that suggests to us that this has legs and is going to continue to play out for a period of time. And the reality is we haven't really hit a recessionary environment for an extended period of time, if we were to, then all those commentary sort of gets taken off the board and you're looking at a meaningful leg up. But if you just assume the current economic environment. We think you're going to continue to see robust liability management and restructuring. We have not seen any diminution in that activity. And if anything, we think we're starting to see the very early signs of that growing.

In addition, we have every day the goal of broadening our footprint. Broadening our footprint with sponsors, broadening our footprint in industry groups, broadening our footprint geographically. And every day that we broadened that footprint gives us a greater addressable market in which to market those leading liability management and restructuring capabilities and as we're able to reach a broader group and become relevant to a broader group. That gives us the prospect of continuing to grow our business at rates that may be greater than what with the overall liability management or restructuring data suggestion.

That's great color, Paul. And then just for my follow-up, I want to talk about the kind of platform maturation. You kind of mentioned that a couple of times. Obviously, tremendous growth in strategic advisory over the last -- really last decade, but the last handful of years, really, the business has been maturing. So -- and again, I appreciate you don't break out a segment P&L. It's not how you run the firm. But -- can you help us get comfort around the ability to drive operating leverage off of those investments? Is there any proof points that you're seeing that? And then just kind of order of magnitude of operating leverage as the business backdrop transitions to a stronger M&A environment to the extent it does, I don't know if there's a way to think about an algorithm of revenue versus expense growth? Or just how you would frame just given the growth you've had and then the maturation of some of that growth as well.

Well, I don't think we've had a year to date where our strategic advisory partners writ large, have been more productive than in 2025. So clearly, as you just look at the maturation and the progression of our firm, that continues to be up and to the right. At the same time, that may direct to -- up and to the right, but that doesn't mean that every quarter and every year is precisely up and to the right. And as an example, 1 factor is just the pace of investment. And we've made it very clear that when we find individuals who match our expectations for talent, relationships and personal integrity and ability to operate in a culture of teamwork and collaboration.

We're not going to be shy about onboarding those individuals. So some of these productivity measures get masked from time to time based on what's the rate and pace of investment. So that's why it's never a straight line. And also the Strategic Advisory business is a long-scale cycle business. So many times, you could be having real impact in effect. And from the KPIs one would look at, you're seeing increased productivity even if the revenue lags. But I think we look back on 2025, and we're just a fundamentally different firm and maybe the easiest way to see that is if you just look at our firm-wide revenue and compare it to 2021, which was the peak year for M&A activity of all time, on that basis, we're up nearly 75% in firm revenues from 2021 to 2025. So just to give you some perspective as to how this continued investment is starting to gel. I think there's been real returns, but we're not satisfied with where we are this. We have really high expectations and aspirations. But we're going to just continue to methodically get after all of the light space that we see across the board.

Our next question from James Yaro with Goldman Sachs.

This is [indiscernible] for James. Paul, 2025 was a mega M&A-driven backdrop. So can -- do you think can this part of market continue at this pace or improve further in '26.

I certainly think we're -- we haven't tasted the full extent of how robust the M&A market can be. But when you have a year like 2025, we're depending upon how 1 counts. Volumes were up 35%, 40%, even higher than 40%, and you're looking at the second highest revenue year it becomes a difficult comparison. But I focus less on whether we're going to ring the bell and top tick last year, I asked myself, are we in a multiyear period of elevated deal activity and I think given the current net economic backdrop, the regulatory posture this administration, the desire in Europe to address certain issues in terms of industry consolidation and the like, which has perhaps been a negative for the continent.

When I think about the attractive capital markets backdrop, and a wall that is speeding up and not slowing down, which means you either need to press your competitive advantage. And one of the ways to do that is with more scale and to use your capabilities to continue to build moats or you find yourself left behind and you need to think about the corporate structure that you have or you're vulnerable to shareholder activism or you need to pair the mission and focus on areas where you have clear core competencies and advantages.

All of that suggests that we should be in a multiyear period of elevated deal activity it's easy to talk about inflection points when things are going to get better or things are going to get worse. But when you're dealing with quite attractive macro backdrop. The issue is just simply how long is it going to continue, and we think it has legs. But whether we're continuously hitting new highs, that's much harder to call.

Very helpful. Just a follow-up here. You delivered a meaningful step down in the comparison in the quarter. Can you please help us think through the outlook for the comp ratio from here?

Well, I think we've said a couple of years ago that when we were delivering our financial results that we thought that based on everything we have seen our compensation as a percentage of revenue had peaked, and it had peaked because we had maximum investment in a period of relatively low velocity M&A activity, and that confluence had caused that ratio to gap out in the short term, but we expect that to continue to work its way down.

And I don't think we're done working it down. The question is just simply the pace and rate of that. And that, in part, going to be a function of how the markets develop over the next couple of years and how strong they are and how much operating leverage we get by revenue growth, but some of it is also going to be the pace of investment, which is still very much TBD. And we'll report at the end of the first quarter when we deliver our Q1 results our best estimate for what that ratio should be for 2026.

Our next question from Brennan Hawken with BMO Capital Markets.

Paul. I'm hoping you can help me with something because I'm struggling a little bit here. So I hear you loud and clear that restructuring of the outlook is pretty good. But when we look at the revenues here in the fourth quarter, I know you guys flagged in the press release that restructuring was up, but like the multiple on the geologic revenue was 1 of the lowest that we've seen in years. So, to me, that suggests that the actual quarter was a little bit lighter on the restructuring side than what we've been seeing. So number one, I'd love to hear you maybe speak to those -- I know restructuring is chunky, right? So like that can happen quarter-to-quarter. But maybe help reconcile that a little bit. And then when you're thinking about restructuring. Could you speak to maybe certain sectors and where you're seeing a lot of activity. There's a lot of odd out there around software. So curious about what you're seeing in your business there.

Okay. I don't spend a lot of time looking at [indiscernible] data. I just focus on the business that we do. And we are pretty clear in how we communicate to investors, we had our record quarter in restructuring. Q4 was the best restructuring quarter we've ever had. The year was the best restructuring year we've ever had and we continue to be constructive and optimistic about the future prospects for our franchise. I can't be any clearer than that. That's -- those are the facts.

Okay. and sectors. -- where you're busy in respect 1 sectors. .

Look, we're really busy across the board, but I think there are areas. I think you look at challenged industries, parts of the health care complex. There's a lot of pain. Software is an area where there will be elevated focus just given events and pressures coming from AI. We've talked consistently about the fact that AI is going to be a disruptor. The whole digitization on the consumption of media has created significant opportunities in media. There are issues in retail, which also comes from online versus offline shopping and changing consumer behaviors.

I think it's broad-based. It's not narrow because in many industries, there are companies that are being left behind and their business models took on or suggest that they could support a quantum of debt that as the world moves forward, it's clear that, that was not the right capital structure and companies are increasingly trying to get ahead of these issues, and they're looking at where they're choke points might be in the future as far as covenants or significant maturities, and they're using the creativity and deep capital markets and the ability to access public or private markets to come up with a better capital solution. So it's really quite broad-based. And our focus is not narrow and that's another reason why I have greater confidence that this that this trend continues. If it was just a couple of very narrow verticals, there's always the risk that, that well run dry, but that's not what we see.

And look, -- the strength of the restructuring franchise that you built is clearly quite good. Maybe I'm going to by my question in a different direction. I know you don't pay attention to Dealogic, but we're stuck here using the data that we've got. So could you speak to Park Hill? I know you spoke to the challenges in the fundraising environment, but there's also the GP secondaries business, which has been better what did trends in Park Hill revenue trends of Park Hill look like? And was that maybe a little bit weaker just because the fundraising remains so challenging?

I think most of my commentary throughout the year was that we expected the year to come close to will be approximate to the prior the prior year's record performance. 2024 was a record for the Park Hill business. We ended up with a record fourth quarter and as a result of a record fourth quarter. We created a new full year record. Our 2025 was on. I mean if we just step back for a moment, -- we generated over $500 million of revenues in the quarter. We've never done that before as a firm.

We had a record quarter. We pierced $500 million by a significant amount, we had the best quarter ever in restructuring. We had the best quarter ever in Strategic Advisory. We had the best quarter ever in PJT Park Hill and the reality is we're dealing with a fourth quarter a year ago, where we also had records. So we had very tough pearls there, and we've cleared them across the board. So all of the businesses are very well positioned going forward. I think as you look at the Park Hill business going forward, you're going to see private capital solutions structured products and the like, increasingly represents the bulk of the revenue opportunity. And that market, as I said in the outlook, is growing meaningfully faster for us than any potential dimunition or flatness in the primary fundraising line, which makes us optimistic about the Park Hill business in Edrive. So we're we're feeling pretty good about where we stand at the end of 2025, moving into 2026.

We'll move next to Jim Mitchell with Seaport Global Securities.

Paul, last, you mentioned that M&A volumes are the second best year ever. But when we look at sort of the number of deals down for the fourth year in a row last year, so very much a mega cap kind of environment. So I guess, number one, are you seeing activity starting to broaden out to more of the middle market and down? And then secondly, for you, specifically for PT I know you've been looking to build out your touch points with financial sponsors. So just any kind of update on how you're positioned for that maybe middle market recovery among financial sponsors.

Volumes are up meaningfully. Deals count down, although if you really double-click on that, a lot of the reduction in deal count has been a sub-billion transactions and that's not a place that we play as much in. So in some respects, it's not as broad-based as people might think because a lot of that reduction in deal count is at a much, much smaller level than it is in chunky $3 billion, $5 billion, $10 billion transaction. That would be the first point.

I think the second point is if you look at the buying bench, in private equity in 2021. And then the painful deal come up in 2023 when there were somewhere like 9 rate hikes in 2023. You've got a very, very low velocity private equity environment. And I think what we're doing is we're getting back to equilibrium between capital expended and DPI. And we've talked about this. It's not always the easiest way to shift from a fundamental imbalance as well as capital has been called and relatively little of it is monetized.

If you do that for a period of time, you create stresses and strains in the system. I think, the industry has worked through a lot of it. They haven't worked through all of it. But I would expect that we will continue to see some increasing activity amongst private equity firms as they become more comfortable in monetizing investments at these valuations and the more that they can monetize. I think that will make it easier for them to be more forward-leaning and 1 more capital that we'll get this ecosystem better, better linked between sort of capital deployed and capital return.

I don't think that it's going to be perfectly imbalance, which is why we're so constructive on the private capital solutions business. I think that narrow in 1 quiver that's going to continue for a considerable period of time. And as far as the private equity ecosystem and how we touch it and how we cover it, one way we touch it and cover it is through all the liability management exercise as we do. And as we continue to broaden out our sponsor coverage, it shouldn't be a surprise that some of that benefits our restructuring special situation liability management effort.

I think the next is we have a leading private capital solutions business. The more developed that business is, the more opportunities we have to use those distinctive capabilities and also our distribution and our ability to raise new capital to further penetrate the middle market or some mega fund complexes, and that's an area where PJT Park Hill is particularly strong and has real deep relationships. And as we continue to build out our industry groups and strategic advisory, we become more relevant to more sponsor firms because of our industry expertise and our industry verticals better matching where there might be investor focus. So we're continuing that journey to further grow that business. But I always believe it needs to start with best-in-class advice. It needs to start with best-in-class corporate access. And then from there, you have things of real relevance that resonate with your sponsor clients.

Maybe a quick one for Helen. I appreciate not giving the full year tax rate yet, but can you give us any help on the first quarter given the the likely quite positive benefit in the first quarter. Any way to think about what the target could be in the first quarter? .

Sure. When we really estimate the taxes, Jim, we look at it over the full year and smooth it over the full year when we do the adjusted effective tax rate. So when we do that and when I gave you the high teens, that anticipates that benefit from the day will be really much.

Our next question from Mike Brown with UBS.

Paul and Helen. I wanted to just double-click on the Private Client Solutions opportunity here. You've touched on it a number of times on the call. Maybe just start on the secondary side of the market. What are you expecting from kind of the GP and LP side in terms of the mix in '26 compared to '25? And then your positive views there. It sounds like it's kind of a secular growth, but maybe can you unpack a little bit about PJT's opportunity from market share opportunity? And then, just on the primary side, if you could spend a minute there. We are seeing realizations picking up for the industry. So when could that return of capital start to translate to stronger fundraising on the primary side for Park Hill?

Okay. Why don't we start there? I think the primary industry across the board is challenged for a variety of reasons, right? One of which is increasingly asset allocators are allocating larger and larger percentages of their allocations to the largest fund complexes. And as a result, many of those have their capabilities in-house. So you're really dealing with the next level. That trend towards consolidating relationships and the like, I don't expect to change. I think that's the first thing.

I think the second is the performance across the industry has been a bit uneven. And I think the 2021 vintage may choose, may turn out to be less than flattering vintage when history is written. And as a result, there's also the risk that just the absolute allocations to the asset class sort of move away. At the same time, there's immense interest and opportunity in credit and credit products and structured credit. And I think we're very well positioned there. There's also real opportunities in real estate and I think that the dynamics today are more favorable than they've been for a considerable period of time.

So it's not like one monolithic industry. It's the fact that there are going to be pockets of opportunity always. And in a world where it's more difficult to raise capital. Clients are going to be more discerning about whether or not to employ a placement agent, if they use a placement agent who to use. And I think all of those trends work to our benefit. And the more we solidify those relationships, that puts us in a pole position for more of the opportunities and looks as it relates to private capital solutions. So I think those businesses are highly synergistic as they work together.

And I do think that as an asset class, if you just look at how many new funds are being raised in secondaries. I think as I said in my prepared remarks, there is an increasing realization of the attractiveness of the secondary opportunity from an investment perspective, the absence of a J curve, the ability to invest alongside sponsors where there's continuity of management specific identification of the assets, a real track record of performance. And increasingly, those assets that are being presented to the marketplace are the highest quality assets.

So I think that, that's going to have a reinforcing effect, and that's going to make more capital, the more capital there is, the ability to run a more competitive process with a better price discovery where you have a multitude of providers of capital to choose from. So all of that, I think, is a positive for the industry, and we're very comfortable with our market position in the sense that we have unique capabilities particularly the secondaries joined with our unique primary distribution capabilities, and we expect to gain share in that business as we look at going forward.

Great. Just wanted to follow up on the restructuring side. So very positive outlook here for restructuring. That was clear. Just wanted to ask, are you seeing any competition for talent in the restructuring business. You've obviously got a premier franchise and leading share, but we did observe that a partner looks like they spun out and creating their own restructuring business and just curious how you're thinking about the war for talent and that restructuring side of the business?

Look, we're a talent-focused firm. So we're always focused on making sure that we have the best talent, and we believe we have the best talent. We believe we have the best culture, and we believe we have tremendous opportunities ahead of us as we start to get at the white space that we have. And I think our franchise enjoys more white space than most anyone else. So we're very comfortable that it is a highly attractive destination and we'd love nothing more than to continue to invest in our franchise and to add more talent if those opportunities arise,

We'll move next to Brendan O'Brien with Wolfe Research.

I guess to start, just a bigger picture question, Paul. There's obviously been a lot of optimism on the Capital Markets outlook this earnings season. But just based on what we can see in the data, it looks like announced volumes for January were down around 10% year-on-year. I know that one month does not make a trend. But as you flagged in your prepared remarks, that we have seen a notable uptick in geopolitical tension and political uncertainty in the U.S., which is only likely to intensify into the midterm.

So I just wanted to see if you had any views on surround as to what is driving that delta between the optimism and the data thus far and whether you've seen the rhetoric and resulting market volatility have any impact on dialogues at this point?

I think bankers love to be optimistic in January. I think that that the tried and true tradition and that doesn't seem to vacillate regardless of the macro environment. I think maybe because I've been around so long, I have a more sober view of the world, which is I think we have a highly constructive macro backdrop, but the deal environment of the capital markets environment are inherently fragile, and they react in a punishing way the news flow and the new slow to be positive or it could be negative, and we're dealing with some large geopolitical risks, and we're dealing with very large debates about the capital being deployed to AI is the pace of that capital deployment, what the returns are, the implications for industries and changing market winners and result in market losers.

So I think we have a very constructive backdrop, but I'm not prepared to kind of just wave the flag and bring up the pump pumps and talk about how this is going to be the the best year ever and the like, I think it's a highly constructive environment. I take a note of the first month. I think it is just a month. But maybe when we have our conversation at the end of the first quarter, we'll have more clarity. But the reality is, 2025 was a pretty darn good year with volumes up however you count at 350, 40-plus percent the second best year, it does create a high bar.

So to me, it's less about is this year better than last year. The issue in my mind is how long is this runway and how do we, as a firm, focus our efforts on continuing to gain market share. And we've always talked about our firm as a market share, not a market-sized story. And what that means is as long as we have a relatively healthy deal backdrop and as long as deals can get done, our goal is to win over clients 1 at a time. and to be more relevant and more active in more geographies, more industries with more capabilities and a longer and longer record of excellence. So in my mind, if things get a little tougher, that's actually good because it just means that nice matters more.

And when advice matters more in the selection process, that's good for our firm. So I'm still highly constructive on the M&A environment. I just -- I'm not sure anyone can tell you exactly how good it's going to be. But relative to what we dealt with in '22 and '23 and pockets of '24, there's no doubt that we're in a much more favorable constructive environment.

That's helpful color. And I guess for my follow-up, you've talked a lot about the maceration of the platform on this call. And one thing that stood out to me in your deck is that you're entering 2026 with the lowest percentage of partners on the platform for less than 2 years since you went public by a pretty significant margin. I was hoping you could help us think through the implications of this for your ability to generate comp leverage and revenue growth in 2026 just given you'll have less under-earning partners on the platform. .

It was so ironic about all of this. And I think we introduced this concept when we went public, and we just sort of broke out 2-year partners because we made the observation at the time that it was quite difficult for any new partner when you actually went through the calendar to generate any revenues of consequence in the first 2 years because by the time someone came on to the platform, they still had non-solicit issues that after those head cuts came off or they went to engage with all of their clients. They need to get to know you process, so they could better introduce their new firm then you needed to see whether or not a mandate was available, the mandate was available that might or might not lead to an announcement or [indiscernible] led.

So we started out by just sort of saying don't even expect any revenues for 2 years and somehow that's now the view that, that's like a fully functioning, mature partner on the platform. And the reality is that every year that those partners are on our platform every year. There should be greater and greater productivity. So it's not like the magic. In year 3, there's a calendar invite the opportunity for there to be real revenue, but year 4 is better than year 3, year 5 is better than year 4, that's the first point I would make.

The second point I would make is that in many areas, we have added our first or second partner and if you're adding 1 or 2 partners to a greenfield initiative, it might take 4 or 5 partners until you get to critical mass. So the productivity curve of going from 0 to 1, 1 to 2, 2 to 3 might be quite light. When you add that 4 to 5, all of a sudden, you have a step function change because you light up the network for all of those partners. So it's not as easy to model.

And the third point, which I talked about all the time is the walk-in business where people reach out to you because they've heard of the firm. There have been positive experiences. The Chairman has a direct experience, their CEO, someone else in the C-suite or someone else in the ecosystem. And every day that goes by, that continues to expand, and that also is a meaningful driver of productivity, which is what I call sort of the firm or the franchise value. So all of those elements are still very much in play. And I think we're in the very early days of getting to that potential that we aspire to, which is to continue to build the world's best investment bank. And I think as we do it bit by bit brick by brick, we should have financial rewards that come along with it.

We'll move next to Alex Bond with KBW.

Most of my questions have been asked already, but maybe a quick one for Helen, just on the non-comp side. So I heard the guide for the year of roughly similar to the year-over-year increase to last year, but maybe if you could just help us think through what are going to be the main drivers there of the higher nominal amount in 2026, that would be helpful.

Yes. So as I said, we'll give a more refined view in the first quarter. But if you think of the tailwinds going into '26, we definitely should experience less occupancy growth. We've made some pretty significant investments in New York and London. So that growth should slow. And we're always going to get leverage out of some of our fixed costs around IT infrastructure or some of the professional fees that we have relating to being a public company. So there would be the tailwinds.

And I think the headwinds are more people, more people bring more travel, more market data, more IT and com support, but I think against that, we're going to see the growth and just trying to figure out how we manage that. I think it will be fair to say we've been very disciplined in how we manage our expenses. But there are some just activity-related expenses that are going to drive those non-concept.

Thank you, that concludes our question-and-answer period. I would now like to turn the call back over to Mr. Taubman for closing remarks.

Just once again, we want to thank everyone for joining us this morning as we reported our full year results. We're very excited to get on with 2026. And we look forward to reconvening to report our Q1 results in April. Thank you very much, and have a great day.

Okay. Let's get started here. Up next. Delighted to welcome Paul Taubman, Chairman CEO and Founder of PJT Partners. Paul founded PJT and just celebrated the first decade of the company, which has seen tremendous growth and reached one of the -- and become one of the preeminent investment banking firms out there.

Before PJT, he spent nearly 30 years at Morgan Stanley, serving a series of leadership roles. Thank you so much, Paul, for joining us.

Pleasure. Thank you for having us.

Excellent. Okay. So Paul, on that first decade point, what are the key lessons you've learned? And maybe you could touch on your key strategic goals over the next 3 to 5 years?

I think the biggest lesson is if you're going to build it right, it's going to take time, and you need the right foundation. And we started out with a great deal of patience, but no matter how patient you are when you conceive the build-out. In reality, you need to be even more patient because everything takes more time if you're going to do it right.

And we focused initially on culture, on attracting the right individuals on having the right filter, and we could have moved more quickly. We could have added more individuals, but I don't think we would be in a strong position we're in today if we had cut those corners.

So to me, the first 10 years has really been the ratification of the strategy that you need to go slow to go fast. And now that we're 10 years in, and we have a lot of the foundation built and we're better appreciated, and we're much better developed as a global institution. I think it's time to be able to capitalize on that and to go faster not to change the standards but to sort of leverage all of the hard work and foundational investment that was made in the first 10 years.

When you think about investing today, are there specific businesses, areas, geographies that you're really focused on? Or is it more broad and opportunistic?

You always have to discriminate between where there's the biggest wallet and where you can get the right individuals. In an ideal world, those two are perfectly aligned. But the world isn't perfect and sometimes you know the spaces you want to occupy. But if you try and get to them too early, you'll end up with the wrong individuals. So when we look at our build-out over the 10 years, we're in almost all of the industry verticals, but our build-out is in varying degrees of progression.

When I look at the biggest wallets, the biggest wallets would be in health care, writ large, the world of technology and industrials. And I think we have made major investments, but there's still a tremendous opportunity in those three spaces, which are very large, high wallet, high-impact opportunities. And the fact that we've come so far and not really made commensurate investment in those verticals with some of the other areas. I think to me, it's just more opportunity for upside because now as we get at those opportunities, we have the ability to take our franchise to yet another level.

Talk a little bit about being able to grow a little faster now in the second decade, so help us think about your hiring outlook. You did have, thus far, at least a stronger hiring year already. So is that just something that we should expect going forward a little more?

Well, when I talk about going faster, it's really it's just a compounding effect, right? You're spending a lot of the first 10 years building a foundation where you're meaningfully strengthening the firm, you're building it out, but you haven't fully capitalized on what you've built. The next 10 years, we really have the opportunity to capitalize on a lot of what we've built.

So if you think about how the first decade has gone, everything we've done has been a de novo greenfield build on the strategic advisory side. And you need to compare that build-out to the best-in-class businesses that we inherited from Blackstone as it relates to restructuring and liability management and the fund placement business and capital raising.

But on the strategic advisory side, everything we've done has been a greenfield build. And as a result, in the first 10 years, you have a lot of partially built networks. Every geography that you enter starts out with that first partner, that first client, that first connection. And until you light up each one of those geographic areas or one of those industry verticals, you have a lot of investment but not a lot of return on that investment.

And as we get into the second decade, a lot of those partially built networks have transitioned to completed networks. And then all of a sudden, you're seeing the real power of that investment once it's all together, you get to a critical size, critical scale. And then the next leg up is when the brand and the perception of what we've built better matches what we've actually built. We spent the first 10 years focused on delivering the best client experience, the best advice to clients. And that takes time to be broadly appreciated in the marketplace. And with every passing day, every passing year, there's better appreciation, and we're increasingly seeing clients seek us out as opposed to us having to seek out the next client.

So it's that compounding effect that suggests that a lot of the hard work and discipline and investment of the first 10 years should show compounding returns in the second 10 years.

And then if you can marry that to then attacking some of the really high return verticals health care, industrials, technology on a global platform with best-in-class talent, then that's where you really see the acceleration in the results.

You're still heavily involved in -- with clients in the boardroom. What do you think has changed under this administration in discussions versus the last when you're with Boards. And I guess, what sort of deals or how much focus is there on deals that you couldn't do under the last administration are you having?

It's a very different approach from the prior administration. The prior administration took the view that they were going to go after certain consolidating transactions vigorously with a view that the more difficult they made approvals and the longer it took to get those approvals and the more uncertain securing those approvals would be that there would be knock-on effects, and you would have a chilling effect on consolidating transactions. So there was really a policy decision which was sometimes they weren't shooting at that particular target, but the view was that by firing the shots, it was sending a message to others in the industry.

And as a result, there was a lot of litigation. There was a lot of threat in litigation, and it had a chilling effect on a lot of large consolidating transactions because if you're in the Boardroom, and you're thinking there's a reasonable chance that your deal is going to be vigorously contested and it's going to result even if you prevail, even if you have legal doctrine on your side, but the time to close is going to be elongated, the risk that when you get to the other side and you close the transaction, the business that's presented to you is not in nearly the appropriate shape with the right operating momentum than when you would first stitch the deal together. That makes you more risk-averse and you start to price that into the deals and then it makes it harder for buyer and seller to come together.

So you have this cascading level of degree of difficulty if you keep moving hurdles higher and higher you do get what you're seeking, which is to reduce consolidating transactions.

This administration has taken a much more real politic approach to transactions, which is for the right degree of concessions and the right offerings, there may well be a path forward. And if you can go into that with your eyes wide open that there could well be a negotiated outcome that doesn't require litigation. And that if you have certain things that you're prepared to commit to whether it's bringing jobs back to the United States, whether it's trying to address affordability issues, national security issues, pro growth initiatives, it gives you a greater degree of confidence.

There's no guarantee that any deal is going to be approved. But I think there's a view that the current environment for large consolidating transactions to be given a fair shake is meaningfully greater than what we've seen in predecessor administrations and it's likely to be as good, if not better, than in future administration. So in some respects, this is as good as it gets moment, and that has caused more companies, more Boards of Directors to look at those green deals and ask themselves, if not now, when? And as a result, you're going to see and we'll continue to see more of those deals brought to market.

So you just touched on the strategic Boardroom. But what about when you're with private equity decision makers? What's top of mind for them and their appetite to transact?

Look, private equity raised an extraordinary amount of capital in the last few years. They invested an extraordinary amount of capital in the late 2020, '21 period. And in many respects, there was too much capital chasing too few deals, paying too high a price. That's not true across the board, but that was a consistent theme. And as a result, there are many of those deals that today have not lived up to their full promise and for many private equity owners, they're waiting for the right time for the operating performance to get to a certain level. And for the realization prices and multiples to deliver to their investors attractive returns. And as they continue to sort of push out some of the monetizations, it has reduced the DPI, less capital is being returned. And what has occurred over the last few years is just a mismatch between capital that was drawn and invested and capital that was harvested and monetized and returned to LPs.

And what that has done is it's caused notwithstanding all of the dry powder that the private equity industry has for them to be more cautious about deployments and more selective about realizations waiting for the right moment to monetize their investments.

As we're getting to the other side, that mismatch between invested and drawn down capital and return capital is getting into a closer equilibrium. And as that occurs, you're going to start to see more of the dry powder expended on new investments on new initiatives.

We're already seeing it. Sponsors' willingness to commit new capital has increased meaningfully in 2025. I suspect that, that will continue to increase as the rate of monetization continues to pick up.

Sound like what you're describing on the private equity side, is more of a steady build. There's not some sort of acceleration that we should be thinking about? Or is there a catalyst that you see that could cause this to really step up materially?

I think the -- this M&A resurgence was led in large part by strategics in 2025. I expect that all the trends that were in evidence in 2025 to be present in 2026 and then some, because if you take a step back, we spent a number of months dealing with the uncertainties and dislocations resulting to the new tariff regime. And that did freeze strategic activity for the first half of 2025. Our perspective is that 2026 is going to look a lot more like how 2025 is finishing up from a corporate strategic perspective. So that says a full year of that type of activity in '26, should generate more activity than what we saw from strategics in 2025.

Second, private equity contribution to deal activity, while it improved in 2025 sort of lagged strategic activity. We see in 2026, there will probably be more acceleration in private equity commitments and monetizations as the environment continues to be more favorable and build. And as a result, if you have increased activity from both sides of the equation, it shouldn't be a surprise that 2026 i setting up to be a really good year.

Maybe just your thoughts on financing conditions today. And I'd just love to specifically within that comment, get your view around the quantum of AI data center debt and whether that's having an impact on financing markets and whether there's any sort of concern that we should be thinking about there going forward.

Mean the amount of capital that's being deployed is breathtaking when you look at it in one perspective. On the other hand, when you look at the credit quality that underpins most of those long-dated commitments, these are investment-grade companies with enormous market capitalizations, enormous cash flow generating ability, I don't think that there is much concern at the moment from a credit perspective. I think there is a question as to what happens if the equity markets at some point, start to look at these hyperscalers and revalue the equities based on how much hard assets are in the ground, how much free cash flow is being redeployed to capital expenditures. And that model is shifting.

What's unclear is whether this is transitory or whether this is the new normal but there's always the risk at some point for the equity valuation paradigm to shift. I see this more as an equity risk than as a credit risk. And most of the capital that's being lent is really backstopped by commitments that are very high quality on the obligor's perspective. So that's less of an issue from our perspective.

What's a bigger issue is, what are the dislocations that are going to come out of this AI revolution, what business models are going to be disrupted, compromised and what are the knock-on effects. So to the extent that there are credit issues in the marketplace, it may well be that certain industries are severely disrupted as a result of AI deployment and innovation. And if that happens, then you can see a real uptick in default rates and the like in industries that are particularly vulnerable to AI disruption.

Just a couple more here on M&A. So you noted the rebound has been led by strategics. It's also been led by the largest deals is the impediment to the mid-cap improving or catching up to a commensurate level sponsors? Or are there other things that are weighing on mid-cap activity specifically?

These numbers can be a bit deceiving. If you look at a number of deals, number of deals are down, but number of deals are down at $1 billion and less. But number -- deal count is actually up from $1 billion deals and higher. So there's a lot that you can play with in all of these numbers.

The fact remains that what we're seeing are larger deals because Corporates have very strong balance sheets, are searching for growth, a lot of growth in certain industries is not top line growth but it's cost rationalization and being able to create more efficiencies. And the way you do that is in horizontal consolidating transactions. You have more favorable regulatory regime. So you're seeing more there you're seeing private equity for all the reasons we've talked about, which tends to be smaller transactions because those are principally cash deals. Those are not large stock-for-stock transactions. They tend to be smaller in size. Those have lagged. It's not going to persist for very long. I think you're going to see an uptick across the board. And volumes are up meaningfully. Deal counts are down only in the very low end of the range where there's probably less access to capital and there's less attractive consolidating opportunities.

But we see the world speeding up. There's more disruption, there's more dislocation, the cost of standing still is greater today than it's ever been. The real issue has been in light of all of that, why have overall M&A volumes been so sluggish? And the answer is, no one knows exactly why, but even today with this meaningful uptick in M&A volumes, the total M&A volume measured as a percentage of global market capitalization or global output is barely back to sort of average levels.

So we're not in some sort of dangerous level here thinking that we're at an unsustainable level of activity. The fact is M&A activity was beaten down for a number of years, a lot of it, I think where the COVID hangover effects, a lot of it was very vigorous antitrust and anti-competition policies. A lot of that's been relaxed. And I think you're just seeing more of a return to a more normal M&A market, and that should continue for at least the next year. And beyond that, my crystal ball gets super fuzzy.

This quarter has also had some headwinds, most notably the government shutdown. In hindsight, was there any impact? Anything structural that you've seen either on your business or on the economy?

I think at the margin, it probably made management teams and Boards more cautious because you never know what the collateral effects are as you get further and further into the shutdown. I think this was more a case of what might have been the case had the shutdown persisted for another 1 month or 2 or 3 and what those unforeseen consequences were than the actual damage that was presented during the period of the shutdown, was certainly a period of time when merger reviews and the like ground to a halt, but I think that's mostly behind us. And it's as if we're back to a more normal operating cadence. And we haven't seen much impact on our business.

Let me turn to restructuring, which for you, and I think the industry generally has remained persistently strong Help us think about the forward from here, how do you think about the moving parts of elevated liability management versus bankruptcy and the I'd say divergent tone we've heard from various participants around whether it could continue to grow, stay this level or slow.

Well, I can only speak to what we see, of course. And whether or not that comports to what others see is really more for others than for us. Here's what we see, which is we've been constructive on restructuring liability management for more than a couple of years now. We think there are secular trends which are going to continue to keep activity high relative to what we've seen before. Why is that?

First of all, we're dealing in a world of greater dislocation and disruption, changing buying patterns, consumer preferences, use of technology, onshoring, all of those factors are disruptive to existing business models. There are winners and there are losers when there is disruption.

We tend to focus more on the winners and the innovators. But for every innovator, there who is disrupting, there is someone who is disrupted. And as a result, there are business models that worked when the capital structure was initially created that no longer work and you need to address that. That's just a fact.

The second is when we look at activity levels, we're anchored in what the "normal was, but if the normal is a near 0 interest rate environment, that may have been where we were, but that's not a normal credit environment. So where rates are today, where default rates are today is closer to what normal looks like than what we saw 4 or 5 years ago. as a result of those two factors, you should see increased levels of liability management and restructuring.

Add to that, the fact that the size of the addressable market has grown by leaps and bounds and the quantum of debt outstanding is meaningfully greater. So if you have higher debt outstanding, if default rates are closer to normal by historical levels than what we've seen in the last few years, if more companies are being disrupted or disintermediated, you're going to see more concentrated stress. All of those things are secular trends that suggest that activity should increase even if the overall macroeconomic environment is reasonably benign.

Then you take from our perspective, what are our own tailwinds, one is that we continue to grow geographically. As we expand outside the United States, our ability to bring our best-in-class restructuring and liability management capabilities to markets outside the United States grows, our addressable market grows in that dimension.

The second is we have a significant market share with certain financial sponsors in liability management. But as we continue to build out our sponsor coverage efforts, our addressable market grows on that dimension as well.

And then the third is just the interplay between our Strategic Advisory build-out and restructuring and liability management, the more industry expertise, the more personal relationships we have. So we see all of those as suddenly increasing our addressable market. So even if the overall market is flat, we should be able to gain share. And if we can get those two things going together, we could have an environment where we have increasing M&A activity and increasing liability management activity.

You alluded to the growth in the quantum of debt, one of the things that I find entering is the fact that restructuring MDs don't actually grow that quickly, whether at your firm or across the industry. Is that just the nature of restructuring and why if there's so much more debt, is there not the commensurate growth in senior bankers.

Well, first of all, we are aggressively adding to the resources committed, some of it comes from dedicated restructuring and liability management practitioners, but some of it comes from all the other areas that we talked about. If you have more sponsor coverage professionals. if you have more individuals who are running country office outside the United States, if you have more industry bankers their ability to work alongside our best-in-class restructuring liability management bankers is where you're getting incremental capacity.

And they're not taking the leading role in actually dealing with the liability management issues, but they're identifying the targets. They are important in prospecting and presenting our credentials providing industry expertise. And as we take advantage of that interdisciplinary approach to all of our assignments we're able to do more without necessarily meaningfully increasing the dedicated number of individuals.

But if you look at just our headcount and the effort, it continues to grow, but the reality is it's a specialized area, and if you're looking for the best of the best, they're not being grown every day. They're really being trained through an apprenticeship model. So where we're getting a lot of that is getting our VPs to operate at a higher level of responsibility and everyone sort of moves up because they're seeing so much activity and they're learning from the best, their ability to operate at a more senior level is enhanced.

One more on the restructuring side. When you think about the growth in the quantum of debt, mostly been in private credit. Do you see any risks in private credit today?

I mean private credit has a place alongside the more traditional syndicated model. I think there will be moments in time where each market is better and more aggressive in terms of pursuing credit opportunities. Our job is to increasingly tap both markets and give our clients the best opportunities.

But over time, you would expect that the composition of underwrites of lending standards and the like to be reasonably consistent across both markets. And oftentimes, you'll see a deal that's underwritten in private credit, and then it gets refinanced through the syndicated market. And there's a back and forth.

I think when you're first starting up a business, there is that pressure to sort of get market share to get into the game, but you very quickly realize that in order to have a robust business model, you need to have credit quality and underwriting standards that, look, like everyone else, and you can't be a laggard in that regard. And I think as the industry matures, that's precisely what you're going to see. But the idea that anyone is infallable and won't make lending mistakes or underwrite mistakes, that's not realistic either.

Let's turn to margins here. Maybe you could just help us think about the competitiveness of the hiring market and how that's impacting comp ratios. And relative to today's 67.5% that you put up last quarter, how should we think about the normalized comp ratios over the medium term? And I guess, over what time frame?

Well, the first thing you have to focus on is the supply of bankers and in a high-velocity environment, the supply diminishes. What do I mean by that? When everyone is sitting around with nothing to do because M&A is dormant, M&A activity is dormant. The only activity you have is to think about changing. When everybody is working full out, they don't have time to think about a career move or if they do, they're deeply concerned about the dislocations to their clients if they go on gardening leave.

So we've talked about this for years in a low velocity M&A environment, the switching costs are the lowest, and therefore, we lean in the most in terms of our recruiting efforts. In a high-velocity M&A environment, the switching costs are high and your yields are going to be lower. That has less to do about the competitive dynamic than it does just about the supply and those bankers who are willing in a busy M&A environment to investigate changing jobs or career opportunities.

Then if you layer on to that, the fact that everyone seems to have recommitted to investing in their banking franchise, you have more firms looking for talent. You have fewer individuals who are willing to make a move, not surprisingly, recruiting is going to become more difficult in that environment.

But since we believe we're offering a unique value proposition to candidates. The fact that it gets more competitive, doesn't make that much of a difference on our yields because ultimately, what we're presenting to senior bankers is fundamentally different than what they can experience at a large bank. The biggest challenge we have is just when everybody is active and they're busy, and they don't want to hit the beach for 3 months or 6 months, it just -- it takes longer to get individuals to make the move because the switching costs are higher.

And as far as the comp ratio goes, it's in large part a function of how much investment are you making at that moment in time? And how quickly are you getting a return on that investment? And not surprisingly, because we've made major investments in the last few years, and we have not come near getting full return on that. We will in the coming years, but it takes a while, you're seeing an elevated comp ratio.

Touch on AI a little bit in terms of the market, but what are the impacts on your business, whether it be in terms of headcount, margins or productivity?

The easiest one to answer is productivity. How can it not go up? So productivity is going to go up. The question then becomes, what do you do with that productivity surplus? How much of that goes back to the client? Because you just need to provide more services to that client on every transaction. And in many of the technological innovations of the last 20 or 25 years that should have been productivity tools. What ended up happening is they were productivity tools, but the clients ended up with better service, better advice, better data, better response times from bankers, better analytics and the like. So the first question is, it needs to go back to the client.

To the extent that there's additional productivity gains, which I suspect there will be, because we're in a growth position, I would imagine that we would take most of that productivity increase. and we would be able to do more with the same resources than we did previously.

Okay? That's a great place to end. With that, we're out of time. So thank you so much, Paul. Hope to do again next year.

It's a pleasure, James. Thanks for inviting us.

Good morning. Welcome to the PJT Partners Third Quarter and 9 Months 2025 Earnings Conference Call. Joining the earnings conference call today is Paul Taubman, Chairman and Chief Executive Officer; Helen Meates, 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 pjtpartners.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 in evaluating the company's performance.

For detailed disclosures on these non-GAAP metrics and their GAAP 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 Taubman.

Good morning. Thank you all for joining us today. This morning, we reported record results, revenue, adjusted pretax 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 pretax income was $94 million, up 86% and adjusted EPS was $1.85, up 99% from year ago levels. For the 9 months, revenues increased 16% to $1.18 billion. Adjusted pretax income increased 34% 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 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 on 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, a weakening labor market, 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 were $447 million, up 37% year-over-year. And for the 9 months ended September 30, total revenues were $1.179 billion, up 16% year-over-year. Revenue growth for the third quarter and first 9 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, while 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, we presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8-K. 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 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 increase for the first 9 months of the year were higher occupancy costs, which are up 19% year-over-year, reflecting the 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 adjusted pretax income. We reported adjusted pretax income of $94 million in the third quarter and $230 million for the first 9 months. Our adjusted pretax 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, we presented our results as if all partnership units have been converted to shares and that all of our income was taxed at a 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%. 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. Our adjusted if converted earnings were $1.85 per share for the third quarter, up 99% and $4.43 per share for the first 9 months, up 43% from the same period 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. Our repurchases in 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 ended the quarter with $520 million in cash, cash equivalents and short-term investments and $558 million in net working capital, and we have no funded debt outstanding. Finally, the Board has approved a quarterly dividend of $0.25 per share. Back to Paul.

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, our 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, health care, 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 seeking to raise capital. 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 flown 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 as the significant investments we have made over an extended period of time 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 envisaged a firm where complex challenges would meet creative solutions, where top professionals would build their careers and where success would be defined by excellence, 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.

[Operator Instructions] We'll take a question from Devin Ryan of Citizens.

Congratulations on 10 years.

Thank you. Good to speak, Devin.

Yes, absolutely. So, I want to start, Paul, on the restructuring outlook and appreciate the framing that you gave and still sounds like you expect a strong kind of backdrop there. We've been hearing somewhat mixed trends, I would say, through earnings. And so, I just want to get a sense of how you're thinking about PJT specific relative to the broader macro backdrop for trends because you guys have a leading practice and so potentially outperform the industry in different environments. So, do you still see the environment being very good? Or is this more just about PJT maintaining or even gaining share as your kind of always going to be active in that business?

Well, it's always hard to deconstruct the market versus your position in the market precisely. But we don't see any real diminution 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, for 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 0. 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 an overall accommodative environment, you can have a higher 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, continued penetration of sponsor 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, we have more relationships with which to leverage. So, I don't spend a lot of time talking about or thinking about the exact interplay of the 2. But as we look at our activity levels, they remain elevated, and we expect them to be elevated for the foreseeable future. And I do think there's a call option on a meaningful shock to the system because we're not experiencing any of that today. I'm not predicting it, but none of this assumes any real deviation from the current environment.

I appreciate all that color, Paul. And then just for my follow-up, when I look at partner productivity, I appreciate it's kind of a crude number from the outside. But on a blended basis, it looks like you're on track for a record year productivity on my numbers at least. And I appreciate some of that's very strong restructuring and then you have strategic advisory ramping pretty materially as those partners on the platform mature. So, I'd love to just get an update on how you think about the productivity potential of partners from here, particularly as strategic advisory still feels like the environment is getting better, but then also the bankers on the platform are maturing as they've been doing. And I guess in that question, just love to hear about how you think about what is a reasonable number of kind of revenue per partner for strategic advisory when you're hiring somebody externally? Are you targeting $15 million to $20 million? Or is there a number? Just 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.

Yes. I never think about a number. I never talk about a number. I don't believe in a number. What I believe is if you hire difference makers, you 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 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 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's a number that we don't spend a lot of time with, but we have great confidence that what we're building is highly additive and accretive to our overall financial results and to our brand and to the service of our clients. And that's how we think about it. And I think it's more of the relative construct. And if you ask me, do I think we've hit maximum levels, I'd say no, 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 revenue. So, I think we feel very good about the direction of travel, but I don't spend a lot of time thinking about it as a number.

We'll take a question from James Yaro of Goldman Sachs.

Paul, I'd love to just get your perspective on the impact of the government shutdown on the business. Do you expect this to have an impact on the fourth quarter? But really more importantly, how are you thinking about the impact going forward? Is there anything beyond the temporary impact?

Look, I think it has real implications to a lot of individuals in this country who are suffering because of the shutdown, but I don't think that it really affects our business in a meaningful way. It creates some complexities and complications and maybe some timing issues, but I think those pale in comparison to other implications. What I worry about more is ultimately what does this do to the broader macroeconomic environment in the country, which is really a function of how long does this shutdown continue, 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 the reality is no one has answers to that. So, we're all watching and waiting. I think that's the bigger question is what, if anything, does this do to overall economic output and consumer confidence and business confidence.

That's super clear. Just maybe turning to the primary fundraising business. I'd love to just get your perspective on the ability for that to continue to improve. Obviously, it was down for a couple of years there, and you've seen a nice bounce back there over the past few quarters. So, is this sustainable? And how are you thinking about the outlook for that business?

Well, there's 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 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 the best fundraising team, and that's going to play to our strength. So, I think overall, it's positive, but it's like everything else, it's never 100% positive. There are some puts and takes there.

We'll take our next question from Brennan Hawken of Bank of Montreal.

I was hoping that you could -- I know, Paul, I heard you sort of loud and clear that the 67.5% is your expectation for the full year. But taking a step back, what's the best way we should be thinking about operating leverage, right, and the path for pretax margin as you continue to see this strong revenue growth as you see the -- as the investments that you've made in strategic advisory begin to bear fruit. How should we be thinking about that either in the year-end and then, of course, into the coming years?

Well, I think into year-end, we've given you our best estimate for this year. You talked about operating leverage, which I appreciate the question because to me, operating leverage is what's the pretax margin because ultimately, that's what drives shareholder value. And if you look at our operating margin for this year and you look at it in the historical context of where we've operated, I suspect that if you ex-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 inflated. I think 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 don't like to focus on any one individual component of that because, a, there's a lot of interrelationships between all of these line items; and b, you're trying not to manage the firm for the here and now, you're trying to manage it for the long-term. But if you're asking me, do we think that there's further margin improvement along the journey, I think the answer is yes. And 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 firm at, I think, the lowest non-comp to revenue margins that we've had as a firm. And if you take all of that together, the overall output is quite attractive.

But to answer your question, 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, this is going to be ex those 2 aberrational years, I think our best operating margin year in a decade.

And then when you think about the operating margin improvement that you guys are likely to generate here in 2025, is that a good way to be thinking about a path forward sort of you never want to anchor overly on one particular year, obviously, because things will move around. But is that a decent way to be thinking about it going forward? Or are there other factors -- what other factors should we consider?

Well, look, I think as a general matter, there's -- we believe in operating leverage in the business. Let's just start there. We also believe in disciplined cost, but not an obsession with cost at the expense of long-term value-enhancing growth. So that's the mix. And since we continue to believe that we should be able to grow our top line faster than our expenses, we think that there's more operating margin 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 normalized world because no one was traveling, no one was entertaining, there were no conferences. There was no travel expense. There was no entertaining expense.

If 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 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.

We'll take a question from Brendan O'Brien of Wolfe Research.

To start, I just wanted to touch on the dynamic you flagged, which is the divergence of deal value versus deal count, which is something we've been keeping an eye on ourselves. The drivers of the increase in the larger activity is apparent around derive and things of that nature. But I just wanted to get a sense as to what you think is behind the lack of breadth and activity so far and what could maybe drive an improvement in that dynamic over the next coming year?

Look, I think there's -- some of this is there's -- you have to really deconstruct the market. So, I'll just give you 2. I don't want to turn this into 3, I'll give you 2 thoughts. Number one, 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 sub-billion dollar deals or $1 billion 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 pro-growth, 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 number of 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 noted in your prepared remarks that Park Hill revenues were down year-on-year so far this year and PCS revenues were up, but the placement line was also up. So, I just wanted to -- if you could just unpack that piece a bit more, whether there's some non-Park Hill fees in that placement line. And then also last quarter, you noted that you expect a significant acceleration in PCS fees in the second half. Based on the commentary, it doesn't seem like that came through in 3Q. So, I just wanted to get an update here.

Well, just let me just take the latter part. I think it did. And just to recall, those get booked in advisory. So just to be clear, what we said is exactly what happened, and that strength is counted as advisory as distinct from placement in most instances, and that's reflected in our financials. But on the former, I'll turn it back to you.

Yes. And then on the -- just a reminder that the placement line includes Park Hill placement, but it also includes any corporate placement. So, we did have some placement fees 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 designations because I'm not sure it helps give anybody any real clarity on the business. And we don't spend a lot of time apportioning it one way or the other. At the end of the day, they're advisory with a capital A revenues because they all relate to intellectual capital and intellectual advice. But I appreciate your question.

We'll take a question from Alex Bond of KBW.

Just wondering if there's anything that stood out from you in your recent dialogues with clients in regard to the overall credit backdrop. Curious how you're thinking about this broadly given your obviously strong presence in the restructuring market, the fact that private credit remains in the headlines, and we've got a couple of high-profile bankruptcies here recently. So, any color you can add here would be great.

Well, look, I'll just make some general observations. One is when you see spreads tighten as much, I'm not sure that credit has 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 spreads. And as it relates to these situations, unfortunately, malfeasance is a risk factor, and it occurs in bull markets, it occurs in bad markets. And I'm not yet seeing evidence that this is widespread. But when you're putting out an enormous quantum of capital, it does put pressure on diligence, diligence standards. And if you're dealing with individuals or entities that are not forthright and are 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't 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 we're creating all of these 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, the number of companies that are going to need to address their balance sheets is probably more likely to grow than to shrink. It may not happen immediately, but I think there's a longer-term trend at play here.

And then maybe for my follow-up, I suppose just trying to understand to what degree maybe the strong restructuring activity has been a benefit to the comp ratio in recent periods. The headcount here is obviously a little bit lower than the strategic advisory business. So, I guess just in a scenario where maybe the restructuring activity does slow a bit, is it -- is there anything that would lead you to believe that there might be less comp leverage just given the smaller headcount there? And maybe if there's anything else we should be considering in that regard?

Look, obviously, if there are big dislocations to our revenue, good or not, that will affect because this is a roll-up of all of the businesses. But if we continue to have steady growth or if we're going to have a reasonable match between the headcount growth and revenue, then you're just going to see a steady decline in the comp ratio. If you see a disconnect between those as we saw in '23, where you have the overall strategic advisory market meaningfully down. At the same time, you're adding meaningful heads, you're going to see real pressure to the comp line. So, it's like anything else, we see a baseline direction of travel, which is to get our comp ratio lower. But if there is a shock to the system in one place, good or bad, that could either accelerate or retard the improvement. But that's why 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 to no longer be operative.

We have a follow-up question from James Yaro of Goldman Sachs.

I just wanted to ask a nitty-gritty one. Any, I guess, pull forward in the quarter that we should be aware of?

It was relatively modest. It was $8 million this quarter. Last year, it was $6 million, so pretty similar.

That concludes our question-and-answer period. I would now like to turn the call back over to Mr. Taubman for closing remarks.

Well, 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 report full year results. Thank you, and have a good day.

Good day, everyone, and welcome to today's PJT Partners Second Quarter 2025 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Sharon Pearson, Head of Investor Relations. Ms. Pearson, please go ahead, ma'am.

Thank you very much. Good morning, and welcome to the PJT Partners Second Quarter and 6-months 2025 Earnings Conference Call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners. And joining me today is Paul Taubman, our Chairman and Chief Executive Officer; and Helen Meates, our Chief Financial Officer.

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. 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. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2024 Form 10-K, which is available on our website at pjtpartners.com.

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. For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations, 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.

Good morning. Thank you for joining us today. This is a day that puts things like earnings calls in perspective, the sad and challenging day as we mourn in the loss of life from yesterday's senseless active violence in Midtown Manhattan, just steps from our office. We grieve for those who lost their lives, pray for healing for those injured and offer comfort to the families, friends and colleagues of those impacted. And we expressed gratitude to our first responders who worked tirelessly to keep us all safe.

And now we'll turn to our earnings. This morning, we reported record-setting results as revenues, adjusted pretax income and adjusted EPS all set record highs for both 3- and 6-month periods. Second quarter revenues were $407 million, up 13%. Adjusted pretax income was $80 million, up 22% and adjusted EPS was $1.54, up 29% from year ago levels. For the 6 months, revenues increased 6%, adjusted pretax income increased 13% and adjusted EPS increased 19% from year ago levels.

Since our last earnings report, the market backdrop has improved appreciably. Equity valuations have come up. Market volatility has come down. Business confidence has rebounded, capital is more readily available. Last quarter's tariff uncertainties spark concerns about the potential for such dislocations to chill investment, trigger an economic slowdown and fan inflationary pressures. Today, market concerns regarding these risks are much diminished.

Throughout all this tumult, we continue to invest for the long term. Our firm's commitment to investing is unshakable through bull and bear markets alike. Our North Star remains building the best advisory firm, period, one built on excellence, integrity and an unwavering commitment to client service. Nearly 10 years into this journey, we are ever closer to that goal.

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 second quarter were $407 million, up 13% year-over-year. For the 6 months ended June 30, total revenues were $731 million, up 6% year-over-year. Revenue growth for the second quarter and first half was primarily driven by Strategic Advisory, which was up meaningfully for both periods. Restructuring revenues rose modestly in the second quarter and were up slightly for the first half, while PJT Park Hill revenues decreased year-over-year for both periods.

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. So it's adjusted compensation expense. We accrued compensation expense at 67.5% of revenues for the first half of the year compared to 69.5% for the first half of 2024. This ratio represents our current best estimate for the full year 2025.

Turning to adjusted noncompensation expense. Total adjusted noncompensation expense was $52 million in the second quarter, up 18% year-over-year and $101 million for the first half, up 13.5% year-over-year. As a percentage of revenues, 12.8% in the second quarter and 13.9% in the first half. The main drivers of the expense increase for the first half of the year were higher occupancy costs and higher travel and related expenses. Overall, for the full year, we continue to expect that our non-comp expense will grow at a rate similar to our 2024 growth rate of 12%.

We reported adjusted pretax income of $80 million in the second quarter and $136 million for the first 6 months. Our -- adjusted pretax margin for the second quarter was 19.7% compared to 18.2% for the same period last year and 18.6% for the first 6 months compared to 17.5% for the same period last year.

Provisions to taxes as with prior quarters, we have presented our results as if all partnership units had been converted to shares and that all of our income was taxed at a corporate tax rate. Our effective tax rate for the first half of 2025 was 16.5%, and this is our current estimate for the full year.

Our adjusted if-converted earnings were $1.54 per share for the second quarter, up 29% and $2.59 per share for the first 6 months, up 19% from the same period last year. For the quarter, our weighted average share count was 43.4 million shares, up 1% versus a year ago. During the second quarter, we repurchased the equivalent of approximately 642,000 shares, primarily through open market repurchases. Our repurchases in the first 6 months of the year totaled approximately 2.1 million shares.

On the balance sheet, we ended the quarter with $318 million in cash, cash equivalents and short-term investments and $461 million in net working capital, and we had no funded debt outstanding. And finally, the Board has approved a quarterly dividend of $0.25 per share.

I'll now turn back to Paul.

Thank you, Helen. Beginning with restructuring. We continue to experience elevated levels of liability management activity as an expanding quantum of outstanding debt, elevated interest rates and increasing economic and technological dislocations have increased demand for best-in-class liability management and restructuring advice. In this period of heightened activity, our restructuring team continued its market leadership, ranking #1 in announced and completed U.S. and global restructurings for the first half of 2025.

Our restructuring team also continued its track record of exceptional financial results with first half revenues bettering last year's record performance. Our current expectation is for full year restructuring results to at least match last year's record levels.

Turning to PJT Park Hill. The primary fundraising environment remains challenged as historically low levels of capital return, coupled with a market increase in first-time fund launches have contributed to a significant supply-demand imbalance. In contrast, the environment for private capital solutions is far more favorable where increased demand for alternative liquidity vehicles from GPs and LPs is better matched with investor appetite for these asset classes.

For PJT Park Hill, both second quarter and first half revenues were below last year's results, principally due to timing of closings. However, we expect our strong pipeline in both primary and private capital solutions to result in stronger performance in the second half.

Turning to Strategic Advisory. Our Strategic Advisory business delivered record performance in both the second quarter and first half as we benefited from increased transaction closings and increased fee realizations. While there are indications that M&A activity is picking up, the year-to-date data is mixed. Although annualized global announced M&A volumes are up 20%, the annualized number of transactions is down 15%.

Of greater consequence global M&A activity remains near record lows when measured relative to total equity market capitalization or GDP. We've consistently maintained that in a world that is speeding up, companies need to respond more quickly to changes in their operating and competitive environment. This, in turn, requires companies to be more active strategically. Elevated economic and regulatory uncertainty has impeded much of this strategic interest from being active upon.

As some of this uncertainty has dissipated and the business environment has become more favorable, we now see a more constructive environment for companies to pursue their strategic ambitions and our preannounced strategic advisory pipeline now stands at record levels.

We continue to position ourselves for a return to more normalized levels of M&A activity. This quarter, 4 new strategic advisory partners will be joining. As we look ahead, reiterating our prior commentary, strategic advisory will be up strongly from 2024's record levels while restructuring and PJT Park Hill are expected to deliver results in line with last year's record levels. As before, we remain confident in our near intermediate and long-term growth prospects.

And with that, we will now take your questions.

[Operator Instructions] We'll go first this morning to James Yaro of Goldman Sachs.

Paul, maybe I could just start with the sponsor M&A. Sponsors have remained slower in transacting, but obviously, do have a lot to sell or IPO. In your analysis, do many of these assets now have enough EBITDA that they can actually be sold for a gain? And maybe you could just comment based on your dialogues when you expect sponsor sell sides to start to come back?

Well, I think we're seeing an increase in sponsor activity across the board. And it's been challenged for a variety of reasons, and the release valves are starting to evidence themselves across the board. So while the IPO market is far from robust, it's been meaningfully more receptive to initial public offerings in recent months, which has created an opportunity to create liquidity events on portfolio companies. That's the first point. That's a necessary condition to get the return of capital right. And what we've always said is you've got to get the return of capital right, so that there is the confidence to deploy increasing quantums of capital.

The second is the credit markets have become more accommodative. There's been more evidence of dividend recap transactions, which have also been a release valve. I think the third is strategic interest in a number of portfolio companies, which have been expressed, but then sort of retreated around Liberation day because of all of the uncertainties created by the proposed tariffs. As that uncertainty recedes, I think strategics are taking a pressure look at some of those portfolio companies. And then continuation vehicles remain very active and effective means of creating liquidity. So we're seeing more bids, more interest from strategics. But we're also seeing that in the portfolio effect with lots of different levers to pull that sponsors are starting to be able to increase the pace of return of capital, which I do believe is going to make them buyers of additional quantums.

And when you think about selling portfolio companies of sponsors, sometimes the buyers are strategic, sometimes there are other sponsors and being able to have robust processes where you have greater confidence that other sponsors will play. And now that some of the clouds of Liberation Day have lifted greater strategic interest, it's setting up better. It's still far from perfect. But I think that healing process has begun and it portends ever-increasing levels of M&A, we believe, but slowly as we return to a more normalized cadence.

Makes a lot of sense. An adjacent question. The secondary -- or the continuation fund business, I would imagine likely slows in terms of growth with the return of regular way sponsor M&A and IPOs. Have you given any thought to what that particular dynamic means for the growth rate of continuation funds? What -- I guess, what portion of assets should be in continuation fund vehicles versus they're being put in them right now because regular way exit strategies are not available?

Yes. I don't know if it's a substitution effect. I think it -- I think every day that goes by, there's greater acceptance of continuation funds as an appropriate means to manage liquidity. I also think that there are many instances where these are assets where there's still meaningful upside and there's a desire to continue to operate and manage the asset, but there is a desire on the part of some, but by no means all of the LPs to create liquidity events. So I think of it as a tool in the toolkit that if you go back 5 years, was barely understood and rarely used. Now it's much better understood and used. And the biggest governor on using that as a tool today is simply that the dedicated pools of capital for continuation funds is relatively modest in the context of the interest on the part of asset managers to deploy continuation funds.

So right now, the governor is there's just not enough dedicated capital to the asset class. And if you believe, as we do, that the returns over time will prove to be attractive returns and that this is a class of asset that should have appeal to a lot of investors. One obvious advantage is you identify the asset and you're investing in it immediately as opposed to a blind pool concept. Another advantage is you're making the investment commit and the drawdown of the funds is happening at the same time, which is not the case with the fund structure. And I can go on, but there are other benefits.

So we think that it's here to stay. It has room to grow. And probably what it does is it substitutes for some of what historically would have been regular way IPO. As a problem with the regular way IPO is there's oftentimes the IPO at considerable discounts, the funds are almost inevitably used to realign the capital structure to pay down debt to make it a more normalized capital structure for a public company, then you've got to wait for the expiry of lockups and it starts to be a very long goodbye. And this may in fact be something that competes more directly with the IPO alternative.

We'll go next now to Jim Mitchell of Seaport Global Securities.

Paul, just I know one area of focus has been leveraging kind of the Park Hill franchise to build out coverage of financial sponsors on the M&A side. Can you just give us an update on where you think you are in terms of moving along that spectrum and kind of getting more into the middle market deals with financial sponsors and leveraging that Park Hill relationships?

Yes. We're still in the early days of that, but we're -- there are many different ways in which those relationships come together. So with the best-in-class primary distribution and really being the fund placement agent of choice, what we increasingly want to do is for clients to develop a holistic relationship with our firm where there's a recognition that if we're going to do the primary raise, we're also going to be the adviser of choice on the continuation funds and the like. And that's just an adjacency where having a holistic conversation with the fund manager makes all the sense in the world.

And then on top of that, as we are increasingly sought after to do capital raises that oftentimes are difficult to raise the quantum of capital that might have been desired. So there's a recognition that we can deliver more capital than anyone else. It's to have those more holistic conversations about ways in which our strategic advisory colleagues can jointly cover that client and then also have dialogues related to how they think about the GP itself stake sales, liquidity events and the like. So we're increasingly having those holistic conversations, and I think it's begun to bear fruit. But when I think about where we are, we're meaningfully advanced from what we started the firm. We still have an awful lot of ground to cover before we fully mine that opportunity. So I still think we're early days.

Okay. That's helpful. And maybe, obviously seeing good growth on the Strategic Advisory side, where a lot of the hiring has been concentrated in the last few years. So does that give you a little more -- I mean, I know your comp ratios set -- your best guess is now 67.5%. But does it give you more confidence with a record pipeline in strategic advisory revenue growth picking up that you're sort of lapping the growth in strategic headcount with revenues and we can start to see some progress in the next 1 year or 2 on the comp ratio?

I think based on the indicated ratio, you're already seeing some progress. [indiscernible] I know you'd like more on all dimensions than I've got to just constantly just ask myself what's around the bend and what's around the bend could be, what's around the bend in terms of additional hiring opportunities? Or what's around the bend is competitive dynamic changing. So we're just going to be thoughtful and cautious. I've always said that as we get more productivity, we know where the direction of...

[Technical Difficulty]

Mr. Taubman, it appears we have lost you on the main line, if you could switch to the backup line. Again, Mr. Taubman, Ms. Meates, we did lose your audio on the main line. Mr. Taubman, I believe we have you back, sir.

Yes.

Thank you.

Is there another question?

We do, Mr. Taubman. We'll go next now to Brendan O'Brien with Wolfe Research.

I'm sorry, I was on mute. Can you hear me?

Yes. Yes.

I cut out. I don't know if that was everybody issue, but I'm -- Paul, I guess to kick things off, I just wanted to get an update on the regulatory front. There's obviously a lot of optimism around the outlook for large cap M&A. Do the expectation for lighter regulatory touch under the current administration? And it feels like that's warranted based on the recent decisions by the FCC. However, just based on your conversations thus far, would you say that C-suites are now more willing to push forward with large-scale transactions than they were before? Or has some of the volatility and macro uncertainty been too big of a stumbling block?

I don't know if the available answer is all of the above because it might be all of the above. So let's parse that a little bit. There's no doubt that in totality, the regulatory approach of this administration is more conducive to M&A consolidation combinations than the prior administration. That's good news.

Number two, I think there is more willingness on the part of this administration to negotiate remedies as opposed to having an up or down approach to some combination. So there is the sense that for the right package of negotiated points, the right behavioral remedies, you can secure approval. That's a good thing.

On the other hand, there are industries, I believe, where they are consumer-facing where they may well affect the price consumers pay, where there continues to be a very heightened sensitivity, things like certain retail consolidation and the like. I think media continues to be its own area of inquiry from the SEC -- from the SEC and the like. So it's not clear that all industries are demonstrably easier to have line of sight to consolidation transactions than before, but the direction of travel is definitely better.

The other sort of overlay here is until there really is a sense that the time lines from signing to closing are demonstrably shorter. And it's difficult for this administration to really deal with that directly because in many of these situations, you're dealing with many regulatory bodies around the world who have their ability to put their voice out there. You're seeing still what are by historic lenses long closing periods. And in a world that moves around quite a bit, that is volatile, having the commitment to acquire businesses where even if you have a high degree of confidence, you'll ultimately be able to complete the acquisition. If you have elongated processes and prolonged delays, the type of business momentum that you start out with at closing may be very different than what you anticipated.

And I think that, that has suddenly made on some of these big deals, just getting the right price where there's enough risk reduction reflected in the price because of the fact that even if the acquisition makes sense, you may end up with 12 to 18 months where here in no man's land that, that does harm the health of the business that's received. I think that, that's complicated things in a subtle way. So bottom line, we're in a better place than where we were in the prior administration. We have clarity. There's a greater sense of willingness to negotiate remedies, more industries, more situations are likely to go through on an expedited basis. But it's still in certain industries or in certain politically sensitive areas that may also invite regulatory scrutiny from other areas of the globe. It still makes large transactions quite complicated to effect.

That's helpful color. And I guess for my follow-up, there's been a lot of optimism on the potential for a meaningful ramp in M&A in the back half now that we seem to be heading towards a resolution on tariffs and getting greater clarity on the macro outlook. But just wanted to get your views on what the trajectory of that recovery could look like, given it feels like there's significant pent-up demands for transactions, specifically on the sponsor side, but it does feel like there's still a few big question marks out there on both trade as well as interest rates and the like?

Okay. I'm going to try and rephrase the question because you came across a little glitchy. And I think it was really just saying, look, there seems to be a general sense that the direction of travel for M&A is up and to the right. But can you sort of draw it out a little bit as to what that trajectory is likely to be. I think it's going to be a gradual plus. And gradual in the sense that I think all of these clouds are lifting slowly but surely. And that would suggest that it's going to be a prolonged period of this slow gradual improvement. The plus is I've always said that what makes M&A different as many things, not least of which is the competitive responses and in situations where your competitor makes a bold strategic move, the likelihood that there's a competitive response and a follow-on transaction in an industry is high.

So I kind of think that this is a gradual build as it relates to some of these storm clouds continuing to lift. And every day, it seems recently, there's just a little bit more clarity, a little less volatility and a little bit more comfort. But I think that plus is I expect that in certain industries and the like, you're not going to see one transaction that's been on the drawing board. You're going to see the second and maybe even the third as competitors were more comfortable with the status quo when no one was moving. But if there's a competitive response, the need to respond in kind is probably greater.

We'll go next now to Alex Bond of KBW.

Maybe just moving back to Park Hill and the fundraising business. So your placement fees were up quarter-over-quarter, but you did call out that the broader fundraising backdrop remains challenging. So just curious, to what extent that you may have seen an improvement here in the recent weeks as the macro backdrop has improved there? And then you also mentioned that you expect both the primary and private capital contribution to improve for Park Hill in the second half. But just trying to get a sense of if you think that contribution might be more weighted towards the private capital side given the challenging fundraising backdrop.

Right. I think it's both. I think we're just dealing with the fact that there is lumpiness in these capital raises. And if things get pushed out a little bit, they don't show up in Q2. They're showing up in Q3 and Q4. So we look much more at all the transactions, whether they're private PCS transactions or fund placement on the primary side as to how many fundraisers are in flight, and that number continues to build on both sides, notwithstanding the challenging conditions on the primary side. So we think that because of just the cadence of transactions and transaction closings, it's likely to be more in the back half of the year than in the first half of the year. But I also think that structurally, the secondary business is just in a better place because there is a better matching of supply demand.

And what you're seeing on the primary side continues to be that everyone wants to fundraise and in fact, there are even more managers out trying to fund raise, but allocated capital to the asset class is diminished. And as a result, it's made fundraisings more challenging. It's taken longer to get deals done, and it's less likely to have an oversubscription than it would have been before. So the opportunity for positive surprises is reduced. The flip side is, in a world where it's more difficult to raise primary capital and primary capital is the lifeblood of the alternative asset managers, then the flight to quality is greater, and that's been a benefit for our PJT Park Hill team.

We go next now to Devin Ryan of Citizens.

Just kind of a bigger picture question, Paul, just around kind of the PJT franchise today, and you guys have built over the past handful of years. Obviously, the firm looks different than in 2021 on the prior kind of peak cycle and a number of groups that you have today are much bigger from an industry perspective than they were kind of during that time. So I'd love to just maybe get a little bit of sense of where you feel like you're really getting some net effects on that scaling [indiscernible] whether it's industries or the sectors or geographies, kind of where you feel like you're seeing evidence of network effects? And then maybe areas where you feel like there's been a lot of investments made. The momentum maybe hasn't come through yet to the public, but you're really optimistic about?

Sure. Well, the reality is every day, there's evidence of the network effect, literally every day. So I just -- if I go through my e-mails every single day, there is a connecting of dots. The call comes into one area. There's expertise, there's a relationship. They'd like to be introduced to partners at another part of our business. We identify situations. We're trying to connect dots. And where in earlier days, we might have had a relationship with the C-suite. Now we have a relationship with the C-suite and the Board, and it's more likely than we've presented to one of the companies where one of the Board members has recently experienced our advice and capabilities.

So that network effect is an evidence every day. But like everything else, it takes time for it to fully be developed. So we see it every day in our ability to collaborate across geographies, across industries, across different touch points and companies. We're seeing more conflict adjudication because we may have opportunities to represent a group of creditors. At the same time, we have a strong relationship with the debtor. We're getting all of that benefit, but I still think we're really early days compared to what our vision for this franchise can be.

And when you think about it by geography or industry, there are places where we really haven't made any effort at all. So that's just complete white space. There are areas where we have made small investments, and we've gotten outsized returns. And I would just highlight as one of those examples, Japan, where we've made very modest commitment of resources, but we've received outsized returns in terms of our connectivity to some of the most consequential Japanese companies and opportunities to really showcase the firm, and we're now going to follow that up with additional resources.

Then we have other areas where we're in the midst and we've seen real benefits, but there's still so much more to do. And then even in our strongest areas, we're big believers that oftentimes investing in our strongest franchises, can create the greatest results. So you might look at us from the outside in and say they appear to be strategically complete in these areas. We look at it and say we can go from strong to stronger or from stronger to strongest or from strongest by a little bit to strongest by a lot. And that's why we're going to continue to invest because everywhere we look, we see two things.

We see proof of concept that all the things we believed in 10 years ago have proved out. And we see proof of concept that no matter how much white space we've filled in there's still white space as far as the eye can see. And as a result, we feel really good about the track we're on, but we still think we're early, early days in building out the firm and the vision that we have for this firm.

Great. And then can you just touch on the restructuring opportunity outside the U.S. and just kind of initiatives to scale the footprint? And I appreciate probably need a lot of headcount, but just kind of where that may go over the next couple of years?

Well, a lot of that, if you just -- we couldn't agree more. And if you just look at the increased investment that we've made in various European countries, the opportunity to do more in France, to do more in Germany, to do more across Europe. As our footprint grows, as our strategic connectivity increases, the opportunity to do more on the liability management side in Europe increases. We have significant commitment to the Gulf region. The opportunity in the Gulf to do more is considerable. We have a small but highly successful commitment to non-Japan Asia. And those opportunities have already produced great results. There's an opportunity to do more, and there's an opportunity to do more in Japan.

So everywhere we have had footprint and connectivity and success outside of liability management, we're now spending time trying to make sure that those opportunities were in front of and that we're bringing our teams to those opportunities. And as a result, I think there's opportunities for us to take that liability management practice that's outside the U.S. and make it multiples the size of what it is today.

Thank you. Ladies and gentlemen, that does conclude our question-and-answer period. I would now like to turn the call back over to Mr. Taubman for any closing comments.

All right. Well, hopefully, you all could hear us, and we appreciate your support and your interest in our company, and we look forward to reconvening in 3 months when we'll report our third quarter results. So again, thank you for your support and your interest, and we wish you a good day.